The cost of Championship football - Norwich City accounts show loss of £2.7m
PUBLISHED: 14:08 01 November 2017 | UPDATED: 15:41 01 November 2017
ARCHANT EASTERN DAILY PRESS (01603) 772434
The harsh cost of relegation at Carrow Road has been laid bare today as a hit of £18.6m in broadcasting money and falling parachute payments gave Norwich City FC a loss of £2.7m in their latest accounts.
It is a financial hit largely driven by a season of Championship football, but worsened by severance payouts totalling more than £4m, split between outgoing chief executive Jez Moxey, former manager Alex Neil, and some of his coaching staff.
Income for the club is down by almost £25m year on year, from £100.6m in 2015/16 to £75.9m in the last financial year.
The loss has taken Norwich City from a profit of £9.4m in 2015/16 to a loss of £2.7m for the year ending on June 30, 2017.
It comes amid a fundamental shake-up of staff, with the creation of the new structure and appointments of Stuart Webber and Daniel Farke.
“The reality is that the financial gap between the Premier League and Championship has widened,” said chairman Ed Balls.
“The accounts show how hard it is to be relegated. Even though we tried a plan to ensure player wages came down too it wasn’t enough to fill the gap.”
Of the £4.4m in severance costs paid out over the last year, £712,000 went to former chief executive Jez Moxey, despite the fact he was only in the job for seven months.
Mr Balls said “a sizeable chunk” of it went to Alex Neil, with the remainder divided among 15 others, including some of the old coaching staff.
The exact figure paid to Neil could not be revealed due to contract confidentiality.
“That severance pay was on the one hand money we would rather not have spent but on the other hand it is money we spent in order to put in place changes we all felt, and many fans felt, were necessary,” said Mr Balls. “When the judgement was made that we needed to make a change we accepted the financial consequences of that.”
Football in the second tier of English football also affected gate receipts and sponsorship.
Ticket sales fell from more than £11.5m in 2016 to £9.2m in 2016/17, with away fan attendance and ticket prices dropping from the rich territory of the Premier League.
Managing director Steve Stone said: “We had more games but far less, primarily away fans, than we did in the Premier League and we couldn’t charge as much as we could in the Premier League.
“It is a dramatic difference between the Premier League season and Championship season.”
Finances at Carrow Road have given the club a renewed focus to achieve promotion back to the Premier League this season. Dealings in the transfer market have reaped some benefit, with a £2.1m profit from player trading, compared to an £11m loss the previous year. Player purchases totalled £27.6m and players sold brought in £29.7m.
“The plan is to get promoted back to the Premier League, but not at all costs,” added Mr Stone. “The reason for bringing change into the structure of the club was to put us on a better footing to achieve promotion first time around.
“There were a lot of players who were expensive replaced by players who are comparatively cheaper. Whether they will be value for money we have to wait and see but that is the model we need to focus on.
“The only way to improve the revenue is to get to the Premier League.”
During the 2015/16 season the club cleared outstanding debts including to Delia Smith and her husband Michael Wynn-Jones who were owed £1,529,000 and Michael Foulger who was due £460,000.
Mr Stone said despite the falling revenue for the club there is no desire to get back into debt. By the end of June the only external debt for the club was a bank working capital facility of £1.8m, down from £2.7m the previous year.
“The board has been scarred by some of the debt issues we had to work through as a club before my time,” he said. “In 2009/10 going down to League One those were difficult times here. I don’t think anyone has an appetite to go back to those times.”
Mr Balls added: “The financial position of this club is sound and we are not needing to resort to any extra borrowing. We have had 10 new players come in over the summer - we have a younger squad and a hungrier squad.
“We are not a club that plays fast and loose with money, but we are being ambitious. Stuart and Daniel knew the financial challenge we faced and we were dealing with the consequences of a fall in revenue from relegation. If they want to make changes in January we can talk about that but there is no financial need to do so.
“We have been looking at how the squad can evolve, filling the financial gaps next summer if we do not get promoted. There will be some difficult decisions and we have to look hard at our costs. There is no financial gap we have to fill at the moment but there is not a pot of money either.
“It becomes more challenging next summer if we don’t get promoted. We will be really disappointed if we are not in the play-off places before Christmas and there at the end of the season.”
Last month a staffing review at the Norwich City academy led to a number of departures, including club legend Darren Huckerby.
The cuts are set to have an effect on next year’s severance pay figures but the changes were made as part of a long-term plan for player recruitment.
After more than £4m was paid out in severance in the last financial year, chairman Ed Balls said there would be further losses in next year’s accounts due to the academy redundancies.
Asked what the plan would be if the club fails to achieve promotion to the Premier League this season, managing director Steve Stone said: “The Plan B is creating a succession plan for players brought in from the academy to look at the squad for the next three years and to look at who can replace players to achieve getting to the Premier League in the intervening transfer window.
“The academy really has to work in the long term bringing players through under our existing funding model. I would expect staff costs to come down next year, primarily due to redundancies.”
Carrow Road expansion will wait
In light of the tighter financial situation at the club, long-mooted expansion hopes for Carrow Road seem much further from reach.
In its strategic report, the club states its future strategy is “investing all available cash in to the playing squad and hence maximising the chances of returning to the Premier League at the earliest opportunity [which] will allow the consideration of longer term investment projects centred on both the club’s training facilities at Colney and Carrow Road itself.”
Chairman Ed Balls added: “If we can establish ourselves over a period of years in the Premier League some of those financial investments become easier to do. At the moment our priority is to ensure we are as strong as we can be on the football pitch.
“We regularly talk about Colney and this ground. We are taking a long-term view but at a time when our financial position is changing so fast I think we are right to focus on putting football first.”
Neil’s contract was amended
Norwich City chairman Ed Balls also moved to quash rumours that Alex Neil’s contract had been privately renegotiated.
A national newspaper report in December claimed Mr Balls had struck a ‘secret deal’ to keep Neil in Norfolk and that he was due for a £2m pay-off if his contract was terminated.
“Alex Neil came in and got us up to the Premier League based on a contract which was negotiated when he arrived,” said Mr Balls. “If things do not work out fans want quick decision.
“When we did terminate his contract it cost us a lot of money, but that is what we have to pay.
“There was some stuff in the papers about how Alex’s contract was changed in the summer. That was never true.
“That contract in its basic form was unchanged. Alex and the players were all set to see their money fall sharply when we were relegated from the Championship. Because of the way the contract was negotiated Alex’s money was set to fall more sharply. The board judged that was unfair so there was a change made to ensure it was in line with the players.”