These are challenging times – Doncaster
The end of Premier League parachute payments has left Norwich City’s finances in a parlous state. But just how bad are the numbers and can the club afford to challenge for promotion? Business editor Chris Starkie quizzed chief executive Neil Doncaster, finance director Shaun O’Hara and new director Sharon Turner on the state of the club’s finances.
Q. Can you describe the current financial position?
A. It's challenging. The situation is very much akin to Crystal Palace and Southampton who came down at the same time as us. This is largely due to the gap between the Premier League and the Championship. We are all chasing the same players on salaries that seem to be increasing year on year and show no sign of abating.
Q. The £7m shortfall from the loss of the parachute payment needs bridging - what are you doing about that?
A. Through a combination of measures. The £800,000 solidarity payment from the Premier League, profits on player trading and the £2m loan from the Turners as well as steps to reduce costs.
There were also a number of non-cash items in this year's accounts such as depreciation.
Q. Those measures will help in the short term - what steps are you taking to improve the overall financial performance of the club?
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A. The club strategy is to maximise our off-field activities to support the manager on the field.
That means activities like Travel Norwich City and the Norwich and Peterborough Canary account. Every time someone goes into one of our restaurants they support the club.
All of these avenues are designed to generate revenues and help maximise the impact on the pitch.
Q. Income from these activities is not keeping pace with the increase in wages you have outlined and many of these projects only produce a few thousand pounds, which is hardly going to make a big difference to the finances.
A. Looking at all the different income streams together they do make a big difference.
Catering for example generates around £500,000 more profit than before we took it over.
This year we are looking harder than ever to increase revenues through sales and marketing, catering and commercial activities, the development of office space.
Every single element we are looking to achieve the best we can achieve. We have set challenging targets and are focused on keeping costs as low as we can.
Q. Can you explain the club's debt. How much has been borrowed and when is it due to be repaid?
A. The main loan is the £12.7m outstanding on the Jarrold stand. This is currently reducing by around £900,000 a year.
We have a final £300,000 to pay on the NU stand which will be paid by next year. We also have a £2.55m loan used to pay for the Laurence Scott land which will be repaid by next May.
Finally there are loans of £1.3m taken out to refurbish the offices in the Jarrold stand. These are covered by the income from the offices.
Q. Can you outline the hotel deal. There have been suggestions the club should have built another corner stand on the site.
A. The hotel is a joint venture. We have a 30pc stake in the company which owns the hotel. In return for the land we were paid £1.1m which we used to help fund the Norwich Union community stand.
There is no ongoing income from the hotel as the rent is used to service the loan used the build it. However our 30pc share is an asset that could be sold in the future. A new stand would have cost £3.3m and we did not have the funds for that at the time.
Q. It's often said the club has land which could be developed.
A. The club achieved planning permission on a final chunk of land on riverside. This is for 200 residential flats as well as more units on the Laurence Scott test bed. We will be looking to realise the value of this site in the future.
Q. What are the directors' attitudes to external investors?
A. The club remains open minded about future monies coming into the club. There is however a misconception that people are queuing up to put money into the club.
People don't generally put money into Championship clubs as an investment. What you are looking is for people that want to put money into the club that they love.
The fact is that people who love the club are generally known to us, but the perception we are a closed shop is wide of the mark.
Q. Realistically can the club hope to challenge for the Premiership?
A. We want to be in the Premier League, that remains our ambition. It is not a pipe dream. We believe that by increasing revenues and managing costs we can develop a financially sustainable football club and one that can achieve promotion to the Premier League.