The mysteries of football money

So McNasty tells us that promotion = a ?90m injection even if we go straight down again - pay off the debts, strengthen the squad, yadda yadda.

Makes it sound like a complete no-brainer

BUT - we've heard and done this before. We DID go up. We DID come straight back down again. And the result seemed to be that we were completely financially f**ked. We couldn't afford to buy a striker in the summer (Big Gary Pumperty was to be our target man, remember?) - Worthy said in that online interview that he pleaded for funds for Ashton and only got them in January. When we went down, many of our decent players left and were replaced with no-fee no-names. We stil had a debt - in fact it INCREASED.

Just read this stuff from Doomcaster and GumbyMunby explaining that promotion hasn't been the cure-all we all thought it was going to be ...

07 October 2005
Promotion doubled players' wage bill
Norwich City's player wage bill virtually doubled during the club's brief stay in the Premiership, it was revealed yesterday.

The rewards for reaching the top flight for the first time in nine years were vividly illustrated in the club's annual statement of accounts for the period ending May 31, 2005.

With a number of new stars coming in, and the existing players getting bonuses and improved contracts, the Canaries forked out around ?12.8m in an attempt to cling on to their hard-earned top-flight status - up from ?6.4m the previous season.

That huge outlay goes some way towards explaining why the club's net debt increased to ?18.5m at a time when turnover shot up from ?13.9m to a staggering ?37.4m.

Reaching the Premiership provided City's finances with a massive shot in the arm, of that there is no doubt. But it also forced them to spend money at a faster rate than ever before - and chief executive Neil Doncaster is adamant that they went about their business the right way, even though the huge rise in expenditure from ?19.7m to ?28.3m failed to produce the desired result.

?Our stated policy of prudence with ambition led the club to invest substantially in a number of areas last season,? he said. ?The board chose to make considerable investment, both in team strengthening and in infrastructure, to enhance the prospect of the business going forwards.

?The club made a very significant investment in players, both in transfer costs and wages. Those are the sort of costs we had to incur in order to try and give ourselves the best chance of staying in the Premiership.?

The increase in the club's wage bill was one of the most eye-catching figures in the new accounts, which have been sent out to shareholders this week.

In theory the Canaries made a profit after tax of ?7.7m during the 2004-5 campaign, thanks to a sharp increase in revenue, but that was described as an ?accounting quirk? by Doncaster, with the real figure being closer to ?700,000 once all the long-term expenditure has been taken into account.

The rich rewards for reaching the top flight are there for all to see - television income of ?18.4m, increased gate receipts of ?2.9m from an expanded Carrow Road and an extra ?1.55m on the catering and commercial fronts.

But that was, by and large, cancelled out by money heading in the opposite direction. As well as almost doubling their wage bill, the Canaries also forked out over ?5m to bring in new players, with the likes of Mattias Jonson, Youssef Safri and record signing Dean Ashton being snapped for sizeable fees. On top of that they had to splash out a further ?1.25m to keep up the instalments on previous transfers.

While investment in the playing staff was always going to be the top priority that wasn't the end of the story by any means, with City also setting aside cash for off-the-field improvements.

The club spent ?2.8m on the Norwich Union Community Stand, which now accommodates an extra 1685 fans, ?700,000 on a re-laid pitch, ?260,000 on new offices for the Football in the Community team and ?140,000 on improved facilities at Colney training ground.

There were those who assumed that the club's debts would just about be wiped off by promotion to the Premiership, but that certainly hasn't been the case. The Canaries still have ?14.1m to pay on their long-term securitization loan - which amounts to a 15-year mortgage - while other smaller scale borrowings mean that the level of debt has actually risen by ?400,000 since May 2004.

A debt of ?18.5m doesn't sound too healthy for a club who have just dropped out of the top-flight, but Doncaster insists everything is being carefully managed - and that there was no reason for fans to be concerned about the future of their club.

?It is certainly the case that the club's financial position is stable and our debts our manageable,? he said. ?But despite making a profit before taxation of ?9.2m our debt actually increased over the course of the Premiership year.

?In any other industry to be able to record such a profit on annual turnover that had increased by over 150 per cent would be cause for considerable celebration. But this is football. And while there is much within this set of financial statements to be proud of, the fact remains that the year covered in these reports saw Norwich City Football Club relegated from the Premiership.?

He added: ?There is a common misconception that promotion to the Premier League brings with it such untold riches that financial stability is virtually guaranteed for many years to come, that the club's debt will have been virtually wiped out by last season's influx of Sky money. Such notions are a very long way from the truth.

?Any view that the club is awash with cash is wholly misplaced. But enormous strides have been made in recent years to build new sources of revenue - income that relies on the enormous power of the club's brand and on the unparalleled loyalty of our marvellous supporters. Norwich City Football is well placed to succeed in the future.?

A return to the top-flight would clearly give City's finances another timely boost - but for the time being a parachute payment of ?6m has softened the blow of relegation and the latest accounts have been greeted with cautious optimism by various key figures at Carrow Road.

?Promotion to the Premiership was not a financial panacea,? said chairman Roger Munby. ?But our year in football's top flight did stabilise the club's financial position and enable substantial investment in a number of important areas. If promotion had not been achieved in 2004 the club would undoubtedly have been forced to make player sales that summer. Promotion, despite our subsequent relegation, has put the club in a situation where no players need to be sold for financial reasons during the 2005-6 season.?

Director of finance and operations Shaun O'Hara added: ?Relegation to the Championship has, without doubt, had a major impact on the finanancial position of the football club. However the impact will be lessened by the re-structuring of the club's finances two years ago, the expected ?6m of parachute money from the Premier League for each of the next two years, excellent season ticket and casual gate sales and continued growth in merchandising, catering and sponsorship income.?

Posted By: Old Git on January 19th 2011 at 10:03:46

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