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Swiss Ramble @SwissRamble
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#BristolCity recently published their 2017/18 financial results, which cover a season when they finished a respectable 11th in the Championship and had a memorable run to the Carabao Cup semi-final. Some thoughts in the following thread.
There was a substantial increase in #BristolCity loss before tax from £6.6m to £25.3m, despite revenue increasing £4.7m (22%) to £26m, mainly due to profit on player sales falling by £13.3m to just £0.3m and wages rising by £6.4m (30%) to £27.3m.
The good news was that all #BristolCity revenue streams were up: commercial by £2.2m (23%) to £11.6m; match day by £1.6m (32%) to £6.6m; and broadcasting by £0.9m (13%) to £7.7m.
Apart from the growth in the wage bill, there were increases in other costs, notably player amortisation and impairment rose £2.6m (51%) to £7.8m, while other expenses were up £2.2m (19%) to £13.3m and depreciation £0.2m (8%) to £2.7m.
To be fair to #BristolCity, almost all clubs lose money in the Championship, but their £25m loss would have been among the highest in 2016/17, only behind #NUFC £47m and #BHAFC £39m (both adversely impacted by promotion bonuses and exceptional payments).
#BristolCity player sales dried up in 2017/18 with their tiny £0.3m profit unsurprisingly being one of the lowest in the Championship. This is in stark contrast to Norwich City, whose bottom line last season was greatly boosted by £48m from this activity.
#BristolCity have consistently lost money with aggregate losses of £124m over the last 10 seasons, though the 2017/18 loss is their highest ever. The relatively small £7m loss in 2016/17 was largely due to £14m profit on player sales (mainly Jonathan Kodija to Aston Villa).
#BristolCity have rarely made big money from selling players. In fact, the £14m profit in 2016/17 is around two-thirds of the £20m generated in last 10 years from this activity. However, this season will include £23m sales of Bobby Reid, Aden Flint & Joe Bryan (cash income £13m).
#BristolCity EBITDA (Earnings Before Interest, Tax, Depreciation & Amortisation), which can be considered as a proxy for cash operating profit, fell from £(11)m to £(15)m in 2017/18. This was around break-even back in 2008, but has been steadily declining since then.
In fairness, only four clubs in the Championship managed to generate positive EBITDA with Norwich City being the highest at just £9m and two clubs at only £2m, but #BristolCity’s minus £15m is firmly in the bottom half of the table.
#BristolCity revenue has risen by 238% (£18.3m) in the 3 years since promotion from League One from £7.7m to £26m last season. Most came from commercial (£8.5m) & broadcasting (£6.8m), though match day also contributed £3.0m. Merchandising moves to another group company in 18/19.
Despite the growth, #BristolCity £26m revenue is still only mid-table in the Championship. For some context, in 2016/17 Newcastle led the way with £86m, a full £60m more. So far in 2017/18, Norwich City and Hull City have posted £62m and £56m (with Sunderland & Boro to come).
Of course, it’s difficult to compete with clubs receiving Premier League parachute payments with no fewer than 8 clubs benefiting from these in 2017/18, led by #hcafc, #Boro and #SAFC receiving £42m, followed by #AVFC and #NCFC £34m, then #CardiffCity, #FFC and #QPR £17m.
If parachute payments were to be excluded, it would be a very different story. In this case, #BristolCity would have the 7th highest revenue in the Championship, which would give them a very decent chance of making the play-offs.
#BristolCity broadcasting income increased by £0.9m (13%) to £7.7m, due to the Premier League solidarity payment rising from £4.3m to £4.5m and money from their Carabao Cup run. Clubs with parachute payments have much higher TV money: year 1 £45m, year 2 £37m and year 3 £18m.
The lucrative TV deal in the top flight (with clubs receiving between £95m and £150m) helps explain why so many Championship clubs “go for it”. #BristolCity owner Steve Lansdown: “Reaching the Premier League would be a big success for us. But you have to cut your cloth.”
#BristolCity match day income rose 32% (£1.6m) to £6.6m in 2017/18, as the average attendance increased from 19,256 to 20,953 and they hosted 3 more Cup games (including 2 against #MUFC and #MCFC). This revenue would have placed them in the top 10 in the Championship in 2016/17.
#BristolCity attendances have significantly increased since promotion from League One, rising 80% from 11,681 to 20,953. The redevelopment of the Ashton Gate stadium (capacity 27,000), shared with Bristol rugby club and also used for major concerts, has helped generate revenue.
That said, #BristolCity average attendance of 20.953 was only the 12th highest in the Championship, over 10,000 less than Aston Villa and Leeds United. However, the club has announced a record number of season ticket sales for 2018/19, despite controversy over the pricing scheme.
#BristolCity commercial income rose 23% (£2.2m) to £11.6m in 2017/18. This would have placed them in an impressive 6th place in the Championship in 2016/17. New shirt sponsor from 20178/19 is online casino company Dunder, while the kit is made by their own company Bristol Sport.
The #BristolCity wage bill grew by 30% (£6.4m) from £20.9m to £27.3m in 2017/18, meaning a £16.2m increase in the 3 seasons since promotion from League One. The wages to turnover ratio worsened from 98% to 105%, but still much better than 170% in the 2012/13 Championship season.
Despite the significant growth #BristolCity £27m wage bill is still in the bottom half of the Championship, around £15m less than #NCFC £42m. In 2016/17 the other two clubs benefiting from first year parachute payments had even higher wages: #NUFC £80m and #AVFC £61m.
Although #BristolCity wages to turnover ratio of 105% is obviously not great, it is not uncommon in the Championship. In fact, more than half the clubs have ratios over 100%. The Robins’ league position corresponds fairly well to their place in the wages league.
#BristolCity player amortisation, the annual expense to write-down transfer fees, has risen from £0.9m in 2014 to £6.8m in 2018, reflecting recent investment in the squad. The club also booked a £1m impairment charge to reduce the values of certain players in the accounts.
#BristolCity player amortisation of £6.8m would have been at the higher end of the Championship in 2016/17, though may well be overtaken when other clubs publish their accounts. For some context, Norwich City’s £15m player amortisation was more than twice as much.
#BristolCity had £12m player purchases in 17/18, including record signing Famara Diedhiou. Although £2m lower than previous year, combined £26m over last 2 seasons was much more than £7m in preceding 2 seasons. Still massively outspent by #AVFC £88m, #NUFC £41m & #WWFC £32m.
In the last 3 seasons #BristolCity have substantially increased their annual average spend on players to £11m, but sales have grown even more to £14m, leading to net sales of £3m. This is a marked change in approach from previous 6 seasons: gross £1.6m, sales £1.0m, net £0.6m.
#BristolCity gross debt rose slightly to £72m, comprising £50m bank loan (for stadium redevelopment), guaranteed by the owners; £18m loan from Pula Sports Ltd (Steve Lansdown’s company); and £4m overdraft. Club also owes £6m on transfers, but is itself owed £5m from other clubs.
#BristolCity gross debt of £72m is quite large for a club of their size, but many other clubs in the Championship have larger debts. The debt is not an issue, so long as Steve Lansdown remains a friendly owner, as he demonstrated when converting £37m of debt to equity in 2013.
In fact, Lansdown provided a further £19m of funding in 2018/19. This support is essential, as #BristolCity do not generate cash from operating activities, losing £14m last season alone, before spending £3m on player purchases (net), £1m on infrastructure and £1m interest.
Since 2012 #BristolCity had available cash of £143m: (a) £77m from loans; (b) £65m from issuing share capital. Half of this has been used to cover operating losses £77m, £54m on capital expenditure (mainly the stadium), £2m on interest and just £10m on (net) player investment.
As the accounts state, #BristolCity is dependent on funding from Lansdown, the co-founder of financial services firm Hargreaves Lansdown. I estimate that he has put in around £134m to date (capital £114m, loan £20m) with little sign of the need for this funding going away.
#BristolCity have £47m losses over the 3-year FFP monitoring period, but estimated £12m allowable deductions for academy, community and infrastructure take their FFP losses to £35m, which is just within the £39m target.
#BristolCity are fortunate to have a benevolent owner in Steve Lansdown, but this is in reality a necessity for those Championship clubs that are not in receipt of sizeable parachute payments, if they wish to compete.
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