Thread by @SwissRamble

I published a study last week on where Premier League clubs source their money and what they spend it on by reviewing the clubs’ cash flow statements over the last decade. Today I do a similar exercise on Championship clubs – where the picture is very different.

In the 10 years between 2008 and 2017 Championship clubs had over £2.8 bln of available cash with the vast majority of financing £2.5 bln coming from their owners (loans £1.9bln and shares £0.6 bln)

So an incredible 87% of Championship clubs’ cash came from owner financing with just 7% from operating activities. This is in stark contrast to the Premier League with 54% from operations and 42% from owners. There was also £41m from (net) player sales & £45m from bank balances.

Unsurprisingly, the Championship clubs with most cash are largely those who have benefited from long periods in the Premier League before relegation, e.g. #AVFC, #NUFC and #FFC, but the principal source of funds is still owner financing.

19 of the 24 Championship clubs have sourced between 70% and 100% of their funds from owner financing. In fact, no fewer than 10 clubs got at least 90% of their cash from their owners: #AVFC, #DCFC, #NFFC, #QPR, #SWFC, #FFC, #HTAFC, #CardiffCity, #BHAFC and #Rovers.

Only 7 Championship clubs had positive operating cash flow, led by #NCFC £90m, #NUFC £70m, #WWFC £13m and #WAFC £12m. The picture would have been even bleaker if we had only analysed the seasons spent in the Championship, as the top four clubs all spent time in the top flight.

As a reminder, cash flow from operating activities is operating profit adjusted for: (a) adding back non-cash items such as player amortisation & depreciation; (b) movements in working capital. It does not include profit on player sales, which is shown in (net) player purchases.

The scale of owner investment in the Championship is breathtaking with 3 clubs “in and around” £300m: #AVFC £310m, #QPR £299m and #BHAFC £279m. Other clubs over £100m: #CardiffCity £182m, #FFC £178m, #DCFC £156m, #NUFC £144m, #NFFC £133m, #BristolCity £114m & #Rovers £100m.

Again in contrast to the Premier League, some Championship clubs have player sales as a source of funds (net of player purchases), though this activity is not exactly a money-spinner with the largest earnings at #ITFC £13m, #Rovers £11m, #LUFC £9m and #BrentfordFC £4m.

Because of the generosity of their owners, very few Championship clubs have needed to take out external bank loans. The largest is #BristolCity whose £40m loan is for Ashton Gate stadium development, followed by #BCFC £4m and #QPR £2m.

Some clubs have also used a decrease in their cash balance as an effective source of funds, though the largest here is #BHAFC £16m, which was driven by a short-term overdraft to fund promotion bonuses in the summer of 2017.

£1.2 bln of the £2.8 bln Championship cash has been needed to simply cover operating losses, while £734m has been spent on purchasing players (net of sales), £551m on capital expenditure, largely stadium and training ground, and just £281m on loan and interest payments.

We know that most clubs in the Championship lose money, so it should be no surprise that 42% of funds are needed to cover losses. As a reminder, none of the clubs in the Premier League had to allocate cash to finance operating losses.

The amount spent by each club is equivalent to the sums of available cash (including movement in cash balance), so it’s the same clubs leading the way for expenditure, namely #AVFC, #QPR, #BHAFC, #NUFC, #CardiffCity and #FFC. All these have competed in the Premier League.

The percentage of available cash required to cover losses is strikingly high at some Championship clubs, especially #ITFC 98%, #NFFC 91%, #Rovers 86% & #HTAFC 85%. Clubs recently relegated from Premier League spend more on players, e.g. #NCFC 61%, #NUFC 58%, #FFC 54% & #AVFC 49%.

The largest amount spent on funding losses by far was #QPR £176m, despite 2 seasons in the top flight in this period. They are followed by #NFFC £122m, #BHAFC £109m and #Rovers £95m.

It’s a similar story in the Championship for player purchases with the most spent (net) by clubs with decent spells in the Premier League: #AVFC £152m, #NUFC £129m, #FFC £97m and #QPR £97m, then a sizeable gap to #NCFC £59m and #DCFC £56m.

Thanks to the generosity of owner Tony Bloom, #BHAFC have invested a hefty £159m in the Amex Stadium and a new training facility. The next highest capital expenditure is #BristolCity £55m for the development at Ashton Gate. Worth noting just £10m at #NUFC.

Despite high levels of debt in the Championship, much is provided by owners interest-free with no scheduled repayment dates. In this way, loan & interest payments are only £281m, compared to £1.7 bln in PL (£800m for #MUFC alone). £82m of this was spent by #NUFC (£73m in 2008).

Despite the challenges in the Championship, some clubs have still managed to increase their bank balance over the last 10 years, led by #AVFC £21m, #WAFC £13m, #CardiffCity £9m and (maybe surprisingly) #PNE £8m.

This analysis does come with a health warning: (a) not all clubs produced cash flow statements over the period; (b) some clubs spent some of the period covered in the Premier League or League One; (c) the cash flow format is different for different clubs.

Nevertheless, the main conclusion is clear, namely the Championship is a division where most clubs require significant financing from their owners, largely to cover operating losses and fund player purchases, as they strive to reach the (wealthier) heights of the Premier League.