Birmingham City’s 2017/18 financial results covered a season when they finished 19th in the Championship, only avoiding relegation on the final day, and had three managers: big-spending Harry Redknapp, Steve Cotterill and Garry Monk. Some thoughts in the following thread #BCFC
#BCFC loss before tax more than doubled from £16.4m to a barely credible £37.4m, primarily due to massive investment in the squad: wages rose £16.1m (71%) from £22.5m to £38.6m, while player amortisation increased by £5.0m from £2.6m to £7.6m. 
The higher #BCFC loss arose even though revenue grew by 9% (£1.6m) to £19.1m and profit on player sales was up £1.9m to £2.1m. All revenue streams increased: broadcasting £0.6m (9%) to £7.6m, match receipts £0.6m (13%) to £5.1m and commercial £0.4m (6%) to £6.5m.
However, there was cost growth in all categories, as well as wages and player amortisation. Other expenses rose £1.7m (19%) to £10.9m, depreciation increased by £0.2m (33%) to £0.9m and net interest payable climbed £0.7m to £0.9m.
In fact, #BCFC 17/18 loss of £37m is the 7th highest ever registered in the Championship, though a lot lower than QPR’s £70m 13/14 loss (excluding £60m loan write-off). It’s the 3rd highest loss for a club not promoted, only below Bolton £51m (12/13) and Blackburn £42m (13/14).
#BCFC have consistently lost money, only reporting a profit once in the last six seasons – and that was just £1m in 2014/15. Since then, the losses have been growing: £5m in 2015/16; £16m in 2016/17; and £37m in 2017/18. Total losses since 2008/09 are £83m.
The only season that #BCFC reported a significant profit in recent years was £16m in 2011/12, which was very largely due to £22m of once-off player sales (Johnson, Dann, Gardner, Beausejour, Jerome & Ridgewell). In the 6 years since, club only had £18m profits from this activity.
#BCFC EBITDA (Earnings Before Interest, Tax, Depreciation & Amortisation), which can be considered as a proxy for cash operating profit, has steadily declined from £14m in 2010 to £(30)m in 2018, including a £17m deterioration in 2017/18 alone.
Despite the 17/18 growth, #BCFC revenue has dropped by more than two-thirds (£42m) to £19m in the 7 years since relegation from the Premier League, very largely TV. In the 4 years between 2012 and 2015, Birmingham benefited from £48m parachute payments, but these stopped in 2016.
#BCFC £19m revenue is still firmly in the bottom half of the Championship. For some context, in 16/17 Newcastle led the way with £86m, more than 4 times as much, and so far in 17/18 Norwich and Hull have posted £62m & £56m. That said, Huddersfield were promoted with only £16m.
Although #BCFC huge expenditure can be criticised, it is perhaps more understandable with the size of the prize in the Premier League, where clubs receive £95-150m TV money. In contrast, most Championship clubs get £8m, including £2.3m EFL distribution & £4.5m PL solidarity fee.
#BCFC match day income rose 13% (£0.6m) to £5.1m in 2017/18, as the average attendance increased from 18,650 to 21,042 and the club hosted 2 more cup games. However, this revenue is still towards the lower end of the division (6 clubs earn more than twice as much).
Despite their many issues, #BCFC have seen their attendance rise 4 years in a row from the 15,457 low point in 2013/14, which reflects very well on their supporters. In fact, the 21,042 attendance last season was the highest since they were last in the Premier League in 2010/11.
#BCFC wage bill shot up an incredible 71% (£16.1m) from £22.5m to £38.6m in 2017/18, as the “Redknapp effect” bit hard, though was inflated by severance payments for departing managers. In just 2 season, wages have increased by £23m (150%) with playing staff up from 64 to 107.
As a consequence, the #BCFC £39m wage bill was one of the highest in the Championship, thanks to numerous signings and loan players. It was actually higher than Hull City’s £31m and only £3m below Norwich City £42m, even though both clubs benefited from hefty parachute payments.
To illustrate just how big the #BCFC 2017/18 wage bill of £39m really is, it is actually the highest amount ever paid in the Championship by a club not in receipt of a parachute payment. Furthermore, many of the others in this list were inflated due to chunky promotion bonuses.
The 2017/18 #BCFC wages to turnover ratio of 202% is not quite the highest (worst) in Championship history, but it is only surpassed by Bournemouth’s 237% in 2014/15 – and that was adversely impacted by an estimated £7m promotion bonus, while Birmingham finished a lowly 19th.
The recent heavy investment in the #BCFC playing squad is reflected in player amortisation, the annual charge to write-down the cost of transfers, almost tripling from £2.6m to £7.6m (up from just £0.4m in 2014/15). This is the highest since £13.4m in the Premier League in 2011.
As a consequence, #BCFC player amortisation of £7.6m would have been one of the highest in the Championship in 2016/17, above promoted Brighton and Huddersfield. However, for more context, in 2017/18 Norwich City £16m was twice as much.
#BCFC annual net transfer spend (from a cash perspective) rose to £6.4m in the last 2 seasons, compared to £6m net sales in previous 5 seasons, as first Zola, then Redknapp were allowed to splash the cash. Almost back to £8m average net spend in the Premier League before 2011.
#BCFC gross debt increased by £40m from £33m to £73m, all owed to the club’s parent company BSHL (not repayable in next 12 months). Debt has grown by a worrying £63m in the last 3 years. The club also owes a net £7m on transfers plus contingent liabilities of £6m.
So the #BCFC £73m debt is now one of the largest in the Championship, only behind Ipswich Town £89m (having adjusted for the promotion and relegation of clubs after 2016/17). The debt itself is not an issue – so long as the owners continue to provide support.
#BCFC made a £1.1m interest payment in 2017/18. This is not huge, but is 4 times as much as the £276k paid the previous season and is the third largest in the Championship (only below Hull City £3.1m and Reading £2.2m).
Parent company BSHL had to provide a further £40m funding in 2017/18. This support is essential, as #BCFC do not generate cash from operating activities, losing £29m last season alone, before spending £9m on player purchases (net), £1m on infrastructure and £1m interest.
Since 2012 most of #BCFC available cash of £79m came from loans from the owners £64m, boosted by (net) player sales £15m. Over 80% has been used to cover operating losses £64m with just £3m invested in infrastructure and £2m interest. Remainder was used to clear the overdraft.
The accounts state that #BCFC will need £39m additional funding from the owners for the 18 months between July 2018 and December 2019. This is obviously a large sum, but (on a “glass half-full” basis) less than the £40m provided in the last 12 months (£26m pro-rated).
However, the auditors still note a “material uncertainty” which casts “significant doubt” on #BCFC’s ability to continue as a going concern. They also point to the notification from the EFL about breaches of the Championship Profitability and Sustainability Rules (FFP).
#BCFC have £59m losses over 3-year FFP monitoring period. Estimated £10m allowable deductions for academy, community & infrastructure give FFP losses of £49m, so £10m above target. EFL has already restricted transfers, but could also issue a points penalty when meets next month.
This is obviously a truly horrible set of financials for #BCFC, as their gamble of spending big failed miserably. The wage bill should come down in 2018/19, but they will still need substantial support from their owners with the threat of a points deduction hanging over them.
