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Middlesbrough’s 2017/18 financial results covered the season after relegation from the Premier League when they reached the Championship play-offs by finishing 5th before losing in the semi-finals. Tony Pulis replaced Garry Monk as manager in December. Some thoughts follow #Boro
Following relegation #Boro moved from a pre-tax £6.9m profit to a £6.4m loss, as revenue halved from £121m to £62m, though profit on player sales was up £4m to £15m. After tax, the decline was even steeper (from £11.5m profit to £6.6m loss), due to prior year’s £4.6m tax credit.
#Boro £59m revenue decline was very largely driven by broadcasting’s £55m fall from £102m to £47m, as the £42m parachute payment was much lower than Premier League £99m distribution. Commercial also decreased £2.9m (26%) to £8.3m and match day was down £1.6m (18%) at £7.1m.
#Boro cut costs with wage bill down £16m (25%) to £49m, mainly due to relegation clauses & players sold, and player amortisation/impairment falling £4m to £24m. Other expenses were £13m lower, while no repeat of £11m “exceptional payroll related charges” (presumably Karanka).
Although #Boro £6m loss is obviously not great, it’s not that bad if you consider that 4 of the Championship clubs that have published 2017/18 accounts had losses of £25m or higher. As Pulis said, “there are a lot of clubs in trouble, a lot losing a lot of money.”
#Boro were boosted by £15m profit on player sales, including Marten de Roon, Jordan Rhodes, Gaston Ramirez and Adam Forshaw. Worth noting that clubs relegated from the Premier League seem to have an advantage here, as seen by large profits at #NCFC £48m and #HCAFC £31m.
#Boro have only made a profit once in the last 10 years (£7m in the 2016/17 Premier League). In that time they have accumulated £125m of losses. Last season’s £6m loss was significantly lower than the £32m record deficit of two years ago, though this included promotion bonuses.
For a long time #Boro did not make much from player sales (only £14m in 5 years to 2015/16). However, have generated £27m in last 2 years, while accounts note £28m net income in 2018/19 from sales of Adama Traoré (Wolves), Ben Gibson (Burnley) and Patrick Bamford (Leeds).
#Boro EBITDA (Earnings Before Interest, Tax, Depreciation & Amortisation), which is a proxy for cash operating profit, as it strips out player sales and once-off items, fell from £38m in the Premier League to £7m, but still much better than previous seasons in the Championship.
Despite the decrease, #Boro EBITDA of £7m is actually the 3rd best of the Championship clubs that have published 2017/18 accounts to date, only (just) behind #NCFC £9m and #HCAFC £8m. The vast majority of clubs in this division generate negative figures.
Despite the large fall after relegation, #Boro £62m revenue was £40m more than the last time they were in the Championship. However, the dependency on the parachute payment is clear, as TV accounts for 75% of total revenue. Revenue will drop to £25m in 19/20 (unless promoted).
#Boro £62m is the highest Championship revenue reported to date, just above #NCFC £62m and #HCAFC £56m, though likely to be beaten by #AVFC and #SAFC when they publish 2017/18 accounts. The top club not benefiting from parachute payments was #LUFC £34m.
Championship revenue is hugely influenced by Premier League parachute payments with 8 clubs benefiting from these in 2017/18, led by #Boro, #HCAFC and #SAFC receiving £42m, followed by #AVFC and #NCFC £34m, then #CardiffCity, #FFC and #QPR £17m.
Clubs relegated from the Premier League normally get 3 years of parachute payments (total £91m), but #Boro will only receive 2 years, as they went down after just one season in the top flight. They will get £34m in 2018/19, then zero from 2019/20.
So #Boro TV revenue fell significantly from £99m to £47m in 2017/18, which will drop to £38m in 2018/19. Once that cushion is removed, they will only get the same £8m as other Championship clubs (including £4.5m Premier League solidarity payment & £2.3m EFL central distribution).
#Boro gate receipts decreased £1.6m (18%) from £8.7m to £7.1m, despite hosting 4 more home games, as average attendances declined by 16% from 30,449 to 25,544. That said, the highest earning clubs in the Championship (#AVFC, #LUFC and #SWFC) only produce £10-11m match day income.
Despite having a reasonably successful season by reaching the play-offs, #Boro crowds are unsurprisingly around 5,000 lower in the Championship compared to the Premier League. though the 2017/18 attendance was around 1,000 more than the last time they were in the second tier.
#Boro attendance of 25,544 was the 9th highest in the Championship, as some traditional big clubs led the way, e.g. #AVFC 32,097 and #LUFC 31,525. Ticket prices were frozen in 2017/18, as they have been this season.
#Boro commercial revenue was down £2.8m (26%) to £8.3m, comprising sponsorship & commercial, down £2.5m to £5.7m, and merchandising, down £0.3m to £2.6m. This is currently 8th highest in the Championship, though only half of #LUFC £16m.
In 2018/19 #Boro changed their main sponsors. A “record-breaking three-year partnership” saw online casino 32Red replace long-standing Ramsdens as shirt sponsor, while kit supplier Adidas was replaced by a five-year deal with Hummel, as worn in the 1986/87 promotion season.
Following relegation #Boro wage bill was cut by 25% (£16m) from £65m to £49m, though the revenue reduction was even higher at 49% (£59m), so the wages to turnover ratio worsened from 53% to 79%. Wages were around 50% more than the £33m the last time club was in Championship,
As a result, #Boro £49m wage bill is currently the highest reported to date in the Championship, ahead of Cardiff City £48m (including promotion bonuses), #NCFC £42m and #BCFC £39m, though #AVFC and #SAFC will probably overtake them.
In fact, #Boro £49m wage bill is actually the 6th highest ever in the Championship, though a fair way behind the leaders (all from 2016/17): #NUFC £80m, #AVFC £61m and #NCFC £55m.
To be fair, #Boro 79% wages to turnover ratio was actually one of the lowest in the Championship, where around half of the clubs have a ratio over 100%. This season, Birmingham City lead the way with a scarcely credible 202% (the “Redknapp effect”).
Despite relegation, #Boro player amortisation was unchanged at £24m, which is a clear sign of owner Steve Gibson’s desire to invest in the squad to give the club the best chance of promotion (“We want to smash the league, we want to go up as champions”).
As a consequence, #Boro player amortisation of £24m was the highest in the Championship, way ahead of #NCFC £15m and #HCAFC £12m, though it would be no surprise if #AVFC and #SAFC were higher when they publish their 2017/18 accounts.
#Boro made an incredible £66m player purchases (including Assombalonga, Braithwaite, Fletcher, Howson, Randolph, Shotton, Christie & Johnson), which is actually more than the £48m spent in the Premier League. As Pulis said, “Steve threw an enormous amount of money at the club.”
#Boro net spend took off in 2015-17, averaging £28m a year after being break-even over the previous 5 years. Although this fell to £2m following relegation, gross spend only slightly reduced from £37m to £35m, as Gibson backed his managers, but sales rose from £9m to £48m.
#Boro gross debt fell £1m to £101m. Almost all of this (£94m) is owed to the owner (interest-free), while there is also a bank loan of £7m. Debt would have been even higher if Gibson had not converted £63m into share capital, highlighting the club’s reliance on the owner.
#Boro £101m gross debt is the 2nd highest in the Championship, though it is largely of the “soft” variety. On the other hand, the club owed £56m in transfer fees (£29m net), up from just £5m in 2015, suggesting that much of the recent player spend has been on credit.
#Boro do not include a cash flow statement in their accounts, so we do not know exactly how much interest the club actually paid, though the £1.5m shown as interest payable in the P&L would place them among the highest in the Championship.
#Boro have no FFP issues, as they have an allowable loss of £61m over 3-year monitoring period (£35m for 1 Premier League season & 2 Championship seasons at £13m). Club broke-even after excluding allowable deductions (academy, community & infrastructure) plus promotion bonus.
#Boro have the financial resources to support a promotion campaign (and are indeed in the mix), though they will face a much tougher challenge next season if they miss out, as parachute payments end this year. If so, having a benefactor like Steve Gibson will again be critical.
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