Thread by @SwissRamble

Sheffield United’s 2017/18 financial results covered their first season back in the Championship after six years in League One, when they mounted an unlikely challenge for a play-off place before finishing a creditable 10th. Some thoughts in the following thread #SUFC

#SUFC reduced the loss from £5.7m to £1.9m, highlighting the “significant impact” of promotion. Revenue rose 76% (£8.7m) to £20.0m, but this was more than offset by the cost of operating in a higher division, as wages rose £8.9m (89%) to £19.0m & other expenses up £1.9m to £8.5m.

However, it is worth noting that #SUFC lower loss is essentially driven by higher profit on player sales, which rose £5.6m to £8.4m. If this is excluded, loss was actually larger in the Championship than League One. In addition, no repeat of prior season £0.6m player impairment.

#SUFC £8.7m revenue growth was mainly due to broadcasting, which was up £6.5m to £8.1m, thanks to higher central distributions in the Championship. Match day also increased by £2.2m (34%) to £8.7m due to higher attendances, but commercial was flat at £3.2m.

#SUFC £2m loss is actually one of the better results in the Championship. In fact, 3 clubs reported losses just under £40m: Cardiff City £39m, QPR £38m and #BCFC £37m. As Blades manager Chris Wilder said, “You’ve got people who are taking risks and not being sensible.”

#SUFC bottom line was boosted by £8m profit on player sales, mainly due to sell-on fees for Kyle Walker, Harry Maguire and Jamie Murphy. The board noted that player trading “represents a key element of our strategy to be a self-sustaining club.”

#SUFC have consistently lost money since relegation from Premier League in 2007. Twice reported profits because of special factors: 2009 £10m due to the £18m Carlos Tevez legal settlement; 2014 £31m due to £35m waiver of inter-company loan. £20m total losses in last 4 years.

#SUFC made little money from player sales in League One, averaging just £2m a year, but this rose to £8m in the Championship. This season will include £11.5m from the sale of David Brooks to Bournemouth for a club record transfer fee.

#SUFC EBITDA (Earnings Before Interest, Tax, Depreciation & Amortisation), which can be considered as a proxy for cash operating profit, as it strips out player sales and once-off items, has been negative since 2010, falling slightly from £(5)m to £(7)m in 2017/18.

In fairness, very few Championship clubs manage to generate positive EBITDA (only #NCFC £9m, #HCAFC £8m and #Boro £7m to date in 2017/18), so #SUFC £(7)m is actually in the top half of the table. For some perspective, it’s less than a quarter of #BCFC’s awful £(30)m.

Following promotion, #SUFC revenue rose £8.6m to £20.0m in 2017/18, £6.1m (44%) higher than the last time they were in the Championship in 2010/11. In this division, around 40% of the club’s income comes from TV, though this is still lower than the 44% from match day.

Despite the substantial increase after promotion, #SUFC £20m revenue is firmly in the bottom half of the Championship, only around a third of clubs benefiting from parachute payments, such as #Boro £62m, #NCFC £62m and #HCAFC £56m. The top club without parachutes was #LUFC £34m.

As the club said, “The league is highly polarised in terms of revenues with several big teams receiving significant parachute payments following Premier League relegation.” #Boro, #HCAFC and #SAFC got £42m, followed by #AVFC and #NCFC £34m, then #CardiffCity, #FFC and #QPR £17m.

Wilder could not hide his unhappiness with the situation: “Parachute payments are not used to bail clubs out. They are transfer funds. Nothing more, nothing less for the vast majority. They’re not being used as a safety net for those who have slipped down the divisions.”

Promotion to the Championship quadrupled #SUFC TV revenue from £1.6m to £8.1m, including £4.5m PL solidarity payment and £2.3m EFL central distribution. Boosted by being shown live 13 times (7 home at £100k and 6 away at £10k). Premier League would be worth at least £170m.

#SUFC match day income rose by a third (£2.2m) to £8.7m, despite hosting one home game less, as average attendance increased from 21,892 to 26,854. This was the 6th highest revenue in the Championship, only £2m below #AVFC £11m.

#SUFC attendances have risen by over 50% since the 17,507 low in League One in 2013/14. The club’s potential is shown by the 30,000+ crowds in the Premier League back in 2006/07.

#SUFC average attendance of 26,854 was the 6th largest in the Championship, only surpassed by #AVFC, #LUFC, #WWFC, #SAFC and #DCFC. Also higher than 6 clubs in the Premier League. Ticket prices were frozen for 2017/18.

Disappointingly, #SUFC commercial income was unchanged at £3.2m, comprising retail £1.6m, academy £0.7m, facility £0.6m & Superdraw £0.3m. This is one of the lowest in the Championship, only a fifth or #LUFC £16m. Board has “high expectations” from “excellent stadium facility”.

#SUFC has a long-term kit deal with Adidas since 2014, while the main shirt sponsor in 2017/18 was Teletext Holidays, replaced by Ramsdens Financial in 2018/19. The club also has other sponsors: back of shirt DoorDeals and shorts Utilita.

#SUFC wage bill almost doubled, rising from £10m to £19m. This included first team wages going up from £5.9m to £13.5m, reflecting “the increased financial challenges we face in order to compete in the Championship.” Wages to turnover ratio worsened from 88% to 95%.

Despite the steep increase, #SUFC £19m wage bill is one of the lowest in the Championship, around the same level as Ipswich Town £18m. To underline how much the club has outperformed under Wilder, it is miles below #Boro £49m, Cardiff City £48m, #NCFC £42m and #BCFC £39m.

Even after the worsening of #SUFC wages to turnover ratio to 95%, this is actually not too bad for the Championship, where around half of the clubs have a ratio over 100% with Birmingham City leading the way with an extraordinary 202% (the “Redknapp effect”).

#SUFC player amortisation was flat at just £2.0m, around a third of the £5.7m reported in 2008. This is due to limited expenditure on bringing in new players, which is either a reflection of the club’s traditional frugal approach or a result of the owners’ squabbles.

As a consequence, #SUFC player amortisation of £2m is one of the smallest in the Championship. To place this into context, it is less than 10% of big-spending #Boro and #AVFC, both £24m.

#SUFC spent just £4m on players in 17/18, one of the lowest in the Championship and only slightly more than the previous season’s £3m in League One. As a comparison, #Boro splashed out £66m, while the majority of clubs that have reported to date spent between £12m and £17m.

#SUFC have had net sales in 11 of the last 12 seasons, breaking-even since 2018. Although this theoretically places them at a competitive disadvantage, Wilder argued, “I think we’ve shown, with good planning and intelligence, we can try to make up the gap in different ways.”

#SUFC have reduced gross debt from £70m in 2012 to just £2.1m in 2018, partly thanks to £35m of inter-company debt write-offs and £27m of debt to equity conversion. Cash balance of £1.3m gives net debt of £0.8m. Also only owe £1m in transfer fees.

As a result, #SUFC £2m debt is the 3rd lowest in the Championship, only more than Burton Albion and Preston. This is considerably lower than some clubs, e.g. #Boro £101m, #ITFC £89m and Cardiff £74m. They do have £7m contingent liabilities, based on appearances, performance, etc.

Although debt is often high in the Championship, most is provided by owners who charge little or no interest, e.g. #SUFC paid just £148k in 2017/18, while the highest was #HCAFC £3.1m.

#SUFC cash balance fell by £0.8m in 2017/18. Basically, they lost £4.8m from operating activities, which was largely compensated by £4.5m net player sales, but they also invested £0.4m in infrastructure and made £0.1m interest payments.

Since 2013 #SUFC’s available cash of £35m has largely come from new shares/owner loans £25m, though a further £10m is from net player sales. Most (£19m) has covered operating losses, while the club also spent £10m on loan/interest payments, plus £3m on infrastructure investment.

Note that the #SUFC cash flow statement is from parent company Blades Leisure Ltd, as this is not shown in The Sheffield United Football Club Ltd accounts. However, the revenue and P&L numbers are almost the same for these two companies, so it should be a reasonable proxy.

#SUFC have no FFP issues, as they have adopted “a cost-conscious playing model that ensures that we remain well within the constraints of the financial fair play rules whilst remaining competitive with the league.” The Academy is a fundamental part of the club’s strategy.

One potential fly in the ointment is a High Court battle between the #SUFC joint owners: the McCabe family, who have put in around £100m since the 90s, and Prince Abdullah, who joined the club six years ago by taking a 50% share of Blades Leisure Ltd.

There is much to admire about #SUFC self-sustaining business model. Despite their financial limitations, they are punching well above their weight, as they have established themselves “as genuine contenders in the race to achieve promotion to the Premier League.”