Thread by @SwissRamble

Nottingham Forest’s 2017/18 financial results covered the first full season under the ownership of Evangelos Marinakis (80%) & Sokratis Kominakis (20%), who bought the club in May 2017 from Fawaz Al-Hasawi, when they finished 17th in the Championship. Some thoughts follow #NFFC

#NFFC reported a £6m loss before tax compared to a £32m the prior season, though the £38m drop is a bit misleading, as it was largely due to loan write-offs decreasing from £40m to £5m. Revenue rose £1.9m (9%) to £22.7m, but profit on player sales fell £4.7m to £10.1m.

#NFFC £1.9m revenue increase was due to more broadcasting revenue from the EFL, up £0.8m (10%) to £9.0m, and higher ticketing income, up £0.9m (14%) to £7.4m, as attendances grew by 21%. Commercial income was flat overall at £5.2m, while player loans rose £0.2m to £1.1m.

#NFFC lowered the wage bill by £1.5m (5%) to £27.7m, but player amortisation increased by £1.2m (61%) to £3.2m. Other expenses were also cut by 5% (£0.6m) to £11.0m, but interest payable was up from virtually zero to £0.3m.

#NFFC £6m loss is actually not too bad for the Championship, as most clubs in this division lose money. In fact, 3 clubs reported losses just under £40m: Cardiff City £39m, QPR £38m and #BCFC £37m. Exceptions are normally due to once-off items (player sales, write-offs).

However, it is worth noting that #NFFC figures were boosted by £10m profit on player sales, very largely Britt Assombalonga to #Boro. Clubs relegated from the Premier League appear to have an advantage here, as seen by large profits at #NCFC £48m and #HCAFC £31m.

#NFFC £32m reported profit in 2017 was entirely due to the £40m loan write-off. Excluding that special factor, the last profit was way back in 2005 – and that was only £1m. Since then, the club has consistently lost money, amounting to £82m in the last decade.

The main drivers for improvement in #NFFC bottom line in last 3 seasons are once-offs: (a) £63m of loan write-offs: 2016 £18m, 2017 £40m and £2018 £5m; (b) £29m profits from player sales. Excluding these items, Forest’s losses would again have been at £23m level.

In the past #NFFC made very little money from player sales, but this has changed in recent seasons: 15/16 £4m (Antonio); 16/17 £15m (Burke & Lansbury); and 17/18 £10m (Assombalonga). However, there have been very few lucrative player sales this season.

#NFFC underlying profitability is poor, as shown by their EBITDA (Earnings Before Interest, Depreciation and Amortisation), which strips out profit on player sales and non-cash items. This has been consistently negative, though did improve from £(20)m over last 4 years to £(16)m.

In fairness, very few Championship clubs manage to generate positive EBITDA (only #NCFC £9m, #HCAFC £8m, #Boro £7m & Burton £0.4m to date in 2017/18), but #NFFC £(16)m is only “beaten” by #BCFC’s horrific £(30)m.

#NFFC revenue has grown by £7.3m (48%) from £15.4m to £22.7m in the 4 years since 2014/15, though £3.4m of that is from bringing back in-house retail operations and catering. Another £3.9m is from broadcasting, mostly due to increase in solidarity payment from the Premier League.

Despite the growth, #NFFC £23m revenue is firmly in the bottom half of the Championship, significantly below clubs benefiting from parachute payments, such as #AVFC £74m (2016/17), #Boro £62m, #NCFC £62m and #HCAFC £56m. The top club without parachutes was #LUFC £34m.

Championship revenue is hugely influenced by Premier League parachute payments with 8 clubs benefiting in 2017/18, led by #Boro, #HCAFC & #SAFC receiving £42m, followed by #AVFC & #NCFC £34m, then #CardiffCity, #FFC & #QPR £17m. This makes life more difficult than ever for #NFFC.

#NFFC TV income rose £0.8m (10%) to £9.0m, including PL solidarity payment £4.5m and £2.3m EFL central distribution, boosted by live broadcast of “high profile” cup games. The amounts in the top flight (£150m for 1st, £95m for 20th) explain why many Championship owners spend big.

#NFFC match day revenue rose by 14% (£0.9m) to £7.4m, despite price reductions, as average attendance increased from 20,333 to 24,680 and they hosted 1 more game at the City Ground. This is the 8th highest in the Championship, though a fair way below #AVFC £11m.

#NFFC attendances had been declining, due to the poor results on the pitch and unhappiness with the owner, but they bounced back strongly last season. The 2017/18 average of 24,680 was around 25% (5,000) higher than the low 2 years ago of 19,676.

#NFFC 24,680 attendance was 10th highest in the Championship with some traditional big clubs leading the way, e.g. #AVFC 32,097 & #LUFC 31,525. Ticket prices were again frozen in 2018/19, including some positive ticket pricing initiatives, e.g. free/cheap tickets for young fans.

Commercial income was unchanged at £5.2m. Few Championship clubs earn big money commercially (highest #LUFC £16m and #NCFC £13m), but it is still disappointing that a club with #NFFC’s great tradition (two European cups) is towards the lower end of the division.

This maybe explains why #NFFC have changed both their main sponsorship deals in 2018/19: (a) BetBright replace 888Sport as shirt sponsor; (b) Macron replace the Adidas kit deal. No financial details were divulged, but deals described as “most significant in the club’s history”.

#NFFC wage bill was cut by 5% (£1.5m) from (restated) £29.2m to £27.7m with number of staff falling from by 10 to 197 (all non-playing). Allied with the revenue growth, this has reduced the wages to turnover ratio from 140% to 122%. Second year in a row that wages have fallen.

As a consequence, #NFFC £28m wage bill is in the bottom half of Championship, around the same level as Bristol City £27m. To underline the magnitude of new manager Martin O’Neill’s challenge, it was miles below #Boro £49m, Cardiff City £48m, #NCFC £42m and even #BCFC £39m.

Although #NFFC have managed to reduce their wages to turnover ratio from 177% in 2014 to 122% in 2018, this is still among the highest (worst) in the Championship, last year only below #BCFC 202% (the “Redknapp effect”) and Cardiff City 139% (including hefty promotion bonuses).

#NFFC player amortisation increased from £2.0m to £3.2m. This had fallen from £6.4m in 2015, due to the club being given a transfer embargo impacting three windows for previous FFP misdemeanours, so player purchases pretty much dried up.

Despite the growth, #NFFC player amortisation of £3m is one of the smallest in the Championship. To place this into context, it is only around an eighth of big-spending #Boro and #AVFC, both £24m.

#NFFC spent just £7m on players in 17/18 (including Murphy, Cummings, Bridcutt & Darikwa), one of the lowest in the Championship, though more than prior season’s £5m. As a comparison, #Boro splashed out £66m, while the majority of clubs that have reported to date spent £12-17m.

#NFFC gross spend on players over the last 3 years was obviously impacted by the FFP transfer embargo for 3 windows, so annual average was only £2.5m. However, since these accounts, club spent around £25m last summer, including Joao Carvalho £13m and Lewis Grabban £6m.

#NFFC gross debt fell from £42m to £31m, comprising £22m from the new Greek owners, £8m promissory notes and £1m owed to other related parties. Debt would have been considerably higher without capitalising £70m of debt and writing-off £63m of loans.

#NFFC £31m debt is not that large for the Championship, and is considerably lower than some clubs, e.g. #Boro £101m, #ITFC £89m and Cardiff £74m. However, there is no mention of the old Al-Hasawi debt (£19m in last year’s accounts), though this may be included in Other Creditors.

Although debt is often high in the Championship, most of it is provided by owners who charge little or no interest, e.g. #NFFC had no interest payments in 2017/18, while the highest was #HCAFC with only £3.1m.

#NFFC had a small positive cash flow in 2017/18, but only thanks to £13m additional loans. The club lost £10m from operational activities, spent £1m on infrastructure and broke-even on player sales and purchases.

The reality is that #NFFC is still “dependent on funding from its parent company”. Since 2005 the various owners have pumped just under £160m into the club. The vast majority of that (£142m) has been used to simply cover operating losses with only £9m on improving infrastructure.

#NFFC should not have any immediate FFP problems. Can exclude academy, community & infrastructure (estimated at £4m a year), though likely EFL will also deduct loan write-offs (as they did for QPR). Over last 3-year monitoring period, FFP losses were £27m against the £39m limit.

#NFFC have announced plans to redevelop the stadium, increasing capacity by 8,000. This will include a museum and a new club shop, while club will look to increase revenue via improved hospitality and executive boxes. Building work will commence at end of 2019/20 season.

This is evidence of the commitment the new owners are showing to #NFFC, though funding details are not yet clear. Evangelos Marinakis is also the owner of perennial Greek champions Olympiacos, where he has a reputation for frequent changes of manager (amongst other things).

There are some signs that #NFFC are moving in the right direction after the fairly disastrous Al-Hasawi era, though the Championship is incredibly competitive, so there is no guarantee of success, especially as Forest are in the bottom half of the table on most financial metrics.