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Swansea City’s 2017/18 financial results covered a “difficult” season when they finished 18th, so were relegated to the Championship after 7 consecutive years in the Premier League. They had 3 managers: Paul Clement, Carlos Carvahal and Graham Potter. Some thoughts follow #Swans
#Swans made a loss before tax of £3.2m, compared to a prior year profit of £13.4m, representing a £16.6m deterioration, as revenue fell £1m from £128m to £127m, though profit on player sales was up £9m to £46m. After tax, the club went from a £13.0m profit to a £2.9m loss. 
#Swans £1m revenue fall was very largely driven by broadcasting’s £4.7m (4%) decrease from £109.4m to £104.7m, due to less prize money for a lower league position. In contrast, commercial rose £3.8m (35%) from £10.7m to £14.5m, while match day was flat at £7.4m.
#Swans loss driven by: (a) significant investment in the squad, leading to player amortisation rising £13m (53%) to £37m; (b) once-off costs: £15m write-down of player values, £1.7m onerous contracts. However, wages dropped £10m (10%) to £89m. Other expenses up £4m (16%) to £31m.
#Swans have been profitable 5 times in their 7 Premier League seasons, but they have posted losses twice in the last 3 years. Talking about 2018/19, chief operating officer Chris Pearlman warned, “We’re not going to make any money this year, we’re going to lose money.”
#Swans note that player trading is the “primary source” of income, evidenced by £83m profits on player sales in last 2 seasons. Excluding this, underlying loss has increased 4 years in a row. This season will be boosted by sales of Alfie Mawson, Federico Fernandez & Sam Clucas.
That said, #Swans EBITDA (Earnings Before Interest, Tax, Depreciation & Amortisation), considered a proxy for cash operating profit, as it strips out player sales and once-off items,, improved from £3m to £7m, though this is a lot lower than the £23m peak in 2014.
However, #Swans EBITDA of £7m was one of the smallest in the Premier League, only above Everton £7m, Southampton £6m and Stoke City £4m. For more perspective, it’s only around half of Watford, Bournemouth, WBA and Crystal Palace.
#Swans revenue nearly doubled in the Premier League from £65m in 2011 to £127m. Almost of all of this £62m growth has come from TV £56m (new deals in 2014 & 2017). Club noted that relegation has resulted in revenue falling by £65m, which Pearlman described as “a pretty big drop.”
#Swans had the 18th highest revenue in England, exactly in line with their final league position, only ahead of Huddersfield Town and WBA £125m, around the same as Watford and Stoke City. For more context, they were a quarter of a billion below 6th placed Tottenham.
Even after the estimated £65m revenue reduction in 2018/19, the resulting £62m would have still placed the #Swans in the top 4 clubs in the 2017/18 Championship, behind Aston Villa £69m and Sunderland £64m, but around the same level as Middlesbrough and Norwich City.
It is also worth noting that #Swans £127m places them just outside the Deloitte Money League, only £6m below 30th placed Benfica £133m.
#Swans broadcasting revenue fell £4.7m (4%) from £109.4m to £104.7m, which was the 8th highest in the top flight. Premier league distribution is fairly equitable, but European money can make a big difference, e.g. the Champions League entrants earned between £36m and £72m.
#Swans TV money from Premier League fell £4.7m from £103.2m to £98.5m, as finishing 18th compared to 15th in the previous season meant that the merit payment halved from £11.6m to £5.8m.
Nevertheless, a hefty 83% of #Swans revenue came from TV (£105m out of £127m), though in fairness it should be noted that no fewer than 12 of the 20 Premier League clubs get more than 75% of their income from this source, with Bournemouth “leading the way” with an amazing 89%.
After relegation #Swans benefited from a £42m parachute payment in 2018/19, but total TV revenue of £45m will be around £55m lower than PL. On the other hand, most Championship clubs only receive £8m. Parachute will drop to £34m in 19/20, then £15m in 20/21 (if not promoted).
#Swans match day income was unchanged at £7.4m, which is slightly puzzling, given that they had 4 more home games, while average attendance was unchanged. This was the 4th lowest in the Premier League, only above Burnley, Bournemouth and Huddersfield Town.
#Swans average attendance was basically flat at 20,623. Their advance through the leagues had been matched with growth in attendances, facilitated by the move to the Liberty Stadium in 2005. Crowds have unsurprisingly fallen in the Championship to 18,456.
#Swans 20,623 attendance was 3rd lowest in the top flight, only ahead of Watford & Bournemouth. Early Bird season ticket prices for 2019/20 have been reduced, the 7th consecutive season of no price increases. After a cut in 2015, tickets are cheaper than 2012/13.
#Swans bought the land at the south end of the stadium for £1.4m, while acquiring 100% of the company responsible for the Liberty Stadium management. These will facilitate stadium capacity expansion, but this would only be considered after a return to the Premier League.
#Swans commercial revenue rose £3.8m (35%) to £14.5m, mainly due to “additional sponsorship gains”. Comprised £12.0m commercial income & £2.4m other. This was 15th highest in the Premier League, sandwiched between WBA £15m & Burnley £12m. Very likely to fall after relegation.
#Swans 2017/18 shirt sponsor was LeTou for £4.5m a year, but from 2018/19 there is a new deal with Bet UK. They have a long-term kit supplier agreement with Joma. Low Cost Vanda are shorts sponsor. Barracuda Networks were the first sleeve sponsor in 2017/18.
#Swans wage bill fell 10% (£10m) from £99m to £89m, having excluded £1.7m onerous contracts provision from reported £90.7m. Figures likely to include payouts to numerous sacked managers. Wages spiraled out of control: up £54m (160%) since first year in Premier League in 2012.
However, #Swans £89m wage bill was one of the smallest in the top flight, even lower than fellow relegated clubs, Stoke £94m and WBA £92m, as Premier League survival bonuses were not paid. Number of employees up 40 to 409, partly due to taking on stadium management.
In fact, #Swans were the only club whose wage bill decreased year-on-year. It should fall further, as the owners have spoken of the need for “hard medicine” following relegation. Many high earners on loan likely to leave, e.g. Ayew brothers, Borja, Montero and Carroll.
#Swans wages to turnover ratio improved from 77% to 70% (72% including the onerous contracts provision), better than 84% in 2015/16, but much higher than 53% in the first season back in the Premier League. This was the 8th highest (worst) in the top flight.
Remuneration for #Swans highest paid director increased by £21k from £634k to £655k, which is not a great look when all staff (except Graham Potter and the first team squad) have been advised of potential redundancy.
#Swans player amortisation, the annual charge to expense transfer fees, shot up £13m (53%) from £24m to £37m, more than four times as much as the £9m in 2012/13, reflecting the club’s much higher expenditure in the transfer market.
In addition, #Swans booked £15m player impairment charges. Basically, this reduces the value of a player in the books to an amount based on directors’ assessment of achievable sales value. The effect is also to reduce future player amortisation charges.
It has become quite common for clubs relegated from the Premier League to book large player impairment charges. For example, in 2017/18 Stoke City booked £29m, while the previous season Sunderland booked £14m.
#Swans made £55m player purchases in 17/18 (Andre Ayew, Clucas, Bony and Mesa), one of the lowest (and most calamitous) in the PL. This was £9m less than 16/17 £64m, but the £120m total in the last 2 seasons was significantly more than the £69m outlay in the preceding 2 seasons.
#Swans gross transfer spend quadrupled over the last 4 years from an annual average of £10m to £40m, but the owners admitted that “our recruitment strategy hasn’t been good enough” and “fans have every right to be critical about some of the transfer decisions.”
Pearlman added, “I’d be lying to supporters if I said there’s a big chunk of money out there to buy a lot of players, there’s not.” Consequently, it’s no surprise that #Swans accounts state that only £1.6m was spent on new players subsequent to the balance sheet date.
#Swans gross debt increased from £10m to £16m, of which only £1m is from group undertakings. Most is a loan from an “approved financial institution”, repayable in instalments until August 2019. Worth noting that Swansea had net funds in 4 years out of 5 up to 2016.
However, #Swans £16m gross debt was still one of lowest in Premier League, though other creditors, including amounts owed on transfers, increased to £43m. In addition, there are £21m contingent liabilities potentially payable, dependent on player appearances, team success, etc.
#Swans external loans accrue interest at 4.5% a year, though they only actually paid £133k in 2017/18, a fair bit lower than some other clubs who have to pay largish amounts of interest, e.g. Watford £3.3m, Southampton £1.2m and Crystal Palace £0.7m.
#Swans had a £26m cash loss from operations in 2017/18, which was partly covered by (net) £16m from player sales and £4m additional loans. However, £2m infrastructure investment resulted in a net cash outflow of £7m.
In their 7 seasons in the Premier League #Swans generated £82m cash from operations, bolstered by £11m loans. Most was spent on new players £61m, plus £28m on infrastructure and £4m dividends. Unlike many other clubs, there has been no funding from the owners.
#Swans are now in the third season under the control of the American consortium led by Stephen Kaplan and Jason Levien, who own 68% of the shares. To date, these owners have been unwilling (or unable) to put any money in, saying player sales should cover any shortfall.
Pearlman said that #Swans are “in a much stronger position” than they were over the summer, but added, “we cannot roll the dice – we’re losing money.” The club’s strategy is “to work hard to find the right balance between success on the field and prudent financial management.”
