Stoke City’s 2018/19 financial results covered a season when they finished 16th in the Championship following relegation after ten years in the Premier League, featuring two managers, first Gary Rowett, then Nathan Jones from January. Some thoughts in the following thread #SCFC
Despite relegation, #SCFC cut their pre-tax loss from £30m to £15m, even though revenue dropped £57m (45%) from £127m to £71m and profit on player sales fell £4m to £18m, as costs were down £75m, including £28m reduction in impairment (lowering value of players in the accounts). 
The main reason for #SCFC £57m revenue reduction was broadcasting, which more or less halved in the Championship from £101m to £51m, despite parachute payments, though commercial was also down 30% (£6m) to £13m and gate receipts fell 17% (£1.3m) to £6.4m.
To offset the revenue reduction, #SCFC cut the wage bill by £38m (41%) from £94m to £56m, while other expenses were £12m (41%) lower at £17m. However, somewhat surprisingly, player amortisation rose £2m (9%) to £29m.
#SCFC £15m loss is obviously not great, though in fairness very few clubs manage to make money in the challenging Championship environment. Worth noting that the highest losses are often reported by the promoted clubs – though these invariably include hefty promotion bonuses.
#SCFC loss would have been even higher without £18m profit on player sales, second highest in the Championship, mainly from the sales of Xherdan Shaqiri to Liverpool, Ramadan Sobhi to Huddersfield Town and Marc Muniesa to Girona.
Following four consecutive years of (small) profits between 2014 and 2017, #SCFC have now posted losses two years in a row, adding up to £45m in total (£30m in 2018 and £15m in 2019), though worth noting that £31m of this is from impairment (non-cash) adjustments.
#SCFC have traditionally made very little from player sales – averaging just £1m a year in the 6 seasons to 2015. However, in the last 4 years, profit has increased to £15m a season. Per the accounts have only made £1.3m to date this season, though January window still to come.
#SCFC EBITDA (Earnings Before Interest, Tax, Depreciation & Amortisation), considered as a proxy for cash operating profit, as it strips out player sales and exceptional items, fell from £4m to £(3)m, the lowest since 2013 and far below 2017’s record £25m.
In fairness, only three clubs in the Championship managed to generate positive EBITDA, so #SCFC £(3)m was actually one of the better performances, placing them in the top five. To put this into perspective, Birmingham City’s EBITDA was £(30)m.
This is the second year in a row that #SCFC revenue has fallen. It is down by almost a half (£65m) from the club record high of £136m in 2017 to £71m in 2019. Most of the reduction is from TV money £57m, but commercial is also down £7m.
Despite steep decrease, #SCFC £71m revenue is highest to date in 2018/19 Championship (though other relegated clubs Swansea & WBA still to publish accounts) and actually third highest ever in the second tier. This makes their performance on the pitch all the more disappointing.
Obviously #SCFC benefited from £43m parachute payments, which will fall to £34m in 2019/20 and £15m in 2020/21. Swansea City and WBA received the same amount, while Hull City, Middlesbrough and Sunderland got £34m, QPR £17m and Aston Villa £15m.
If parachute payments were excluded, #SCFC £33m would still be among the highest revenues in the Championship, though below Norwich City £34m (in 2018/19) and Leeds United £41m and Aston Villa £39m (in 2017/18).
Even though #SCFC broadcasting income dropped nearly 50% from £101m to £51m following relegation, this was still a lot more than the £8m most Championship clubs received, including £2.5m EFL central distribution and £4.6m Premier League solidarity payment.
Nevertheless, this is a lot less than the TV riches available in the Premier League with revenue distributions ranging from £97m to £152m. That said, #SCFC did earn a chunky £646m from their decade in the top flight.
#SCFC commercial revenue fell 30% (£6m) from £19m to £13m, comprising sponsorship & advertising £5.1m, conference & hospitality £2.7m and other operating income £5.1m. This was 5th highest in the Championship, but a fair way behind Leeds United £22m.
The main driver of the decrease in #SCFC commercial income was sponsorship and advertising, which more than halved from £11m to £5m. Owner bet365 pays a reported £3.2m for shirt sponsorship and also has stadium naming rights. Macron have a 5-year kit deal from 2016/17.
#SCFC wage bill was cut by 41% (£38m) from £94m to £56m, though the wages to turnover ratio still increased from 74% to 79%, as “the club has invested significantly in its playing squad as well as suffering a reduction in overall turnover.” Lowest wages since 2012.
Even though #SCFC wages to turnover ratio worsened from 74% to 79%, this is actually among the lowest (best) in the Championship. In fact, more than half the clubs in this ultra-competitive division have ratios over 100% with Birmingham City 202% “leading the way”.
Although most players’ contracts contained relegation clauses that reduced their wages, #SCFC directors’ remuneration actually increased 21% from £711k to £858k. This was all paid to one director, almost certainly chief executive Tony Scholes.
Surprisingly, #SCFC player amortisation, the annual charge to expense transfer fees over the length of a player’s contract, increased 9% (£2.5m) from £26.5m to £29.0m, which is quite rare after relegation, but reflects further investment in the squad.
As a consequence, #SCFC player amortisation of £29m is by far the highest in the Championship. As a comparison, it was 20% more than the highest charges from the previous season, namely Middlesbrough and Aston Villa with £24m.
One reason for #SCFC lower loss was they only booked £2m impairment charge, compared to £29m the prior season. It is fairly common for clubs relegated to the Championship to review the value of their players, partly due to allowable FFP losses being higher in the Premier League.
However, #SCFC have turned off the taps this season with only £6m spent to date, compared to an annual average of £48m over the previous four seasons. Over the same periods, net spend has dropped from £27m to £5m, though club may well move some players on in January.
#SCFC gross debt increased by £19m from £123m to £141m, all ultimately owed to the Coates family. The good news is that Stoke have no bank debt, but the “friendly” debt with their owners has shot up by around £82m over the past three years.
In fact, #SCFC gross debt of £141m is by far the highest in the Championship. The closest challengers were Middlesbrough £101m, Ipswich Town £96m and Sheffield Wednesday £79m.
However, the #SCFC debt picture is a little misleading, so long as the Coates family continues to provide support. The fact that their loans are interest-free gives Stoke a competitive advantage against a number of their rivals, who have to pay interest on their loans.
In 2018/19 #SCFC made £9m cash loss from operations, but still spent net £24m on players (purchases £51m, sales £27m) plus £0.6m on capital expenditure and £0.8m tax. The Coates family put in a further £19m, but this still meant a net £16m outflow, reducing cash from £22m to £6m.
Since 2009 #SCFC have had available cash of £221m: (a) £155m from owners’ loans; (b) £61m from operating activities (negative last two years). Virtually all of this has been invested in the squad with £214m (97%) spent on players, albeit with mixed results.
Chief executive Tony Scholes said #SCFC “don’t like the (FFP) rules. We think they’re wrong and ill conceived.” However, manager Michael O’Neill admitted, “We have restrictions. We have Financial Fair Play to deal with.” This effectively means player sales and/or loans.
FFP is assessed over 3-year period (the current season plus previous two seasons). Annual allowable loss is £13m in Championship and £35m in Premier League, so #SCFC maximum FFP loss was £83m in 2018/19, falling to £61m in 2019/20 and £39m in 2020/21 (if not promoted).
It should be noted that FFP losses can exclude academy, community & infrastructure, which I estimate as £7m for #SCFC. Based on my projections, they were fine in 2018/19 and should also be OK this season, but will be in a bit of trouble in 2020/21 (unless promoted).
Given these financial constraints, it would not be overly shocking if #SCFC were to offload some high earners in the January transfer window. There have been media reports that the likes of Badou Ndiaye, Jack Butland and Joe Allen might be leaving.
Based on the financials, #SCFC should really have done much better in 2018/19, as their revenue, wages and player purchases were among the highest in the Championship. Supporters will be hoping that the arrival of new manager Michael O’Neill heralds a change in fortunes.
