Birmingham City’s 2018/19 financial results covered a season when they finished 17th in the Championship after being deducted 9 points by the EFL for breaches of Profitability and Sustainability rules. Manager Garry Monk replaced by Pep Clotet in June. Some thoughts follow #BCFC
#BCFC loss before tax improved from £37.4m to “only” £8.4m, primarily as a result of £17.2m profit on the sale of the stadium, though revenue rose £4.2m (22%) from £19.1m to £23.3m, while profit on player sales doubled from £2.1m to £4.4m and wages fell £5.8m (15%) to £32.8m. 
Almost all of #BCFC £4.3m revenue growth came from commercial, which increased £3.7m (57%) from £6.5m to £10.2m, though there were also some small increases in other revenue streams: broadcasting was up £0.4m (6%) to £8.0m, while match receipts were £0.1m (2%) higher at £5.2m.
As well as the £5.8m reduction in wages, player amortisation/impairment was also cut by £0.5m (6%) to £7.6m and net interest payable dropped £0.4m to £0.5m. On the other hand, other expenses climbed £1.5m (13%) to £12.3m.
As a result of their fancy financial footwork, #BCFC £8m loss was nowhere near the worst reported in the Championship. Very few clubs manage to make money in this extremely competitive division, though largest losses often from promoted clubs – including hefty promotion bonuses.
It looks like newly registered company Birmingham City Stadium Ltd now owns the #BCFC stadium, though this is only an accounting transaction with no cash received. The ground will be leased back to the football club for 25 years at an annual rent of £1.25m.
#BCFC have consistently lost money, only reporting a profit once in the last seven seasons – and that was just £1m in 2014/15. In the last three years, the club has accumulated £62m of losses – or £79m if the stadium sale is excluded.
The only season that #BCFC reported a big profit recently was £16m in 2012, very largely due to £22m of player sales. They have only made £23m from player trading in the 7 years since then, but it will be a much higher figure in 2020 following Che Adams’ £15m move to Southampton.
#BCFC EBITDA (Earnings Before Interest, Tax, Depreciation & Amortisation), considered a proxy for cash operating profit, as it excludes player sales and exceptional items, improved from £(30)m to £(21)m, though this is still the second worst performance in the last decade.
Following last season’s £4.2m (22%) increase, #BCFC revenue has now grown for 3 consecutive years. The 2019 £23.3m revenue is now higher than the £21.0m reported in 2015 – the last year when they received a parachute payment. Mainly driven by commercial income more than doubling.
Despite this growth, #BCFC £23m revenue is still firmly in the bottom half of the Championship, around the same level as Nottingham Forest. However, for some perspective, the Blues’ revenue was less than a third of Stoke City’s £71m
Of course, it’s difficult to compete with clubs receiving Premier League parachute payments. In 2018/19, Stoke City, Swansea City and WBA received £43m, while Hull City, Middlesbrough and Sunderland got £34m, QPR £17m and Aston Villa £15m.
#BCFC broadcasting income rose by £0.4m (6%) to £8.0m, including £2.5m EFL central distribution & £4.6m Premier League solidarity payment. The size of the prize in the Premier League, where clubs receive £97-152m TV money, helps explain clubs spending big in the Championship.
#BCFC have a new shirt sponsor from 2019/20 in the form of Irish bookmakers Boyle Sports, who replaced 888sport after 3 years, while there is also a deal with Sadler’s Brewing Co, whereby the Peaky Blinders logo will be on the back of the shirt. The kit supplier is Adidas
Despite their many issues, #BCFC have now seen their attendance rise 5 years in a row from the 15,457 low point in 2013/14, which reflects very well on their supporters. In fact, the 22,483 attendance last season was the highest since they were last in the Premier League in 2011.
Nevertheless, the #BCFC average attendance at St. Andrews of around 22,500 was only the 11th highest in the Championship, around 13,500 below Villa’s 36,000. Season ticket prices have been frozen for seven successive seasons.
#BCFC wage bill fell £5.8m (15%) from £38.6m to £32.8m, though the prior season was inflated by severance payments for departing managers. Despite the reduction, this is still more than twice as much as £15.3m wages just 3 years ago in 2015/16. Playing staff down from 107 to 92.
Following the decrease, the #BCFC £33m wage bill is now only mid-table in the Championship, a long way below the likes of Aston Villa £73m, Stoke City £56m and Fulham £54m (all with parachute payments) and Norwich City £51m (including promotion bonus).
The #BCFC wages to turnover ratio dropped from a hideous 202% to 140%. In fairness, more than half of the clubs in the Championship have ratios over 100%, but Birmingham were still in the top (worst) five in the league. More than twice as much as the 67% they reported in 2014/15.
There were again no payments made to #BCFC directors, though remuneration to senior management increased by 37% from £680k to £932k.
#BCFC player amortisation, the annual charge to write-down the cost of transfers, fell slightly to £7.6m, though this expense has risen from just £0.4m in 2014/15, reflecting the significant investment in the squad.
Despite the growth, #BCFC player amortisation of £7.6m is still only mid-table in the Championship, less than a third of big-spending Stoke City £29m, Middlesbrough £24m and Aston Villa £24m.
#BCFC player purchases of £7m were less than half of prior season’s £15m (£12m in 2016/17). Included the controversial acquisition of Kristian Pedersen, despite restrictions applied by the EFL. Massively outspent by Stoke City £67m, though not far behind promoted Norwich £9m.
#BCFC net transfer spend rose in 2017 £9m and 2018 £12m, as Board allowed Zola and our old friend Harry Redknapp to splash the cash, before EFL restricted transfers in 18/19 to £2m following FFP breach. Net sales of £10m in 2020, while Jude Bellingham could go for big money.
#BCFC gross debt increased by £24m from £73m to £97m, all owed to the club’s parent company BSHL (not repayable in next 12 months). Debt has grown by a worrying £81m in the last 3 years. The club also owes £5m on transfers plus contingent liabilities of £4m.
Unsurprisingly, #BCFC £97m debt is one of the largest in the Championship, only behind Stoke City £141m and Middlesbrough £101m. The debt is not an issue – so long as the owners continue to provide support. It is unsecured and interest-free, though repayable on demand.
#BCFC made a £549k interest payment relating to transfer fee liabilities. It should be noted that although many clubs in the Championship carry high debt, it is often provided by owners who do not charge any interest.
Parent company BSHL had to provide a further £24m funding in 2018/19. This support is essential, as #BCFC do not generate cash from operating activities, losing £17m last season alone, before spending £7m on player purchases (net), £0.5m interest and £0.4m on infrastructure.
Since 2012 most of #BCFC available cash of £96m came from loans from the owners £88m, boosted by (net) player sales £8m. Over 85% has been used to cover operating losses £81m with just £3m invested in infrastructure and £2m interest. Remainder was used to clear the overdraft.
The accounts state that #BCFC will need £54m additional funding from the owners for the 18 months between July 2019 and December 2020. This would increase the debt to the club’s owners to a hefty £151m.
However, the auditors still note a “material uncertainty” which casts “significant doubt” on #BCFC’s ability to continue as a going concern. They also point to the notification from the EFL about breaches of the Championship Profitability and Sustainability Rules (FFP).
#BCFC have already fallen foul of the EFL’s FFP rules, incurring a 9 points deduction in 2018/19 season following an overspend in the 3-year monitoring period up to 2017/18. After allowable deductions for academy, community & infrastructure, they were £10m above the £39m target.
There is a new EFL charge for #BCFC failing to comply with the previously imposed business plan. It is understood that this relates to the club refusing to sell players below market value in January, realizing more profit in the summer, so it believes that it has a good case.
It is worth noting that the FFP clock has been “reset to zero” for #BCFC, so they will be assessed on one season in 2018/19 (£13m), two seasons in 2019/20 (£26m), then back to three seasons in 2020/21 (£39m).
So #BCFC creative accounting (within the rules, to be clear) solved FFP for 2018/19, as their adjusted FFP loss of £4m was well within the £13m limit. However, if the £17m stadium profit were excluded, the FFP loss would have been £9m above the limit.
To their credit, #BCFC have managed to increase commercial income and reduce their wage bill, but they would have again posted a large loss without the stadium sale accounting trick. The club still needs substantial support from its owners, so is far from being out of the woods.
