Thread by @SwissRamble

Sheffield United’s 2018/19 financial results covered a season when they finished second in the Championship, securing automatic promotion to mark a remarkable rise from League One to the Premier League in 3 years under Manager of the Year Chris Wilder. Some thoughts follow #SUFC

These accounts cover the final year of #SUFC co-ownership between Kevin McCabe and Prince Abdullah. Since then the High Court has ruled that McCabe must sell his 50% share to the Prince for £5m. As a result, the club will purchase the stadium and training facility for £43.5m.

#SUFC loss increased from £2m to £21m, reflecting the “exceptional cost of promotion to the Premier League”. Revenue rose 4% (£0.8m) to £21m, while profit on player sales was up £6m (69%) to £14m, but this was more than offset by £26m of cost growth.

#SUFC £0.8m revenue growth was driven by broadcasting, which was up £0.5m (7%) to £8.3m, and commercial, up £0.4m (6%) to £6.7m. Match day was basically flat at £5.9m. Note that the club restated its revenue split in the prior year comparative.

#SUFC wage bill more than doubled from £19m to £41m, largely due to significant (though unquantified) promotion bonuses. Similarly, player amortisation and impairment rose £1.3m to £3.5m, other expenses increased by a third to £11m and net interest payable was up £0.6m to £0.7m.

Although #SUFC £21m loss is obviously not great, most clubs lose money in this division and the other two promoted clubs lost far more: #AVFC £69m and #NCFC £39m. As Chris Wilder said, “The Championship is quite the mess in terms of overspend and chasing glory.”

#SUFC loss would have been higher without £14m profit on player sales, mainly David Brooks move to #AFCB. Board said player trading “represents a key element of our strategy to be a self-sustaining club.” However, a lot lower than Bristol City £38m, #Boro £33m and Swansea £30m.

#SUFC have consistently lost money since relegation from Premier League in 2007. In fact, they only reported a profit once in the last decade – and the £31m profit in 2014 was thanks to a £35m loan write-off. Excluding that adjustment, club has made £76m losses in those 10 years.

#SUFC profit from player sales has increased in last 2 years, totaling £23m, including sell-on fees for Harry Maguire and Kyle Walker. This is almost as much as the previous 8 years combined (£24m). However, the club said transfer fees only contributed £4m in 2019/20.

#SUFC EBITDA (Earnings Before Interest, Tax, Depreciation & Amortisation), a measure of underlying profitability, as it strips out player sales and once-off items, slumped from £(7)m to £(31)m in 2018/19, again due to the promotion bonuses.

To be fair, only four Championship clubs have managed to achieve positive EBITDA in 2018/19, but #SUFC £(31)m was the second worst in the Championship, only behind #AVFC £(54)m, who were also adversely impacted by promotion bonuses.

#SUFC revenue of £21m is almost twice as much as the £11m they reported in League One just two years ago, but this will pale into insignificance compared to the £150m+ that they should get in the Premier League (COVID-19 permitting).

The last three clubs promoted to the Premier League saw an average increase in their revenue of £112m, though #WWFC £146m growth might be a better comparative for #SUFC, as they were the only club without parachute payments (and they also did very well in the top flight).

Despite the increase in 2018/19, #SUFC £21m revenue was firmly in the bottom half of the Championship, less than a third of clubs benefiting from parachute payments, such as WBA £71m, Stoke City £71m and Swansea £68m. This makes their promotion achievement even more impressive.

Championship revenue is hugely influenced by Premier League parachute payments with WBA, Stoke and Swansea leading the way with £43m. Wilder is not a fan: “They are not used to bail clubs out. They are transfer funds. Nothing more, nothing less for the vast majority.”

If parachute payments were excluded, #SUFC £21m revenue would have still placed them in the bottom half of the Championship. In fact, their revenue would have been less than half of Leeds United £49m and Aston Villa ££43m.

#SUFC broadcasting income rose £0.5m (7%) to £8.3m, including £2.5m EFL distribution and £4.6m PL solidarity payment. The Blades benefited from their games often being shown live, but the sums involved are not that much: £100k home, £10k away.

Obviously promotion will see a significant increase in #SUFC TV money. In 2018/19 #LFC received £152m, while #HTAFC got £97m. However, United should get even more, partly from higher overseas rights in 2019/20, partly due to their (current) 7th place – estimated at £138m.

#SUFC match day income was slightly (1%) down at £5.9m, as they played one home cup game less. This was almost exactly mid-table in the Championship, less than half of #AVFC and #LUFC £13m. Note: prior year restated down from £8.7m (offset in commercial).

#SUFC attendances (somewhat surprisingly) fell from 26,854 to 26,177, though this was still around 50% higher than the 17,507 low in League One in 2013/14. The club’s potential is shown by crowds approaching 31,000 in the Premier League this season.

#SUFC average attendance of 26,177 was the 5th largest in the Championship, only surpassed by #AVFC, #LUFC, #NFFC and #DCFC. Also higher than 6 clubs in the Premier League. Ticket prices were increased by 11% following promotion, but still cheapest in the top flight.

#SUFC commercial income rose £0.4m (6%) to £6.7m, comprising sponsorship & advertising £3.0m and facility £3.7m. This is pretty low, only a quarter of #LUFC £27m. However, the Board spoke of “an enormous commercial revenue opportunity” in the Premier League.

#SUFC kit deal is with Adidas since 2014, while the main shirt sponsor has changed twice in last two years: in 2018/19 Ramsdens Financial replaced Teletext Holidays, but was in turn replaced by Union Standard Group this season in a deal reportedly worth £3.5m (including sleeve).

#SUFC wage bill more than doubled, rising from £19m to £41m, because of investment in the squad and “bonuses payable due to the success of this investment”, namely promotion. Wages were four times as much as the £10m paid two years ago when they won League One.

Despite the steep increase, #SUFC £41m wage bill was still only 8th highest in the Championship in 2018/19 (to date), around the same level as Reading. To underline how much the club has outperformed under Wilder, it was miles below #AVFC £83m, Stoke City £56m and #NCFC £51m.

However, some might be surprised to see that #SUFC £41m wage bill is actually the 5th highest ever in the Championship for clubs not benefiting from parachute payments, though a fair way below #NCFC and #WWFC £51m, who both also included substantial promotion bonuses.

Due to those promotion bonuses, #SUFC wages to turnover ratio increased from 95% to 195%, the highest (worst) in the Championship. That said, more than half of the clubs in this very competitive division have ratios over 100% - without achieving promotion.

No #SUFC directors received remuneration (only £13k the previous year), which is in stark contrast to the likes of Reading £1.4m, Birmingham City £932k, #NFFC £932k and Stoke City £858k, none of whom won promotion.

#SUFC player amortisation, the annual charge to write-down transfer fees over a player’s contract, rose from £2.0m to £3.5m, significantly higher than the £0.3m booked in 2014.

Despite this growth, #SUFC player amortisation of £3.5m is still one of the smallest in the Championship, miles below bigger-spending clubs like Stoke City £29m, Swansea City £28m, #Boro £26m and #AVFC £26m. Will significantly increase after last summer’s spending.

#SUFC cannot be accused of buying success, spending just £7m on players in 2018/19, one of the lowest in the Championship, including John Egan & Oliver Norwood. As a comparison, Stoke City splashed out £67m. In fact, United only spent £14m on players in 4 years before promotion.

Before promotion, #SUFC had net sales in 8 of the last 10 seasons with the highest annual net spend in that period just £1.2m in 2014/15. In fact, highest net sales were in last 2 years. However, spent £60m on players this season, including Berge, McBurnie, Mousset & Robinson.

M#SUFC gross debt increased from £2m to £4m, mainly “soft” loans from the owners. This would have been much higher without the owners writing-off £35m debt and converting £27m of debt to equity. Also only owe £6m in transfer fees (£5m net of receivables).

#SUFC £4m debt was one of the lowest in the Championship, far below the likes of #BRFC £142m, Stoke City £141m, #Boro £105m, Birmingham City £97m and #ITFC £96m, though this is largely provided by owners. After the year-end took out loans with Macquarie bank against TV money.

Although debt is high in the Championship, most of it is provided by owners who charge little or no interest. #SUFC £699k was the 6th highest in the division, but still not particularly onerous.

#SUFC lost £9m cash from operating activities in 2018/19, though this was compensated by £9m net player sales. They also invested £1.3m in infrastructure (Bramall Lane stadium) and made £0.7m interest payments, which was largely funded by £1.5m from the owners.

As a consequence, #SUFC cash balance fell to £0.9m, which is one of the smallest in the Championship. In fairness, 15 clubs in this division had less than £2m cash in the bank, so this is not that unusual (albeit not great in the current shutdown).

Since 2013 #SUFC’s available cash of £46m was split between owner financing £23m and £20m net player sales. Most of this (£29m) was used to cover operating losses, while the club also spent £11m on loan/interest payments, plus £5m on infrastructure investment.

Note that the 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, wages, P&L and debt numbers are almost the same for these two companies, so it’s a reasonable proxy.

#SUFC have no FFP issues, as they were comfortably within the £39m maximum loss over the 3-year monitoring period, even before deducting allowable expenses for academy, community & infrastructure (£3m a year) and the promotion bonuses (estimated at £12m).

As a result of COVID-19, #SUFC playing squad plus Wilder and his coaches have agreed a 10% wages deferral for six months. Some non-playing staff have been put on furlough, though the club said they would continue to be paid in full.

Apart from the pandemic, this has been a glorious period for #SUFC. There is much to admire about their strategy. Despite their financial limitations, they have delivered on the pitch under Wilder, even with board room issues, and are genuinely competitive in the Premier League.