Thread by @SwissRamble

West Bromwich Albion’s 2018/19 financial results covered a season when they finished 4th in the Championship following relegation, losing in the play-offs semi-final. Manager Darren Moore replaced by James Shan in March, followed by Slaven Bilic in June. Some thoughts follow #WBA

#WBA managed to hold pre-tax losses at £7m, despite a “significant” £54m (43%) reduction in revenue from £125m to £71m, as they cut expenses by £50m and increased profit on player sales by £4m to £10m. After tax, the loss remained at £6m, thanks to a £1m tax credit.

The main reason for #WBA £54m revenue reduction was broadcasting, which nearly halved in the Championship, falling from £102m to £53m, though commercial also decreased £5m (30%) to £11m, while gate receipts were only down £0.1m (2%) to £7.3m.

To offset the steep revenue reduction, #WBA cut the wage bill by £45m (49%) from £92m to £47m, mainly due to relegation clauses, while player amortisation and impairment was down £2m (8%) to £23m and other expenses decreased £3m (15%) to £16m.

#WBA £7m loss is not great, but it is actually one of the better financial performances in the Championship, as 13 clubs have to date reported higher losses, including 6 above £20m. Highest losses often at promoted clubs, e.g. #AVFC £69m (including hefty promotion bonuses).

In fact, the situation in the Championship would have been even worse without the inclusion of once-off property sales in some clubs’ accounts for their stadium, training ground or land, most notably at #DCFC £40m, #SWFC £38m and #AVFC £36m.

Excluding these once-off property sales, only 5 clubs in the Championship would have posted profits, led by Bristol City and Brentford with £11m. The other profitable clubs were only just above break-even. On this basis, #WBA £7m loss was actually 8th best result in the division.

#WBA profit on player sales rose from £6m to £10m, including Chadli to Monaco, McClean to Stoke City, Evans to #LCFC and Foster to Watford. This was pretty good for the Championship, but a lot lower than Bristol City £38m, #Boro £33m, Swansea £30m and Brentford £27m.

Up until 2018, #WBA had not made a loss since 2009, so they have been profitable an impressive 8 times in the last decade, though have now lost money in the last 2 seasons. In that period the club accumulated £83m of profits, but around half of this (£40m) came in 2017 alone.

Like many other clubs, #WBA have become increasingly reliant on player sales with the average annual profit rising from £5m to £10m in the last 3 years. This trend has continued in 2019/20, which will include £36m sales proceeds (Rondon, Rodriguez, Dawson and Rogers).

#WBA EBITDA (Earnings Before Interest, Tax, Depreciation & Amortisation), considered a proxy for cash operating profit, as it strips out player sales and once-off items, fell from £13m to £8m. The £45m peak in 2017 was somewhat of an outlier for the club.

Despite this decrease, #WBA EBITDA of £8m was the second highest in the Championship, only surpassed by Hull City £14m. In fact, only 4 clubs managed to generate positive EBITDA with most reporting large negatives, e.g. #AVFC £54m, #SUFC £31m, Reading £31m and #NFFC £26m.

#WBA revenue has basically halved from the recent high of £138m in 2017 to £71m in 2019, almost entirely due to less TV money in the Championship. Unless Albion are promoted, this will continue to fall as parachute payments tail off (by £8m in 2020 and £19m in 2021).

Even after this significant decrease, #WBA £71m revenue was still the highest in the Championship, just ahead of Stoke City £71m and Swansea City £68m. In other words, the three clubs most recently relegated from the Premier League enjoyed the most revenue.

Obviously, #WBA benefited from £43m parachute payments, which will fall to £35m in 2019/20, £16m in 2020/21 and nothing in 2021/22. Stoke City and WBA received the same amount, while Hull City, Middlesbrough and Sunderland got £35m; QPR £17m; and Aston Villa £16m.

If parachute payments were excluded, #WBA £33m would still be among the highest revenues in the Championship, though they would be behind Leeds United £49m, Aston Villa £43m and Norwich City £34m.

Even though #WBA broadcasting income dropped 48% from £102m to £53m 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 in 2018/19. That said, #WBA have earned nearly £700m from the PL in the last 14 years, of which 4 were outside the top flight.

#WBA gate receipts were “relatively static” despite relegation, falling just 2% to £7.3m, as there were 4 more home league games plus a play-off semi-final. This was the 7th highest in the Championship, though a fair way below the £13m at #AVFC and #LUFC.

#WBA average attendance fell from 24,520 to 24,148, which was pretty good following relegation, and 2,000 more than the last time the club was in the Championship, when crowds dropped to 22,000.

#WBA attendance of 24,148 was the 9th highest in the Championship, though a fair way below #AVFC 36,027 and #LUFC 34,033. Following relegation, there were “major price reductions” in season ticket prices for 2018/19 – the “cheapest for 10 years”.

#WBA commercial revenue fell £4.6m (30%) from £15.3m to £10.7m, as “the commercial realities of not being in the Premier League took hold”. Seventh highest in the Championship, but miles behind the likes of Leeds United £22m, Aston Villa £18m and Bristol City £16m.

#WBA had two new principal sponsorship agreements in 2018/19: Ideal Boilers replaced Palm Eco-Town Development in a 2-year deal, since extended to 2021; while Puma replaced Adidas as kit supplier in a multi-year deal. 12Bet also moved from sleeve sponsor to back-of-shirt.

#WBA wage bill was almost halved from £92m to £47m, mainly due to relegation clauses and the sale of some high earners, though headcount was much the same. This is the club’s lowest wages since £44m back in 2011.

Despite the steep decrease, #WBA £47m wage bill is still 5th highest reported to date in the 2018/19 Championship, though a long way behind #AVFC £83m. Also below the two other clubs relegated from the Premier League in 2017/18, namely Stoke City £56m and Swansea City £48m.

That said, it is the 17th highest ever in this division, as the board “decided that as strong as possible a squad should be retained in order to enhance the prospects of an immediate return to the Premier League” – a strategy that very nearly worked (and may well do this season).

#WBA wages to turnover ratio actually decreased from 74% to 66%, one of the lowest (best) in the Championship, as more than half of the clubs here have ratios over 100%. Parachute payments have helped, but still better than fellow relegated clubs, Stoke City 79% and Swansea 70%.

#WBA total directors’ remuneration also fell from £1.2m to £953k, though this was 2nd largest in the Championship, only below Reading £1.4m. However, remuneration for the highest paid director rose from £219k to £437k, maybe linked to the return of chief executive Mark Jenkins.

#WBA player amortisation, the annual charge to write-down transfer fees over a player’s contract, fell £2.7m (10%) from £25.4m to £22.7m, though this is still much higher than the £17m two years ago. In fact, it was only £3m in 2014.

Even after this decrease, #WBA player amortisation of £23m was the 5th highest in the Championship, only below the other relegated clubs, Stoke City £29m and Swansea City £28m, plus #Boro and #AVFC, both £26m.

#WBA player purchases fell from £46m to £13m, mainly Sam Johnstone from #MUFC and Kyle Bartley from Swansea City. However, club has still spent £144m in last 5 years. Massively outspent by Stoke City £67m, #AVFC £31m and #NFFC £23m.

#WBA net transfer spend surged in last 4 years in the Premier League, averaging £26m, compared to £3m under Jeremy Peace. However, this dropped to £11m net sales in last 2 year in the Championship. Club targeting recruitment of younger talent and integration of Academy players.

#WBA gross debt was unchanged at £24m, all owed to the owners (unsecured, no fixed repayment date). The club agreed an overdraft facility with Barclays in January 2019, but this was not utilised, so not replaced once finished in July 2019.

#WBA £24m debt was firmly in the bottom half of the Championship, far below the likes of #BRFC £142m, Stoke City £141m, #Boro £105m, Birmingham City £97m and #ITFC £96m, though this has largely been provided by owners.

The loans provided by #WBA owners are interest-free, which gives them a competitive advantage against those clubs who have to pay interest, though the highest in the Championship is only £2.4m. Most debt is provided interest-free by club owners.

#WBA also have £19m transfer debt for outstanding stage payments, though are in turn owed £18m by other clubs, so the net payable is only £1m. In addition, there are £13m potential contingent liabilities, based on number of appearances and future events.

For years #WBA have been self-sustaining with no need for additional loans or more share capital, but since 2018 they have had to eat into cash balances. In 2019 they had £6m negative operating cash flow, spent £3m (net) on players and £1m tax credit, giving £8m net cash outflow.

As a consequence, #WBA cash balance fell from £9.1m to £1.2m, mid-table in the Championship. In fact, 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). West Brom down from £39m in 2017.

In the last 7 years #WBA have generated an impressive £115m from operations, supplemented by £22m of owner loans. Of this, £91m was spent on players (net), £27m on a mysterious dividend in 2016, £11m tax and £7m capex.

It is striking that owner Guochuan Lai has not put any more money into #WBA since the £175m he paid to acquire the club in September 2016. In fairness, that is not unusual at West Brom, but it is relatively uncommon in the Championship.

As a technical note, this analysis is based on West Bromwich Albion Football Club Ltd, while the ultimate parent company is West Bromwich Albion Holdings Ltd. There are no differences in revenue or wages, though there is no debt in the holding company.

Following the huge 2017 profit, #WBA currently have no issues with FFP, but Jenkins cautioned, “If the club remains in the Championship for a prolonged period, this will have a direct impact on the trading practices and wage structures to which the club will adopt and commit.”

#WBA fans want an investigation into a £3.7m loan made to former owner Jeremy Peace, since transferred to Lai as part of the 2016 takeover. Lai acknowledged the £4.1m debt (including interest), but said he could not repay it at the moment, due to Chinese government restrictions.

In response to the financial challenges posed by COVID-19, #WBA chief executive Mark Jenkins has taken a 100% cut for the duration of the lockdown, while other senior managers have also agreed a significant reduction. Pledged that non-playing staff wages will not be impacted.

#WBA have managed the big decrease in revenue following relegation from the Premier League pretty well, compensating by cutting costs and selling players, but still challenging. Currently in 2nd place, 6 points ahead of 3rd, they will be hoping that the season is concluded.