#ReadingFC 2018/19 financial results covered a season when the #Royals finished 20th in the Championship for the second consecutive year. Manager Paul Clement was replaced in December 2018 by José Gomes, who was in turn succeeded by Mark Bowen October 2019. Some thoughts follow.
This was the second season that #ReadingFC were under the control of Chinese businessman Dai Yongge (and his sister Dai Xiu Li), who own 95% via Renhe Sports Management Co Ltd. Bowen said, “He has spent a hell of a lot of money on the club and still wants to spend money.” 
#ReadingFC loss increased by £9m from £21m to £30m, despite revenue rising £3m (18%) from £18m to £21m, and increases in profit on player sales (up £1m to £2m) and property disposals (up £2m to £8m). In contrast, other operating income fell £8m to £2m and expenses were up £7m.
#ReadingFC revenue would have been flat without £3m loan of Sone Aluko to a Chinese club controlled by owner Dai Yongge. Otherwise, increases in broadcasting, up £0.5m (6%) to £8.0m, and match day, up £0.5m (13%) to £4.7m, were offset by £0.8m (14%) fall in commercial to £5.3m.
#ReadingFC wage bill increased by £5m (15%) to £41m, while player amortisation/impairment rose £1.1m (13%) to £9.3m and other expenses were up £1m (12%) to £13m. On the other hand, depreciation dropped £1.0m (60%) to £0.7m, while interest payable was £0.1m lower.
Most clubs in the Championship lose money, but it is worth noting that #ReadingFC £30m loss is the 3rd largest announced to date in 2018/19. This huge deficit was only surpassed by #AVFC £69m and #NCFC £39m, whose figures were adversely impacted by hefty promotion bonuses.
In fact, #ReadingFC loss would have been even larger without £8m profit from sale of Hogwood Park training ground (sales proceeds £13m less £5m book value). This follows £7m profit from stadium sale last year at £27m price (much lower than #DCFC £81m, #SWFC £60m and #AVFC £57m).
Renhe Sports now owns the Madejski Stadium, though it has been leased back to the football club for £1.5m annual rent, while the training ground is owned by Sun Elegant Group. These sales are within the EFL rules, but this is still some fancy financial footwork by #ReadingFC.
Excluding these once-off property sales, only 5 Championship clubs would have posted profits, led by Bristol City and Brentford with £11m. The other profitable clubs were only just above break-even. However, #ReadingFC £38m loss would still have been 3rd worst in the division.
#ReadingFC bottom line was not helped by only £2.4m profit on player sales, though higher than £1.4m in 2017/18, mainly Bacuna to Cardiff and Ilori to Sporting. One of the lowest in the Championship, miles behind Bristol City £38m, #Boro £33m, Swansea £30m and Brentford £27m.
#ReadingFC have posted losses in 7 of the last 10 seasons, accumulating an £83m deficit, even managing to lose money in the Premier League in 2013. However, the 2019 loss of £30m is their worst in this period. As Bowen said, “This sums up the erratic way the club has been run.”
Moreover, #ReadingFC losses would have been even higher without £53m once-off gains in past 8 years, including property sales £26m, grants received £10m, loan write-off £9m & disposal of investments £8m. If the “questionable” £3m player loan is also excluded, loss would be £43m.
#ReadingFC have made very little from player sales, averaging around £4.5m a year since 2010. Much poor recruitment has resulted in numerous free transfers in order to get players with high wages off the books. 2019/20 will be no better, as accounts note only £1m sales proceeds.
#ReadingFC EBITDA (Earnings Before Interest, Depreciation and Amortisation), which strips out player sales and non-cash items to give underlying profitability, further fell from £(19)m to £(31)m. The last time this was positive was 2013 – and that was only £3m.
In fairness, only four Championship clubs have managed to achieve positive EBITDA in 2018/19, though #ReadingFC £(31)m was the 3rd highest loss, only “beaten” by #AVFC £(54)m and #SUFC £(31)m.
#ReadingFC revenue has fallen by £16m (43%) in the last 2 years from £37m to £21m, mainly due to parachute payments stopping. The decline would have been even higher without the “friendly” £3m player loan. The club received £71m in parachute payments between 2014 and 2017.
#ReadingFC revenue of £21m is firmly in the bottom half of the Championship, though interestingly around the same level as #SUFC, who managed to secure promotion on this small budget. For context, £50m less than WBA and Stoke City (both £71m).
Championship revenue is hugely influenced by Premier League parachute payments with 8 clubs benefiting in 2018/19, led by Stoke, Swansea and WBA £43m;followed by Hull City, #Boro and #HCAFC £35m; QPR £17m and #AVFC £16m. This makes life really difficult for clubs like #ReadingFC
If parachute payments were excluded, #ReadingFC would have the 14th highest revenue in the Championship, though the top club’s revenue would drop from £71m to £49m (Leeds United). That said, this would still be more than twice as much as the Royals’ £21m.
#ReadingFC broadcasting income rose by £0.5m (6%) to £8.0m, due to increases in the Premier League solidarity payment and EFL pool. The lucrative TV deal in the top flight (with clubs receiving between £97m and £152m) helps explain why so many Championship clubs “go for it”.
#ReadingFC match day income rose £0.5m (13%) to £4.7m, despite a small fall in average attendance and fewer home games, due to receipts from an FA Cup game at Old Trafford against #MUFC. Only 17th highest revenue in Championship, less than half the £13m earned by #AVFC and #LUFC.
#ReadingFC attendance fell from 15,181 to 14,991, which is around 9,000 lower than the 24,000 crowds they attracted the last time that they were in the Premier League. The number of season ticket holders dropped by 13% from 11,586 to 10,052.
Following the decrease, #ReadingFC attendance of 14,991 was the 15th highest in the Championship, a long way below #AVFC 36,027 and #LUFC 34,033. Ticket prices were reduced in 2017/18 and have been largely frozen since then (plus some other reductions).
#ReadingFC commercial income fell £0.8m (14%) to £5.3m. Includes £0.3m from the ground share agreement with London Irish rugby club. This is only 16th highest in the Championship, miles behind the likes of Leeds United £27m, Aston Villa £18m and Bristol City £16m.
#ReadingFC have two new major sponsors from 2019/20: Carabao were replaced by online casino operator Casumo in a 2-year deal; while they signed a 3-year kit supplier deal with Macron, who replaced Puma, who have been with the club since 2004.
#ReadingFC wage bill rose £5.4m (15%) from £35.3m to £40.7m, the highest since the last time in the Premier League in 2013. Wages have grown by 46% (£13m) in the last 2 years, while revenue has fallen by 43% (£16m) over same period, increasing wages to turnover from 76% to 194%.
#ReadingFC £41m wage bill is the 8th highest in the division, meaning the club has badly under-performed. For a comparative, #SUFC had the same wages, though that included substantial promotion bonuses. The club knows that it has to address the issues caused by a large squad.
#ReadingFC wages to turnover ratio improved from 197% to 194%, but that was still second worst in the Championship. Moreover, excluding the £3m “friendly” player loan, it would have been an even more horrific 226%. To be fair, no fewer than 14 clubs are above 100%, but even so.
Given the state of #ReadingFC finances, it is somewhat surprising to see that their directors enjoyed the highest remuneration in the Championship with £1.5m, a fair way ahead of WBA £953k. The highest paid director earned a cool million, up from £640k (£407k in 2017).
#ReadingFC player amortisation, the annual charge to write-down transfer fees over the life of a player’s contract, rose £0.7m (8%) to a club record £8.9m following more player investment. Also booked £442k player impairment, up from prior year’s £69k.
As a consequence, #ReadingFC player amortisation of £8.9m is 9th highest in the Championship, though it is still less than half of (relatively) big-spending clubs like Stoke City £29m, Swansea City £28m, #Boro £26m, #AVFC £26m and WBA £23m.
#ReadingFC spent £8m on players in 2018/19, including Sam Baldock from #BHAFC and Mark McNulty from Coventry, less than half the £19m they spent the previous season. However, still spent £36m in last 3 years. Massively outspent by Stoke City £67m, #AVFC £31m and #NFFC £23m.
For many years #ReadingFC spent little on player recruitment, but have averaged £12m in last 3 seasons (compared to just £4m average in preceding 7 seasons). They again splashed the cash last summer to bring in George Puscas from Inter and Lucas Joao from #SWFC.
#ReadingFC gross debt rose £6m from £62m to £68m, almost entirely owed to the club’s owners. This has nearly tripled from £25m in 2011. In addition, there is around £3m owed for outstanding transfer fees (estimate based on Trade Creditors balance), though £7m owed to the club.
#ReadingFC £68m debt was the 8th highest in the Championship, though this is a fair way below the likes of #BRFC £142m, Stoke City £141m, #Boro £105m, Birmingham City £97m and #ITFC £96m. Most debt in this division is provided by owners of the clubs.
The majority of this owner debt is either interest-free or little interest is charged. In this way, #ReadingFC only paid £44k interest, down from prior year’s £172k. Only 2 clubs in the Championship paid more than a million interest: Hull City £2.4m and Bristol City £1.0m.
#ReadingFC made a large £32m cash loss from operating activities in 2018/19, then spent £1m on players (net) and £1m capital expenditure. This was funded by £35m from the owners (£28m shares and £6m loans). Interestingly, no cash received for the training ground sale.
As a consequence, #ReadingFC cash balance rose from £685k to £917k, 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).
In the last decade #ReadingFC had £157m available cash: £62m loans (mostly from the owners), £53m share capital plus £42m from asset sales. This has mainly been used to cover £106m operating losses, £25m player purchases (net), £9m interest and £9m infrastructure investment.
My model suggests that #ReadingFC are there or thereabouts in terms of FFP compliance, as they can exclude academy, community & infrastructure (estimated at £5m a year). Whether they pass or fail depends on whether EFL allows £11m of loan write-offs and investment disposals.
If these once-off items are excluded, #ReadingFC would be £4m over the £39m losses allowed in the 3-year monitoring period, which is probably why they were given a soft transfer embargo. However, they would definitely not have been compliant without £15m from property sales.
Unless #ReadingFC drastically reduce their wage bill, they will surely have big issues with the EFL’s FFP rules in 2019/20. This has been acknowledged by chief executive Nigel Howe, “One of my challenges next season is the issue of profit and sustainability.”
In response to the financial challenges posed by COVID-19, the #ReadingFC manager and chief executive have agreed to defer a substantial percentage of their wages, though their players are yet to follow suit.
This is an awful set of accounts for #ReadingFC, which would have been even worse without many exceptional sales. Like many other Championship clubs, funding from the owners is vital, though this will not help meet FFP targets. Manager Mark Bowen has a tough task on his hands.
