Upwardly mobile Norwich City show how it can be done
14:28 22 November 2012
Norwich City writer Paddy Davitt digs beneath the club’s impressive financial figures ahead of tonight’s annual meeting to chart the scale of the fiscal fightback
When Norwich City’s hierarchy address the club’s shareholding supporters this evening those record-breaking figures will tell only part of the remarkable story.
The Canaries’ £13.5m annual profit, after tax, for the period covering last season’s Premier League success was the first time in five campaigns a football club which at one stage had peered into the financial abyss had posted a profit; a meagre profit admittedly, but positive figures nonetheless.
The set of accounts covering the 2006/07 season showed a £90,000 uplift on the balance sheet, yet also came attached with stark warnings about addressing losses and countenancing further potential player sales.
How times change. It was the era of Championship mediocrity, an obsession with loan recruits and managerial miscalculations.
The malaise had set in already by that point; it was simply camouflaged by the influx of two £7m parachute payments which softened the impact of failing to retain the club’s Premier League status in 2005. A debilitating, downward spiral brought loss of league status, ever increasing annual losses and reduced turnover opportunities – a footballing equivalent of negative equity.
That masochistic loyalty inherent in supporters kept the turnstiles clicking, but there was a growing disconnect between the terraces and the boardroom; fruitless searches for new investment the common battleground.
When you look back now through the Premier League filter of global brand exposure and multi-billion pound broadcast deals it is difficult to comprehend just how bleak the landscape may have looked for Norwich City if key executive appointments had not occurred in that summer of upheaval following relegation to League One.
The lower tiers of the current football pyramid are full of proud clubs who used to be Norwich’s rivals. Provincial centres like Coventry, Sheffield and Nottingham have all failed to match the Canaries’ revival, and they get further left behind with each passing season of disparity on the balance sheet.
Astute corporate governance by the City board allied to a playing squad and a management team who instilled renewed belief coalesced from 2009 onwards to trigger the long march back to financial vitality.
Debt edged down, turnover bent in a positive direction, but it was the elevation to the Premier League which essentially brought access to revenue streams which remain the preserve of the privileged few.
The highest annual profit in the club’s long history is the headline figure to be formally presented this evening from the most recent set of accounts. Overall debt is no longer a handbrake to sustained progress; reduced from £16.8m to £11.3m year-on-year, with the stated aim to wipe out in the region of another £10m during the current accounting period to ensure the club is virtually free of external debt – save for working capital requirements.
Norwich’s television revenue grew almost ten-fold last season from the estimated £5m windfall in their Championship promotion campaign. Premier League clubs can expect huge fresh increases in revenue with a new domestic deal from 2013/14 onwards already concluded for a combined £3.018bn and lucrative overseas broadcast contracts now up for discussion over coming weeks.
Such footballing inflation has an unwanted by-product - the competition to survive this season will be cut-throat. It is hardly an exaggeration to state Chris Hughton and his squad can not only influence what happens in the present, but for many years to come if they buck the prevailing trend.
The most recent Premier League win over Manchester United embellished a superb run of results which gives supporters fresh optimism after early season difficulties. Chief executive David McNally and chairman Alan Bowkett would expect to field questions this evening regarding the manager’s potential January transfer budget to try and maintain that forward momentum.
Equally, both will reiterate the mission statement of a club adhering to a ‘co-operative’ business model; one which re-invests every spare penny generated into the football side of the operation. Norwich do not have rich benefactors on the scale of Russian oligarchs or Middle-Eastern sheikhs. City’s turbulent recent experience since the last time they traded a profit in 2007 is not that dissimilar to a Coventry City or a Sheffield United. Like the majority of English clubs outside the super elite, they increasingly had to exist beyond their means as ever-declining income and revenue streams failed to keep pace with player inflation.
City’s relative success since, both on the pitch and in their prudence off it as demonstrated by the latest completed set of accounts, have put them back in control of their own destiny. And in that regard they are in a select band of football clubs in this country. Both McNally and Bowkett have already underlined the absolute strategic importance of staying part of this exclusive clique when the latest healthy figures were initially unveiled in October. Norwich City is now justifiably a buying club in the transfer market. Contrast that with the rather more sombre tone the last time they were in profit.
The 2011/12 set of accounts mark another milestone in the trajectory of a football club that had been heading into dangerously uncharted waters.
The fiscal foundations in place now are much stronger than even three seasons ago, but there is a bleak undercurrent to such fabulous financial numbers. The differential between the ‘haves’ and the ‘have nots’ has never been greater across the highest echelons of the domestic game.
Norwich’s board and supporters will know it is imperative to stay the right side of the divide.