ANALYSIS: City's complex financial story still has a reassuring theme

Former Norwich City players, from left, Jamal Lewis, Emi Buendia and Ben Godfrey

Norwich City sold, from left, Jamal Lewis, Emi Buendia and Ben Godfrey during the 2020-21 financial year - Credit: Paul Chesterton/Focus Images

There’s a reassuring familiarity to Norwich City’s annual financial results after managing to post a £21.5million profit as the Canaries soared to the Championship title, despite the continuing impacts of Covid-19. 

In total, City estimate the pandemic forcing games behind closed doors has cost them around £30million in expected income since its outbreak yet their finances make for mostly comforting reading despite those challenges. 

The familiarity comes from a set of 2020-21 accounts - for the 11 months up to June 30 - that once again tells the story of a club being run sensibly and sustainably as long-term health is prioritised over the financial risks that a self-funded club would need to take in chasing short term success. 

So, in spite of the pandemic forcing football behind closed doors and some income streams collapsing, City were still able to invest £4.2million into improving infrastructure at Carrow Road and the Lotus Training Centre, as well as providing £250,000 towards completing the Community Sports Foundation’s community hub near Hellesdon, The Nest. 

With finances in such a delicate state for many EFL clubs - with transfer embargoes for clubs including Hull and Reading, and points deductions for Derby and Sheffield Wednesday in the past year - and huge debts of continuing concern in the Championship, Norwich continue to chase their Premier League dream amid comparative safety. 

City were able to spend £52.7m during the recent summer transfer window following this year’s promotion, with £22.7m in further fees also potentially following, mostly depending on whether Premier League survival can be achieved – as shown by the post balance sheet transactions. 

However, that self-funded status is unavoidable. 

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Had it not been for a £48.8m profit from players sales during the 2020-21 financial year – chiefly from the sales of Emi Buendia, Ben Godfrey and Jamal Lewis – then the Canaries would have posted a pre-tax operating loss of £26.6m  

This is where the familiarity comes in, even with leeway allowed for the pandemic, such as gate receipts dropping from £7.6m down to just £118,000 due to most games being played without spectators, or catering income from £4.6m to £415,000 with the club’s restaurants forced to close. 

It is the drop in turnover, chiefly due to broadcast revenue, that City supporters will recognise though – after the club’s third top-flight relegation in seven seasons. 

Back in the Championship, turnover dropped from £119.3m down to £57.2m as broadcast revenue dropped 47pc from £90.2m in the Premier League, down to 48.7m - a significant part of which is from the Premier League’s parachute payments for relegated clubs. 

As part of the various facts, figures and required financial auditing included in the report is the ‘going concern’ section, which states that financial forecasts have been made until the end of 2023-24 and that the chances of City running into financial difficulty in the next 12 months are “considered remote”. 

This is in light of the continuing economic threat of Covid-19, in preparation for income again being drastically impacted, such as if football was forced back behind closed doors. 

One element of football finances that is often overlooked is that teams promoted do not get the Premier League money upon arrival – estimated at close to £100million for the team that finishes bottom – but in stages. 

Similarly, transfers are often structured in various ways as clubs deal with multi-million-pound payments. This is why City are currently owed just over £54m by other clubs, around half of which is due during the current financial year. 

Staff costs – the majority of which is wages – represented 116 per cent of turnover during the successful 2020-21 season, which included promotion bonuses. 

That is down on the 162pc of the 2018-19 promotion season, when City’s turnover was lower at £33.7m, due to it being the first year without parachute payments after the 2016 top-flight relegation. 

This time around, turnover was higher at £57.2m so despite staff costs being around £8m higher than during 2018-19, that percentage of turnover was lower. 

The report also shows that claims from the government’s Job Retention Scheme dropped from £1m to £741,000 during 2020-21. These were for non-football staff placed on furlough, such as chefs and ticket office staff, to protect jobs and avoid redundancies. 

The Canaries stoped these claims once promotion had been secured, in anticipation of Premier League funds and crowds returning to stadiums. 

Norwich City director Stephan Phillips, left, and finance director Anthony Richens

Norwich City have published their financial report for the 2020-21 financial year, with director Stephan Phillips, left, and finance director Anthony Richens leading a presentation to the media at Carrow Road - Credit: Adam Harvey

The annual statement was presented to reporters at a Carrow Road briefing earlier this week ahead of publication on Wednesday morning, with director Stephan Phillips and finance director Anthony Richens available to explain the various facts and figures. 

The briefing had been scheduled ahead of Saturday’s concerning 7-0 defeat at Chelsea and its timing was not related to current struggles on the pitch, with shareholders due to receive their reports in the post ahead of next month’s annual general meeting. 

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