Norwich City´s last season ended in bitter disappointment, as
the club finished in 18th place in the Premier League, and were relegated to
the Championship as a result. While the season was a bit of a struggle all along
for the club, it was only the last
few rounds that really decided the relegation. Manager Chris Hughton was unable
to salvage the club, and was sacked with only five matches to go. Neil Adams
took the job, but was unable to keep the club form getting relegated. After
three seasons at the top tier, Norwich City FC were headed for the Championship.
While relegation is always a bitter disappointment for any
club, in Norwich´s case it could be argued that it was always going to be a
struggle to stay at the Premier League. In 2011-12, after getting promoted they
finished in 12th position, which was an
excellent result. In 2012-13, the club performed even better, finishing in 11th
position, which was their highest finishing position since 1992-93. So
results-wise, everything looked bright heading for 2013-14. The club seemed to
have secured their place in the Premier League, optimism was high, the club´s
finances were in excellent condition. But in reality, dark clouds were already
gathering above Carrow Road.
The most remarkable thing about Norwich´s 3-year spell in
the Premier League is arguably it´s financial performance. Below is presented
the club´s turnover and result from the past four seasons:
Looking at the numbers it must be noted that in 2012-13 the
club changed it´s financial year end from 31 may to 30 June, therefore the
figures cover a 13 month-period. Still, the figures above are an impressive set
of numbers for any football club. The profit in 2013 was slightly below 2012
and 2014 due to the final loan repayment to AXA Investment Managers Limited in
April 2013.
But the stellar financial performance over these three years
was hardly an accident. The board had been open about their goal of making sure
the club´s finances are in order and that they don´t spend more than is
reasonable. Back in 2009, following the club ´s relegation to League One,
Norwich were burdened by debt worth £ 23 million. Over the following years, the
club managed to get back-to-back promotions and found themselves in the Premier
League for the 2011-12 campaign. During this period, loans were restructured
and the finances, along with performances on pitch, started to look bright
again. By 2013, the club was finally free of external debts, owing only
intrest-free money to it´s owners. In 2013 accounts, external debt was £ 900 000,
of which £ 700 000 was in preffered shares, and £ 200 000 was later paid.
Non-external debt included £3,1 million to owners Delia Smith, Michael-Wynn
Jones and Michael Foulger. In 2014, the director´s loan was down to £ 2,1
million. Chairman Alan Bowkett told the
BBC in October 2013: ” We're on a sound
financial footing. In my view we have our best team for 20 years. The future is
looking rosy. In terms of the football club going forward it gives us complete
freedom to manage our own destiny”.
Being free of debt obviously helped in recording profit,
since the club no longer had to take care of interest payments which, for
example, were £ 2,6 million in 2011, when the club was still in the Championship.
But the problem for the club was that
while being free of external debt was financially an excellent achievement,
getting to that position and the insistence of keeping it that way dictated
their spending on the squad. As director of finance Sam Gordon stated in 2013´s
annual report: ”The Club´s future strategy
is to invest all profits in to the playing squad in continued pursuit of
becoming a sustainable Premier League Club”. Strong words, but without
additional investment from the owners and/or increasing debt, investing only
the profits wasn´t really that much. At least not in the Premier League, where
big spending and ugly profits have been more of a norm than an exception.
Obviously spending only what you can afford in the squad is financially smart
in two ways: Firstly, there is naturally no need for external loans or equity
injections, and secondly, the less money the club spends on buying players, the
less are the annual amortisations of the players´contracts. Consequently, it is
easier to record a profit with low amortisations. As is often the case,
however, it is not easy to be both financially smart and still succesfull on
pitch.
Norwich´s wage policy is very indicative of the club´s
approach to it´s finances. Below is a figure describing the club´s
wages/turnover –ratio from the past four seasons in £ millions:
Since achieving promotion to Premier League, the club´s
wages have been at a resonable level for a football club. In 2013-14 the
wages/turnover –ratio actually declined all the way to 57 %. This was partly
due to increased turnover due to bigger broadcasting income. According to the
annual report, much of the players´salaries were performance related ,and since
the club was relegated, the salaried were at a lower level than they would have
been had the club performed better. Looking at the total wage bill from
2012-13, Norwich was, unsurprisingly, at the bottom end of the Premier League:
The Club´s position is hardly that surprising. It is obvious
the the club wasn´t able compete with clubs like Manchester City, Chelsea or
Arsenal, or even Queens Park Rangers. But is worth noting that of the four
clubs ranked below Norwich, two (Reading and Wigan Athletic) were relegated.
Looking at the Premier League clubs´spending in new players
in 2012-13, Norwich was at the very low end of the table, with a spending worth
£ 9,8 million (figures from Transfermarkt). The story is very similar to the wage bill figure above.
Once again, of the four clubs that spent less than Norwich,
two (Reading and Wigan Athletic) were relegated to the Championship. The most
expensive arrival to Norwich was Robert Snodgrass, who arrived from Leeds with
a fee worth £ 2,8 million. That´s hardly
a huge catch for a Premier League club. Still, the club managed to achieve 11th
position. In 2013-14 the Club upped the stakes a bit in the transfer market. Players
arriving were worth £ 26,4 million in total. Now Norwich was no longer among
the clubs that spent the lowest amounts to new players:
Looking at the above figure, seven clubs spent less than
Norwich, even if several clubs are at roughly the same level in the low-end of
the table. In 2013-14 the problem for Norwich was obviously not the money they
spent, but what they got with it. Their biggest catch was forward Ricky van
Wolfswinkel, who arrived from Sporting Lisbon for £ 8,8 million. Wolfswinkel´s
season was far from a success. He scored in Norwich´s opening match against
Everton (2-2), but that was to remain his only goal for the whole season. He
was also injured with a sprained ankle for a part of the season. All in all, he
was hardly worth the money the club paid for him. While it might a bit harsh to
blame one man for the relegation, clearly the money the club spent on van
Wolfswinkel´s and what the club got in return was a big part of the failed
season.
Both the wage bill and transfer policy are very indicative
of the club´s policy during the last few years. Finances have been the
priority, and building the squad has been secondary to that. Even if the club
increased their spending in 2013-14, a certain cautiousness is apparent. It
shoud be noted though, that with the club´s wage bill being one of the lowest
in the Premier League, it was always going to be difficult to attract big names
to Norwich. Still, staying in the Premier League was a vital part of the Club´s
long-term strategy. As chairman David McNally said in 2013: ” As long as we're alive, we have to stay in
the Premier League. It's a message I need to get across to all of my colleagues
here at the football club. The board knows it, but everybody who works here
needs to be focused on that”. Once again,
strong words, but now that the Club is relegated, it almost feels like they were
trying to do just enough to stay in the Premier League, but not more than that,
and that was always a risky strategy. With the level of investments they made,
it was always going to be a struggle to stay up. In hindsight, maybe reaching
the 12th and 11th positions was a little unlucky after all, giving the club a
false sense of what is required to compete in the Premier League. Who knows.
Whatever the case, it should be rememberd that the board of
the club did a fine job in getting the finances in order. And while criticising their cautious approach is a relevant argument, it must be remembered that
Norwich just don´t have a the kind of resources that Chelsea or Manchester City,
for example, have. They were never in a position to spend lots of cash on star
players, and their refusal to jeopardise finances in order to do that is a sign
of admirable running of the club. Still, with the approcah the club took,
staying in the Premier League was always going to be like walking a tightrope.
Is there something that can be learned from Norwich´s fate,
then? In hindsight, it´s always easy to speculate. But the fact remains that in
an extremely competitive environment like the Premier League, success often
comes through heavy investments. A cautious strategy can eventually end up
being the most expensive one. It is very difficult to keep a healthy balance
sheet and get good results at the same time. And when a tight budget is the
number one priority, those investments that are made need to be successful. As
already said, Ricky van Wolfswinkel can´t obviously be solely blamed for the relegation.
But a forward who scores one goal is hardly a successful acquisition. van
Wolfswinkel´s transfer fee (£ 8,8 million) was pretty much wasted, and adding
his salary to that, it was an expensive miss. And for a club who spends as
little as Norwich, there just isn´t room for those kind of misses. A forward
who would have score 10-15 goals might have been able to make a difference, and
the club might still be playing in the Premier League. That is obviously purely
speculation, however.
Norwich are currently sitting at 7th place in the Championship
and are in contention to get back to the Premier League. A lot of their
turnover will be gone due to relegation and as a result it will be
difficult to make this financial year a profitable one. Having said that, a
strong balance sheet, players´contracts relegation clauses and Premier League parachute payments give the club a healthy
springboard to reach for promotion. In the long term, a return to the Premier
League would definitely be vital to the club. If they are to continue their
prudent approach with the finances though, it will be a rocky road to being a
successful club again. But it would be nice to see a well-run, profitable club
playing in the Premier League again, no matter how difficult that is. There
certainly aren´t too many of those clubs around.
