Accounting for Dummies
Charlton Life Website (extract)
So, after a hugely disappointing Forest defeat, a return to the third tier of English football appeared closer and closer. If our on field activities weren’t providing enough worries, just a look at the previous year’s annual accounts would certainly have got your palpitations going.
The club’s finances had been a cause for concern for some time due to the amount of debt that the directors had taken on to allow the club to compete in the Championship. That led to some suggestions that the club had been close to going into administration. Or to you and me - broke and going out of business.
A football club’s finances are key to their future and without knowledge of them, you didn’t know if we were going to go the way of a Southampton, a Leicester or even a Leeds. But the true reality was that the club had joined that ‘elite’ band.
The club’s accounts that covered the 2008/09 football season made for uncomfortable reading. It revealed that the club had made a financial loss of some £11.5m. That works out at a whopping £51,000 a day, despite the club reducing its staff by 15%. The club’s turnover (or its total income) for the year was just under £27m. Just under half of that (£13m) was money from the SKY/ITV contract. Ticket sales amounted to £8m while the remaining £5m came from the commercial activities which included areas such as sponsorships, executive boxes, banqueting and merchandise sales.
That turnover was some £9m down from the previous (Premiership) season. Most of that reduction was due to loss in TV money, but even with the ‘parachute’ payments that the club got, they still received in 07/08 £7m less than the season before. But the real reason why there was such a huge loss was not the club’s reduced income but their costs.
It was costing £39m to run the club – or a staggering £106,000 a day. The major reason why it cost so much to keep the club running was the wage bill. That came in at nearly £24m. Now admittedly, that was £10m less than in 2007 but it wasn’t nearly enough to allow Charlton to balance its books. The club did realise money through player sales, mainly Darren Bent and Luke Young, but they gave Alan Pardew £12m to spend on new players (‘ZZ’, Varney, McLeod, Gray, Moutaouakil etc.).
You might have thought that with the money the club had got for Bent and Young (a total of around £16m after sell on clauses were satisfied), that they would be sitting on a pile of money, but in 2007, the club had debts of close to £45m: the legacy of the money given to Iain Dowie and the price paid for continuing to pay championship players premiership wages.
Author: Bryan Matthew