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City chiefs stress there is no need to panic about financial results, with profit expected in 2020

From L-R. Chief Operating Officer, Ben Kensell, Director, Stephan Phillips and Chief Financial Officer and Company Secretary, Ben Dack at the release of Norwich City's annual accounts. Picture: Neil Didsbury

From L-R. Chief Operating Officer, Ben Kensell, Director, Stephan Phillips and Chief Financial Officer and Company Secretary, Ben Dack at the release of Norwich City's annual accounts. Picture: Neil Didsbury

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Norwich City have revealed the cost of promotion to the Premier League, with an operating loss of £38million - but club chiefs have insisted there is no need to panic, with a return to profitability on the horizon.

The Canaries have released their accounts for the 2018-19 financial year, their first set of financial results to not include top-flight cash since 2011.

That's due to Premier League parachute payments ceasing at the end of the 2017-18 season, leaving a £35m hole in the books, as turnover reduced by 55pc to £33.7m.

That £35m final parachute payment was replaced by a £7m solidarity payment from the Football League, contributing to an operating profit of £19m for 2017-18 dropping by £57m, transforming into a £38m operating loss (£33m after tax).

That loss of £38m may seem an alarming drop but club bosses estimate not getting promotion would have meant a loss of between £10m and £15m, when player sales could then have been used to balance the books - as the sale of James Maddison to Leicester, for a reported initial £21m, demonstrated the previous summer.

In a similar vein, profits from player sales dropped from £48m in 2017-18 - including that club-record sale of Maddison - to just £2m, emphasising the financial support required for promotion.

And while the initial figures may look concerning, the accounts are framed by the current season's income, with City expecting a profit of over £20m by the end of 2019-20.

That figure could change depending on player trading during the January transfer window - for which a budget has already been set behind the scenes - and could even be lower if survival in the top tier is secured, due to performance bonuses which would be due.

However, with the team which finished bottom of the Premier League last season, Huddersfield Town, receiving £96m in payments despite being relegated - Norwich know they have huge amounts of money headed their way, regardless of what happens on the pitch.

Ben Dack, Norwich City's Chief Financial Officer and Company Secretary, with the club's latest financial figures. Picture: Neil DidsburyBen Dack, Norwich City's Chief Financial Officer and Company Secretary, with the club's latest financial figures. Picture: Neil Didsbury

That also extends to finishing position, with every place worth around £2m and 11th placed West Ham receiving over £17m more than Huddersfield last season, who received a merit payment of £1.9m for finishing bottom.

Further context is provided by broadcast income, with a total of £2m generated from matches being screened last season. That works out to around £100,000 per home game, whereas in the Premier League each televised game is worth around £1m.

Company secretary, Ben Dack, explained: "The big positive is that we know next year, irrespective of what happens we will turn a profit. Whether we retain Premier League status or get relegated will determine just how big those profits are.

"So ultimately what we've shown is that this loss of £38m will be funded by next year's (financial) results, so overall I think there is a positive view coming, it's just a matter of waiting 12 months."

Canaries fans will know that the added context to those results comes from the relegation of 2015-16, when the money spent trying to secure survival resulted in drastic cost-cutting once it had become clear that the club wouldn't be bouncing straight back to the Premier League.

That's with joint majority shareholders Delia Smith and Michael Wynn Jones, and the rest of the club's board of directors, continuing to target becoming established in the top flight as a self-funded club despite most clubs of comparative sizes having far wealthier owners.

Yet head coach Daniel Farke and his players still managed to win the Championship title and earn promotion amid that tight financial situation.

Turnover reduced from £61.7m in 2018 to £33.7m, which largely accounts for why player wage costs as a percentage of turnover rose from 50pc to 73pc - and to 105pc once promotion bonuses are factored in.

Chief Operating Officer, Ben Kensell, Director Stephan Phillips and Chief Financial Officer and Company Secretary Ben Dack, at the release of Norwich City's annual accounts. Picture: Neil DidsburyChief Operating Officer, Ben Kensell, Director Stephan Phillips and Chief Financial Officer and Company Secretary Ben Dack, at the release of Norwich City's annual accounts. Picture: Neil Didsbury

Outgoings totalled £32.8m, including the £5m repayment of the Canaries Bond which funded the redevelopment of the training facilities at Colney, where a sponsorship deal had seen the site re-branded as the Lotus Training Centre.

The accounts are for the financial year ending June 30, 2019, and show that an £18.2m overdraft was being used to maintain cashflow, although Dack stressed this was "well within our headroom" and that it has since been repaid.

That is due to the Premier League cash of around £100m for this season not arriving immediately but being paid in chunks of around a third during the campaign.

Dack added: "Whatever happens you are indiscriminately going to get the first year of £100m from the Premier League. If you then get relegated you get the £55m and £45m in the next two years - or if you stay in the Premier League another year you'll get three years of parachute payments.

"So when people say £150m or £170m actually what you have to think of is that is over three years. So some clubs gamble and use all that funding available up front and some use a more measured approach - and we have to get a balance between those two."

Commercial income has risen by almost £1.3million in the past year, to almost £8.5m, with Carrow Road's hosting of music concerts contributing to that rise.

Chief operating officer Ben Kensell, who works alongside business and project director Zoe Ward and sporting director Stuart Webber as an executive committee, pointed out that a three-year plan is in place to continue rebuilding the club's financial strength.

"These figures demonstrate the club's financial resilience, with our first year without parachute payments whilst achieving promotion to the Premier League as champions," Kensell said.

Norwich City's Chief Operating Officer, Ben Kensell with the clubs latest accounts. Picture: Neil DidsburyNorwich City's Chief Operating Officer, Ben Kensell with the clubs latest accounts. Picture: Neil Didsbury

"With the new executive committee structure firmly in place now a year into the new structure, we are able to strategically maximise our off-pitch commercial revenues in order to ensure we have effective squad planning and therefore utilising all available cash in the playing squad.

"The club continues to invest into the Lotus Academy to continue the development and production of talented players with the aim to progress them into the first team.

"The club is committed to ensuring ongoing investment in both the Lotus Training Centre and the stadium at Carrow Road."

- For the full financial report, go to canaries.co.uk

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