Season review
Birmingham City competed in its ninth consecutive season in the Championship which could also have been its last, with the club narrowly avoiding relegation in 20th position.
A run to the FA Cup fifth round was a positive while there was upheaval at the end of the season with Pep Clotet departing via mutual consent.
Off the pitch it was not a pretty picture as Birmingham City recorded a significant loss of £18m driven by the club’s substantial wage bill which far exceeded its revenue.
Revenue
Overview
Birmingham City’s revenue remained flat at £23m in 2019/20 despite the outbreak of COVID-19, with the further progression in the FA Cup helping the cause.
Matchday
Matchday revenue decreased by 8% to £4.7m as the club played its final five home games of the season behind closed doors. With no fans for the entirety of the 2020/21 season, Birmingham City is looking at a £4m hole in its revenue in 2021.
Broadcast
Broadcast revenue rose from £8m to £8.8m (11%) as the club progressed two rounds further in the FA Cup to the fifth round. This was not replicated in 2021 and therefore is likely to result in a dip in revenue.
Commercial
Birmingham City saw its commercial revenue fall from £10m to £9.3m (9%) due to lower levels of sponsorship activation with its partners as a result of COVID-19 and a new shirt deal with 888 Sport (replacing Boyles Sport) which may have been on lower terms.
The club has a new kit deal with Nike which it will be hoping may boost commercial revenue slightly in 2021.
Birmingham City may have seen the current peak of its revenue potential while it remains a bottom half Championship side and will likely require improved performance on the pitch to see any rise in its revenue from this point (outside of any broadcast rights growth of the league as a whole).
Operating costs
Overview
Operating costs fell ever so slightly to £45m (3%) as the club stabilised its cost base knowing it is far too high given current revenue levels.
Wages
Wages were stable at £33m with Birmingham City reporting a wages to revenue ratio of 145%, spending £1.45 on wages for every £1 of revenue generated which cannot be maintained without its owners’ deep pockets.
Other costs
Other costs fell from £13m to £12m as Birmingham City made some costs savings due to COVID-19.
Birmingham City will need to reduce its cost base to a more sustainable level unless its owners are willing to continuously inject funds to cover its losses, while it also runs the risk of failing to meet the EFL’s financial fair play regulations.
Transfers
Overview
Birmingham City had to try and plug a Che Adams size hole ahead of the 2019/20 following his departure to Southampton.
In came Sunjic (£7.2m), Giminez (£1.4m) and Crowley (£0.7m) for a combined £9.3m.
Che Adams (£15m), Peleteiro (4.1m), Vassell (£2.0m) and Villalba on loan (£0.4m) departed St Andrew’s for a combined £21m, a net transfer income of £12m.
Amortisation
Player amortisation charges rose from £7.6m to £8.4m following an increased level of transfer spending (albeit funded by sales).
Further signings in 2021 are likely to see this rise further.
Profit on player sales
Despite Birmingham City recording a profit on player sales of £12m in 2020, the club reported significant losses highlighting the effort required to overcome its high-cost base. The sale of wonderkid Jude Bellingham will however help balance the books in 2021.
Transfer debtors / creditors
Birmingham City are owed £13m in transfers compared to owing £9.2m resulting in a net debtor position of £3.8m which can only be a positive.
Profitability
Overview
Birmingham City is nowhere near profitability and has recorded large losses over the past few years which has seen it have run-ins with the EFL and its profitability and sustainability rules.
Operating profit / loss before player trading
Before player trading, Birmingham City recorded a loss of £20m (2019: £4.8m – driven by the sale and leaseback of its stadium for £18m profit) with its high wages driving these losses.
Birmingham City has cumulative operating losses before player trading of £79m over the past five seasons.
Operating profit / loss after player trading
After player trading, the club recorded an operating loss of £17m due to a slight profit on its player trading.
Following the sale of Bellingham, the club should hopefully reduce its losses, even after the impact of COVID-19 on revenue.
Profit / loss before tax
Birmingham City recorded a loss before tax of £18m due to £0.9m in finance costs.
Birmingham City will need to reduce its wages if it is to return to profitability, a feat not achieved since 2015 with revenue growth limited without much improved sporting performance.
Assets / Liabilities
Birmingham City is heavily reliant on its owners to fund its losses.
Cash flow
Cash levels fell from £2.9m to £1.7m with Birmingham’s owners injecting £19m in cash to absorb cash outflows from its operations (£17m), transfers (£2.8m – with the club clearly due the cash from player sales in instalments).
Birmingham City incurred minimal capital expenditure in the year (£0.1m).
Debt
Following this cash injection, Birmingham City’s owner debt now stands at £116m with the owners providing the club with £43m in funding over the past two seasons, showcasing a commitment to the club but also highlighting an unsustainable business model.
Net debt
Birmingham City are hence in a net debt position of £115m with all but £0.6m (bank debt) of its debt being to its owners.
Final Remarks
Birmingham City is a club at a financial crossroad where the current wages level is not sustainable for a club in the Championship that is not currently challenging for promotion.
Now may be time to reset, reduce wages and look to build a more sustainable footing for future promotion challenges.
In addition, while the owners are willing and evidently backing the club now, Birmingham City will want to reach a more financially stable position to reduce the risk of financial troubles should the owners purse slam shut as has been seen recently.
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