This article analyses Lincoln City finances in respect of the 2020/21 season.
It was Lincoln City’s second season in League One in 2020/21 having successful avoided relegation in 2019/20. The Imps really kicked on from its 16th placed finish, leading the league at Christmas. The club ultimately achieving a play-off place in 5th.
It was however heartbreak for Lincoln City as the club lost in the final at Wembley to Blackpool.
Lincoln City finances were damaged by the loss of matchday revenue as the season was played without fans. This saw revenue decline 20% and losses rise from £0.9m to £1.4m.
Revenue fell from £6.5m to £5.2m (20%) driven by games being behind closed doors. Perhaps the larger driver was the absence of managerial compensation. Lincoln City had received a sizeable sum from Huddersfield in respect of the Cowley brothers in 2019/20.
Matchday revenue declined from £1.9m to £1.0m (45%) as the club played without fans in the stadium. The loss of almost all its gate receipts was offset by £900k of digital sales from the EFL’s iFollow platform, which was used as a substitute for fans to watch the team. Play-off income was also welcome.
The return of fans in 2021/22 will boost revenue back towards the £2m mark.
Broadcast revenue rose from £2.1m to £2.9m (36%). This was due to the club receiving £813k in grants from the Premier League as part of its rescue package. Underlying central EFL distributions actually fell by £52k. With no grant income or significant cup runs in the two major domestic cups, Lincoln City will see a decline in broadcast revenue in 2022 back towards the £2m mark.
Commercial revenue halved from £2.6m to £1.3m (48%) as the club counted the cost of games being behind closed doors. This limited the commercial opportunities available to Lincoln City. The major driver of this decline however was the absence of managerial compensation with 2020 including the income received from Huddersfield Town in respect of the Cowley brothers.
The return of fans in 2022 should help boost this number, although it also includes some revenue in respect of the EFL trophy run, when the club reached the EFL Trophy semi-final.
Usually, this revenue would be included in broadcast however the nature of the accounts aggregates this with other income which may be more commercial in nature (i.e. Cowley compensation).
It was a challenging season from a revenue generating standpoint, with the Premier League’s grant going a long way. The £813k was about 15% of total revenue. The return of fans will hence be a big boost as it moves forward without this income.
Operating cost fell 9% from £7.7m to £7.0m. This was largely driven by a reduction in matchday costs.
Wages remained flat at £5.1m as reductions in wages were offset by performance bonuses for reaching the play-off final. The reduction in revenue saw Lincoln City’s wages to revenue ratio rise from 79% to 98%. This is above UEFA’s recommended limit of 70%.
The return of matchday revenue should help reduce this, although the removal of the EFL’s wage cap has put upward pressure on wages which may unfortunately absorb this.
Other operating costs fell from £2.6m to £1.9m as the club’s matchday related costs decreased.
Operating costs declined due to games being behind closed doors. However, the demise of the salary cap and increased resources among some League One clubs will add inflationary pressure to wages especially which will make budgetary control challenging for Lincoln City.
Like for many clubs, the 2020/21 season was much more subdued from a transfer perspective. With Lincoln City and clubs it may sell to counting the cost of COVID-19, The Imps did not spend, nor receive any material transfer fees.
Due to this, player amortisation charges fell from £0.9m to £0.2m. It is worth noting the reduction is also driven by 2020 including significant loan player fees. Limited loans and no significant signings for a transfer fee means that this number is likely to remain relatively flat.
Profit on player sales fell from £0.5m to essentially nil (£22k) due to no significant sales. The sale of Edun to Blackburn for around £0.5m will be a sizeable financial boost. Fulham does however have a significant sell-on clause due which will limit amount received by Lincoln City.
Transfer sales can be critical to the financial health of clubs such as Lincoln. The £0.5m reduction in player sales is the exact amount by which losses have risen by. The sale of Edun will be a financial boost and the club will be hoping to secure more such sales in the future.
The Imps once again recorded a loss as it battled the financial impact of COVID-19.
Before player trading, operating losses more than doubled from £0.5m to £1.2m (154%). This is driven by revenue declining significantly without Cowley compensation and gate receipts. The return of the latter should help improve this; however, wages increases will absorb a lot of this.
After player trading, operating losses rose from £0.9m to £1.4m. Despite profit on player sales of £0.5m in 2020, this was absorbed by player amortisation of £0.9m. The sale of Edun and no significant purchases or loan signings mean that profitability could improve.
Minimal finance costs in either year means losses before tax remained the same as operating losses after player trading.
Lincoln City, like most League One and Two clubs, is a loss-making business. The occasional significant player sale or cup run can end this trend, however neither is the case in 2022 and therefore losses are likely again.
As the losses mounted, Lincoln City required significant funding from its owners to keep running smoothly.
Lincoln City’s cash reserves rose from £0.6m to £1.2m as the club received cash inflows from its investors of £1.2m. This was supplemented by cash inflows from operations of £0.2m. Cash outflows on player transfers (£0.3m) and capital expenditure (£0.7m) partly offset this.
The capital expenditure of £0.7m relates to spending on its elite performance centre and a new all-weather pitch at the Sincil Bank.
Debt levels remained flat at £0.7m as the new funding provided by investors was via capital injection. The US based Jabara family is the latest investor into the club, purchasing around 7% of the club. This investment and strategic know-how (Landon Donavon has joined as an advisor) will hopefully be a great partnership. Since 1 July 2021, the investors in the club have provided £1.7m of further equity financing.
Lincoln City is hence in a net cash position of £0.5m.
The Imps are a relatively well-run operation. However, the pressures of ambition and a competitive division will and has put upward pressure on its costs. The same cannot be said for revenue and hence the club is losing money year-on-year. Currently, Lincoln City has a supportive investor group, investing over £1m a year in the last few seasons. This investment is likely to be needed for quite some time as the club pushes for promotion or consolidates and manages its finances as a League One club. Time will tell.
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