Derby County’s administration could indicate football league’s troubles as government withdraws support

With clubs paying back deferred tax repayments and increasing wage costs, Derby County has fallen into administration after reportedly several years of financial mismanagement from its owners and breaching of EFL accounting rules. Derby’s annual accounts show operating losses reached £97m over the three financial years from 2015/6 to 2017/18, with the club also being fined £100,000 over its accounting policies by the English Football League (EFL), says GlobalData, a leading data and analytics company.

While the club is still yet to submit its annual accounts for the financial year ending 30 June 2019, the end of the government’s furlough scheme and repayment of taxes may mean that Derby is not the last club to enter administration during the pandemic era.

Patrick Kinch, Sport Analyst at GlobalData, comments: “While Derby has seen revenues grow under its current owners, so too have losses, stemming largely from increased transfer spending, player wages and the selling of Pride Park stadium, which Derby now rent, through a holding company owned by chairman Melvyn Morris.”

GlobalData Sport’s latest report, ‘English Football Leagues (EFL) Major Revenue Sources across Championships League, League One and League Two’, revealed that the 72 football league clubs are facing ticketing losses of up to ** $762m based on current season ticket prices and the largely behind closed doors 2020/21 season, with lower league clubs relying more heavily on ticket revenue and in-venue merchandise sales than Premier League clubs, who can count on more lucrative sponsorship and TV monies. The report also confirms that Derby County has a front of shirt deal with betting brand 32Red worth $0.80m a year, the sixth biggest in the Championship, and a kit supplier deal with Umbro, also worth $0.80m a year, with these partnerships both likely to be factored into the administrator’s valuation of the club as it looks for a new owner.

While the pandemic is part of the reason for Derby’s woes, the club has flirted with Financial Fair Play rules, while also seeing transfer spending increase by * 364% from 2013-15 to 2016-18, with wages growing to *151% of revenue over the same period, double UEFA’s recommended ratio.

Clubs will also have to deal with ticketing losses from the 2020/21 season in their accounts of the financial year ending June 2021. For Derby these estimated losses reach up to * $20 m based on 2019/20 season ticket prices, stadium capacity and number of home games, while operating costs have not fallen as games continue to be played.

Kinch adds: “With EFL clubs having to pay back over £77m in taxes that was owed to HMRC from 31 March onwards, and with the furlough scheme ending in totality from 30 September, firms are currently required to pay 20% of furloughed staff salaries, other clubs may suffer the same fate as Derby as these government support schemes end.”

According to GlobalData Sport’s EFL revenue report,
* Derby County Annual Accounts 2013-2018
** GlobalData Sport estimates based on available club data

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