Midweek fixture: Oxford United’s finances

Oxford United have released their accounts for 2018/19. I’m no accountant so this isn’t a forensic assessment of the results, but there are some titbits which may give clues to the club’s ambitions and future.

Quite simply, football is a precarious business; the broad challenge for all clubs is to climb the divisions. That relies heavily on the resources available. On average, League 1 teams have revenues of £6m a year, at Championship level that jumps to £25m, at Premier League it climbs to £200m+. Each promotion presents a massive financial challenge.

There’s £7m in TV revenue when you get to the Championship; with the £6m of League 1 turnover there’s still a £12m shortfall. Even selling out every week would barely make a dent in that. So clubs need to generate more revenue or accept more debt. More debt effectively means betting a portion of any future Premier League riches – spending £20m-£30m now in the hope of making £200m in the future. But it’s more complicated than that, if you have ambition to make it to the Premier League, then you have to compete with the biggest Championship teams who are raking in around £60m, and if that’s not a big enough number, even those teams are going deep into debt to make the top flight.

It’s a big gamble; for every Brighton and Bournemouth who have bridged the gap, there are more Ipswich Towns and Sunderlands (and Boltons and Portsmouths and Barnsleys and Wigans).

So, why own a football club? Perhaps it’s the joy of playing real life Football Manager or maybe it’s to invest in the hope of returning a profit in the future – which only really happens when you make the Premier League. Or, you invest in order to sell on to a richer successor.

There are less noble reasons – reputation cleansing (so called sports washing) or to leverage another business venture such as a land deal. We don’t own our ground or any notable assets, so we’re quite insulated from that particular evil, something we were stung by it when Firoz Kassam sold The Manor to, well, himself.

Although our owners appear well resourced, it doesn’t seem enough for us to simply be a plaything for billionaires. If it were, we’d probably have seen some frivolous champagne signings over the last couple of years, instead the players we have signed seem to have genuine sell-on value.

So, that leaves us with two scenarios; invest for future profit or to sell on. Either way, the key is the ability to invest and for those investments to improve the value of the club.

The headlines show that we’ve been losing £80,000 a week and are £18m in debt. Clearly this isn’t a position anyone can sustain forever.

There are some positive signs – there appears to have been above average investment in players – £475k, as well as a £713k investment in fixed assets – presumably the training ground. According to The Price of Football, this is high for our level, which is hopefully a good sign.

£11m of our losses are underwritten by the club’s owners, which, presumably will only be repaid if there’s another investor with the money to clear the debt. What we don’t really know is whether the current owner’s resources are a house of cards ready to crumble or built on a pot of real money and assets. Superficially, the loans make this quite a soft debt for the club to accumulate. In addition, there are some costs which are hopefully one-offs such as the fees owed to Darryl Eales (£2.6m).

While the headlines look scary, the figures pre-date the sale of Gavin Whyte and apparently others. There’s a note which advises there’s £4.4m to be included in this year’s accounts which should see the club return to profit next year. This likely excludes Shandon Baptiste and Tariqe Fosu’s sales and doesn’t account for this season’s cup runs or increases in attendances. With the prospect of Rob Dickie and Cameron Brannagan going in the summer, which will be reflected in our 2020/21 results, we seem reasonably set up for the next couple of years. The trick is to have one or two players a year moving on for big money on a regular basis.

There has been a lot of criticism about player sales, but I’d argue the fact we are selling, rather than driving ourselves into the ground with blind ambition, is a good sign. It illustrates a balance between the ambition to move the club forward and the pragmatic need to sustain ourselves in the longer term.

No football club outside the Premier League is in a ‘good’ financial position, football needs a fundamental structural reorganisation for smaller clubs to be genuinely sustainable, but our finances suggest we’re neither spiralling out of control nor stagnating. In the modern game, that might just about be the best we can hope for.