Birmingham City Finances 2022/23

It Ain't Easy

Despite beating Norwich City in the final game, Birmingham City have been relegated to League One after 13 years in the Championship. This was obviously disappointing, but in fairness this had been on the cards for a while, as the Blues had finished no higher than 17th in the previous seven seasons.

Ownership

It wasn’t meant to be this way, as hopes had been high when ownership of the club effectively passed to Thomas Wagner’s Knighthead Capital Management in July 2023.

This change was greeted with delight (and some relief) by Blues fans after the trials and tribulations experienced since Hong Kong businessman Carson Yeung took full control of the club in 2009. After he was arrested on charges of money laundering, Yeung resigned, but the club remained in the hands of Chinese owners.

Last summer’s transaction was made with Knighthead’s UK affiliate, the wonderfully named Shelby Companies Ltd (SCL), with a reference to the family in the excellent Peaky Blinders, which is of course set in Birmingham.

The club’s majority owners, including Birmingham Sports Holdings Ltd (BSHL) and Oriental Rainbow Investments Ltd (ORIL), approved the sale of 45.98% of Birmingham City Ltd and 100% of the St. Andrews stadium.

Although this agreement does not give SCL a majority shareholding, with BSHL retaining 51.72%, the announcement said, “SCL has assumed responsibility for all operations of the club and will provide the necessary funding to rebuild and set a new trajectory for the club.”

Wagner emphasised the changing of the guard, “The way that the transaction has been structured, we will assume full operational control over the team from today forward. So, we'll be setting the strategic vision for the club, and, ultimately, we'll be the ones who are responsible for achieving the goals that we set. I think it's fair to say that the buck stops with us from here forward.”

The new owners also brought on board Tom Brady, the legendary NFL quarterback, though his stake cannot be too large, given that all the minority investors only hold a negligible 2.3% of the club.

Understandably, there was a lot of excitement around the new owners, as chief executive Garry Cook explained, “Knighthead has invested in Birmingham and is bringing a level of ambition that is going to improve the fortunes of both the Club and the city itself.”

The CEO added, “We are well aware of what has happened at Blues over the past decade. We believe we have moved on from those dark days giving hope and aspiration to existing and new fans.”

However, Cook did sound a note of caution, “Creating a winning culture in an organisation that has been on its back foot for a number of years is not easy.”

On The Pitch

For all the fine words, it is evident that Blues badly under-performed on the pitch last season, due to making some poor decisions.

After a questionable recruitment campaign in the summer, perhaps the most fateful move was the dismissal of manager John Eustace, who had guided the club into the play-off positions (and saved the club from relegation the season before), which was attributed to “misalignment with the leadership of the club”. However, after that encouraging start to the season, results have been below par, to say the least.

Eustace was replaced by a “glamour signing” in the shape of Wayne Rooney, but the former England international lasted less than three months, as the squad was not really aligned with his ideas of how to play football.

Tony Mowbray brought some stability, but unfortunately he had to take a leave of absence due to ill health, so the club then turned to former manager, Gary Rowett.

If we include the two interim managers, Steve Spooner and Mark Venus, this means that Birmingham City had an incredible six managers this season, which was never going to be a recipe for success.

Off The Pitch

So that’s a black mark for Knighthead, but their report card is much better for events off the pitch.

After many years of neglect, the new board has invested in the St. Andrews stadium, while outlining exciting plans for a new Sports Quarter in Birmingham. In addition, they have signed some lucrative commercial deals.

That’s all going to boost the club going forward, but it’s worth taking a look at the financial position that Knighthead inherited by reviewing Birmingham City’s accounts for the 2022/23 season. These covered the 12 months up to 30th June 2023, i.e. just before the new owners took control in July.

Profit/(Loss) 2022/23

Blues’ pre-tax loss slightly increased from £25.0m to £25.3m, as revenue rose £1.6m (9%) from £18.1m to £19.7m, while operating expenses were cut £2.4m (5%) from £49.4m to £47.0m.

These improvements were largely offset by reductions in profit from player sales, down £1.1m from £3.2m to £2.1m, and other operating income, down £3.2m from £4.0m to £0.8m. Net interest payable was unchanged at £1.0m.

The main driver of the revenue increase was commercial, which rose £1.4m (25%) from £5.6m to £7.0m, though there was also decent growth in broadcasting, up £0.7m (8%) from £8.4m to £9.1m. However, match receipts dropped £0.5m (11%) from £4.2m to £3.7m.

Blues made a concerted effort to reduce staff costs, as wages fell £3.2m (10%) from £32.1m to £28.9m, while player amortisation decreased £2.8m (45%) from £6.3m to £3.5m. On the other hand, other expenses rose £3.8m (39%) from £9.6m to £13.4m, as they were hit by the inflationary impact on services and utilities.

Very few clubs make money in the incredibly competitive Championship, but Blues’ £25.3m loss was one of the worst results in the division in 2022/23, only surpassed by three clubs, namely Burnley £36m, Sheffield United £31m and Norwich City £27m.