Derby County Finances 2022/23

Don't Look Back In Anger

It’s been a long time since I reviewed Derby County’s finances, but I have been unable to do so for the simple reason that the club did not publish any accounts for four years.

However, these have been made available for the 2022/23 season, so I thought it would be interesting to look at the state of Derby’s finances, even though the usual trend analysis is somewhat compromised by the lack of data between 2018/19 and 2022/23.

Promotion

The good news is that Derby are back in the Championship, having secured promotion by finishing runners-up in League One last season, as head coach Paul Warne once again demonstrated his ability to guide a club out of the third tier (having already done so three times with Rotherham United).

This was all the more impressive, given that this was achieved just two years after the club nearly folded.

David Clowes

However, none of this this would not have been possible without the intervention of local businessman and lifelong supporter, David Clowes, who bought the club out of administration in July 2022, splashing out well over £50m in the process.

After numerous false dawns, Clowes stepped up to save Derby from the threat of liquidation, just as it looked as if all hope had been lost, even though this reluctant hero would have much preferred to have remained in the background (and in his seat in Pride Park).

However, Clowes said, “I could not stand by as the risk of losing Derby County became all too real. I could not have looked myself in the mirror if I had not done everything possible to protect it.”

As Clowes added, his purchase “ended nine months of uncertainty and fear over the future of our club.”

Mel Morris

Derby had entered administration in September 2021 after former owner, Mel Morris, was unsuccessful in his attempts to sell the club. Morris had bought a 20% stake in May 2014, before purchasing the remaining shareholding from North American Derby Partners in September 2015 to take full control.

There was no faulting the ambition of the Candy Crush multi-millionaire, as his stated intention was “to make Derby County a perennial competitor in the upper reaches of the Premier League”, leading to unprecedented levels of spending.

However, it’s fair to say that the gamble did not work out too well with Derby going through no fewer than nine different managers between June 2015 and May 2021, as the club’s attempts to reach the Promised Land of the Premier League became increasingly desperate.

Morris certainly paid a heavy price for this failure, admitting that the club had lost him “in excess of £200m”.

In addition, according to the administrators’ report, Derby owed £36m to HMRC, £24m to US investment group MSD Holdings and £15m to other creditors, including an outstanding £5m transfer instalment to Arsenal for Krystian Bielik.

Punishments

The EFL imposed a 12-point deduction for entering administration, followed by another 9-point penalty for breaches of the Profitability and Sustainability rules. Derby would have comfortably avoided relegation to League One in 2021/22, if they had not been deducted these 21 points.

A transfer embargo had already been imposed a couple of months earlier, due to the club’s financial problems, making life almost impossibly difficult. This was only lifted in May 2023.

Other Potential Investors

Clowes had got involved after various other investors fell by the wayside, but Derby certainly had a narrow escape when the deal with Chris Kirchner, somehow the administrators’ preferred bidder, collapsed in June 2022, given that the American businessman has since been sentenced to 20 years in prison for fraud.

Other unsuccessful takeover bids came in from Spanish businessman Erik Alonso and the Abu Dhabi-based Bin Zayed Group, but Clowes looks like an altogether better option for Derby.

Takeover

Clowes paid £33m to purchase the club, including the assets and certain liabilities, as prescribed by EFL regulations, of five companies in administration: SEVCO 5112 Limited, The Derby County Football Club Limited, Derby County FC Academy Limited, Club DCFC Limited and Stadia DCFC Limited.

In addition, the new owner spent £22m to secure the club’s stadium via his acquisition of Gellaw 202 Limited.

As part of the purchase, Clowes settled around £20m of liabilities. In addition, certain liabilities were transferred to the new company, Derby County (The Rams) Limited. These pertained to football creditors, which were transferred in full, plus unsecured creditors, which were transferred at a minimum value of 25 pence in the £1 of the balance previously held by the companies in administration.

This approach meant that Derby did not incur an additional 15-point penalty when coming out of administration.

History

Given the club’s history, it’s incredible that things got so bad at Derby. Older supporters will remember a glorious period in the early 70s, when the legendary Brian Clough and Peter Taylor led the Rams to their first ever (old) First Division title in 1972, then guided the team to the semi-finals of the European Cup, where they were controversially eliminated by Juventus.

Clough and Taylor left the club following a disagreement with the directors, but former player Dave Mackay repeated their great feat by winning the league again in 1975. Once more, they (briefly) shone in Europe, including a memorable 4-1 demolition of Real Madrid.

League Position

The last time Derby were in the Premier League was 2007/08, but that turned out to be a nightmare season, as the team only collected a paltry 11 points, winning just once and finishing rock bottom.

Following relegation, the club’s strategy of spending big in an attempt to bounce back very nearly worked, as they reached the Championship play-offs four times between 2013/14 and 2018/19, but it ended up being a case of “close, but no cigar”.

Instead, there was a steady decline after the loss in the 2019 play-off final to Aston Villa, as Derby narrowly avoided the drop to League One in 2020/21, before relegation the following year. In contrast, Villa will be playing in the Champions League this season, so this was a real “Sliding Doors” moment.

Profit/(Loss) 2022/23

After so much turmoil, the club described the 2022/23 season as a “stabilising and rebuilding exercise”, though Derby actually performed pretty well, only just missing out on the play-offs after finishing seventh in League One.

The new company, Derby County (The Rams) Limited, was incorporated on 23rd June 2022, so the accounts covered slightly more than the usual 12 months, but these are still a good basis for our financial review.

In 2022/23 Derby generated £20.4m revenue, boosted by £1.6m profit from player sales, but they had £32.6m operating expenses and £19.7m exceptional charges, leading to a £30.4m loss.

Derby’s reported £30.4m loss was actually the highest in League One in 2022/23, followed by that season’s champions, Ipswich Town £18.2m.

The deficits at both these clubs were a long way above the next highest losses, posted by Charlton Athletic £9.6m and Sheffield Wednesday £7.2m. In fairness, only one club in the Division managed to generate a profit that season, namely Exeter City – and that was just £0.3m.

However, it is worth noting that Derby’s loss was made worse by £19.7m impairment of goodwill arising from the purchase of the club. This goodwill predominately reflected the creditors that the new company was required to acquire as part of the transaction.