The Palace accounts cover the year to 30 June 2017, they were due to submitted to Companies
House by 31 March 2018 but were a few months late.
Income
Clubs split income into three categories, matchday, broadcasting and commercial.
Palace’s matchday income fell 11% in 2017 to £10.6 million.
This initially appears odd as attendances rose [from 24,635 to 25,160].
The fall is due to two Wembley appearances in the FA Cup the previous season and the
cap on away fan ticket prices in 2016/17 at £30.
Palace have more matchday income than many provincial teams due to being able to charge
London prices, but less than those with bigger stadiums and regular European home games.
In terms of broadcasting income, Palace were major beneficiaries of the new domestic TV
deal, with an increase of 50%.
This was combined with the club appearing on TV four times more than the previous season
(worth about £1m per appearance) and £2m for prize money in finishing one place higher
in the league table too.
A lot of clubs in the Premier League are very dependent upon broadcast income and Palace
are no exception, with nearly £5 in every £6 coming from this source.
There are mutterings from fans of many clubs that TV money ruins the game but there is
an argument to say that it makes the Premier League more competitive.
Successfully being able to outbid most clubs in Europe for players has allowed clubs of
the stature of Palace to recruit the likes of Yohan Cabaye and keep Wilfred Zaha.
A rise in commercial income of 28% is impressive.
Although both the shirt sponsor and manufacturer were the same as the previous season the club
may have signed deals on the back of the previous season’s FA Cup run (or earned bonuses that
kicked in on the back of this).
An additional source of income for Palace in 2016/17 was £4 million of ‘other income’.
In the accounts this is described as ‘compensation for…award in favour of the club by the Premier
League Manager’s Arbitration Tribunal.
This would appear to the money Palace received when former manager Tony Pulis tried to stiff
the club by taking a £2.5m bonus for keeping them up in 2013/14 and then left.
Pulis was however only entitled to the bonus if still at the club at 31 August but quit
having asked for it to be paid early and then resigning on 14th August.
Palace sued for the bonus to be repaid by Pulis and the case went to tribunal.
Costs
Wages
Palace’s main costs were in relation to players, and the wage bill rose by 39% to
nearly £112 million, close to six times the amount they paid out when promoted from the
Championship in 2013.
Having a wage bill rising at this rate does look alarming.
Normally wages rise substantially when a club is either promoted or there is a new Premier
League TV deal commencing.
This would explain the jumps in 2014 and 2017, but in between too there have been significant
increases in wage costs as the club has invested in new players and keeping some existing ones.
A wage bill of this magnitude puts Palace almost neck and neck with Leicester, who had
won the Premier League the previous season and had the benefit of Champions League participation
in 2016/17 too.
It’s difficult to see the rationale behind Palace’s wage rise compared to that of many
other clubs.
The three promoted clubs are self-explanatory, City had to fund Guardiola’s [NOT VITAL]
spending spree, Leicester had new contracts having won the Premier League (and had Champions’
League bonuses to pay).
Chelsea’s wage bill fell despite winning the Premier League because of lack of Champions’
League participation.
Premier League wages overall rose by ‘only’ £135 million (6%) as the clubs promoted had
lower totals than those they replaced (Villa, Newcastle and Norwich).
Representing £78.30 of cost for every £100 of income in 2016/17, wages at Palace are
proportionately the highest of any Premier League club.
This suggests both Alan Pardew & Sam Allardyce we’re backed during the season.
It does however limit wriggle room to increase wages in future years unless they generate
extra income, hence the proposal to expand Selhurst.
Because of the boost in staff costs, Palace players have an average weekly wage of over
£50,000 a week.
One of the directors also had a substantial pay rise.
Only one director appears to be on the payroll, and the likely recipient is Steve Parish.
There’s nothing wrong with Parish earning such a sum, he’s been a contributor to the
club being promoted and securing a position in the Premier League.
The sum earned is broadly in line with the average income for a first team player.
The accounts do appear very defensive in relation to this money though.
First there is a note in the directors’ report stating that a bonus the previous season
had been foregone and then implied that the bonus and more had been invested in the club.
In addition to the salary earned, Steve Parish controlled companies that sold services to
Palace.
VMM Ltd appears to be a property company with one employee, and Smoke & Mirrors Group Ltd
by all accounts rents a property in Soho to Palace, which seems a bit odd, as does tripling
the rent for 2016/17.
Profit
Profit is income less costs, but it contains lots of layers and estimated figures.
Palace’s profit and loss account refers to a few different profits, so they need a
bit of explanation.
Operating profit is income less all the running costs of the club except loan interest & tax.
On the face of things, it looks as if Palace have had a good year in 2016/17, with an improvement
of nearly £19 million.
Included in operating profits are some volatile income and costs such as profit on players
sol.
Palace made profits on player sales of £35m.
If non-recurring items like these are removed, we get something called EBIT (earnings before
interest and tax) which in theory is a sustainable/recurring profit figure.
Palace’s EBIT profits are less impressive, as the profit becomes a loss reflecting the
increase in wages and other operating costs in the year.
The Premier League made EBIT profits of £147 million in 2016/17, but these vary substantially
from club to club.
Palace had the third highest EBIT loss.
If non-cash costs such as amortisation and depreciation (the same as amortisation except
this is how a club expenses other long-term asset such as office equipment and properties
over time) then another profit figure called EBITDA (Earnings Before Income Tax, Depreciation
and Amortisation) is created.
This is liked by professional analysts as it is the nearest thing to a cash profit figure.
The good news for Palace is that they made an EBITDA profit, the bad news is that it
was the second lowest in the division.
The Premier League made EBITDA profits of £1,183 million, of which £10 million was
earned by Palace.
Player Trading
Palace splashed the cash in 2016/17 with over £104 million on player purchases such as
Benteke, Townsend, Milivojević & Van Aanholt, making them the fourth highest gross spenders
in the division.
The large spend on players is why the amortisation charge in the profit and loss account is so
high.
Fans will rightly point out that clubs also sell players and that net spend is a better
measure of a club’s investment in talent.
Taking this into account Palace spent over £65 million net in 2016/17 and shows the
extent of the achievement in 2013 in being promoted with a negative net spend.
Palace once again come fourth in the Premier League in terms of net spend.
Summary
So, how can we summarise Palace’s accounts?
Ultimately, Premier League membership is the most critical element of income generation
and here the club has been successful, so the directors would argue that the policy
has worked.
Some questions remain, such as the source(s) of funding for the stadium expansion, but
these are capable of being overcome, provided there are not significant interest costs on
any loans.
As for the delay in sending in the accounts, there seems to be little justification.