Burnley’s auditors have issued a warning about the club’s financial position in the latest accounts if sufficient funds are not raised in the event of relegation.

The club posted a £27.9milliom post-tax loss – a significant drop from £26million profit made in the previous accounting period.

The 2022-23 campaign saw Burnley feel the effects of relegation from the Premier League. With a second relegation looming in three seasons, failure to secure survival will have a significant impact on their finances.

Burnley currently sit 19th in the Premier League and are six points off safety with seven games remaining.

The club’s auditors, BDO, have concluded that “material uncertainty” exists which casts doubt about the club’s “going concern” should funds not be raised primarily through player trading and salary reductions for players and staff.

The accounts state: “In the event of relegation, the group as with all such clubs will incur a significant reduction in turnover as Premier League broadcasting revenue is replaced with parachute payments. The group will be required to take steps to reduce costs and borrowings to a level more sustainable for a Championship club.

“In this scenario the group would expect significant reduction in wages and salaries, which will be largely achieved by contractual means existing in player and
employee contracts and player transfers.

“The group has also forecast a net inflow of cash from player trading, as is common for many clubs relegated from the Premier League. In such a case, to support the group’s obligations, the directors will consider and utilise financing options available, including but not limited to, player receivable financing.

In the event that the group’s financial performance varies or is less than that modelled, the directors are satisfied that sufficient funds can be generated or otherwise obtained by the Group, if this was absolutely necessary.

“If player trading results were to be materially less than forecasts, and the operating budget modeled otherwise remained unchanged, the resulting conditions if unresolved would indicate a material uncertainty which may cast doubt about the group’s ability to continue as a going concern if unresolved and therefore that it may be unable to realise its assets and discharge its liabilities in the normal course of business.”

Owners ALK Capital, including principal owners and chairman Alan Pace, will point to how they have dealt with the most recent relegation as evidence that they can navigate the club through a large turnover decrease.

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The auditors are expressing caution and are satisfied that the opinion of Burnley’s directors that the club should be considered to be a going concern.
Their turnover dropped from £123.4million in the previous year to £64.9million. This was largely due to the loss of broadcast revenue which fell from £104.9million to £47.8million. As part of their own cost cutting measures, the wage bill was reduced significantly from £92million to £53.7million.

High earners such as James Tarkowski, Ben Mee and Nick Pope departed, and coupled with wage reductions for those who remained and new signings arriving on more suitable wages to the Championship it became more manageable. Wage-turnover ratio, a key indicator of sustainability, increased to 83 percent, up from 75 percent.

The wage bill will have increased this year but in line with the statement above, it will once again drop to a more sustainable level if relegation becomes reality.
They made an £11.4million profit from player trading, largely helped by the sale of Maxwel Cornet to West Ham for £17.5million. It was a significant drop from the £54.2million in the previous year when Dwight McNeil, Nathan Collins and Nick Pope were sold.

Burnley will aim to use a similar method if relegated again, selling some of their most valuable assets. However, Kompany’s young, inexperienced side have encountered plenty of struggles this season and it is not clear what players are obvious profit-turning assets – Sander Berge, Wilson Odobert and Luca Koleosho are possibilities.

As Burnley’s accounts continued to July 2023, it incorporated some of this summer’s transfer deals including the signings of James Trafford, Zeki Amdouni and Jordan Beyer. However, outlays for those signed from August onwards, including Berge, Odobert and Aaron Ramsey were not included – with a further £39.4million spent after the accounting period.

The sensible management of Burnley’s finances in recent years means they are under no pressure from profit and sustainability rules. However, the club’s net debt (the total debt minus cash in bank) rose from £53.2million to £81.3million – and up from £14.8million in 2020-21.

Meanwhile, bank loans rose from £45million to £70million, borrowed from MSD UK Holdings at a high interest rate averaging 11.23 percent, which must be repaid or refinanced by May 2027.

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(James Gill/Getty Images)