Cardiff City recorded losses of £13.6m in the year up to the end of May 2012, according to the Championship club's latest financial accounts.
While turnover rose by £4m, including £2.3m from reaching the Carling Cup Final, other costs increased such as the wage bill and interest on loans.
Some £1.6m was paid out when manager Dave Jones and his staff were sacked in 2011 and Malky Mackay brought in.
The directors said many of the historic financial issues had been resolved.
The losses are an increase on the previous year's £11.8m deficit, but the club are currently 10 points clear in the Championship and will hope for a major financial boost from reaching the Premier League.
Keith Morgan, a Cardiff City fan and director of Mazars accountancy firm, said the £13.6m loss was worrying, but the club's overall debt of just over £83m was not as serious as it first appeared.
The directors said in their report: "The club continues to face the challenging financial environment presented by the Championship competition, as illustrated by the operating loss year-on-year, despite significant turnover growth - these gains being absorbed by increased direct football costs.
"Since May 2010, the club has seen substantial new investment, principally from Malaysian businessmen, which has continued during the year to the end of May 2012 and thereafter.
"The new investment has stabilised the club's financial position, allowing the club to work towards the delivery of a coherent and sustainable business strategy, as formulated by the new board and its management team."
The directors admitted the immediate future contained "significant challenges" but the Malaysian investors had made further funds available and entered into negotiations with creditors to reschedule payment plans.
"In addition, while their funding is not guaranteed, the new investors have indicated that providing the business develops as planned, they will continue to support the club in the foreseeable future and provide additional finance in order that it can settle its liabilities," said the report.
Increased sponsorship
The club also hopes that the rebranding of the team's main colours from blue to red and featuring a dragon on the team badge will help secure "future commercial opportunities".
The accounts revealed that the Bluebirds' turnover was £17.5m for the year to last May, compared to £13.6m in 2011.
More than £2.3m of the increased turnover was attributed to the Bluebirds reaching the Carling Cup Final at Wembley, which they lost to Liverpool on penalties.
There was also increased sponsorship, including £1m in shirt sponsorship with the club carrying the "Malaysia" name.
But the boost in income was more than offset by increases in expenditure such as the wage bill for players and other staff. This reached £18.5m, up £5m on the figures for 2011.
Increases in administrative expenses and interest on loans also played a part.
The accounts also show that the debt to Langston, the company represented by ex-City owner Sam Hammam, is put at £19.2m, with a one-off payment of £5m due if City reach the Premier League while the debt is outstanding.
Mr Morgan said the losses showed the club could not run at Championship level sustainably, but added that the overall recorded debts of £83.1m "overstates the reality of the position".
He said £37.4m was due to Malaysian backer Vincent Tan and his associates, which would disappear if this was converted to shares.
The £19.2m due to Langston could also be "greatly overstated", said Mr Morgan, because there had been speculation about settling the debt for significantly less.
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Comments
83 Mill in Debt . That's Frightening.
Is any club in our division not running at a massive loss?
It's not sustainable. Eventually the crooks will have all laundered their money and we all be proper fucked!
Howmuch is it thatBolton owe - in excess of 100 mil if memory serves me right.
New stand, old bill costs, few admin staff, new bit of turf and some corner flags every once in a while ....... and players wages. Ridiculously unsustainable wages in lots of cases.
You don't need a degree in economics to work out where the problem is.
It's the old mantra isn't it, "Market forces", that would be the same market forces that crashed the global financial markets and which are currently forcing the vast majority of clubs into big operating losses.
Can anyone think of any industry that wage caps?
I hate the 'ol `market forces' excuse as much as the next man but unfortunately it looks pretty air-tight to me. Football clubs are businesses at the end of the day and in the open market its survival of the fittest. Harsh but thats the nature of the beast. Football has found itself in this mess through natural evolution...
Of course the governing bodies of football are hoping to sort all this out with the roll out and development of the `Financial Fair Play' system thats imminent. Dunno how/if it would work as you go down the footbal ladder but thats another issue.
Just checked EUFA's site and here are the core principles of their FFP concept:
• to introduce more discipline and rationality in club football finances;
• to decrease pressure on salaries and transfer fees and limit inflationary effect;
• to encourage clubs to compete with(in) their revenues;
• to encourage long-term investments in the youth sector and infrastructure;
• to protect the long-term viability of European club football;
• to ensure clubs settle their liabilities on a timely basis.
Sounds easy eh ;P
Anyway, our total wages 8m, Cardiff's 18m. How are we supposed to compete with that?
If Slater and TJ are having to pull out from behind the sofa a million a month to keep the club afloat then you would expect Millwall as an example with their smaller gate receipts to have even bigger debts to service.
Just makes me think (after having worked for American companies for a loong time) that there is some other motive- dunno what it could be though.
There is actually nothing wrong, per se, with Cardiff or Charlton making losses if the owners are prepared to finance those losses; that's their choice. Indeed, it might be argued that investing today in the expectation of higher revenues tomorrow is a valid business strategy, albeit, as I noted on another thread, a dangerously seductive one in the case of Football.
Football's problem with this has not been that it is "unfair", but instead arises when losses are funded by debt (and I'd exclude loans from the equity investor in that calculation), which then becomes unmanageable, and because of the absurd length of player contracts which lock in a high cost base.
To a significant extent the risk created by debt funding is taking care of itself because Banks won't now lend to Football Clubs, but player contracts are still a major problem. It would be much healthier if they were all one year in length or, alternatively, linked to performance so that if a Club gets relegated player's salaries automatically fall. In Charlton's case, for example, this would have avoided the crippling need to continue to pay Racon, Semedo and Youga "Championship wages" for Division One football.
The wizards at the EPL are onto the problem of player contracts, of course, but their solution, as is so often the case, is perverse and damaging. They've increased the size of the parachute payments to Clubs relegated. This is a positive incentive for promoted Clubs to be irresponsible and is perhaps the primary reason the Championship is such a financial nightmare. Clubs like Charlton and Cardiff are forced to inject equity to compete with Clubs receiving unfair subsidies. You really couldn't make it up.
The consequence of so-called FFP will be to lock in this unfair advantage. Charlton's owners will not be allowed to lose as much money as they are doing today - even if they can afford to - and, of course, in many ways that has to be a good thing. However, once FFP is in place it will be even harder for a club like us to win promotion because the Clubs with parachute payments will enjoy an even bigger advantage (3 Clubs each season with an average of £12m p.a for four years). As result, and perhaps paradoxically, FFP may make a Club like Charlton a less attractive vehicle for a very wealthy owner.
An interesting anecdote which helps to illustrate the point I'm making is that recently some of the big Clubs wrote to the FA/EPL arguing in favour of the introduction of FFP. The list included Manchester United, Arsenal and Tottenham. I wonder why? They know that their revenue advantage means that their only competition can come from a wealthy owner injecting equity. Remove that threat and there will be no competition - they'll enjoy a wonderful virtuous circle of dominance on the pitch and the benefit of the huge revenue advantage that follows from that. They'll be able to employ all the best players (hoarding them using the now completely farcical loan system) and have enough over to pay themselves fat dividends.
That folks is Financial Unfair Play.
Seems like it's premier league or bust for them, god knows what they'll do if they don't go up.