Leeds join the revenue elite

The authoritative Swiss Ramble reviews the 2019/20 accounts of Leeds United., a year that saw them promoted as title winners from the Championship. Some fans saw it as a 'now or never' season.

The club paid a price for success, as their pre-tax loss widened from £21m to £62m, despite revenue rising £5m (11%) from £49m to £54m, as significant investment led to expenses increasing £44m (52%), including £20m promotion bonuses and £7m TV rebate to broadcasters.

The main reason for the £5m revenue growth was £7m (25%) increase in commercial income from £27m to £34m (largely merchandising), as gate receipts fell £1.2m (9%) to £11.4m and broadcasting was down £0.5m (5%) to £8.7m. Profit on player sales dropped £6m to £10m.

Commercial income is by far the highest in the Championship and more than all but eight clubs in the Premier League. Commercial income will further rise, as lucrative new deals have been signed in 2020. SBOBET shirt sponsorship reportedly worth £6.5m a year, compared to 32Red £750k, while Adidas replaced Kappa in 5-year kit supplier deal and new training kit partnership with Clipper.

Revenue has more than doubled in the last five years from £24m to £54m, mainly driven by commercial, which has tripled from £11m to £34m, now contributing 63% of total revenue. The growth was partly due to bringing £4m catering back in house.

Excluding parachute payments, the £54m revenue would have been comfortably the highest in the Championship. In fact, this is the highest ever revenue for a Championship club not in receipt of parachutes (Leeds have the four largest on record, all from last four seasons).

However, the club saw significant cost growth, as wages shot up £32m (70%) from £46m to £78m (including £20m promotion bonus) and other expenses rose £7m (30%) to £30m. wage bill rose significantly by £32m (70%) from £46m to £78m, which means that wages have almost quadrupled in the last 3 years, rising from £21m. The wages to turnover ratio worsened from 94% to 144%, though this would be reduced to 108% if promotion bonus excluded. Even excluding the promotion bonus, wages were pretty high at £58m.

Of course, most clubs in the Championship habitually report large losses. Even before the pandemic, quite a few lost more than £20m. That said, the Leeds £62m loss is by far the worst to date in 2019/20, much more than the next highest, Boro £36m. £62m loss is only below £69m posted by Villa in 2018/19.

Leeds have only made money once in last eight years (and that was just £1m in 2016/17). Losses have been increasing in the three years following Radrizzani’s arrival, due to investment in Bielsa, his coaching team and the squad, amounting to £88m.

Profit on player sales has been on the rise, averaging £15m over last three years. As Radrizzani explained, “Unfortunately to sustain a club in this league we need to sell one or two players each year.” However, this will fall this season, as mainly free transfers last summer.

Leeds will earn much more TV revenue in the Premier League, e.g. current 11th place gives around £120m based on 2018/19 distribution. Figures for 2019/20 have not been published, but should be higher (before any COVID rebate) with each league place worth around £3m.

As a result, revenue this season could increase from £54m to around £160m. Would have been even higher without COVID, which Radrizzani estimates has cost £30-40m with no fans at games and loss of corporate/commercial business. This would place Leeds among the revenue elite.

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The Political Economy of Football V2

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