Ajax have a sustainable business model despite Covid hit

The authoritative Swiss Ramble provides a forensic analysis of the latest accounts of Ajax.

Ajax swung from €27m pre-tax profit to €12m loss (€8m loss after tax), a €39m decline, largely due to revenue dropping €37m (23%) from €162m to €125m. Profit on player sales rose €2m to €86m, while operating expenses were up €1m.

The €12m pre-tax loss is the highest in the Netherlands, though it should be emphasised that these accounts are the first published for the 2020/21 season, so the only ones that include a full year of the pandemic. In 2019/20 no fewer than 11 of the 18 clubs were profitable.

The €8m post-tax loss is dwarfed by the massive losses reported by other leading European clubs for the COVID impacted 2020/21 season, including Barcelona €481m, Inter €246m, Juventus €210m.

Ajax have a sustainable business model, so their 2021 loss was only the second they have reported since 2010 (the other loss was less than €1m in 2016). In fact, in the last 10 years they have accumulated nearly a quarter of a billion Euros profit, averaging €24m a season.

They are very reliant on player sales, earning a thumping great €461m from this activity in the last decade, including €361m in last 5 years alone. However, transfer results of this season’s summer window were lower than expected, due to COVID depressing the market. [Clubs across Europe have become increasingly reliant on player sales, but it is a volatile source of income].

They are known for their strategy of developing and selling players, as highlighted by the €275m profit made in the 4 years up to 2020, much higher than PSV €102m, AZ €70m and Heerenveen €41m. In fact, this was more than many leading European clubs.

The €37m revenue fall was mainly due to COVID driven reductions in match day, down €40m (95%) to €2m, partly offset by commercial increasing €4m (5%) to €68m, including €11m NOW pandemic subsidy, Broadcasting fell €1m to €55m, largely from UEFA distributions.

Revenue has fallen by €74m (37%) in the past two years from the €199m peak to €125m, though still club’s third highest ever. Reduction driven by lower UEFA TV money, and especially match day, down to €2m as games played behind closed doors, so just 2% of total revenue.

Clearly COVID has had a significant effect on club finances. The Swiss Ramble estimates the revenue loss in 2020/21 to be around €38m (mainly match day), partially offset by €13m expense savings. Excluding the net €25m impact, the club would have posted a €13m pre-tax profit.

Ajax dropped from 23rd to 27th in the Deloitte Money League, just behind West Ham. This is a good achievement, though their revenue is still far below the European elite. In the last 10 years the gap to top 20 has held steady, but has greatly widened to the leading clubs.

To reinforce the enormous revenue disparity for Dutch clubs, the Eredivisie €530m revenue in 2020 was around 10% of the Premier League €5.1 bn. It was also miles behind Germany €3.2 bn, Spain €3.1 bn, Italy €2.1 bn and France €1.6 bn. Also below Russia €877m & Turkey €670m.

Based on the Swiss Ramble’s estimate, Ajax earned €46m from Europe in 2020/21: €42m from the Champions League group stage plus another €4m after dropping down to the Europa League. It was slightly less than the previous season, due to lower UEFA coefficient and COVID rebate.

They have earned a hefty €194m from European competition in the last five years, which is even more impressive considering that they reach the group stage of the Champions League or Europa League in 2018. The importance of Champions League qualification to the business model cannot be over-stated with their €194m European TV money in last 5 years being considerably more than PSV €72m and Feyenoord €44m.

The €68m commercial revenue is the highest in the Eredivisie, well ahead of Feyenoord €42m and PSV €40m, but it is less than a fifth of the elite European clubs, such as Real Madrid €383m, Bayern Munich €361m and Barcelona €340m.

The wage bill rose €2m (3%) to €95m, as higher performance bonuses offset a reduction in salaries. By some distance the highest in Eredivisie, twice as much as PSV €47m, followed by Feyenoord €38m. There is then a further big gap to AZ €22m, Twente €15m and Vitesse €14m. Following the decrease in revenue, the wages to turnover ratio rose from 57% to 76%

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The Political Economy of Football V2

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