Financial woes at Barcelona

The authoritative Swiss Ramble reviews Barcelona's latest accounts and it's a sorry tale.

The pre-tax loss widened from €133m to a shocking €555m (€481m after tax). Revenue dropped €138m (19%) from €729m to €591m and profit on player sales fell €64m to just €4m, partly offset by operating expenses down €66m, though net interest payable rose €22m.

President Joan Laporta blamed this on the previous management, who “delivered the worst accounts in Barca history”. This resulted in €161m player impairment and €110m other impairment and provisions (law suits, tax cases) following the Due Diligence report.

Before the 2020 loss, Barca had reported profits 8 years in a row, amounting to around a quarter of a billion pre-tax over this period. However, they have now posted massive €689m losses in last 2 years. Club has budgeted a return to profitability (€4m) in 2021/22.

The €555m pre-tax loss is by far the highest in Spain, though worth noting that next largest losses were made by clubs that have also published 2020/21 accounts, Sevilla €39m and Athletic Bilbao €25m. In stark contrast, Real Madrid have announced a small profit.

Barcelona had the highest revenue in the world in 2019/20 with their €715m topping the Deloitte Money League, but this only highlights the fact that revenue is not the whole story. As the old saying has it, “Revenue is vanity, profit is sanity and cash is king.”

Clearly, COVID has had a huge impact on finances in 2020/21 with many leading clubs across Europe reporting horrific losses, e.g. Inter €246m, Juventus €210m and Manchester United €105m. That said, Barca’s €481m post-tax loss is the worst ever, almost twice as much as next highest.

In contrast to previous years, the club did not benefit from player trading, as profit from player sales slumped from €68m to just €4m, as €34m gains were largely offset by €30m losses.   Like many other clubs, they have become increasingly reliant on player sales, though profits have fallen 3 years in a row from €208m peak in 2018 (mainly Neymar to PSG).

[This reliance on player sales is a trend across Europe, but they are volatile and it is a risky strategy to depend on them.  Arguably Chelsea have pursued a sophisticated and successful selling strategy, WG].

Barca earned €85m from the Champions League after reaching the last 16, €15m less than prior season €100m (quarter-final). Less than Real Madrid’s €111m, but ahead of Atletico Madrid €76m and Sevilla €68m.   Worth noting the influence on Champions League money of the UEFA coefficient payment (based on performances in Europe over 10 years), where the club had the 3rd highest ranking in 2020/21, giving them €33m. This change in distribution rewards good record of Spanish clubs.

They have earned a hefty €421m from European competition in the last five years, only surpassed in Spain by Real Madrid €446m. Atletico Madrid’s success has brought them €361m, then a big gap to Sevilla €201m, Valencia €118m and Villarreal €80m.

Football wages fell €11m (2%) to €432m, down from €501m two years ago, partly due to players agreeing payment deferrals. That said, still nearly €100m more than €340m wage bill in 2017.  €432m wage bill is still €54m higher than Real Madrid €378m, though gap has narrowed in last two years, and over €200m more than Atleti €227m. Will further reduce in 2022 following departure of players on high wages and agreed pay cuts (Pique, Busquets and Alba).

One comment was ‘My understanding is they have a lot of debt, but also high revenues. If they can service that debt by posting small profits yearly they can do this indefinitely (as long as interest rates do not rise).’  [Which they may well do].