Skip to main content

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].

Comments

Popular posts from this blog

Threat of financial calamity removed from Baggies

West Bromwich Albion had effectively been in decline ever since the club was sold to a Chinese consortium in August 2016, paying a figure north of £200m to buy former owner Jeremy Peace’s stake. Controlling shareholder Guochuan Lai’s ownership was fairly disastrous for the club, but his unloved tenure finally came to an end after Bilkul Football WBA, a company ultimately owned by Florida-based entrepreneur Shilen Patel and his father Dr Kiran Patel, acquired an 87.8% shareholding in West Bromwich Albion Group Limited, the parent company of West Bromwich Albion Football Club. This change in ownership was urgently required, due to the numerous financial problems facing West Brom, including growing high-interest debt and serious cash flow concerns, following years of no investment from the former owner. Indeed, West Brom’s auditors had already rung the alarm bell in the 2021/22 accounts when they cast doubt on the club’s ability to continue as a going concern without making player s

Gold standard ground boosts Tottenham's income

The gold standard in European football grounds is the Tottenham Hotspur stadium in north London, a £1bn construction project completed in 2019. Its impact on the club’s finances has become increasingly clear as the effects of the pandemic have faded. Previously, the average fan would spend less than £2 inside the ground on a typical match day, but now that figure is about £16, thanks to new facilities including the longest bar in Europe and an on-site microbrewery. Capacity has gone up from 36,000 at the club’s previous home of White Hart Lane to 62,000.  The new stadium — built on land adjacent to White Hart Lane — has opened the door to a broad range of other events that have helped to push commercial income up from €117mn in 2018 to €215mn in 2022. Last year, Tottenham hosted US singer Beyoncé for five nights on her global Renaissance tour, two NFL matches, as well as rugby games and heavyweight boxing bouts.  Money brought in from football has gone up too. Match day income is

Spurs to sell minority stake

Tottenham Hotspur is in talks to sell a minority stake in a deal that could value it at up to £3.75 billion and pave the way for Joe Lewis and his family to sever ties with the Premier League football club. Tottenham chairman Daniel Levy is seeking an investment that values the club at between £3.5 billion and £3.75 billion, including debt. While the terms of any deal have not been finalised, City sources expect Spurs to sell about 10 per cent. The club is being advised by bankers from Rothschild on the sale. Tottenham wants to raise fresh capital for new player signings and to help fund the development of an academy for its women’s team, as well as a 30-storey hotel next to its north London stadium. The financier Amanda Staveley, who brokered the deal for Saudi Arabia’s Public Investment Fund to take over Newcastle United, is understood to be among the parties to have expressed an interest in Tottenham. Staveley’s fund, PCP Capital Partners, has raised about £500 million to depl