Big Six took a Covid hit

The authoritative Swiss Ramble takes a look at how Covid affected football club finances.

For the purpose of illustrating the effect of the pandemic, I have looked at the Big Six Premier League clubs, comparing the numbers for the last two sets of published accounts (2019/20 and 2020/21) with those reported for the preceding two seasons (2017/18 and 2018/19).

All the Big Six lost money in the last two years with four clubs posting losses over £100m: Arsenal £181m, Tottenham Hotspur £148m, Chelsea £120m and Manchester City £120m. This was very different from the preceding 2 years when 5 clubs were profitable. The deterioration was quite significant, e.g. Liverpool £218m.

The main reason that a football club fails is a problem with cash flow. It does not matter how large your revenue is (or your profits are), if you do not have the cash to pay your players, suppliers or indeed the taxman, then you will find yourself in trouble.

The Big Six generated 5.3 bn revenue in last two years, but still made £1.0 bn operating loss, due to £3.4 bn wages (wages to turnover 65%), £1.7 bn player amortisation/depreciation and  £1.1 bn other costs. Pre-tax loss was £665m after £477m player sales profit less £160m interest.

In contrast, in the preceding two years the Big Six posted £471m pre-tax profit, thanks to higher revenue (£5.8 bn vs £5.3 bn) and more profit from player sales (£681m vs £477m). Despite these falling in the last two years, wages still increased from £3.1 bn to £3.4 bn.

The reduction in revenue was largely driven by match day, down £587m, as almost all games were played behind closed doors in 2020/21, though broadcasting also fell £108m, mainly due to rebates. This was partially offset by £212m commercial growth.  Despite less potential for retail sales and pre-season tours, four of the Big Six grew commercial income in the last 2 years, mainly thanks to new sponsorships,

There were also large decreases in revenue in the last 2 years for most of the Big Six, especially Man United £214m, Arsenal £112m and Spurs £89m. However, Liverpool managed to lose only £11m revenue, while Man City actually increased revenue by £13m.

Even though revenue and player sales reduced in the last two years, four of the Big Six still significantly increased their wages, led by Man City £131m, then Chelsea£87m, Liverpool £66m and Spurs £60m. The growth at Arsenal was only £8m, while Man United actually dropped £22m.

Despite less available cash, the Big Six still spent slightly more on net player purchases in the last two years: £964m vs. £927m. Manchester United were easily the highest with £284m, followed by Arsenal £159m, whose net spend was somewhat surprisingly more than Manchester City £147m and Liverpool £145m.

As the old saying goes, “Revenue is vanity, profit is sanity, but cash is king.” This has never been more true than the past two years, when football was severely impacted by the COVID pandemic. Those clubs that saved cash for a rainy day benefited from their prudence.