Why Ajax have to be a selling club

The authoritative Swiss Ramble reviews the 2020/21 accounts of Ajax. Their pre-tax loss widened from €12m to €32m (€24m after tax), despite revenue rising €64m (51%) from €125m to €189m, as profit from player sales fell €48m from €86m to €38m and operating expenses increased €35m (16%).

The €32m pre-tax loss is the highest in the Netherlands, even though the most recent accounts for other clubs cover the 2020/21 season, which included a full year of COVID. In 2019/20 (pre-pandemic) no fewer than 11 of the 18 Eredivisie clubs were profitable.

Ajax normally run a sustainable business model, but they have posted losses amounting to €43m in the past two years, driven by the pandemic. In the previous eight years, they had accumulated nearly a quarter of a billion Euros profit, averaging €30m a season.

In fairness, Ajax have done much better than other leading European clubs during the pandemic, reporting an aggregate pre-tax €15m profit for 2019/20 and 2020/21, which was significantly better than the huge losses at the likes of Barcelona €689m, PSG €350m and Inter €337m.

However, Ajax are very reliant on player sales, earning nearly half a billion (€485m) from this activity in the last decade, including €281m in the last four years. This season’s figures will be even more impressive after sales of Antony, Martinez, Haller, Schuurs and Tagliafico. They are known for their strategy of developing and selling players, as highlighted by the €361m profit made in the 5 years up to 2021, more than three times as much as PSV €110m. In fact, they have one of the highest gains from player trading in all of Europe.

Revenue

Main reason for Ajax revenue increase was match day, which rose €32m from €2m to €34m, due to the partial return of fans to the stadium, while broadcasting was up €19m (34%) from €55m to €74m and commercial grew €13m (19%) from €68m to €81m.

Following last year’s growth, Ajax €189m revenue is only €10m (5%) less than the club’s €199m peak in 2019, when they reached the Champions League semi-finals. Lower match day (due to COVID restrictions) and broadcasting have been largely offset by higher commercial.

€189m revenue is by far the highest in Netherlands, well ahead of PSV €71m and Feyenoord €62m, though their rivals’ figures are from the 2020/21 season when games were played without fans and 13 of the 18 Eredivisie clubs had revenue lower than €15m.

In 2021 Ajax dropped out of the Deloitte Money League with their €125m revenue being a long way below 30th placed Lazio €164m, having been as high as 23rd in 2019. This highlights that their revenue is far below the European elite, which is why Ajax are a selling club.

The importance of Europe

Ajax earned €63m from Europe in 2021/22 after reaching Champions League last 16. This was €17m more than prior year’s €46m when they were eliminated in the Champions League group stage, followed by making the Europa League quarter-finals. A large part of Ajax European money comes from the UEFA coefficient payment (based on performances over 10 years), where they were ranked 15th in the Champions League, thus receiving €20m. This distribution methodology rewards the club’s good record in Europe. They have earned a hefty €237m from European competition in the last five years, which is even more impressive considering that they did not reach the group stage of the Champions League or the Europa League in 2018.

The importance of Champions League qualification to the Ajax business model cannot be over-stated with their €237m European TV money in last five years being considerably more than PSV €62m and Feyenoord €52m and much higher than the domestic TV deal.

The wage bill rose €14m (15%) from €95m to €109m, due to higher bonuses, player signings and contract extensions. This was far more than Dutch rivals, e.g. in 2020/21 PSV €47m and Feyenoord €37m, and actually the highest ever in the Eredivisie. Following the increase in revenue, Ajax wages to turnover ratio improved from 76% to 58%, which was one of the lowest (best) in the Eredivisie, However, for Ajax it is a case of being “a big fish in a small pond”, as their €95m wage bill in 2020/21 was significantly lower than top clubs in the major leagues, e.g. less than 20% of PSG €503m. This makes it fairly inevitable that their young stars will move abroad.

They are a well-run club, but their business model is very reliant on two factors: (a) qualification for the Champions League; (b) profitable player sales. They clearly have the best financial resources in the Eredivisie, but are still far behind their elite European rivals.

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The Political Economy of Football V2

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