Benfica punch above their weight

The authoritative Swiss Ramble reviews Benfica’s finances.  Benfica’s ability to punch above their weight (given their relatively low revenue) is impressive, but it should be acknowledged that their business model is very reliant on two factors: (a) qualification for the Champions League; (b) large gains from player sales.

Benfica pre-tax loss in 2021/22 widened from €34m to €42m (€35m after tax), despite revenue rising €75m (80%) from €94m to club record €169m, as profit from player sales fell €46m from €88m to €42m and expenses increased €37m (17%).

Benfica normally run a sustainable business model, but they have posted losses amounting to €76m in the past two years, partly due to the pandemic. In the previous 7 years, they had accumulated €187m profit, averaging €27m a season, with their last loss coming in 2013.

Benfica €42m pre-tax loss was in stark contrast to their principal Portuguese rivals, who both posted good profits: Sporting €25m and Porto €22m. This was largely due to the impact of the deflated transfer market on player sales in 2021/22.

Benfica revenue growth driven by Champions League participation, which led to broadcasting increasing €48m (73%) from €66m to €114m, and match day, up €25m from €0.5m to €25m, due to the  return of fans to the stadium. Commercial also rose €3m (10%) from €28m to €31m.

Benfica’s €169m revenue was higher than Porto €144m and Sporting €123m in 2021/22, though their relative position against Porto is basically dependent on which club does better in Europe, e.g. Benfica in 2022, Porto in 2021.

Reliance on player sales

Benfica profit from player sales fell €46m from €88m to €42m, as transfers were mainly of previously purchased players, rather than academy products.   Benfica are very reliant on player sales, earning an impressive €734m in the last decade, including €389m in the last five years. However, 2021/22 €42m profit was easily the lowest since 2013. Only meaningful sale to date this season is Yaremchuk to Club Brugge €16m.

All clubs in Portugal depend on player trading, but this is especially the case for Benfica, whose €734m profit in last 10 years was even higher than Porto €500m and Sporting €398m.  In fact, in the 10 years up to 2021, no club in Europe has generated more profit from player sales than Benfica.

Benfica have been a selling club for many years. In fact, they have only had net spend one year in the last decade (and that was just €8m in 2021). In the last five years, they made €342m player purchases, but €528m sales produced €186m net sales.

In 2021 Benfica dropped out of the Deloitte Money League with their €94m revenue a long way below 30th placed Lazio €164m, having been 23rd the previous season. This highlights that their operating revenue is far below the European elite, which is why they are a selling club.

Benfica have earned nearly €200m from European competition in the last five years, though this is less than rivals Porto €240m.  The importance of Champions League qualification to the Benfica business model cannot be over-stated, as seen by the €61m they have earned to date in this season’s Champions League after qualifying for the last 16.

Benfica €31m commercial revenue is a fair bit lower than Porto €43m and similar to Sporting. Significantly this is less than the elite European clubs, six of whom generate more than €250m a year.

Benfica wage bill rose €16m (16%) from €97m to €113m, mainly due to higher bonuses for Champions League. This means that wages have shot up over €50m (87%) in just 4 years. This is much higher than Porto €83m and Sporting €67m.   However, Benfica’s wages are still much lower than top clubs in the major leagues, e.g. their €95m in 2020/21 was less than a fifth of PSG €503m. This makes it fairly inevitable that their young talent will move abroad sooner or later.

Following the increase in revenue, Benfica wages to turnover ratio decreased (improved) from 103% to 66%, though still higher than Porto 57% and Sporting 55%. However, Benfica’s ratio is close to its normal pre-COVID levels.

Benfica gross financial debt increased from €146m to €171m, comprising €142m bonds, €26m bank loans and €2m accrued interest. The club had been steadily reducing debt since €330m peak in 2014, but it has now risen from €100m 2 years ago, due to COVID & squad strengthening.  Despite the increase, Benfica €171m debt is a fair bit lower than Porto €280m, but higher than Sporting €158m. Miles below other leading European clubs.

Even though Benfica posted large losses in the last 2 years, the SR’s model suggests that they were fine in terms of UEFA FFP, thanks to allowable deductions (infrastructure, academy, women’s football & community) and adjustment for COVID losses.