Porto very reliant on player sales

Porto swung from a pre-tax €22m profit to a €47m loss, a deterioration of €69m, despite revenue rising €22m (15%) from €144m to €166m, which reflected a return to normality after three years impacted by the global pandemic. The main reason for the worsening of the bottom line was a steep reduction in profit from player sales, which slumped €70m (83%) from €84m to €14m.

Porto’s revenue growth was driven by more progress in the Champions League which led to broadcasting increasing €15m (17%) from €90m to €105m. Commercial rose €5m (11%) from €43m to €48m, while match day was up €2.5m (23%) from €11.0m to €13.5m, due to the lifting of all COVID restrictions.

In contrast to Porto’s reported €47m loss before tax, the other leading Portuguese clubs were all profitable in 2022/23, with Sporting leading the way with €26m, followed by Benfica €21m and Braga €2m.

As we have seen, Porto’s business model is very reliant on player sales, as they have earned an impressive €438m in the last decade, including €202m in the last 5 years. Profits will return to normal levels in 2022/23 after the €60m sale of Otavio to Saudi Arabian club Al-Nassr this summer.

Porto have earned an impressive €273m from European competitions in the last 5 years, rivals just ahead of Benfica’s €256m. Both clubs enjoyed a substantial advantage over all other Portuguese clubs, e.g. Sporting €108m and Braga €48m.

Porto’s wage bill rose €12m (15%) from €83m to €95m, mainly due to higher bonuses for more progress in the Champions League. This is a new club record, though is only 4% more than the €92m paid four years ago. Porto’s wages are much lower than top clubs in the major leagues, e.g. PSG’s €729min in 2021/22 was nearly nine times as much as their €82m, while even West Ham paid almost twice as much with €160m. This makes it fairly inevitable that their young talent will move abroad sooner or later.

Porto’s gross financial debt increased from €280m to €302m, mainly due to a €55m bond offering in June 2023. The year-end balance comprised other loans €175m (factoring €152m and commercial paper €23m), bonds €125m and bank loans €2m. Porto’s debt is at an all-time high of €302m, and is considerably more than its rivals: Benfica €170m, Sporting €138m and Braga €7m. In fact, it’s almost as much as those three clubs put together.

Porto’s ability to punch above their weight in Europe has been impressive, particularly given their relatively low revenue, but it should be acknowledged that their business model is very reliant on two important factors: (a) qualification for the Champions League;(b) large gains from player sales.

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The Political Economy of Football V2

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