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Liverpool: running a tight ship and securing success

Liverpool swung from a £7m pre-tax profit to a £9m loss, as revenue was static at £594m, but operating expenses rose £20m (3%) to £632m and net interest payable was up £2.0m to £4.5m. This was partly offset by profit on player sales increasing £6m from £28m to £34m.

Although a loss is rarely good news, Liverpool’s £9m pre-tax deficit is actually the third best result to date in the Premier League, only surpassed by the profits made by Manchester City £80m and Brentford £9m.

Their sustainable approach is in stark contrast to many other clubs, as some very large losses have already been reported for last season, including Aston Villa £120m, Southampton £87m, Newcastle United £73m, Wolves £67m and Arsenal £52m.

Last season was the first time that Liverpool reported a loss (since 2016 outside of the COVID years). In fact, in the five years up to 2019 they had managed to generate nearly a quarter of a billion of profits.    The last three years have not been so impressive, but even here they have only lost a total of £6m, which is pretty good going in the fiercely competitive world of football.   To illustrate Liverpool’s devotion to the bottom line, only one Premier League club made more money than the Reds’ £153m in the 10 years up to 2022, namely the Daniel Levy inspired Tottenham.

Liverpool’s £594m was very slightly below last year’s club record, but still £61m (11%) more than the £533m pre-pandemic peak in 2018/19.  Interestingly, the only revenue stream that has grown since then is commercial, which has led to it being the club’s biggest revenue source with 46%. Broadcasting contributes 41%, while match day only accounts for 13%.

Revenue growth

In fact, Liverpool’s £61m revenue growth in the last four years has been outpaced by all the other members of the Big Six with the exception of Manchester United. Their rivals at the top of the table, Manchester City, grew nearly three times as much with £178m.

Nevertheless, Liverpool’s £594m revenue is the third highest in England, albeit more than £100m below Manchester City’s £713m and over £50m less than Manchester United.   They are in turn well ahead of Tottenham £549m, Chelsea £513m and Arsenal £465m. In other words, in revenue terms, there is competitive imbalance even within the Big Six.

Liverpool were one of only three Top 20 Money League clubs that saw their revenue decrease in 2022/23, though the reductions were larger at Atletico Madrid and West Ham.   Revenue will increase once the Anfield Road redevelopment is completed, which will increase capacity by 7,000 seats to around 61,000. This was estimated to cost £80m, but is likely to have risen after the previous contractor, Buckingham Group, entered administration, which led to a delay in the planned opening.

Liverpool’s £84m (45%) growth in commercial revenue since 2019 is one of the best in the Premier League, though they were still outpaced by Manchester City £114m and Tottenham £92m. That said, it was significantly better than Arsenal £58m, Chelsea £31m and Manchester United £28m.

 

Player trading

Liverpool have built a reputation as a club that sells well, but since the blowout £124m in 2017/18, mainly from Philippe Coutinho’s big money transfer to Barcelona, they have only averaged £35m, which is good, but not great.  This season should be a bit better, thanks to a couple of sales to Saudi Arabian clubs, with Fabinho moving to Al-Ittihad and Jordan Henderson to Al-Ettifaq.

In the four years up to 2021/22, Liverpool made £140m from player trading, which was towards the upper end of the Premier League, but less than half of Chelsea’s £354m.

Europe

The size of the prize in Europe’s leading tournament was again highlighted last season by the €135m earned by Manchester City when they won the trophy for the first time by defeating Inter in the final.

Interestingly, Liverpool earned €18m more than Tottenham, even though the Londoners also reached the last 16, mainly because of a better UEFA coefficient (based on performance in UEFA tournaments in the last 10 years) and a higher TV pool (after finishing higher in the previous season’s Premier League).

The Champions League has been an important driver of Liverpool’s revenue growth with an impressive €564m earned in the last six years, only surpassed by Manchester City’s €615m, but much more than other English clubs.

The contrast with Liverpool’s European exploits in the previous six years is stark, as they only earned €77m in that period, despite reaching the Europa League final in 2016, as they failed to qualify on three occasions.

Therefore, only playing in the Europa League this season will significantly hurt Liverpool’s finances. The Swiss Ramble estimates that they have earned €25m to date for reaching the last 16, though they will surely progress to the quarter-finals after spanking Sparta Prague 5-1 in the first leg.

Even if they were to win this competition, their income would still be only around €38m, which would be less than half of last season’s Champions League TV money, while there would also be reductions in gate receipts and sponsorship payments.

Wages

Liverpool’s wage bill increased by £7m (2%) from £366m to £373m (another club high), which was a little surprising, given the poorer performance on the pitch, as salaries are apparently highly incentivised.

Liverpool’s wages have increased by £165m (79%) in the last five years, which is actually the highest growth of the Big Six, though three other clubs are also up by more than £100m: Manchester City £159m, Chelsea £140m and Tottenham £126m.

Following this steep growth, Liverpool’s £373m wages are now the second highest in the Premier League, only behind Manchester City’s £423m, which was inflated by large bonuses after their three trophies last season.

However, Liverpool have managed to maintain their wages to turnover ratio at around the 60% level, which is pretty good.

Transfers

Liverpool have greatly reduced their transfer budget in the last four years since the peak outlay in 2018 and 2019. Average gross annual spend has more than halved from £209m to £92m, while net spend is down from £111m to £55m.

Klopp has long since reconciled himself to the fact that his funds are more limited than some other clubs, e.g. when discussing the prospect of bringing Jude Bellingham to Anfield last year, “We cannot have six players in the summer and every one is £100m, for example. That is kind of clear. You have to realise what you can do and then work with that.”

Instead, Liverpool have unearthed some gems from the academy, such as Conor Bradley, Jarell Quansah, Jayden Danns, Lewis Koumas and Bobby Clark, which should save the club a lot of money in the transfer market.

Debt and owner funding

Liverpool’s gross debt increased by £38m from £159m to £197m, as the bank loan was up from £87m to £125m, while the owner’s loan was unchanged at £71m.  There’s been an interesting change of approach here, as the Main Stand expansion was funded by owner loans, while the Anfield Road Stand development has instead been financed by taking on more external debt.  In the last 10 years most of Liverpool’s £925m available cash has been sourced from the club’s own operations with £782m, which underlines the club’s dedication to a sustainable business model.

FSG have rarely put money into the club, though they did provide £174m in the six years up to 2016 to help fund stadium development. In the four years after that, the club actually made a £37m partial repayment of those loans.

This is in stark contrast to the sums provided by many other owners, e.g. in the five years up to 2022, there was significant funding at Everton £573m, Chelsea £416m and Aston Villa £351m. On the other hand, FSG might point to the relative lack of success at those clubs compared to Liverpool, i.e. money does not guarantee success.

this is in stark contrast to the sums provided by many other owners, e.g. in the five years up to 2022, there was significant funding at Everton £573m, Chelsea £416m and Aston Villa £351m. On the other hand, FSG might point to the relative lack of success at those clubs compared to Liverpool, i.e. money does not guarantee success.

Although FSG were reportedly open to the possibility of relinquishing control of the club, they ended up only selling a minority stake worth $100-200m to US investment firm Dynasty Equity.

Unlike the well publicised issues that many clubs have with the Premier League’s Profitability and Sustainability rules, not least the one on the other side of Stanley Park, Liverpool have absolutely no problems with Financial Fair Play (FFP).

The theme of financial sustainability runs strongly through Liverpool’s strategy.  Any Liverpool fans expecting the club to splash the cash on new players is likely to be disappointed, though the Reds continue to compete at the highest levels.

Whether Liverpool can win the Premier League in an emotional finale to Klopp’s adventure on Merseyside remains to be seen, but the club has bucked the financial odds before under the charismatic German, so it would be a brave man to bet against them.

 

 

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