Barca's future dominated by Camp Nou development

 Barcelona actually reported a pre-tax loss of €129m in  2023/24, compared to the prior year’s huge €471m profit, which represented an adverse swing of €600m.

However, this is largely driven by the movement in economic levers, which delivered an €800m profit in 2022/23, but €141m of this gain was impaired last season. This alone led to a €941m deterioration in the bottom line.

As a reminder, Barcelona had pulled these famous levers (“palancas”) to raise funds, albeit at the expense of sacrificing income in the future. Without the benefit of the financial levers, Barcelona would have posted a €459m pre-tax loss in the last three years, instead of the reported €466m profit

In terms of normal business, revenue fell €43m (5%) from €806m to €763m, which was actually a pretty good performance, as they had to contend with a decrease of more than €100m following the temporary relocation of the men’s first team to the Olympic Stadium while the Camp Nou is being redeveloped.

This was offset by a €121m improvement in player sales, which produced a €79m profit, as opposed to the previous season’s €42m book loss.

In addition, Barcelona have started to get to grips with their cost base, which was reduced by €264m (25%) from €1,070m to €806m. Net interest payable slightly rose from €23m to €24m.

Following last season’s decrease, Barcelona’s €763m revenue is now a substantial €310m below Real Madrid’s €1,073m, as per their press release. This stated that Madrid are the first football club to exceed one billion Euros in revenue.

Playing home games at the smaller Olympic Stadium meant steep decreases in both competitions income, down €38m (31%) from €124m to €86m, and season tickets and membership cards, which more than halved from €66m to €30m.

In contrast, broadcasting rose €26m (12%) from €216m to €242m, while there was a net €4m (1%) increase in commercial revenue streams to €405m, including marketing and advertising, rendering of services, other operating income and grants.

The ‘levers’

Before the large losses in 2019/20 and 2020/21, Barcelona had reported profits eight years in a row, amounting to a quarter of a billion pre-tax. Thanks to the levers, they then posted profits in the subsequent two years, though the partial reversal of one of those levers led to last season’s large loss.

Barcelona’s first lever was the sales of some their La Liga TV rights to Sixth Street. In 2021/22 they sold 10% of the rights for €266m, then another 15% in 2022/23 for €399m.  In total, these sales have delivered €665m, but there’s no such thing as a free lunch, so the club will have to pay €41m per annum for 25 years.

Barcelona are by no means the only elite football club to make big losses, but their €1.2 bln in the four years up to 2022/23 (excluding the sales of the “family silver”) was by far the largest in Europe, far ahead of PSG €833m, Juventus €661m and PSG €551m.  That said, Barcelona’s €763m revenue is still a lot more than all their other domestic rivals, being more than twice as much as Atletico Madrid €358m, who were in turn far above Sevilla €214m and Real Betis €149m.

Barcelona’s return to “ordinary” profit was greatly helped by €79m profit from player sales, which represented a significant improvement over the previous year, when they made a net €42m lose, as they desperately offloaded players to reduce the wage bill.   This year’s budget is for only €22m profit, largely from the sales of Mikayil Faye to Rennes and Julian Araujo to Bournemouth, as there was the customary spate of free transfers, including Ilkay Gundogan, Sergino Dest, Sergi Roberto and Marcos Alonso.

Barcelona earned €97m TV money for reaching the Champions League quarter-finals, where they were eliminated by Paris Saint-Germain.  Barcelona have earned an impressive €425m from Europe in the last five years, though this was a long way below Real Madrid’s €581m. Atletico Madrid were not too far behind the Catalans with €410m, but there was then a sizeable drop to Sevilla €284m and Villarreal €142m.

Barcelona’s football wage bill was slashed by €141m (25%) from €571m to €430m, due to “the application of a strict wage pyramid, restraint in hiring and the gradual disappearance of the higher contracts that the club had been keeping in place.” 

Growing debt

A major issue for Barcelona is the growing financial debt, which increased by another €192m last season from €1.6 bln to €1.8 bln, comprising €1,442m bonds, €325m bank loans and €44m other financial liabilities.  This is largely driven by the debt taken out for the Espai Barca development, organised by Goldman Sachs and JP Morgan via a series of loans from 20 different investors.

Even before last season’s increase, Barcelona’s financial debt was the highest in Europe, above Real Madrid and Tottenham’s €979m, once again linked to funding for a stadium development.  The good news is that Barcelona have replaced much of their expensive short-term debt with longer-term debt, including a grace period, so the vast majority is scheduled for repayment in 2032/33 and beyond.

Barcelona have noted that they do not benefit from owner funding (loans and share capital), unlike many other leading clubs, whose business model is reliant on benevolent shareholders. They argue that this helps explain why they needed to pull the economic levers.

It is certainly true that the club has made some progress off the pitch, especially in cutting their wage bill and other costs, and they did post an “ordinary” profit of €12m excluding the exceptional provision.

Also encouraging is the continued growth in sponsorships and merchandising, while match day income is anticipated to rise after the return to the Camp Nou in the second half of this season.

Indeed, Barcelona’s future will be dominated by the Camp Nou stadium development, which is a bit of a double-edged sword: on the one hand, it should ultimately generate substantial additional income; on the other hand, the club has had to take on a huge amount of debt to finance this major project.

The last few years have been characterised by all sorts of fancy financial network, which have helped keep Barcelona going, though it has to be acknowledged that the club has sacrificed a large slice of its future revenue in exchange for a series of short-term fixes.

This strategy might still bite them in the backside, especially if UEFA get tough over the FFP failures, but if the club continues with its more sustainable strategy, then things should improve.

Most fans will simply be happy that the team appears to have got its mojo back, thanks to the rapid development of many talented stars from La Masia, exemplified by Saturday’s dazzling 4-0 triumph against Real Madrid.