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Benfica punch above their weight in Europe

Benfica’s 2023/24 accounts cover a season where they finished second in the Primeira Liga, which was pretty good by most clubs’ standards, but has to be considered a disappointment for the club from Lisbon, especially after they won the league the previous season. President Rui Costa, the former player (and football legend), admitted, “This fell short of what we intended in terms of sport.”

In 2023/24 Benfica swung from a €2m profit before tax to a €31m loss, a deterioration of €33m, as revenue fell €17m (9%) from €196m to €179m and profit from player sales dropped €6m (8%) from €64m to €58m.  This was exacerbated by operating expenses increasing €6m (3%) to €252m and net interest payable rising by a third from €12m to €16m. The net result after tax went from a €4m profit to a €31m loss.

Importance of player sales

Rui Costa attributed the loss to the Euros, which delayed activity in the summer transfer window, thus reducing the club’s ability to make money from player sales. The president said that a profit would have been “easily achievable” without this timing factor.    Despite complaining about the impact of the Euros on player sales, Benfica still made a €58m profit (€77m gain less €19m expenses), though this was down on the previous season’s €64m.   The strategy in Portugal is to offset operating losses with profits from player sales, which has worked well for Benfica for many years, but has come a little unstuck recently.

In the last four years, the €251m profit from player sales was not enough to compensate for €309m operating losses; whereas in the previous six years, the €429m profit from player sales was more than twice as much as the €209m operating loss.

The main driver of Benfica’s lower revenue was less progress in the Champions League, which led to broadcasting falling by €24m (19%) from €125m to €101m.

If we widen the period under review to the last ten years, Benfica actually had the highest net sales in the world – by some distance. According to the CIES Football Observatory, this was worth a hefty €816m, miles more than Ajax €473m, RB Salzburg €401m and Lille €391m.

This was partially offset by increases in the other revenue streams, especially commercial, which rose €5.7m (16%) from €36.7m to €42.4m, while match day was up €1.8m (4%) from €33.9m to €35.5m.

Benfica’s €31m pre-tax loss is actually the worst reported to date for 2023/24, ahead of Porto’s €23m. In stark contrast, a couple of their principal Portuguese rivals both posted good profits, namely Braga €14m and Sporting €12m.

Benfica have traditionally run a sustainable business model, reporting profits in each of the seven years up to 2019/20. However, the performance since then has been very different, as they have lost money in three of the last four seasons, adding up to a €105m deficit.

Benfica have enjoyed the highest revenue in Portugal eight times in the last decade. The last time that they found themselves behind Porto was in 2020/21, with the relative position being partly dependent on which club does better in Europe.

That said, the gap has narrowed to just €5m in 2023/24, as Benfica’s €179m revenue was only slightly ahead of Porto’s €174m. There was then a sizeable drop to the third member of Portugal’s “big three”, as Sporting generated €103m.

Braga are effectively the “inbetweeners” in the Primeira Liga, as their €57m is a long way below the top three, but by the same token is much more than the next highest club, which was Vitoria SC with €17m. In fact, no fewer than 11 of the 18 clubs in this division had less than €8m revenue.

Broadcast revenue

Portuguese clubs still have individual TV deals, e.g. Benfica signed a deal with NOS in 2015 that runs to 2027. However, after that deal finishes, the Primeira Liga will introduce a centralised TV deal that aims to have a much fairer distribution, reducing the massive disparity in earnings. It is unclear how much this will impact Benfica.

As it stands, the aggregate annual value of the Primeira Liga TV rights is €198m. The good news is that this is the highest of any league outside the Big Five, but the bad news is that it is worth a lot less. It is only about 5% of the Premier League’s incredible €4 bln, while also €460m lower than Ligue 1, even after their deal was slashed.

Benfica earned an estimated €48m TV money from Europe in 2023/24, primarily €44m from the Champions League, which was boosted by €4m after dropping down to the Europa League.   Porto received the most money of Portugal’s Champions League representatives with €64m after reaching the last 16, while Braga got €33m after also dropping down to the Europa League. Sporting only got €14m from the Europa League, even though they got to the last 16.

Importance of Europe

Benfica have earned quarter of a billion Euros from European competitions in the last five years, though this is slightly below their great rivals Porto €258m. The other Portuguese clubs have received less than half of this, i.e. Sporting €111m and Braga €80m.

The importance of Champions League qualification to the Benfica business model cannot be over-stated, as seen by the €63m they have averaged in the last three seasons, compared to only €11m in the Europa League in 2020/21. Indeed, Rui Costa said that it was “fundamental to our planning and competitiveness”.

This is even more the case after the implementation of the new, expanded Champions league format, which features more games and a 20% uplift in the overall revenue available for distribution.

Benfica’s average attendance slightly fell from 57,107 to 56,248, though this was still the highest in Portugal by some distance, a long way ahead of Sporting 40,102, Porto 37,912, Vitoria SC 17,388 and Braga 15,445.

Wages

Benfica’s wage bill fell €4m (4%) from €115m to €111m, due to a reduction in performance bonuses. This is the club’s lowest in the last four years, but wages have still increased by €43m (63%) since 2017/18.   As a result, Benfica’s €111m wage bill is easily the highest in Portugal, far above Sporting €90m and Porto €89m. The gap to the rest of the league is enormous, e.g. the next highest is Braga €39m, followed by Vitoria SC €17m.

However, Benfica’s wages are still much lower than the top clubs in the major leagues, e.g. their €115m in 2022/23 was half a billion Euros less than PSG’s €621m. This makes it almost inevitable that their young talent will move abroad sooner or later.

Benfica’s gross financial debt rose €52m from €170m to €222m, as bonds increased by €11m from €164m to €175m, while bank loans were significantly up from just €3m to €46m. A new 3-year €50m bond was issued in April 2024 at 5.75%, replacing the 2022 bond at 4.6%.

Benfica had been steadily reducing debt since the €330m peak in 2014, but it has now more than doubled from the €100m owed four years ago. The club said that this increase was “to consolidate the growth strategy and investment in the squad”, i.e. to fund transfer spend.

It is imperative for Benfica to qualify for the lucrative Champions League, which in fairness they have achieved most seasons.  Their ability to punch above their weight on the European stage has been impressive, given their relatively low revenue, though it will be difficult for the Eagles to fly any higher, when they lose their top talent to richer leagues every year.

 

 

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