From his Zurich eyrie, the authoritative Swiss Ramble turns his attention this week to Porto who have changed their strategy. Here is a summary of his main conclusions, much more on his Substack page.
Porto have started the season in great form, at least
domestically, where they have won their first eight games in the league, though
results have not been so impressive in the Champions League, as they have lost
both games to date.
There has been a marked change in strategy, as the club
chose to spend heavily on strengthening the squad and retain some of its
talent, as opposed to its usual approach of selling players to balance the
books.
The “significant investment made to restore sporting
competitiveness” clearly paid dividends in the league, but it was also
reflected in Porto’s financials, as they swung from the club record pre-tax
€45.0m profit to a €20.3m loss, a significant year-on-year deterioration of
€65.3m. Porto’s €20.3m pre-tax loss was
actually the worst in the Primeira Liga, ahead of Rio Ave €19.3m and Santa
Clara €14.9m (both 2024/25 results).
Revenue was basically flat at €150m, while there was a steep
increase in operating expenses, which shot up €46.0m (25%) from €181.5m to
€227.5m. Furthermore, profit on player
sales almost halved from €100.4m to €55.9m, though this was partially offset by
€24.0m exceptional gains from asset sales.
Porto’s figures would have been even worse without the
benefit of €24m of exceptional items, made up of €9m from the sale of a stake
in insurance subsidiary Porto Seguro to MDS and a €15m earn-out from the sale
of a 30% stake in Porto StadCo to Ithaka, a Spanish infrastructure investment
firm.
Broadcasting remained the most important revenue stream with
44%, closely followed by commercial 42% and just 14% match day.
Porto’s €150m revenue was a fair way below Benfica €214m,
while they were also overtaken by Sporting €188m. This was the first time they
had been ranked third since 2017/18, as they are normally second in Portugal.
Their relative position basically depends on which club does
best in Europe, e.g. the last time that Porto enjoyed higher revenue was in
2020/21 when Benfica and Sporting only competed in the far less lucrative
Europa League.
The importance of European TV money to Porto is evident, as
this has been higher than domestic broadcasting income in seven of the last ten
years. Only playing in the Europa League in the last two seasons has therefore
hit them hard. Portuguese clubs are
still adversely impacted by having a very small TV deal, which is part of the
value pillar calculation.
Porto’s average attendance increased to 45,612, as a record
31,665 season tickets were sold, marking the first time the available capacity
was fully booked, while the occupancy rate was up to 91%.
Porto’s wages shot up €21m (25%) from €82m to €103m, driven
by the strengthening of the first-team squad, as well as performance bonuses
after winning the league. In addition, the contracts of ten of the first team
squad were renewed, including Diogo Costa, Martim Fernandes and Pepé.
Porto’s gross financial debt was cut by €25m from €273m to
€248m, comprising €231m bonds and an €18m bank loan taken out with
Oldenburgische Landesbank (OLB), where the maturity date has been extended to
30 September 2027. Porto’s refinancing
efforts significantly reduced the annual interest payment from €21.4m to €16.2m
in 2025/26, having been as high as €30.8m in 2020/21.
Although Porto’s financial results significantly worsened
last season, as they swung from a substantial profit to a large loss, this was
the result of the deliberate strategy of investing heavily in the squad.
The club would probably think that this was a price worth
paying, as they managed to win the league, which enabled them to qualify for
the lucrative Champions League.
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