TLDR - In short, all looks pretty healthy to me.
Detail
Buckle up...
So the 2023 accounts have now been published. If you want to, you can find them here:
https://find-and-update.company-information.service.gov.uk/company/00035668/filing-history
The accounts cover a season when we were shite. We finished 5th in the League, were knocked out of both domestic cups in the 4th round and exited the Champions League at the round of 16. We did win the Community Shield, so in Guardiola’s world we won a trophy. In everybody else’s world, we won fuck all and were shite.
By contrast, the year before the almost quad squad finished runners up in the league and Champions League, and won both domestic cups.
Profit and loss
So it is frankly remarkable how much our profit and loss account for 2023 resembles the one for 2022.
At a revenue level, we dropped off a net £0.4m. Media was down £19.3m (mostly performance related, largely due to early elimination in the Champions League), with £7m less on matchday due to fewer fixtures, offset by £25.8m growth in commercial revenue. It’s difficult to identify from the accounts precisely what the commercial growth relates to, but it’s likely to be new partnership / sponsorship deals, and possibly some price increases on existing deals on the back of a successful season the year before.
Wages are up a total of £6.8m. A lot of this will be Salah’s new deal (plus other new deals and probably an impact from purchasing new players), and it is worth pointing out that there would have been chunky bonuses in 2022 which weren’t paid out in 2023 (mainly trophy wins, as a lot of the goals / assists / clean sheet bonuses might still have been triggered). So the increase in wages reflects an increase in the underlying salaries and will be carried forward into 2024 and beyond.
Other operating costs were up £11.3m, which was mostly extra amortisation on new player spend (£7m).
So to put it in percentage terms, turnover was down 0.1% and operating costs were up 3.1%. That is remarkably stable from one year to the next, despite massive differences in on-pitch performance and a transfer spend of £133.5m. For net spend fans (you know who you are), the net spend number is £89.4m. Those numbers are full fat, not cash flow. At a cash flow level, we paid out £122.2m and received £39.1m (so a comparable net cash number of £83.1m).
Just looking at the profit and loss account, all looks pretty stable, nothing to write home about.
Cash flow
The cash flow statement gives a better picture of what was really going on. To summarise:
That was basically funded by drawing down £38m debt and using up £10.1m of existing cash on hand.
So essentially, player spending was funded by earnings in the year and spend on capital projects (mostly the Anfield Road stand) was funded by drawing down more bank debt and spending existing cash.
This is all sensible management. We didn’t overstretch on transfers, we took on debt to fund the stadium expansion – the returns from that expansion will be more than enough to service that debt, but see further comments below on the capital costs.
However, as you may recall we took on extra investment from Dynasty during the following year and the funds were to be used to pay down our bank debt, which would have left us in a more healthy position. That investment was leaked on 28 September 2023, but the accounts were signed off by the auditors on 27th, so the accounts don’t include any reference to it. Nevertheless, the auditors had no concerns even before that investment (although I’m yet to see any filings which give any details as to how (or if) that investment made its way into the club).
Post balance sheet events (i.e. stuff between 1 June and 27 September 2023)
The accounts include some summary financial details about the summer 2023 window. Szobo, Mac Allister, Gravenberch, Endo and probably some other sundry players signed for a combined total spend of £156.2m and sales of Fabinho and Hendo for a total profit of £19.3m. That suggests to me that the sale proceeds figures mooted for those players were not as high as suggested in the press. My best estimate of their value on sale was about £13m, which suggests total sales proceeds of £32m (Fabinho was rumoured at £40m on his own).
Transfer spend
We are potentially on the hook for future transfer contingencies of £55.9m. This is up from £33.7m last year and, assuming we’ve already paid out some extras on Nunez, it suggests a fair chunk of it relates to summer 2022 transfers.
By contrast, future amounts potentially due to us are £12.7m (up from £3.5m in the prior year) and most of that will be [EDIT] Mane, Neco, Minamino.
We’re due to make future net payments on existing transfers of £45.8m (£112.4m payable, £66.6m receivable). These payments will affect our transfer budget for 2024, but in context the comparable net payment at the end of 2022 was £38.6m, so it’s not a huge up-tick and I would not worry about it constraining us next summer.
As a final point, at the end of 2023 the total cost of our playing squad stood at £787m. This is comfortably lower than many of our competitors. Chelsea have spent more than that in the Boehly era alone and City were already over £1bn at the end of 2022. However Arsenal were comparable at £772m (also at 31 May 2023).
Anfield Road
It looks like total spend on the stand at the year end stood at £75.9m, with a further £11.9m contracted (although we should expect this to be exceeded given Buckinghamshire’s bankruptcy. On that latter point, it looks like the club has stepped in as main contractor to get the job done, which means they will be managing all of the individual firms working on the stand, rather than just managing a single construction contract. That essentially means the club itself is now carrying the contract risk, not a third party. That’s not an ideal situation.
And in overview, the costs for the Anfield Road are looking like they could top out at around £90m, which is about 3/4 of what the Main Stand cost, but with a much smaller up-tick in revenue. As great as it is to have a bigger ground and more fans in to watch every game, financially speaking it doesn’t look like a good investment, and it’s probably fair to say that the Dynasty investment was required to de-risk it, where it might have been used to allow us to kick on with a more drastic re-build of the squad. That said, the lads we have are doing OK just now, but none of them are getting any younger.
Debt
Overall debt is up by £48m in the year, and stands at £197.4m. £126m of this is due to banks, the rest to FSG (we can practically ignore the FSG amount as it doesn't look like they will call it in any time soon). We have the capacity to increase debt to £300m in total, and in practice debt levels will go up and down quite drastically during the year as football cash flow is quite lumpy (e.g. overheads are mostly constant, but a lot of revenue is timed to drop in the early part of the year to offset transfer spend). So a decent facility is required just to manage ebbs and flows. It’s likely we have significant headroom after the Dynasty deal, but before it, given the hefty outlay in the summer 2023 transfer window, we’d have likely increased those debt levels even more.
But in short, I’m not worried. Although I am bothered that there is no mention of the money Barcelona owe us for Coutinho; I do hope we haven’t written it off.
Summary
Post Dynasty, we should have a decent cash / debt balance right now, with money to spend in summer 2024.
The Anfield Road stand is looking like a bit of a folly from a purely financial perspective, but it’s obviously great to have more fans in the ground and a better chance for people to get tickets. But it won’t be financially transformative in the way the Main Stand was, and that’s probably why we had to self-fund this time around.
The revenue and overhead structure has proved to be remarkably resilient despite a drop-off in performance levels.
Not worried.
Detail
Buckle up...
So the 2023 accounts have now been published. If you want to, you can find them here:
https://find-and-update.company-information.service.gov.uk/company/00035668/filing-history
The accounts cover a season when we were shite. We finished 5th in the League, were knocked out of both domestic cups in the 4th round and exited the Champions League at the round of 16. We did win the Community Shield, so in Guardiola’s world we won a trophy. In everybody else’s world, we won fuck all and were shite.
By contrast, the year before the almost quad squad finished runners up in the league and Champions League, and won both domestic cups.
Profit and loss
So it is frankly remarkable how much our profit and loss account for 2023 resembles the one for 2022.
At a revenue level, we dropped off a net £0.4m. Media was down £19.3m (mostly performance related, largely due to early elimination in the Champions League), with £7m less on matchday due to fewer fixtures, offset by £25.8m growth in commercial revenue. It’s difficult to identify from the accounts precisely what the commercial growth relates to, but it’s likely to be new partnership / sponsorship deals, and possibly some price increases on existing deals on the back of a successful season the year before.
Wages are up a total of £6.8m. A lot of this will be Salah’s new deal (plus other new deals and probably an impact from purchasing new players), and it is worth pointing out that there would have been chunky bonuses in 2022 which weren’t paid out in 2023 (mainly trophy wins, as a lot of the goals / assists / clean sheet bonuses might still have been triggered). So the increase in wages reflects an increase in the underlying salaries and will be carried forward into 2024 and beyond.
Other operating costs were up £11.3m, which was mostly extra amortisation on new player spend (£7m).
So to put it in percentage terms, turnover was down 0.1% and operating costs were up 3.1%. That is remarkably stable from one year to the next, despite massive differences in on-pitch performance and a transfer spend of £133.5m. For net spend fans (you know who you are), the net spend number is £89.4m. Those numbers are full fat, not cash flow. At a cash flow level, we paid out £122.2m and received £39.1m (so a comparable net cash number of £83.1m).
Just looking at the profit and loss account, all looks pretty stable, nothing to write home about.
Cash flow
The cash flow statement gives a better picture of what was really going on. To summarise:
£m | |
| Cash from operations | 88.9 |
| Interest | (4.1) |
| Player net spend | (83.1) |
| Infrastructure spend | (49.8) |
| |
| Spending deficit in the year | (48.1) |
That was basically funded by drawing down £38m debt and using up £10.1m of existing cash on hand.
So essentially, player spending was funded by earnings in the year and spend on capital projects (mostly the Anfield Road stand) was funded by drawing down more bank debt and spending existing cash.
This is all sensible management. We didn’t overstretch on transfers, we took on debt to fund the stadium expansion – the returns from that expansion will be more than enough to service that debt, but see further comments below on the capital costs.
However, as you may recall we took on extra investment from Dynasty during the following year and the funds were to be used to pay down our bank debt, which would have left us in a more healthy position. That investment was leaked on 28 September 2023, but the accounts were signed off by the auditors on 27th, so the accounts don’t include any reference to it. Nevertheless, the auditors had no concerns even before that investment (although I’m yet to see any filings which give any details as to how (or if) that investment made its way into the club).
Post balance sheet events (i.e. stuff between 1 June and 27 September 2023)
The accounts include some summary financial details about the summer 2023 window. Szobo, Mac Allister, Gravenberch, Endo and probably some other sundry players signed for a combined total spend of £156.2m and sales of Fabinho and Hendo for a total profit of £19.3m. That suggests to me that the sale proceeds figures mooted for those players were not as high as suggested in the press. My best estimate of their value on sale was about £13m, which suggests total sales proceeds of £32m (Fabinho was rumoured at £40m on his own).
Transfer spend
We are potentially on the hook for future transfer contingencies of £55.9m. This is up from £33.7m last year and, assuming we’ve already paid out some extras on Nunez, it suggests a fair chunk of it relates to summer 2022 transfers.
By contrast, future amounts potentially due to us are £12.7m (up from £3.5m in the prior year) and most of that will be [EDIT] Mane, Neco, Minamino.
We’re due to make future net payments on existing transfers of £45.8m (£112.4m payable, £66.6m receivable). These payments will affect our transfer budget for 2024, but in context the comparable net payment at the end of 2022 was £38.6m, so it’s not a huge up-tick and I would not worry about it constraining us next summer.
As a final point, at the end of 2023 the total cost of our playing squad stood at £787m. This is comfortably lower than many of our competitors. Chelsea have spent more than that in the Boehly era alone and City were already over £1bn at the end of 2022. However Arsenal were comparable at £772m (also at 31 May 2023).
Anfield Road
It looks like total spend on the stand at the year end stood at £75.9m, with a further £11.9m contracted (although we should expect this to be exceeded given Buckinghamshire’s bankruptcy. On that latter point, it looks like the club has stepped in as main contractor to get the job done, which means they will be managing all of the individual firms working on the stand, rather than just managing a single construction contract. That essentially means the club itself is now carrying the contract risk, not a third party. That’s not an ideal situation.
And in overview, the costs for the Anfield Road are looking like they could top out at around £90m, which is about 3/4 of what the Main Stand cost, but with a much smaller up-tick in revenue. As great as it is to have a bigger ground and more fans in to watch every game, financially speaking it doesn’t look like a good investment, and it’s probably fair to say that the Dynasty investment was required to de-risk it, where it might have been used to allow us to kick on with a more drastic re-build of the squad. That said, the lads we have are doing OK just now, but none of them are getting any younger.
Debt
Overall debt is up by £48m in the year, and stands at £197.4m. £126m of this is due to banks, the rest to FSG (we can practically ignore the FSG amount as it doesn't look like they will call it in any time soon). We have the capacity to increase debt to £300m in total, and in practice debt levels will go up and down quite drastically during the year as football cash flow is quite lumpy (e.g. overheads are mostly constant, but a lot of revenue is timed to drop in the early part of the year to offset transfer spend). So a decent facility is required just to manage ebbs and flows. It’s likely we have significant headroom after the Dynasty deal, but before it, given the hefty outlay in the summer 2023 transfer window, we’d have likely increased those debt levels even more.
But in short, I’m not worried. Although I am bothered that there is no mention of the money Barcelona owe us for Coutinho; I do hope we haven’t written it off.
Summary
Post Dynasty, we should have a decent cash / debt balance right now, with money to spend in summer 2024.
The Anfield Road stand is looking like a bit of a folly from a purely financial perspective, but it’s obviously great to have more fans in the ground and a better chance for people to get tickets. But it won’t be financially transformative in the way the Main Stand was, and that’s probably why we had to self-fund this time around.
The revenue and overhead structure has proved to be remarkably resilient despite a drop-off in performance levels.
Not worried.
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