2020-21 accounts
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CASH FLOW
TLDR - starting to look more normal, I'm not convinced we'll be spending a lot on new players this summer.
Historically, the key to understanding LFC’s finances was cash.
Between 2011-12 (FSG acquired LFC) and 2017-18, the total cash flow was a net increase of £8m (total). The cash flow in/out was never more than £6m in any of those individual years. Basically, we spent what we earned.
In 2018-19, that started to change. Cash inflow was £27m, then £112m inflow in 2019-20, followed by £118m OUT in 2020-21. So across those three years, a total of £21m IN. That suggests it’s probably best to ignore the year-on-year differences and focus on the three year-cycle (which is closer to the previous long-term pattern).
Of course, in those three years we had a CL/EPL runner up spot, a CL win, a EPL win and covid. All of those things will have thrown things out of whack with cash being earned after the January transfer window (when we might have spent it had we known it was coming in). For reasons I still don’t understand, the club drew down all but £3m of its bank facility at the end of 2019-20 (leaving a wad of cash in the bank), but it has gone back to a more normal pattern in 2020-21 (still a high cash balance by historic standards, but just £32m, compared to £149m the year before (long-term trend prior to 2018-19 was single-digit £millions).
My reading is that, in a normal year, the club spends on players what it earns on operations, but bear in mind that cash spending can include instalments on deals in prior years, so although our net spend (ignoring timing differences) in 2019-20 was basically £nil, our net cash out was £90m, because we were still finishing paying instalments for Alisson, Fabinho, Keita, Salah, VVD. By contrast, in 2020-21, our purchases less sales were £93m, but our cash out was £56m (so there’ll be more to pay this year and next).
The club doesn’t split out transfer debtors and creditors, but the amounts due after more than one year are almost certainly transfers, which says that we’ve got a starting balance to pay in 2022-23 of £46m (net of receipts on sales), before taking into account any spending in the current season.
So that says to me that the likelihood of major spending in the summer is dependent on four things:
To me, it looks unlikely we will splash the cash in a big way this summer, and we know Diaz was a deal that was brought forward to January due to Tottenham’s interests, but it’s one we could probably afford because of how well we’re doing this year. I’d like to be wrong.
EDIT - also if we're forecasting a big surplus for 2022-23 (i.e. increase in operating profits) then that would also give us some extra money to spend in Summer, but I'm not aware of any major factors which would suggest exceptional profits.
TLDR - starting to look more normal, I'm not convinced we'll be spending a lot on new players this summer.
Historically, the key to understanding LFC’s finances was cash.
Between 2011-12 (FSG acquired LFC) and 2017-18, the total cash flow was a net increase of £8m (total). The cash flow in/out was never more than £6m in any of those individual years. Basically, we spent what we earned.
In 2018-19, that started to change. Cash inflow was £27m, then £112m inflow in 2019-20, followed by £118m OUT in 2020-21. So across those three years, a total of £21m IN. That suggests it’s probably best to ignore the year-on-year differences and focus on the three year-cycle (which is closer to the previous long-term pattern).
Of course, in those three years we had a CL/EPL runner up spot, a CL win, a EPL win and covid. All of those things will have thrown things out of whack with cash being earned after the January transfer window (when we might have spent it had we known it was coming in). For reasons I still don’t understand, the club drew down all but £3m of its bank facility at the end of 2019-20 (leaving a wad of cash in the bank), but it has gone back to a more normal pattern in 2020-21 (still a high cash balance by historic standards, but just £32m, compared to £149m the year before (long-term trend prior to 2018-19 was single-digit £millions).
My reading is that, in a normal year, the club spends on players what it earns on operations, but bear in mind that cash spending can include instalments on deals in prior years, so although our net spend (ignoring timing differences) in 2019-20 was basically £nil, our net cash out was £90m, because we were still finishing paying instalments for Alisson, Fabinho, Keita, Salah, VVD. By contrast, in 2020-21, our purchases less sales were £93m, but our cash out was £56m (so there’ll be more to pay this year and next).
The club doesn’t split out transfer debtors and creditors, but the amounts due after more than one year are almost certainly transfers, which says that we’ve got a starting balance to pay in 2022-23 of £46m (net of receipts on sales), before taking into account any spending in the current season.
So that says to me that the likelihood of major spending in the summer is dependent on four things:
- Whether we make any big sales
- How successful we are this year in bringing prize money in for CL / EPL
- Spending on the Anfield Road stadium (which could easily be £40-50m this year)
- Whether Aston Villa finally pay us the £42m that Barca owe us for Coutinho 🙂
To me, it looks unlikely we will splash the cash in a big way this summer, and we know Diaz was a deal that was brought forward to January due to Tottenham’s interests, but it’s one we could probably afford because of how well we’re doing this year. I’d like to be wrong.
EDIT - also if we're forecasting a big surplus for 2022-23 (i.e. increase in operating profits) then that would also give us some extra money to spend in Summer, but I'm not aware of any major factors which would suggest exceptional profits.
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COVID IMPACT
TLDR - we've done pretty well, but positive timing differences from the prior year make it look better than it might have been. 2020-21 might have been a really strong year financially, but for COVID, and we might even have spent a bit more in the transfer market
Massive hit to matchday income (down £81m from the high in 2018-19) so much of that should bounce back this year, particularly given good runs in domestic cups (although we only keep half of the ticket money on the home games). Commercial income was flat, which is not bad. There’ll be some sponsor bonuses in there (probably not much net, just the difference between 2nd and 1st place in the Premier League due to timing of confirming league positions) but we should be seeing some gains from the Nike deal. One of the key areas that will have taken a hit in commercial is the retail stores (due to closure) but we may have made up some of this loss on online sales.
It's likely some of the sponsor deals will have taken a bit of a hit too as some of the rights they will have bought (player / manager appearances and match-tickets) will have been affected so we’ll have probably had to pay some rebates for that. Also global sales from licensing of products may have taken a hit as well due to a general retail slowdown. Finally, non-matchday catering (stadium-based events, Boot Room restaurant) will have been hit, but I doubt that’s a lot of money in the grand scheme. It’s worth bearing in mind that the only line in the accounts where we can see this stuff is turnover, but a lot of these things will have costs of sale attached, so the net profit hit won’t be as significant.
It's not clear to me whether stuff like pre-season games would be in matchday or commercial (different clubs take different views) so that’s hard to gauge. In truth, whilst the top-line numbers for pre-season look attractive, when you take out the costs of travel (we probably charter a jumbo for a week or two and put the Melwood staff up in 5+ star hotels) and taxes overseas, the net profit from tours isn’t as big as you might imagine.
As far as media is concerned, there’ll be some revenue shifted from 2019-20 into 2020-21 due to covid. Revenue from the final games of the 2019-20 season will have moved, as well as the prize money impact between 2nd (guaranteed when season stopped) and 1st (final position confirmed on re-starting the season). There may also be a bit of extra money for the Champions League from 2019-20 – although we were knocked out before the season was curtailed, the final revenue shares are often not confirmed until the tournament completes (with country shares being affected by how far all teams from that country go in the tournament).
So if we look to 2021-22, I’d expect media revenue to be similar to or slightly lower than 2020-21 (£266m) bearing in mind better performance in the league and domestic cups, plus comparable or better in CL. The downsides would be loss of timing benefit as discussed above, but offset by a lower broadcaster rebate for EPL, much of which was deferred into the 2020-21 league payments.
Matchday will obviously be up (and potentially better than the 2018-19 high of £84m) and there should also be some gains on commercial with retail back on stream, benefit of Nike and other partnerships.
TLDR - we've done pretty well, but positive timing differences from the prior year make it look better than it might have been. 2020-21 might have been a really strong year financially, but for COVID, and we might even have spent a bit more in the transfer market
Massive hit to matchday income (down £81m from the high in 2018-19) so much of that should bounce back this year, particularly given good runs in domestic cups (although we only keep half of the ticket money on the home games). Commercial income was flat, which is not bad. There’ll be some sponsor bonuses in there (probably not much net, just the difference between 2nd and 1st place in the Premier League due to timing of confirming league positions) but we should be seeing some gains from the Nike deal. One of the key areas that will have taken a hit in commercial is the retail stores (due to closure) but we may have made up some of this loss on online sales.
It's likely some of the sponsor deals will have taken a bit of a hit too as some of the rights they will have bought (player / manager appearances and match-tickets) will have been affected so we’ll have probably had to pay some rebates for that. Also global sales from licensing of products may have taken a hit as well due to a general retail slowdown. Finally, non-matchday catering (stadium-based events, Boot Room restaurant) will have been hit, but I doubt that’s a lot of money in the grand scheme. It’s worth bearing in mind that the only line in the accounts where we can see this stuff is turnover, but a lot of these things will have costs of sale attached, so the net profit hit won’t be as significant.
It's not clear to me whether stuff like pre-season games would be in matchday or commercial (different clubs take different views) so that’s hard to gauge. In truth, whilst the top-line numbers for pre-season look attractive, when you take out the costs of travel (we probably charter a jumbo for a week or two and put the Melwood staff up in 5+ star hotels) and taxes overseas, the net profit from tours isn’t as big as you might imagine.
As far as media is concerned, there’ll be some revenue shifted from 2019-20 into 2020-21 due to covid. Revenue from the final games of the 2019-20 season will have moved, as well as the prize money impact between 2nd (guaranteed when season stopped) and 1st (final position confirmed on re-starting the season). There may also be a bit of extra money for the Champions League from 2019-20 – although we were knocked out before the season was curtailed, the final revenue shares are often not confirmed until the tournament completes (with country shares being affected by how far all teams from that country go in the tournament).
So if we look to 2021-22, I’d expect media revenue to be similar to or slightly lower than 2020-21 (£266m) bearing in mind better performance in the league and domestic cups, plus comparable or better in CL. The downsides would be loss of timing benefit as discussed above, but offset by a lower broadcaster rebate for EPL, much of which was deferred into the 2020-21 league payments.
Matchday will obviously be up (and potentially better than the 2018-19 high of £84m) and there should also be some gains on commercial with retail back on stream, benefit of Nike and other partnerships.
WAGES
TLDR - wages being slightly lower than the prior year is probably not surprising with hindsight, it makes sense that 2019-20 would be our highest year to date
Quite a lot has been said about wages going down, albeit only by a small amount. Firstly, the 2019-20 figures will have extra bonuses in (extra for winning, as opposed to runners up in CL which was on 1 June, plus 2ndplace bonuses for EPL – given 2nd was worst we could finish at the year-end). The fact that we had some poor performances in 2020-21, particularly mid-season, means goals / assists bonuses were probably down, particularly for the defence as there weren’t as many clean sheets and the reserve players wouldn’t be getting the big bonuses the first team guys would have earned.
It's also notable that employee numbers are up nearly 10% in admin / back office. This seems a little unlikely to me (doubt we’d have recruited loads of people during a slowdown) so it might just be a reclassification of some casual workers as staff (it’s not uncommon for casual workers in retail / catering to basically be doing 30+ hours per week, and they’re really permanent staff to all intents and purposes). So these changes would add staff numbers, but not costs as their pay would already be in the wages line.
Finally, I think I’d picked up somewhere that we were still paying normal levels of pay to our more regular casual workers (matchday stewards, catering etc) so the matchday cost will largely still be in there, but it won’t be a huge number as those staff will mostly be on minimum wage rates.
With a hike in minimum wage due in April, plus social care levy, our casual payroll will probably take a bit of a hit next year, but buttons in the grand scheme compared to player payroll.
TLDR - wages being slightly lower than the prior year is probably not surprising with hindsight, it makes sense that 2019-20 would be our highest year to date
Quite a lot has been said about wages going down, albeit only by a small amount. Firstly, the 2019-20 figures will have extra bonuses in (extra for winning, as opposed to runners up in CL which was on 1 June, plus 2ndplace bonuses for EPL – given 2nd was worst we could finish at the year-end). The fact that we had some poor performances in 2020-21, particularly mid-season, means goals / assists bonuses were probably down, particularly for the defence as there weren’t as many clean sheets and the reserve players wouldn’t be getting the big bonuses the first team guys would have earned.
It's also notable that employee numbers are up nearly 10% in admin / back office. This seems a little unlikely to me (doubt we’d have recruited loads of people during a slowdown) so it might just be a reclassification of some casual workers as staff (it’s not uncommon for casual workers in retail / catering to basically be doing 30+ hours per week, and they’re really permanent staff to all intents and purposes). So these changes would add staff numbers, but not costs as their pay would already be in the wages line.
Finally, I think I’d picked up somewhere that we were still paying normal levels of pay to our more regular casual workers (matchday stewards, catering etc) so the matchday cost will largely still be in there, but it won’t be a huge number as those staff will mostly be on minimum wage rates.
With a hike in minimum wage due in April, plus social care levy, our casual payroll will probably take a bit of a hit next year, but buttons in the grand scheme compared to player payroll.
YES! Been waiting for this thread. Thank you good Sir
Thanks for this @Beamrider!
Not bad Beamy but you missed out the 42M we're owed from Barca and that Nike are forking out for M'bappe's contract for the shirt sales.
No he didn't.. he said Villa owe us.
Stop reading the TLDR versions and read the whole thing doc.
I mean, I even put a smiley next to it FFS! 😉
I've been caught out.
Remember the camping edict : Leave No Trace !
Thanks for the analysis mate.
I assume that if we were to cash in on one our players this summer then your opinion on our transfer budget/spending might change.
Hypothetically, a transfer fee of £100m for Salah would allow us to bring in two £50m players
Broadly, yes (that was what I meant by my point 1).
I know I’ve probably been banging this drum for a while, but the only space we have in the current squad is for a homegrown player.
If Adrian’s contract runs out at the end of the season we’re short a 3rd choice experienced keeper with a slot each for home grown and overseas.
The only notable loan players I think we need to make a call on whether to release or include are Nathan Phillips, Ben Davies and Ben Woodburn.
I expect they’ll all be sold for whatever we can get - we don’t need specific replacements.
I really don’t see us adding much more to the team, other than obvious bare essentials, unless we either decide to sell Salah, or we decide to get rid of either Keita or Thiago and look for a more central midfield type.
McGinn from Villa… maybe.
If Adrian’s contract runs out at the end of the season we’re short a 3rd choice experienced keeper with a slot each for home grown and overseas.
The only notable loan players I think we need to make a call on whether to release or include are Nathan Phillips, Ben Davies and Ben Woodburn.
I expect they’ll all be sold for whatever we can get - we don’t need specific replacements.
I really don’t see us adding much more to the team, other than obvious bare essentials, unless we either decide to sell Salah, or we decide to get rid of either Keita or Thiago and look for a more central midfield type.
McGinn from Villa… maybe.
That's assuming no deparatures though, isn't it?
I do agree with you that generally, we don't make a lot of wholesale changes. But Keita, Ox, Salah, Mane, Firmino have their contracts ending in summer of 2023. Milner this summer and Origi, either this summer or the next depending on how the automatic extension kicks in. I cannot see FSG agreeing to contract extension for all of them in the first group. Outside of the fringe players like Woodburn and Adrian, there is a good chance that we see two or three departures (atleast one among Keita,Ox; atleast one among Salah, Mane, Firmino) among the players. Whether the sales will raise enough money to get replacements, I am not sure.
Thanks a lot for the analysis, @Beamrider .
Also, mods, consider making this post a sticky at the top. I can see this post being referred to quite a bit depending on how our summer transfer goes.
Also, mods, consider making this post a sticky at the top. I can see this post being referred to quite a bit depending on how our summer transfer goes.
yep - if no-one asks to leave, I don’t see Klopp pushing anyone out.
Yeah… but next summer is when a lot of the kids - Jones, Neco will need to be registered.
I see a few of those players extending or being allowed to leave on a free.
I just don’t see us making wholesale changes.
I agree that Keita might be the one to go, but unless others push to leave - then I’m kind of happy for them to stay.
Not arguing with you, just curious, you think all three of Mane, Salah, Firmino will still be with us next season?
Personally, given the age profile of our squad, I wouldn't be surprised if FSG does not approve of the renewal of the contract of all three. Particularly Firmino. Unless he is willing to take a wage cut. Which I highly doubt he will agree to.
We seem to hold onto players till the bitter end these days so it wouldn't suprise me.
Origi will surely leave so perhaps we'll either extend Firmino or keep him for a season and let him go on a free.
I don’t know mate - a lot hinges on whether Salah signs a new deal - and that’s sort of anyone’s guess.
I can definitely see Firmino signing a new contract - I’m not sure terms will reduce all that much - has Milner’s - I don’t know for sure.
Mane is trickier, but I feel like he’ll be dealt with after the Salah issue is addressed.
We might sell one, but I can’t see all 3 gone by the start of next season.
Im also not sure Origi will go - it doesn’t look like he’s agitating fir a move - he looks happy to play a supporting role in one of the best teams in the world where he can win things - as opposed to starting every week for a mid tier team winning nothing.
It’s all just speculation based on previous - I have no more of an idea than anyone, really.
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