Season review
AFC Bournemouth played in the Premier League for the fifth consecutive year in the 2019/20 season. Unfortunately, it proved to be its final one for now, with the club relegated with 34 points in 18th place.
Bournemouth received no reprieve in the domestic cups, exiting at or before the fourth round in both cups.
In what was a difficult year for all clubs following the outbreak of COVID-19, Bournemouth is experiencing further change with long-term manager Eddie Howe leaving the club at the end of the season.
Off the pitch, Bournemouth felt the financial impact of the pandemic as its revenue fell 27% to £95m due to the disruption caused and its worsened Premier League performance, resulting in losses nearly doubling to £60m.
Revenue
Overview
Bournemouth’s revenue fell from £131m to £95m (27%) in the club’s final Premier League season. This was almost entirely driven by its lower league finish and COVID-19, with commercial revenue rising slightly despite the chaos.
Matchday
Bournemouth saw its matchday revenue fall 29% to £3.5m as the club played its final five home games of the season without fans.
The Cherries had the smallest stadium in the Premier League by a distance with a capacity of 11,364 and therefore generate a relatively low share of its total revenue from matchday, hence the impact is not felt as greatly.
With that said, the hole of around £4m in matchday revenue that will be lost due to a full season with no fans in 2020/21 while relatively small, will be missed following relegation.
Broadcast
Broadcast revenue dropped by 30% to £81m following the club’s 18th placed Premier League finish, four places lower than in 2018/19.
Bournemouth’s financial year runs to 30 June 2020, and hence seven of its Premier League games fall into the 2021 financial accounts meaning broadcast revenue associated with this is deferred, approximately £15-20m of revenue which will boost 2021 numbers.
In addition, the club incurred its share of Premier League broadcast revenue rebates totalling £7.2m.
Bournemouth are back in the Championship and currently in receipt of parachute payments, which will run for the 2020/21, 2021/22 and 2022/23 seasons. This will result in a drop in revenue going forward, albeit dampened in the 2021 accounts as a result of the deferred broadcast revenue.
Commercial
Commercial revenue remained sturdy despite the pandemic, increasing 9% to £11m. This was despite a reported renewal of its Mansion Bet sponsorship deal on reduced terms (£8.8m to £5m).
Bournemouth losing its Premier League status will have commercial consequences which will likely result in lower commercial revenue in the coming years, either as a result of clauses in existing contracts relating to reduced terms in the event of relegation, or reduced terms upon renewal.
Summary
Bournemouth are back in the Championship after five successful years in the Premier League. This will undoubtedly have revenue ramifications that will persist unless promotion is achieved swiftly. This will be heightened by the financial impact of COVID-19 and fans and club executives will be hoping to improve upon its play-off semi-final defeat in 2021.
Operating costs
Overview
While revenue decreased significantly, the majority of a football clubs’ operating costs are fixed (i.e. wages) and therefore cannot be decreased significantly.
This was the case for Bournemouth with its operating costs only falling 2% to £130m, damaging profitability significantly.
Wages
The majority (83%) of these operating costs relate to wages which fell 3% to £108m as the club managed to make limited savings despite new signings.
The fall in revenue and flat wages saw Bournemouth’s wages to revenue ratio increase from 85% to 113%. UEFA consider 70% to be the sustainable level of wages to revenue, with Bournemouth now well above that ratio which will need to be remedied, especially given relegation.
Bournemouth will have to reduce wages following relegation which will be achieved by player sales and relegation wage-drop clauses.
Other costs
Other costs remained relatively flat with non-player amortisation and depreciation remaining at £1.3m and other operating costs at £21m with much of these costs committed to ahead of the season.
Summary
Bournemouth will need to manage its costs following relegation while also aiming for a swift return to the Premier League to avoid financial difficulties further down the line, especially if promotion is not secured with many examples of the troubles this can cause.
Transfers
Overview
AFC Bournemouth invest cautiously ahead of the 2019/20, purchasing a few young, high-potential players. This ultimately has not paid off in the short-term.
In came Billing (£15m), Danjuma (£15m), Kelly (£13m), Stacey (£4.0m) and Wilson on loan (£2.4m) for a combined £49m.
Departing the Vitality Stadium were Mings (£20m), Mousset (£10m), Mahoney (£1.0m) and Begovic on loan (£0.1m) for a combined £31m, resulting in a modest £18m net spend.
Amortisation
Bournemouth incurred player amortisation charges of £47m in 2020, a 30% increase following its 2020 player investments. This is likely to fall significantly following relegation and the resulting lower investment and player sales.
Bournemouth spent next to nothing in 2021.
Profit on player sales
The Cherries generated a profit on player sales of £23m, much higher than the £3.1m achieved in 2019 which helped prevent losses rising further.
Player sales of around £85m in 2021 will result in a significant profit on player sales which will absorb much of (if not all and then some) the fall in revenue from relegation.
Transfer debtors / creditors
Bournemouth are in net transfer creditor position, owing £77m in transfer fees as of June 2020. This is partly offset by £18m of transfer fee the club is owed, meaning the club owes £59m net in transfer fees, explaining the limited 2021 transfer activity.
With the significant player sales in 2021, this picture will surely reverse.
Profitability
Overview
Bournemouth reported a loss for the third successive season in 2020 and at £60m, was nearly double its 2019 loss of £32m as the financial impact of COVID-19 was felt.
Operating profit / loss before player trading
At operating level, the club recorded a heavy loss of £33m before player trading compared to a loss of only £2m in 2019 due to the significant decline in revenue.
Relegation to the Championship likely to only heighten these losses.
Operating profit / loss after player trading
Taking into account player trading, the losses are even uglier, increasing to £52m (£27m in 2019) as despite generating £23m in profit on player sales and £6m in loan player income, player amortisation charges of £47m led to significant losses after player trading.
Significant player sales as mentioned above will likely reverse this trend and possibly lead to a profitable 2021 despite relegation.
Profit / loss before tax
A £60m loss does not paint a full picture, with significant revenue deferred into 2021 which will help the club appear more profitable in 2021.
The level of profitability (or losses) in 2021 will be driven by Bournemouth’s ability to cut costs and the profit generated on player sales in 2021. Looking forward, the club will need a swift return to the Premier League to avoid the need for significant cost cutting measures which may impact competitiveness in the future.
Assets / Liabilities
Overview
Bournemouth are in a net liabilities position which doubled from £59m to £118m as of June 2020.
Cash flow
Cash levels increased by £3.4m to £13m (35%). Despite a significant cash outflow from operations (£46m) and £2.1m of capital expenditure, the club received a net £14m from transfers and were thankful to its owners (Mr Demin) and banks for providing a net £37m in new funding as the club navigates the pandemic
Mr Demin has injected significant funds into the club in the last two seasons (c.£70m net) and will be hoping this is repaid in the coming years via promotion back to the Premier League.
Debt
As a result of this new debt funding, amounts owed to its owners increased from £100m to £126.3m.
This was not enough to get Bournemouth through the season, with the club taking out bank debt of £16m, of which £9.9m is due in 2021.
Net debt
This led to a net debt of £129m, up from £90m in 2019 as the club, like many others, required funding to survive the financial impact of COVID-19.
Bournemouth have the additional complication of relegation now and will, like it has already, need sell players to help balance the books, in addition to cutting costs going forward.
Final remarks
Bournemouth are where many clubs have been before them, knowing that a swift return to the Premier League is required to avoid having to adapt to a new reality without Premier League revenue or parachute payments which will make it more difficult to return and may also threaten future financial health.
With a new era following Eddie Howe’s tenure coming to an end, Bournemouth will have cautious optimism for a promising future.
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