Season review
Blackburn Rovers competed in its second season back in the Championship in 2019/20, improving on its 15th placed to finish in the top half of the table.
While this improvement was welcome, it could have been so much better had talisman Bradley Dack not unfortunately been victim to a long-term injury.
A poor run of form after the season resumed following a pause in play due to COVID-19 ended the club’s waning promotion push.
Blackburn Rovers is one of a number of teams struggling to control wages with the situation worsened by COVID-19 and has led to the club recording losses in excess of £20m in 2020.
This article analyses the 2020 finances of Blackburn Rovers and the impact of COVID-19.
Revenue
Blackburn Rovers saw its revenue fall from £17m to £14m (19%), feeling the financial impact of COVID-19.
Matchday
Matchday revenue declined from £3.7m to £2.7m (29%) as the club played four home games without fans which was combined with a drop in average league attendance.
Blackburn Rovers are facing, like most clubs a season with little matchday revenue in the 2020/21 season.
Broadcast
Broadcast revenue fell from £7.4m to £6.8m (8%) as the club were impacted by COVID-19 and revenue deferrals into the 2021 financial year despite an improved league finish.
In addition, broadcast revenue was also impacted by Blackburn Rovers featuring in two less televised games than the previous season.
2020/21 finances are expected to be back to 2019 levels and may improve slightly due to revenue deferrals being recognised.
Commercial
Blackburn Rovers saw its commercial revenue take quite a hit, falling from £5.5m to £4.0m (27%) despite maintaining the same two main sponsors, Umbro and 10Bet.
This suggests the decline is driven by missed corporate hospitality and smaller partnerships.
The club will be hoping that this lost revenue can be clawed back, starting with its new shirt sponsorship deal with Recoverite.
Blackburn Rovers suffered as did most due to COVID-19 even with slightly improved on-pitch performance. However, with no fans in 2020/21 things will get slightly worse for the club before it gets better with revenue likely to drop again before recovering in the current 2021/22 season.
Operating costs
While revenue was down nearly 20% in 2020, costs did not follow suit, rising 4% to £34m as the club’s costs, mainly wages, were fixed from the beginning of the season.
Wages
Wages rose from £22m to £26m (14%) as the club upped its investment in the playing squad ahead of a second season back in the Championship. These costs were contracted at the beginning of the season and therefore could not be materially reduced when COVID-19 hit.
Blackburn Rovers was already struggling with its wage bill, highlighted by its wages to revenue ratio reaching an already high 134% in 2019.
This increased to a 189% which means its wage bill was close to double its revenue before taking into account any other costs. This requires deep pockets from its owners and possible EFL attention as they monitor financial sustainability.
Other costs
Blackburn Rovers did manage to identify costs savings in other costs which fell from £10m to £8.7m (13%).
A wages to revenue ratio of 189% means that Blackburn Rovers were £12m in the red just by deducting wages from revenue, which is not financially sustainable without owner investment. As we have seen with Derby, this can be withdrawn. Blackburn Rovers will need to reduce its wages in the near future to a more sustainable level or meaningfully find a way to increase revenue.
Transfers
Blackburn Rovers were all about quality over quantity in 2019/20, with only one signing each way for a transfer fee.
Sam Gallagher joined the club for £5.9m while Raya departed Ewood Park for £3.0m. This led to a £2.9m net spend with other signings such as Dack and Downing joining on free transfers.
Amortisation
Following the Gallagher signing, player amortisation charges nearly doubled from £2.2m to £4.3m (94%) due to a greater level of spending than previously.
Transfers purchases of £1.6m in 2020/21 will likely see amortisation charges decline.
Profit on player sales
Blackburn Rovers recorded a profit on player sales of £3.2m following the sale of Raya and sell-on clauses activated in respect of former players.
With no major outgoings in the 2020/21 season, Blackburn Rovers is likely to have a £3m hole to fill.
This however will be recovered in 2021/22 following the sale of Armstrong.
Transfer debtors / creditors
Blackburn Rovers is in a transfer creditor position following the signing of Gallagher, owing £6.3m in transfer fees in total while only being owed £0.6m, a net creditor position of £5.7m.
With the sale of Armstrong in 2021, this was largely a cash flow concern that has obviously since been met.
Blackburn Rovers is in a heavily loss-making position which will take some time to resolve, and the club may have to rely on the sale of star players such as Armstrong to prop up its finances, which may make a promotion push difficult in the coming seasons.
Profitability
Blackburn Rovers is deep in the red and will struggle to reverse this in the near future while remaining competitive in the league, and therefore will be reliant on its owners to keep their pockets open.
Operating profit / loss before player trading
Operating losses before player trading reached £20m (2019: £16m) and £80m cumulatively across the last five years.
These losses are almost entirely driven by wages being too high for the current revenue profile of the club.
Operating profit / loss after player trading
After player trading, losses rose slightly to £21m (2019: £18m) with the club generating minimal player sales across the last couple of seasons, making the sale of Armstrong a timely reversal of this trend.
Profit / loss before tax
Finally, Blackburn Rovers recorded a total loss before tax of £22m (2019: £18m) due to finance costs of £0.6m.
Red, red and more red. Blackburn Rovers losses have mounted over the years and the most evident solution is a reduction in wages. This however must be a gradual process to avoid a situation where the club can’t compete in the Championship and suffer relegation, a tough balance.
Assets / Liabilities
Blackburn Rovers is a one of several EFL clubs that are reliant on its owners to operate with large losses needing to be covered.
Cash flow
Cash levels are very low with the club utilising most of its cash to stay afloat.
Reserves fell from £0.3m to £0.2m as cash outflows from football operations of £13m, transfer outflows of £1.0m and capital expenditure of £0.6m absorbed by new owner funding of £14m and a £0.6m EFL loan.
Debt
This took the clubs owner debt to £141m as the Venky’s injected over £30m in the past two seasons.
Despite this, Blackburn Rovers still required a £15m overdraft to manage its cash flow.
This isn’t a situation that is likely to reverse any time soon, although the Armstrong sale my slow the burning hole in the owners’ pockets.
Net debt
Overall, Blackburn Rovers’ net debt now stands at £156m as the owners continue to plug the growing gap in the club’s finances.
Final Remarks
Blackburn Rovers is at a financial crossroad with the current wage bill not sustainable for a club in the Championship.
Now may be time to reset, reduce wages and look to build a more sustainable footing for future promotion challenges.
In addition, while the owners are willing and evidently backing the club now, Blackburn Rovers will want to reach a more financially stable position to reduce the risk of financial troubles should the owners purse slam shut as has been seen recently.
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