Season review
Brentford competed in its sixth successive Championship season in 2019/20. Having finished just outside the play-offs in the last few seasons Brentford was hoping to make the leap.
The club was in the automatic promotion chase for the entire season. However, following a run of seven wins after the season resumed that put automatic promotion in sight, a poor end to the season saw the club finish third.
Seeking a fairy tale end to its 116-year stay at Griffin Park, Brentford unfortunately suffered play-off heartache losing in the final to Fulham. Retribution would be achieved the following season.
From a financial perspective the club’s investment in its playing squad had led to a wage bill nearly double its revenue. This led to operating losses of £23m which were partly offset by significant player sale but still a £9.1m loss. While this will be a footnote following promotion in 2020, the gamble of Matthew Benham on Brentford’s scouting network shows there are winners and losers in the Championship merry-go-round.
This article analyses the finances of Brentford FC in 2020.
Revenue
Brentford saw its revenue decline from £15m to £14m (9%) due to the impact of COVID-19 on broadcast and matchday revenue.
It is worth noting that Brentford generated other income of £0.9m compared to £14m in 2019. This was due to 2019 including the sale of Griffin Park.
Matchday
Matchday revenue fell from £3.4m to £3.1m (9%). This follows the club playing its final five home games without fans in attendance.
Unfortunately for Brentford, its first season in its new stadium was played without fans. Due to this, there will be minimal matchday revenue in 2021.
Broadcast
Brentford’s broadcast revenue declined significantly from £8.2m to £6.4m (22%). This was due to a combination of six Championship games being played after its financial year (plus three play-off games) and hence some broadcast revenue was deferred into 2021 and also worsened FA Cup performance.
Brentford are likely to see broadcast revenues return to 2019 levels (£8-9m) in 2021. This will then be replaced by supercharged growth following promotion to the Premier League.
Commercial
Commercial revenue experienced a sizeable jump from £3.7m to £4.4m (22%). New main sponsorship deals with Umbro (kit) and EcoWorld (shirt) driving this growth.
As its stature grows commercial revenue growth will become a bigger priority and opportunity for the club.
A new sponsor was also present on its shirt front in 2020/21 in Utilita.
Brentford will be satisfied that revenue only dipped 9% in 2020. There is however likely to be a further drop in 2021 due to limited matchday revenue. This may however be offset by broadcast and commercial growth.
Following promotion to the Premier League in 2021/22, revenue will grow to over £100m which will be levels Brentford has never seen before.
Operating costs
Brentford saw its operating costs increase from £29m to £38m (31%), driven by wages growth. With revenue suppressed, this cost growth significantly impacted profitability.
Wages
Wages rose from £19m to £26m (37%), accounting for the majority of the rise in costs. Brentford has invested significantly in its wages, relying on player sales to fund this.
The wages to revenue ratio grew to 186% which means the club is spending almost double its revenue on wages. This requires significant covering by player sales and/or owner funding.
This gamble has to date paid off following promotion but is unlikely to successfully replicated by many envious Championship clubs which are chasing promotion.
Other costs
Other costs rose from £10m to £12m (15%) as the club invested across the club’s entire infrastructure.
Brentford is owned by a successful sports gambler. The heavy investment in gaining promotion was a calculated bet backed by a confidence in the value of its players. Despite a wages to revenue ratio far in excess of the recommended, losses remain manageable due to significant player sales. This means that owners looking to replicate this model should proceed with caution.
Transfers
Brentford had a busy season in the transfer market as it looked to reinvest sizeable transfer receipts.
In came Mbeumo (£5.9m), Jansson (£5.5m), Jensen (£3.4m), Norgaard (£3.2m), Pinnock (£3.0m), Raya (£3.0m), Dervisoglu (£2.7m), Baptiste (£2.0m), Valencia (£1.8m) and Fosu (£0.7m) for a combined £31m.
Departing Griffin Park were Maupay (£20m), Konsa (£12m), Sawyer (£2.9m) and Bentley (£2.0m) for a combined £37m. This led to Brentford recording a net transfer income of £5.6m.
Amortisation
Player amortisation charges rose from £6.6m to £12m (73%) as Brentford reinvested the majority of transfer receipts. Spending was back to a more normal level for Brentford in 2021 so amortisation is likely to remain at a similar level.
Profit on player sales
Brentford recorded a much need profit on player sales of £25m to offset large losses due to wages. 2021 will likely see even larger profits following the sales of Watkins and Benrahma for significant sums.
Transfer debtors / creditors
Brentford is unsurprisingly in a net transfer debtor position. The club is owed £22m in transfer fees and owe £16m, a net £6m is hence owed to Brentford.
This is even after the club forward sold (factored) sum of it transfer debts to improve cash flow.
The business model operated by Brentford has received plenty of plaudits. Brentford has operated a transfer surplus in each of the last five years (totalling £57m) and generated significant profits (£94m). This will continue to be crucial on and off the pitch in the Premier League. However, promotion to the Premier League and the need to retain talent to stay competitive may require tweaking to the model.
Profitability
Despite the significant profits on player sales, the high wages and cost base relative to revenue saw the club record a £9.1m loss.
Operating profit / loss before player trading
Before player trading the club recorded a loss of £23m (2019: £0.2m profit). This is almost entirely driven by a significant wage bill as discussed and the gamble on player sales.
It is worth remembering that the £0.2m profit is driven by other operating income relating to the stadium sale.
Operating profit / loss after player trading
After player trading, operating losses improved to £9.2m (2019: £23m profit). This highlights the importance of player sales to the Brentford model and how difficult it is to replicate.
As mentioned, the sales of Watkins and Benrahma will likely see the club record a profit in 2021.
Profit / loss before tax
Minimal finance costs meant the Loss before tax was £9.1m
Brentford will be unconcerned by losses in 2020 following the sales of Watkins and Benrahma in 2021 and Premier League promotion.
Assets / Liabilities
Brentford balance sheet looks healthy due to its transfer activity and its owner did not therefore need to go too deep into his pockets.
Cash flow
Brentford improved its cash reserves significantly from £2.2m to £16m as the club forward sold a chunk of its transfer receipts.
Cash outflows from football operations of £7.7m were matched by transfer inflows of £7.7m. Capital expenditure in finishing the stadium came to £3.9m. The club then saw £14m enter its coffers following the factoring of transfer receipts (interest rate of 6.5%). Matthew Benham then injected around £4m into the club.
Debt
Due to this factoring, debt levels rose from £57m to £74m. Owner debt now sits at £60m, with Matthew Benham investing over £100m including equity injections. This has ultimately paid off following promotion (as long as they stay there!).
Net debt
Net debt now stands at £58m, up slightly from 2019’s £55m. It will be interesting to see if further transfer factoring is conducted but shouldn’t be a huge concern following promotion.
Final Remarks
Brentford is seen by many as a model club due to its fantastic scouting. While this is much to be admired, the club will now look to ensure financial stability to reduce reliance on player sales as this is not guaranteed income. Premier League survival will now be paramount to the financial success of the club as they look to reach the next level.
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