Season review
Brighton enjoyed its third successive season in the Premier League in 2019/20. The season started with change as Graham Potter was appointed Manager. His impressive resume in Sweden saw immediate play style changes, however the club remained mired in a relegation battle, ultimately surviving in 15th.
There was no joy in the domestic cups, exiting in the third round in both.
From a financial perspective, the club suffered heavy losses of £67m. This was due to a combination of the impact of COVID-19 (estimated to be £25m in 2020) and significant playing squad investment.
This article analyses the finances of Brighton & Hove Albion in 2020.
Revenue
Brighton saw its revenue decline from £148m to £124m (17%) due to the impact of COVID-19 on its finances.
It is worth noting that Brighton had other income of £9.4m in 2020 which was exceptional in nature. This income related to the redevelopment of New Monks Farm, its former training ground.
Matchday
Matchday revenue fell from £19m to £14m (27%) as the club played five of its home games behind closed doors. A full season without fans in attendance in 2021 will hurt finances even more.
Broadcast
Brighton saw its broadcast revenue fall from £114m to £90m (21%) as six of its games fell into the 2021 financial year and hence associated revenue was deferred. The club also incurred its share of the Premier League broadcast rebate (around £8-10m).
The Seagulls can expect a bumper broadcast year in 2021 due to the deferred broadcast revenue from 2020 being recognised and no rebates being payable. This should more than offset the fall in matchday revenue anticipated.
Commercial
Commercial revenue increased from £16m to £20m (24%). However, this is largely driven by ‘other revenue’ and hence, the reason is unknown. This is despite Brighton having the same main shirt sponsors in 2019 and 2020.
Brighton can expect revenue to rise given the bumper broadcast revenue year anticipated and will be close to if not exceeding its 2019 levels as normalcy resumes. Brighton improved results on the pitch will also drive revenue growth off it.
Operating costs
Despite falling revenue, operating costs grew from £140m to £151m (8%). This is largely due to the majority of costs (i.e. wages) being fixed from the beginning of the year.
There was £8.8m in associated costs from the New Monks Farm development as mentioned above.
Wages
Wages remained flat, growing 2% to £103m. Although the wages to revenue ratio increased to a slightly high 84% this shouldn’t be a concern. This is because it is only temporary in nature and not that much higher than the recommended 70%.
Other costs
Other operating costs were relatively stable at £39m.
Brighton controlled its operating costs relatively well with losses rising primarily due to COVID-19’s impact on revenue. While it is clear Brighton is trying to reach the next level, it will have an eye on cost control to avoid financial issues later on.
Transfers
Brighton had a busy 2019/20 of transfer spending. In came Maupay (£20m), Webster (£20m), Trossard (£18m), Clarke (£3.5m), Mooy (£3.0m), Lamptey (£3.0m) for a combined £67m.
Departing the Amex Stadium were Knockaert (loan – £4.1m), Mateju (£1.6m), Dreyer (£0.9m), And one (loan – £0.6m) and Bong (£0.5m) for a combined £7.7m.
Brighton hence recorded a net transfer spend of £60m. This highlighting the costs of survival in the Premier League and the going rate if you want to kick on.
Amortisation
Amortisation charges rose from £33m to £46m (37%) after significant investment in the playing squad. A more modest spend in 2020/21 may see these charges fall slightly.
Profit on player sales
Brighton had the rare case of recording a loss on player sales of £0.6m after the sale of fringe players.
A bigger summer of sales in 2020/21 will see the club record a profit which may assist a return to profitability.
The record-breaking sale of Ben White ahead of the 2021/22 season will be recognised in the 2022 financial accounts.
Transfer debtors / creditors
Brighton unsurprisingly is a net transfer creditor, owing more than it is owed in transfer fees. The Seagulls owe £37m in transfer fees and are only owed £2.9m, a net £34m creditor position.
The club will need to service these debts and combined with COVID-19 may explain the smaller spend in 2020/21.
Brighton has spent significantly in recent years and is banking on this paying off. This looks a promising approach given results on the pitch and of course the sale of Ben White.
Profitability
Brighton estimated that the 2020 accounts were £25m worse off due to COVID-19. Even when considering this, Brighton’s losses are considerable.
Operating profit / loss before player trading
Before player trading, Brighton recorded a loss of £18m. This compares to an £8.6m profit in 2019 and the deterioration is almost entirely due to COVID-19.
Brighton should be close to profitability in 2021.
Operating profit / loss after player trading
Operating losses reached £64m after player trading due to significant investment in transfer fees. This compares to a £19m loss last year where the club did not have the impact of COVID-19 and also sold a greater value of players.
2021 is likely to be better due to operating profitability improve before player trading and also greater player sales too. 2022 will be a bumper year following the sale of Ben White.
Profit / loss before tax
Losses rose to £67m before tax due to £3.3m in finance costs.
Brighton fans may see the large losses and be concerned. However, Tony Bloom has shown ambition and these losses are the cost of his ambition. The improved performance on the pitch and transfer pipeline off it means that this may be reversed in the near future (i.e. Ben White sale or increased revenue).
Assets / Liabilities
Brighton haven’t just invested on the pitch; it has invested in the pitch via its new training facility costing £25m. This and mounting losses meant owner injections were required to keep the club running.
Cash flow
Brighton saw its cash levels improved from £0.7m to £3.7m. Cash inflows from operations remained a healthy £30m despite COVID-19. This helped supplement transfer fee outflows of £39m and capital expenditure of £14m. Simple arithmetic shows this doesn’t add up and Tony Bloom had to provide a further £39m via a loan.
Debt
Brighton’s debt now stands at £309m, of which £307m is owed to Tony Bloom, showcasing the level of investment and commitment to the Seagulls. This investment is starting to pay off however under Graham Potter.
Net debt
Net debt now stands at £305m which may growth further as investment in the club continues on and off the pitch.
Final Remarks
Brighton is looking in a promising place. The Seagulls are flying as things stand in the 2021/22 season and look to be turning towards profitability following COVID-19. Brighton will know that survival remains the priority but following consolidation in the league can start aspiring to loftier heights.
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