This article analyses Benfica finances in respect of the 2020/21 season.
Season review
Benfica season did not go as hoped as it finished the campaign empty handed. Domestically, a 3rd place league finish was achieved, while agonising exits in the cups as finalists and semi-finalists were heart-breaking.
In Europe the club started the season poorly, exiting the UEFA Champions League (UCL) in the qualifying rounds. The club eventually exited the UEFA Europa League in the Round of 16.
Failure to qualify for the UCL group stages and a season played predominately behind closed doors saw the club record a €17m loss in 2021.
Benfica Finances – Revenue
Benfica’s revenue suffered as no fans, or UCL group stage qualification saw revenue fall from €140m to €94m (33%).
Matchday
Matchday revenue was almost non-existent in 2021, plummeting from €22m to €0.5m (98%). The return of fans in greater numbers (still restrictions) means that the majority of matchday revenue should be recovered in 2022.
Broadcast
Broadcast revenue fell from €87m to €66m (25%) due to failure to qualify for the UCL group stages. This resulted in UEFA competition distributions falling from €48m to €10m, highlighting the importance of UCL participation. This was slightly offset by some revenue from the 2019/20 Primeira Liga season being recorded in the 2021 financial year. This is due to the end of the 2019/20 season falling into July, with Benfica’s 2020 financial year ending in June. While not disclosed by Benfica, Porto recorded deferred revenue of €6.3m and Benfica’s will not be too dissimilar.
Benfica successfully qualified for the UCL group stages in 2021/22 which will see broadcast revenue shoot back up. The club is still with a chance of qualifying for the knockout rounds which could result in even further revenue. Qualification alone is worth €9.6m.
Commercial
Commercial revenue fell from €31m o €28m (9%) due to restrictions in the 2020/21 season limiting corporate hospitality and sponsorship activation opportunities. The first ever sleeve sponsor for Benfica is debuting in the 2021/22 season, Betano. This will drive commercial growth in 2022.
Benfica Finances – Revenue summary
Benfica had a poor revenue year as it suffered like everyone else from a season behind closed doors. However, the return of fans and qualification for the UCL group stages should see revenue recover to close to 2020 levels. This could get even better if Benfica can qualify for the UCL group stages.
Benfica Finances – Operating costs
Operating costs rose fell from €172m to €155m despite rising wages as Benfica’s other operating costs fell sharply.
Wages
Benfica’s wage bill rose from €86m to €97m (13%) as it invested heavily in its playing squad. This led to a wages to revenue ratio of 103%, a huge increase on 2020 (61%). This is significantly higher than the recommended maximum ratio of 70% stated by UEFA. An anticipated rise in revenue in 2022 that will likely far exceed wages should see this ratio fall.
Other costs
Other operating costs fell from €86m to €57m (34%) as Benfica made significant savings on matchday costs but also in costs to suppliers. It is uncertain whether these are permanent savings or just temporary in nature and this may therefore impact profitability in 2022.
Benfica Finances – Operating costs summary
Benfica’s costs base was reduced in 2021 but not to the level of its revenue reduction. Both are likely to rise in 2022, however revenue growth should exceed cost growth, improving profitability.
Benfica Finances – Transfers
Despite a cautious transfer market for many in 2020/21, Benfica used it as an opportunity to invest heavily in its playing squad after recent player sales.
In came Nunez (€24m), Everton (€20m), Pedrinho (€18m), Waldschimdt (€18m), Otamendi (€15m), Verissimo (€6.5m), Gilberto (€3.0m), Todibo (Loan – €2.0m) and Leite (€1.5m) for a combined €105m.
Departing Estádio da Luz were Dias (€68m), Vinicius (Loan – €3.0m), Lema (€2.0m), Florentino (Loan – €1.5m), Zlobin (€1.0m), Fernandes (Loan – €0.5m), Cadiz (Loan – €0.5m) and Gonzalez (Loan – €0.4m) for a combined €77m.
This resulted in a net transfer spend of €28m compared to a net transfer income of €175m in 2020.
Amortisation
Player amortisation charges rose from €40m to €52m (31%) as Benfica reinvested some of its extraordinary player sales money. Significantly lower spending in 2021/22 so far will likely see this number decline.
Profit on player sales
Benfica recorded a profit on player sales of €88m, 30% down on 2020’s €126m. This contributes hugely to Benfica’s profit/loss and lower players sales to date in 2021/22 will therefore be felt financially.
Transfer debtors / creditors
While Benfica is typically seen as a net seller it also spent heavily in the 2021 which meant it now owes more in transfer fees than it owes. Benfica are owed €51m in transfer fees but owe €106m, a net €55m owed. This may explain the reduced spending in 2021/22.
Benfica Finances – Transfers summary
Player trading is a core part of Benfica’s business model, contributing hugely to its finances. The club is a talent hub, and the club are excellent at developing and spotting talent. However, reduced sales in 2021 will cause a hole in its finances for 2022 which may result in back-to-back losses.
Benfica Finances – Profitability
2021 resulted in Benfica recording its first loss for a number of years after failing to qualify for the UCL group stages and lost matchday revenue.
Operating profit / loss before player trading
Before player trading, Benfica saw its operating losses nearly double from €32m to €60m (89%). This was the result of the major reduction in revenue due to no fans at the stadium and no UCL group stage prize money. The return of both in 2022 will see this number improve.
Operating profit / loss after player trading
After player trading, a €54m profit turned into a €25m loss as despite strong player sales, it was not enough to overturn the huge loss before player trading. Weaker sales in 2021/22 so far will counteract some of the positive revenue growth mentioned above unless significant sales in January.
Profit / loss before tax
Net finances costs of €8.9m resulted in a loss of €34m. This compares to a €47m profit in 2020.
Benfica Finances – Profitability summary
A first loss in a number of years may cause some concern. However, perspective is needed as UCL group stage qualification and returning fans will see the club bounce back in 2022. It does however show the importance of both fans and the UCL to Benfica’s financial health.
Benfica Finances – Assets / Liabilities
Benfica saw debt levels rise as it required funding to support its losses.
Cash flow
Benfica’s cash reserves rose from €5.3m to €44m. Cash outflows from operations (€83m) and capital expenditure (€2.8m) were absorbed by cash inflows from player transfers (€56m), other investing activities (€27m) and financing (€42m).
Debt
Benfica’s debt levels hence rose from €98m to €145m. This was largely due to a new debenture loan of €60m, with some repayments on existing loans.
Net debt
Benfica’s net debt rose from €93m to €101m.
Benfica Finances – Final Remarks
It was a challenging year on and off the pitch for Benfica as it failed to deliver the results on the pitch. This and the lack of fans resulted in financial losses off the pitch. However, the club has bounced back in Europe and this plus the return of fans means financially the picture will be rosier in 2022.
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