This article analyses FC Twente finances in respect of the 2020/21 season.
Season review
2021 marked FC Twente’s second season back in the Eredivisie after relegation in 2017/18. It was a strong season for the club as it improved its performance by four league places to 10th. This meant the club avoided a relegation battle and will be looking to kick on further in 2021/22.
FC Twente finances were hit hard by COVID-19 with revenue falling significantly, resulting in a loss of €1.7m, its first loss since 2018.
FC Twente Finances – Revenue
Revenue fell from €24.4m to €14.0m (43%) as the club severely missed fans at De Grolsch Veste. Governmentsupport via the NOW and TVL schemes of €5.1m mitigated some of this revenue decline. This resulted in total income falling by a smaller measure, from €25.7m to €18.3m (29%).
Matchday
Matchday revenue decreased by €5.5m (95%) to €0.3m. The loss of matchday revenue was significant for the club as it typically accounts for around a quarter of total revenue. The return of fans (with some restrictions) should recover a significant portion of this revenue.
Broadcast
Broadcast revenue fell slightly from €2.6m to €2.4m (10%). This reduction was despite a rise in the club’s ranking due to the distribution mechanism employed by the Eredivisie, perhaps due to less live TV games.
FC Twente is currently in around the European play-off positions. Qualification is the next step of the revival of the club which would result in a significant boost to its finances.
Commercial
Commercial revenue fell from €16.0m to €11.3m (29%). This was due to near non-existent corporate hospitality as games were played behind closed doors. Much of this should be recovered in 2022.
FC Twente noted that the club received €2.3m in payments from sponsors despite the club being unable to activate some elements of their agreements due to no fans in the stadium, highlighting the strong bond between the club and its partners.
FC Twente Finances – Revenue summary
The loss of matchday and corporate hospitality revenue was huge to FC Twente and accounted for the entirety of the revenue decline. The return of these revenue streams will be critical in 2021/22 as the club looks to improve its finances.
FC Twente Finances – Operating costs
Operating costs fell €5.6m (22%) to €20.3m as the club managed its costs in light of falling revenue. This was however not enough to prevent the club making a loss.
Wages
FC Twente’s wage bill fell from €14.5m to €11.7m (20%). The club actively sought to reduce its costs and showed tremendous agility to do so. This did not stop the wages to revenue ratio worsening from 60% to 83%. This is above UEFA’s recommended ratio of 70%, however due to the exceptional circumstances should not be a concern. Historically FC Twente has had a wages to revenue ratio comfortably below 70%.
Other costs
Other operating costs fell by €2.7m to €8.6m as the club saved matchday costs without fans in attendance. This will likely rebound back to around €11m.
FC Twente Finances – Operating costs summary
The club successfully managed to reduce its cost base given the reduction in revenue experienced. This limited the loss suffered by the club and leaves them well position to bounce back financially.
FC Twente Finances – Transfers
The 2020/21 season was a cautious transfer season for many clubs and FC Twente was no different. The club made no signings for a transfer fee according to Transfermrket.com. The accounts suggest the club may have spent €0.3m. This could relate to Dario Dumic. The only departure was Jorn Brondeel for €0.1m.
Amortisation
FC Twente has spent very little in recent years and as such player amortisation charges are minimal. Player amortisation fell from €0.2m to €0.1m (65%). This is likely to remain low in 2022 as the club has yet again spent little in the transfer market.
Profit on player sales
Profit on player sales fell from €1.2m to €0.5m (55%) due to minimal player sales in the year. It is likely the majority of the €0.5m recorded relates to sell-on clauses. 2021/22 saw PSV swoop in for Joël Drommel for a reported €3.5m. This is likely to contribute to a significantly higher profit on player sales in 2022.
Transfer debtors / creditors
It does not appear that FC Twente is owed, or owes any amounts in respect of transfer fees.
FC Twente Finances – Transfers summary
FC Twente has operated frugally in recent years, utilising its academy and the free transfer market to recruit talent. Investment in youth is key and this has been seen by FC Twente reportedly increasing its investment in its joint youth program with Heracles. This has so far been successfully with the club’s performances improving year-on-year since relegation.
FC Twente Finances – Profitability
After two profitable seasons, the loss of matchday revenue was the key culprit for a loss-making 2021.
Operating profit / loss before player trading
Before player trading, operating losses increased by €1.7m (646%) to €2.0m. This was driven by the loss revenue from a season behind closed doors. A significant portion of this lost revenue should be recovered which should improve profitability considerably, and possible result in operating profits in 2022.
Operating profit / loss after player trading
After player trading, FC Twente recorded a €1.5m operating loss. This compares to €0.7m profit in 2020. FC Twente does not tend to spend significant sums in the transfer market, so player amortisation is low. This means that FC Twente finances are always boosted by any player sales achieved, no matter how small. The sale of Joël Drommel will hence have a significant impact on profitability and will result in FC Twente return to profitability.
Profit / loss before tax
Net finance costs of €0.7m resulted in FC Twente recording a loss before tax of €2.2m. This compares to a €0.3m profit in 2020.
FC Twente Finances – Profitability summary
Despite a financially challenging season, FC Twente recorded a respectable loss. The return of fans, improving sporting performance and sale of Joël Drommel will see FC Twente return to a profit in 2022.
FC Twente Finances – Assets / Liabilities
The €2.2m loss recorded did not require any substantial new debt as the club utilised its cash reserves.
Cash flow
FC Twente’s cash reserves fell from €7.5m to €4.7m. This was due to the need to service existing debt. Cash outflows from financing (€3.1m), capital expenditure (€0.8m) and player transfers (€0.1m) were partly offset by cash inflows from operations of €1.2m.
Debt
At the end of the 2020/21 season, FC Twente had debt of €33m. This is split as follows:
- €14m of subordinated debt (no interest – likely from shareholders of FC Twente);
- An €8.4m loan taken out in 2017 – This loan attracts a 1.8% interest rate until the end of the loan (March 2047); and
- €11m of other loans (split unknown) to various parties attracting interest of between 0-5.3%.
The interest rates on the majority of loans are relatively low which enables the interest payments to not overwhelm the club.
Net debt
Net debt was €27.9m at the end of the 2020/21 season.
FC Twente Finances – Final Remarks
FC Twente experienced a sharp fall from grace as it crashed to relegation in 2018. Since then, the club has regrouped, and its finances appear to be in a good place following two consecutive profitable years prior to the financial shock of COVID-19. 2022 performances in the league have been strong and the club will be eyeing a European spot in the next stage of its journey as it looks likely to return to profitable position in 2021/22.
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