This article analyses Heracles finances in respect of the 2020/21 season.
Season review
The 2020/21 season resulted in another mid-table Eredivisie finish as Heracles finished in 9th position. This was disappointingly just outside the European play-off places, which Heracles continue to strive for. Heracles also reached the Round of 16 in the KNVB Cup.
Heracles finances coped admirably with the impact of COVID-19, perhaps due to a low reliance on matchday income. The club recorded a €1.6m profit, continuing a strong streak of profitable seasons.
Heracles Finances – Revenue
Revenue fell €2.0m (16%) to €10.2m due to lost matchday revenue as games were played behind closed doors. Government support via the TVL scheme of €0.6m mitigated some of this revenue decline. This resulted in total income falling by only a small amount, from €12.2m to €10.8m (12%).
Matchday
Matchday revenue fell from €1.7m to €0.8m (50%) as the season was played behind closed doors. Heracles generates a relatively small amount of its revenue (10-15%) from matchday revenue. Due to this, the impact of no fans in its 12,080-seater stadium were less significant than for some of its peers. Nonetheless, matchday revenue should recover substantially in 2022.
Broadcast
Broadcast revenue was relatively flat in 2020/21, rising £0.1m (1%) to €3.5m. Due to the club’s performances over the past 10 seasons, Heracles has reached ‘top 8’ status in the Eredivisie. This means that from the 2021/22 season, it will receive a greater share of TV distributions which will boost broadcast revenue. The club’s struggles in the current season could however mean this status is short-lived.
Commercial
Commercial revenue fell from €7.1m to €5.9m (17%) as the club played without fans. This reduced commercial opportunities and eliminated the majority of corporate hospitality. This should rebound in 2022.
Heracles Finances – Revenue summary
Almelo’s limited reliance on matchday revenue was a blessing across the last season, limiting the loss of revenue suffered compared to its rivals. Heracles’ new status as a top 8 club should provide a financial boost. The club can also welcome back fans and the additional revenue this will bring.
Heracles Finances – Operating costs
Operating costs rose €0.4m (4%) to €10.9m. Heracles successfully controlled its costs despite continued investment which avoided the club becoming loss-making.
Wages
Heracles’ wage bill rose from €6.5m to €7.2m (11%) as the club invested in its squad as it looks to improve on the pitch. This saw its wages to revenue ratio worsen from 53% to 70% – This is bang on UEFA’s recommended ratio of 70%. The recovery of revenue in 2022 will likely see this ratio fall again towards 60%, comfortably within recommended limits.
Other costs
Other operating costs fell from €4.0m to €3.7m as the club saved matchday costs due to no fans at the Erve Asito.
Heracles Finances – Operating costs summary
Heracles has stated it wants to invest greater sums in pushing the club further. The club has stated its budget (included player amortisation of c.£1.1m) will be €14.5m, a 21% increase on 2021.
Heracles Finances – Transfers
Heracles saw a handful of outgoings and signings during 2020/21. In came Bakis (€0.6m), Burgzorg (€0.2m) and Les (€0.2m) for a combined €1.1m (rounding). Departing Heracles were Dessers (€4.0m) and Van der Water (€1.2m) for a combined €5.2m. This resulted in net transfer income of €4.1m.
Amortisation
Player amortisation charges fell slightly from €1.2m to €1.1m (8%) following playing squad investment. Minimal spending to date in 2021/22 is likely to result in this figure falling in 2022.
Profit on player sales
Profit on player sales remained flat at €3.8m following player sales in the year. To date, Heracles has not sold any players for a transfer fee in 2021/22. Due to this, the club will see a €3.8m hole in its finances which may cause the club to be loss-making in 2022.
Heracles Finances – Transfers summary
Heracles is a net seller in the transfer market, relying on small purchases, free transfers, and its academy for talent. The club typically generates a relatively significant part of its income from player sales as a result. Therefore, the lack of sales in 2021/22 will have a sizeable impact on its finances, more so than the lost matchday revenue did this season.
Heracles Finances – Profitability
Heracles continued a streak of profitability in 2021, however the lack of sales in 2021/22 may put an end to this.
Operating profit / loss before player trading
Before player trading, Heracles recorded a minor operating loss of €0.2m. This compares to a €1.7m profit in 2020. This is due to the loss of matchday revenue, much of which should be recovered in 2022 to reverse this.
Operating profit / loss after player trading
After player trading, Heracles recorded a €2.5m operating profit. This compares to a €4.3m profit in 2020. The loss of nearly €4m of player sales in 2021/22 due to limited transfer sales will likely see the club make an operating loss after player trading in 2022.
Profit / loss before tax
Net finance costs of €0.6m resulted in a €1.9m profit before tax. This compares to a €3.7m profit in 2020.
Heracles Finances – Profitability summary
Heracles may incur its first loss in a number of years in 2022. Heracles management has budgeted for a €2.8m loss in 2022, with the main driver being a lack of player sales in the current season. As we progress through the winter transfer window, we will be paying attention to any sales that may improve this position.
Heracles Finances – Assets / Liabilities
Heracles profitability enabled the club to improve its cash position and pay-down some of its debt.
Cash flow
Heracles’ cash reserves improved from €5.7m to €9.1m. This was driven by cash inflows from operations of €5.4m. These inflows absorbed cash outflows from player transfers (€1.1m), capital expenditure (€0.3m) and financing activities (€0.6m). This leaves Heracles in a comfortable cash position despite the challenges to all clubs in the past two years.
Debt
Heracles’ debt stood at €11.7m at the end of the 2020/21 season. The majority (c.€8m) relates exclusively to third parties, and all attract interest rates of between 1-6%. The remaining (c.€3.5m), relates to amounts loaned by the ‘Founders’.
Net debt
Net debt hence now stands at €2.6m following the increased cash position.
Heracles Finances – Final Remarks
Heracles has run profitability for a number of seasons, managing to continue this despite the challenges of COVID-19. This has been helped by continued player sales during this period. The lack of player sales in 2021/22 will likely result in the club incurring an unfamiliar loss. However, the strong cash position of the club and years of profitability mean the club should be able to take any loss in its stride as it looks to improve performances in the second half of the 2021/22 season.
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