This article analyses Valencia finances in respect of the 2020/21 season.
Season review
The 2020/21 season was Valencia’s 86th season in the top flight. It was however another disappointing season as it finished 13th in the table, condemning Valencia to a second successive season without European football. The season also saw a mass exodus of talent, including the transfer of club captain Dani Parejo to league rivals Villareal.
Due to financial distress caused by COVID-19, Valencia finances were damaged, forcing the club to sell superstars like Ferran Torres for a discounted price. Despite significant player sales, Valencia recorded a pre-tax loss of €17.1m, representing a 151% rise from the previous financial year. This was driven by the loss of matchday revenue and no UEFA Champions League (UCL) participation.
Valencia Finances – Revenue
Total revenue fell from €172m to €109m (37%) due to a significant decrease in matchday income caused by the effects of COVID-19 and failure to qualify for Europe the prior season.
Matchday
Matchday revenue fell from €13m to nil, as games were played behind closed doors.
Attendance restrictions (40%) due to newer COVID-19 variant has limited matchday revenue in 2022 at the Mestalla. In addition, Valencia has severely missed its 12th man, highlighted by its impact on sporting performance.
Broadcast
Broadcast revenue fell from €135m to €89m (34%), as the club were absent from the UCL. A portion of 2019/20 TV income was recognised in the 2021 year due to the delays in the 2019/20 as a result of COVID-19.
The absence of broadcast revenue deferrals in 2022 will likely see broadcast revenue decline further. However, Valencia is in with a good chance of domestic cup success with the Spanish giants all out of the cup. This may help absorb some of the revenue reduction.
Commercial
Commercial revenue reduced from €25m to €19m (22%).
Income from marketing and advertising and sales in its official stores have been considerably lower than previous, this can be attributed to lower attendance and footfall at the Mestalla due to the pandemic. The addition of Socios.com as its shirt sponsor and the return of fans should help boost commercial revenue in 2022.
Valencia Finances – Revenue summary
Valencia had a challenging year with revenue dropping by over a third, largely due to its absence from European competition. There is hope for Valencia as indicated by its new Socios.com deal, which also includes fan Tokens ($VCF) which provide a new revenue source. The club also stands to benefit from the historic La Liga deal with CVC aimed at growing the value and global brand of La Liga. However, a return to Europe is most critical to Valencia’s revenue recovery.
Valencia Finances – Operating costs
Operating costs fell from €141m to €129m (9%). This was largely driven by a reduction in wages.
Wages
Valencia saw its wage bill fall from €110m to €97m (11%). This is mainly attributable to a mass exodus of first team players, including some of the highest earners at the club.
However, the wages to revenue ratio has increased from 64% to 90%, due to the 37% reduction in revenue. UEFA recommends a maximum ratio of 70%. This ratio may fall slightly as matchday revenue returns.
Valencia has seen a major strategic change in its transfer policy with the club now completing several loan deals. The majority of which are without loan fees. As a result, Valencia could see a consistent decrease in wages as it recovers from the financial impact of COVID-19.
Other costs
Other costs attribute to management expenses (€31m) have been relatively consistent compared to the prior year.
Valencia Finances – Operating costs summary
Compared to the previous two seasons, operating costs have seen a large reduction. This is driven by the new transfer policy and tighter wage control, highlighting a new direction under President Anil Murthy.
Valencia Finances – Transfers
Valencia saw 13 departures and three incoming players all of whom were on loan deals.
The net income was €88m, with around 70% of the total fees derived from the sale of Ferran Torres (€34m) and Rodrigo Moreno (€30m). There were no purchases in the year.
The club’s financial situation forced it to sell their best players to direct rivals, it also led Valencia to selling its biggest superstars for discounted transfer fees.
Amortisation
Due to the mass exodus of first team players, player amortisation fell from €90m to €55m (39%). Although the club spent €13m in January, player amortisation in 2022 is unlikely to rise significantly.
Profit on player sales
Profit on player sales has been at its highest in five years, rising from €17m to €49m. However, the sale of many players for discounted fees means the club may have been able to increase this figure further had it not had such strong financial pressures. Limited sales in the 2021/22 season mean that the club has a significant financial hole to plug compared to 2020/21.
Valencia Finances – Transfers summary
The significant sales in 2020/21 helped Valencia absorb much of the revenue reduction caused by the loss of matchday income and no European football. No such income has been generated in 2021/22 which will likely result in a significant rise in losses in the current season.
Valencia Finances – Profitability
Valencia was once again loss-making as it counted the cost of no European football and COVID-19.
Operating profit / loss before player trading
Before player trading, there was a massive fall in profitability as a €65m operating profit turned into a €13m loss (-120%). This was driven by the loss of UEFA competition and matchday income. Matchday revenue will return to an extent in 2022, however, broadcast revenue is unlikely to rise significantly, and the club will do well to record an operating profit in 2022.
Operating profit / loss after player trading
After player trading, operating losses rose from €8m to €18m (137%). The significant player sales in 2021 helped reduce the operating losses resulting from its revenue reduction. However, such sales have not occurred in 2022 and therefore losses are likely to rise significantly.
Profit / loss before tax
Net finance income of €1.2m saw Valencia record a loss before tax of €17m. This was a 151% increase in 2020 (€6.8m).
Valencia Finances – Profitability summary
The lack of European football and player sales in 2022 is likely to see Valencia record a significant loss in 2022. The club may therefore require significant funding from its owners or further discounted player sales to continue operating at its current level. The club will be hoping for an upturn in form in the next couple of years to return to past glories.
Valencia Finances – Assets / Liabilities
Another loss for Valencia led the club needing to seek further shareholder financing for the 2020/21 season, resulting owner’s debt to increase from €42m to €60m in the year.
Cash flow
Valencia’s cash reserves fell from €14m to €1.1m, this is mainly due to the repayments of debt with credit institutions and capital expenditure on its training ground. Cash inflows from player transfers €21m was absorbed by cash outflows from operations (€8.2m), capital expenditure (€13m) and financing activities (€13m).
Net debt
Valencia has seen 13% fall in debts compared to prior year owing to the club’s commitment to refinance its debts and reduce the interest cost burden going forward. Debt to its owners rose from €42m to €60m, while third party debt fell from €173m to €127m. Net debt stood at €186m.
Valencia Finances – Final Remarks
There may be further financial challenges ahead for Valencia as 2022 promises a sizeable loss. Management is hence in a transitional phase, with the overall objective is clear in the restructure of wages and personnel. Fans will be hopeful that a more youthful approach will pay dividends in the coming year, while the La Liga – CVC deal and exciting sponsorship deals with Socios.com that provide interesting opportunities for the club.
We would also love to hear any feedback on this article, our website or if you would like to contribute! Please use the form below and have a great day.
