Thread by @SwissRamble

Brentford’s financial results for 2017/18 covered “yet another season of consolidation and progress”, when the Bees finished 9th in the Championship under head coach Dean Smith, their fourth consecutive top 10 place. Some thoughts in the following thread #BrentfordFC

#BrentfordFC loss widened from £1.0m to £3.9m, due to “increased football related costs”. Revenue was stable at £12.7m, due to ”similar on-pitch performance and attendance year-on-year”, while profit on player sales rose £1.3m to £14.1m.

#BrentfordFC revenue was flat at £12.7m, as ticketing income fell £0.4m (12%) to £3.1m, offset by increases in commercial, up £0.3m (15%) to £2.3m, and broadcasting, up £0.1m (2%) to £7.3m. Other operating income dropped £0.3m to £0.2m.

#BrentfordFC saw some cost growth: wage bill increased by £2.5m (17%) to £17.2m, player amortisation rose by £1.3m (31%) to £5.6m and other expenses were up £0.6m (8%) to £8.0m. Net interest went from £0.2m payable to £0.6m receivable, due to unwinding of discount on transfers.

#BrentfordFC £4m loss was actually one of the better results in the Championship, with only 5 reporting profits. In fact, 10 clubs lost more than £20m with those promoted “leading the way”, impacted by hefty promotion bonuses: #WWFC £57m, #FFC £45m and Cardiff City £39m.

However, #BrentfordFC loss would have been much higher without £14.1m profit on player sales (6th highest in the Championship), including three sold to Birmingham City (Jota, Maxime Colin and Harlee Dean) plus Lasse Vibe. This was actually higher than the club’s £12.7m revenue.

Following promotion from League One, #BrentfordFC losses initially increased in the Championship (£17m in 2015 and £13m in 2016) in order to compete at the higher level, but the club has now put into place a stronger business model, leading to smaller losses in 2017 and 2018.

The improvement is down to player trading, as #BrentfordFC have made £42m profit on player sales in the last 3 seasons, due to their ability to “buy low and sell high”. 2018/19 will see further gains following over £30m of sales (Mepham, Woods, Yennaris, Egan & Josefzoon).

#BrentfordFC chairman Cliff Crown stated that “player trading remains an integral part of our business strategy”, though he added the principle was “obtaining the right valuation for players, while maintaining a strategy for replacements with the potential to improve the squad.”

#BrentfordFC EBITDA (Earnings Before Interest, Depreciation and Amortisation), which strips out player sales and non-cash items to give underlying profitability, has been consistently negative, falling again in 2018 from £(9)m to £(12)m, though still better than £(16)m in 2016.

In fairness, only four Championship clubs managed to achieve positive EBITDA in 2017/18, so #BrentfordFC £(12)m is only just in the bottom half of the division. For some context, it was significantly better than clubs like #BCFC £(30)m, #AVFC £(27)m and #WWFC £(27)m.

#BrentfordFC revenue has nearly tripled since promotion from League One to Championship, rising from £4.4m in 2014 to £12.7m in 2018. The majority of the £8.3m growth has come from TV (£6.2m), but ticketing (£1.4m) and commercial (£0.7m) have also increased.

#BrentfordFC financial challenge is highlighted by the fact that their £12.7m revenue was lowest in the Championship, below Burton Albion £12.9m, Preston £13.3m & Barnsley £14m (two of whom were relegated). Only around a fifth of #AVFC £69m, Sunderland £64m, #Boro & #NCFC £62m.

Championship revenue is hugely influenced by Premier League parachute payments with 8 clubs benefiting in 2017/18, led by #Boro, #HCAFC & #SAFC £42m, followed by #AVFC & #NCFC £34m, then #CardiffCity, #FFC & #QPR £17m. This makes life really difficult for clubs like #BrentfordFC.

If parachute payments were excluded, #BrentfordFC would still have had the lowest revenue in the Championship, though the top club’s revenue would drop from £69m to £41m (Leeds United), which would “only” be 3 times as much as the Bees’ £13m.

#BrentfordFC TV income rose £0.1m to £7.3m, including PL solidarity payment £4.5m and £2.3m EFL central distribution. The huge amounts received in the top flight (£150m for 1st place, £95m for 20th) help explain why so many Championship clubs spend big in pursuit of that prize.

#BrentfordFC ticketing revenue fell £0.4m (12%) to £3.1m, despite one more home game at Griffin Park, as 2016/17 was boosted by an FA Cup tie at Chelsea. One of the smallest match day incomes in the Championship, only above Burton Albion, and around a quarter of #AVFC £12m.

#BrentfordFC attendance increased 1% from 10,472 to 10,581, which was just under 3,000 more than when they played in League One, though down on the 10,700 peak the first season back in the Championship. Ticket prices had been frozen for 4 seasons, though £10 increase in 2019/20.

Despite the upward trend, #BrentfordFC attendance of 10,581 was still the second smallest in the Championship, only ahead of Burton Albion and nearly 3,000 behind the next lowest club, Millwall 13,368. It was miles behind the top two: Aston Villa 32,097 and Leeds United 31,521.

#BrentfordFC will move to a new 17,250 stadium at Lionel Road in the summer of 2020. Following the sale of Griffin Park and the new stadium to a developer, the club expects to recognise a once-off £32.5m gain on disposal of assets in the 2018/19 accounts.

#BrentfordFC commercial income rose £0.3m (15%) to £2.3m. Comprises commercial £1.2m, catering £0.4m, retail £0.4m, media & membership £0.1m and other income £0.1m. There has been no academy income following its closure (£0.8m in 2016).

#BrentfordFC £2.3m commercial income is third lowest in Championship, only above Millwall and Barnsley. This is a big competitive disadvantage, e.g. #LUFC £22m is nearly 10 times as much. Shirt sponsorship is with gaming company LeoVegas, while kit supplier is Adidas.

#BrentfordFC wage bill rose £2.5m (17%) from £14.7m to £17.2m, reflecting higher salaries throughout the Championship, despite headcount falling from 132 to 119. As a consequence, the wages to turnover ratio increased (worsened) from 116% to 135%. Wages down £0.5m from 2015.

#BrentfordFC £17m wage bill was the 5th lowest in the division, only ahead of Preston, Millwall, Barnsley and Burton Albion. As former manager Dean Smith said, “If it was down to budgets, we might as well give up now.” However, the Bees have continued to punch above their weight.

#BrentfordFC wages to turnover ratio of 135% is obviously not great and was actually the 7th highest (worst) in the Championship. That said, no fewer than 13 clubs in this division have reported ratios above 100% - with #BCFC, Reading and #WWFC all around 200%.

Including amounts paid to key management personnel at Smartodds Ltd and Briburg Ltd for “services provided by a director” (£227k), #BrentfordFC total directors remuneration increased from £213k to £326k, which was the 7th highest in the Championship.

#BrentfordFC player amortisation, the annual charge to write-down transfer fees over the life of a player’s contract, rose £1.3m (31%) to a club record £5.6m. Note: they did not capitalise and amortise player purchases before promotion to Championship in 2014

However, #BrentfordFC player amortisation of £5.6m was still firmly in the bottom half of the Championship, though more than promoted Cardiff City £5.1m. For more perspective, it was miles below (relatively) big-spending clubs like #Boro and #AVFC, both £24m.

#BrentfordFC spent £11m on players in 2017/18, £4m more than prior season, including Ollie Watkins, Neal Maupay, Henrik Dalsgaard and Kamohelo Mokotjo. Still significantly outspent by clubs like Middlesbrough £66m, Fulham £31m, Leeds United £28m and Wolves £25m.

For many years #BrentfordFC spent little on player recruitment, but have averaged £8m in last 3 seasons. However, player sales increased even more to £12m, leading to £4m net sales. Benham argued that this was a necessity, “With FFP we were always going to have to sell players.”

#BrentfordFC gross debt rose £11m from £60m to £71m, all owed to the owner Matthew Benham. Money from stadium development sales allowed debt to be reduced by £19m repayment in August. Also owe £2.7m on outstanding transfer fees, but are in turn owed £10.5m by other clubs.

#BrentfordFC £71m debt was the 7th highest in the Championship, a fair way below Middlesbrough £101m and Ipswich Town £95m, but around the same level as Wolves £75m, Cardiff City £74m (both promoted), Birmingham City £73m and Bristol City £72m.

Although debt is high in the Championship, most of it is provided by owners who charge little or no interest. In this way, #BrentfordFC only paid £87k interest in 2017/18 (mainly factoring), as Benham’s loans are interest-free.

Even after adding back non-cash items such as player amortisation & depreciation, #BrentfordFC made a hefty £11m cash loss from operating activities in 2017/18, then spent £4m on stadium development. This was funded by £12m of new loans from Benham and £3m of (net) player sales.

Since 2009 #BrentfordFC only real source of funds has been money put in by Matthew Benham, used to cover operating losses (£68m) with a further £36m spent on infrastructure investment (stadium & training ground) and £8m on acquiring a subsidiary (for the Lionel Road site).

Benham’s commitment to #BrentfordFC was a substantial £114m as at 30 June 2018, comprising £76m loans and £38m share capital. Included £30m for the new stadium. With much justification, Crown has described this as “magnificent financial backing”.

#BrentfordFC had no problems with Financial Fair Play (FFP), as the total losses were well within the FFP limit for the 3-year monitoring period, even before deducting allowable expense for academy, community and infrastructure.

As the #BrentfordFC chairman said, “Perhaps the most remarkable achievement is continuing to challenge in the top half of the table, while operating comfortably within FFP regulations, largely achieved by securing profits from player trading of over £40m in the last three years.”

Although #BrentfordFC suffer from very low revenue and wages in the Championship, their smart approach to player trading has “created a platform from which we intend to build in our attempt to finish in the top six and ultimately secure promotion to the Premier League.”