Thread by @SwissRamble

This season’s Champions League semi-finals largely feature the usual suspects, but the presence of #Villarreal is a surprise to most, after the “yellow submarine” defeated Bayern Munich. Having only finished 7th in La Liga, they qualified for the CL by winning the Europa League.

Compared to the European elite, #Villarreal have far fewer financial resources, playing their home games in a stadium with a capacity of only 23,500, though this would hold almost half of the city’s population of just over 50,000.

#Villarreal were bought in 1997 by Spanish businessman Fernando Roig, who made his fortune in ceramic tiles (plus a stake in a large supermarket chain). However, unlike many others, this is not a story of an owner pumping in money so that the club can buy its way to success.

Instead, Roig’s philosophy for #Villarreal has been very different: “Play good football, invest in youngsters and owe nothing to anyone. We will only spend what we generate.” So let’s look at the club’s business model and its financials over the last few years.

In 2020/21 #Villarreal posted a rare pre-tax loss of €17.9m (€14.2m after tax), despite club record revenue of €124m, up €38m (44%) from €86m. Mainly due to COVID, which not only hit gate receipts, but also contributed to player sales profit falling from €46m to €12m.

#Villarreal €38m revenue increase was due to broadcasting, which rose €38m (58%) from €67m to €105m, due to Europa League success and games deferred from 2019/20 season. Commercial was up 5% to €17m, while match day dropped €1.5m to €1.9m, as games played without fans.

However, #Villarreal other income fell €7m to €4m. Wages increased €12m (15%) from €83m to €95m, including bonus payments for EL success, while other expenses rose €8m (34%) to €30m. Player amortisation down €7m (18%) to €30m, while depreciation up €0.8m to €3m.

Many clubs in La Liga had worse financial results than #Villarreal €14m post-tax loss, including Atletico Madrid €112m, Sevilla €41m, Real Betis €37m, Valencia €31m & Athletic Bilbao €25m, while Barcelona €481m deficit was in a league of its own. Similar story before tax.

Obviously, all clubs financials were adversely impacted in 2020/21 by the COVID pandemic. This meant that all games were played behind closed doors, which meant a reduction in gate receipts, while also hitting merchandising and events.

COVID also impacted player trading, as it depressed the transfer market. As a result, #Villarreal profit on player sales slumped from €46m to €12m, mainly Toko Ekambi to Lyon and Unal to Getafe. Far below the likes of Real Madrid €106m, Valencia €49m & Atletico Madrid €38m.

#Villarreal 2020/21 loss was very much the exception to the rule, as they strive to break-even, having posted profits in 5 of the last 8 years. They generated €16m pre-tax profit over this period, even after last year’s €18m loss, which is pretty good in the football world.

#Villarreal’s business model owes a lot to player trading, having made an impressive €192m in the last 8 years. The large €46m gain in 2020 included Pablo Fornals’ big money move to #WHUFC. Club has a good record of developing Academy players, who they can then sell for profit.

#Villarreal operating loss, excluding player sales and interest, improved from €46m to €30m in 2021, which was significantly better than Spain’s “big three” clubs: Real Madrid €101m, Atletico Madrid €129m and particularly Barcelona’s shocking €509m.

#Villarreal revenue has actually grown €8m (7%) from the pre-pandemic 2019 figure of €116m to €124m, despite COVID driving a €4m fall in match day, as broadcasting rose €11m (12%) to €105m, thanks to their Europa League victory. Club has budgeted €128m for this season.

Despite the recent increase, #Villarreal €74m revenue growth since 2014 is the lowest of all the leading Spanish clubs with the exception of Valencia (only up €20m). The other clubs are all up more than €100m with Atletico Madrid leading the way with €169m growth.

However, #Villarreal €124m revenue is now 5th highest in Spain, having overtaken Valencia €108m. That said, they are still miles below Real Madrid €653m, Barcelona €591m and Atletico Madrid €339m, while Sevilla €171m are also a fair bit ahead of them.

To place #Villarreal achievement in reaching Champions League semi-finals into perspective, their €124m revenue is far below €164m required to be in the top 30 of the Deloitte Money League. Bayern Munich, who they beat in the quarter-finals, have 5 times as much with €611m.

#Villarreal broadcasting income rose €38m (58%) from €67m to €105m, due to Europa League success and money deferred from 2019/20 for games played after the accounting close. This was 5th highest in Spain, but Real Madrid €302m and Barcelona €281m had nearly 3 times as much.

After many years of individual deals in Spain, La Liga have introduced a collective deal, based on 50% equal share, 25% performance over last 5 years and 25% popularity (1/3 for average match day income, 2/3 for number of TV viewers). Gross income reduced by liabilities.

Even after the changes, the big two still receive by far the highest TV income from La Liga’s TV deal. In 2020/21 Barcelona and Real Madrid got around €150m, while #Villarreal received less than half as much with €67m, though up €4m compared to previous season.

Europe is important to the #Villarreal strategy, as seen in 2020/21, when I estimate they earned €32m for winning the Europa League. Still a lot less than the Spanish representatives in the Champions League received, e.g. Real Madrid got more than 3 times as much with €111m.

#Villarreal have earned €80m from Europe in the last 5 years, which is not bad, especially given that they failed to qualify in 2020. However, still far below four Spanish clubs: Real Madrid €446m, Barcelona €421m, Atletico Madrid €361m and Sevilla €201m.

#Villarreal will earn big money from this season’s Champions League. My model suggests the SF is worth €78m, though is restricted for two reasons: (a) nothing from first half of TV pool, as qualified via Europa League; (b) low UEFA coefficient (based on last 10 years’ results).

#Villarreal match day revenue fell 44% from €3.3m to €1.9m (season tickets sold), as all home games were played behind closed doors, down from €5.5m pre-pandemic. Note: Competitions plus Season Tickets and Memberships from club accounts, reduced for Europa League TV money.

#Villarreal 15,753 average attendance in 2019/20 (for games played with fans) was firmly in the bottom half of La Liga table. Not only miles below elite Spanish clubs, but also a lot less than others, like Real Betis 48,000, Athletic Bilbao 41,000, Valencia 40,00 & Sevilla 37,000

Despite the pandemic, #Villarreal commercial income rose €0.7m (5%) from €16.1m to €16.8m. This is 7th highest in Spain, but the top three clubs are out of sight commercially: Real Madrid €314m, Barcelona €270m and Atletico Madrid €96m.

#Villarreal shirt sponsor since 2013 has been Pamesa Ceramica, owned by Roig, whose company Nomar Patrimonial provided €10m per the accounts. El Madrigal stadium renamed Estadio de la Ceramica. Kit supplier Joma replaced Xtep in 2016 in a deal reportedly worth €2m a year.

#Villarreal wage bill increased by €12m (15%) from €83m to €95m, mainly due to bonuses for winning the Europa League. Grown by €38m (68%) in the last 5 years, but this is much less than Spanish rivals (e.g. Atleti €129m, Barcelona €94m & Real Madrid €91m) except Valencia.

#Villarreal €95m wages are 7th highest in Spain, but very close to Athletic Bilbao €99m and Valencia €97m. However, they are miles below Barcelona €432m, Real Madrid €372m and Atletico Madrid €266m, while Sevilla €133m are also a fair bit higher.

One consequence of #Villarreal good financial management is the high salary cap allowed by La Liga’s regulations. In fact, their €159m for 2021/22 is the fourth highest in Spain (up €51m in last 2 years), in stark contrast to Valencia €31m, and also above Barcelona’s €98m.

Following the revenue increase, #Villarreal wages to turnover ratio decreased (improved) from 96% to 77%, though the impact of the pandemic meant that this was still quite high compared to most years. Mid-table in La Liga, around the same level as Sevilla 78% and Barcelona 73%.

#Villarreal player amortisation, the annual cost of writing-off transfer fees, fell by €7m (18%) from €37m to €30m. Less than a fifth of Real Madrid €158m & Barcelona €155m, and also well below Atletico Madrid €117m & Sevilla €65m, underlining their conservative approach.

#Villarreal prudent strategy is further highlighted by transfer activity. Although gross spend in last 5 years averaged €60m, annual net spend was only €13m. Spent €47m in 2020/21, mainly on Estupinan & Capoue (Watford), Coquelin & Parejo (Valencia) & Rulli (Real Sociedad).

That said, in the 2 years up to January 2022 window, #Villarreal had the 3rd highest net spend in La Liga, only surpassed by Sevilla and Atletico Madrid, while Real Madrid, Barcelona and Valencia all made net sales. Their gross spend was also very competitive, being 4th highest.

It is worth noting that #Villarreal are debt-free, which has been the case for many years. This is all part of owner Roig’s philosophy (“owe nothing to anyone”), but is rare in the big leagues, where clubs often drown in a sea of debt.

#Villarreal’s zero financial debt is in stark contrast to the position at some other Spanish club, e.g. Valencia €181m, Atletico Madrid €166m, Real Madrid €158m and especially Barcelona’s outrageous €533m.

As a result, #Villarreal paid no interest in 2020/21, while other clubs had to make substantial interest payments, with Barcelona €41m “leading the way”, followed by Atletico Madrid €30m and Valencia €11m.

#Villarreal do have €45m of transfer fees debt (outstanding stage payments), though down from €60m in 2018. This was 6th highest in Spain, but far below some others: Barcelona €231m, Atleti €196m & Valencia €101m. Amount owed by other clubs is €40m, so only €5m net payable

#Villarreal cash balance fell by €1m to €13m, though still one of the highest in La Liga. Other clubs like Real Madrid, Atletico Madrid and Barcelona have more cash, but this is largely because they have taken on more debt to fund investment and working capital.

Although #Villarreal are one of La Liga’s healthiest clubs financially, Roig supports the new CVC deal, whereby clubs receive a large sum of money upfront, most of which has to be spent on infrastructure, against a percentage of future television revenue for the next 50 years.

#Villarreal will indeed use the CVC cash injection for a €20m upgrade to their stadium, mainly on new roofing, though very little impact expected on the capacity. The redevelopment should be completed in January 2023.

Given their limited resources, #Villarreal have done amazingly well to reach the Champions League semi-finals. The smart money will be on #LFC to win, though that was also the case in last season’s Europa League final, when all of #MUFC financial advantages counted for nothing.