June 26, 2020 / 10:22 AM / 6 days ago

Breakingviews - Liverpool has one more financial peak to conquer

Soccer Football - Premier League - Liverpool v Tottenham Hotspur - Anfield, Liverpool, Britain - October 27, 2019. Liverpool's Mohamed Salah celebrates scoring their second goal with Jordan Henderson.

LONDON (Reuters Breakingviews) - Liverpool FC has reached the promised land. The UK soccer club, which dominated English football in the 1980s but then went into prolonged decline, on Thursday finally won the national Premier League after three decades. Unlike manager Juergen Klopp, who has now secured all the most prestigious titles he could win with Liverpool, the club’s finances have one more peak to climb.

Unlike many top teams, Liverpool makes a profit. Annual results released in March showed that revenue rose by 17% to 533 million pounds, and EBITDA jumped 30% to 124 million pounds. The three main sales drivers – matchday gate receipts, television rights and commercial income from sponsorships – all increased. Its 42 million pounds of pre-tax profit was over four times that of nearest on-pitch rival Manchester City.

A striking feature of Liverpool’s financial success, however, has been its ability to generate profit from buying and selling players. With the exception of rival Chelsea, it has made more money from transfers over the last five years than any of the other top six-placed teams, according to soccer analyst Swiss Ramble. Without last year’s 45 million pounds of player-trading profit, Liverpool would have made a loss. That makes the club a bit like an investment bank that makes ends meet through risky proprietary trades, which are inherently unpredictable.

It’s pretty clear how Liverpool can put things on a firmer footing. Despite being named the seventh-richest club globally in Deloitte’s most recent annual Football Money League, the club is notably underweight in commercial and sponsorship revenue. Those sources contributed 46% of table-topper Barcelona’s 841 million euros of revenue in 2019, but only 35% of Liverpool’s top line.

With fan visits to stadiums in flux due to Covid-19 and TV rights less likely to continue the growth of the last few decades, commercial revenue is the name of the game anyway. But Liverpool lags Barcelona and Real Madrid on newfangled metrics like Facebook likes and Twitter followers, according to Deloitte, and the consultant flags that fan engagement is the secret to long-term growth. Still, the good news for Liverpool is that Klopp’s on-field magic makes its sponsorship shortcomings easier to solve.

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.


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