Brighton post £21.8m loss for 2018/19

Brighton & Hove Albion, who appointed Graham Potter following the end of the 2018/19 season, posted a loss after tax of £21.8m during 2018/19.

Brighton & Hove Albion yesterday published their accounts for the 2018/19 financial year ending on 30th June 2019, and have swung from a profit after tax of £11.3m during the 2017/18 season, to a loss after tax of £21.8m. In order to read their full accounts, click here. Some key performance indicators from their accounts are the following:

Revenue

This increased to a total of £143.4m in 2018/19, an increase of just under £4m from the 2017/18 season. Key to this increase was the increased revenue from broadcasting, as matchday revenue saw a very negligible increase of £14k, however, broadcasting revenue increased by £3.2m, this despite the fact that Brighton finished 2 places lower than in the previous Premier League season which meant a fall in Premier League payments of just under £2m. However, that being said, Brighton did reach the FA Cup semi-final last season, which, coupled with an increased prize fund from the FA, may well have offset the fall in revenue suffered from Premier League payments. Meanwhile, commercial income saw an increase of £0.8m to a total of £9.6m in the 2018/19 season.

Therefore, in conclusion, one can clearly see how, regarding their revenue, Brighton are hugely dependent on being in the Premier League, with the club receiving £105.7m (73.7%) from the Premier League, and making a total of £113.4m (79.1%) in broadcasting revenue - which only serves to further highlight how much Brighton depend on TV revenue.

Wages These saw a substantial increase of £24m from the 2017/18 season, as wages totalled £101.5m during the 2018/19 financial year. This may very well be influenced by the number of signings made during the summer of 2018, namely Florin Andone, Leon Balogun, Bernardo, Yves Bissouma, Martin Montoya, Dan Burn and club-record signing Alireza Jahanbakhsh.

The wages to turnover ratio for 2018/19 was that of 72.8%, an increase of 17.2 percentage points from the 2017/18 financial year, due to the substantial increase in wages, coupled with a relatively low increase in turnover. However, the ratio is still a relatively respectable one, and is considerably better than during the 2016/17 financial year in which the club achieved promotion to the Premier League (so perhaps wages were influenced by promotion bonuses), as in that season the club had a wages to turnover ratio of 107%, meaning for that for every £1 earned in revenue, the club was spending a total of £1.07 in wages alone.

Amortisation This increased by 72% from 2017/18, as this increased from £19.3m to £33.2m. Amortisation refers to depreciation of intangible assets. Why is this figure so important for football clubs? When a club signs a football player, say for example Brighton signed Jahanbakhsh for £17m (as per the BBC) - the club does not record that £17m as an expense in the Income Statement straight away. Instead, what it does is, it takes that £17m, and depreciates the transfer fee over the duration of the player's contract (in Jahanbakhsh's case 5 years), meaning £17m/5 = £3.4m is recorded as amortisation in the club's books every year. This amortisation, however, is NOT a cash expense. Due to the signing of several players for substantial fees, it is understandable as to why Brighton saw a substantial increase in amortisation during the 2018/19 financial year.

EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) This figure saw a considerable fall, from £35.9m during the 2017/18 financial year to a total of just under £14.4m in 2018/19. This figure is considered a key performance indicator for a business, as in effect, this removes non-cash items such as depreciation, amortisation and impairment, as well as profit on player sales (which is a non-cash source of revenue), whilst removing other expenses such as tax and interest, which are non-operating expenses for a business. Therefore, EBITDA is very useful to assess a business' profit from operations, and arguably helps to show a business' ability to generate cash revenue. This fell quite considerably in 2018/19, which is mainly influenced by the sizeable increase in wages. Exceptional items Whenever a club fires/sacks/dismisses their manager, a payment in compensation, sometimes referred to as a golden handshake, is paid in order to terminate his/her contract, though this is not a cost a business tends to incur very often, hence why it is referred to as an exceptional item. At the end of the 2018/19 season, Brighton sacked Chris Hughton as their manager, which led to compensation being paid to him and his coaching staff to be released from their contracts. In addition, Brighton paid a reported £3m in compensation (as per the BBC) to Swansea City to appoint Graham Potter, together with members of his coaching staff, as their new manager. Therefore, these are exceptional items as the club does not intend to incur such costs in any other future financial year, and these were costs that the club did not intend to even incur during the 2018/19 financial year, either, and it is clear that these costs had an impact on the club's profits in 2018/19. Also, these costs, although unknown, would have impacted EBITDA, as these get deducted from the EBITDA figure in order to get the total profit after tax.

Conclusion One can see how Brighton's financial performance during 2018/19 worsened, with the main factors in this being increased wages, as a result of significant investment being made in the summer 2018 transfer window on the playing squad, as well as the managerial change which was made at the end of the 2018/19 league season.