Breaking Down Liverpool's Finances and How Big Their Debt Is

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Breaking Down Liverpool's Finances and How Big Their Debt Is
Michael Regan/Getty Images
Much to talk about: but how will Werner and Henry react to Liverpool's overall debt rising to £87m?

Back in March, Liverpool released their eagerly anticipated financial results for the 10 months leading up to May 30, 2012, and they made fascinating reading for supporters of the Merseyside giants, revealing as they did that the Reds’ overall debt had worryingly increased by almost £22 million to £87.2 million from the previous year’s figures.

However, to fully understand just how that has happened, we have broken down the club’s finances for that 10-month period (July 2011 to May 2012), bearing in mind that time frame covers the first year of the initial Financial Fair Play Monitoring Period.

 

Turnover (Fifth-highest in the Premier League): £169 million (2010/11: £183.6 million)
Match day: £42.3 million (2010/11: £40.9 million)
Media: £62.8 million (2010/11: £65.3 million)
Commercial: £63.9 million (2010/11: £77.4 million)

Worryingly for Liverpool’s American owners, the Fenway Sports Group (FSG), turnover for the 2011/12 period dropped by £14 million due to a fall in both media and commercial income.

However, having said that, if one looks ahead to the projections for the 2012/13 period, there appears to be some light at the end of the tunnel for FSG in this regard as if one takes into account the new commercial deals with the likes of Warrior, FOX and Chevrolet that are all due to kick into action during this time. Then, turnover in this category is projected to rise to £93 million, which is an increase of £16.4 million.

And when one takes that into consideration overall turnover for 2012/13 is set to rise from £169 million to £201.2 million, while when the new bumper three-year TV deal with the Premier League also kicks in from 2013/14, media income will then jump by around a further £20 million to £30 million as well.

 

Wages (Fifth-highest in the Premier League): £118.7m
Wages as a proportion of turnover: 70%

Liverpool still pay “big” (£100,000-plus per week) wages to some of their best players, including star performers like skipper Steven Gerrard, vice-captain Jamie Carragher, striker Luis Suarez and goalkeeper Jose Manuel Reina.

However, what will disappoint FSG the most in this particular category is that for the period in question, July 2011 to May 2012, despite having the fifth-highest wage bill in the Premier League, the club could only manage a disappointing eighth-place finish in the table under previous manager Kenny Dalglish.

Chris Brunskill/Getty Images
Smiles better: Ayre has assured Liverpool fans that the club will not be forced to sell off their best players this summer

 

Profit/Loss on Player Sales: - £1.7 million (2010/11: +£43.3 million)

A big factor in whether a club ultimately makes a profit or a loss come the end of the financial year will be just how well they fare when it comes to their dealings in the transfer market for that period in question.

And it is fair to say that Liverpool spent big in the summer window of 2011, but without also bringing in any significant proceeds from player sales, hence why the made a loss on player sales compared with a huge profit the previous year.

 

Loss Before Tax: £40.5 million (2010/11: £49.3 million)

While the Reds have once again announced a loss for the period 2011/12, it is not all doom and gloom at Anfield as if one looks ahead to 2012/13, which covers this season under new head coach Brendan Rodgers, using the financial results published by the club then the Reds are on course to once again reduce their overall loss to a figure of just £14.9 million.

And so that would be three straight financial years where the club’s loss fell, from £49.3 million (2010-11), to £40.5 million (2011-12) and then to £14.9 million (2012-13), and when the new big-money Premier League TV deal gets under way in the 2013-14 campaign, Liverpool will be on course to firstly break even and then start to even move into profit after that.

 

Net Debt: £87.2 million (2010/11: £65 million)
Interest payable: £4 million
Highest-paid director: Unnamed, £657,000 (Ian Ayre is the managing director)

 

Conclusion

A bit of a mixed bag of result for Liverpool owner John Henry, chairman Tom Werner and FSG as a whole. On the plus side, the losses the club have been making are being reduced year on year, with forecasts projecting the Reds will soon break even before then making a profit due to an overall increase in turnover.

However, of more concern to FSG will be the fact that the club’s overall debt has once again increased to £87.2 million, and this explains why Henry and Co. had to loan Liverpool FC an interest free, inter-company loan of £46.8 million last August in order to reduce that figure which surely the Americans’ would not have envisaged having to do when they bought the Reds in November 2010.

But managing director Ian Ayre has allayed fans’ fears that Liverpool’s increasing debt will force Rodgers to sell off the club’s crown jewels this summer, saying in the Daily Mail:

We won't be selling anyone because of the financial position. If we are selling anyone, it will be because they are deemed by the manager to be surplus to his requirements and if that happens we will be replacing them and bringing new players in as we always do. 

Will Liverpool manage to break even within the next two years?

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There's no panic on part. We feel that we are making progress and improving all the time. Our aspiration for the next couple of years, as the rules will dictate, is to break even and then to make a profit beyond that.

The recent rules that we've adopted at the Premier League will expect people to break even and limit their spending and player wages. We will conform just as everyone else does. 

We've been a big advocate in pushing for that so we're certainly not going to fall foul of it.

We will try and invest carefully and try and find the right deal in the transfer market. If we get the deals right and I would draw attention to January when we did some good business for the club, we got two great players and hopefully we can continue along that sort of line.

And as ever, as the club directors point out in their accounts, in the long term the key to off-field financial success is always on-field performances.

 

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