In a recent Pride of West London Podcast (click on the link above), we discussed a number of issues relating to the running of the club including Brentford’s annual accounts, the progress on Lionel Road and how the .
One of the Beesotted crew ‘The Dutchman’ – a Director of Management Accounts for a large corporate company – took time off his holiday in Tenerife to look through the accounts and new stadium paperwork and report back to the assembled crew in the pub.
Also part of the pub conversation were Billy Grant, Dave Lane and Nick Carthew and podcast guest Paul Grimes.
Many fans have asked Beesotted to give a breakdown of exactly what was discovered on surveying these document documents.
Below is a summary of what we found out.
Lots of assumptions have been made in doing these (simple) calculations. One big assumption is £50m in one year is £50m in another year – not taking into consideration is what a £50m spend would mean in real terms down the line if you take into account interest that could have been earned otherwise and/or the return/losses that could have been received from high-returning investment schemes.
It should also be noted that the Brentford accounts term runs from June 30th to June 30th each year – so these figures don’t exactly reflect each season. Also it is interesting that – in making comparisons to other clubs – the accounts Brentford have submitted seem to be more detailed than other football clubs.
Summary
- £16.7m – Brentford loss for 2014/15 year – A 91% increase on last year
- £9.9m – Brentford’s turnover for 2014/15 year – A 124% increase on last year
- £4.1m – Football League and FA as ‘drip down’ money (to keep the lower league clubs ‘happy’). The biggest contribution to Brentford’s turnover
- £3.1m – Ticket sales: The next highest income
- £250k – TV money
- £17.7m – Wages. Up from £10m in our Division 1 Promotion year (2013/14)
- £75m – Matthew Benham’s investment in Brentford at the time these accounts were published. This includes around £25m invested in the stadium project (the up-to-date figure is reputed to be closer to £90m)
- 10,700 – Average crowd. Up from 7,700 the previous year
5,600 – Season Tickets. Up from 3100 in previous year (promotion year) - £2.5m – The valuation of Capital Court (the final bit of land needed to be purchased to start the Lionel Rd construction)
- £6.25m – Brentford’s offer for Capital Court
- £25m – Brentford’s contribution to the Lionel Rd project
- £45m – Brentford’s possible final financial commitment to the Lionel Rd project (£20m more than initially tabelled)
Brentford’s Accounts
Brentford made a loss of £16.7m for 2014/15 year. This was a 91% increase on last year.
Brentford’s turnover for 2014/15 year was £9.9m. This was a 124% increase on last year. So despite a huge upturn in turnover, our losses have nearly doubled.
A large proportion of the loss was for money paid out bonuses for finishing 5th. The Dutchman pointed out this was sound business sense in terns of incentivisation even though we didn’t quite get where we ultimately wanted to go.
However, as The Dutchman and Paul Grimes pointed out later, this pay structure also has it’s drawbacks. Despite the team doing well and paying out huge bonuses, unfortunately this was still not enough to keep the best players lured by offers from clubs with deeper pockets.
Also, if clubs were able to offer twice and three times the wages to certain players up front WITHOUT without the need to get decent results to bolster their wage packet – and with a promotion bonuses thrown in for good measure – this could prove to be a problem for Brentford trying to keep hold of their best players.
Of the £9.9m turnover, the largest income was £4.1m which came from the Football League and FA as ‘drip down’ money (mainly from the huge TV deal) – funds paid to lower league clubs to keep them happy.
Ticket sales are the next highest income at £3.1m
There is a view that broadcast money is the saviour in the Championship. However, TV money actually accounted for less than £250k.
Brentford’s commercial income was less than £1m
(see chart above for the full list)
Wages went up from £10m in our Division 1 Promotion year (2013/14) to £17.7m in our Championship playoff year (2014/15). These wages covered 32 admin staff and 133 players and player-connected staff (coaching, agents etc)
Matthew Benham’s investment in the club was £75m at the time the accounts were submitted (rumour is the figure is closer to £90m at the moment). Whichever way you may look at it, there is no doubt that the club is quite simply is running off the back of his investment.
Taking a simple calculation and making a few assumptions, if the club were to operate the same as it did in the last period – spending no more or no less – Matt Benham would have to continue to put in £15m every year to keep things ticking.
If, for example, we were to sell £20m worth of players and buy £10m worth, he would then reduce his input to £5m in that year.
Add this to the £90m already put in.
Even if we moved to Lionel Road with a bigger capacity, corporate hospitality money etc, The Dutchman estimated that we could still be looking at losses of between £6m and £8m a year if the club continued running in the same way.
To cover these losses each year, the club would either have to ask Matthew Benham to fund the deficit or find income from elsewhere to cover the shortfall (eg. selling players, other unexpected revenue).
It was acknowledged, however, that these are the gambles that clubs make to try and get to the Premier League. Just one season in the Premier League – where each team will receive around £130m – would wipe out all these debts.
But it’s a big gamble. And for every 3 teams that makes it to the Premier League, there are 21 teams that don’t make it.
Paul Grimes noted that Sheffield Wednesday and Brighton were not competing for Premier League action last season whereas Brentford and Ipswich where but aren’t this season. However, they have made huge investments to ensure that this season they are now competing. An analysis of their accounts over three seasons may show what we would have to do to compete with them.
There is an argument to say Brentford are unable to pay players £30k a week whereas Sheffield Wednesday can. So even accepting the fact that there will be increased costs, we still won’t be in the same spending league as teams like Sheffield Wednesday.
Billy Grant noted Brentford were very close to breaking the FInancial Fair Play (FFP) rules as the club’s spend was very high in relation to their income in the season they went up to the Championship ( ).
To cut a long story short, FFP states that Championship teams can lose up to £13m over one season as long as the owner is injecting cash into the club.
If there is no cash injection, maximum permitted losses are £5m a season.
The ‘FFP period’ changes from next season (2016/17) from 1 year to 3. Authorities will now be looking at losses over 3 seasons with an average loss of £13m per season permitted.
What we are no doubt going to see over the next few seasons is teams really going for it in year 1 and year 2 – spending like mad to get that Premier League status – then in the 3rd year, they will reel it in and try and come within the £39m acceptable accumulated loss level.
That’s lot of money to lose over 3 seasons if you are not successful.
This current season (2015/16), Brentford have the second lowest attendance in The Championship at 10,219 – 2,500 less than the next highest team Huddersfield Town (12,596). As FFP is linked to income, our cash injection is much much lower than other teams. We are not making huge amounts of money in the bigger scheme of things other than on the gate so this will always be an issue for Brentford.
How about raising ticket prices or taking into account the increased crowds in Lionel Rd to raise income?
If the club raised the ticket prices by say 20% (a huge rise) making a £30 match ticket £36 and a £350 season ticket £420, the addition in income would be £600k. Is it worth the aggravation when you look at the bigger picture??
If crowds doubled from 10k to 20k (which is the capacity of Lionel Rd), assuming the prices remained the same, gate income would double to £6.1m – this would mean an additional £3.1m. In addition, there would be an increase in commercial and other income. But when the club is losing £15m in one year, you can see where the problems lie.
Paul Grimes picked up on the fact that we have made around (and this is a rough estimate) £20m on transfers this season (sale of Andre Gray, Tarkowski etc) which will be reflected in the 2015/16 accounts. His opinion was that maybe people should look at the £20m as being money already spent getting us to where we are as opposed to additional income we will have received.
Of course, that doesn’t mean that no money will be spent in the summer.
It just gives us a touch of reality as to where the club is at the moment.
Lionel Road Stadium Build
Brentford offered £6.25 million for Capital Court – the final piece of land Brentford needed to acquire to start the construction work. A number of deals were aborted at that price with the land being valued at between £1.7m and £2.5m. The current figure being banded about is £2.5m.
The £6.5m is what Brentford offered to avoid the Compulsory Purchase Order (CPO) process and speed up the deal.
The company owning Capital Court (FIL) felt that the deal was worth £8.5m to them. They also tried to make the case that the new ground could be build without Brentford buying Capital Court.
Brentford won the CPO ruling. So it now gone to a tribunal.
The view is that the tribunal will rule the price closer to the £2.5m than the £6.5m but it could take up to 2 years to resolve.
However, after 6 weeks Brentford are in principal free to start building while the price gets negotiated in the background. This can’t actually happen until the administrative process of acquiring the land has been completed and Willmott Dixon have raised the finance to build the flats.
The process.
Brentford buys the land.
Brentford get permission to build on the land.
Willmott Dixon raises the finance.
Willmott Dixon then develops a finished stadium and everything around it at their cost.
Willmott Dixon sells the flats at an agreed price- making a profit on the sales.
Brentford end up getting a stadium out of the deal.
Matthew Benham’s input into the stadium project is apparently £25m. That could possibly increase to £45m because of numerous delays, changes in design, lawyers costs, construction company raising finance etc.
On completion of the stadium, Wilmott Dixon will pay Brentford back £17.5m. However, they need to start building it first.
Without knowing the exact terms of the deal, what is a trifle unclear is – with regards the additional costs incurred – whether these costs becomes a Willmott Dixon responsibility, a shared cost or whether Brentford are landed with paying out an additional unbudgeted £20m.
Whichever way this ‘extra costs pie’ is cut, the whole analysis of Brentford’s financial position highlights the kind of finances that are needed just to keep the club in the game.
Billy Grant
@BillyTheBee99
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Although there is no real surprise in the content of the analysis the very fact that it is set out so succinctly makes it abundantly clear to everyone the sheer magnitude of the commitment and undertaking by Matthew Benham. What is also very evident is that without promotion every year there will be sale(s) of players to make up some or all of the operating loss and why the conveyor belt of emerging you talent and the structure to identify that talent is so critical for the sustainability of Brentford.
There is no doubt that Benham has a strategy (worked out statistically) so that he knows just what risks he is facing, and that the statistical model is regularly updated. Judge was a sure $8m – $10m sale until the Ipswich game, so now this possible change of circumstances would have been fed into the model and (possibly) revised to some degree.
One thing for sure, it is not about the size of spending power but the efficient use of that spending power. This is where Benham is ahead of the pack and it is a combination of this and the massive financial commitment of the man himself that he will continue to build the team (both on and off the pitch) and reach the promised land of Premier League football within the 3 year time scale stated by Rasmus Ankerson earlier this season.
I sometimes think we underestimate how close to the top we are because we are so often too quick to be critical……..but without Benham there would be no Brentford.
Great article which show how difficult it is to run a football club especially a small one in championship. Let’s hope to not end up like Bolton and MK Dons with nice new stadium and now in league one!
This is an interesting and thought provoking piece, well done for putting it out there. Whilst some legitimate questions are fair, no sane person in possession of the information could suggest that MB is doing anything other than ensuring the survival and securing the future of BFC. For that we can only be truly thn
My feeling (feel free to correct me) is that 2014 / 2015 produced a particularly extreme set of financials, it was the year following promotion, and of course to some extent we “went for it”. I’m curious to know how incoming transfer monies are fed into the accounts, for example where do we find the proceeds from the sale of Adam Forshaw which occurred during the period? Clearly there will be significant incoming transfer monies when the 2015 / 2016 results are seen. Maybe Burnley can also ensure a nice little windfall for us if they can ensure promotion in the next week or so.
We can debate the rights and wrongs of this, but the fact remains that football is unlike any other business, in that many clubs only continue to operate at the behest of a very generous owner. It is a reach to even call football a business, as most commercial enterprises would be liquidated if they produced similar accounts. Some high profile clubs have delivered on plans to fund losses through to reaching a break even position, and it seems reasonable that MB has a similar plan for BFC. This includes smart recruitment, progress on the pitch and the move to LR.
Who is to say that MB will always be our sole owner and benefactor? The “possibility” of BFC playing top level football and being located in the West London area is an attractive one. And one of the things that I admire most about MB, is that he really sees the true potential in BFC, returning the club to its pre war place at the top table, no more “little old Brentford” with this man, his ambitions go beyond ours and he’s been right on most things so far.
Finally and randomly i’m struck by the challenges facing pretty much all League 1 clubs trying to make the step up. Clearly it has been very challenging for us, so what about the prospects for Burton Albion, Walsall etc in next year’s championship? Maybe the vultures will circle around these clubs in the way they have around us during the transfer windows?
Anyways it’s all good, next stop Hull, UTB….
Cheers Rebel Bee. Some good points there. As for vultures … its natural that teams will always try and pluck away the better players of ‘so called’ smaller teams. Funny but I’m sure we will be seen as ‘vultures’ in the years to come.
Sorry for the unfinished line in my 1st paragraph – truly thankful was what I wanted to say.
BRILLIANT PIECE OF JOURNALISM all the answers to all the questions us fans ponder about week after week thanks so much for all the hard work time and effort from all those involved in this remarkable constructive well written piece UP THE BEES !!!!!
Thanks Terry for reading and listening .. and taking time to comment. UTB
As a mentioned when you guys posted the pod cast last week, very insightful. One thing not mentioned in the breakdown of the finances are sponsorship deals. Is that because we are in effect sponsored by Matchbook who are MBs own company or is this included under one of the other parent headings?
There is probably scant mention of sponsorship income because for Brentford it would be very little at the moment. The reason for the Matchbook sponsorship is probably because that is the best available and another instance of funding Brentford by Benham.
The reality is that there is very little sponsorship income for any football club unless they are in the Premier League – and even then the lions share of sponsorship income would go to the handful of ‘top’ clubs expected to compete in Europe each year. The worldwide TV audience of the EPL is the catalyst for sponsorship income and it is only when Global Brands link themselves to one of the few elite clubs that sponsorship income really starts to have an impact. Manchester United, Liverpool, Arsenal, Chelsea etc would earn so much more in sponsorship income than, say Bournemouth, Stoke City and Swansea.
The first step for Brentford is to attain EPL status and gain income from the TV deal. Then Brentford would need to consistently be competing in Europe, developing a fan base in Asia, Africa, South America and increasingly important North America, then the Global Brands will begin to spend some serious sponsorship dollars. Brentford/Benham have a big mountain to climb before sponsorship income is significant.
At the present time Brentford would still be regarded as a ‘high risk’ sponsorship because last year few organisations believed Brentford would achieve as they did and this year the expectation was that Brentford would be mid table or struggle.
I would suggest that when Matchbook is not the shirt sponsor for Brentford it would be a signal that at long last there would be the start of recognition that Brentford really can be partnered by a national and/or global brand and all reference to ‘little old’ in front of Brentford can be consigned to history.