Rambling through the 2018-19 Financial Results
The Swiss Ramble does a great job of presenting these results in graphics that are easy to understand and then providing useful commentary that summarizes the information. We in turn take these figures and graphics and comment on the results based on what catches our eye.
A cursory glance through the 2019 Profit & Loss (P&L) shows another strong year of growth from FC Bayern with a few exceptions. Turnover (revenue) increased €30.9m year over year to €660.1m. Profit before and after tax increased €29.1m and €23.0m year over year to €75.3m and €52.5m, respectively.
On the flip side, Match Day revenues decreased by €11.4m from 2018 to €92.4m, due mostly to staging less Champions League matches according to Swiss Ramble. Expenses notably increased by €83.3m to €604.3m. Earnings before interest, taxes, depreciation and amortization (EBITDA) decreased during the year by 48% to €55.8m. Finally, operating profit declined by €34.1m to €(20.0)m.
The primary factors for these declines were a €33.7m increase in Wages and a €53.1m increase in Other Expenses. The increase in wages is understandable and likely to continue it’s assent but it’s unclear what the driving forces were behind the increase in Other Expenses and is therefore something to keep an eye on going forward.
The accounting for Player Sales is always an area of contention between club and auditor. The club includes the profits from player sales in their revenue figures, where the auditors consider these to be extraordinary income.
This had an increased affect on the figures this year as the €90.3m brought in is the highest in club history. If you include Player Sales, Revenues jump up to €750.4m from €660.1m.
On the other hand, if you were to exclude player sales from the P&L before tax, Bayern would drop to a €(15.0)m loss from the €75.3m profit for the year. That number is somewhat alarming on the surface, though clearly player sales factor into how the club runs it’s business.
EBITDA is also greatly affected by Player Sales. When including those profits, Bayern are near their historic highs, whereas excluding them puts them at a 10 year low for 2019.
As player sales become more and more regular, it is reasonable to at least acknowledge this revenue source and it’s impact. No matter which side of the argument you fall on, both sets of data provide interesting insight into the club’s performance.
Revenue’s continued their year over year increase in 2019. The graph below breaks down the sources of revenue over the last 8 years which gives insight into where that increase is sourced.
As you might expect, broadcasting revenues are one the biggest factors behind these increases. At €211m in 2019, broadcasting revenues increased €34m over the prior year and €105m since 2015.
Sponsoring & Marketing provides the other significant source of increase having steadily risen for the periods shown. The €197m generated in 2019 is an increase of €8m from 2018 and €83m since 2015.
Finally, the offset of Wages and Revenue is an important metric and in 2019 Bayern has for the first time crept above the 50% mark. For the year 51% of their revenue was paid out to their employees. Given the way markets have moved in the last few years, this is hardly surprising, but likely something the Board is keeping a close eye on.
Bayern’s financial performance compared to their Bundesliga rivals is equally as dominating as it has been on the pitch for the last 7 seasons. Once again, the club outperformed their domestic competition by significant margins.
Borussia Dortmund remain their closest competitor but were significantly out performed. While the gap in revenues actually contracted to €283m in 2019 from €312m in 2018, it still represents the 3rd highest gap in the last 10 seasons.
Two of the biggest factors in this split are the differences in sponsorship deals and broadcasting revenues. As you can see in the graph below, Bayern dominate the domestic sponsorship market, with the Adidas deal alone outperforming their next closest rivals entire sponsorship revenue by €10m.
The graphic below gives a breakdown of the Bundesliga broadcasting revenue distribution for the 2017/18 season. Bayern’s unsurprisingly gained the largest payout, a position that is unlikely to change.
Where the gap really widens though is the European television revenues. Over the last 5 years, Bayern have taken in an estimated €124m more than BVB, their nearest competitors.
Finally, this difference in revenue between Munich and the rest of the Bundesliga has a major impact on the field as well. In the chart below, you can see that the gap between Bayern and BVB’s wages has reached a 10 year high at €131m.
Interestingly though, Bayern haven’t led the pack in either gross or net spending over the last 4 seasons. RB Leipzig takes the crown as the largest net spenders while Dortmund have spent the most overall, by a significant margin.
Bayern’s advantage over their domestic competition continues to rise. Unquestionably, football lives by the old adage that the rich get richer. While many lament the competitive implications of these numbers, the club deserves credit for their continued financial, and sporting, dominance.
In general, especially given their disadvantage in regards to broadcasting revenue, Bayern performed very well when compared to their European counterparts.
P&L before tax ranks 5th among the top 15 Money League clubs behind four English sides that benefit greatly from their domestic broadcasting deal.
Revenues as well remained strong coming in 4th behind Real Madrid, Barcelona and Manchester United, with Arsenal, Chelsea and Liverpool yet to report.
Revenue growth however was relatively poor to their European competition. Only Real Madrid’s €6m increase was less than Bayern’s €31m. The unfortunate truth is that there is likely very little the Board can do to change this trend, at least in the short term. As the table below shows, broadcasting revenues for the two Spanish giants and the Premier League have launched them into another dimension. Until things change, it will be difficult for Bayern to keep up the pace.
Another area that Bayern are at a disadvantage when compared to their continental rivals is in their sponsorship deals. Bayern may have dominated domestically but are 9th when comparing to their European counterparts.
Bayern have given their domestic partners, and in Adidas’s case partial stakeholders, a significant bargain when compared to the other big clubs in Europe. The €35m from Deutsche Telekom for shirt sponsorship is by far the lowest among the 11 clubs examined while the €60m from Adidas comes in at 8th. Both of these seem far too low given the commercial and sporting success that Bayern has enjoyed over their history. As you can see in the table below for example, their Champions League coefficent was 3rd, just behind Real Madrid and Barcelona, which suggests that based on performances they should be much higher in the sponsorship rankings.
While Bayern is playing at a disadvantage in terms of sponsorship and broadcasting, they have maintained a close distance in large part due to commercial revenues. This has allowed them to keep their wages competitive, which obviously affects their on field success. As you can see below, Bayern had the 5th highest Wages of the Money League clubs.
Importantly though, they managed to pay those wages at a much lower percentage of their total revenues with the exception of Real Madrid (and Tottenham whose wages were also significantly lower). So while that 3% increase to 51% is likely a thorn in the side for the board, it is well below most of their European competitors.
Due to the timing of each club’s filing and the time required to compile data, some metrics are necessarily only comparable for prior periods. The following are largely from Deloitte’s Money League comparison for 2017/18.
Overall, Bayern finished 4th in the Money League behind Real, Barca and Manchester United. As Swiss Ramble notes, this ranking in terms of revenue could take an adverse hit due to several clubs, including Barcelona and PSG likely surpassing the Munich club in Commercial Revenue.
While Bayern finished 2nd last season, many of the clubs in Europe are catching up with or surpassing them in a category that they used to dominate. As mentioned repeatedly, broadcasting revenues are a huge problem for Bayern. Below is a breakdown of how they actually fared.
This graphic puts into stark focus the challenge presented to FC Bayern in regards to domestic broadcasting revenue. Manchester United for instance brought in more from their domestic broadcasting deal than Bayern did in total. Even Premier League clubs with very little to no European revenue are neck and neck with Bayern. Of Europe’s elite, only PSG suffer a worse fate domestically bringing in just €66m.
Finally, Bayern has remained very strong in terms of match day revenues coming in 5th. This is particularly impressive given their ticket pricing structure, which tends to be far lower than the rest of Europe.
In summary, Bayern had another solid financial year in 2019. While they continued to dominate their domestic competition, the European landscape is murkier. The board will need to be creative to find a way to stay competitive given their domestic limitations.
It will be especially interesting to see how these challenges are faced given the recent shakeups at the higher level. With Uli Hoeneß retiring, Herbert Hainer will need to put his business acumen to good use. He and Karl-Heinz Rummenigge will lead this charge over the next few seasons, as well as Oliver Kahn, who will take over for Kalle in a few years.
Perhaps this is a good thing though. Perhaps new blood will institute fresh ideas that will allow Bayern to maintain their identity while also remaining competitive in Europe. There’s little doubt however that there are many challenges awaiting the Board in the near future. Whether they have the solutions to these issues, remains to be seen.