AFC Bournemouth 2018 Finances – Howe You Doin’?

Bournemouth had another solid season in the Premier League, securing their 4^thsuccessive season in the top flight following a 12^thplaced finish. A Quarter-Final finish in the League Cup partly made up for the club failing to follow up on last season’s top half finish.

2018 saw Bournemouth begin to flex their growing financial muscle, breaking the £20m transfer fee barrier for the first time.

The added investments made led to a £14.0m profit in 2017, turning into a £10.6m loss in 2018, a sizeable swing and their first loss since 2015.

It is worth noting that the figures below are not a direct comparison as 2017 was an 11-month period for Bournemouth who changed their financial year last year. The effect of this was larger on costs than revenue due to most of their revenue being received in that 11 month period, whereas costs were affected far greater, making the increase in costs seem greater than they actually were.

Let’s delve into the numbers.

Revenue Analysis

Revenue dissapointingly fell a bit, falling from £136.5m to £134.9m (1%).

Matchday revenue did rise however, increasing from £6.5m to £6.8m (5%) on the back of another impressive season full of good performances. Bournemouth also benefitted from more home games this season after their League Cup campaign yielded 2 additional home games.

Broadcasting revenue dropped from £124.5m to £119.5m (4%) after Bournemouth fell 3 places in the Premier League and this lost revenue couldn’t be offset by their cup performances. This showcases the importance of their Premier League position to their revenue and the club will be hoping they can improve on their 12^thplaced finish this season.

Commercial revenue increased significantly, rising from £4.7m to £8.1m (72%) after the club’s commercial strategy paid dividends as they exploited their fairly secure Premier League status. Bournemouth will be hoping they can build on this going forward.

Other revenue fell from £0.8m to £0.5m (38%).

Looking ahead, Bournemouth are likely to see a similar level of revenue next season. Bournemouth’s cup campaigns once again faltered early while they are due to finish around the same position as last year this year. The final league position is likely to dictate whether revenue rises while another jump in commercial income would be welcome and could boost revenue significantly.

Costs Analysis

Costs increased significantly (even if the longer period is taking into account), rising from £121.4m to £153.1m (26%). Such a rise when revenue was falling hurt Bournemouth’s profitability hugely.

Amortisation was a big mover, rising from £19.6m to £26.9m (37%) on the back of a large increase in player investment as Bournemouth begun to kick on in the Premier League as their ambitions changed.

Lease rental costs fell slightly from £0.9m to £0.8m (11%).

Bournemouth saw their interest costs increase from £1.5m to £1.8m (20%) due to an increase in interest costs on transfer fees paid by instalments.

Bournemouth had no tax to pay due to their loss-making status this year. The loss will also help reduce future tax bills on future profits as the loss could be offset against these profits.

Bournemouth’s wage bill ballooned this year, rising from £71.5m to £101.9m (43%) as Bournemouth broke the £100m wage bill barrier for the first time. Players were rewarded for another solid season with new contracts, while Begovic and Ake commanded premium wages.

The increase in wages works out an eye-watering £585k extra a week, unheard of for a club the size of Bournemouth, showcasing how far they have come in such a short period of time.

Directors saw their wages rise from £1.4m to £1.7m (21%) after meeting their objectives for the season.

Bournemouth also saw ‘income’ of £2.8m in relation to their 2014/15 Financial Fair Play fine of £7.6m from the EFL. After a long back and forth with the EFL, Bournemouth settled the penalty at £4.8m. Having already recorded the expense previously at £7.6m, they have been able to recognise income of £2.8m to reflect the fall in the charge.

Looking ahead, Bournemouth are likely to see another rise in costs as Bournemouth continue to push ahead and show their new financial muscle. A record transfer season in 2018/19 will see both wages and amortisation rise.

Transfers Analysis

Bournemouth had a rather quiet 2017/18 transfer season with two signings and no departures.

In came Ake (£20.5m) for a record transfer fee and Begovic (£10.4m) for a combined £30.9m.

With no outgoings this meant their net spend increased from £13.7m to £30.9m (126%) showcasing the increased ambition Bournemouth have shown having consolidated their position as a Premier League club.

Bournemouth went for quality over quantity and it paid dividends as Ake and Begovic both slotted in as key players for the Cherries.

Bournemouth also received £5.2m in loan fees and wages for the likes of Afobe, Grabban and Gradel.

In cash terms, Bournemouth spent cash of £37.9m and received only £6.3m (due to previous season transfers), a net cash outlay of £31.6m.

On top of this, Bournemouth are owed £11.2m in transfer fees while they owe a further £37.5m (of which £26.5m is due this year). This means that Bournemouth owe net £26.5m in transfer fees, although this seems to not have affected their transfer dealings this season.

There could also be a further hefty charge of £29.5m if certain clauses are met in the future. £5.9m of this relates to transfers which will be owed to other clubs while £23.6m is potentially due to Bournemouth players and their agents.

Debt Analysis

Bournemouth are excited at the new era they are entering where they have more financial power behind them. 

The added spending this year saw cash levels fall from £12.7m to £7.7m as their net transfer outlay (31.6m) plus the purchase of new training ground land for development (£3.8m) were funded by Mr Demin who plunged new loans of £16.7m.

The new loans led to debt levels increasing from £52.6m to £69.3m (32%) as Mr Demin showed his new level of ambition have successfully stabilised the club in the Premier League.

All the loans are interest-free and are likely to increase this season as spending continues to grow, this will require further loans to fund their increased transfer activity and the new training ground that is to be built.

Net debt hence increased from £39.9m to £61.6m (54%) as the club look to push forward. The big area the club need to consider for further investment is a new stadium or a stadium expansion due to the constraints their current stadium of 11,000 holds over the club, Bournemouth have the lowest matchday revenue by a distance in the Premier League (it is also less than a lot of Championship clubs).

Bournemouth are in a good place currently, having prudently managed their finances while they adjusted to life in the Premier League and now feel at home and able to invest more heavily without risking their financial future. 

As long as Bournemouth continue to invest smartly and keep hold of Howe, relegation doesn’t seem a worry and they should continue to improve financially, although they should keep a watch on their rising costs which are hurting profitability.

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