Liverpool had a great season on and off the pitch, after a long hiatus from the Champions League, Liverpool returned to the Champions League after a 4th place finish in the Premier League much to the delight of their fans.

Disspointingly Liverpool finished another season trophy less, something they can improve on and will be target in the coming seasons as they look to build on the success Klopp has experienced to date.

Off the pitch, Liverpool returned to profit in spectacular fashion, making a profit of £39.2m after a loss of £21.4m in the previous year, this was despite no European football for Liverpool in the 16/17 season.

Revenue was on the rise, increasing 20.7% to record levels while expenses also fell by 3.1%, creating the perfect storm for a profitable year. Liverpool fans will be hoping to see this profit utilised (plus the Coutinho money) in the summer as they look to kick on and challenge for the Premier League.

This article will analyse the financial performance of Liverpool in the promising 16/17 season.

Revenue Analysis

Revenue rose to record levels for Liverpool, rising 20.7% to £364.2m from £301.7m.

Revenue compromises income from matchdays and gate receipts, TV broadcasting revenue based on televised games and competition finishes and commercial revenue from merchandise and sponsorship’s.

Revenue rose well on all three fronts with the stand out being a 24.8% increase in broadcasting revenue, a similar theme among Premier League clubs this year with the new record breaking TV deal in effect for the first time. A 4th place finish and the extra income from the deal offset any loss in income from a lack of European football. Broadcasting revenue was £154.3m (2016: £123.6m).

Commercial revenue rose an impressive 17.9% to £136.4m from £115.7m after a successful year of bringing in new sponsorships, capitalising on the popularity of the teams playing style as well as the ‘Normal one’ Jurgen Klopp.

Matchday revenue also rose significantly to £73.5m from £62.4m, a 17.8% increase. This was mainly due to the expansion of Anfield that was completed at the beginning of the season, a further expansion next season will see this figure rise even further.

We expect Liverpool to continue to increase revenue due to the growing popularity and success of the club. Liverpool are well placed for another top 4 finish and are enjoying a successful Champions League campaign, which will boost broadcasting revenue. This success will also help ensure more lucrative commercial deals and an excited fan base will spend more on matchday in a bigger Anfield.

Expense Analysis

Expenses fell ever so slightly from 2016 record levels by 3.1% to £319.7m from £329.9m.

This decline was primarily due to a fall in player amortisation cost of 9.5% due to a number of outgoings at the club. For more information on the ins and outs of amortisation costs, click here.

Depreciation on fixed assets (machinery, stands etc.) rose by a remarkable 80% on the back of the Main Stand expansion due to the amount of equipment needed to build the stand expansion.

Wages remained fairly stable falling slightly to £207.5 from £208.3m, with new players wages offset nearly perfectly by a number of outgoings.

Net interest costs rose 35.9% to £5.3m from £3.9m due primarily to an increase in bank loans of £18m.

Liverpool had a lower tax expense for the year surprisingly despite making a profit compared to last year’s loss. This was due to the club making a profit abroad and having to pay foreign tax on this income which amounted to more than the tax payable in the UK this year due to losses available to offset the profit made this year.

Liverpool paid UK tax of £0.7m this year on their £39.2m profit, an effective tax rate of a measly 1.8%.

Transfer Analysis

Liverpool recorded their first negative net spend in years while achieving one of their best seasons in this period to the delight of their owners FSG.

Liverpool brought in 6 players for a combined transfer fee of £71.9m with none particularly disappointing, especially when considering their respective transfer fees.

In came Sadio Mane (£37.1m), Wijnaldum (£24.8m), Karius (£5.6m) and Klavan (£4.5m) with Matip and veteran keeper Manninger joining on free transfers. Sadio Mane impressed considerable as their (at the time) record transfer, while Karius failed to cement himself as Liverpool No.1.

Outgoings were considerable, with 11 players departing the club for £76.4m.

Out went Benteke (£28.1m), Ibe (£16.2m), Allen (£14m), Skrtel (£5.4m), Illori (£3.9m), Luis Alberto (£3.6m), Brad Smith (£3.2m) and Sakho (Loan: £2.1m). Controversial Balotelli, Toure and Texiera all left on free transfers, freeing up wages for all their new recruits.

None of the outgoings were missed with Luis Alberto the only player where a higher transfer fee may have been possible.

Asset/Debt Analysis

Debt rose 10.9% in the current year to £182.9m from £164.9m due to a rise in bank debt of £18m while cash fell 51.2% to £4m from £8.2m, with Liverpool not traditionally being a cash rich club.

Net debt hence rose 14.2% to £178.9m from £156.7m after bank debt rise 34.5% to £71.7m from £53.3m.

Liverpool are also committed to purchasing £11.5m in fixed assets for training and stadium improvements as the Liverpool continue to invest in the club.

Cash this year was spent on fixed assets (£52m) with a net cash outgoing of £38.8m despite the negative net spend due to transfer arrangements agreed.

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