Southampton had what many would think was a good season, finishing 8th in the Premier League and reaching the EFL Cup Final for the first time since 1979, losing out to Zlatan’s heroics for Manchester United. However this was not enough to save their Manager Puel being relieved of his duties before the start of this season, with his playing style and a Europa League Group Stage exit the principal reasons.

Off the pitch their Europa League campaign and EFL Cup run helped the club record their highest revenue levels while profits rose by a huge 85.6% to £34.1m.

Let’s delve into the numbers.

Revenue Analysis

Southampton’s revenue rose to record levels of £182.3m, a large 46.7% increase. This was helped largely by the new Premier League TV deal, while the clubs cup performances also helped contribute to this record figure.

Broadcasting revenue experienced the largest increase, rising from £143m to £90.4m thanks to the new Premier League TV deal, while their good performances in the Premier League led to Southampton being televised more often. The Europa League and EFL cup money for televised games also helped boost this number.

Matchday revenue also rose, increasing from £18.9m, to £22.4m (15.6%) with the added gate receipts received due to the extra EFL Cup and Europa League games.

Commercial revenue increased significantly after a good commercial season for the club, rising from £12.2m to £15.5m (27%) after agreeing new sponsorship deals with their kit manufacturer in Under Armour and their shirt sponsorship deal with Virgin Media, increasing sponsorship revenue by a huge 82%.

Other revenue fell by half to £1.4m.

Revenue is likely to fall significantly next year on the back of a less than ideal Premier League season that has left the club with the very real possibility of relegation (the effects of relegation wouldn’t be felt until the end of next season) while no EFL Cup Final or Europa League will also have a negative effect on broadcasting and matchday revenue, however their strong FA Cup run should offset some of this loss of revenue.

Expense Analysis

Southampton saw operating expenses rise from £149.1m to £180.6m (21.1%) after wages ballooned while the costs of terminating their manager also added costs.

Southampton despite rising costs saw amortisation costs fall after player departures reduced amortisation more than the subsequent arrivals added to it. Amortisation fell from £31.0m to £27.4m (11.6%), more on this in the next section.

Southampton also had exceptional costs of £3.3m compared to none last year due to the severance package owed to Claude Puel and his team of £1.8m, while they also suffered player impairment costs on Gaston Ramirez after he left on a free transfer.

Wages rose significantly, ballooning to £112.5m from £84.9m (32.5%) after an increase in staff of 14% as the club looked to replace their departing star players with similar quality who ultimately costs the club more in wages than their original stars. This works out at an eye watering extra £531k a year for Southampton.

Net interest expense fell from £2.6m to £2.2m (15.4%) after the club paid back a significant chunk of debt to move the club into a net cash position as detailed in the final section of this analysis.

The club also had a heavy tax bill of £7.4m compared to only £1.0m last season. This works out at an effective tax rate of a high 21.7% after the club ran out of losses to offset the recent profits they have been making.

Cost are likely to experience a lesser rise next season with wages likely to still rise despite the departure of Virgin Van Djik due to more arrivals coming in they players leaving, with arrivals likely to command large salaries.

Transfer Analysis

Southampton continued their reputation as a selling club after selling key players which led to a small overhaul which saw 5 players join the club while 5 left for pastures new (for transfer fees).

In came Boufal (£16.8m), Gabbiadini (£15.3m), Hojbjerg (£13.5m), Redmond (£12.2m) and McCarthy (£4.2m) for a combined outlay of £62.0m while Pied also joined on a free transfer.

Out went Mane (£37.1m), Pelle (£13.7m), Wanyama (£13m), Fonte (£8.3m) and Juanmi (£4.5m) for a combined fee of £76.6m while Ramirez left on a free transfer.

This led the club to having a negative net spend of £14.6m (compared to a net spend of £6.7m last season) which won’t please fans who want to see investment into the club and may be ruing this lack of investment for their current plight.

The departures left a big hole to fill with Mane enjoying a fantastic debut season in particular at Liverpool, while Wanyama impressed at Tottenham. Southampton failed to really find the players to replace those who left, even Pelle and Fonte who failed to impress in their new surroundings were missed with Boufal and co. struggling to fit in. The club enjoyed a small boost by the early form of Italian Gabbiadini however this quickly subsided after an injury setback.

These departures were good for the Southampton’s finances; boosting their profit on player sales from £29.1m to £42.1m (44.7%) which won’t come as much of a consolation to Southampton fans should they be relegated.

Asset/Liabilities Analysis

Southampton looked to become more financially stable under their new owners, reducing debt while increasing cash levels significantly.

Debt fell from £63.0m to £37.7m (40.2%) after repayments of loans of £37.7m with only £11.5m of new loans being taken out.

Cash levels rose by a greater amount, increasing from £23.9m to £40.6m (69.9%) after receiving £75.5m in player sales (paid out £70.4m though) while their increased profit levels also put more cash into Southampton’s coffers.

This led to net debt levels of £39.1m turning into a net cash position of £2.9m, a hugely positive £42.0m swing in debt levels. This leaves room for future investment with the club being attractive to potential lenders however it may also be part of a more prudent approach by Southampton which won’t please fans who will see it as a lack of ambition.

The club also have potential debts of £12.7m relating to contingent transfer fees, while they also have definite transfer fees payable of £11.7m and stadium/training ground improvements of £748k have been committed for this season.