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Liverpool Announce £40.5m Loss As Debt Climbs

Not pretty numbers coming out of Anfield today. For the ten months ending 31 May 2012, Liverpool announced a loss of £40.5m and an increase in the club’s debt to £87m. That compares with £49.3m in the previous twelve month period with the club changing its accounting dates to coincide with the football season.

Liverpool try to spin these numbers are being positive, but they are not. Liverpool reported a wage bill of £109m for the 10 months, equating to £131m over a full year (in 2011 it was £134m). A wage ball that eats up 70% of Liverpool’s total turnover is not sustainable. Liverpool are paying wages as if they are playing Champions League football every year.

On the positive side, two trips to Wembley for the FA Cup and League Cup, helped the club increase revenues by £5m to £187m. And Liverpool’s managing director, Ian Ayre, argues that the club is in a transitional period and has now

“implemented a new transfer strategy” which aims to “bring in talented players on sensible contracts”.

Ayre claimed that despite the £40.5m loss and increase in net debt to £87m from £65m in 2010-11, Liverpool are being prudent.

“We’ve done it in a frugal way,” he said, explaining that players have been put on “the right contracts”, with payment in instalments both for them and the selling clubs. “It’s important that we have that sort of prudent approach as we want to create sustainability for the club, he added.

Besides the high wage bill, the other number that surprised me was the slight decline in commercial revenue. Everyone else has been growing their commercial revenue but Liverpool reported numbers of £64M over 10 months, compared to £77.5M in the 12 months prior. That translates to £76.8 annualized, a slight decline in revenue.

Next season’s numbers don’t look like they will be any better as Liverpool have spent a net £39m on players in this fiscal year, including Fabio Borini, Joe Allen, Daniel Sturridge and Philippe Coutinho. That means that Liverpool will record another sizeable loss at this time next year.

But is not all gloom and doom for Fenway Sports Group, despite probably missing out Champions League football again next year. Next season brings with it the riches of the new Premier League TV deal which combined with financial fair play rules, could see the club profitable for the 2013/14 season.