Europe's premier leagues
- The total European market grew to €13.6 billion
in 2006/07, a €1 billion increase in revenue on the
previous year.
- Revenue for the 'big five' European
leagues exceeded €7 billion for the first time in
2006/07, up €402m (6%) to €7.1 billion. The
increase in revenue was achieved despite a €236m
reduction in Italian Serie A revenues in 2006/07, which was
primarily due to the relegation of Juventus into Serie B.
Total revenue for the other four 'big five'
European leagues increased by €638m (12%) in
2006/07.
- The English Premier League clubs' revenue
totalled €2.3 billion in 2006/07 (up 11%). Premier
League total revenue was €0.9 billion (65%) higher
than that reported by its nearest challenger, the German
Bundesliga (€1.4 billion). For the first time since
2001/02, the Premier League has reported the highest revenue
from each of the three main sources – matchday,
broadcast and commercial – amongst the 'big
five' European leagues.
- Germany's Bundesliga and Spain's La Liga
achieved the highest percentage increases in revenue
– both up 15% – which helped these two
leagues overtake Italy's Serie A in 2006/07.
Juventus's return to Serie A in 2007/08 should result
in a close race for second place in next year's
edition, behind England's Premier League.
- In four of the 'big five' European
leagues, the wages/turnover ratio was in the relatively
narrow range 62%-64% in 2006/07, with the German Bundesliga
proving to be the exception with a much lower ratio of 45%.
Despite a €184m increase in revenue in 2006/07,
Bundesliga wage costs only increased by €12m, which
bucks a trend seen elsewhere in the 'big
five' leagues where increases in revenues have
historically largely flowed through to increased wage
costs.
- Total wage costs for the 'big five'
leagues increased by €260m (7%) in 2006/07,
primarily driven by a €171m (13%) increase in
English Premier League clubs' wages to over
€1.4 billion. Premier League clubs' wages
were more than €0.6 billion (75%) higher than in
Spain's La Liga (€0.8 billion) and double
the total wage costs paid by any of the other 'big
five' leagues.
- For the first time since our analysis began, the English
Premier League has been knocked off the top spot in terms of
operating profits amongst the 'big five'
European leagues. With an impressive €168m (206%)
increase in operating profits to €250m in 2006/07,
the German Bundesliga generated €109m more in
operating profits than England's Premier League
(€141m), its closest rival. Bundesliga
clubs' operating margin was 18%, three times as high
as the 6% for Premier League clubs.
- The improvement in Bundesliga clubs'
profitability has not been matched by recent on-pitch
success. During the five seasons from 2003/04 to 2007/08, no
Bundesliga clubs have reached the semifinals of the UEFA
Champions League. In contrast, the English Premier League has
provided three semi-finalists in both 2006/07 and 2007/08 and
at least one finalist every season since Liverpool's
success in 2004/05.
Revenue and profitability
- The overall revenues of the top 92 professional clubs
exceeded £2 billion for the first time in
2006/07.
- Premier League clubs' revenues increased by 11%
(£151m) to £1,530m in 2006/07. Average Premier
League club revenues exceeded £75m for the first
time.
- Championship club revenues increased by 3% (£11m)
to £329m in 2006/07. League 1 revenues were unchanged
at £102m whilst League 2 revenues increased by 3%
(£2m) to £63m.
- The key components in Premier League clubs'
revenue growth in 2006/07 were matchday revenues, which
increased 19% (£87m) and commercial revenues which
increased by 15% (£52m). Broadcasting revenues were
relatively flat in the year, increasing by 2% to £592m.
We estimate that broadcasting revenues increased by just
under 50% in 2007/08.
- The £87m increase in 2006/07 was a record for
matchday revenue growth in a single year. Arsenal was the
main contributor, reporting a 105% matchday revenue increase
from £44m to £91m for their first season in the
Emirates Stadium. Other key contributors were Manchester
United, Chelsea and Tottenham Hotspur with increases of
£21m, £17m and £15m respectively.
- The £52m rise in commercial revenues in 2006/07 was
also the biggest increase in that revenue stream ever
recorded. Again, some of the largest clubs had significant
growth in commercial revenues, with Chelsea recording the
biggest increase (£14m).
- Revenue growth was focussed amongst the 'big
four' clubs. On average, 'big four'
club revenues increased by 24% (£34m) to £178m,
while the rest of the Premier League clubs had average
revenues of £50m in 2006/07.
- We estimate that total Premier League clubs'
revenues were £1.9 billion in 2007/08 based on the new
broadcasting deals. If Premier League clubs maintain growth
from both matchday and commercial revenues then an annual
total in excess of £2 billion should be reached before
the end of the decade.
- Increases in both wages and other operating costs have
led to a fall in operating profits for the Premier League
clubs for the second consecutive year after five years of
growth. Operating losses amongst Championship clubs increased
for the third successive year, but the gap in operating
performance between the average Premier League and
Championship club decreased from £9.1m to
£7.9m.
- In 2005/06, 16 Premier League clubs recorded operating
profits. In 2006/07 half that number – eight clubs
– recorded an operating profit. These were five
long standing, well supported, Premier League clubs;
Manchester United, Arsenal, Tottenham Hotspur, Liverpool and
Newcastle United and the three promoted clubs; Reading,
Sheffield United and Watford.
- Manchester United shattered their own record for
operating profits set in 2003/04 (£52m), with operating
profits of £66m in 2006/07.
- We expect that operating profits will have been boosted
in 2007/08 by increased broadcasting revenue. The question is
how much of the increased revenues have already been spent
and will continue to be spent on wages and transfers. We
expect that 2007/08 operating profits for the Premier League
clubs will have exceeded the 2004/05 record of £162m,
and could have doubled from 2006/07 levels of £95m to
exceed £200m for the first time.
- Aggregate operating losses for Championship clubs
increased from £53m to £75m; in excess of
£3m per club in 2006/07. Increased parachute payments
and solidarity payments from the Premier League in 2007/08
should help arrest this decline.
- Total taxes contributed by the top 92 professional clubs
were at a record high of £710m in 2006/07, up 11% on
2005/06. As a result, total taxes paid to the Exchequer by
the clubs from the top four divisions over the years since
1992/93 are in excess of £5.5 billion.
Wages and transfers
- After the unprecedented fall in wage costs in 2004/05,
Premier League clubs' wage costs increased by 13% to
£969m in 2006/07, a second consecutive year of growth.
Premier League clubs' total wages will have exceeded
£1 billion for the first time in 2007/08, an average of
more than £50m per club.
- The key performance indicator – wages/turnover
ratio – has increased to 63% in 2006/07, which in
general remains a reasonably comfortable level for the
finances of clubs in England's top division.
- All 20 Premier League clubs have reported an increase in
wages in 2006/07, the first time this has happened since
1999/2000, whereas only 12 clubs reported an increase in
revenue.
- The largest increases in wages in 2006/07 were reported
by Chelsea (£19m), West Ham United (£13m),
Portsmouth (£12m), Newcastle United (£10m) and
Liverpool (£9m), with West Ham United and Portsmouth
investing significantly in their playing squads following the
arrival of new owners.
- Excluding the revenue and wages increases of the top five
finishers and the three newly promoted clubs, the remaining
Premier League clubs, who were competing to qualify for
Europe or avoid relegation, reported an aggregate increase in
wages of £61m, despite an £18m reduction in their
revenue in 2006/07. This will have made significant inroads
into spending the c.£300m of incremental annual revenue
from 2007/08 from the new broadcasting agreements.
- Despite the increase in wage costs, the surplus of
revenue over wages for the Premier League clubs has increased
again from £525m to £561m (7%) in 2006/07.
- The significantly enhanced broadcast rights revenue in
2007/08 will provide Premier League clubs with the
opportunity to address the League's record high
wages/turnover ratio of 63%.
- An increase of £31m (14%) in 2006/07 means that
Championship clubs' wages growth has exceeded revenue
growth (£11m) resulting in an increase in the
wages/turnover ratio to 79%, breaking the recent trend shown
in the previous three years of around 72%.
- Premier League clubs invested a record £492m on
total gross transfer spending in 2006/07. This record was
then beaten in 2007/08 with Premier League clubs spending in
excess of £600m in reported gross transfer fees in the
summer 2007 and January 2008 transfer windows.
- The majority of Premier League clubs' transfer
spending continues to be with overseas clubs with £275m
spent in 2006/07 (up from £256m in 2005/06). Once
Football League clubs are considered, the net transfer
spending leaving English football (to non English clubs and
agents) has increased by 15% to a record £277m.
- No Premier League clubs reported a cash inflow on player
transfers in 2006/07, which compares with two clubs with net
transfer receipts in 2005/06 (Charlton Athletic and
Manchester City). Transfer activity now almost always
represents a net cash outflow for Premier League clubs which
will therefore need to be funded by operating profits or
borrowings.
- Total player costs for the top four divisions –
being the aggregate of wage costs and net transfers spending
– increased to a record high of £1.2 billion
in 2006/07, a 12% increase on 2005/06.
- Football League clubs' total transfer expenditure
has increased by 79% from £48m to a record £86m
with spending on buying players from the Premier League clubs
doubling from £11m to £22m. The most significant
net spenders in 2006/07 were the three clubs who subsequently
managed to secure promotion to the Premier League:
Sunderland, Birmingham City and Derby County –
money ultimately well spent.
Stadia development and operations
- Total attendances across the four divisions of English
football of 29.9m for 2007/08 are the highest since the
1967/68 season.
- Average attendance at 36,144 and total attendances of
13.7m for 2007/08 represent records for the Premier
League.
- 2007/08 was the tenth consecutive season of average
attendances over 30,000 and the eleventh consecutive season
of utilisation over 90% in the Premier League.
- In terms of total attendances in 2007/08, the
Championship is now the fourth biggest football league in the
world eclipsing Serie A in Italy and Ligue 1 in France and
pushing La Liga in Spain very close for third place.
- Revenue per attendee in the Premier League has more than
doubled in a decade and sustains the dominance of the Premier
League in matchday revenue generation in European
football.
- Despite the predicted slowdown in development spending,
stadia investment levels across the top 92 clubs were over
£100m for the eleventh consecutive season with
£161m invested in total in 2006/07. Almost £2.4
billion has now been invested by clubs since the Premier
League began.
- Football League clubs invested £34m in 2006/07
– their highest amount since 2002/03.
Club financing
- Capital employed by Premier League clubs –
being the aggregate of debt financing and shareholders funds
– continued the rise of recent years to reach over
£2.2 billion at the end of the 2006/07 season.
- The Premier League clubs' net debt figure at
summer 2007 increased by 19% to £2,469m. It is
sometimes commented that "football is not like a normal
business"; the net debt figure includes around
£900m which is of a non-interest bearing 'soft
loan' nature from club owners.
- The net debt figure includes £605m in relation to
Red Football Shareholder Limited (the UK parent company of
Manchester United) and £620m in respect of Chelsea
Limited (the parent company of Chelsea).
- By the end of the 2006/07 season, Roman Abramovich had
injected around £575m of new money into Chelsea,
through a combination of debt and equity. This represents by
far the largest contribution to a football club from any
single funder.
- Around £1.4 billion has changed hands in respect of
almost 20 changes of ownership of English clubs in the top
two divisions since the start of 2005. For the majority of
these transactions it is too early to assess the overall
financial impact on the clubs themselves.
- Premier League clubs incurred aggregate net interest
charges from finance providers of £144m in 2006/07. The
non-interest bearing nature of other loans at a number of
clubs help to keep the Premier League clubs'
aggregate net debt service charge at under 6% of the overall
debt balance.
- Based on the available information, the Championship
clubs had aggregate net debt at the end of the 2006/07 season
of £289m. Ten Championship clubs had filed accounts
showing net debt at the end of the 2006/07 season in excess
of £10m. In general, a Championship club can only hope
to significantly reduce its net debt in the short/medium term
via either promotion to the Premier League or an injection of
equity funding from its owner.
- Below the top two divisions, managing the club's
financial position remains a challenge from one season to the
next. Legacy debt issues and the risks taken by some boards
of directors will, without correction, inevitably lead to a
continuing flow of insolvency cases in the seasons to
come.
These highlights are extracted from the relevant sections of the Deloitte Annual Review of Football Finance (May 2008). The basis of the calculations are described in the relevant sections.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.