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Deloitte’s latest Annual Review of Football Finance, reveals that whilst the changes to the Premier League clubs’ financial results over the past three seasons have been fairly minimal, there are some big increases just around the corner. According to the business advisory firm Deloitte, the combination of increases in revenue and reasonable wage cost control should almost double operating profits to £260m in the 2007/08 season.
The report, in its 16th year, confirms that the Premier League clubs remain by far the biggest earners in world football, with the top 20 clubs generating around £1.4 billion in turnover.
Dan Jones, Partner in the Sports Business Group at Deloitte, commented: “We believe the relatively small changes in Premier League clubs’ financial results over the past three seasons represent the calm before the storm. The new broadcasting rights deals - providing an additional c.£300m of revenue to the Premier League clubs in 2007/08 – and other revenue increases will drive overall turnover up to almost £1.8 billion.
The wave of new owners will contribute towards more restraint by clubs, compared to the past, in terms of their spending. Even if the Premier League clubs are only able to maintain the current wages to turnover ratio of 62% in 2007/08, we predict operating profits will almost double to £260m. Every percentage point reduction in the wages to turnover ratio – a key performance indicator for clubs - could deliver additional profitability of £18m shared amongst the clubs.”
Looking ahead to this summer’s transfer window and into next season, whilst the clubs may exercise some relative restraint, player transfer spending this summer is again likely to exceed £300m and Premier League clubs’ total wages cost will still rise to over £1 billion in 2007/08.
Paul Rawnsley, Director in the Sports Business Group commented: “Whilst wages will rise, clubs do have the opportunity to increase the importance of performance related pay structures. This will both insulate the business in future when on-pitch results are not so good, and also help motivate and reward players and management for winning. We also hope and expect to see a further enhancement of the clubs’ level of investment in supporter and community schemes in the future.”
Other key findings of the Deloitte Annual Review of Football Finance 2007 include:
English football contributed around one quarter of the total revenue of the European football market of £8.7 billion in 2006.
Premier League clubs generated the highest revenue (£1.4 billion) and operating profitability (£138m) in Europe in 2005/06. Their lead over second placed Italian Serie A clubs (total revenue of £1.0 billion) will grow further next year. The other ‘big five’ leagues are in Germany (£0.8 billion), Spain (£0.8 billion) and France (£0.6 billion).
Championship clubs’ turnover grew 4% to £318m (average of £13m per club) in 2005/06. The Championship clubs’ combined wages to turnover ratio remained stable at 72%. At least 11 Championship clubs have net debt of more than £10m.
Below the top two divisions, in general the financial position remains very challenging, but it has improved and stabilised over the past 3-4 years.
Each year English professional football contributes around £650m in taxes to Government.
Alan Switzer, Director in the Sports Business Group at Deloitte went on to discuss the outlook for football finance: “English clubs will continue to lead the world financially. Whilst the players will be the main financial beneficiaries from the new TV deals, English clubs will continue to invest in their stadia and youth facilities, which is a vital element of a successful business strategy. Over 15% of revenue generated by Premier League clubs since 1992/93 – over £1.7 billion - has been invested in facilities; the ‘shop window’ for the game. The contrast to facilities in countries like Italy is now stark.”
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Note to editors
Basis of preparation
The News Release and Highlights are extracted from the relevant sections of the Deloitte Annual Review of Football Finance (May 2007). The bases of the opinions and calculations are explained in that publication.
The analysis of the financial results and position of English clubs, and comparisons between them, has been based on figures extracted from the latest available group or company financial statements. The analysis of the financial results of various European leagues, and comparisons between them, has been based on figures extracted from the relevant company or group financial statements or from information provided to us by national associations/leagues.
In some cases Deloitte have made adjustments to the disclosed figures to enable, in Deloitte’s view, a more meaningful comparison of the financial results and position of the football business on a club by club basis. Deloitte have not performed any verification work or audited any of the information contained in the statutory financial statements for the purpose of their analysis.
In relation to estimates and financial projections, actual results are likely to be different from those projected because events and circumstances frequently do not occur as expected, and those differences may be material. Deloitte can give no assurance as to whether or how closely the actual results ultimately achieved will correspond to those projected and no reliance should be placed by any party on such projections.
The published financial statements of clubs rarely split wages costs between playing staff and non-playing staff. Therefore, unless otherwise stated, references to wages relate to total wages for a club/division, including playing and non-playing staff.
The publication and this News Release are intended to provide general information on the finances of the clubs in English football and other European leagues and cannot be relied upon to cover specific situations. No responsibility for loss occasioned to any person acting, or refraining from action, as a result of any material in this News Release will be accepted by Deloitte & Touche LLP, Deloitte Touche Tohmatsu, and all other member firms of Deloitte Touche Tohmatsu organisation and their affiliates and in all cases any successor or assignee. Readers should not act upon any material in this News Release without taking relevant professional advice.
The exchange rate at 30 June 2006 has been used to convert figures in Euros (£1 = €1.4464).
About the Sports Business Group at Deloitte
Over the last 15 years Deloitte has developed a unique focus on the business of sport. Our specialist Sports Business Group offers a multi-disciplined expert service with dedicated people and skills capable of adding significant value to the business of sport. Whether it is benchmarking or strategic business reviews, operational turnarounds, revenue enhancement strategies or stadium/venue development plans, business planning, market and demand analysis, acquisitions, due diligence, expert witness, economic impact assessments, audits or tax planning; we have worked with more clubs, leagues, governing bodies, stadia developers, event organisers, commercial partners, financiers and investors than any other adviser.
For further information on our services you can access our website at www.deloitte.co.uk/sportsbusinessgroup
In this press release references to Deloitte are references to Deloitte & Touche LLP, which is among the country’s leading professional services firms. Deloitte & Touche LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu (‘DTT’), a Swiss Verein whose member firms are separate and independent legal entities. Neither DTT nor any of its member firms has any liability for each other’s acts or omissions. Services are provided by member firms or their subsidiaries and not by DTT. Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority. The information contained in this press release is correct at the time of going to press.