PracticeConsultingFootball income to break £1bn barrier

Football income to break £1bn barrier

English football's income rose by 10% to £951m in 1998/99, promting suggestions that in the 1999/00 season income will break through the billion pound mark, according to Deloitte & Touche's annual review of football finances.

But head of Deloitte & Touche Football Industry Team, Gerry Boon, was quick to warn clubs about spending too much.

‘With the recently agreed broadcasting rights deals set to bring £2.4 billion of revenue into the game over the next four years, the challenge for clubs will be to manage their money,’ he warned.

‘The shot in the arm from the new TV deals paradoxically presents many clubs with a predicament. Can the clubs hold onto the windfall or will it trickle through their fingers into the bank accounts of overseas clubs or the pockets of the players?’ asked Gerry Boon.

New TV and internet deals for the Football League could be worth as much as £3.5m per annum to Division One clubs. And Boon reckons this is offers a great opportunity for these clubs to secure there future.

‘The new TV (and internet) deals offer Football League clubs a once-in-a-lifetime opportunity to stabilise their financial condition ? to create a football business model that can demonstrate break-even or, dare we hope for it, profitability on a sustainable basis,’ said Boon.

‘It will no longer be quite such a desperate struggle to climb out of Division One – and remaining there might realistically represent the pinnacle of ambition for a large number of clubs.’

AccountancyAge.com will be providing more coverage on the publication of the Annual Reveiw of Football Finances today and tomorrow.

Other highlights from the report included:

Profitability

  • In the 1998/99 season the ninety two English professional football clubs generated turnover of £951 million (up 10%) from £863 million. Once all the clubs announce their financial results for the 1999/2000 season, it should confirm that the clubs broke through the £1 billion barrier in the season just ended.
  • Premier League clubs generated 16% more income. The seventy two Football League clubs actually suffered a small reduction in turnover for the first time in a number of years.
  • Seven out of every ten Premier League clubs made operating profits whilst more than nine out of every ten Football League clubs made operating losses
  • Smaller clubs like Oxford United, Crewe and York City joined a host of more illustrious Premier League clubs who made pre-tax profits greater than £1 million. The highest pre-tax profit makers were Manchester United (£22.4m), Aston Villa (£20.2m), Nottingham Forest (£8.0m) and Derby County (£6.7m).

Wages and Salaries

  • Total wages increased 18% against a 10% turnover increase, but were only up 3% overall in The Football League.
  • 80% of clubs (60 out of 75 clubs with reported results) now have a wage bill in excess of two thirds of their income compared to 60% in the 1995/96 season (the first year we performed this analysis). Only 4 clubs have wages/turnover ratios of 50% of less.

Player Trading

  • Total transfer payments rose to an unprecedented £316.9 million – of which £142.2 million (45%) went overseas.
  • The ‘trickle down’ to The Football League was back up from £1.5 million (1997/98) to £27.5 million.

Financing The Clubs

  • At the end of the 1998/99 season, £1.15 billion of finance was ‘tied up’ in the 92 clubs. About 80% had come from shareholders, directors and related parties.
  • The four divisions have moved from being a net cash depositor, which had occurred for the first time in 1997/98, back to being a net borrower of over £118 million from the Banks.
  • 10 clubs account for £128 million of net bank borrowings. The three largest bank borrowers are Coventry, Bolton and Middlesbrough.
  • There was an overall cash flow deficit in 1998/99 of £111 million – £44 million in the Premier League and £67 million in The Football League.

The fans and the stadium

  • Over 25 million people watched Premier League and Football League matches in total in 1998/99 – higher than at any time in over two decades. However, figures for the 1999/2000 season show slight fall in overall attendance numbers.
  • Average stadium occupancy was 91% in the Premiership; 66% – Division One; 53% – Division Two; and 36% in Division Three.

Links

Highlights of the report

Deloitte & Touche website

Deloittes report shows dive in soccer profits

Football’s big league finances

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