PracticeConsultingFootball’s big league finances

Football's big league finances

Even accountants are getting in on the beautiful game these days, with Deloitte & Touche's reviews of football finances becoming as regular a fixture as the FA cup final. Matthew Gerry reports on its latest tome, which says while turnover is on the up, profits are being hit by pricey players.

Deloittes latest report is concerned purely with football’s greatest cash cow – the English Premiership. It confirms that club turnover is going through the roof, but high wages threaten the long-term stability of those who are less successful.

Club revenues continue to rise with the profile of the sport, with more income than ever from gate receipts, sponsorship deals and television and radio broadcasting rights. But although average club income stood at a record-breaking 33.5m pounds, higher spending in the transfer market meant profits shrunk by 22.7m pounds to 18.7m pounds compared to the previous season.

Player transfer costs, and in particular Premiership stars’ spiralling wage demands, are highlighted as the key to the profits slump. Wages increased by 31% in the 1997/98 to a staggering 397m pounds, although this is actually represents a fall in the rate of wage inflation. Despite this, the rise still outstrips the average growth in turnover.

Many clubs now have what Deloittes view as an unfavourable wages-to-turnover ratio. Relegated Blackburn Rovers had a ratio of 126% in their last season in the top flight, while Merseyside giants Liverpool recorded an 80% ratio. The report perceives ratios of more than 50% as being unhealthy for a club’s finances. But only Manchester United (33%) and Aston Villa (48%) achieve this.

However, while the clubs moan about soaring wage bills, the Treasury stands to benefit more than ever from soccer this year. For 1998/99 a massive 194.6m pounds was paid in National Insurance, PAYE and VAT, a rise of 27% from 1997/98.

Profitabilty – who’s making money?
Aggregate pre-tax profits for Premiership clubs yielded only 31m pounds from a staggering aggregate turnover of 2.8bn pounds, representing a 1% net margin.

Club Year-end

Pre-tax profit/(loss) 000 pounds

Arsenal May 99

2,068

Aston Villa May 99

20,156

Barnsley May 99

799

Blackburn Rovers June 99

(7,780)

Bolton Wanderers June 99

(5,122)

Charlton Athletic June 99

1,249

Chelsea June99

23

Coventry City May 99

1,045

Crystal Palace June 97

(486)

Derby County May 99

6,734

Everton May 99

(10,769)

Leeds Utd June 99

711

Leicester City July 99

(6,181)

Liverpool July 99

(8,061)

Man Utd

July 99

22,411

Middlesbrough July 99

(3,909)

Newcastle Utd July 99

1,373

Nottingham Forest May 99

7,951

Sheffield Weds May 99

(9,230)

Southampton May 99

2,257

Tottenham July 99

1,293

West Ham May 99

(2,657)

Wimbledon June 99

n/a

Source: Deloitte & Touche England’s Premier Clubs

Fourteen clubs made an operating profit in 1998/99 – less than in the previous season. But six of those clubs (Man Utd, Aston Villa, Chelsea, Tottenham, Arsenal and Leeds) had aggregate profits of 71.8m pounds – more than the total for all 20 clubs.

Size matters
The much-talked of gap between the ‘haves’ and ‘have nots’ appears to be growing by the season, with Manchester United’s turnover of 401m pounds dwarfing the 32.8m pounds of relegated Charlton Athletic for 1999. But Gerry Boon, chairman of the Football Industry team at Deloitte & Touche, believes the gulf between clubs is not limited to within the Premiership.

‘This polarisation is not solely within the Premier League,’ he says. ‘The move from Division One to top flight football could be likened to expanding from a convenience store into a supermarket over a two month period.’

Curbing this disparity, while remaining competitive with European opposition, surely represents one of the largest challenges for the football authorities.

But for the moment it is the accounts of large clubs, which will make the big headlines. As Boon says: ‘Big clubs are dominating – size does matter.’

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