Football still not converting revenue growth into sustainable profit!

Premier League clubs’ combined revenue reached a record £2.27bn in 2010/11, according to the 21st Annual Review of Football Finance from the Sports Business Group at Deloitte. In total, the top 92 clubs in English football saw revenues increase by 9% to £2.9bn in 2010/11.

Dan Jones, Partner in the Sports Business Group at Deloitte, said: ‘Top clubs in English football have continued to show impressive revenue growth despite a difficult economic climate. Premier League clubs’ revenues increased by 12% in 2010/11, driven by broadcast revenue increasing by 13%, to £1.18bn, in the first year of a new three year broadcast cycle.’

‘This uplift was primarily due to an increase in overseas broadcast deal values, demonstrating once again the Premier League’s unrivalled global popularity. Commercial revenue grew by 18% during 2010/11, although this was largely attributable to clubs with a more global profile. Matchday revenue increased by £20m (4%) to £551m, however almost half the clubs suffered a reduction in matchday revenue in 2010/11.’

More than 80% of the Premier League clubs’ revenue increase was spent on wages, which increased by £201m (14%) to almost £1.6bn, and resulted in a record Premier League wages/revenue ratio of 70%.

Adam Bull, Consultant in the Sports Business Group at Deloitte, noted: ‘Despite the increase in revenue generated by Premier League clubs, operating profits reduced by £16m (19%) to £68m in 2010/11 and combined pre-tax losses were £380m. Gross transfer spending by Premier League clubs increased by £210m (38%), to a record level of £769m.’

‘The challenge for clubs remains converting impressive revenue growth into sustainable profits. This will become even more important for a number of clubs as the financial results for 2011/12 will, for the first time, count towards their UEFA Financial Fair Play break-even calculation.’

Revenue in the Football League Championship increased by £17m (4%) to £423m, prompted by an increase in the solidarity payments from the Premier League and the promotion of some larger clubs into the division.

Alan Switzer, Director in the Sports Business Group at Deloitte, commented: ‘The Football League’s achievement in attracting fans and growing revenues is often overlooked. The Championship is the fourth best attended League in Europe, ahead of the top divisions in Italy and France.’

‘Whilst Championship revenues have held up well, a wages/revenue ratio of 90%, combined operating losses of £130m and record pre-tax losses of £189m, are a cause for concern. It is therefore encouraging that in April 2012 Championship clubs agreed to the implementation of new financial fair play regulations that aim to help clubs reduce the level of annual losses.’

Other key findings of the Deloitte Annual Review of Football Finance 2012 include:

  • The total European football market grew to a record £15.3bn in 2010/11;
  • Premier League clubs generated the highest revenue (£2.3bn) of any league in Europe in 2010/11, followed by Germany and Spain (each £1.6bn), Italy (£1.4bn), and France (£900m);
  • The Bundesliga remained Europe’s most profitable league with operating profits of £154m, a 24% increase on the previous year and widening the gap to the Premier League, where operating profits decreased by £16m to £68m;
  • The top 92 English clubs invested £167m in stadia and facilities in 2010/11 and over £3bn has been invested over the last 20 years. This is likely to increase further in the future given the anticipated investment in training ground facilities resulting from the introduction of the Elite Player Performance Plan (EPPP);
  • Average league capacity utilisation at Premier League clubs was above 90% for the 15th consecutive season, despite total attendances at Premier League matches decreasing by 2% in 2011/12;
  • Net debt in respect of Premier League clubs fell by £351m (13%) to £2.4bn, its lowest level since 2006.  This overall reduction is not representative of the experience of every club, with increases at around half the Premier League clubs;
  • The Government’s tax take from the top 92 professional football clubs was almost £1.2bn in 2010/11, a £219m (23%) increase, largely due to the increase in VAT (to 20%) and the introduction of the 50% rate for earnings over £150,000.

Of the £2.4bn net debt in the Premier League, 62% (£1.5bn) is in the form of non-interest bearing ‘soft loans’, of which almost 90% relates to three clubs – Chelsea (£819m), Newcastle United (£277m) and Fulham (£200m).

On the positive side of the balance sheet, Premier League clubs recorded a carrying value of tangible fixed assets of almost £1.9bn, reflecting the huge investment in facilities seen over the past two decades and a carrying value of player registrations of around £1.2bn.

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