Liverpool – The Kop’s Commercial Weakness

Liverpool FC released their financial results recently to great fanfare, record profits, growing revenue and a competitive wage structure were all reasons for Liverpool fans to get excited. Among all this excitement the composition of their revenue went under the radar.

Roughly half of their revenue was from TV money and prize money, which although shows success in a season, isn’t something that can be relied upon each year. Unless your Real Madrid or Barcelona, Champions League finals/trophies are a rare occurrence due to the strength of the competing rivals.

Roughly a fifth of Liverpool’s revenue came from matchday earnings which has remained fairly stable but is increasing as the capacity of Anfield increases.

This leaves around a third of Liverpool’s revenue being from commercial revenue. Commercial revenue is made up of sponsorship deals and merchandise sales. This is the area where Liverpool are below Europe’s top table and an area that has significant room for improvement.

The Problem

The graph above shows the potential Liverpool have to grow this area of revenue and boost income significantly to boost their financial muscle. Liverpool’s commercial revenue is the 8^th highest in Europe according to Deloitte and is less than half the amount Real Madrid command. Although no one is saying Liverpool are as big a club as Real Madrid, the difference is much bigger than it should be.

Liverpool lag their northern rivals in Manchester significantly too, by more than £100m in Manchester United’s case. This gap needs to shrink if Liverpool are serious about mixing with Europe’s finest.

Mr. Popular

The reason Liverpool have so much potential and are currently under achieving when it comes to commercial revenue is the growth the club has experienced in popularity and appeal worldwide under Klopp.

Liverpool have struggled over the past couple of decades to ‘get with the times’ and match their rivals in digital popularity as football moved into the modern era. Manchester United perfectly exploited and channelled the new commercial era and as a result saw their finances explode with Liverpool playing catch up ever since.

However, Liverpool are catching up and are ahead of many in terms of social media followers. The club have the 6^th highest number of twitter followers of the twenty teams to make up the Deloitte Money League. They also have 9^th highest number of followers on Instagram which could be improved upon with more engagement and is an area for growth.

The club only has the 10^th highest number of Facebook ‘likes’ and should look at these platforms as areas that could grow significantly. In all these areas they aren’t far of moving further up the social media chain as the club engage to a greater extent with the fans and their success on the pitch attracts more digital fans.

The importance of this nowadays cannot be underestimated, a club’s social media pull gives companies a great way to advertise directly to their target market being football fans or geographical location. A greater number of followers makes it much easier to negotiate lucrative sponsorship deals, especially the smaller club partners who can make up a considerable amount of a club’s commercial revenue.

Kitted Out

Liverpool currently earn roughly £28m from their kit manufacturer New Balance annually. This is almost a third of the amount Manchester United attract in their £75m deal with Adidas and 5 times less than Barcelona’s high of £140m from Nike.

Liverpool are (and should be) entertaining offers from the likes of Adidas and Nike as they look to match, if not exceed the amount earned by Manchester United when their deal with New Balance runs out at the end of next season.

Liverpool should be able to increase their kit deal significantly as Manchester United negotiated their deal a few years ago so by now, this should be well within the grasp of Liverpool considering the growth in popularity the club has sustained of late.

Their current deal is also below the likes of Chelsea and Manchester City, clubs of a similar stature social media wise however Liverpool also have a larger fan base outside of this and would therefore hope to command at least in excess of the £50m Manchester City recently negotiated with Puma.

Getting More Shirty

Liverpool have stayed loyal to their shirt sponsors historically, seemingly married to Carlsberg until they parted ways a few years ago and Standard Chartered took their place. Liverpool chose wisely and have recently renegotiated their deal on £40m a year for four years, up from £30m. This was a shrewd move and Liverpool are doing well in terms of their shirt sponsor and there is not much room to improve in this area.

The club should focus on maintaining a good working relationship with Standard Chartered and negotiate at the appropriate time to improve the terms, maybe by incentivising additional performance related bonuses that will reward the club on the back of successes on the pitch.

Opportunity Knocks

Liverpool have many additional areas that could enhance commercial revenue with some controversial and others just sensible.

Sleeves

Liverpool currently have a 5-year deal with Western Union as their sleeve sponsor, mainly in line with their rivals. Arsenal are currently leading the way with an £8m-a-year deal, something Liverpool should consider exceeding considerably when their current deal expires in 3 years, something for the future.

Training kits

Liverpool’s training kit is sponsored by BetVictor and their current deal expires at the end of the season, making it an opportunity to bring in a more lucrative deal. For comparison, Barcelona have reportedly the highest training kit deal (with Beko) at around £16m a year, which offers a sizeable boost in revenue should Liverpool get anyway near that figure, either by improved terms of a new sponsor.

Naming Rights

Stadium naming rights are a controversial topic in England among fans with many opposed to the idea of ruining club traditions all for the sake of a few quid. However, recent studies have shown it is no longer a few quid with valuations in excess of £10m being placed on Anfield and other famous stadiums. A boost of even £10m in commercial revenue would by over 5%.

Club Partners

Liverpool could attempt to go a different way and go for volume with sponsors. Club partners can add small multi-million-pound deals here and there however if this was scaled up, could run to the tens of millions. The main drawback here is the time it may take and the devaluing of their main sponsor who may not be best pleased to see all these deals that take the shine of their large deals.

Go Strange

What if Liverpool find the newest trend like the sleeve sponsor? This is an option for the creative. How about shorts sponsors? Press conference sponsors? These are all options and many more. The club could also develop a new medium to share their content that substantially boost their social media following and attracts more lucrative deals.

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February 18, 2019February 18, 2019

Liverpool 2018 Financial Review – Klopping Profits

Liverpool came off age last year under Klopp and returned as a European powerhouse, securing a top 4 place for the second consecutive year and coming within a goalkeeping performance and Salah arm of winning the Champions League. Domestic cup performance was the only blot on an otherwise promising season.

It has already been documented that the Reds have achieved recording-breaking level of profits, recording a profit of £125m (£106m after tax). This may seem amazing however the finances detail that the profit, although impressive, may not be all that it seems, with it predominately due to transfers.

Let’s delve into the numbers.

Revenue Analysis

Liverpool saw their revenue shoot up significantly on their return to the Champions League. Revenue rose from £364.5m to £455.1m (25%) with their success in the Champions League and consistent Premier League performance the main reason.

Broadcasting rose by the largest amount, increasing from £154.4m past the £200m barrier to £220.1m (43%). This huge boost was due to the £70m the club earned from their European exploits as they maintained their 4^thplaced finish in the league and suffered early exits in the domestic cups.

Commercial rose a disappointing amount, increasing from £136.6m to £154.3m (13%) as the club hopefully have yet to see the full benefit of their Champions League exploits and general goodwill/popularity they have begun to generate.

Matchday revenue rose from £73.5m to £80.7m (10%) on the back of a greater number of home games from their Champions League participation.

Looking ahead, revenue is likely to increase as Liverpool enjoy (or try to) a title race for the ages that should see a boost in Premier League prize money. It will be a tough ask to equal or better their Champions League campaign of last year which will see a drop-in prize money here. However, any rise will depend largely on the success of the commercial team to monetise the increasing popularity of the club.

Costs Analysis

Liverpool saw a rapid rise in their costs this year, increasing from £357.8m to £447.8m (40%) as they looked to compete to a greater extent with their rivals. Interestingly despite the large profit recorded, profitability actually fell as their costs rose a greater rate than their revenue.

Amortisation rose by a third, increasing from £58.4m to £77.3m (32%) as player investment increased significantly due to a notable departure. It seems the investment is already paying off.

Liverpool also had stable lease costs of £2.6m in the year.

Net interest expense rose by 13% to £6.0m in the year as overdraft interest rose by £300k and notional interest on transfers rose in the back of increased transfer activity.

Liverpool also paid tax of £19.1m, an effective tax rate of 15% which is largely in line with the tax rate of 19% with a few adjustments.

It has been well publicised that Liverpool wages have grown significantly, and they grew 27% to £263.6m from £208.3m in 2018. This was due to both new higher earners as well as a whole host of contract renewals. Liverpool also incurred an increase in bonuses due to a hugely successful campaign. The wage rise works out as an eye-watering extra £1,063k a week, making the club have one of the highest wage bills in Europe.

Liverpool also paid directors £2,276k, up from £1,649k due to a boost in performance.

Looking ahead, wages are likely to continue rising but at a slower rate unless a trophy comes home in which case bonuses may bump wages significantly. The club are likely to see a large rise in amortisation after a summer of significant investment.

Transfer Analysis

Liverpool were very active in the transfer window in 2018, spending and receiving over £150m in each direction.

Arriving at Anfield were Van Dijk (£70.9m), Salah (£37.8m), Oxlade-Chamberlain (£34.2m), Robertson (£8.1m) and Gallacher (£0.2m) for a combined £151.2m.

Departing Liverpool were Coutinho (£121.5m), Sakho (£25.4m), Origi (Loan – £5.9m), Lucas (£5.1m), Stewart (£4.1m), Wisdom (£2.1m) and Sturridge (Loan – £2.1m) for a combined £166.1m.

This meant that for the second successive season Liverpool had a net transfer inflow, this year of £14.9m. Despite this the club had a successful season and belatedly spent the cash built up this summer on the likes of Keita and Alisson.

The signings were all fantastic additions, even the Ox who was viewed by many as a poor signing initially. Van Dijk and Salah have been world class and repaid their large transfer fees already.

Now, Liverpool fans were rightfully worried when Coutinho was sold mid-season however the club performed admirably without him. Liverpool fans do not wish to thank Coutinho for much, but they do have this record-breaking profit due to his departure. Liverpool recorded a profit on player sales of £123.8m, pretty much the whole amount of their profit this year. This shows that the profit recorded is primarily due to transfers and not performance, however this isn’t something that should be looked at poorly due to the transfer fee being used to invest back into the club which should see revenue continue to rise as a result.

Liverpool are owed a huge £168.6m in transfers while they owe £151.6m which should give the club little to worry about despite the huge sums involved.

Liverpool may also owe another £38.6m in contingent transfer fees should certain clauses be met and may be owed £35.7m themselves if certain clauses are met elsewhere.

Liverpool also saw a net cash outflow of £49.2m despite a net transfer inflow as they gave clubs more favourable terms to pay for transfers than they negotiated themselves. Liverpool spent cash of £154.1m and only received cash of £104.9m.

Debt Analysis

Liverpool had loaded up on debt a little due to the redevelopment of Anfield and took out loans in order to finance this expansion. Their cash levels are usually low as a result as they use all their capital in order to improve the stadium and their training facilities.

Cash levels were at their highest levels in recent times, rising from £4.1m to £10.3m (158%). This is largely due to transfer fees received and rising revenue that allowed them to repay loans to banks and their owners of £29.9m and invest a further £15.9m in facilities and the stadium.

Debt levels hence fell due to the repayments, falling from £181.6m to £151.1m (15%) as they repaid £17m to the bank and £12.9m to FSG. Liverpool’s loans have a fairly low rate of interest to both the bank (1.73%) and FSG (2.44%). Liverpool are due to repay the bank loan in 2020 which is just around the corner now and may hamper future transfer plans while the FSG loan has no repayment date.

Net debt hence fell from £177.5m to £140.8m (19%) as the club come towards the end of their bank loan which will release a significant financial burden on the club and allow greater investment once completed as Liverpool look to become less of a selling club and more of a powerhouse with promising signs already.

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August 29, 2018

Liverpool F.C. – The FSG Era

It was reported recently that FSG rejected a monumental, world record bid for Liverpool of £2bn. This a huge indicator of the added value the owners have achieved given a controversial start. Acquired for £264m in 2010, the club have gone on from strength to strength, a seven-fold increase in price is testament to that. There have been troubling times to say the least, however Liverpool are enjoying the good times at the moment, and are seen as genuine challengers for the Premier League and Europe.

This article looks at the FSG era and breaks down the performance year by year to date.

2010/11

The story began on the 1^stOctober 2010 when FSG paid a total consideration of £264m for a distressed Liverpool after the terrible period of ownership under Gillet and Hicks. The consideration consisted of:

Cash of £220.2m (Cash of £224m less £3.8m already within the club)
Acquisition costs of £6.5m
The assumption of the previous owner’s debt of £37.7m

Revenue by the end of the accounting period (July each year) was £142m while a loss of £50m was incurred, showing the financial troubles the club were in. To help solve this, FSG negotiated an increase in their credit facilities from banks to £120m in September 2011.

In a show of ruthlessness ahead of an eventful transfer window, FSG sacked the underperforming Roy Hodgson and replaced him with club legend Kenny Dalglish on the 8^thJanuary 2011, in a move that instantly gained the owners goodwill.

FSG arrived at a difficult time which was made more difficult by the sale of Torres to Chelsea, all proceeds were reinvested with the signings of Carroll (£37m) and Suarez (£24m) for a combined £61m who enjoyed very different careers at the club. Along with Torres (£53m), Babel (£6m) was also sold, leaving a net spend of a measly £2m.

Liverpool finished 6^thafter the morale boost appointment of King Kenny, however this was still a below par league performance. This was compounded by poor cup performances with third round exits from the FA Cup and League Cup whilst they also exited the Europa League in the Last 16.

2011/12

2011/12 was a mixed season for Liverpool. A poor Premier League campaign led to an 8^thplaced finish which was below par, however the club reached the FA Cup final before losing to Chelsea and also won the League Cup, which is still the only trophy won in the FSG era despite a host of final appearances.

This was not enough to keep Dalglish in a job and he was sacked on 16^thMay 2012 and was replaced by Brendan Rodgers on the 30^thMay 2012 as the club looked for a young manager to take the club forward, playing an attractive brand of football.

Off the pitch financial performance was also mixed, revenue rose by 19% to £169m however poor cost management under the previous owners and a need to spend led to a loss of £55m.

Another big nail in the coffin of Dalglish was the transfers and their lack of success. £60m was spent overhauling the squad with the signings of Downing (£21m), Henderson (£16m), Adam (£8m), Coates (£7m), Enrique (£7m) and Teixeira (£1m).

Out went Meireles (£12m), Ngog (£4m), Konchesky (£2m), Insua (£1m), Ayala (£1m) and Jovanovic (£1m) for £21m leading to a net spend of £39m.

None of the signings lit the world alight with only Henderson remaining after coming into his own later, however the signings were universally ridiculed and contributed to Dalglish’s dismissal.

2012/13

2012/13 was a poor season for Rodgers and FSG as the owners endured what was probably their most difficult season. Having sacked club legend Dalglish, Rodgers failed to galvanise the squad as they stumbled to a lowly 7^thplaced finish, Fourth Round exits in both domestic cups and the Round of 32 in the Europa League.

FSG backed their new man spending £65m on Allen (£17m), Sturridge (£14m), Coutinho (£12m), Borini (£12m), Sahin (Loan – £5m), Assaidi (£4m) and Yesil (£1m) with Coutinho and Sturridge both proving terrific signings.

Out went Adam (£6m), Aqualani (£2m), Carroll (Loan – £1m) and Kuyt (£1m) for £10m at a total net spend of £55m.

Off the field the losses kept piling up despite rising revenues as Liverpool incurred losses of £70m, despite 22% revenue growth to £206m. In a show of intent, FSG also injected another £47m into Liverpool in August 2013.

FSG had brought themselves some extra goodwill early in the season as on the 15^thOctober 2012, FSG announced their preference to redevelop Anfield rather than move to Stanley Park.

2013/14

2013/14 was nearly a monumental season for Liverpool under their new manager who nearly gained legendary status as Liverpool were inches from winning the title before Gerrard’s notorious slip.

A second-place finish is the closest attempt Liverpool have had to winning the Premier League trophy. This was however coupled with yet again early cup exits (5^thRound FA Cup & 3^rdRound League Cup)

Financially there were huge improvements. Losses of only £9m were much smaller than any other year to date under FSG while revenue grew by 24% to £256m despite no European football due to a terrific domestic season. As another show of goodwill, FSG wrote off £6m of the loans owed to them by Liverpool.

Transfers didn’t prove to be crucial to their campaign, however there is always the what-if way of thinking if Liverpool had strengthened in January.

In came Sakho (£17m), Aspas (£10m), Mignolet (£10m), Luis Alberto (£7m), Ilori (£7m), Moses (Loan – £1m) and Cissokho (Loan – £1m) for a combined £52m, with only Mignolet proving crucial to Liverpool’s Premier League assault.

Out went Carroll (£16m), Shelvey (£5m), Downing (£5m), Borini (Loan – £2m) and Spearing (£1m) for a combined £29m, adding up to a £23m net spend.

2014/15

Having come so close to winning the Premier League, now was the time for Liverpool to shine and become regular title challengers. We all know this didn’t happen as Suarez managed to force through a move to Barcelona and his replacements failing to improve Liverpool is an understatement.

A dismal season ended in a 6^thplaced Premier League finish and disappointing Semi-Final exits in both domestic cups. A return to the Champions League was meant to be exciting however it was a horrendous affair as the club were knocked out at the Group Stage by Basel and they didn’t fare much better in the Europa League after falling down into the competition, exiting at the Round of 32.

Off the field, a return to Champions League finally saw Liverpool make a profit of £50m. Revenue rose 16% to £298m as revenue continued its year-on-year growth. FSG continued to back Liverpool, plunging another £49m of cash into the club as they looked to continue moving forward after a poor season. FSG also renegotiated their credit facilities with banks to £150m in September 2015.

Transfers were the main culprit for their poor season.

In came Lallana (£28m), Lovren (£23m), Markovic (£23m), Balotelli (£18m), Moreno (£16m), Origi (£11m), Can (£11m), Lambert (£5m) and Manquillo (Loan – £2m) for a combined £136m.

Out went Suarez (£74m), Assaidi (£5m), Agger (£4m), Reina (£3m), Kelly (£2m), Suso (£1m) and Robinson (£1m) for £89.3m, a net spend of £47m however most of this money was a waste with only Lallana, Lovren and Can having decent spells at the club with Moreno and Origi also having a little success.

2015/16

FSG have shown they will act when it is needed, showing ruthlessness, intent and ambition when on 4^thOctober they sacked Brendan Rodgers and appointed Jurgen Klopp 4 days later, signalling a new era where the FSG machine has shone.

After a dismal start of the season saw the club languish in mid-table, Klopp improved the team despite finishing 8^thin the Premier League as the club began their tags as nearly men, finishing Runners-Up in both the Europa League and League Cup, whilst they suffered an early 4^thRound exit in the FA Cup.

With no Champions League and a poor Premier League campaign, revenue growth slowed, increasing by only 1% to £302m and they also returned to a loss-making position of £26m.

In a further show of intent, FSG plunged another £61m into the club in order to pay for the Anfield stadium expansion.

Prior to his departure, FSG showed Rodgers patience, shown by the summer transfer window where £113m was spent at a net spend of £31m.

In came Benteke (£42m), Firmino (£37m), Clyne (£16m), Ings (£7m), Grujic (£6m) and Gomez (£4m).

Departing were Sterling (£57m), Borini (£10m), Aspas (£5m), Lambert (£4m), Coates (£3m), Wisdom (Loan – £2m) and Grujic (Loan – £1m).

The signings failed to adjust early on, especially Firmino who has excelled under Klopp, while the signing of Benteke for a then club record, was the nail in the coffin for Rodgers as he departed his passing philosophy in signing the Belgian whilst Sterling was also missed.

2016/17

With no Europe as a distraction in Klopp’s first full season, the target of the Top 4 was achieved as the club finished 4^thin the Premier League. The club also reached the Semi Final of the League Cup and 4^thRound of the FA Cup.

Revenue was on the up once again after a lull in the prior year, rising 21% to £365m and the club also returned to profit as Liverpool made a profit of £34m.

At the beginning of the season Anfield was also expanded to 54,074 seats as the club looked to get more supporters into the ground and increase matchday revenue.

It was a conservative transfer window with net cash in of £4m as the club cut the purse strings slightly under the cost restraints of expanding a stadium, fortunately this was not a sign of things to come for Liverpool fans.

In came Mane (£37m), Wijnaldum (£25m), Karius (£6m) and Klavan (£5m) for a combined £72m outlay.

Leaving Anfield was Benteke (£28m), Ibe (£16m), Allen (£14m), Skrtel (£5m), Ilori (£4m), Smith (£3m) and Sakho (Loan – £2m) for a combined £76m.

The signings of Mane and Wijnaldum impressed and adapted seamlessly to Klopp’s tactic with Mane winning Liverpool Player of the Season.

2017/18

In Liverpool’s best year to date under FSG with optimism reaching a climax as Klopp led Liverpool to the Champions League Final. Alongside this was another 4^thplaced Premier League finish. Early 3^rdRound and 4^thRound exits from the League Cup and FA Cup respectively were ignored.

A period of sheer optimism wasn’t slowed by the departure of Coutinho with Liverpool breaking the record for a defender with the signing of Van Djik.

FSG also announced plans to further expand Anfield to 61,000 seats as they look to compete with their rivals.

Transfer wise there was a net cash infusion with £6m entering the coffers however this paints a distorted picture with the signing of Naby Keita confirmed last season however only went through this year whilst the club were building a transfer assault this summer.

In came Van Dijk (£71m), Salah (£38m), Oxlade-Chamberlain (£34m) and Robertson (£8m) for a huge £151m with all the players proven shrewd purchases.

Departing Anfield was a host of players as Coutinho (£113m), Sakho (£25m), Origi (Loan – £6m), Lucas (£5m), Stewart (£4m), Wisdom (£2m) and Sturridge (Loan – £2m) leaving for a combined £157m.

FSG and Klopp were brave in many respects in January, letting Coutinho leave which could have caused massive disruption and going all out in buying Van Dijk for a world record fee (for a defender). It looks to have been the right move and has earned FSG much applaud.

Accounts for the financial performance last year is yet to be released with Liverpool having until next July to release them. We expect revenue to see a huge boost after their Champions League run which makes a return to profitability almost a certainty.

2018/19

This summer could prove to have been a monumental one and a great success as Liverpool look to transition from a Top 4 hopeful to a regular title challenger. Investment in the squad was huge, targeting world-class players in positions of weakness, no more so than in goal after Karius’ Kiev nightmare.

In came Alisson (£56m), Keita (£54m), Fabinho (£41m) and Shaqiri (£13m) for a total of £164m with minimal outgoings outside Ward (£12m).

This investment has meant that optimism has peaked, and the club looks ready to be considered among Europe’s elite again.

Such investment, raised profile and solid financials have seen the club valued at above £2bn to FSG with such a bid rejected as they sense the start of something special.

The future only looks rosy for Liverpool and FSG after many tortuous times.

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August 16, 2018

Premier League 2018 Review – Wages

As Premier League clubs grow richer, so do the players as we saw in our revenue analysis, revenue has increased dramatically and so have wages, rising 18.5% to surpass the £2.5bn barrier.

In this new Premier League world, we have wages of £150k a week as commonplace throughout the league, not just the top 6. Wages rose by over £7.5m per week and this includes the growing wage of directors and key management as their competence off the field grows in importance.

This article analyses the wages of players and directors among Premier League clubs competing in the 2016/17 season.

Who’s Up, Who’s Down?

Wages increased on average by 28.6% as the majority of clubs saw sharp increases due to increased player investment.

The promoted clubs were key contributors here with Burnley (59.4%), Middlesbrough (100.3%) and Hull (104.3%) experiencing the highest growth rates as they looked to align their wages with their newly earned Premier League riches. Interestingly, only Burnley survived despite being considerably more cautious with their wages than the other two.

Chelsea (-1.2%) and Liverpool (-0.6%) were surprisingly the only clubs to experience a fall in wages, albeit very small drops. Chelsea’s sales of high earners Oscar, Cuardrado (Loan), Ivanovic and Mikel were the main reasons for this in a season of few high-profile purchases. Liverpool similarly saw the exit of Benteke, Skrtel, Balotelli and Sakho who were all on high wages as Jurgen Klopp began his rebuild.

Tottenham saw wages grow by 26.9% as they looked to reward their players performances with new, improved contracts such as Kane, Alli and Eriksen. The purchases of Sissoko, Janssen and Wanyama supported this growth with the only high-earner to depart being Chadli.

Manchester City financial growth saw no signs of slowing down as wages grew by 33.5% as the Guardiola era began with a summer transfer spree featuring minimal departures as surplus players entered the final year or two of their high paid contracts, we expect wage growth to fall as these players depart at the end of their contracts.

Rivals Manchester United experienced a smaller rise of only 13.5% despite the high-profile purchases of Pogba and Ibrahimović due to a number of departures and the relative size of their wage bill already.

Leicester rewarded their Premier League winning squad with substantial pay rises leading to wage growth of 40% as the likes of Vardy, Mahrez and Schmeichel signed new deals which was added to by new higher profile players.

On the low side alongside Chelsea and Liverpool were Sunderland (0.6%) and Stoke (3.2%), possibly signalling they were worried about their soon to be relegations and were preparing for as much.

In absolute terms, the average wage rise was £375k per week, or £19.5m a year. Leading the way however was Manchester City’s astronomical rise of £1.3m a week in wages after their transfer spree to introduce Guardiola to the Premier League.

Crystal Palace saw wages rise £600k a week after the introduction of Sam Allardyce who used the winter transfer window to significantly strengthen the squad with a sizeable investment, a tactic that ultimately worked as they secured survival.

Middlesbrough also experienced a £600k a week increase but were unfortunately much less successful in doing so after suffering relegation and the unenviable wage reduction strategy required. Wages are likely to fall automatically as relegation wage clauses come into effect.

Tottenham significant contract renewals contributed to wages rising by £517k a week as Harry Kane and Co became richer after another top 4 finish for the club.

Manchester United saw wages rise by £600k a week despite a relatively small % increase due to the enormous size of their wage bill to begin with.

As mentioned, on the other end of the scale is Chelsea and Liverpool who saw minimal wage drops per week of £50k and £15k, remaining relatively stable in terms of wages after offloading deadwood.

Arsenal also remained relatively stable with wages growing by £77k a week, a minimal 2% increase for the club.

Wage to Revenue Ratio

A key performance indicator for all clubs, the wage: revenue ratio is key to a club in measuring financially stability and prudence. A high ratio suggests overspending, making profitability almost impossible whilst a ratio too low suggest over cautiousness and a failure maximise the use of resources. The average is 57% and most clubs will be aiming for a ratio of 50-55%.

The ratio shows a clear trade-off between risk and reward with clubs having to balance the need to grow and meet their targets and their financial future. Clubs near the bottom of the Premier League are likely to have higher ratios due to their lower revenues, however these clubs still spend an awful lot on wages due to the riches of staying in the Premier League.

Those higher up the table pay higher wages but see relatively higher revenue – which is what those spending large near the bottom are aspiring to.

Crystal Palace have the highest rate at 78.5% after their huge spending in the winter transfer window to preserve their Premier League status, a gamble that paid off but also potentially jeopardised their future, however such a gamble has enriched those at the club including senior management (more on this later).

Swansea’s was nearly as high at 77.3% due to low revenue and relatively high wages, a situation we hope they have remedied in 2018 after relegation which will cause this key ratio to increase.

Tottenham much discussed wage policy sees them achieve the lowest ratio at 41.4% as Daniel Levy continues to run a tight ship, something he is proud of considering their recent domestic performances, an increase in revenue will however help them increase their wages more in line with their rivals.

North London rivals Arsenal are 3^rdon the list at 47.6%, another club who are notoriously known under Wenger to watch the purse strings, it must be something in the water up in North London!

Manchester United despite have one of the largest wage bills in world football have a wage to revenue ratio of only 45.3% due to the huge revenue they generate, showcasing that potentially player investment and huge wages leads to larger revenue, a model that Manchester City seem to have adopted in their earlier years.

Chelsea at 60.8% have the highest ratio due to providing players with historically high wages whilst also stockpiling young talent meaning they have more player wages on their books.

Liverpool (57%) and Manchester City (55.8%) complete the top 6 who all have lower than 61% ratios which is around the ball park most clubs should be.

Other than Chelsea, Crystal Palace and Swansea, the only other clubs with ratios above 60% are Everton (61.1%), Southampton (61.2%), Stoke (62.5%), Sunderland (66.8%) and Watford (60.3%), all clubs with aspirations of growing despite Sunderland and Stoke’s recent troubles.

Of the rest, Burnley’s low ratio (50.5%) should be commended due to their performances in 2017 and 2018. Outside of those already mentioned Bournemouth (52.4%), Hull (52.4%), Middlesbrough (53.5%) and West Ham (51.8%) all have ratios below 55%.

Rich Directors

Directors and key management staff are becoming increasingly vital to the success of football clubs with their business acumen key in driving revenue from off the field sources. The work of many executives has been praised in both the transfer market and in raising the profile of their club. A good executive can propel a financially ruined club into a viable business and footballing success.

This is apparent in the fact that directors’ salaries rose 19% to £41.5m despite not playing a minute of football, with the average salary being just under £4m, working out an average of £72k a week which is a respectable Premier League footballer wage.

However, note that director salary disclosures in the accounts may not show the full picture with some directors paid in other opaque companies and through other means which are hidden and difficult to locate so the numbers here are likely to be understated to some degree.

The highest director compensation paid was by Manchester United unsurprisingly considering their global profile and stock listing. Manchester United directors were paid £12.5m last year with this including stock options that may be more valuable than recorded currently.

Tottenham are the next closet some way behind with payments of £9m with Daniel Levy paying himself £6m as a golden pat on the back for the recent successes of the club that few would argue with despite his insistence of being more prudent than that on his players.

Arsenal also pay highly with directors being paid £3.4m despite performing poorly as of late.

Liverpool’s directors were paid relatively poorly compared to their above rivals, receiving a meagre £1.6m.

Chelsea and Manchester City had minimal values in their accounts. This may have to do with Chelsea having no CEO for the majority of the year and until the appointment of Guy Laurence. The payments for other key management were likely to not have been disclosed and as such no analysis can be performed. There is a similar story for Burnley as well.

The lowest outside of this appears to be Hull with payments of only £185k made to directors.

Also, below £1m were Leicester (£325k), Stoke (£806k), Swansea (£634k) and Watford (£571k). The most surprising club here is Leicester due to the absence of any significant rise in director payments despite the incredible season they recently had.

Crystal Palace have a notably high compensation package for directors with wages paid to directors of £2.4m, with Steve Parrish paying himself all of that as the club’s only director after the club steered clear of relegation last year, a controversial decision by the Mr. Parrish.

Wages Summary

There was £2.5bn in wages last year, an eye-watering £48.1m a week with Premier League clubs incurring an average wage bill of £125m. The Premier League Top 6 account for a huge 51% of total wages, showing their unparalleled financial power.

There was a change at the top of the wage bill chart as Manchester City’s continuing financial growth saw them shell out £264.1m in Guardiola’s first season, overtaking Manchester United who paid out £263.5m in wages.

Chelsea (£219.7m), Liverpool (£207.5m) and Arsenal (£199.4m) follow at around the £200m mark as they continue to pay players top dollar to maintain their power and clutch of world class players.

The ever-rising Tottenham lag their rivals yet again in this department, paying out ‘only’ £126.9m on wages due to Levy’s tight wage policy, a strategy that may see them struggle to keep competing with their rivals.

Burnley must be commended for their comfortable survival despite operating the lowest wage bill in the Premier League of £61.2m.

Bournemouth (£64.9m) and Hull (£61.3m) were the only other clubs with wages under £70m.

On the other end of the scale, Leicester (£112.6m), Everton (£104.7m), Crystal Palace (£111.8m) and Southampton (£112.4m) were the only clubs outside the top 6 with wages exceeding £100m.

With this all said, wages are likely to continue increasing as the amount of revenue continues to rise in the Premier League and player wage demands continue to rise and the price of relegation becomes costlier. Wages are likely to increase to around £3bn in the coming year.

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August 13, 2018

The True Costs of Transfers

Premier League True Summer Transfer Cost

The True Costs of the Premier League 2018 Summer Transfer Window

The Premier League transfer window has officially shut with over £1.2bn spent by Premier League clubs ahead of the new season.

Clubs have to be wary of Financial Fair Play when purchasing players to avoid penalties and bans (for more on this click here) and also need to ensure they are running sustainably for their owners etc.

This brings us to this article, which will explain the true costs of transfers from the 2018 summer transfer window explained briefly below:

When clubs sign a player, from an accounting perspective this is not all charged in the year of the transfer as the payments are matched to how the player will be used. So, a player signing for £50m on a 5-year contract is deemed to cost the club £10m a year, known as the amortisation cost. This is the true costs of the transfer per season for the club.

Another key element is player sales. In this regard the profit the club gain is not simply the transfer fee received minus the transfer fee paid, it is the transfer fee received less the remaining value of the player sold. So, for a £50m player on a 5-year contract, he will be ‘worth’ £50m minus the amortisation charges to date, so after two years of charges, the player will be ‘worth’ £30m. Hence, should a player be sold 2 years later for £50m, a ‘profit’ of £20m will be recorded, rather than nothing like many people believe.

This article will analyse each Premier League club’s business and compare to their counterparts.

Due to the availability of data, this excludes the costs of loans and player wages. All transfer fees and contract lengths are via Transfmartk.co.uk. In order to simplify the amortisation costs, we have ignored contract renewals which make the calculation more complex without much added insight.

Let’s Not Talk About Spend, Let’s Talk About Net Spend

Premier League clubs had an active transfer window despite its shortening, spending over £1.2bn, receiving only £353m in return, leaving the club with an astronomical net spend of £909m.

This was due to higher spending by certain clubs, with Liverpool leading the way by a distant after investing heavily following their Champions League heartache with Naby Keita, Fabinho, Alisson and Shaqiri joining while only Danny Ward left, leaving the merseysiders with a net spend of £151m.

Fulham became the first promoted club to ever break the £100m barrier after a barnstorming transfer window with 7 players arriving for transfer fees and only 1 leaving. This led to the club having a net transfer spend of £101m with Seri the pick of the players signed.

Fellow West Londoners Chelsea had the third biggest net spend at £92m after breaking the world transfer record for a goalkeeper in the £72m paid for Kepa after losing Courtois to Real Madrid and they also signed Jorginho.

Manchester United and Manchester City had quiet windows with both making one big purchase a piece with Fred joining United (along with Dalot and Grant) and Mahrez joining City.

At the other end of the scale were Watford with a net transfer spend of minus £23m after not reinvesting all of their Richarlison windfall. Newcastle also were in the black after recording a net transfer spend of minus £13m as Mike Ashley used transfer cash received to purchase House of Fraser rather than reinvest in the Toon.

Additional Amortisation Costs

Premier League clubs face additional transfer costs of £275m this year alone after a huge transfer spend of over £1.2bn, with this cost spread of the players signed contracts which average at just over 4-year contracts.

Amortisation costs are, as explained above, based on transfer spend and contract lengths and as such the costs are higher for larger spends and also higher when contract lengths are shorter. A key example is Kepa, a £72m keeper who signed a 7-year contract, costing Chelsea just over £10m a year. While Mahrez, a £61m purchase on a 5-year contract cost Manchester City more at just over £12m a year despite the smaller transfer fee.

Liverpool unsurprisingly lead the way after their impressive transfer window where they spent £164m with Alisson signing a 6-year contract while Keita, Fabinho and Shaqiri signed 5-year deals. Liverpool will have additional costs of £31m after these deals.

Fulham had the second highest net spend after their £105m 7 player splurge with contracts lengths 4 years on average, bringing amortisation costs of £24m over that period.

Leicester despite their relatively small net spend have a large transfer costs due to their £103m spend with the Mahrez deal diluting their net spend after the club reinvested the Mahrez cash and then some, leading to an amortisation cost of £22m.

Chelsea and West Ham also had large amortisation costs above £20m after their productive transfer windows.

Tottenham were at the other end of scale after an inactive transfer window, becoming the first club since the transfer window came into effect in 2003 not to purchase or sell a player.

Crystal Palace were the only other club to have an additional amortisation cost below £5m.

Amortisation Costs Savings

Premier League clubs saved £41m on amortisation cost after after player sales of £353m with many players sold either brought cheaply or have been long serving players that no longer attract amortisation costs after staying longer than their original contract.

Amortisation costs savings are driven again by the transfer fee paid when the player was brought and their original contract length. So, for instance Daley Blind signed for Manchester United 4 years ago for £15.8m on a 4-year contract, costing Manchester United just under £4m a year for those 4 years. Now that the 4 years are up, Blind costs United nothing from an accounting perspective, so no amortisation costs are saved and hence no savings included in our calculations.

As such many Premier League clubs didn’t recorded any savings as the players sold had already seen their entire transfer fee amortised. This includes players signed as youths such as Danny Ward at Liverpool or long serving players such as Courtois at Chelsea.

In a couple of situations, players were signed and immediately sold. This was the case for Benik Afobe at Wolves and Mikel Merino for Newcastle. In both these cases the amortisation costs were excluded when calculating additional costs and savings.

Bournemouth were the biggest savers, saving just under £8m after the sales of the after mentioned Benik Afobe to Wolves (before Wolves later sold him to Stoke), Lewis Grabban and Max Gradel.

Everton (£7m), Newcastle (£6m) and Watford (£5.5m) were the only other clubs to save in excess of £5m on player sales after the sales of the likes of Klassen, Mitrovic and Richarlison.

Burnley, Cardiff, Crystal Palace and Tottenham sold no players hence the reason for their lack of amortisation costs savings.

Chelsea, Liverpool, Manchester United, Southampton and West Ham also had no amortisation costs savings despite player sales due to the players sold having been at the club for at least their original contract lengths such as Courtois, Danny Ward, Blind, Tadic and Kouyate.

Profit, Profit, Profit (Or Loss)

Premier League clubs due to this made profits on their sales of £247m after selling players for £353m, a 70% return on investment.

When players are sold, as seen above, this may not lead to amortisation costs savings if the players amortisation costs were low due to the price paid or they have been at the club a long time.

This doesn’t mean they receive nothing, as the amount earned is recorded as a profit on player sales. This is recorded as the transfer fee received minus their remaining value as explained in the introduction. However, to avoid you having to scroll up, here is an example from this season using Courtois.

Courtois cost Chelsea £8m 7 years ago on a 5-year contract, costing the club £1.6m a year initially. Each year he is worth less of his transfer fee, so after 1 year he is worth £6.4m and after 2 years £4.8m etc. After 5 years he is worth essentially zero, at this point when he is sold the transfer fee received is all profit, so Chelsea record a profit of £31.5m.

Clearly the biggest benefiters here were Leicester after their sale of Mahrez was essentially all profit and hence the club recorded a profit of £67.1m.

Chelsea also benefited as described above, whilst Watford were the only other club to record a profit of more than £30m after their sale of Richarlison.

Everton were one of only two clubs to make a loss after the costly purchases of Klassen and Funes Mori who they both made a loss on after buying them recently and then selling on the cheap. Leading to a loss of £3.8m.

Arsenal also made a loss on the flop transfer of Lucas Perez, diluted slightly by the sale of academy graduate Akpom.

Burnley, Cardiff, Crystal Palace and Tottenham made no transfer sales and hence recorded no profit or loss this year.

The Summary – The True Cost

To work out the true cost of this transfer window we use the following formula:

Additional amortisation costs – Amortisation costs saved -/+ Profit/Loss on player sales.

This gives an interesting picture for Premier League clubs with a net transfer costs of minus £13.9m! Meaning Premier League clubs as a whole have saved on transfers this year from a Financial Fair Play perspective.

This is heavily skewed due to the net savings made by Leicester, Watford and Newcastle in particular.

Leicester, due to the Mahrez deal have made a saving of approximately £50m after their new signings, while Watford and Newcastle have also saved in excess of £20m.

Both Manchester clubs are in the black after making one big purchase each and selling a couple fringe players.

Chelsea are also in the black after selling Courtois.

Fulham have the highest cost of £20m after their sensation transfer window in which they spent hugely for a Premier League newcomer, making a statement on their ambitions.

Liverpool were unsurprisingly up there with a net cost of £18m. Everton and Arsenal were the only other clubs with a net cost exceeding £15m.

To put this all into perspective there is a mismatch. The profits received are all given in the period of sale, while new transfers are spread over their contract. This means that Chelsea, despite making a profit on Courtois, and hence their net costs are negative, will indeed see amortisation costs rise in the long run as next year they will not have that Courtois profit.

The same is the case for amortisation costs saved, for some of the players sold, they may only have had one more year of amortisation costs and as such this saving will not be there next year and hence they will see amortisation costs rise the following year.

Amortisation costs have risen over the years and will continue to as long as clubs net spends are still as large as they are.

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June 24, 2018June 29, 2018

Premier League Financial Review – Summary

Here is your summary of Premier League financial performance for all Premier League clubs in 2018. As financial accounts are released one year in arrears, finances are based on 2017 season performance. In depth summaries of these finances are available by clicking the club’s name or the infographic.

Arsenal – Wenger’s Wonga

Bournemouth – Finances With a Cherry on Top

Burnley – Marking Their Turf

Chelsea – Riches of Champions

Crystal Palace – The Price Of Survival

Everton – Stuck Toffees

Hull – Tigers Timid Roar

Leicester – Foxes’ Fortunes

Liverpool – Top 4, Top Finances

Manchester City – Sky’s The Limit

Manchester United – No Top 4, No Problem

Middlesbrough – Down The River

Southampton – Saints Keep Marching On

Stoke – Cold, Wet and Windy But Safe

Sunderland – Out of Lives

Swansea – Survival Swans

Tottenham – White Cash Lane

Watford – Honest Hornets

West Brom – Unusual Addicks

West Ham – Ambitious Hammers

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March 12, 2018

Financial Football News Round-Up Edition 17

Financial Football News Weekly Round-Up 17

Here is your weekly financial football news round-up to keep you up to date with all things financial football! This is your round-up for the week commencing 5th March 2018, featuring Amazon, Manchester City, Bundesliga, Chinese Super League, Liverpool, Leicester and Wolves.

Amazon Infiltrate La Liga In New Documentary

Amazon continue to increase their presence in football with the consumer giants set to produce a documentary on La Liga.

The documentary, Six Dreams is to feature Atletico Madrid midfielder Saul Niguez and Athletic Bilbao forward Inaki Williams among others, following their day to day activities aimed at the Spanish football fans.

Amazon are producing similar documentaries with Manchester City and Juventus having completed one for Argentinian giants Boca Juniors, with rumours of a second series of Six Dreams featuring Real Madrid and Barcelona already rife.

The documentary is scheduled for a 2018 fall release.

Serie A Have A New Chief In Town

Gaetano Micciché has been unanimously approved as the temporary president of Italy’s Serie A by all Serie A clubs as the Italian league look to overhaul the division to better compete with their European rivals.

Micciché is presently the chairman of financial services group Banca IMI and will be hoping to bring a fresh look at the troubled league that with the exception of Juventus, have failed to progress on and off the pitch.

Their new TV deal significantly lags those experienced in Germany, Spain and England and will need a long term strategy to bridge the gap.

Manchester City Agree US Barclays Deal

Barclays have agreed a sponsorship deal with soon-to-be Premier League champions Manchester City to be their sponsor during their US preseason tour, where they compete in the International Champions Cup (ICC).

Barclays branding will appear on interview backdrops during pre-season player and manager interviews, while Barclays will hold various competitions and offers during the tournament.

IMG Win Chinese Super League TV Rights

Global sports agency IMG has agreed a three-year extension with the Chinese Super League for the distribution of the global TV rights to the upcoming league.

The new contract also includes in-flight rights, while IMG will also advise the Chinese Super League on television production for the league.

SWM Motors Secure Chinese Team’s Name

Continuing on a successful commercial week for the Chinese Super League, SWM Motors have also signed a sponsorship deal with the CSL club Chongqing Dangdai Lifan to rename the club!

The club will be named Chongqing SWM until 2020 for a fee of £21.3m, something that would cause complete outrage in England but is seen as financially wise in the forward thinking Chinese Super League.

Bundesliga are Completely Sleeved After Freiburg Deal

Freiburg have become the final Bundesliga side to sign a sleeve sponsor, signing a deal with energy company Badenova.

This means all Bundesliga clubs next season will sport sleeve sponsors, the first league to do this. The Bundesliga have done a good job of remaining financially competitive despite low TV rights compared to Spain and England and this is just another example of that impressive feat.

Wolves – Foul or Fair Play?

Wolves inevitable pursuit to the Premier League has hit a bump in the road after Championship clubs complained of Financial Fair Play, with accusations of suppressed transfer fees for their star players so they can

Wolves connections through super agent Jorge Mendes has lead to some of Europe’s top young talent now plying their trade in the Molineux Stadium such as Ruben Neves and Diego Jota, players who have been linked with top Premier League clubs for fees larger than they paid in the past.

Wolves are “entirely comfortable” with their compliance with Financial Fair Play. We will watch this develop with intrigue and keep you up to date with developments.

Flurry of Financial Statements

In a big week of financial announcements the following clubs have released their financial results:

Premier League

Leicester

Liverpool

West Ham

Watford

Championship

Cardiff

Ipswich

Nottingham Forest

QPR

Reading

Sheffield Wednesday

Wolves

League 1

MK Dons

Rotherham

We will be analysing all these accounts at FFN, stay tuned !

Directors On The Move

A new feature! Here is a list of Director movement at Premier League and Championship clubs this week:

Chelsea
- In: Jonathan Guy Laurence
West Brom
- In: Mark Jones Jenkins
- Out: Richard Garlick

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March 9, 2018June 24, 2018

Liverpool Financial Review 2018

Liverpool had a great season on and off the pitch, after a long hiatus from the Champions League, Liverpool returned to the Champions League after a 4th place finish in the Premier League much to the delight of their fans.

Disspointingly Liverpool finished another season trophy less, something they can improve on and will be target in the coming seasons as they look to build on the success Klopp has experienced to date.

Off the pitch, Liverpool returned to profit in spectacular fashion, making a profit of £39.2m after a loss of £21.4m in the previous year, this was despite no European football for Liverpool in the 16/17 season.

Revenue was on the rise, increasing 20.7% to record levels while expenses also fell by 3.1%, creating the perfect storm for a profitable year. Liverpool fans will be hoping to see this profit utilised (plus the Coutinho money) in the summer as they look to kick on and challenge for the Premier League.

This article will analyse the financial performance of Liverpool in the promising 16/17 season.

Revenue Analysis

Revenue rose to record levels for Liverpool, rising 20.7% to £364.2m from £301.7m.

Revenue compromises income from matchdays and gate receipts, TV broadcasting revenue based on televised games and competition finishes and commercial revenue from merchandise and sponsorship’s.

Revenue rose well on all three fronts with the stand out being a 24.8% increase in broadcasting revenue, a similar theme among Premier League clubs this year with the new record breaking TV deal in effect for the first time. A 4th place finish and the extra income from the deal offset any loss in income from a lack of European football. Broadcasting revenue was £154.3m (2016: £123.6m).

Commercial revenue rose an impressive 17.9% to £136.4m from £115.7m after a successful year of bringing in new sponsorships, capitalising on the popularity of the teams playing style as well as the ‘Normal one’ Jurgen Klopp.

Matchday revenue also rose significantly to £73.5m from £62.4m, a 17.8% increase. This was mainly due to the expansion of Anfield that was completed at the beginning of the season, a further expansion next season will see this figure rise even further.

We expect Liverpool to continue to increase revenue due to the growing popularity and success of the club. Liverpool are well placed for another top 4 finish and are enjoying a successful Champions League campaign, which will boost broadcasting revenue. This success will also help ensure more lucrative commercial deals and an excited fan base will spend more on matchday in a bigger Anfield.

Expense Analysis

Expenses fell ever so slightly from 2016 record levels by 3.1% to £319.7m from £329.9m.

This decline was primarily due to a fall in player amortisation cost of 9.5% due to a number of outgoings at the club. For more information on the ins and outs of amortisation costs, click here.

Depreciation on fixed assets (machinery, stands etc.) rose by a remarkable 80% on the back of the Main Stand expansion due to the amount of equipment needed to build the stand expansion.

Wages remained fairly stable falling slightly to £207.5 from £208.3m, with new players wages offset nearly perfectly by a number of outgoings.

Net interest costs rose 35.9% to £5.3m from £3.9m due primarily to an increase in bank loans of £18m.

Liverpool had a lower tax expense for the year surprisingly despite making a profit compared to last year’s loss. This was due to the club making a profit abroad and having to pay foreign tax on this income which amounted to more than the tax payable in the UK this year due to losses available to offset the profit made this year.

Liverpool paid UK tax of £0.7m this year on their £39.2m profit, an effective tax rate of a measly 1.8%.

Transfer Analysis

Liverpool recorded their first negative net spend in years while achieving one of their best seasons in this period to the delight of their owners FSG.

Liverpool brought in 6 players for a combined transfer fee of £71.9m with none particularly disappointing, especially when considering their respective transfer fees.

In came Sadio Mane (£37.1m), Wijnaldum (£24.8m), Karius (£5.6m) and Klavan (£4.5m) with Matip and veteran keeper Manninger joining on free transfers. Sadio Mane impressed considerable as their (at the time) record transfer, while Karius failed to cement himself as Liverpool No.1.

Outgoings were considerable, with 11 players departing the club for £76.4m.

Out went Benteke (£28.1m), Ibe (£16.2m), Allen (£14m), Skrtel (£5.4m), Illori (£3.9m), Luis Alberto (£3.6m), Brad Smith (£3.2m) and Sakho (Loan: £2.1m). Controversial Balotelli, Toure and Texiera all left on free transfers, freeing up wages for all their new recruits.

None of the outgoings were missed with Luis Alberto the only player where a higher transfer fee may have been possible.

Asset/Debt Analysis

Debt rose 10.9% in the current year to £182.9m from £164.9m due to a rise in bank debt of £18m while cash fell 51.2% to £4m from £8.2m, with Liverpool not traditionally being a cash rich club.

Net debt hence rose 14.2% to £178.9m from £156.7m after bank debt rise 34.5% to £71.7m from £53.3m.

Liverpool are also committed to purchasing £11.5m in fixed assets for training and stadium improvements as the Liverpool continue to invest in the club.

Cash this year was spent on fixed assets (£52m) with a net cash outgoing of £38.8m despite the negative net spend due to transfer arrangements agreed.

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February 12, 2018February 12, 2018

Financial Football News Round-Up Edition 13

Financial Football News Weekly Round-Up 13

Here is your weekly financial football news round-up to keep you up to date with all things financial football! This is your round-up for the week commencing 5th February 2018, featuring the Premier League, Champions League, Bayern Munich, Manchester United, Alexis Sanchez, Liverpool and Hartlepool.

Premier League TV Deal First Round

The deadline for the first round of bids for Premier League TV rights for 2019 – 2022 passed this Friday with technology giants Facebook, Google and Netflix declining to bid, seeing this bold step into televised football as a step too far currently.

There is growing speculation of an Amazon bid for one of the smaller packages, however the usual suspects Sky and BT are expected to lead the way in live games taken. There is a record 200 Premier League live games available each year for the next 3 seasons.

Football Fans Save Hartlepool

Football fans united to remarkably save Hartlepool’s future by raising the £48k necessary to pay overdue taxes to HMRC to avoid a winding up order coming into effect.

Hartlepool fan Rachel Cartwright set up a just giving page which was promptly filled as Hartlepool fans contributed before it gained publicity and football fans worldwide all came together to help a club in need, and ended up raising nearly double the £48k needed.

Hartlepool will be hoping the worst is behind them now after a terrible twelve months where they were relegated from League 2, dropping to the conference for the first time in 96 years.

Priceless – Mastercard Renew Champions League Deal

Mastercard continue their synonymous partnership with the UEFA Champions League by renewing their deal for 2018 – 2021.

This is the fourth cycle that the two companies will be intertwined with their partnership starting as early as 1994 and are the exclusive payment partner of Europe’s biggest cup competition.

They join Pepsi, Heineken, Nissan and Satander in agreeing commercial deals with UEFA for 2018 – 2021.

North American 2026 World Cup Economic Study Supports Bid

Boston Consulting Group have released a report stating that a North American 2026 World Cup could bring in $5bn of economic activity to the area.

The United States, Mexico and Canada are combining to bid for the 2026 World Cup and such news will excite these countries officials with the competition expected to be able to support 40,000 jobs across the region.

The 2026 World Cup is to be the biggest in history with a record 48 teams competing for the World’s most prestigious football trophy.

Bayern Check-In with Marriott Hotels

Marriott Hotel, the largest hotel chain in the world have become the Official Hotel Partner of the Bundesliga giants Bayern Munich until 2020.

Bayern are perhaps surprisingly the most commercial club in the world, bringing in the most commercial revenue of any club and this will only enhance that by joining forces with another leading brand in their industry.

The partnership will involve the build of a custom-built executive box at the Allianz Arena as special offers for Bayern fans and Marriott club members.

Neymar Electrifies TCL

Brazil’s £200m Superstar Neymar has signed a new endorsement deal to be a brand ambassador for Chinese electronics company TCL.

This is another commercial success for the ever-growing Neymar brand, who is also enjoying a stunning year on the pitch after signing for PSG who are romping to the French Ligue 1 and our one of the favourites for the Champions League.

Manchester City Transfer In AvaTrade

Manchester City and AvaTrade have announced a multi year sponsorship where AvaTrade will become Manchester City’s Official Online Trading Partner in China, Asia and Latin America as Manchester City look to grow their presence worldwide.

AvaTrade is a leading online brokerage and will gain brand exposure through exclusive offers and giveaways for Manchester City experiences to their customers.

This is just one of a number of recent commercial deals signed by the Premier League Champions in waiting as they look to grow commercially and financially.

Adidas Win From Sanchez Deal

Manchester United have announced that the signing of Alexis Sanchez has smashed their previous record shirt sales by 3 times the prior record.

The huge domestic transfer has undoubtedly cause a buzz with Manchester United beating their Manchester rivals to the signing of their domestic rivals best player, creating a huge demand in shirts with the No.7 on the back.

It is an even more outstanding feat being mid season, with most fans purchasing their kits at the beginning of the season.

This news will be music to the ears of Adidas who will profit the most from the deal, gaining most the shirt sale revenue as part of their £75m a year deal with Manchester United, and will be hoping to recoup a sizeable portion as part of this deal.

MediaPro Win Serie A Race

Spanish Media Company MediaPro have won the race for the Italian Serie A rights for 2018 – 2021, paying €1.05bn the minimum threshold required by Serie A who will be slightly disappointed but also relieved the process is over.

Sky Italia missed out and not one to go quietly are calling on Serie A to reject the deal as they claim MediaPro will not act as the actual broadcaster, with MediaPro rumoured to be planning to help Serie A launch its own channels, taking care of scheduling and editorial matters, making them a glorified intermediary.

Sky will be hoping their challenge is successful as they look to continue their stranglehold on televised football.

Alexis Sanchez Avoids Prison Time

Alexis Sanchez is the latest player to fall foul of Spanish tax law after accepting a 16 month suspended jail sentence for tax fraud, avoiding a trial in the process.

The case relates to unpaid taxes amounting to £886k from image rights deals in 2012 and 2013 during his time in Spain at Barcelona. The Chilean’s agent has denied his client any wrongdoing and had “fully obeyed” laws and his image rights income “has been declared”.

Liverpool Petro-Canada Lubricants

Liverpool have announced a three-year deal with Petro-Canada Lubricants with the Canadian lubricant manufacturer being able to offer exclusive Liverpool offers for its customers.

Manchester United Second Quarter Financial Results

Manchester United announced their second quarter results this week, with revenue up 4% on last year due mainly to increased broadcasting revenue (up 17%) from a return to the Champions League and more Premier League live games than last season at this stage.

Profits before tax were down nearly 5% due to rising costs suffered by the Manchester Club despite record revenues.

Debt levels were down 20%, leading to financing costs falling an incredible 64.2% which will seem to be a step in the right directions for the heavily financed Premier League giants.

As a publicly listed company in America, Manchester United are required to report their financial performance every 3 months, with an annual financial performance review in the final quarter of their financial year.

For a detailed review of their second quarter performance click here.

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February 7, 2018February 7, 2018

You’ve Been Sponsored

Sponsorship revenue is a major source of income for premier league clubs and has been increasing year on year. Commercially vital to clubs, major sponsorships provide revenue of a long period due to the contracts usually being over a few years. This year club sponsorships brought in £282 million in revenue for premier league clubs before taking into the various partnerships they also delve into. This article will will go into detail about the types of industries that are attracted to invest and sponsor football clubs. We will also look at kit manufacturers and the role they play in football finance.

Football sponsorship has changed immensely over the years. Looking at the last 11 years (2007 – 2017), Beer has diminished as a large purchaser of sponsorships with no current club having a beer manufacturer as a sponsor. Betting companies have dominated as of late with a high of 9 companies donning sponsorship deals in 2016/17 season, nearly half of all clubs. This makes perfect sense being that football fans represent a key audience for betting companies. Interestingly, this space is not dominated by the largest, most well-known betting companies (other than Bet365 and BetWay), rather overseas and casino gambling companies being the most keen sponsors. It would be interesting to see if the likes of Paddy Power and Ladbrokes decide to enter this space in the future.

Financial services companies are aiming to fill the gap left since Barclays no longer sponsor the Premier League. Banks, Insurance and pay-day loans companies are all present here and the financial sector has been ever present in the sponsoring premier league clubs, with at least 3 on average in each of age last 11 years.

Airlines are another major part of the football clubs with two of the largest clubs, Arsenal and Manchester City representing the industry. Both have long standing partnerships with their respective airline.

Other industries to have sponsored Premier League clubs over the years include Sports fashion, Charities, Automobiles and confusingly a Zoo!

As mentioned, sponsorships are a huge source of cash for the clubs with over £282m coming from shirt sponsors alone. Above we have the league table of shirt sponsors. It has a very familiar look to it, with domination from the top 6 who take home over 75% of sponsorship revenue. Man United show their dominance as the most reputable club in English football if not the world, with their Chevrolet deal bring them a handsome £47m a year. While newly promoted Huddersfield and Brighton at the foot of the table with deals of £1.5m each, more than 30 times less than Manchester United.

West Ham can be pleased at being 7th with their BetWay sponsorship bring in £10m a year, this is due to run until the end of this season and they will be hoping a strong showing in the league this season can lead to a similar, if not larger deal especially with the attraction of such of large stadium and tourist attraction for prospective sponsors.

Leicester have a long term agreement with shirt and stadium sponsor King Power and have yet to really cash in their title heroics through this commercial medium.

Interestingly, all London clubs are in the top half of the table, suggesting their is a preference among sponsors to pay a premium to sponsor London clubs, with Crystal Palace above the likes of Newcastle, Leicester, West Brom and Southampton.

Please Stay!

In terms of turnover of club sponsorships, only Tottenham of the Premier League ever-presents has had more than 2 sponsorships, with 6 in the 11 years analysed. Only Arsenal however have not changed sponsors during this period, however most of these changes were after a long period with that sponsor and we suspect their current deals to continue for the foreseeable future. West Brom have a record high of 7 sponsors in 9 years (including 1 year with none), this is interesting as to whether this indicates poor commercial success or just a policy of renewal. This doesn’t seem to be working with their current deal the 4th worst in the league ahead of only newly-promoted Brighton and Huddersfield, and Burnley.

Kitted Out

Kit manufacturer income is another major source of sponsorship income, many large sport brands pay millions to create kits for clubs, profiting from the sales of these. The largest two manufactures are the most well known sports brand in the world, Adidas and Nike. Adidas have seen a huge decline however since their high of 9 kits in 2013 to only 3 in 2017, even losing Chelsea who cut their sponsorship short to sign for Nike last season, paying £67m in the process. The spread of sport companies has diversified in recent years with none dominating as was the case with Adidas, Nike and Umbro in previous years. Umbro were previously a huge producer of kits, making 6 kits in 2007, the largest at that time to none in 2013 before renewing their presence recently with 3 currently rocking the diamond on their kits.

It will be interesting to see how Adidas react to their recent fall, they may decide to attract a large club such as Arsenal to their ranks after missing out on Manchester City who have agreed a deal with Puma for next season.

Speaking of Puma, they lead the way this year for clubs wearing their brand, which has been on a steady increasing trend since 2007.

There is the usual pattern for Kit makers as there is in performance in domestic leagues, the top 6 dominate due to their domestic success and the large fan bases that come with that. The top 6 take home a remarkable 89% of income generated from kit manufacturers.

Surprisingly, Manchester City lag their domestic rivals significantly in the value of their deal with Nike, coming in at only £12m a year compared to the £75m Adidas deal of their Manchester rival or £60m a year deal of Chelsea who also have their kits made by Nike, something that will be rectified once Puma take over in the summer in a £50m a year deal.

Data was unavailable for Huddersfield and Brighton, however we suspect their deals to be around the £1m mark, maybe lower than Bournemouth who are bottom with an £800k annual deal.

Sleeves of Gold

A new phenomenon among premier league clubs is the introduction of sleeve sponsorships, with 17 out of the 20 premier league teams (Arsenal, Manchester United and Tottenham are yet to have one). This has brought in on average £3m a year extra revenue to premier league clubs, for example Liverpool Western Union deal has brought in £5m a year to the clubs coffers. Chelsea have the largest sleeve sponsor deal to date, with an extra £8m year brought in, while at the other end of the scale Huddersfield only bring in £300k in extra revenue from their sleeves.

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