Football finance big league beckons for Hull
PROMOTION to the Premier League will catapult Hull City into the top 50 clubs in the world in terms of revenue according to Deloitte’s latest Annual Review of Football Finance.
The club’s triumph over Bristol City in the Championship Play-off Final on Saturday will see its turnover increase from its current level of £16m to around £75m next season according to chairman Paul Duffen, who headed a consortium which bought the club last June.
And that puts it in football’s big league with sports business experts from Deloitte predicting that England’s top 20 clubs will have a combined turnover of more than £2bn next season.
The Deloitte report released this morning reveals that Premier League clubs’ revenues have increased substantially across all areas of their business.
The Premier League now generates more revenue than any other league across each of the three primary revenue categories; matchday, broadcast and commercial.
This has seen clubs recruit and retain the best players and in the season just ended, culminated in two English clubs, Manchester United and Chelsea, contesting the Champions’ League Final for the first time.
Dan Jones, partner in the Sports Business Group at Deloitte, commented: “Domestic popularity, investment in facilities and global reach continue to drive revenue growth for Premier League clubs. The top 20 clubs reported revenues of over £1.5bn for 2006/07 and we estimate this will have increased to £1.9bn for the 2007/08 season just ended.
“So far there is limited evidence that the clubs are translating this revenue boost into improved profits. The record amounts of spending on wages and player transfers were such that operating profitability declined in 2006/07.
With increased television revenues, profitability will have improved in 2007/08, probably to record levels. However, the exact bottom line result achieved will depend on the degree of spending restraint displayed by clubs.”
The amount Premier League clubs spent on wages increased by 13% in 2006/07, marginally ahead of the rate of increase in revenue (11%).
This was in anticipation of the significant revenue uplift for 2007/08, as a result of the new broadcasting rights deals.
In a video interview with TheBusinessDesk.com ahead of the Play-off Final, Hull City chairman Mr Duffen said that the club would invest significantly in players if promoted but the move to the Premiership would mean “we become an enormously profitable business”.
To see the interview click here: http://www.thebusinessdesk.com/news/3025-video-interview-hull-city-chairman-on-premier-ambitions.html
Deloite said that Premier League club’s boost in revenues has also fuelled investor interest, with around 40% of the clubs in the top two tiers of English football having changed ownership in the last couple of years.
Paul Rawnsley, director in the Sports Business Group at Deloitte said: “The global interest in English football from broadcasters, viewers and commercial partners will continue to grow and will add further substance to a business model which remains primarily financially based on a successful domestic market.
“In turn, we expect there will continue to be significant investor interest from around the globe and further ownership changes. The key strategy for earning a return from owning a club appears to be brand value and long term asset appreciation, rather than the more tangible ongoing measure of profitability.”
The report, in its 17th year, confirms that the Premier League clubs remain by far the biggest earners in world football. Other key findings of the Deloitte Annual Review of Football Finance 2008 include:
• English football contributed around one quarter of the total revenue of the European football market of £9.2bn in 2006/07;
• Premier League clubs generated the highest revenue (£1.5bn) of any league in Europe in 2006/07, followed by Germany (£0.9bn), Spain (£0.9bn), Italy (£0.8bn) and France (£0.7bn);
• The aggregate operating profits of German Bundesliga clubs in 2006/07 of £168m exceeded those for the Premier League (£95m) for the first time, albeit the position may have altered for 2007/08;
• Championship clubs’ revenues grew by 3% to £329m in 2006/07. Championship clubs’ aggregate operating losses worsened as wage increases (14%) outstripped revenue growth (3%);
• English professional football’s annual tax contribution to Government is now more than £700m.
As in other sectors of the economy, there is now a greater scrutiny of football’s balance sheet. Alan Switzer, director in the Sports Business Group at Deloitte added: “Whilst there is more debt in the game than ever before, there is also more revenue, and more interest from wealthy investors and financiers. It should also be noted that over one-third of the Premier League clubs’ net debt of almost £2.5bn is of a non-interest bearing ‘soft loan’ nature.
“The English clubs have also invested significantly in stadia and youth facilities over the past decade, with over £1.7 billion of such assets recorded on clubs’ balance sheets. This is in stark contrast to other European leagues like Italy,” he said.
