Thursday, 10 February 2011

Deloitte “Football Money League” – vanity vs. sanity day

Accountants Deloittes today published their annual Football Money League (“FML”) look at club football. The press love the FML and there will no doubt be much comment about who the “richest club” is, who is on the up and who is heading down.

Deloitte’s work is pretty thorough and their numbers are useful for people like me who look at football finance, especially when examining those clubs whose disclosure is poor (hello Chelsea). It is worth remembering however that the FML focus solely on revenue. The “riches” it lists take no account of any of the costs of running a football club. Revenue is not a major problem for participants in Europe’s main leagues, the financial problems of the game are on the cost side.

As the famous business saying goes:
“Revenue is vanity, profit is sanity, cash is reality.”
To help maintain some sanity on FML day, here are some figures for 2009/10 for the seven English clubs who appear in the Top 20 of the FML.

* Arsenal turnover excludes property development
** Liverpool figures assume flat costs on 2008/09 and are proforma to exclude all interest payments (to reflect pay down of debt)
*** Villa figures assume flat costs on 2008/09

So there you can see the real picture of England’s biggest clubs. Only one makes a pre-tax profit (although United would do excluding non-cash goodwill amortisation and last year’s exceptional finance costs).

In total the clubs only make EBITDA of around £149m, a paltry 12% margin. The big loss makers obviously have wealthy owners to bankroll them, but in aggregate, for all the talk of resilience through the recession, English football remains systemically loss making and the only people getting rich are players, managers and agents.