Premiership Financial Review.

Mitch Connor · 29-05-2008 7:46am #1

http://www.telegraph.co.uk/sport/main.jhtml?xml=/sport/2008/05/29/sfndel129.xml

What the Deliotte Annual Review of Football Finance means for the top four and the rest of the Premier League.

Man Utd

1. Manchester United
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The Glazers bought United for £777 million in May 2005, and at the end of the 2006/07 season they were £453 million in debt from bank borrowings - over half of the entire Premier League's total borrowings from banks - and £152 million in debt from other loans.

Although they have regained their Premier League crown, they have done so while spending less Chelsea on wages.

They did record an eight per cent increase in wage payments between 05/06 and 06/07 but that increase was matched or exceeded by 14 of the other Premier League clubs during the same period.

And while their wages increased, their revenue has grown with it. In fact, their absolute growth in revenue over wage surplus was second only to Arsenal.

United are ranked above the benchmark "comfort level" for effective cost management, which is calculated by comparing wages to turnover ratio - the key performance indicator of a club's welfare. They are second only to Tottenham in this regard.

They have the second highest net assets in the League, after Arsenal, with £80 million assets, and they earn the most of all English clubs with £32 million generated through television deals.

They are predicted as having the highest operating profit over the next five years with an operating profit of £239.5 million. United are also second in the list of stadium utilisation for the 2007/08 season with an average turnout of 99.4 per cent of the 75,691 capacity.

While the club had a pre-tax loss of £62,575 in 2007, United earn more from two matches at Old Trafford than Wigan Athletic reap from an entire season of home games.

Chelsea

2. Chelsea

Chelsea have recorded the highest wage bill in the Premier League, hiking their player salaries by 17 per cent between 2005/06 and 2006/07.

The club also have the biggest debt. At the end of the 2006/07 season Chelsea had a net borrowing of £620 million, with a personal loan of £90 million from Roman Abramovich in that season alone, which brought his total investment in the club to £575 million and offset the club's losses after tax of £76 million.

Chelsea were ranked ninth in their stadium utilisation (bums on seats) this season, although it had improved from the previous season. Chelsea did bring in the second highest television payments - £30m for the 2006/07 season.

Arsenal

3. Arsenal

Arsenal recorded an eight per cent increase in their wage outgoings between 2005/06 and 2006/07, although in that season they had the highest surplus of cash after wages had been deducted from the club's revenue.

Arsenal also had the best stadium utilisation this season with 99.5 per cent of their 60,054 capacity used. It is just as well: Arsenal were the major stadium investors in 2006/07 with £34.2 million, while their pricing strategy this season did not increase on the previous one.

But the club have the third highest debt. At the end of 2006/07 their net borrowings stood at £268 million, with the second highest loans balances in the country. They are required to pay £19 million in net interest costs, but that is dealt with comfortably by revenues (match-day revenue doubled to £91 million in 2006/07 alone) generated by the move to the Emirates Stadium.

Also, by refinancing a £260 million loan, the club has reduced its annual debt service cost from £32 million to £20 million per annum. Moreover, the club is predicted to have an operating profit of £103.9 million over the next five years - the second highest in the country. Arsenal also lead Manchester United as the club with the most assets, put at £113 million at the end of the 2006/07 season.

Finally, according to 2006/07 figures, they bring in the third largest amount of money through television rights - £29 million.

Liverpool

4. Liverpool

As of summer 2007, Liverpool had a debt of £43 million in bank borrowings, and £13 million in other loans, although over the next five years they have a predicted operating profit of £98.4 million, the fourth highest in the country.

Tom Hicks and George Gillett Jr bought Liverpool in March 2007 for £218.9 million but burdened the club with debt topping £105 million when their loan was refinanced in January. And the club's 13 per cent increase in wages from 2005/06 to 2006/07 has not been converted into greater success on the pitch in the Premier League.

However, the club were listed as having £20 million net assets before the beginning of last season, and had the third highest stadium utilisation – 98.8 per cent of their 44,721 capacity. Furthermore, they brought in £28 million through television money in 2006/07.

5. Everton:

Everton failed to raise enough revenue to cancel out their wage bill during 2006/07, and in fact were left with a deficit of £8.1 million, despite finishing sixth in the league and being well below the Premiership wage average. The club was also below the league average for stadium utilisation last season.

6. Aston Villa:

Villa finished the 2006/07 season with the fifth highest assets in the country (£35 million) and increased their home match attendances to 94.8 per cent of their 40,375 capacity stadium. They were also one of the top six investors in facilities in that season, injecting £9.9 million. However, their wage expenditure exceeded the income generated from revenue, leaving them £1.2 million in deficit. The club also recorded £63 million of debt in the summer of 2007.

7. Blackburn

While Blackburn have £21 million net assets, they were approaching the "danger level" after the 2006/07 season in their cost management, with 85 per cent wages to turnover.

8. Portsmouth

Portsmouth utilised 97.9 per cent of their 19,905 capacity stadium in the last season, although they are critically close to Deloitte's "danger level" by spending large amounts on their wage bill, without being able to support it with revenues.

9. Man City

City have the third highest net assets in the Premier League - £57 million at the end of the 2006/07 season, although they are £103 million debt. However, they are in a comfortable position regarding their wage to revenue ratio.

10. West Ham

West Ham have £142 million of debt and, along with Newcastle, were the most notable under achiever with regards to wages in 2006/07. Their league position was 15, while they were they were outspent on wages by only five other clubs. This supports the view that the correlation between wages and on-pitch performance is weaker outside those clubs in the top four, and the relegation zone.

11. Tottenham

Spurs are ranked top in the country for effective cost management, calculated by the key performance indicator wages to turnover ratio, and they generated £27 million from television rights in 2006/07 - fifth highest in the Premier League. They come third in the league in terms of surplus cash when wages have been deducted from their revenue, and also third on the predicted five year operating profit table with £70.2 million, as well as having the fourth highest stadium utilisation with 98.4 per cent of White Hart Lane's 35,699 capacity being filled on average. Finally, they had £49 million in net assets as of the end of the 2006/07 season.

12. Newcastle

Newcastle, like West Ham, have generally under achieved in the league despite spending vast sums of money on wages. They finished the 2006/07 season 13th in the league, yet they were the fifth highest club when it came to player salaries. They also have £69 million of debt.

13. Middlesbrough

Middlesbrough were £85 million in debt at the end of the 2006/07 season, and are dangerously close to over-extending themselves with regards to wages.

14. Wigan

Wigan sustained a £14 million deficit in 2007 as their revenue did not match their wages even closely. They are squarely in the "danger level" of cost management.

15. Sunderland

Sunderland won the Championship in 2006/07 with the highest wage bill in the league - a 37 per cent increase on the previous year, but look unlikely to be able to generate enough revenue from match-days as they have an average of just 89 per cent of their stadium capacity filled throughout the season.

16. Bolton

Bolton were left with a £6 million deficit thanks to their wage bill in 2006/07, although they finished seventh in the league.

17. Fulham

Fulham increased their average attendances to 93.4 percent of their 23,670 capacity stadium last season, but as of summer 2007 were £182 million in debt. The club spent £4.6 million on facilities in 2006/07, and were left with a £2.8 million deficit in their revenue after paying player salaries.

18. Reading

The most drastic wage increase in the Premier League was recorded by Reading, who hiked their wage bill by 109 per cent between 2005 and 2007. They also spent £11 million on their stadium and facilities.

19. Birmingham

Birmingham were the second highest in the Championship during the 2006/07 season, being promoted after spending the second highest amount on wages - a 21 per cent increase on the previous year.

20. Derby County

Derby were £30 million in debt after the 2006/07 season, and were 125 per cent for cost effective management (55 per cent is considered safe, 100 per cent "dangerous").
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Pity United are in debt of around 700million - we're going to need more than just "cost effective" management!