The 92 Premier League and Football League clubs’ capital expenditure in 2014/15 reached £305 million, the most ever invested in a single season. The clubs generated more than £4 billion in revenues for the first time, a new record, according to the 25th Annual Review of Football Finance from the Sports Business Group at Deloitte.
It was another strong year of capital investment in the Premier League with a record total spend of £228m in the 2014/15 season, an increase of £16m (8%). Manchester City (£62m) were the largest capital spenders for the third successive season, as they continue to develop their facilities in and around the Etihad Stadium. Tottenham Hotspur (£43m) invested the second most, with their stadium development project, which includes plans for a 61,000 seat stadium finalised in December 2015.
Other significant expenditure in the 2014/15 season included Liverpool (£36m), who continue to redevelop Anfield as part of a wider project of economic regeneration, and Chelsea (£33m) who have announced plans to build a 60,000 capacity stadium at its Stamford Bridge site.
Total capital expenditure in the Championship increased by 8% in 2014/15 to £53m. Brentford had the highest capital expenditure, spending £16m on their proposed new stadium “Brentford Community Stadium”, which has a projected capacity of 20,000. Watford (£6m) were the second largest spenders in the Championship, with work completing in the season on a new 3,000+ stand at its Vicarage Road stadium.
Of the £21m of capital expenditure in League 1, three-quarters relates to the £16m investment Bristol City have made for the redevelopment of Ashton Gate.
£3m was spent on capital expenditure by League 2 clubs, almost half (£1.3m) in relation to Portsmouth’s new training base in the city.
Dan Jones, Partner in the Sports Business Group at Deloitte, comments:
The pace of football’s financial growth in two and a half decades is staggering. By half-time of the second televised Premier League game next year, more broadcast revenue will have been generated than during the whole of the First Division season 25 years ago. It is particularly reassuring to see that clubs are looking to spend on improving stadia and infrastructure.
The impact of the Premier League’s broadcast deal is clear to see. For the first time, the Premier League leads the football world in all three key revenue categories – commercial, matchday and broadcast – and this is driving sustainable profitability. When the enhanced new broadcast deals commence in the 2016/17 season, operating profits could rise as high as £1 billion.
Deloitte envisages that clubs will continue to look to facilities and stadia investment as a way of investing in their future. The 25th Annual Review of Football Finance states:
We expect more clubs will increase their capital expenditure in the coming seasons, taking the opportunity to increase the capacity of their stadium, as well as investing in their training facilities in an attempt to attract players and gain competitive advantage over their rivals.
A ‘build it and they will come’ approach to stadium development – based on hope as much as evidence – is a risky approach that we have always advised against. Clubs must equally be wary of a ‘build it and they will pay’ assumption in respect of new stadia driving average revenue per seat. Ensuring financial viability for a stadium (re)development is therefore key to ensure schemes are cost effective, with realistic assumptions about achievable ticket prices, return period and the balancing act of filling the new stadium, maximising revenue and being attractive to fans on pricing.”
Capital expenditure breakdown in hundreds of millions. Courtesy 25th Annual Review of Football Finance from the Sports Business Group at Deloitte.
Premier League clubs once again saw record revenues, generating £3.3 billion as the league continues to benefit from the current broadcast rights cycle, which began in 2013/14. The lucrative broadcast deals have also helped clubs to record a second consecutive year of pre-tax profits in 2014/15, the first time this has happened since 1999.
Despite the revenue increase being modest (3%) when compared with wage costs growth (7%), Premier League clubs’ operating profitability was still the second highest it has ever been and almost seven times the average of the five years to 2012/13.
Other key findings of the Deloitte Annual Review of Football Finance 2016 include:
· The Premier League remained Europe’s most profitable league in 2014/15, followed by the Bundesliga and La Liga. In contrast, clubs in Italy’s Serie A and France’s Ligue 1, generated combined operating losses;
· Premier League clubs’ combined gross expenditure to acquire players was a record-high of £1.1 billion in the 2014/15 season;
· Premier League clubs’ net debt remained at £2.4 billon with interest-free soft loans, usually from the owners, accounting for 75% of the total;
· The Government’s tax take from the top 92 professional football clubs in 2014/15 was around £1.5 billion, up from £1.4 billion the previous season.
Although the wages/revenue ratio has increased for the Premier League clubs, Jones does not see this as cause for concern: “Wage costs grew at a faster rate than revenues in 2014/15 and as a result the division’s wages/revenue ratio rose from 58% to 61%. However, this represents the second lowest level since 2004/05 and is ten percentage points lower than in 2012/13. In fact, in the last two years, only 30% of revenue increases have been consumed by wage growth, whereas in the five years to 2012/13 this figure was 99%.”
In the Championship, combined revenues grew 12% to £548m in 2014/15, exceeding £0.5 billion for the first time. Wage costs rose by 4% to £541m which, despite a reduction in the wages/revenue ratio from 106% in 2013/14 to 99%, means clubs spent almost as much on wages as they generated in revenue. This remains an unsustainable level of spending without the support of owner funding. This resulted in operating losses of £225m and a combined pre-tax loss of £191m.
Adam Bull, Senior Consultant in the Sports Business Group at Deloitte, commented:
With promotion to the top flight now worth at least an additional £170m to those Championship clubs not in receipt of a parachute payment, it is no surprise that clubs are doing all they can to put the best talent on the pitch in the hope of reaching the promised land of the Premier League.
At the same time, as none of the Championship clubs reported an operating profit in 2014/15 they need to be mindful that profits from player sales or owner funding are likely to be needed if they do not gain promotion.