• England the European champions in c. €11 billion game
• England’s top 92 clubs generated income of over €2.6 billion in 2003/04
• Player costs exceed €1.5 billion for the first time, in part due to Chelsea’s record spending
• Excluding Chelsea, total and player wages declined for first time in Premiership’s history
• Record Premiership clubs’ operating profits
• England’s Football League clubs make great strides in controlling costs and reducing losses
• Clubs in England’s top four divisions contributed around €900m of tax to Government in 2003/04

Liverpool’s victory in the 2004/05 UEFA Champions League means that England can now lay claim to being both on and off field (financial) champions of Europe.  Liverpool’s win will have already generated up to €45 million in revenue for the club with the promise of more to come.  Overall, Premiership clubs earned almost €2 billion of revenue in 2003/04. This confirms that the English Premiership is the biggest football league in Europe by a record margin and represents 18% of the total €11 billion European football market.

The 2003/04 season marked Chelsea’s first full year under new ownership.  This has had a substantial influence on the English and European game. Deloitte estimates €450m has already been invested in the club and has been rewarded with Chelsea’s first Premiership title. Chelsea’s spending on player wages and transfers contributed to total expenditure on players of over €1.5 billion for the first season ever.  However, excluding Chelsea, we estimate that players’ wages actually fell in the Premiership – again a Premiership first. 

Dan Jones, Partner in the Sports Business Group at Deloitte in the UK comments: “The Premiership continues to go from strength to strength with solid top line growth. This gives the Premiership a competitive advantage compared to its continental European rivals, most notably when it comes to attracting and retaining top quality players.  Premiership and Football League clubs have also had success in reining back costs, particularly wages, and in doing so have improved the profitability of English professional football.”

Financial Champions of Europe

Premiership clubs grew revenue by 6% in 2003/04 to €1,976m, equating to average revenue of €98.9m per club – over 50% more than the €64.1m average in Italy’s Serie A, its nearest competitor.  Growth was driven by broadcast revenues (up 9%, or €75m) and matchday revenue (up 9% or €48m).

Premiership clubs also recorded significantly higher operating profitability than their continental European counterparts. The Premiership clubs returned record operating profits of €222m (or €11.1m per club).  Within the other ‘big five’ leagues only German clubs recorded operating profits and even these were substantially lower than in 2002/03. 

In 2004/05 we anticipate there may be a small fall in Premiership revenues due to the first year of the new broadcasting deals.   Dan Jones commented: “While the structure of the new three year domestic broadcast deals, which started in 2004/05, will result in lower domestic broadcast revenues, evidence suggests that many clubs have been successful in increasing matchday and commercial revenues to compensate. Again this demonstrates the ability of Premiership clubs to adjust to changing market conditions. At worst, we expect a modest fall in overall revenues in 2004/05 and steady growth thereafter.”

England continues to boast the best stadia in Europe.  2003/04 saw further substantial investment with the opening, for football, of the City of Manchester Stadium and progress with Arsenal’s 60,000 capacity Emirates Stadium, scheduled to open for the 2006/07 season. Deloitte forecasts that total investment in stadia and facilities will exceed €3 billion by the end of summer 2006. 

Alan Switzer, a Senior Consultant in the Sports Business Group at Deloitte in the UK, commented: “Quality facilities have contributed to increased attendances and revenues. Total Premiership and Football League attendances of 29.3m in 2004/05 represented the highest aggregate attendances since 1969/70. Utilisation of stadia capacity is increasing, as are revenue yields per seat on matchday.  Clubs are also becoming more sophisticated in treating their facilities as 365 day a year assets. England is Europe’s clear market leader in the football stadium business.”

Competition at the top end – blue shift?
Manchester United were again top of the Premiership (and global number one – see Deloitte Football Money League 2005) in terms of revenue generation (with €256m revenue) but Chelsea,  assisted by progressing to the UEFA Champions League semi-final in 2003/04, narrowed the gap (with €215m revenue).

Dan Jones commented: “Chelsea’s successful 2004/05 Premiership campaign marked the end of the second full season of Roman Abramovich’s investment in the club, and has shattered the on-field duopoly of Arsenal and Manchester United. Liverpool has the opportunity to build on their UEFA Champions League success adding to the promise of a competitive 2005/06 season both on and off the field.”
Competition at the bottom end
Much is written about the difficulties of ‘bridging the gap’ between England’s Championship and Premiership for promoted clubs.  It is challenging, but certainly not impossible.  Portsmouth and West Bromwich Albion have both successfully survived in the Premiership and Bolton Wanderers, Birmingham City, Charlton Athletic and Fulham are now looking beyond survival and, in some cases, to Europe. The significant boost provided by Premiership broadcasting monies and the ability of clubs to convert promotion into higher commercial and matchday revenues provides a revenue boost of upwards of €31m to invest in players, infrastructure and ‘gearing up’ to life in the Premiership.  Alan Switzer, from the Sports Business Group at Deloitte noted: “The financial boost received by promoted clubs means management’s ability (on and off the field) to adapt and step up quickly, and of course a slice of luck are arguably as, if not more, important than any perceived financial ‘gap’ upon promotion.”

England’s top four divisions – wage restraint and reduced losses
The clubs in England’s top four divisions generated total income of over €2.6 billion in 2003/04.  Premiership clubs accounted for three-quarters of this total, or €1,976m, up 6% on 2002/03 (€1,857m). 

The slowdown in wages growth first exhibited in 2002/03 continues. Total wages increased by the lowest rate ever (7%) in the Premiership’s history and actually declined if Chelsea is excluded.  The Football League clubs did better still and reduced overall wages for the second year running.

In relation to player transfer costs, the substantial fall in 2002/03 was reversed with gross spending of over €600m largely driven by Chelsea.  The amount of transfer fees leaving the English game to overseas clubs or agents was a record at €392m.

Dan Jones commented: “Whilst English clubs’ spending on player wages and net transfer fees costs exceeded €1.5 billion for the first time in 2003/04, a significant element of that was driven by Chelsea.  We expect the 2005 summer transfer window to quieten down. Big transfer fees and wages will continue to be paid for star players, but for the majority of players the new sense of ‘realism’ will continue to limit transfers fees and we hope that more performance dependent wages will continue to be introduced for all players.”

Football League clubs’ increased revenue and reduced wages resulted in substantially smaller losses.  However, operating losses of €78m and pre-tax losses of €100m still need further attention.  Paul Rawnsley of the Sports Business Group at Deloitte in the UK commented: “The Football League clubs have undoubtedly turned the financial corner post ITV Digital and are getting to grips with their cost base. A reduction in total wages of 10% across the three divisions represents an impressive achievement, but further progress is required to reduce the current unsustainable level of losses. The Football League has been rightly applauded for the governance changes it has introduced including Sporting Sanctions for insolvency, limits on wage spending and enhanced transparency in player agent dealings.”

Whilst it is the pay packets of players that receive the most media coverage, Deloitte highlights that the success of English football does deliver considerable benefits, including a significant annual return for Government.  Jason Hargaden, Tax Director in the Sports Business Group at Deloitte in the UK, commented: “There is sometimes a perception that the game does not pay much tax. In fact, professional football contributed around €900m of tax to UK Government in 2003/04. By the end of the 2004/05 season we estimate the clubs in the top four divisions have paid Government €6.4 billion in tax over the last 13 years.  A tidy sum for the Exchequer.”
- ENDS -

Notes to editors
For further information or to speak with a member of the Sports Business Group at Deloitte please call Katie Broome (Deloitte Press Office) on +44 (0)20 7303 6359 or +44 (0)7977 203 155, or e-mail: kbroome@deloitte.co.uk.

Exchange rate
The exchange rate at 30 June 2004 has been used to convert figures in Euros (£1 = €1.49055). 

Basis of preparation
The News Release and Highlights are extracted from the relevant sections of the Deloitte Annual Review of Football Finance (June 2005).  The bases of the opinions and calculations are explained in the relevant sections/appendices of that publication.

The analysis of the financial results and position of English clubs, and comparisons between them, has been based on figures extracted from the latest available group or company financial statements.  The analysis of the financial results of various continental European leagues, and comparisons between them, has been based on figures extracted from the relevant company or group financial statements or from information provided to us by national associations/leagues.

In some cases Deloitte have made adjustments to the disclosed figures to enable, in Deloitte’s view, a more meaningful comparison of the financial results and position of the football business on a club by club basis.  Deloitte have not performed any verification work or audited any of the information contained in the statutory financial statements for the purpose of their analysis.

In relation to estimates and financial projections, actual results are likely to be different from those projected because events and circumstances frequently do not occur as expected, and those differences may be material.  Deloitte can give no assurance as to whether or how closely the actual results ultimately achieved will correspond to those projected and no reliance should be placed by any party on such projections.

The published financial statements of clubs rarely split wages and salaries costs between playing staff and non-playing staff.  Therefore, unless otherwise stated, references to wages and salaries relate to total wages and salaries for clubs, including non-playing staff.

The publication and this News Release are intended to provide general information on the finances of the clubs in English football and other European leagues and cannot be relied upon to cover specific situations.  No responsibility for loss occasioned to any person acting, or refraining from action, as a result of any material in this News Release will be accepted by Deloitte & Touche LLP, Deloitte Touche Tohmatsu, and all other member firms of Deloitte Touche Tohmatsu organisation and their affiliates and in all cases any successor or assignee.  Readers should not act upon any material in this News Release without taking relevant professional advice.
About the Sports Business Group at Deloitte
Over the last decade Deloitte has developed a unique focus on the business of sport. Our specialist Sports Business Group offers a multi-disciplined expert service with dedicated people and skills capable of adding significant value to the business of sport. Whether it is benchmarking or strategic business reviews, operational turnarounds, revenue enhancement strategies or stadium/venue development plans, business planning, market and demand analysis, acquisitions, due diligence, expert witness, audits or tax planning; we have worked with more clubs, leagues, governing bodies, stadia developers, event organisers, commercial partners, financiers and investors than any other adviser.
For further information on our services you can access our website at www.sportsconsulting.co.uk 
About Deloitte
In this press release references to Deloitte are references to Deloitte & Touche LLP.

Deloitte & Touche LLP is the UK's fastest growing major professional services firm based in 21 UK locations, with over 10,000 staff nationwide and fee income of £1,246 million in 2003/2004. It is a member firm of Deloitte Touche Tohmatsu, a leading professional services organisation, delivering world class audit, tax, consulting and corporate finance services, with around 120,000 people in over 140 countries. Deloitte Touche Tohmatsu is a Swiss Verein, and each of its national practices is a separate and independent legal entity.

Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority.

The information contained in this press release is correct at the time of going to press.
Highlights

Notes: These Highlights are extracted from the relevant sections of the Deloitte Annual Review of Football Finance (June 2005).  The bases of the opinions and calculations are explained in the relevant sections/appendices of that publication.  In the 2004/05 season Divisions One, Two and Three were re-titled ‘Championship’, ‘League 1’ and ‘League 2’ respectively. 

Europe’s premier leagues

• Overall revenue for the ‘big five’ European Leagues totalled €5.8 billion in 2003/04, up 2% on the previous year. This is the lowest growth rate since our analysis began in 1995/96.
• The German Bundesliga and French Ligue 1 experienced a decrease in revenue in 2003/04 to €1,058m and €655m respectively, a 5% drop in each case, the result of declining broadcast revenues. Italian Serie A revenues were static for the third successive year with revenues totalling €1,153m. 
• The French will reverse this trend soon. The Ligue 1 clubs’ revenues will be boosted significantly from 2005/06 when a €600m a season domestic television rights deal with Pay-TV broadcaster Canal Plus commences. The c.50% increase on current deals, will put it on a par with the English Premiership as the most lucrative domestic football league broadcast contract in the world.
• The English Premiership generated revenues of nearly €2 billion, the most of any ‘big five’ league. This widens the gap between itself and the Italian Serie A, the second highest earning league, by €128m to €823m.
• The Spanish Primera Liga, led by Barcelona and Real Madrid, achieved the most impressive revenue growth of 13%, a €106m rise to €953m. This combined with static wages and salaries costs meant that the league’s wages/turnover ratio decreased from 72% to 64%. 
• Matchday revenues grew in each of the five leagues analysed, except Italy. The Spanish Primera Liga and French Ligue 1 showed the largest growth at 14% and 13% respectively. However, absolute performance between leagues in this area varies greatly with the English Premiership total of €588m in 2003/04, higher than the matchday revenues of all the French Ligue 1, German Bundesliga and Italian Serie A clubs combined.
• The French Ligue 1 and Italian Serie A each reduced wages and salaries costs by 4%, whilst the German Bundesliga clubs cut their bill by 2%. The English Premiership clubs continue to have the highest wage bill at €1.2 billion.
• The ‘big five’ leagues differ widely in their operating performance with only the English Premiership and German Bundesliga clubs recording profits in 2003/04. The French Ligue 1 clubs recorded operating losses of €102m, their largest losses since our analysis began. Italian Serie A clubs’ operating losses totalled €341m in 2003/04, making cumulative losses of €1.5 billion since 1995/96.

Club profitability

• In 2003/04 England’s top 92 professional clubs generated total revenue of £1,766m, up 7% from 2002/03.
• The total revenue of Premiership clubs was £1,326m, up 6% on 2002/03 (£1,246m) – the lowest rate of growth since the Premiership’s formation, but still comfortably maintaining the league’s position as the ‘World champions’ in terms of revenue generation.
• Overall, Football League clubs’ revenue increased by 7% to £440m for 2003/04, with total attendances across the three divisions also up 7% to 15.9m.
• Premiership clubs’ revenue growth was driven by broadcasting and matchday revenue. The last (stepped) year of the 2001/02 to 2003/04 BSkyB domestic TV deal contributed to increased broadcasting revenues of £593m – up 9% from 2002/03. Broadcasting remains the largest revenue source at 45% of total revenue and, given its ‘100% profit margin’ status, is arguably the most important.
• Premiership matchday revenues grew impressively by 9% to £395m (from £363m in 2002/03) despite average league attendances falling by 1% to 35,008. Thus increased ticket yields were the key driver of higher revenues.
• Manchester United headed the Premiership revenue league table (and Deloitte’s global Football Money League) at £172m, followed by Chelsea (£144m and fourth globally) who had substantially narrowed the gap, then Arsenal (£114m and sixth globally).
• Premiership clubs reported overall operating profits of £149m – another record high (up £25m on the previous record) since the formation of the Premier League and a healthy 11% margin. Only four clubs made losses at the operating level.
• The reduction in domestic broadcasting revenues in 2004/05 presents a new challenge to the Premiership clubs and has led us to predict a modest, but temporary, reduction in total estimated revenues for 2004/05. Continuation of the improved cost control at many clubs should enable them to adjust relatively painlessly to any revenue shortfalls.
  l Pre-tax losses (i.e. after player transfer costs) also reduced from £153m to £128m and, excluding Chelsea, improved by £86m. Ten Premiership clubs returned a pre-tax profit (five in 2002/03).
• The revenue gap between the ‘big five’ and the remaining Premiership clubs has stayed steady in relative terms over the last five years, but has increased in absolute terms from £44m in 1999/2000 to £74m in 2003/04.
  l In 2003/04, the average Premiership club generated revenue of £66m, compared to £12m for a Championship club (a gap of £54m, compared to £52m in 2002/03).
• The battle for the title of ‘the richest game on earth’ – a contest between the Football League Championship Play-off Final and the chase for the UEFA Champions League fourth qualifying spot – has narrowed; but, at a minimum of £35m versus an average £19m respectively, the Championship Play-off Final remains firmly on top. 
• Manchester United was again, by far, the most profitable club at an operating level. Their operating profit of £51.7m was not only the first time any club in the world broke the £50m barrier, but increased again their Premiership record (previously £47.8m in 2002/03). Given the new broadcasting deal for 2004/05 and the club’s interim results and on-field performance, it is unlikely this record will be bettered in 2004/05.

Player costs – wages and transfers

• Overall Premiership clubs’ total wages grew by 7% in 2003/04, to reach £811m compared to £761m in 2002/03. This was the lowest growth rate since the formation of the Premier League in 1992 and well below the astonishing compound annual growth rate of 23% seen in the previous decade. 
• Stripping out the total wages figure for Chelsea (up £60m), total wage bills for the other clubs fell from £706m (2002/03) to £696m (2003/04). If a 1% reduction could ever be described as
• highly significant – then this is it.
• 2003/04 was a significant year for Championship clubs, as the total spent on wages and salaries decreased by 9%, from £228m in 2002/03 to £208m in 2003/04. This is the first fall seen in that division since the 1998/99 season.
• The Premiership average wages/turnover ratio has remained constant at the 2002/03 season’s level of 61%, but excluding Chelsea it declined from 61% to 59%. Manchester United and Bolton Wanderers are the only two Premiership clubs with ratios below 50%. A further five clubs had ratios between 50 and 55% – all very commendable figures.
• The Championship has seen a large overall improvement in its wages/turnover ratio from 89% to 72%. That is an average mark which is still above the comfort level and leaves work to be done.
• Chelsea has a published total wages and salaries cost of £115m, £38m higher than the second placed club, Manchester United, and almost certainly the highest football club wages bill in the world. 
• While the Premiership was the only division to show a rise in players’ earnings (up 6%), as opposed to total wages, we estimate a fall of £15-20m (3-4%) if Chelsea’s player wages are excluded. 
• A welcome fall of 7% in players’ earnings saw the Championship total player wage bill drop to £138m (from £149m in 2002/03) – a significant reversal of the CAGR of 15% over the past ten years. 
• Player wages also declined in League 1 and 2, by £8m (17%) and £1m (4%) respectively.
• Deloitte calculate that the average Premiership player costs his club (including NIC) around £0.9m a year (or £17,000 a week). Due to tax differences it would cost a French club, for example, 44% more ‘gross’ to pay a player the same net wage. Relative to other big European leagues, this is a significant structural advantage that Premiership clubs enjoy.  2003/04 gross transfer expenditure bounced up again to £414m, after a substantial fall in 2002/03 (from £407m to £203m).
• The resurgence is largely, but not entirely, due to the Chelsea phenomenon with the club’s 2003/04 transfer spending of £175m. 
• The January 2005 transfer window saw an estimated gross transfer spending by Premiership clubs of about £50m, which is similar to the level seen in the January 2004 window. The bulk of annual spending is in the summer transfer window. 
• Net transfer fees payable by English clubs (i.e. excess of cost of players bought over proceeds of players sold) increased by 225% from £81m in 2002/03 to £263m. This shows a huge rise in the balance of payments deficit in player transfers with cash flowing to non-English clubs.
• The top 92 clubs’ total player costs (including wages and net transfers) exceeded £1 billion for the first time, despite the limited increase in players’ wages, and represented 59% of total turnover a substantial increase from 2002/03, but still below 2000/01’s high of 62%.
• The net amount of transfer expenditure re-distributed by Premiership clubs to the Football League has increased by £8m from £32m in 2002/03 to £40m. Player disposals by clubs relegated from the Premiership, in particular West Ham United, accounted for the largest part of this ‘redistribution’ of monies. 
• In total, the Premiership has provided Football League clubs with approximately £245m in transfer fees over its 13 year life.

Stadium development

• Total spending by English clubs on stadia and facilities in 2003/04 was above £200m for the first time, taking total investment in the post Taylor era to over £1.8 billion. 
• Spending by Premiership clubs on stadia and facilities was £178m in 2003/04. This was the seventh successive season when their investment exceeded £100m and brings total spending to over £1.3 billion since the start of the Premier League in 1992/93.
• In the two years to summer 2004, Arsenal had invested £170m – primarily in relation to their new Emirates Stadium – accounting for over 50% of all Premiership spend in that period.
• Looking ahead, there will continue to be significant investment in stadia and facilities in the short term, with Arsenal being the main contributor. We expect the total level of investment by English clubs in the post Taylor era to top £2 billion by the end of summer 2006. By that stage, the new Wembley (total project costs over £750m) will also be in operation. In the medium term the position is less clear and will depend on the progression of planning and funding arrangements for some key projects by other clubs.
• In 2003/04 Premiership average attendance remained above 35,000 and capacity utilisation stood at 94.7% – the highest level since our analysis began. In 2004/05, average attendance levels were around 33,900. The fall can be substantially attributed to the changing composition of the Premiership as clubs coming up has smaller stadia than those who went down. This resulted in c.10,000 fewer seats per matchday being available.
• However, clubs should not rest on their laurels as, in the 2004/05 season, we estimate that around 800,000 seats were unused at Premiership matches. This represents lost income of around £24m to the Premiership clubs as a whole.
• In 2004/05 Football League attendances continued to grow and reached 16.4m – a 40 year high and proclaimed as the best attended sporting competition in Europe. The Championship has seen attendances growing strongly in recent years and a further 10% increase in 2004/05 means that the average Championship fixture attracted over 17,000 fans.
• In the World Cup year of 2006, we can expect to see the highest capacity and attendance levels ever seen in the Premiership; Football League attendances at levels not seen since the 1960s; plus Cup Finals and England matches being played in front of 90,000 crowds at the new Wembley.

Club financing

• The financing trend among Premiership clubs is positive. Capital employed increased to over £1.1 billion by the end of the 2003/04 season. Total borrowings by Premiership clubs only increased by 2% to £720m, and the overall gearing ratio improved to 189%.
• Reported net bank borrowings fell to £146m at summer 2004. A record ten Premiership clubs had positive net cash balances at that time.
• Arsenal’s financing arrangements for their new Emirates Stadium have significantly increased the club's overall level of debt, but it is financing a huge asset. At the end of the 2003/04 season, Chelsea (£137m) were just behind Arsenal (£141m) in the level of debt carried.
• Chelsea have received an unprecedented level of cash injection since Roman Abramovich arrived in summer 2003. By the time Chelsea lifted the 2004/05 Premiership trophy, in the space of just two years, we estimate that the club has benefitted by approximately £300m.  The new money has been introduced to the business as both equity and loans. Furthermore, Chelsea’s elevated status has attracted other new commercial money to the club and therefore into the English game.
• Net interest charges from finance providers stood at £36m, whilst interest cover (operating profits: interest costs) improved to 4.1 times.
• Four Premiership clubs finished the 2003/04 season with net funds rather than net debt – Aston Villa, Birmingham City, Manchester United and Portsmouth. Manchester United and Birmingham City were the only clubs to receive more interest than they paid out in the year.
• Cash generation from Premiership clubs' operational activities continues to be strong, with £191m of cash generation before player transfer dealings. After all other transfer, investment and financing cash flows, the overall net cash inflow for Premiership clubs was £46m for 2003/04.
• At summer 2004, Manchester United (£173m) topped the table for net assets, more than double that of their nearest rival, Arsenal (£84m). Overall net assets for Premiership clubs were £382m.
• In the summer of 2004 the financing of Championship clubs was the healthiest for many years. Capital employed had increased to around £300m and gearing was reduced. Bank borrowings for Championship clubs had increased to £163m. This was largely due to the promotion/relegation change in the mix of clubs. In 2004 and 2005, better financial management has helped avoid the rash of insolvencies that plagued the previous couple of years. This has been encouraged and supported by structural changes, such as sporting sanctions for insolvency, the Football League’s Salary Cost Management Protocol and division-dependent pay levels for players.

Football and tax

• English professional football continues to pay substantial amounts of tax to Government. In 2003/04, clubs in the top four divisions paid a record c.£600m in various forms of tax.
• The tax burden is increasing – by 6% in 2003/04.
• The compound annual growth rate (‘CAGR’) of the overall tax take – from 1995/96 to 2003/04 – was 19%, in line with the CAGR for football turnover of 18%.
• The Premiership clubs are estimated to have paid around £430m in tax (PAYE/income tax; National Insurance Contributions (NIC); VAT and corporation tax) in 2003/04. This is a £40m increase on2002/03.
• By the end of the 2004/05 season we estimate the clubs in the top four divisions will have paid Government £4.3 billion in tax over the last 13 years. Premiership clubs account for £3 billion of this total.
• Football League clubs have, we estimate, paid £153m in total tax in 2003/04. Between 1992/93 and 2004/05 we estimate that, despite aggregate operating losses of £705m, Football League clubs have suffered a total tax burden of £1.3 billion. •