University of Liverpool Premier League Club Valuations 2020 / University of Liverpool Centre for Sports Business Group
- The value of Premier League clubs based on their 2018/19 accounts increased by 1.5% overall to £14.7 billion, with the ‘Big Six’ (Manchester United and City, Liverpool, Arsenal, Chelsea and Spurs) making up £11 billion (75%) of this total (2018: £10.6 billion 73%).
- Spurs overtook both Manchester clubs at the top of the table on the back of reaching the Champions League final, a fourth-place finish in the Premier League and a wage bill barely half that of Manchester United.
- Wolves, acquired for £45 million by owners Fosun in 2016/17 is now worth more than ten times that amount.
- Many clubs have fallen in value due to relatively flat revenues as broadcasting revenues are in the final year of a three-year cycle.
- The median value of a Premier League club fell from £366 million to £291 million.
- The figures do not take into account the impact of COVID-19, which, based on falls in share prices for those clubs who are quoted on stock exchanges, would reduce values presently by 25-35%
This is the University of Liverpool’s annual Premier League club valuation report. There are a variety of models used in practice to determine company values, and in an actual takeover deal environment more than one would be used.
At a time of global pandemic football is an irrelevance in terms of its importance to the economy, health, and general wellbeing of nations. We took the decision to publish the results in the context that the findings are just discussion points for fans and not in any way to pretend that it is of any importance compared to the steps being taken to reduce the harm caused by the pandemic.
Some of the values reported do seem intuitively high or low. This is a reflection of shortcomings of any model-based system, but also does perhaps highlight the success or otherwise of some clubs in terms of their business strategies compared to sporting achievements.
The valuation method is broadly based on the Markham Multivariate Model created by Dr Tom Markham, who presently is a senior executive for Sports Interactive, creators of Football Manager.
The model takes into consideration the main financial drivers of football club value in the form revenue, profits, non-recurring costs, average profits on player sales over a three-year period (which ties into how the Premier League calculates profits for Financial Fair Play purposes), net assets, wage control and proportion of seats sold.
The figures are derived from the financial statements sent to Companies House.
The model assumes that the club retains its position in the Premier League. For those clubs that have subsequently been relegated to the Championship realistic values are 60-70% lower.
The formula used is
((R+A) x ((R+P-NR+D)/R) x C)/W where
R = Revenue
A = Net Assets (adjusted for ‘soft’ loans from owners)
P = Net profit
NR = Non-recurring items (legal settlements, redundancy, player & asset sale gains/losses etc)
D = Average player sale profit over last three years
C = Average attendance/ Stadium capacity
W = Wages/Revenue
There have been some adjustments to components in the formula from the previous season and these are reflected in the comparative numbers.
As with all models, they should be treated with caution and in conjunction with other models to get a broader indication of club valuation.
11: Watford £279 million (2018: 18th £168 million)
An improved Premier League position, FA Cup final appearance and a reduction in the wage bill have contributed to Watford’s value increasing in 2018/19.
In addition the sale of Richarlison to Everton meant the club made £22 million in player profit sales.
Like many of the ‘Other 14’ clubs Watford are reliant upon Premier League broadcast income for most of their revenues. This was a major concern earlier in 2019/20 after a poor start to the season, but with improved form under Nigel Pearson they now have a fighting chance of staying in the top division.
Watford, like most clubs in the Premier League, are still making losses on a day to day basis, but player sale profits covered those losses in 2018/19.
12: Fulham £276 million (2018 Championship)
Fulham’s value looks high and benefits from the club being promoted to play in the Premier League in 2018/19. What is becoming increasingly common is that clubs make a profit in their first season in the topflight but that is quickly reversed. Fulham however made a £21 million operating loss in 2018/19, partly due to an increase in wages but also due to spending £120 million on new signings.
Fulham’s results suggest that regardless of division, parachute payments or promotion, owning a football club is an expensive business, with losses averaging £500,000 a week over the last seven years.
13: Southampton £269 million (2018: 10th £369 million)
Southampton made an operating loss of £58 million in 2018/19, so their relatively high position in the valuation table may seem at odds with their day to day trading activities.
The club’s main ability is to develop players and sell them at a profit. Since promotion to the Premier League Southampton have generated over a quarter of a billion pounds of profit on player sales.
Whether the club can continue to make such gains in the post-COVID 19 transfer market is uncertain, as the consensus of views is that fees will be significantly depressed as sellers may be prepared to accept fire sale prices and buyers have limited funds to spend.
14: Everton £257 million (11th: £363 million)
Everton were valued at £175 million when Farhad Moshiri acquired the club in 2016. Their relatively modest present valuation is due to a significant investment in players which have been hit and miss in terms of improving results.
A repeat of the 8th place finish the previous season meant no additional prize money for Everton, wages increased partly due to their accounting period being extended to 13 months and the amortisation charge continues to grow rapidly as Richarlison was added to the squad.
The combined impact of this investment in players resulted in an operating loss of more than £100 million. This is sustainable in the short term under Premier League Profitability and Sustainability rules. Everton have had this season to resort to some unusual transactions, such as selling an option on naming rights for their yet to be approved stadium, to stay within the limits.
Everton are limited by the size and age of Goodison Park, where matchday revenues of £14 million make up just 8% of the total. A move to the new stadium at Bramley Moor Dock is essential if the club wishes to start to challenge the ‘Big Six’ financially.
15: West Ham £248 million (12th: £321 million)
West Ham is another club who most fans would expect to be valued higher than the £248 million produced by the model. CEO Karren Brady values the club at £800 million.
West Ham certainly have the potential to be higher in the valuation table, but their financial performance has held them back. Playing at the London Stadium should in theory result in substantial matchday income, but this has risen only modestly since the move from the Boleyn Ground. This is partially due to season ticket prices being relatively cheap compared to some of the other Premier League clubs in London.
West Ham’s owners have a strained relationship with fans, but there has been significant investment in players in recent seasons, but this has not been converted into improved performances on the pitch.
16: Cardiff £223 million (2018: Championship)
Cardiff effectively took an ‘air shot’ in respect of their season in the Premier League. Revenue increased as a result of promotion, but the wage bill was by some distance the lowest in the Premier League.
Research constantly there is a positive correlation between final league positions and wage levels. It is therefore no surprise that the two clubs with the lowest wage bills in the Premier League were relegated and two of the three highest wage expenses were incurred by the winners and runners up.
Cardiff made a profit before tax of less than £3 million, but this was after taking into consideration the full cost of the transfer of Emiliano Sala, the young man tragically killed shortly after signing for the club in January 2019. Cardiff also wrote down other transfer fees by nearly £12 million to further depress profits.
Cardiff’s main achievement was promotion from the Championship the previous season under Neil Warnock despite negative net spends on players in that division for four seasons.
Realistically their value will have fallen by about two-thirds at least following relegation.
17: Crystal Palace £200 million*
Crystal Palace’s valuation is based on their 2018 accounts, as like Newcastle, they have taken advantage of the relaxation of rules in relation to publishing their accounts.
Conspiracy theorists and rivals will no doubt use this to criticise Palace but there is no evidence of any undue financial stress.
Palace’s strategy since promotion to the Premier League is one of paying wages that many would consider relatively high for a small club, as well as a £240 million investment in players.
Whether the club can reduce the wage bill is open to question. Wilfried Zaha is one of the most coveted players in the Premier League and is paid accordingly to keep suitors away.
Palace had a sizeable loss in 2017/18 which kept the club value low and the club’s profits have fallen every year since promotion which has a further negative impact upon the valuation.
18: Brighton £187 million (2018 15th: £234 million)
Brighton avoided relegation in 2018/19 but it came at a financial cost. The £9 million operating profits of the club’s first season in the Premier League became a £25 million loss as player costs increased by 39% but revenue only 3%, despite an FA Cup semi-final appearance.
Brighton owner Tony Bloom has continued to invest in the club despite it reaching the Premier League.
Brighton have invested significantly in players in recent years in both the Championship and the Premier League. Player sales however have been relatively modest, and this has meant that operating losses have effectively been borne by the club owner.
19: Huddersfield £178 million (2018: 13th: £242 million)
Huddersfield were sold at the end of 2018/19 for an estimated £60 million. This coincided with the club being relegated from the Premier League, and ties in with the view that clubs in the Championship suffer a 60-70% fall in value in the second tier of English football.
Huddersfield’s income declined and wages were static. Income due to finishing lower in the Premier League and wages because many player contracts were bonus driven in relation to avoiding relegation.
However, transfer fee amortisation increased as Huddersfield spent a further £46 million on signings in 2018/19.
20: Bournemouth £99 million (2018 20th: £158 million)
Bournemouth’s value decreased due to the pincer movement of lower revenues and higher costs, especially those relating to players.
With a stadium capacity of only 11,000 the club is heavily reliant upon broadcasting income for most of its total, and the club, which was in the third tier of English football as recently as 2012/13, has been transformed by membership of the Premier League.
Bournemouth are not alone in their dependency on broadcast income with eleven Premier League clubs generating at least three-quarters of revenue from this source.
Bournemouth’s finances are further evidence of the myth that the Premier League is paved with gold for club owners. In 2012/13 the club was in League One, since then its income has increased by £126 million, but player costs have increased by £134 million.
The Big Six clubs continue to be very valuable and their dominance of revenue streams is likely to ensure that the gap between themselves and the remaining clubs in the Premier League is maintained.
Cost control is proving to be very difficult for all clubs in the division, especially in terms of wages and this may restrict future growth in the value of clubs especially with broadcast revenue growth slowing. Wages as a proportion of revenue grew in 2018/19 as the Premier League entered the final year of the three season deal with Sky and BT. Broadcast revenues were set to rise slightly in 2019/20 but it is unlikely to match wage growth.
Underlying profitability (pre tax and interest, excluding one off transactions and player sales) shows that Premier League clubs had a collective loss of £384 million, assuming that Newcastle and Crystal Palace’s results are the same as the previous season.
The pandemic, which of course relegates football to the sideshow in life that we have always secretly known it to be, will have had a significant impact upon the figures for the present and future seasons. Revenue streams will be reduced as matches being played in front of fans may not return until 2021. Transfer fees will decrease significantly as so few clubs will have cash to spend. In the short-term wages may fall slightly, where they will go as long-term contracts expire will be determined by long term revenue trends.