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.
Club by Club Analysis
6: Chelsea £1,231 million (4th: £1,615 million)
Chelsea’s value fell significantly in 2018/19 due to the club registering pre tax losses that exceeded over £100 million.
Chelsea’s income was static during the year as lack of Champions League participation led to falls in matchday and broadcast income. This was broadly matched by an increase in commercial revenue.
Chelsea have a disadvantage compared to the other ‘Big Six’ clubs in that the capacity of Stamford Bridge is considerably lower than that of the rest of its peer group.
Wages increased by 11% and transfer fee amortisation 40% resulting in Chelsea having player costs of £102 for every £100 of income, which helps explain the significant operating losses.
Roman Abramovich bankrolled a big spend on players resulting in the club being the biggest spenders on players last season.
Abramovich’s motives are as opaque as ever. His decision to stop progress in relation to moving to a new stadium appeared to be a reaction to a falling out with the UK government over visa issues.
He then lent Chelsea a net £248 million in 2018/19 to underwrite the investment in playing staff which seems inconsistent with his approach in relation to the stadium.
7: Wolverhampton Wanderers £458million (2018: Championship)
Wolves’ appearance this high in the table in their first season in the Premier League is likely to be questioned, but this reflects their success both on and off the pitch.
Wolves invested £111 million in player additions in 2018/19, but this resulted in a 7th place finish and qualification for the Europa League.
Wolves had relatively good wage control, paying just £53 in wages for every £100 of income, the fourth best in the division. Expect this to increase in future years as further signings and new contracts for established players outstrips revenue. This will have a negative impact upon the valuation when wages rise.
Owners Fosun have made a spectacular return on the £45 million it cost them to buy the club in 2016.
8: Newcastle £387 million*
Newcastle disappointingly but unsurprisingly have not published their 2018/19 accounts, so the above valuation is based on 2018 figures adjusted for changes to the model formula. UK Chancellor Rishi Sunak made an announcement in late March 2020 that companies could take an additional three months if they wished in submitting their accounts.
Mike Ashley, a master at the dark arts of Companies Act compliance, was one of only two Premier League teams to take advantage of this change to the rules.
Newcastle are presently subject to an estimated £300 million sale, which takes into account the disruption of COVID and Newcastle’s wage bill presently likely to be considerably higher than the 2018 figure of £93 million. This will reduce profits and increase the wage/income ratio, both of which would cause the MMM value to fall.
Profits in 2018 were £21 million due to good cost control and modest transfer spending, an issue which has frustrated many of Ashley’s critics, who feel more money should be invested in the playing squad.
9: Burnley £350 million (2018 8th: £398 million)
Burnley’s regular appearance in the top half of the valuatoin table always provokes queries, but ultimatly reflects that they are in many ways the club that punches above their weight both on and off the pitch.
Burnley’s income decreased slightly in 2018/19 despite participation in the Europa League. A fall from 7th to 15th in the Premier League meant far lower prize money (this works out at about £2m per place in the final table) which offset the additional revenue from Europe.
Burnley’s success is built around a modest wage and transfer fee budget. They usually recruit domestic players who have proved themselves to be successful in the Championship.
Burnley have not required any cash injections from their owners for a decade and have the ability to deliver profits on an annual basis when they are in the Premier League and modest losses when in the Championship.
10: Leicester £304 million (9th: £378 million)
Leicester’s value decreased significantly in 2018/19 mainly due to costs rising far faster than revenue. Leicester have invested significantly in players since winning the Premier League in 2016, and this has caused both wage and transfer fee amortisation costs to accelerate.
Leicester had wage and amortisation costs of £120 for every £100 of income in 2018/19. Whilst this was offset to a degree by profits on player sales, it is indicative of the challenges for any club that is attempting to break into the ‘Big Six’.
The sale of Harry Maguire and a potential Champions League finish in 2019/20 should generate an increase in Leicester’s value.