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
1: Spurs £2,567 million (2018 3rd: £1,837 million)
All clubs have to compromise sporting achievement versus financial sustainability. Spurs’ control on the latter in recent years has meant them having something to put in the trophy cabinet in the new stadium in the form of winning this particular award.
Spurs have a degree of control over wages and player transactions that sets them far apart from their peer group in the so called ‘Big Six’ clubs.
Spurs income increased by 21% to £461 million in 2018/19, on the back of commercial deals at the new stadium and reaching the Champions League final. They achieved this despite their main player expenses, wages, and amortisation (transfer fees divided by contract length) being about half of some of their peer group.
Paying just 39% of their income in the form of wages gives Spurs a significant boost and their ability to keep wages so relatively low is the envy of many other club executives.
Whether this achievement is sustainable in the future is questionable, and a relatively poor season on the pitch in 2019/20 to date may be indicative of their low-cost base catching up with them.
2: Manchester City £2,186 million (2018 1st: £2,364m)
Manchester City’s first place position in the 2017/18 valuation surprised some commentators but was borne out by American investors SilverLake buying a 10% stake in the City Football Group in late 2019 for $500 million.
City’ value decreased slightly in 2019 despite winning three domestic trophies. Income advanced by 7% but the wage bill increased at three times this rate, possibly as a result of bonuses being paid for achieving targets in terms of trophies won on the pitch.
Since Pep Guardiola was appointed as first team manager City’s wage bill has increased by over £100 million and this has meant that profits have been relatively static.
City’s value is underpinned by the investment of Sheik Mansour’s Abu Dhabi United fund, which has allowed the club to have relatively low debt levels.
3: Manchester United £2,080 million (2018 2nd: 1,935m)
Manchester United’s value increased in 2019 due to an increase in profit on the back of slightly better player sales, lower tax charges and better overall cost control.
Whilst intuitively one might expect Manchester United to lead the valuation table they have had significant commitments in the form of interest charges on loans, which reduce profits, and dividends to shareholders, which reduce net assets.
Manchester United’s income advantage has been on the back of commercial deals with a variety of partners, but this advartage has stalled in recent years as the lack of on pitch success has led to commercial income plateau.
Manchester United were in danger of being overtaken in terms of generating the most income in 2019/20, but this is now less likely following Covid-19 which is likely to restrict income growth at both Liverpool and Manchester City, United’s biggest threats here.
4: Liverpool £1,553 million (2018 6th: £1,356 million)
Liverpool’s value increased in 2018/19, and the figures do not reflect the club winning the Champions League, which took place on June 2nd2019 but their accounts go up to 31st May.
Had it not been for Covid-19 a further sizeable increase in the value would have been anticipated for 2019/20 on the back of the Champions League bonuses, World Club Championship success and almost certainly being Premier League champions too.
Liverpool’s owners FSG have seen a significant return on the £300 million that it cost them to buy the club in 2010.
Wage costs at Liverpool have doubled since 2015 as the club’s strategy appears to be to aim to break even on a day to day operating basis. The wage to income metric has operated in a relatively tight 56-58% band over recent years apart from the season that Jurgen Klopp was recruited.
Liverpool’s profits have been generated from player sales. Whilst this is an erratic and volatile method the supply line of players from Anfield in recent years has been such that they have made over £300 million from this strategy since 2015. These profits have been reinvested in improving the quality of the squad.
5: Arsenal: £1,374 million (2018 5th: £1,471 million)
Arsenal’s value has fallen for the second consecutive year due to once again only qualifying for the Europa League instead of the Champions League.
Revenue fell despite reaching the final of the Europa League, highlighting that this competition is a relatively minor earner and that Thursday evening football, especially in the early stages of the competition, is not a big draw for fans, broadcasters, or sponsors.
Arsenal are in danger of becoming detached from the rest of the ‘Big Six’ in terms of generating revenue and are falling further and further behind their peers in terms of the one area that the club can potentially grow, that of commercial income.
Arsenal made a pre-tax loss for the first time in many years as player sales generated £12 million profit compared to £120 million the previous season.
In 2017/18 Arsenal had to rely on player sales to reverse operating losses of £18 million as Oxlade-Chamberlain, Sanchez, Giroud and Walcott helped generate a profit of £120 million on disposals.
Less money in from player sales meant a lower investment in terms of recruitment too. Another season in the Europa League in 2019/20, combined with a relatively early exit from the competition is likely to see a further fall in Arsenal’s value.