Friday, June 2, 2017

The 2017 Football Clubs' Evaluation

Is your favourite football club worth its salt? Let us roll.

The international auditing company, KPMG, recently released their second edition of the “Football Clubs’ Valuation: The European Elite 2017. In a publication  by Andrea Sartori, Partner KPMG Global Head of Sport, it looked at the Enterprise Value (EV) of the 32 most prominent European football clubs as at 1 January 2017.

Real Madrid CF and Manchester United shared top spot last year. However, Man U stand clearly at the top of the 2017 ranking, enjoying a 7% EV increase compared to Real's 2% growth - more than EUR 100 million.

This represents a record EUR 3 billion threshold despite missing UEFA Champions League qualification at the end of the 2015/16 campaign, The Red Devils continued to achieve consistent off-the-pitch performance.

The top four clubs surpassed the EUR 2 billion landmark. FC Barcelona and Bayern Munich are third and fourth, the later's 14% increase narrowing the gap with the Catalans.

The supplied data confirmed that top 10 clubs comprised more than two-thirds of the overall EV. Manchester City FC overtook Arsenal FC in 5th position.

The best part is that Tottenham Hotspur FC ousted Paris Saint German FC from the 10th position, thus increasing the number of English teams in this top ranking to six, together with two Spanish, one German and one Italian.

This has been attributed to the strength of the English Premier League, combined with their good operating and financial results.

Spurs are displaying a significant upward trend, especially in terms of profitability and squad value, as demonstrated by a higher EV growth (26%), and their future looks very bright as they plan to move to a new multipurpose stadium, and as they have recently secured UEFA Champions League qualification for the second year in a row.

Only Juventus FC remained the Italian club in the Top 10, with a 24% EV growth. In terms of growth per se, Olympique Lyonnais score the best result (+71%), followed suit by Galatasaray SK (+68%) and Sevilla FC (+44%).

Leicester City FC, in probably the greatest sporting fairy-tale of all time, when lifting the English Premier League crown in 2015/16, earned a remarkable 16th position in the report, whose analysis does not consider the business and sporting results achieved by each club in the 2016/17 football season.

"The proprietary algorithm developed by KPMG and applied for the purposes of this report is consistent with the one applied last year. It is based on the Revenue Multiple approach, where each club’s revenues are multiplied by a specific multiple which takes five metrics into account—each one with a specific weight—expressing differences between clubs, the markets and the economies in which they operate", says the report.

Amounts of broadcasting revenues and their distribution method play a crucial role in the income generation potential of football clubs, with a significant impact on European clubs’ EV.

Few difficult challenges factored in the making of the report included the differences in accounting practices across countries, differences in reporting currencies, fluctuation of exchange rates and differences in financial year-ends.