Football Clubs & Finance

Market Update 2014

Sixth Edition February 2014 Edited by Robert Hucker

ISBN 978-1-78304-125-1

Football Clubs & Finance Football Clubs & Finance Foreword

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Contents

Executive Summary 1

1. Market Definition 2

REPORT COVERAGE...... 2 MARKET SECTORS...... 3 Size of Club ...... 3 Type of Income ...... 3 Ownership ...... 3 MARKET TRENDS...... 4 Illegal Streaming ...... 4 Financial Difficulties ...... 4 Ticket Prices...... 4 ECONOMIC TRENDS...... 5 Table 1.1: UK Economic Trends (000, £m, %, million and £), 2008-2012...... 6 MARKET POSITION...... 7 The UK...... 7 Overseas...... 8

2. Market Size 9

THE TOTAL MARKET...... 9 Table 2.1: Total Turnover of Main UK Football Clubs by Value (£m and %), Seasons Ending May 2005-2013...... 9 Figure 2.1: Total Turnover of Main UK Football Clubs by Value (£m), Seasons Ending May 2005-2013...... 10 BY MARKET SECTOR...... 11 By League Turnover ...... 11 Table 2.2: Turnover of Main UK Football Clubs by League by Value (£m and %), Seasons Ending May 2005-2013...... 12 Figure 2.2: Turnover of Main UK Football Clubs by League by Value Share (%), Seasons Ending May 2005 and 2013...... 13 Market Structure ...... 13 Table 2.3: Structure of Professional Football in the UK and Europe, 2013/2014...... 14 Promotion and Relegation ...... 15 2012/2013 League and Cup Awards ...... 16 Table 2.4: Final League Standings and Cup Winners, 2012/2013...... 17

By Revenue ...... 18 Table 2.5: Turnover of the English Premier League by Type of Revenue (£m and %), Seasons Ending May 2005-2014...... 19 Figure 2.3: Turnover of the English Premier League by Type of Revenue (£m), Seasons Ending May 2005-2014...... 20 Match Day Revenues ...... 20 Table 2.6: Total Attendance to League Matches in England and Wales by Division (million), Selected Seasons Ending May 1949-2013...... 21 Figure 2.4: Total Attendance to League Matches in England and Wales by Division (million), Selected Seasons Ending May 1959-2013...... 22 Table 2.7: Average Attendance to League Matches for Selected Clubs in England and Wales (number), Season Ending May 2013...... 23 Broadcasting Revenue ...... 24 Commercial Revenue...... 25 Table 2.8: Sponsors of Premier League Football Clubs, 2012/2013...... 25

3. Strengths, Weaknesses, Opportunities and Threats 27

STRENGTHS...... 27 WEAKNESSES...... 27 OPPORTUNITIES...... 28 THREATS...... 28

4. Current Issues 29

2012/2013 SEASON...... 29 GOAL-LINE TECHNOLOGY ...... 30 FINANCIAL FAIR PLAY ...... 30 Union of European Football Associations ...... 30 Premier League...... 31 Football League...... 32 SCOTTISH FOOTBALL STRUCTURE REORGANISATION ...... 33

5. Forecasts 34

INTRODUCTION...... 34 General Economic Forecasts ...... 34 Table 5.1: Forecast UK Economic Trends (000, %, million), 2013-2017...... 34 FORECASTS 2014 TO 2018...... 35 Table 5.2: Forecast Total Turnover of Main UK Football Clubs by Value (£m), Seasons Ending May 2014-2018 ...... 36 Figure 5.1: Forecast Total Turnover of Main UK Football Clubs by Value (£m), Seasons Ending May 2014-2018 ...... 36 MARKET GROWTH...... 36 Figure 5.2: Growth in Total Turnover of Main UK Football Clubs by Value (£m), Seasons Ending May 2005-2018 ...... 37 FUTURE TRENDS...... 37 Managerial Dismissals ...... 37 Financial Fair Play ...... 38 Player Contract Disclosure...... 38

6. Company Profiles 39

ASTON VILLA FOOTBALL CLUB LTD...... 40 CHELSEA FOOTBALL CLUB LTD...... 42 EVERTON FOOTBALL CLUB COMPANY LTD (THE)...... 44 FULHAM FOOTBALL CLUB LTD...... 46 MANCHESTER CITY LTD...... 48 MANCHESTER UNITED LTD...... 50 NEWCASTLE UNITED FOOTBALL COMPANY LTD...... 52 THE ARSENAL FOOTBALL CLUB PLC...... 54 THE LIVERPOOL FOOTBALL CLUB AND ATHLETIC GROUNDS LTD...... 56 TOTTENHAM HOTSPUR LTD...... 58

7. Further Sources 60

Publications...... 60 Government Publications ...... 60 Other Sources...... 60

Key Note Research 61

The Key Note Range of Reports 62

Executive Summary

Professional football in the UK remains hugely popular, both domestically and overseas, with live matches attracting massive crowds each week, alongside the huge numbers of spectators throughout the world watching live broadcasts. In the year ending May 2013, revenue across the main UK professional football clubs continued to grow, exhibiting a year-on-year increase of 3.4%.

This rate of growth is, however, relatively low for the football market. This is primarily attributable to broadcasting agreements in the Premier League — with each new 3-year deal providing massive growth rates in the initial season — with 2013 representing the final year of the current agreement. Numerous other factors have also contributed to the significant growth experienced in the football market in recent years, ranging from massive investment in stadium facilities across the nation; through the influx of wealthy overseas investment, international footballing talent and managers; to the continued high performance of English football clubs and players on the international football scene.

Although these factors have boosted the football market considerably, broadcasting revenues remain by far the most lucrative area of the football industry, at least within the elite league. In the Premier League, revenues from broadcasting over the 5-year period ending May 2012 rose by 28.5%, far surpassing growth rates within the commercial and match day revenue streams.

Furthermore, in 2012, the Premier League signed a lucrative new 3-year broadcasting agreement covering the seasons ending 2014 and 2016. With both BT and British Sky Broadcasting (BSkyB) engaged in the tendering process, the Premier League managed to secure just over £3bn for television rights over the 3-year period, representing a massive increase over the previous £1.78bn agreement. In addition, Premier League football is now broadcast in 212 territories across the world, netting the elite league just over £1bn more in broadcasting revenue during the 2012/2013 season.

With the new £3bn agreement broadcast deal starting in the 2013/2014 season, alongside strong growth forecast across the Football League, aggregate turnover among the main football clubs is expected to rise massively in the year ending May 2014. Growth is then is expected to be fairly subdued, before the next broadcast agreement comes into force in 2017.

1. Market Definition

REPORT COVERAGE

This Key Note Market Update examines the UK’s football clubs and their finances across the Premier and Football Leagues in England and Wales, and in the Scottish Professional Football League (SPFL). In addition to financial information, the report covers demand for football and football products in the UK.

The English football leagues are the oldest in the world; they were officially formed in 1888 and comprised of just 12 teams within one division. In the 2013/2014 season, 92 clubs participated in the top four divisions in England, alongside 42 clubs competing in four leagues in Scotland.

On the international level, English football hosts some of the world’s top clubs, both in terms of sporting achievement and turnover, with the major teams in the Premier League — such as Manchester United, Chelsea, Manchester City, Arsenal and Liverpool — all consistently achieving positions in global top 20 listings by turnover. Furthermore, on a sporting level, English football has enjoyed significant success in recent years, with clubs such as Chelsea — which won the Champions League in 2011/2012 and the Europa League in 2012/2013 — and other major clubs remaining competitive in elite international competitions year-on-year.

However, the major clubs that persistently finish within the top four or five positions in the English Premier League largely dominate the sport, both in terms of performance and financial results. These clubs are now well established, with significant income from wealthy benefactors, commercial revenues and massive average attendances. While numerous measures have been introduced over the last season or two to address this issue — and to halt the massive inflationary effect on player transfers and wages — many have suggested that this could serve to maintain the status quo, preventing any further wealthy benefactors from investing significantly in teams — as has been done by Manchester City and Chelsea — and challenging the dominant clubs at the top of the Premier League.

The report analyses data from long-running financial results on the UK football leagues from Deloitte, in addition to the annual review of Scottish football by PwC.

MARKET SECTORS

Size of Club

Generally, the size of each football club is related to the league in which it participates. The largest clubs, in terms of both attendances and revenue, participate in the Premier League. Formerly part of the Football League, the Premier League was formed in 1992 by the largest clubs at the time, alongside the Football Association (FA), in an effort to boost revenue further though greater television exposure, therefore cementing participants as major UK clubs.

However, there remain some considerable differences in the size of clubs operating within the same competition, particularly in the Premier League, within which the top clubs, such as Manchester United, can draw in average crowds in excess of 70,000; smaller clubs — such as Wigan Athletic and Queens Park Rangers (QPR), both of which were relegated in the 2012/2013 season — drew an average attendance of under 20,000.

Type of Income

In terms of type of income, football club revenues can be segmented into three broad streams: match day, broadcasting and commercial activity. Clubs can also generate significant turnover from the sale of players. However, across the majority of clubs, any profit gained from player sales are usually reinvested in the team.

Ownership

Club ownership has changed significantly since the mid-1990s and the formation of the Premier League. With massive growth in revenues across the Premier League and — to a lesser extent — the Championship in recent years, largely as a result of increasingly valuable broadcasting agreements, numerous wealthy overseas investors have entered into club ownership. As a result, club ownership can be now used to segment the market, with three broad separate forms of ownership now preeminent across the leagues:

• full ownership by wealthy individuals or groups

• publicly quoted companies

• traditional control by a wealthy supporter.

MARKET TRENDS

Illegal Streaming

In July 2013, the Premier League became the first sporting body to use the Copyright Designs and Patents Act 1988 — used previously by the film and music industries to stop copyright infringement — to block access to major illegal football streaming services across the six main UK-based Internet Service Providers (ISPs).

As in the film and music industry, illegal live football match streaming has become an increasing problem in recent years. With an increasingly significant portion of revenue coming from broadcasting, and with viewership numbers a key deciding factor in attracting and evaluating advertising and sponsorship, illegal streaming sites can pose a real threat.

Financial Difficulties

Despite the introduction of various financial regulations over the last season or two, many football clubs across the UK remain at risk of insolvency. According to the Red Flag Alert Football Distress Report published by Begbies Traynor in November 2012, a total of six clubs in the Football League Championship, League One and League Two are currently highlighted as facing ‘critical’ financial pressure, as of the end of October 2013. This represents around 8% of the total 72 clubs participating in the Football League.

The continued prevalence of financial struggles across UK football is primarily attributable to stagnation in average attendances, with a 2% rise when averaged across all English divisions — the Premier League and Football Leagues — in the 2013/2014 season up to the end of October 2013. This increase is largely attributable to rises in the Premier League, where finances tend to be stronger, and an increase in League One as a result of Wolverhampton Wanderers’ relegation. With clubs in the Championship and below much more dependent on match day revenues, little to no growth in attendances can have a significant impact on financial stability.

Ticket Prices

In recent years there has been significant outcry from fans, and considerable criticism from the FA and other bodies involved in the industry, concerning above-inflation increases in the cost of match day tickets. In October 2012, a BBC survey — Price of Football — found that the average cost of the cheapest adult ticket in the top four divisions of English football had risen by 11.7% in the 12 months prior to the survey. In a period during which household finances are increasingly being squeezed — with high unemployment and inflation, and slow wages growth — the recent annual growth in the average cost of a ticket has priced many out of attending live matches.

In response to this, many clubs have reduced prices over the last year, with the latest BBC survey — published in September 2013 — revealing a 2.4% average reduction in ticket prices across the top four divisions. While this is a positive indication for fans across the country, it does little to offset the above-inflation increases in prices of previous years.

ECONOMIC TRENDS

National population growth amounted to 3% between 2008 and 2012, rising from 61.4 million to 63.2 million. While growth in the UK resident population provides a slight increase in potential consumers, it has no real significant impact on the market. Similarly, trends in gross national product (GDP) are unlikely to have a major impact on the football market, other than vague indications of consumer demand for merchandise and, to a lesser extent, match day tickets.

Inflation can have a pronounced impact on the football industry, most noticeably on ticket prices, but it can also affect the cost of club merchandise and broadcasting revenues. In 2010 and 2011, the rate of inflation remained relatively high, at 4.6% and 5.2%, respectively, before falling back slightly to 3.2% in 2012. Despite the dip in 2012, the recent rate of inflation will have pushed up prices for tickets and contributed to the rise in the cost of broadcasting rights agreements.

As it is a traditionally ‘working-class’ sport, unemployment can have a major impact on the football market, particularly match attendances. While the demographic for attendances has diversified significantly over recent decades, high unemployment can still represent a barrier. Between 2008 and 2012, unemployment remained high, increasing by 74.7% from 910,000 to 1.59 million.

Despite the poor economic conditions, household disposable income improved year-on-year over the review period — a positive indication for the football market — rising by 12.7% from £15,008 in 2008 to £16,918 in 2012. Ultimately, any rise in household disposable income can lead to increased expenditure on leisure activities, although it is important to note that high inflation and the rising cost of living could offset this somewhat.

Table 1.1: UK Economic Trends (000, £m, %, million and £), 2008-2012

2008 2009 2010 2011 2012 Resident Population Estimates (000), Mid-Years Female 31,244 31,418 31,619 31,833 32,065 Male 30,154 30,374 30,643 30,902 31,179

Total population 61,398 61,792 62,262 62,735 63,244 % change year-on-year - 0.6 0.8 0.8 0.8

Gross Domestic Product (£m) Current prices 1,462,070 1,417,359 1,485,615 1,536,937 1,564,639 % change year-on-year - -3.1 4.8 3.5 1.8

Annual chain-linked GDP 1,541,039 1,461,361 1,485,616 1,502,216 1,504,091 % change year-on-year - -5.2 1.7 1.1 0.1

Rate of Inflation (%) Inflation 4.0 -0.5 4.6 5.2 3.2 Percentage point change year-on-year - -4.5 5.1 0.6 -2.0

Actual Number of Unemployed Persons in the UK (million) Actual number of claimants 0.91 1.53 1.50 1.53 1.59 % change year-on-year - 68.1 -2.0 2.0 3.9

Table continues...

Table 1.1: UK Economic Trends (000, £m, %, million and £), 2008-2012

...table continued

2008 2009 2010 2011 2012 Household Disposable Income Per Capita (£) Household disposable income 15,008 15,443 16,058 16,371 16,918 % change year-on-year - 2.9 4.0 1.9 3.3

GDP — gross domestic product Note: inflation is at retail price index (RPI); inflation data shown are annual average changes; claimant count measures the number of people claiming Jobseeker’s Allowance.

Source: Population Estimates for UK, England and Wales, Scotland and Northern Ireland — Population Estimates Timeseries 1971 to Current Year, December 2011/ National Population Projections, 2010-based projections/United Kingdom Economic Accounts, November 2013/Consumer Price Inflation, October 2013/ Labour Market Statistics, November 2013, National Statistics website © Crown copyright material is reproduced with the permission of the Controller of HMSO (and the Queen’s Printer for Scotland)

MARKET POSITION

The UK

Football can be considered the main national sport in the UK, given the volume of weekly spectators — both at stadia and on television — and in the support of the national teams in the European Championships and World Cup competitions.

The football market is also the dominant sector in terms of sports sponsorship, accounting for around just under half of all major deals each year, even outpacing the Olympic Games in 2012.

The football market can also be considered a major sector within the context of the leisure industry, with numerous consumers across the UK attracted to football events hosted throughout the nation. It can also contribute to tourism, due to clubs within the English Premier League’s strong participation in the major European competitions.

Overseas

UK football is also incredibly successful on an international level, both in terms of overseas viewership of the national game and in sporting achievement. Through the last decade or so, a number of English clubs have achieved success in the most prestigious of European competitions, the Union of European Football Associations (UEFA) Champions League, with Liverpool, Manchester United and Chelsea lifting the trophy in 2004/2005, 2007/2008 and 2011/2012, respectively.

The Premier League is also one of the most-watched football leagues in the world. In the 2012/2013 season, 804 million households across 212 territories received Premier League matches, with agreements in place between the FA and 40 broadcast partners from across the globe, earning the Premier League £1.28bn in revenue for the season.

2. Market Size

THE TOTAL MARKET

Due to massive number of football clubs active across the UK, it is difficult to quantify the market value of the entire UK football industry. As a result, this Key Note Market Update examines the value of the main professional football clubs operating across the English Premier and Football Leagues, and the Scottish Professional Football League (SPFL). According to Deloitte projections, PwC’s Annual Financial Review of the Scottish Premier League and Key Note estimates relating to the Scottish Premiership, aggregated turnover among the main UK football clubs amounted to £3.3bn in the season ending May 2013, following year-on-year growth of 3.4%. With the 2012/2013 season representing the final year of the current Premier League broadcasting agreement, revenue growth was comparatively subdued for the season ending May 2013. However, with a new multi-billion-pound broadcasting agreement in place for next season, the market is expected to exhibit significant growth in 2013/2014.

Table 2.1: Total Turnover of Main UK Football Clubs by Value (£m and %), Seasons Ending May 2005-2013

Value (£m) % Change Year-on-Year

2005 1,962 - 2006 2,030 3.5 2007 2,199 8.3 2008 2,654 20.7 2009 2,714 2.3 2010 2,834 4.4 2011 3,063 8.1 2012 3,191 4.2 2013 3,298 3.4

Note: includes main professional and semi-professional clubs, i.e. those participating in the English Premier League and Football Leagues and the Scottish Premiership; 2012 data includes Key Note estimates for the Scottish Premiership; 2013 data includes Deloitte projections for the Premier and Football Leagues, and Key Note estimates for the Scottish Premiership.

Source: Deloitte Annual Review of Football Finance/PwC’s Annual Financial Review of the Scottish Premier League/Key Note

Figure 2.1: Total Turnover of Main UK Football Clubs by Value (£m), Seasons Ending May 2005-2013

3,500

3,000

2,500

2,000

1,500

1,000

500

0 2005 2006 2007 2008 2009 2010 2011 2012 2013

Source: Deloitte Annual Review of Football Finance/PwC’s Annual Financial Review of the Scottish Premier League/Key Note

The consistently strong growth in revenue across the main football leagues in recent decades has been driven by numerous factors. One of the key factors has been the increasing value of football broadcasting, particularly in the Premier League. This revenue stream has seen incredible growth rates over the last 3 decades, rising from a £6.3m 2-year agreement with the old Football League in 1986 to the recently signed £3bn agreement for domestic broadcasting rights for the three seasons starting 2013/2014 in the Premier League alone.

Growth in the popularity of the sport has also provided a boost in revenue over recent decades. Following falling match day attendances across the nation during the 1980s — with the sport plagued by hooliganism and poor facilities — football clubs across the country invested significant capital through the 1990s to improve the condition of stadiums, in addition to the conversion towards all-seater stadia through the top two division in England. This dramatically improved safety standards and the general condition of facilities, and watching live football matches once again became a popular leisure activity.

Investment in the game has continued throughout the 2000s and 2010s, particularly in the Premier League, where it has become common for wealthy overseas owners to invest significantly in English football clubs, further developing football stadia to increase capital, and expending huge sums to bring some of the best international footballing talent to the UK.

While this investment in British football is positive for the game, there are numerous draw backs. The main issue has been the huge disparity between revenue generation in the elite league compared with that achieved across the Football Leagues. Furthermore, even within the Premier League itself there can be huge differences in turnover between those at the top of the league, and recently promoted and/or bottom-placed clubs. Another main issue created by the massive level of invested in football has been the huge inflation in player transfer fees, player wages and agents’ costs.

BY MARKET SECTOR

While the segmentation of the market by league is useful for an examination of the market, football clubs themselves break the market down in terms of the three main revenue streams: broadcasting, match day and commercial.

By League Turnover

In the year ending May 2012, 74% of aggregated football club revenue was generated by the Premier League, while just over a fifth (21.2%) was derived from the Football League and an estimated 4.9% was accounted for by the Scottish Premier League. The obvious disparity in value of the leagues has widened in recent years, with the Premier League’s share of the market rising from just over two-thirds (68%) in the year ending May 2005, to just under three-quarters in 2012 (74%). For the season ending May 2013, this gulf is expected to have widened, with the projected revenue of £2.48bn among Premier League clubs standing at 75.2% of total estimated turnover.

In the Football League — covering teams participating in the Championship, League One and League Two — total revenue is projected to fall by 2.2% in the year ending May 2013, from £675m in the previous year to £660m. As a result, the Football Leagues’ share of total UK club revenue is expected to decline further, from 21.2% in 2012 to 20% in 2013.

In the Scottish Premiership, the expulsion of Rangers Football Club from the elite league had a significant impact on revenue in 2012, causing an estimated 4.9% decline in comparison with the previous year. The market, however, was estimated to have increase in value by 1.3% in 2013 to reach £158m, accounting for 4.8% of total club revenue.

Table 2.2: Turnover of Main UK Football Clubs by League by Value (£m and %), Seasons Ending May 2005-2013

England Scotland Football Premier League Leagues Premiership Total Value (£m) 2005 1,334 460 168 1,962 2006 1,379 481 170 2,030 2007 1,530 494 175 2,199 2008 1,932 526 196 2,654 2009 1,981 566 167 2,714 2010 2,030 633 171 2,834 2011 2,273 626 164 3,063 2012 2,360 675 e156 3,191 2013 p2,480 p660 e158 3,298

% of Total 2005 68.0 23.4 8.6 100.0 2013 75.2 20.0 4.8 100.0

e — Key Note estimates p — Deloitte projections Note: includes main professional and semi-professional clubs, i.e. those participating in the English Premier League and Football League, and the Scottish Premiership.

Source: Deloitte Annual Review of Football Finance/PwC’s Annual Financial Review of the Scottish Premier League/Key Note

Figure 2.2: Turnover of Main UK Football Clubs by League by Value Share (%), Seasons Ending May 2005 and 2013

100 English Premier League 90 English Football Leagues 80 Scottish Premiership 70 60 50 40 30 20 10 0 2005 2013

Note: figures for English Premier League and English Football Leagues for 2013 are Deloitte projections; figures for Scottish Premiership for 2013 are Key Note estimates; includes main professional and semi-professional clubs, i.e. those participating in the English Premier League and Football League, and the Scottish Premiership.

Source: Deloitte Annual Review of Football Finance/PwC’s Annual Financial Review of the Scottish Premier League/Key Note

Market Structure

UK football clubs participate in league competitions, accruing points depending on results against other clubs which are used to rank them accordingly. Furthermore, clubs are invited to participate in domestic cup competitions, in which clubs from across the various leagues are paired randomly. The top Premier League clubs — and the victors in the two main UK cup competitions — also participate in European competitions, which use a combination of both league and knock-out formats.

The structure of the football leagues in the UK are dependent primarily on the particular governing bodies, although the clubs involved in the league are often consulted in the event of any change in structure. League and cup competitions are generally structured around geographical location, although there are a number of notable exceptions to this, such as Cardiff and Swansea’s participation in the English Premier League and cup competitions.

Table 2.3 outlines the main domestic and European league and cup competitions currently in operation, alongside its governing body and main sponsor. Typically, the main sponsor of a particular league or cup will appear within its official title, such as the ‘Barclays Premier League’ and the ‘Sky Bet Championship’, or the ‘FA cup with Budweiser’ and the ‘Capital One Cup’.

One of the most significant changes to the structure of UK football occurred in June 2013, when the Scottish Premier League (SPL) and Scottish Football League (SFL) agreed to merge, creating the SPFL as the main governing body for all professional leagues in Scotland, as well as the national league cup. As a result the SPL competition was rebranded as the Scottish Premiership, while the SFL Division One, Two and Three were renamed the Scottish Championship, League One and League Two, respectively. However, despite the merger agreement, the actual structure of the league remains much the same, both in terms of the number of teams per league and the promotion/relegation process.

Due to the upheaval related to the formation of the new governing body in Scotland, and the end of main sponsorship agreements — with Clydesdale Bank, Irn-Bru and the Scottish Government — the Scottish Premiership, Scottish Championship and lower leagues, and the Scottish League Cup have all remained without main title sponsorship as of the end of 2013 calendar year. According to the SPF, however, it has continued to engage with various corporations and organisations to secure future sponsorship.

Table 2.3: Structure of Professional Football in the UK and Europe, 2013/2014

Governing Body Main Sponsor Domestic Leagues Premier League The Premier League Barclays Championship The Football League Sky Bet League One The Football League Sky Bet League Two The Football League Sky Bet Scottish Professional Football Scottish Premiership League - Scottish Championship, League One and Scottish Professional Football League Two League -

Domestic Cups FA Cup The Football Association Budweiser League Cup The Football League Capital One Scottish Cup Scottish Football Association William Hill Scottish League Cup Scottish Professional Football League -

Table continues...

Table 2.3: Structure of Professional Football in the UK and Europe, 2013/2014

...table continued

Governing Body Main Sponsor International Cups Champions League UEFA - Europa League UEFA - Club World Cup FIFA -

FA — Football Association UEFA — Union of European Football Associations FIFA — Fédération Internationale de Football Association Note: the Champions League, Europa League and Club World Cup are sponsored by a number of multinational corporations and do not have one main sponsor.

Source: Key Note

Promotion and Relegation

The elite leagues in both England and Scotland were formed in the 1990s, with the top clubs joining to form Premier Leagues, largely due to the desire to retain a greater share of broadcasting revenues from the game. In England, the Premier League is largely autonomous in terms of operation, although it remains under the general remit of The Football Association (FA). The SPL was operated in a similar fashion to that of the English Premier League; however, following its merger with the SFL in June 2013, the elite and lower leagues are now governed by a single body once again.

In the English Premier League, the worst three performing teams in terms of points accrued are subject to relegation, and are replaced with the top two performing teams in the Championship, alongside the winner of a play-off competition between those finishing between third and sixth place. The play-off competition is utilised throughout the Football League divisions, allowing smaller clubs — who often struggle to compete with the dominant league leaders — the chance at promotion.

The promotion and relegation process across the English and Scottish leagues is largely uniform, although the actual number of teams promoted and relegated varies. There is some variation in format between the newly formed Scottish Premiership and Championship, however, in the form of a play-off competition between the 11th-placed team in the elite league and 3 teams from tier two — those clubs finishing second, third and fourth — with the winner either maintaining their position in the Premiership or gaining promotion into it.

2012/2013 League and Cup Awards

In the 2012/2013 season, Manchester United regained the Premiership Title after narrowly missing out to Manchester City in the previous season. Manchester City did, however, achieve a second-place finish, followed by Chelsea, Arsenal and Tottenham Hotspur. Each of the above teams earned qualification into European competitions as a result of their top-five finish, with Tottenham gaining entry into the Union of European Football Associations (UEFA) Europa League, while the remaining teams were entered into the elite Champions League competition.

The cup competitions in England proved more competitive than in recent seasons, with ninth-placed Swansea achieving victory in the Capital One Cup, while Wigan Athletic — who finished in 18th placed and were thus relegated from the Premier League — lifted The FA Cup trophy. As a result, these two teams took England’s remaining two European qualification spots, gaining entrance into the Europa League competition.

Besides Wigan Athletic, Reading — who only gained promotion in the previous season — and Queens Park Rangers (QPR) were relegated from the Premiership, finishing in 19th and 20th, respectively. These were replaced with the winners of the Championship, Cardiff City, alongside second-placed Hull City and play-off winners Crystal Palace.

Also in the Championship, Wolverhampton Wonderers faced their second consecutive season of relegation — after finishing bottom of the Premiership in the 2011/2012 season — finishing 23rd, joining Peterborough United and Bristol City at the bottom of the league in 2012/2013.

In League One, Doncaster Rovers prevailed as champions, gaining automatic promotion alongside second-placed Bournemouth. Fourth-placed Yeovil Town secured victory in the play-off competition, earning the final League One promotion spot. At the bottom of the table, Portsmouth — who have faced significant financial difficulties after their 2008 FA Cup Triumph — finished in 24th, joined by Hartlepool (23rd), Bury (22nd) and Scunthorpe United (21st) in relegation.

Finally, for the English leagues, Gillingham, Rotherham United and Port Vale all secured automatic promotion to League One, while Bradford City secured promotion via the play-offs. Barnet and Aldershot Town dropped out of the Football League — finishing in 23rd and 24th, respectively, in League Two — to be replaced with Mansfield Town and Newport County.

In Scotland, Celtic retained the Championship in the SPL, securing the nation’s only Champions League qualification spot. Motherwell and St Johnstone finished in second and third, respectively, gaining qualification to the Europa League, joining Scottish Cup runners-up Hibernian. In addition to the Championship, Celtic secured victory in the Scottish Cup, while St Mirren prevailed in the Scottish League Cup.

Table 2.4: Final League Standings and Cup Winners, 2012/2013

England/Wales Premier League Champions Manchester United Champions League qualifiers Manchester City, Chelsea, Arsenal Europa League Tottenham Hotspur, Swansea City, qualifiers Wigan Athletic Relegated Wigan Athletic, Reading, Queens Park Rangers

Championship Promoted Cardiff City, Hull City, Crystal Palace Relegated Peterborough United, Wolverhampton Wanderers, Bristol City

League One Promoted Doncaster Rovers, Bournemouth, Yeovil Town Relegated Scunthorpe United, Bury, Hartlepool United, Portsmouth

League Two Promoted Gillingham, Rotherham United, Port Vale, Bradford City Relegated Barnet, Aldershot Town†

Scotland Premier League Champions Celtic Europa League qualifiers Motherwell, St. Johnstone, Hibernian Relegated Dundee

Football League Promoted Partick Thistle (to SPL) Queen of the South, Alloa Athletic (to First Division) Rangers (to Second Division)

Table continues...

Table 2.4: Final League Standings and Cup Winners, 2012/2013

...table continued

Cup Competition Scottish Cup Celtic Scottish League Cup St Mirren

† — Mansfield Town and Newport Country promoted to League Two SPL — Scottish Premier League

Source: Key Note

By Revenue

Football clubs generate the vast majority of their income from three distinct revenue streams. However, it is important to note that losses and gains from player transfers — which can be significant — are generally excluded from financial data.

The three main revenue streams consist of:

• broadcasting — earnings from television rights and distributions from European competitions

• commercial — revenue from sponsorship, merchandising and exploitation of the club brand

• match day — revenue from match day ticket sales and corporate hospitality.

Table 2.5 shows a breakdown of revenue generation across the three main sources of income at Premier League football clubs between 2005 and 2012, and projected earnings for the seasons ending 2013 and 2014. Broadcasting has consistently remained the most significant source of revenue at football clubs since 2005, accounting for 43.4% of the total in 2005, rising to 50.4% in 2012 and a projected share of 55.5% by 2014. In 2012, commercial revenues overtook match day earnings, following a 14.7% rise to reach £624m, accounting for a 26.4% share of total income. In the same period, match day revenues fell slightly, declining by 0.7% to £547m, accounting for 23.2% of the total.

Table 2.5: Turnover of the English Premier League by Type of Revenue (£m and %), Seasons Ending May 2005-2014

Match Broadcasting Commercial Day Total Revenue (£m) 2005 579 316 439 1,334 2006 580 346 453 1,379 2007 592 398 540 1,530 2008 925 453 554 1,932 2009 973 435 573 1,981 2010 1,040 459 531 2,030 2011 1,178 544 551 2,273 2012 1,189 624 547 2,360 2013p 1,200 710 570 2,480 2014p 1,710 790 580 3,080

% of Turnover 2005 43.4 23.7 32.9 100.0 2008 47.9 23.4 28.7 100.0 2012 50.4 26.4 23.2 100.0 2014 55.5 25.6 18.8 †100.0

p — projection † — does not sum due to rounding

Source: Deloitte Annual Review of Football Finance

Figure 2.3: Turnover of the English Premier League by Type of Revenue (£m), Seasons Ending May 2005-2014

Broadcasting 3,000 Commercial Match day 2,500

2,000

1,500

1,000

500

0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Note: 2013 and 2014 figures are Deloitte projections.

Source: Deloitte Annual Review of Football Finance/Key Note

Match Day Revenues

While broadcasting and commercial revenues are the main source of income in the Premier League as a whole, match day revenues remain vital to football clubs, with numerous teams either engaged in or developing plans to expand existing stadium capacity as a means of greater revenue generation. Furthermore, for certain clubs within the Premier League — barring the largest of teams — and the majority operating in the Football Leagues, match day revenues continue to represent the largest source of income.

Match day revenues consist of income derived from the sale of all domestic and European match day tickets and hospitality revenues for games played at the club’s stadium, as well as its share of receipts from cup games played at an away stadium. The majority of match day ticket sales occur in the off-season, during which time season tickets are released to the general public.

With tickets accounting for the largest proportion of match day revenue, attendance is by the far the largest driver within this segment. Since the turn of the millennium, aggregated attendances have remained relatively static, fluctuating around the 30 million mark per season. In the Premier League, figures have sat around the 13 million mark since 2005. For the Championship, attendances in recent history have ranged between 9 million and 10 million, while League One and League Two have consistently attracted live audiences of around 4 million and 2 million a season, respectively.

Over the long term, however, football attendances have fallen from in excess of 40 million in post-Second World War years. In the 1980s, football attendance dropped to record lows — due mainly to neglected stadiums and the proliferation of hooliganism across the country’s football grounds — falling below 20 million during the decade. In the late 1980s and early 1990s, following a number of high-profile stadium disasters, all-seater stadia became a requirement in the UK (later scaled back to cover the top two divisions only) and — with television coverage increasing and a strong performance at the 1990 World Cup — interest in football was reinvigorated, with attendances once again on the rise, aided by a period of reinvestment in facilities.

Table 2.6: Total Attendance to League Matches in England and Wales by Division (million), Selected Seasons Ending May 1949-2013 Championship Premier League League League Total Two One

1949 ---- 41.3 1959 14.7 8.6 5.9 4.3 33.6 1969 14.6 7.4 4.3 3.1 29.4 1979 12.7 6.2 3.4 2.3 24.5 1989 7.8 5.9 3.0 1.8 18.5 1999 11.7 7.8 3.7 2.2 25.3 2005 12.9 9.5 4.1 2.3 28.8 2006 12.9 9.7 4.1 2.3 29.0 2007 13.1 10.0 4.1 2.3 29.5 2008 13.7 9.4 4.4 2.4 29.9 2009 13.5 9.9 4.2 2.3 29.9 2010 13.0 9.9 5.0 2.1 30.0 2011 13.4 9.6 4.2 2.3 29.4

Table continues...

Table 2.6: Total Attendance to League Matches in England and Wales by Division (million), Selected Seasons Ending May 1949-2013

...table continued Championship Premier League League League Total Two One

2012 13.1 9.8 4.1 2.4 29.4 2013 13.7 9.7 3.5 2.4 29.2

Note: data for 2010 to 2013 sourced from ESPN; data prior to 1999 for the Premier League, Championship, League One and Two relates to the old First Division, Second Division, Third Division and Fourth Division, respectively; totals may not sum due to rounding.

Source: The Political Economy of Football (www.footballeconomy.com)/ESPN

Figure 2.4: Total Attendance to League Matches in England and Wales by Division (million), Selected Seasons Ending May 1959-2013

15.0 Premier League Championship 12.5 League One League Two 10.0

7.5

5.0

2.5

0.0

1959 1969 1979 1989 1999 2005 2006 2007 2008 2009 2010 2011 2012 2013

Source: The Political Economy of Football (www.footballeconomy.com)/ESPN/ Key Note

For the cup competitions — particularly the domestic tournaments — attendances tend to be lower than those of the average league game. This is largely due to the additional costs for season ticket holders — the main predominant fan base at any club — as cup games tend not to be included within the price of a season ticket.

Although aggregated attendances across the season are an important indication of trends in match day revenues, for an individual club, average attendance at their home ground is more significant. For the 2012/2013 season, Manchester United remained top in terms of average home attendance, at 73,452, followed by Arsenal at 60,079. These teams also have the largest grounds — Old Trafford and The Emirates — in terms of capacity, highlighting the benefits of stadium expansion.

In comparison, other major teams at the top of the Premier League, such as Manchester City, Liverpool and Chelsea, all have average weekly attendances of around 40,000 to 45,000, a factor attributable entirely to limitations in capacity at their current respective stadiums. As a result, each of these clubs have been linked either with new stadium sites or with plans to further develop existing venues in an attempt to boost attendance and match day revenue.

Table 2.7: Average Attendance to League Matches for Selected Clubs in England and Wales (number), Season Ending May 2013

League Attendance

Manchester United EPL 75,186 Arsenal EPL 60,019 Newcastle United EPL 50,454 Manchester City EPL 47,070 Celtic SPL 46,917 Rangers SPL 45,750 Liverpool EPL 44,652 Chelsea EPL 41,500 Sunderland EPL 41,240 Aston Villa EPL 37,056 Everton EPL 37,031

Table continues...

Table 2.7: Average Attendance to League Matches for Selected Clubs in England and Wales (number), Season Ending May 2013

...table continued

League Attendance

Tottenham Hotspur EPL 35,948 West Ham United EPL 34,604 Derby County Championship 33,010 Sheffield Wednesday Championship 31,375

EPL — English Premier League Note: data for the EPL is sourced from SoccerSTATS.com; data for the Championship is sourced from The Football League.

Source: SoccerSTATS.com/FitbaStats/The Football League

Broadcasting Revenue

Broadcasting revenues have represented the fastest area of growth for football clubs participating in the Premier League. In 1991/1992 — the final season of the old divisional structure — broadcasting income stood at just £15m, accounting for around 9% of total turnover. This has risen in each subsequent broadcasting agreement, to reach £1.19bn in 2012, accounting for more than half (50.4%) of total income. The 2012/2013 season marked the final year of a 3-year agreement for Premier League broadcasting rights with British Sky Broadcasting (BSkyB) and Setanta (later replaced by ESPN following financial difficulties). The agreement covered the period between the seasons ending 2011 and 2013, with BSkyB and Setanta/ESPN paying a total of £1.78bn to the Premier League.

The current agreement for Premier League broadcasting rights was signed in June 2012, with just over £3bn paid by BSkyB and BT for the three seasons ending 2014 to 2016, representing a massive increase on the previous agreement. BSkyB secured the rights for the majority of games on offer, winning the rights to five of the seven packages on offer, totalling 116 matches per season at a cost of £2.3bn over the agreement period. The remaining games — a total of 38 per season — were awarded to BT in exchange for £738m over three seasons. BSkyB also currently has the monopoly on football games, following the signing of a 3-year deal worth £195m for the exclusive rights for all Football League live broadcasting for the three seasons commencing 2012/2013.

Other areas of income from broadcasting include significant payments from overseas broadcasting rights — estimated at around £2bn over the three seasons ending 2013 to 2016 — and agreements for The FA Cup, the Europa League and the Champions League. There are also comparatively smaller agreements for television highlight packages and radio commentary, currently with the BBC and talkSport.

Commercial Revenue

Commercial revenues are derived from a range of sources, covering all activities involving the exploitation of the club’s brand. The main sources of income in this segment, however, include sponsorship, the marketing of branded products, income derived from conference or event hosting, and club museums. Sponsorship is by far the most lucrative activity within the commercial revenue stream, and with numerous agreements available for clubs and their corporate partners, including:

• League and cup sponsor — between businesses and the governing body of the tournament for ‘headline’ sponsorship, such as the Barclays Premier League, BSkyB Championship and the Capital One Cup. Clubs, in turn, receive parachute payments from the governing body.

• Kit sponsorships — between clubs and sports equipment manufacturers, whereby the manufacturer will pay the club to provide its kit in exchange for advertising on both the kit itself and in and around the stadium.

• Commercial sponsors and partners — typically each football team will have one main sponsor whose brand appears on the kit itself. In addition, the majority of clubs have a number of commercial partners whose branding is displayed within and around the stadium.

• Stadium sponsorship — a relatively new trend, whereby the football stadium is named after the sponsor, such as the Etihad Stadium and the Emirates Stadium.

Table 2.8: Sponsors of Premier League Football Clubs, 2012/2013

Type Kit Sponsor Club Main Sponsor Arsenal Fly Emirates Airline Nike Aston Villa Genting Casinos Gambling Macron Chelsea Samsung Electronics adidas Everton Chang Beer Nike Fulham FxPRO Financial Services Kappa

Table continues...

Table 2.8: Sponsors of Premier League Football Clubs, 2012/2013

...table continued

Type Kit Sponsor Club Main Sponsor Liverpool Standard Charter Financial Services Warrior Sports Manchester City Etihad Airways Airline Umbro Manchester United AON Insurance Services Nike Newcastle United Virgin Money Financial Services Puma Norwich City Aviva Insurance Services Errea Queens Park Rangers Air Asia Airline Lotto Reading Waitrose Supermarket Puma Southampton aap3 IT Services Umbro Stoke City Bet365 Gambling adidas Sunderland Invest in Africa Conglomerate adidas Swansea City 32 Red Gambling adidas Tottenham Hotspur Aurasma Technology Under Armour West Bromwich Albion Zoopla Property Services adidas West Ham United SBOBET Gambling Macron Wigan Athletic 12Bet Gambling MiFit

Source: Key Note

Other major activities within the commercial segment include the marketing of branded products. The distribution of replica kits is the most lucrative product for football clubs, with income generated both from kit sponsorship and from unit sales. In addition to replica kits, clubs market a wide range of branded items, from scarves, gloves and posters through to mugs and towels. Such products are typically distributed via a number of channels, including online stores; physical dedicated stores located in or around the football stadium; general sportswear retailers; and, increasingly, dedicated club retailers in high streets where support for the particular club is significant.

Other activities within the commercial segment include publications, such as the weekly printed programmes; official club membership charges; DVDs; and revenue from dedicated television channels.

3. Strengths, Weaknesses, Opportunities and Threats

STRENGTHS

• Football is considered the UK’s national sport, maintaining a massive following throughout country.

• The Premier League is the most watched domestic tournament in the world, reaching 804 million households outside the UK.

• The vast majority of teams operating in the English Premier League and Championship have the capacity to accommodate tens of thousands of spectators.

• Football clubs, particularly in the English Premier League, are highly sought after as corporate partners, due to the levels of spectatorship both in the ground and on television. As such, sponsorship can be massively lucrative in the elite league.

• Mainstream media coverage of football in the UK, particularly the English Premier League, is extensive.

WEAKNESSES

• The domination of the largest clubs, and the expenditure of those with wealthy investors, is a cause for concern regarding the competitiveness in the English Leagues.

• Relegation from the Premier League can have significant financial impact on clubs, due to the massive drop in broadcasting revenue and performance payments from the governing body. Although measures have been introduced to address this, it remains a concern.

• Despite the introduction of financial regulations in the English leagues over the last few seasons, at least eight clubs remain in ‘critical’ financial positions.

• Although the appeal of football continues to widen, the game continues to attract a primarily male audience.

OPPORTUNITIES

• Additional revenue can be generated at football clubs through the leasing of stadia for activities other than football, such as music gigs, boxing matches and rugby matches.

• Merchandising and the exploitation of the club brand, in both the UK and internationally, by the top Premier League teams has been an area of strong development in recent years. There remains significant scope for other Premier League teams to follow suit.

• Each broadcasting agreement since the inception of the Premier League has seen significant growth in the value of contracts, a trend unlikely to end in the foreseeable future.

• Broadcasting agreements for the Premier League are now global business, presenting opportunities to reach an increasing number of overseas national markets.

• Sponsorship agreements between clubs and corporate partners have also continued to increase over the last decade, representing a further opportunity for revenue growth, should this trend continue.

• The Internet has presented new opportunities for revenue — through membership and subscription benefits — and promotion of the club brand. Development in this area, particularly among the smaller clubs, could help raise further income and the profiles of the teams.

THREATS

• Negative fan behaviour — although vastly improved over the last few decades — has continued to reflect badly on the game’s image. This has been exacerbated by the recent trend by some fans to bring flares into UK football grounds.

• High wages remain a persistent problem in the football market, swallowing a significant portion of annual club revenue. While measures have been introduced to counteract this, inflating wages presents huge problems.

• Furthermore, the excessiveness of wages has had a negative impact on the image of the game, particularly in the context of national and global economic recession.

• Football clubs across the English Premier League have been criticised for the high, and rising, cost of match day tickets. Fans have become particularly disillusioned with the costs of away games, for which significant travel costs must also be factored in.

4. Current Issues

2012/2013 SEASON

In the 2012/2013 season, Manchester United regained the Premier League championship — having narrowly lost out to Manchester City in the final game of the previous season — securing the title with four fixtures left to play. Manchester City finished 11 points behind Manchester United in second place, followed by Chelsea and Arsenal in third and fourth, respectively. In the domestic cup competitions, the tournaments proved more competitive than the league, with mid-table Swansea City defeating League Two side Bradford City in the League Cup, while in The FA Cup Final Wigan Athletic — who were ultimately relegated from the Premier League — triumphed over Manchester City. As a result, Manchester United, Manchester City, Chelsea and Arsenal all secured entrance into the 2013/2014 Champions League, while fifth-placed Tottenham Hotspur and cup winners Swansea City and Wigan Athletic qualified from the 2013/2014 Europa League competition.

In the 2012/2013 European competitions there was little success for UK teams in the elite Champions League tournament, with Chelsea and Manchester City failing to proceed through the initial group stage, and Manchester United, Arsenal and Celtic all facing defeat in the Round of 16. However, with Chelsea finishing third in the group stage of the Champions League, the team gained entrance into the Round of 32 in the Europa League and proceeded to win the competition against Portuguese team Benfica in the final, securing Chelsea their second European trophy in successive seasons following their victory against Bayern Munich in the 2011/2012 Champions League final.

At the bottom of the Premier League, Reading and Queens Park Ranger (QPR) — who finished 19th and 20th, respectively — joined FA Cup winners Wigan Athletic, who ended the season in 18th place, in relegation to the Football League Championship. Promotion to the Premier League was awarded to 2012/2013 Championship winners Cardiff City and second place Hull City, alongside play-off winners Crystal Palace. In the Scottish Premier League (SPL) — known as the Scottish Premiership from 2013/2014 — Celtic retained the championship, finishing 16 points above second place Motherwell, and 23 points ahead of third place St Johnstone. In the main cup competitions, Celtic secured victory in the Scottish Cup, while St Mirren prevailed in the Scottish League Cup.

GOAL-LINE TECHNOLOGY

In April 2013, it was announced that the Premier League had voted in favour of introducing goal-line technology from the 2013/2014 season. British-based company Hawk-Eye’s eponymous system — which has been used extensively in cricket since 2001 and tennis since 2006 as a technological means of adjudication — was selected to provide the camera-based technology. Hawk-Eye, which was installed across the 20 stadiums during the close season from central Premier League funds, will instantly relay information to the referee as to whether the football has crossed the goal-line or not.

The introduction of this new technology was taken to a vote in April after the International Football Association Board (IFAB) ratified the use of a goal-line adjudication system following significant debate and campaign led by the English Football Association (FA) after a wrongly disallowed goal in the high-profile Round of 16 England versus Germany game at the 2010 South African World Cup.

In addition to Premier League games, the technology will be utilised in any FA Cup or League Cup fixture where Hawk-Eye has been installed. However, any ground with goal-line adjudication systems that host a Champions League or Europa League fixture will be required to switch the technology off, as it has yet to be ratified by the Union of European Football Associations (UEFA).

While the technology to definitively discover whether a football has crossed the goal line has been available for a number of years, various concerns — primarily that the use of adjudication systems would slow the game down — had halted its implementation. However, various high-profile incidents that could have been averted resulted in the technology gaining support throughout the UK and internationally. Football managers have been particularly vociferous in their support of goal-line technology, with many facing defeat in previous seasons as a result of incorrect decisions being made.

FINANCIAL FAIR PLAY

Union of European Football Associations

In 2009, UEFA’s Executive Committee unanimously approved a financial fair play concept in an effort to create a more even playing field and halt the inflationary impact of football clubs’ spending on salaries and transfer fees. According to UEFA, the principal objectives of the financial fair play concept are:

• to introduce greater discipline and rationality in football club finances

• to relieve the upwards pressure on player salaries and transfer fees

• to encourage clubs to compete within the means of their revenues

• to encourage long-term investment in youth player development and infrastructure

• to protect the long-term viability of European club football

• to ensure clubs settle their liabilities on a timely basis.

The UEFA Club Licensing and Financial Fair Play Regulations were eventually approved in May 2010 and an initial implementation period commenced in summer 2011, with the first assessment period covering the two seasons ending 2012 and 2013. As such, the first season in which a club could fail to be licensed for European Competition is the current 2013/2014 season.

The regulations essentially introduce various criteria that clubs must comply with in order to be licensed to participate in UEFA’s club competitions. The main criterion is an obligation for clubs to achieve a ‘break-even figure’ in revenue over a fixed period of time for football-related activities, covering: income from gate receipts; broadcasting rights; sponsorship; advertising; profits from player transfers; expenditure on player transfers; salaries, employee benefits and expenses; and other operating expenses. Expenditure on youth development activities, community development activities and the development of infrastructure are excluded from the scope of the ‘break-even’ criteria, allowing essentially limitless spending in these areas.

There is, however, an ‘acceptable deviation’ in the maximum ‘break-even’ deficit allowed at each club of €5m. However, if the deficit is entirely covered by contributions from the club’s equity participants, it is allowed to post a loss of €45m for the 2011/2012 to 2012/2013 and 2013/2014 to 2014/2015 assessment period, with this figure falling to €30m in the 2015/2016 to 2017/2018 monitoring period, with lower allowable deviations expected to be introduced beyond this time.

While the withholding of a licence to participate in European competitions represents the ultimately penalty of non-compliance, a number of other punitive measure are available for UEFA, including: reprimands and warnings; fines; points deduction; withholding of UEFA distributions from competition participation; and disqualification from a competition in progress.

Premier League

In February 2013, Premier Clubs agreed in principle to a system of domestic financial regulations, similar in design to those of the UEFA Financial Fair Play Regulations. Unlike the UEFA regulations, however, domestic regulations will affect all clubs participating in the league, rather than only those who qualify for the European competitions. The regulations, as agreed in principle, are focused primarily on a ‘break-even’ rule, requiring all Premier League teams to limit aggregated losses to £105m over the three seasons ending 2014, 2015 and 2016. Any club exceeding this limit will face a tighter regulatory regime.

Also included were short-term cost-control measures to halt the massive inflation in player wages, through the restriction of the amount of Premier League central funds that can be used to increase current player wages. These measures will only apply to clubs with an aggregated wage bill in excess of £52m in 2013/2014, £56m in 2014/2015 and £60m in 2015/2016. In 2013/2014, Premier Clubs with wages in excess of these amounts will only be allowed to increase salary bills further by £4m; this figure rises to £8m in 2015/2016 and £12m in 2015/2016.

However, these measures have been criticised for not going far enough, as the limit to the annual aggregate wage bill only includes income from Premier League distributions. As a result, clubs will still have free reign to increase wage costs using any increased income from commercial and match day revenues.

Football League

The Football League has also agreed on the implementation of a Financial Fair Play framework to operate across the three divisions — Championship, League One and League Two — from the beginning of the 2012/2013 season, again in an effort to limit financial losses at clubs across the country, and to ultimately establish a league of financially self-sustaining football clubs.

The ‘break-even’ approach, based on the UEFA regulations, was once again favoured for the Championship, while in League One and Two, clubs will implement the Salary Cost Management Protocol (SCMP) that has been in operation in the latter competition since 2004/2005.

Financial Fair Play in the Championship will require clubs to provide annual accounts to The Football League by 1st December each year, covering the previous season/financial year. A ‘Fair Play Result’ will then be determined using the club’s profit/loss for the year, excluding investment in certain areas of infrastructure and losses in extraordinary circumstances.

The ‘Fair Play Result’ must not show a loss of less than the permitted level of acceptable deviation and shareholder equity investment for the seasons, originally set at £4m and £8m, respectively, falling to £2m and £3m, respectively, by 2015/2016 .Failure to comply with the regulations from December 2014 will be subject to a transfer, which will remain in place until the club can lodge financial information that demonstrates compliance.

For League One, SCMP — which is already in operation in League Two — will limit spending on total player wages to a proportion of each club’s turnover. In the 2011/2012 seasons, League One introduced a ‘pilot’ of the SCMP, limiting expenditure on wages to 75% of the club’s turnover, but no sanctions were put in place. For the 2012/2013 season this was reduced to 65%, with the current level (2013/2014 season) set at 60%, with sanctions (transfer embargoes) applicable.

SCOTTISH FOOTBALL STRUCTURE REORGANISATION

In June 2013, it was announced that both the SPL and the Scottish Football League (SFL) had voted in favour of a package of measures to deliver a merged league in time for the commencement of the 2013/2014 season. The proposals that both entities agreed to included:

• a single merged league of 42 clubs

• the retention of the 12, 10, 10, 10 — between the first, second, third and fourth tiers, respectively — divisional structure

• a more equitable distribution model, with substantial redistribution to the second tier to enable full-time operation

• a ‘pyramid for the entire game’, allowing access to the senior leagues to clubs operating outside the top 42

• play-offs involving the 11th-placed team in the top division and the second, third and fourth-placed teams in the division below at the end of each season.

As a result of the agreement, the two governing bodies of the leagues in Scotland — SPL and SFL — were merged to create a single body: the Scottish Professional Football League (SPFL), and the league divisions were rebranded the Scottish Premiership, Scottish Championship, Scottish League One and Scottish League Two.

5. Forecasts

INTRODUCTION

General Economic Forecasts

The UK resident population is forecast to rise by 3.1% from 63.8 million to 65.8 million. While this is unlikely to be a major influencing factor for the football industry, it should contribute to sustained long-term demand for tickets, broadcasting subscriptions and merchandise.

From 2013, economic conditions are expected to improve, with gross domestic product (GDP) growth of 1.3%, followed by more significant annual growths between 2014 and 2017. Growth in GDP indicates increased consumer expenditure, helping to boost demand for football and football related products.

Improving economic conditions are expected to provide greater stability in the rate of inflation — particularly in comparison with the recessionary and post-recession period — ranging from 3.1% to 3.5% over the forecast period. While stable inflation should provide greater confidence in the economy, the relatively high rate predicted over the next 5 years — at least in comparison to the Bank of England’s (BoE’s) 2% target rate — is likely to impact the price of match day tickets.

UK employment is also expected to improve between 2013 and 2017, with a 23.3% fall in unemployment from 1.5 million to below 1.2 million. This should also contribute to a rise in consumer expenditure, and therefore, spending on leisure services and goods.

Table 5.1: Forecast UK Economic Trends (000, %, million), 2013-2017

2013 2014 2015 2016 2017

UK resident population (000) 63,758 64,271 64,776 65,271 65,755 GDP growth (%) 1.3 2.2 2.4 2.4 2.3

Table continues...

Table 5.1: Forecast UK Economic Trends (000, %, million), 2013-2017

...table continued

2013 2014 2015 2016 2017

Inflation† (%) 3.1 3.1 3.1 3.3 3.5 Unemployment‡ (million) 1.50 1.39 1.26 1.21 1.15

GDP — gross domestic product † — at retail price index (RPI) ‡ — actual number of claimants; claimant count measures the number of people claiming Jobseeker’s Allowance

Source: National Population Projections, 2010-based projections, National Statistics website/Forecasts for the UK Economy, November 2013, Treasury Independent Average © Crown copyright material is reproduced with the permission of the Controller of HMSO (and the Queen’s Printer for Scotland)

FORECASTS 2014 TO 2018

Aggregated turnover at the main UK football clubs is forecast to rise by 18.8% between the seasons ending May 2014 and 2018, from £3.75bn to £4.45bn. Annual growth in club revenue is forecast to fluctuate significantly, largely in line with the start of new Premier League broadcasting agreements in the 2013/2014 and the 2016/2017 seasons.

In 2014, as the first year of the new £3bn domestic television broadcasting agreements — up significantly from the £1.78bn received in the last deal — club revenues are forecast for massive growth, particularly in the English Premier League, where total turnover is projected to rise by 24.2% to £3.08bn, according to Deloitte. Furthermore, Deloitte also projects a 10.9% growth in Championship revenues in the 2013/2014 seasons, while Key Note estimates a cautious 1.3% rise in Scottish Premiership turnover. As a result, revenue across the main UK football clubs is expected to rise by 13.7% to reach £3.75bn in the season ending May 2014.

In 2015 and 2016, growth is likely to be subdued — following the significant increase in broadcasting revenue in 2014 — at just 3.2% and 3%, respectively, before the implementation of the next Premier League broadcasting agreement for the three seasons beginning 2016/2017. This is expected to provide a 9% boost in aggregate club turnover, to reach £4.35bn, before returning to more subdued growth in 2018 (2.5%).

Table 5.2: Forecast Total Turnover of Main UK Football Clubs by Value (£m), Seasons Ending May 2014-2018

p2014 2015 2016 2017 2018

Value (£m) 3,750 3,870 3,986 4,345 4,454 % change year-on-year 13.7 3.2 3.0 9.0 2.5

p — includes Deloitte projections for the Premier and Football Leagues, and Key Note estimates for the Scottish Premiership Note: includes main professional and semi-professional clubs, i.e. those participating in the English Premier League and Football League and the Scottish Premiership.

Source: Deloitte Annual Review of Football Finance/Key Note

Figure 5.1: Forecast Total Turnover of Main UK Football Clubs by Value (£m), Seasons Ending May 2014-2018

5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2014 2015 2016 2017 2018

Note: 2014 includes Deloitte projections for the Premier and Football Leagues, and Key Note estimates for the Scottish Premiership; includes main professional and semi-professional clubs, i.e. those participating in the English Premier League and Football League and the Scottish Premiership.

Source: Deloitte Annual Review of Football Finance/Key Note

MARKET GROWTH

Between the years ending May 2005 and 2018, Key Note forecasts growth of 127% in total turnover at the main UK professional football clubs, from £1.96bn to £4.45bn, as illustrated in Figure 5.2 overleaf.

Figure 5.2: Growth in Total Turnover of Main UK Football Clubs by Value (£m), Seasons Ending May 2005-2018

4,500 4,250 4,000 3,750 3,500 3,250 3,000 2,750 2,500 2,250 2,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Note: includes main professional and semi-professional clubs, i.e. those participating in the English Premier League and Football League and the Scottish Premiership; 2012 data includes Key Note estimates for the Scottish Premiership; 2013 and 2014 data includes Deloitte projections for the Premier and Football Leagues, and Key Note estimates for the Scottish Premiership.

Source: Deloitte Annual Review of Football Finance/PwC’s Annual Financial Review of the Scottish Premier League/Key Note

FUTURE TRENDS

Managerial Dismissals

As of January 2014, a total of 23 managers in the English Premier and Football Leagues have been fired since the beginning of the 2013/2014 season in August 2013, and around half of England’s 92 league clubs have a manager who has been in the position for less than a year. This massive glut of managerial dismissals — and the pervasive tendency across English football to view manager dismissal as the quickest route to better results — has led the League Managers Association (LMA) to place pressure on The Football Association (FA) to impose sanctions on clubs who ignore employment when replacing technical staff. According to the LMA, the majority of managerial sackings are unfair dismissals, ignoring standard human resource (HR) procedures and employer obligations when making staff redundant. With evidence suggesting that managerial dismissals have little effect on club performance; an aggregated cost estimated at £100m a year in compensation; and increased pressure from the LMA on employment law, technical staff could see increasing stability in job roles in the future.

Financial Fair Play

With European and domestic Financial Fair Play regulations (examined in greater detail in Chapter 4 — Current Issues) now in effect across the divisions, numerous clubs are at risk of non-compliance. Clubs such as Chelsea, who posted a loss of £49.4m for the season ending 2013, and Championship side Queen’s Park Rangers (QPR) — whose massive wage bill could result in posted losses far in excess of the £8m allowed — are in danger of facing sanctions. While all clubs linked with Financial Fair Play non-compliance insist that they are on track to meet the regulations, the complex set of rules — open to various interpretations — could result in a host of sanctions and, ultimately, court challenges against those sanctions.

Player Contract Disclosure

Despite a move towards transparency in football club finances, particularly with greater scrutiny as a result of Financial Fair Play regulations, clubs in England are increasingly refusing to provide an official fee for player transfers. According to the Premier League, just five of the total 115 permanent transfers (excluding free transfers) in the elite league were given an official valuation in the 2013 summer transfer period.

It has been highlighted that full disclosure of all players at the club, together with the amount paid for the player, the contract-end date and their depreciated value — such as is required in Italy — could have halted the financial decline of clubs such as Leeds and Portsmouth who, due to massive overspend on transfer fees and wages, have faced administration in recent years.

This trend towards non-disclosure, however, has been preferred by clubs, as they believe it could help to improve their future bargaining position and remove undue pressure on expensive signings. As such, it is unlikely that Premier League clubs will introduce full disclosure in regard to fees and contracts until required to by the governing bodies.

6. Company Profiles

INTRODUCTION

The following section contains financial profiles of some of the principal companies identified as operating within the market sector discussed in this report. The financial results of some of the important names within the sector may not be reported if:

• their principal activities are so varied that their results are not considered applicable to the survey

• they are no longer trading as separate companies

• their financial data are very out of date. DEFINITIONS

A company which has a ‘Y’ consolidated value has filed consolidated accounts for the relevant year.

† — denotes that the growth rate calculation is invalid, because the figures either move from positive to negative or from negative to positive. Turnover (Sales)

This includes all income derived from the principal activities of the firm, net of VAT. It encompasses UK sales, exports and overseas and intercompany sales. Pre-Tax Profit

The net trading profit figure after deduction of all operating expenses, including depreciation and finance charges but before deduction of tax, dividends, subventions or group relief, and other appropriations. Where applicable, it will include the share of profits and losses of associated companies. Items described by the company as exceptional are included; extraordinary items are excluded. Profit Margin

Pre-tax profit expressed as a percentage of sales. Average Remuneration

Total employee remuneration divided by the number of employees. Sales per Employee

Sales divided by the number of employees. FURTHER INFORMATION

For more detailed financial information telephone Key Note on: 0845-504 0452.

ASTON VILLA FOOTBALL CLUB LTD

Registered Office Villa Park Trinity Road Aston Birmingham West Midlands, B6 6HE Telephone: 0121-327 2299 Company Registration Number 03375789 Date of Incorporation 20/05/97 Holding Company Aston Villa Ltd Ultimate Holding Company Reform Acquisitions LLC

Previous Name(s) and Date(s) of Change

None

Principal Activities

The operation of the commercial activities of a professional football club.

SIC Code

92619, Operation of sports arenas and stadiums.

FINANCIAL PROFILE

Year End 31/05/12 31/05/11 31/05/10 31/05/09 Weeks 52 52 52 52 Consolidated N N N N

Sales

Sales (£000) 79,750 88,820 89,483 84,203 % change year-on-year -10.21 -0.74 6.27 - Exports (£000) - - - - Exports/Sales (%) - - - -

Profits

Pre-Tax Profits (£000) -19,944 -9,744 -27,712 -30,140 % change year-on-year † † † - Profit Margin (%) -25.01 -10.97 -30.97 -35.79 Operating Profit (£000) -19,217 -9,065 -26,882 -29,391

Employees

Number of Employees 1,584 1,565 1,405 1,264 Average Employee Remuneration (£) 5,562 6,371 7,084 7,097 Sales per Employee (£) 50,347 56,754 63,689 66,616 Profit per Employee (£) -12,591 -6,226 -19,724 -23,845 Capital Employed per Employee (£) -77,975 -65,713 -63,970 -47,833

Balance Sheet/Ratios

Capital Employed (£000) -123,512 -102,841 -89,878 -60,461 Return on Capital (%) - - - - Net Worth (£000) -124,352 -104,408 -94,664 -66,953 Current Ratio 0.30 0.34 0.38 0.43 Liquidity Ratio 0.29 0.34 0.37 0.43

CHELSEA FOOTBALL CLUB LTD

Registered Office Stamford Bridge Ground Fulham Road London, SW6 1HS Telephone: 020-7915 2200 Company Registration Number 01965149 Date of Incorporation 26/11/85 Holding Company Chelsea FC PLC Ultimate Holding Company Fordstam Ltd

Previous Name(s) and Date(s) of Change

Chelsea Set Ltd (16/08/91) Lomargate Ltd (18/02/86)

Principal Activities

The operation of a football club.

SIC Code

92629, Other sporting activities not elsewhere classified.

FINANCIAL PROFILE

Year End 30/06/12 30/06/11 30/06/10 30/06/09 Weeks 52 52 52 52 Consolidated N N N N

Sales

Sales (£000) 227,319 205,248 187,290 185,588 % change year-on-year 10.75 9.59 0.92 - Exports (£000) - - - - Exports/Sales (%) - - - -

Profits

Pre-Tax Profits (£000) 200 -71,962 -70,437 -47,022 % change year-on-year † † † - Profit Margin (%) 0.09 -35.06 -37.61 -25.34 Operating Profit (£000) -46,969 -89,624 -68,704 -74,826

Employees

Number of Employees 233 205 213 219 Average Employee Remuneration (£) 550,996 715,727 645,244 637,310 Sales per Employee (£) 975,618 1,001,210 879,296 847,434 Profit per Employee (£) 858 -351,034 -330,690 -214,712 Capital Employed per Employee (£) 1,000,249 709,117 638,131 724,306

Balance Sheet/Ratios

Capital Employed (£000) 233,058 145,369 135,922 158,623 Return on Capital (%) 0.09 -49.50 -51.82 -29.64 Net Worth (£000) -703,494 -629,655 -495,317 -438,675 Current Ratio 0.04 0.02 0.01 0.05 Liquidity Ratio 0.04 0.02 0.01 0.05

EVERTON FOOTBALL CLUB COMPANY LTD (THE)

Registered Office Goodison Park Goodison Road Liverpool, L4 4EL Telephone: 0870-442 1878 Company Registration Number 00036624 Date of Incorporation 14/06/92 Holding Company None Ultimate Holding Company None

Previous Name(s) and Date(s) of Change

None

Principal Activities

A group engaged as a professional football club.

SIC Codes

92619, Operation of sports arenas and stadiums. 92629, Other sporting activities not elsewhere classified.

FINANCIAL PROFILE

Year End 31/05/12 31/05/11 31/05/10 31/05/09 Weeks 52 52 52 52 Consolidated Y Y Y Y

Sales

Sales (£000) 80,531 82,021 79,076 79,669 % change year-on-year -1.82 3.72 -0.74 - Exports (£000) - - - - Exports/Sales (%) - - - -

Profits

Pre-Tax Profits (£000) -9,106 -5,413 -3,093 -6,920 % change year-on-year † † † - Profit Margin (%) -11.31 -6.60 -3.91 -8.69 Operating Profit (£000) -19,254 -17,149 -17,697 -6,757

Employees

Number of Employees 228 238 234 226 Average Employee Remuneration (£) 243,636 206,828 202,778 192,248 Sales per Employee (£) 353,206 344,626 337,932 352,518 Profit per Employee (£) -39,939 -22,744 -13,218 -30,619 Capital Employed per Employee (£) -70,272 -8,412 54,209 49,239

Balance Sheet/Ratios

Capital Employed (£000) -16,022 -2,002 12,685 11,128 Return on Capital (%) - - -24.38 -62.19 Net Worth (£000) -68,220 -68,515 -75,044 -66,059 Current Ratio 0.19 0.25 0.22 0.28 Liquidity Ratio 0.19 0.25 0.22 0.28

FULHAM FOOTBALL CLUB LTD

Registered Office Fulham Football Club Training Ground Motspur Park New Malden Surrey, KT3 6PT Company Registration Number 02114486 Date of Incorporation 24/03/87 Holding Company Fulham Football Leisure Ltd Ultimate Holding Company Mafco Holdings Ltd

Previous Name(s) and Date(s) of Change

Fulham Football Club (1987) Ltd (01/07/13) Fulham (87) Ltd (14/09/87) Maximystic Ltd (02/06/87)

Principal Activities

The operation of a professional football club.

SIC Code

92629, Other sporting activities not elsewhere classified.

FINANCIAL PROFILE

Year End 30/06/12 30/06/11 30/06/10 30/06/09 Weeks 52 52 52 52 Consolidated N N N N

Sales

Sales (£000) 78,652 76,405 76,398 63,145 % change year-on-year 2.94 0.01 20.99 - Exports (£000) - - - - Exports/Sales (%) - - - -

Profits

Pre-Tax Profits (£000) -18,755 4,406 -18,986 -7,898 % change year-on-year † † † - Profit Margin (%) -23.85 5.77 -24.85 -12.51 Operating Profit (£000) -22,575 -8,664 -17,865 -11,710

Employees

Number of Employees 940 840 796 741 Average Employee Remuneration (£) 58,182 59,915 55,010 55,838 Sales per Employee (£) 83,672 90,958 95,977 85,216 Profit per Employee (£) -19,952 5,245 -23,852 -10,659 Capital Employed per Employee (£) 8,880 13,608 3,486 13,101

Balance Sheet/Ratios

Capital Employed (£000) 8,347 11,431 2,775 9,708 Return on Capital (%) -224.69 38.54 -684.18 -81.36 Net Worth (£000) -212,032 -195,527 -197,493 -195,069 Current Ratio 0.50 0.63 0.53 0.33 Liquidity Ratio 0.49 0.62 0.53 0.33

MANCHESTER CITY LTD

Registered Office Etihad Stadium Etihad Campus Manchester, M11 3FF Telephone: 0161-444 1894 Company Registration Number 02989498 Date of Incorporation 08/11/94 Holding Company Abu Dhabi United Group Investment & Development Ltd Ultimate Holding Company Abu Dhabi United Group Investment & Development

Previous Name and Date of Change

Manchester City PLC (12/09/07)

Principal Activities

A group engaged in the operation of a professional football club.

SIC Code

92629, Other sporting activities not elsewhere classified.

FINANCIAL PROFILE

Year End 31/05/12 31/05/11 31/05/10 31/05/09 Weeks 52 52 52 52 Consolidated Y Y Y Y

Sales

Sales (£000) 231,140 153,186 125,050 87,033 % change year-on-year 50.89 22.50 43.68 - Exports (£000) - - - - Exports/Sales (%) - - - -

Profits

Pre-Tax Profits (£000) -98,705 -197,491 -121,300 -92,562 % change year-on-year † † † - Profit Margin (%) -42.70 -128.92 -97.00 -106.35 Operating Profit (£000) -104,091 -194,931 -126,109 -73,598

Employees

Number of Employees 476 386 413 302 Average Employee Remuneration (£) 374,275 398,057 286,584 243,990 Sales per Employee (£) 485,588 396,855 302,784 288,189 Profit per Employee (£) -207,363 -511,635 -293,705 -306,497 Capital Employed per Employee (£) 915,326 1,000,435 1,003,012 268,096

Balance Sheet/Ratios

Capital Employed (£000) 435,695 386,168 414,244 80,965 Return on Capital (%) -22.65 -51.14 -29.28 -114.32 Net Worth (£000) 130,781 42,165 94,431 -162,672 Current Ratio 0.90 0.55 1.09 0.11 Liquidity Ratio 0.90 0.55 1.09 0.11

MANCHESTER UNITED LTD

Registered Office Old Trafford Manchester, M16 0RA Telephone: 0161-868 8000 Company Registration Number 02570509 Date of Incorporation 21/12/90 Holding Company Red Football Ltd Ultimate Holding Company Red Football Ltd Partnership

Previous Name(s) and Date(s) of Change

Manchester United PLC (11/10/05) Voteasset PLC (25/01/91)

Principal Activities

A group engaged in operation of a professional football club and ancillary activities.

SIC Codes

74849, Other business activities not elsewhere classified. 92619, Operation of sports arenas and stadiums. 92629, Other sporting activities not elsewhere classified.

FINANCIAL PROFILE

Year End 30/06/13 30/06/12 30/06/11 30/06/10 Weeks 52 52 52 52 Consolidated Y Y Y Y

Sales

Sales (£000) 363,189 320,320 331,441 286,416 % change year-on-year 13.38 -3.36 15.72 - Exports (£000) - - - 2,864 Exports/Sales (%) - - - 1.00

Profits

Pre-Tax Profit (£000) -8,793 -1,269 34,006 25,349 % change year-on-year † † 34.15 - Profit Margin (%) -2.42 -0.40 10.26 8.85 Operating Profit (£000) 62,014 46,320 66,328 52,039

Employees

Number of Employees 743 696 628 592 Average Employee Remuneration (£) 212,692 205,027 215,873 197,736 Sales per Employee (£) 488,814 460,230 527,772 483,811 Profit per Employee (£) -11,834 -1,823 54,150 42,819 Capital Employed per Employee (£) 1,184,956 840,305 1,001,271 1,345,522

Balance Sheet/Ratios

Capital Employed (£000) 880,422 584,852 628,798 796,549 Return on Capital (%) -1.00 -0.22 5.41 3.18 Net Worth (£000) 26,507 17,399 6,962 33,257 Current Ratio 0.69 2.12 2.15 4.78 Liquidity Ratio 0.69 2.12 2.15 4.78

NEWCASTLE UNITED FOOTBALL COMPANY LTD

Registered Office St James Park Newcastle-Upon-Tyne, NE1 4ST Company Registration Number 00031014 Date of Incorporation 11/03/90 Holding Company Newcastle United PLC Ultimate Holding Company Mash Holdings Ltd

Previous Name(s) and Date(s) of Change

None

Principal Activities

The operation of a professional football club together with related and ancillary activities.

SIC Codes

52485, Retail sale of sports goods, games and toys, stamps and coins. 55520, Catering. 74849, Other business activities not elsewhere classified. 92619, Operation of sports arenas and stadiums. 92629, Other sporting activities not elsewhere classified.

FINANCIAL PROFILE

Year End 30/06/12 30/06/11 30/06/10 30/06/09 Weeks 52 52 52 52 Consolidated N N N N

Sales

Sales (£000) 93,296 88,424 52,208 85,681 % change year-on-year 5.51 69.37 -39.07 - Exports (£000) - - - - Exports/Sales (%) - - - -

Profits

Pre-Tax Profits (£000) 1,401 32,768 -19,749 -14,554 % change year-on-year -95.72 † † - Profit Margin (%) 1.50 37.06 -37.83 -16.99 Operating Profit (£000) -5,028 -3,791 -33,274 -37,023

Employees

Number of Employees 300 478 431 395 Average Employee Remuneration (£) 188,667 103,423 98,044 160,686 Sales per Employee (£) 310,987 184,987 121,132 216,914 Profit per Employee (£) 4,670 68,552 -45,821 -36,846 Capital Employed per Employee (£) 312,727 -52,797 -93,292 -84,334

Balance Sheet/Ratios

Capital Employed (£000) 93,818 -25,237 -40,209 -33,312 Return on Capital (%) 1.49 - - - Net Worth (£000) -78,088 -57,796 -105,469 -102,391 Current Ratio 0.63 0.17 0.10 0.15 Liquidity Ratio 0.61 0.16 0.09 0.14

THE ARSENAL FOOTBALL CLUB PLC

Registered Office Highbury House 75 Drayton Park London, N5 1BU Telephone: 020-7619 5003 Company Registration Number 00109244 Date of Incorporation 26/04/10 Holding Company Arsenal (AFC Holdings) Ltd Ultimate Holding Company KSE UK Inc

Previous Name and Date of Change

Arsenal Football Club Ltd (09/05/91)

Principal Activities

The operation of a professional football club and related commercial activities.

SIC Codes

92619, Operation of sports arenas and stadiums. 92629, Other sporting activities not elsewhere classified.

FINANCIAL PROFILE

Year End 31/05/13 31/05/12 31/05/11 31/05/10 Weeks 52 52 52 52 Consolidated N N N N

Sales

Sales (£000) 220,246 233,541 197,268 228,991 % change year-on-year -5.69 18.39 -13.85 - Exports (£000) - - - - Exports/Sales (%) - - - -

Profits

Pre-Tax Profits (£000) 15,345 68,088 14,351 87,805 % change year-on-year -77.46 374.45 -83.66 - Profit Margin (%) 6.97 29.15 7.27 38.34 Operating Profit (£000) -31,566 2,783 8,264 49,495

Employees

Number of Employees 530 496 454 416 Average Employee Remuneration (£) 250,638 243,645 236,416 226,916 Sales per Employee (£) 415,558 470,849 434,511 550,459 Profit per Employee (£) 28,953 137,274 31,610 211,070 Capital Employed per Employee (£) 907,177 897,137 806,434 846,103

Balance Sheet/Ratios

Capital Employed (£000) 480,804 444,980 366,121 351,979 Return on Capital (%) 3.19 15.30 3.92 24.95 Net Worth (£000) 154,281 151,922 122,404 104,489 Current Ratio 1.39 1.57 1.45 1.42 Liquidity Ratio 1.36 1.54 1.43 1.39

THE LIVERPOOL FOOTBALL CLUB AND ATHLETIC GROUNDS LTD

Registered Office Anfield Road Liverpool Merseyside, L4 0TH Telephone: 0151-263 2361 Company Registration Number 00035668 Date of Incorporation 26/01/92 Holding Company UKSV Holdings Company Ltd Ultimate Holding Company Nesvi LLC

Previous Name and Date of Change

Liverpool Football Club and Athletic Grounds PLC (The) (21/06/07)

Principal Activities

The operation of a professional football club and related activities.

SIC Codes

92619, Operation of sports arenas and stadiums. 92629, Other sporting activities not elsewhere classified.

FINANCIAL PROFILE

Year End 31/05/12 31/07/11 31/07/10 31/07/09 Weeks 44 52 52 52 Consolidated N N N N

Sales

Sales (£000) 168,998 183,640 184,542 177,324 % change year-on-year -7.97 -0.49 4.07 - Exports (£000) 4,705 6,777 3,203 4,298 Exports/Sales (%) 2.78 3.69 1.74 2.42

Profits

Pre-Tax Profits (£000) -40,522 -49,317 -19,880 -16,084 % change year-on-year † † † - Profit Margin (%) -23.98 -26.86 -10.77 -9.07 Operating Profit (£000) -35,132 -89,670 -25,091 -7,608

Employees

Number of Employees 554 535 477 416 Average Employee Remuneration (£) 220,755 224,925 227,566 213,200 Sales per Employee (£) 360,514 343,252 386,880 426,260 Profit per Employee (£) -86,443 -92,181 -41,677 -38,663 Capital Employed per Employee (£) 200,765 165,406 52,392 106,688

Balance Sheet/Ratios

Capital Employed (£000) 111,224 88,492 24,991 44,382 Return on Capital (%) -43.06 -55.73 -79.55 -36.24 Net Worth (£000) -115,652 -114,430 -103,632 -106,943 Current Ratio 0.52 0.31 0.24 0.25 Liquidity Ratio 0.47 0.26 0.19 0.24

TOTTENHAM HOTSPUR LTD

Registered Office Bill Nicholson Way 748 High Road London, N17 0AP Telephone: 020-8365 5042 Company Registration Number 01706358 Date of Incorporation 14/03/83 Holding Company ENIC International Ltd Ultimate Holding Company None

Previous Name(s) and Date(s) of Change

Tottenham Hotspur PLC (24/01/12) Nailage PLC (23/05/83)

Principal Activities

A group engaged in the operation of a professional football club and related commercial activities.

SIC Codes

92619, Operation of sports arenas and stadiums. 92629, Other sporting activities not elsewhere classified.

FINANCIAL PROFILE

Year End 30/06/12 30/06/11 30/06/10 30/06/09 Weeks 52 52 52 52 Consolidated Y Y Y Y

Sales

Sales (£000) 144,156 163,486 119,814 113,012 % change year-on-year -11.82 36.45 6.02 - Exports (£000) - - 859 - Exports/Sales (%) - - 0.72 -

Profits

Pre-Tax Profits (£000) -7,304 402 -6,539 33,398 % change year-on-year † † † - Profit Margin (%) -5.07 0.25 -5.46 29.55 Operating Profit (£000) -10,805 -7,156 -16,792 -19,709

Employees

Number of Employees 341 315 290 286 Average Employee Remuneration (£) 232,053 250,978 204,855 187,332 Sales per Employee (£) 422,745 519,003 413,152 395,147 Profit per Employee (£) -21,419 1,276 -22,548 116,776 Capital Employed per Employee (£) 460,188 549,444 605,797 653,168

Balance Sheet/Ratios

Capital Employed (£000) 156,924 173,075 175,681 186,806 Return on Capital (%) -4.65 0.23 -3.72 17.88 Net Worth (£000) 20,905 -17,687 -43,032 -64,158 Current Ratio 0.29 0.34 0.41 0.56 Liquidity Ratio 0.27 0.33 0.40 0.55

7. Further Sources

Publications

• Annual Financial Review of the • Price of Football Scottish Premier League BBC PwC http://www.bbc.co.uk https://www.pwc.co.uk • Red Flag Alert Football Distress • Annual Review of Football Finance Report Deloitte Begbies Traynor Group https://www.deloitte.com http:// www.begbies-traynorgroup.com/

Government Publications

HM Treasury National Statistics http://www.hm-treasury.gov.uk http://www.statistics.gov.uk • Forecasts for the UK Economy — • Consumer Price Inflation, October Treasury Independent Average, 2013 November 2013 • Labour Market Statistics, November 2013 • National Population Projections, 2010-based projections • Population Estimates for UK, England and Wales, Scotland and Northern Ireland — Population Estimates Timeseries 1971 to Current Year, December 2011 • United Kingdom Economic Accounts, November 2013

Other Sources

ESPN The Political Economy of Football http://www.espn.co.uk http://www.footballeconomy.com

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Corporate Hospitality 7 2012 European Trends in Food Corporate & Promotional Shopping 4 2009 Giftware 5 2013 Exhibitions & Conferences 13 2013 Cosmetic Surgery 11 2014 F Cosmetics & Fragrances 26 2013 Fast-Food & Home-Delivery Courier & Express Services 18 2013 Outlets 27 2013 Cruise Market 3 2012 Film Market 2 2009 Customer Magazines 6 2014 Financial Services Marketing to Customer Relationship BCs 1 2009 Management 5 2013 Financial Services Marketing to Customer Services in Financial DEs 2009 Organisations 5 2010 Financial Services Marketing to Start-Up Businesses & the Self- D Employed 3 2010 Debt Services (Commercial & Financial Services Marketing to Consumer) 8 2014 the Affluent 1 2009 Defence Equipment 11 2010 Financial Services Organisations Diet Foods 5 2013 on the Internet 5 2013 Digital Broadcasting 6 2012 Fire Protection Equipment 10 2013 Digital Communications 2 2012 Fish & Fish Products 15 2012 Direct Insurance 6 2010 Fitted Kitchens 12 2013 Direct Marketing 21 2014 Food Industry 20 2010 Direct Mortgages 9 2013 Football Clubs & Finance 6 2014 Discount Retailing 9 2013 Footwear 18 2013 Disposable Paper Products 14 2013 Forecourt Retailing 9 2012 Distribution Industry 10 2009 Franchising 13 2012 DIY & Home Improvements Freight Forwarding 18 2011 Industry 11 2009 Frozen Foods 27 2014 Domestic Heating 15 2013 Fruit & Vegetables 24 2014 Drinks Market 19 2009 Fruit Juices, Energy & Juice E Drinks 16 2014 E-Commerce: The Internet Functional Foods 6 2010 Grocery Market 8 2014 Further & Higher Education 9 2014 E-Commerce: The Internet G Leisure & Entertainment Market 5 2008 Garden Equipment 15 2013 Electrical Contracting 11 2014 Gas Industry 8 2014 Electrical Wholesale 6 2013 General Insurance 13 2010 Electricity Industry 9 2013 Giftware 20 2011 Electronic Banking 4 2008 Glassware 17 2013 Energy Industry 8 2010 Green & Ethical Consumer 6 2013 Equipment for the Disabled 7 2014 Greetings Cards 28 2014 E-Recruitment 4 2012 Grey Consumer 6 2013 Estate Agents 18 2011 Estate Agents & Services 6 2012 H Ethnic Foods 18 2013 Hand Luggage & Leather Goods 17 2013 European Long-Term Insurance 4 2008 Health Clubs & Leisure Centres 12 2013 European Renewable Energy 2 2008 Healthy Eating 6 2008 European Short Breaks 2 2008 Holiday Purchasing Patterns 6 2012 European Telecommunications 3 2010 Home Entertainment 4 2012 European Tourist Attractions 3 2010 Home Entertainment (Audiovisual) 1 2013

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Home Entertainment Mobile Marketing 1 2009 (Computing & Gaming) 1 2013 Mobile Phones 9 2013 Home Furnishings 21 2013 Motor Finance 5 2013 Home Shopping 15 2013 Motor Industry 12 2008 Horticultural Retailing 18 2013 Music Industry 3 2014 Hot Beverages 7 2013 N Hotels 27 2013 Natural Products 3 2012 Housebuilding 21 2013 Newspapers 20 2014 Household Appliances (Brown Non-Food Sales in Supermarkets 6 2013 Goods) 13 2013 Non-Metal Recycling 5 2014 Household Appliances (White Goods) 19 2013 Nutraceuticals 3 2008 Household Detergents & O Cleaners 18 2014 Office Equipment Industry 9 2010 Household Furniture 21 2014 Office Furniture 23 2013 I Offshore Oil & Gas Industry 7 2013 Ice Creams & Frozen Desserts 17 2014 Ophthalmic Goods & Services 19 2013 Independent Financial Advisers 5 2013 Opticians & Optical Goods 5 2010 Insurance Companies 12 2009 Organic Food & Drink 8 2012 Insurance Industry 10 2009 OTC Pharmaceuticals 16 2013 Insurance Market 13 2012 Over-50s Consumer 1 2009 Insurance Prospects 2 2008 Own Brands 15 2013 Internet & Telephone Banking 2 2013 P Internet Advertising 8 2013 Packaging (Food & Drink) 6 2010 IT Recruitment 6 2012 Packaging (Glass) 13 2008 IT Security 11 2013 Packaging (Metals & Aerosols) 13 2012 IT Training 15 2014 Packaging (Paper & Board) 16 2012 J Packaging (Plastics) 16 2012 Jewellery & Watches 27 2013 Pensions 7 2013 K Personal Banking 2 2012 Kitchenware 9 2013 Personal Lines Insurance 5 2012 Personal Loans 4 2008 L Laboratory Equipment 11 2013 Pet Market 5 2013 Legal Services to Consumers 1 2013 Pharmaceuticals Industry 6 2008 Leisure in the Home 3 2010 Planning for Retirement 1 2008 Leisure Outside the Home 3 2010 Plus-Size Fashion 3 2009 Lifestyle Magazines 6 2013 Poultry 5 2012 Lingerie 12 2014 Power Tools 7 2013 Local Government Services 3 2010 Premium Lagers, Beers & Ciders 11 2013 Low-Fat & Reduced-Sugar Foods 5 2008 Printing 17 2013 Private Healthcare 23 2014 M Protective Clothing & Equipment 9 2014 Marketing in the Digital Age 4 2012 Public Houses 29 2013 Meat & Meat Products 24 2014 Public Relations Industry 4 2012 Medical Equipment 18 2012 Publishing Industry 13 2010 Medical & Health Insurance 4 2012 Men & Women’s Buying Habits 6 2012 Men’s Toiletries & Fragrances 7 2013 Metal Recycling 8 2014 Milk & Dairy Products 27 2013

Title Edition Published Title Edition Published

R Trends in Leisure Activities 5 2012 Rail Travel 8 2011 Tyre Industry 7 2014 Ready Meals 14 2013 U Recruitment Agencies UK Internet Market 1 2009 (Permanent) 13 2014 Utilities 5 2013 Recruitment Agencies V (Temporary & Contract) 13 2014 Vegetarian Foods 7 2012 Renewable Energy 6 2013 Vehicle Breakdown Services 7 2012 Restaurants 27 2013 Vehicle Security 11 2014 Retail Pharmacies 18 2013 Video Gaming 2 2013 Road Haulage 23 2012 Vitamins, Minerals & Rural Economy 2 2009 Supplements 8 2013 S W Sauces & Spreads 13 2012 Wallcoverings & Ceramic Tiles 20 2014 Savings & Investments 7 2013 Waste Management 13 2014 Security Industry 13 2010 Water Industry 8 2013 Shopfitting 16 2014 Windows & Doors 22 2013 Shopping Centres 4 2013 Wine 23 2013 Singles Market 5 2012 Women's Plus-Size Fashion 5 2013 Slimming Market 5 2013 Working Women 5 2009 Small Businesses & Banks 2 2010 Y Small Domestic Electrical Youth Fashionwear 5 2014 Appliances 14 2013 Snack Foods 22 2013 Key Note Archive Reports Social Media Marketing 2 2012 A Soft Drinks (Carbonated & Aerospace 12 2003 Concentrated) 20 2013 Agrochemicals & Fertilisers 3 2002 Soup Market 5 2013 Air Freight 2 2005 Spirits & Liqueurs 3 2014 Air Transport Logistics 1 2003 Sports Clothing & Footwear 15 2013 Animal Feedstuffs 11 2001 Sports Equipment 18 2013 Audio Visual Retailing 1 2000 Sports Market 13 2010 B Sports Sponsorship 9 2013 Baby Foods 3 2006 Stationery (Personal & Office) 27 2013 Baths & Showers 1 2000 Supermarket Own Labels 5 2013 Bearings 2 2007 Supermarket Services 4 2013 Beds, Bedrooms & Upholstered Sweet & Salty Snacks 16 2010 Furniture 2 2000 T Bottled Water 2 2001 Take-Home Trade 18 2011 C Teenage & Pre-Teen Magazines 6 2013 Cable & Satellite TV 10 2004 Timber & Joinery 21 2013 Call Centres 6 2006 Toiletries 26 2014 Cash & Carry Outlets 16 2001 Tourist Attractions 6 2013 Cinemas & Theatres 9 2001 Toys & Games 26 2013 Clothing Retailers 1 2000 Training 22 2014 Commercial Radio 8 2004 Travel & Tourism Market 17 2010 Consumer Borrowing in Europe 1 2004 Travel Agents & Overseas Tour Consumer Internet Usage 4 2000 Operators 25 2013 Contracted-Out Services 3 2007 Trends in Food Shopping 5 2008 Convenience Retailing 12 2002

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Cross-Border Shopping 1 2000 G Customer Loyalty in the Financial Generation Y 1 2007 Services 1 2000 Global Positioning Systems 1 2002 D Global Waste Management 2 2070 Dark Spirits & Liqueurs 3 2004 H Defence Industry 7 2003 Health Foods 22 2003 Design Consultancies 3 2000 Healthcare Market 10 2005 Digital TV 2 2003 Heating, Ventilating & Air DINKY Market 3 2007 Conditioning 9 2002 Document Imaging Systems 1 2007 I Domestic Telecommunications 4 2006 In-Car Entertainment 1 2000 Dry Cleaning & Laundry Services 5 2005 Individual Savings Accounts 2 2005 E Industrial Fasteners 8 2001 Electronic Component Industrial Pumps 5 2000 Distribution 12 2002 Industrial Valves 8 2001 Electronic Component Internet Service Providers 2 2005 Manufacturing 11 2002 Internet Usage in Business 8 2005 Electronic Games 4 2003 Issues & Challenges in the UK Life Equipment Leasing 12 2003 Assurance Market 2 2002 E-Shopping 1 2002 Issues in Higher Education European Electricity Industry 3 2007 Funding 2 2006 European Gas Industry 3 2007 L European Oil & Gas Industry 2 2007 Leisure & Recreation Market 15 2005 European Water Industry 3 2007 Lighting Equipment 14 2002 Extended Financial Families 1 2005 M F Management Consultants 10 2003 Factoring & Invoice Discounting 2 2003 Marketing to Children 4-11 3 2003 Finance Houses 11 2000 Mechanical Handling 9 2001 Financial Services Marketing to Millenium Youth 2 2002 ABC1s 1 2000 Mobile Telecommunications 2 2007 Financial Services Marketing to ABs 4 2006 N Financial Services Marketing to New Media Marketing 3 2002 C1C2DEs 1 2004 O Financial Services Marketing to Off-Trade Spirits 3 2004 Over-60s 1 2004 Organic Baby & Toddler Care 1 2007 Financial Services Marketing to Over-40s Consumer 2 2005 the Retired & Elderly 3 2007 Free-To-Air TV 8 2004 P Paper & Board Manufacturers 14 2002 Passenger Travel in the UK 5 2007 Pay TV 2 2004 Pension Extenders 1 2002 Photocopiers & Fax Machines 14 2005 Plant Hire 13 2007 Plastic Cards in Europe 2 2005 Plastics Processing 10 2003 Pre-School Childcare 1 2001 Private-Sector Opportunities in Education 2 2001

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Process Plant Industry 1 2000 The Fish Industry 1 2001 Public Transport 1 2001 The Legal Services Market 1 2005 R The Luggage Market 1 2000 Rail Transport Logistics 1 2003 The Newspaper Industry 3 2005 Railway Industry 2 2006 Tweenagers 1 2001 Recycling & the Environment 1 2000 V Retail Credit 2 2000 Video & DVD Retail & Hire 8 2005 Retail Development 1 2001 Videoconferencing 4 2007 Road Transport Logistics 1 2003 W S Water Transport Logistics 1 2003 Saving Trends in Eurozone 2 2002 White Goods 2 2000 Short Break Holidays 4 2001 White Spirits 1 2005 Short Breaks 2 2004 Women Over 45 3 2007 Small Office Home Office Consumer 1 2001 Small Office Home Office Products 1 2001 Sponsorship 2 2000 Supermarkets & Superstores 20 2003 T Teenage Magazines 3 2007 Telecommunications 21 2007 Teleworking 2 2003 The Computer Market 11 2004 The Film Industry 4 2002

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