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The European Elite 2019 Football Clubs’ Valuation May, 2019 KPMG Sports Advisory Practice footballbenchmark.com What is KPMG Football Benchmark? A business intelligence tool enabling relevant comparisons with competitors, including: Club fi nance & operations A consolidated and verifi ed database of the fi nancial and operational performance of over 200 football clubs, both in Europe and South America. Social media analytics A historical tracking of the social media activity of 04 05 hundreds of football clubs and players. Foreword Selection criteria Player valuation A proprietary algorithm, which calculates the market value of 4,700 football players from nine European and two South American leagues. 06 16 Headline findings Squad and player valuation - impact on EV 24 26 Enterprise Value Our methodology ranges & mid points Football Clubs’ Valuation: The European Elite 2019 03 Table of contents 04 05 Foreword Selection criteria 06 16 Headline findings Squad and player valuation - impact on EV 24 26 Enterprise Value Our methodology ranges & mid points 04 Football Clubs’ Valuation: The European Elite 2019 Foreword Dear Reader, Following the success of the past three years, I am delighted to introduce you to KPMG’s fourth edition of the club valuation report, an annual analysis providing an indication of the Enterprise Value (EV) of the 32 most prominent European football clubs as at 1 January 2019. We trust our report, prepared by the Football Benchmark team of the KPMG’s Sports Advisory Practice, provides stimulating insights into the European football landscape. After three years of stability on the podium, this year brought same interests and rather sit on confl icting positions that are some turbulence, with Real Madrid CF leapfrogging likely to make future decisions even more challenging. Manchester United FC at the top, and FC Barcelona slipping Comparing the best fi ve listed clubs according to their EV to the 4th spot, letting FC Bayern München take the on the stock exchange (market capitalization plus net debt) 3rd position. Los Blancos jumped above the EUR 3 billion at the fi rst trading day of 2019, to KPMG’s EV, we can see EV level for the fi rst time, the only club to do this alongside the minor differences for Manchester United FC (+7% in KPMG’s Red Devils; however, the Spanish giants’ current EV is still valuation), Juventus FC (+5%) and AS Roma (-5%), while the lower than the Red Devils was last year. Similarly, the Bavarians’ difference is more prominent for Borussia Dortmund (+49%) current value is lower than the Blaugrana’s in 2018. and Olympique Lyonnais (+21%). Further changes among the top 10 include Tottenham Hotspur Considering the 3-year EV evolution of the top 32, FC surpassing Juventus FC to reach the 9th position, Olympique Lyonnais boast the highest (+150%) overall and Arsenal FC dropping two spots to land in the 8th increase, followed by Tottenham Hotspur FC (+110%). position, surpassed by Chelsea FC and Liverpool FC. The On the other hand, FC Barcelona are the only club in the current latter two clubs claim an EV in excess of EUR 2 billion for the ranking who suffered a decrease in their EV (-3%) since the fi rst time, making to eight the number of clubs having an EV publication of the fi rst edition of our report in 2016. over EUR 2 billion. Acknowledging that players and squads constitute the most The two 2019 UEFA Champions League fi nalists boast signifi cant assets of the majority of football clubs, in this remarkable fi nancial performance in the past season: year’s analysis we dedicate a focus section to the context Liverpool FC’s 33% annual EV growth is second only to surrounding player valuation, measured through KPMG’s FC Internazionale Milano’s 41% year-on-year increase, while proprietary algorithms. Tottenham Hotspur FC came in third with a 31% growth. They also registered record levels of pre-tax profi t – EUR 157 In preparing our report, fi rstly, we surveyed the publicly-available million for Spurs and EUR 136 million for the Reds. Tottenham statutory fi nancial statements of the 38 professional football Hotspur FC’s 39% staff costs-to-revenue ratio is also the lowest clubs that meet our selection criteria (see on the opposite page), among the 32 clubs. and of which the top 32 by EV are selected for the purposes of this publication. It is important to note that this analysis does As last year, the big fi ve football leagues are represented not consider the business and sporting results achieved by 27 clubs. The English Premier League has confi rmed by each club in the 2018/19 season. Then, we adopted the its absolute dominance, having nine clubs on the list and so-called Revenue Multiple approach, used in corporate accounting for 43% of the total aggregate value. This year, fi nance valuations. However, to avoid the overly simplistic Scotland’s Celtic FC is a new joiner together with Spanish approach of using uniform multipliers, KPMG professionals Villarreal CF. On the other hand, Valencia CF and Fenerbahçe have applied a proprietary algorithm, consistent with the one SK dropped out, whereas both clubs had been on this list in all adopted in previous editions, that considers the differences the three previous editions of our analysis. between football clubs and the markets and the economies For the third consecutive year, the overall EV of the 32 most in which they operate. Our formula takes into account fi ve prominent European football clubs has increased by 9% parameters – profi tability, popularity, sporting potential, (an impressive 35% over the past three years). This growth broadcasting rights and stadium ownership – each with their rate is in contrast with the overall trend of major European own specifi c weight, and calculating ad-hoc revenue multipliers, Stock Exchanges, notably the STOXX Europe 50 Index1, varying from club to club. showing a year-on-year decrease of -13% (-9% from 2016), and If you would like to receive further information demonstrating the different pace at which the football industry concerning our fi ndings, please contact us through is evolving. www.footballbenchmark.com or myself directly. The transition of major clubs into media and entertainment I would be delighted to discuss them with you. companies, with global brand exposure, also helps create more Yours sincerely, stable and predictable cash fl ows and consequently better warranties to investors and fi nanciers. It comes by no surprise, Andrea Sartori that such remarkable growth has heated the debate concerning Partner the transformation of European clubs’ competition structure. KPMG Global Head of Sports However, the stakeholders involved do not necessarily share the [email protected] 1The STOXX Europe 50 index, Europe’s leading blue-chip index, provides a representation of supersector leaders in Europe covering 50 stocks from 17 different European countries. Football Clubs’ Valuation: The European Elite 2019 05 Selection criteria Besides availability of annual financial statements of the clubs, The rationale behind these selection criteria is that the KPMG set three parameters to be fulfilled in order for a club to chosen clubs are largely successful on pitch, are not in be included in our research. The two primary criteria that have to danger of being relegated and possess a brand with high be simultaneously fulfilled are: international visibility. 1. Clubs must be among the top 50 European teams by Based on the pre-established selection criteria, 38 clubs total operating revenues; and from 9 European countries have met the requirements and have been analysed by KPMG. The 32 clubs ranked according 2. Clubs must be among the top 50 teams according to to EV which make this year’s edition of KPMG’s Football Clubs’ the 5-year UEFA coefficient. Valuation report are provided in the map below, while the six In case one of the above criteria is not fulfilled, a club could still “runners-up” ranked by their EV, are: Olympique de Marseille be shortlisted if: (France), Valencia CF (Spain), Fenerbahçe SK (Turkey), ACF Fiorentina (Italy), FC Porto (Portugal) and Sporting Clube de 3. It is among the top 30 European teams by number of Portugal (Portugal). social media followers (Facebook, Twitter, Instagram and YouTube combined) followers as at 1 January 2019. Scotland 1 Celtic FC England 9 Arsenal FC Chelsea FC Netherlands 1 Everton FC AFC Ajax Leicester City FC Liverpool FC Manchester City FC Manchester United FC Germany 3 Tottenham Hotspur FC West Ham United FC Borussia Dortmund FC Bayern München FC Schalke 04 Italy 6 France 3 AC Milan AS Roma AS Monaco FC FC Internazionale Milano Tu rkey 2 Olympique Lyonnais Juventus FC Beşiktaş JK Paris Saint-Germain FC SS Lazio Galatasaray SK SSC Napoli Spain 6 Athletic Club Bilbao Atlético de Madrid FC Barcelona Real Madrid CF Sevilla FC Villarreal CF Portugal 1 SL Benfica Who is new in the top 32 Who is out of the top 32 Celtic FC Scotland Fenerbahçe SK Turkey Villarreal CF Spain Valencia CF Spain 06 Football Clubs’ Valuation: The European Elite 2019 Headline findings Movement among the top three clubs The positions of the top three clubs atop the podium have been over the last four seasons. Consequently, Los Blancos could stable over the three previous editions of our report. benefit from a cumulated 29% operating revenue growth from In the first year (2016), Real Madrid CF and Manchester 2016 to 2019, slightly higher than their English counterpart, United FC shared the first spot followed by FC Barcelona, which made them the highest revenue generating club. while in the following two seasons, the English giants finished The Spanish side’s improvement in profitability in the 2017/18 ahead of the Spanish club, with FC Barcelona keeping the third season and the growing in popularity, fostered by spectacular spot.