Tuesday, 21 November, 2017

Investors Target Premier League Clubs Due to Rising Profits

Investors Target Premier League Clubs Due to Rising Profits Investors Target Premier League Clubs Due to Rising Profits
Spencer Simpson | 17 June, 2016, 10:07

Many analysts have predicted that investors could buy out several football clubs in the Premier League by the end of this year because of their constantly growing profitability. Before the TV deal in 2013, many top division clubs in England made a series of heavy losses, as revealed by their cumulative pre-tax loss for fourteen back-to-back seasons. However, latest Premier League lines indicate that the clubs have started making good profits.

Last year alone, the top 20 clubs in the Premier League made record revenues of 3.3 billion. This is a three percent increase from the revenues generated in the previous season. Cumulatively, all the clubs made 546 million in profit. According to Deloittes Annual Review of Football Finance, this is the second-highest amount in the history of the game. However, only three of the Premier League clubs did not generate sufficient operating profit.

Dan Jones, the report editor, expressed that Premier League clubs have reached a turning point with such an achievement. He added that this is their new era in terms of finances because, in the last 20 years, PL clubs have generated good revenue but with a poor bottom line. Even though the clubs had always attracted foreign investors before, their owners traditionally purchased them for emotional causes and not for silverware. With their increasing profits, many investors will begin perceiving them as sustainable financial assets.

According to the chair of Square1 consulting, David Bick, the broadcast revenues have put all PL clubs on the same level to make them more investments that are reasonable. As such, the 20 clubs will have the capacity to make their operating profits.

Chinas has also developed a deep interest not only in football, but also in the Premier League, especially with last month’s sale of the relegated Aston Villa club to Chinas Recon Group. Deloittes’ Mr. Jones said that a Chinese would soon own a Premier League club in the top flight even before the year ends.

With the new deal on broadcast beginning in the 2016-17 PL season, many analysts have predicted that the league’s profitability will considerably grow. As clarified by Deloitte, the clubs will generate approximately 10.2 million in revenue for every match broadcast starting next season for the competing clubs. A further estimate shows that the operating profits of the clubs could double to reach a cumulative one billion in the end. Furthermore, by the half time break of the second 2016-17 Premier League match broadcasted domestically, the league will have generated more broadcast revenue than the cumulative revenues generated 25 years ago by all the First Division games.

The PL revenues in the UK still belittles those generated by other leagues in Europe. In comparison, the top five clubs in the Premier League generated nearly two times the revenue made by top five clubs in Spanish second-placed league. Moreover, the report demonstrates that the figures produced by the PL this season defies the tight correlation between on-field success and financial power. With Leicester City setting the pace for breaking such records, their achievement will motivate clubs in the league. According to Deloitte, Premier League clubs have proved that in this commercial era, financial muscles does not warrant success on the pitch.

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