Welcome back to Football Benchmark and to Antonio Di Cianni, Senior Advisor of KPMG. Hi Luca and to all our viewers! Today, we will focus on a very interesting topic, namely the investment of some Arab countries in the football sector. There is no doubt that, besides passion, they brought also a lot of money, however, sporting results are not very satisfying so far. In particular, we will focus on Manchester City and Paris Saint-Germain, two very important clubs, who, nevertheless, are facing some problems in particular in the Champions League race. Something really disappointing not only for the owners, but also for the managers, the players and the fans. Thanks to the KPMG data, let’s analyse some figures of these two clubs since they have been bought. Not only from a sporting point of view, but also from a financial perspective. In the first chart we can see the evolution of the total operating revenue of Manchester City. They increased from EUR 102 M in 2008/2009 up to EUR 568 M in the last season, an unbelievable growth. Yes, 2008/2009 is the first season with the new owner, namely Sheik Mansour of the Abu Dhabi United Group, so this is why we started with this season. As we can see, every year they increased their revenues, with no exception. We can also see their sporting results. Above all, they won three Premier League titles, but they did not win the Champions League and they could not reach the final either, only the semi-finals once, in 2015/2016. If we focus on the total operating revenue growth, we can see that growth is fueled primarily by an increase in commercial revenues. As we can see in the following chart, the same happened at Paris Saint-Germain. So, both clubs tried to boost their commercial revenues, also because this is the area where you can improve more. The next chart focusing on the commercial revenues, shows that both clubs have invested in the field in order to be competitive with the traditional big clubs, for instance Real Madrid or Bayern Munich. For example, in the 2017/2018 season, 58% of PSG’ total operating revenue came from commercial revenues. Yes, and actually, now, both clubs are at the same level, in terms of their total operating revenues. In fact, in the last season, Manchester City earned EUR 568 M, while PSG made EUR 542 M. The difference comes from the broadcasting rights, that is significantly higher in England than in France. Yes, on the other hand PSG’s commercial revenues are higher than Manchester City’ ones. In Europe, Manchester City is the fifth cub in Europe in terms of total operating revenue, while PSG sixth. So, they are very similar, and we are going to see that they have lot of things in common. Yes, they have similar strategies, too, for example. We have just said that commercial revenue is the area where they can increase more. One of the best ways to do so is through the main shirt sponsorship. Does PSG take advantage of this more than Manchester City? Well, we focused on the shirt sponsors, so to help understand how it is possible to increase commercial revenues. In this infographic, we can see
how much the main sponsors and the kit suppliers pay. Of course, the shirt sponsorships are just part of the total commercial revenue. Also in this case, we can see very similar figures for these two clubs: in 2018/2019, Manchester City earned in total EUR 59 M, while PSG EUR 50 M. PSG’s sponsors are Fly Emirates (main shirt sponsor) and Nike (kit supplier). From the next season, starting in September 2019, PSG’s kit supplier will be still Nike, but, according to some media reports, they will change the main shirt sponsor. So, they will change from Fly Emirates to the French hotel group Accor, which will give the club EUR 80/year. So, they will earn more than EUR 100 M. On the other hand, Manchester City earn EUR 45 M from Etihad Airways, their main shirt sponsor and also their stadium’s naming rights holder, and EUR 14 M from Nike (kit supplier) As of September 2019, they will change Nike for Puma, while keeping the partnership with Etihad Airways. They will receive EUR 75 M/year from Puma. Just to make a comparison, during the current 2018/19 season, Juventus will earn EUR 55 M in total, while EUR 68 M in the next season. So, at the moment, Juventus, that is the Italian club with the highest sponsorships is right between Manchester City and PSG. However, despite their renewal with Adidas, Juventus will lagh behind both Manchester City and PSG. Yes, and although their strategies are similar, Manchester City will change the kit supplier, while PSG will change their main sponsor. As we said, both clubs have similar stories: Manchester City was bought by the Arab owner before PSG. The next infographic, focusing on the staff costs to revenue ratio, also demonstrates their similarity. The only exception is the last season, due to the arrival of Neymar and Mbappé to PSG. Yes, also in this case, we can see that if revenues increase, so do staff costs, too. This is something completely regular for a football club. We can notice that between 2016/2017 and 2017/2018, PSG’s staff costs increased a lot, by more than 20%, due to the arrival of Neymar that costed EUR 222 M of transfer fee plus his salary. The circles we can see in the infographic represent the staff costs to revenue ratio. As we can notice, in the previous 4 seasons, it has been quite stable for both clubs between 50% and 60%. Let’s remember, that the UEFA Financial Fair Play recommends a 70% ratio. So, both clubs are performing well in this respect. It is very interesting that while they spend more than EUR 300 M in staff costs,
their staff costs to revenue ratio is still low, around 60 and 65%. Let’s focus now on the profit/loss before tax. In this case the trend is similar, but figures are different. First of all, we can see that in the last 4 seasons, Manchester City made a profit before tax of EUR 52 M in total, while PSG made EUR 54 M. The final result is very similar, but there are some differences, for example in the 2016/2017 season, when Manchester City registered the lowest result, due to their third place in Premier League, and their elimination at the Champions League last 16 by Monaco. At the same time, PSG registered a negative result, as they did not win the Ligue 1, again, due to the great performance by Monaco. Despite that, I would like to highlight that such figures are the result of the UEFA FFP Settlement Agreement imposed on both clubs. The penalties were inflicted in 2014, due to some very negative results. And so the figures we have just seen are the results of the FFP sanctions. So, it is not true that the UEFA never imposes sanctions to big clubs like PSG and Manchester City. Recently, we have also heard that such clubs were accused of inflating their commercial revenue, although UEFA has denied such accusations. So, the UEFA FFP works and has been used also towards PSG and Manchester City. Yes, definitely, it works and for all the European clubs. It is true that both clubs have been investigated for such sponsorships with related parties that cannot exceed 30% of the total operating revenue. As a consequence, both clubs applied the FFP rules. Nevertheless, during the past 7 seasons, Manchester City accumulated EUR 155 M losses, although turning to positive in the past 4 years, as just shown . So, the situation was not so positive before the UEFA FFP sanctions. Now, let’s move to the squad market values of these clubs. Following KPMG Football Benchmark data, Manchester City’ squad market value is more than EUR 1 billion. PSG’s squad value is a little bit smaller, but they can boast two very top players. It is also interesting that Manchester City’s top three players are worth more than EUR 100 M each. Yes, these figures are as at the 1st January 2019, according to our Player Valuation tool that estimates the value of football player and so also the teams. We will update these values at the end of the season and we will definitely see some changes. For instance, Mbappé may surpass Neymar, considering that the Brazilian player has been injured for a long period. So, it is important to notice that also in this respect, both clubs are among the biggest ones. Manchester City, together with Barcelona and Liverpool, are the only teams whose value is over EUR 1 billion currently. And they can boast 11 top players, namely players whose value is over EUR 50 M. PSG have 4 such top players, Neymar, Mbappé, Marquinhos and Cavani. The last comparison is about their Enterprise Value. Here, the difference is quite big. Manchester City’s value is higher, maybe due to the fact that they play in the Premier League and they have a long history. On the other hand, PSG’ Enterprise Value is smaller, even if it is increasing year on year. Nevertheless, if we focus on the latest value, as at January 2018, PSG’ Enterprise Value is half of Manchester City’s value. Yes, as you said, one reason is that Manchester City play in the Premier League, while PSG play in the Ligue 1, a less competitive and attractive championship. As we can see in the infographic, both clubs increased their value during the last 3 seasons, Manchester City’s Enterprise Value is over EUR 2 billion while PSG’s is over 1 billion. So, during the last 3 seasons, the Citiziens grew by 33%, while PSG by 35%, so, again, a very similar increase. In a few weeks, we will go live with the episode about our Valuation Report and we will see the updated Enterprise Value figures. Thank you Antonio for this analysis about Manchester City and PSG. We will see what happens if they may win the Champions League in the future. Thank you again, Football Benchmark will be back next Thursday!