Off The Pitch present the "Best Financial Performance Award" at the Football Business Awards: Here are the 8 finalists

17 August 2021

FBA
Photo: PR

Off The Pitch and The Football Business Awards have partnered to celebrate Britain’s best financially managed football clubs.

Among the 8 finalists are four Premier League clubs, two Scottish, one Championship and one League One club.

Read why they have been selected.

Mads Meisner and Joseph Mailil, analyst jm@offthepitch.com

For the first time in the history of the Football Business Awards the best financially managed football club will be celebrated at its annual awards ceremony on 23 September in London.

The Metrics

The EBITDA margin sheds light on how well a club’s operations are driven relative to its turnover isolated from transfer activities. Clubs who do not disclose profits from player sales separately from overall revenues are excluded from the analysis, as this inflates the EBITDA margin.

 

The ROA-ratio (Pre-tax profit) gives indication to how good a club is at generating profits using its assets, which primarily concerns intangible fixed assets in the form of player registrations. 

 

The Equity ratio’s purpose is to assess how large a share of a club’s assets is being financed by owners’ investments, or how large the share of leverage the club uses to finance its assets is.

 

Finally, a retribution weight for clubs getting relegated in the given financial year is applied.
 

Off The Pitch has analysed the accounts of more than 100 UK clubs to find the 8 finalists. 

We have narrowed all financial figures in clubs 2019/20 annual accounts down to three key metrics, indicating how well the club is managing their operations and assets relative to debt. This method has also been chosen to adjust for the size of the club.

We have looked at the earnings before interest, taxes, depreciation, and amortisation (EBITDA) margin, return on assets (ROA), and equity ratio. To establish which clubs rank the highest when combining the three metrics, we have placed a weight on each parameter.  

The weighting is allocated as follows: 50 per cent on EBITDA-ratio, 30 per cent on ROA, and 20 per cent on equity ratio.

Here are the finalists:

⚽ Burnley FC

Burnley had a highly satisfying 2019/20 season, despite EBITDA almost shrinking by half to just below £20 million, equivalent to an EBITDA-margin of 14.5 per cent. The main driver was wages rising from £87 million to £100 million, which in turn showed in the ROA parameter, as this was close to 0. The club managed to fund its assets through an almost even debt and equity capital structure.
 

⚽ Burton Albion

Despite a 15 per cent drop in revenues, Burton Albion increased its EBITDA-margin from a negative 20 per cent, to a 5 per cent surplus. The club acted quickly and managed to reduce wages by 25 per cent, to gear the business towards overwhelming liquidity shortages. The club also improved its ability to capitalize on core assets, as ROA before taxes swung from a 24 per cent deficit to almost breaking even. The club implemented these changes without any substantial allocation movements in the capital structure.
 

⚽ Chelsea FC

Chelsea were one of very few European top clubs to record a profit in 2019/20, its £35.6 million margin largely attributable to the transfer of Eden Hazard to Real Madrid. This contributed significantly to the club managing a ROA before taxes of 4 per cent. Chelsea also managed to reduce their current financial debt by more than £30 million and increased its equity ratio to 58 percent, the highest since 2015. The financial position going into the pandemic enabled the club to strengthen the squad last summer, and with the recent Champions League success, the club is back to having success off and on the pitch. 
 

⚽ Kilmarnock

While the premature conclusion of the 2019/20 season ended in a disappointing 8th place, the financial outcome of the season was highly satisfying for Kilmarnock. The club showed virtually no Covid-19 related impact on the business, as the club’s turnover fell by just 6 per cent and its management brought down wages by almost a quarter of the value the year before, being among the few clubs which managed to reduce their wages-to-revenue ratio. The club operated with a low leveraged capital structure consisting of 75 per cent equity and 25 per cent debt. Thus, the club managed to finance its assets predominately through own funds in a very volatile end to the season. 
 

⚽ Manchester United

The pandemic took a toll Manchester United’s account, as the club saw revenues decline by almost £120 million. However, with an adaption in wage-expenses, the club still managed an EBITDA-margin of 26 per cent. Despite it being the lowest since 2008, only Sheffield Untied and Tottenham managed a marginally higher ratio in that season, a testament to the stability of Manchester United’s business model. Despite a highly leveraged business model with equity making up 25 percent of total liabilities, the club did yield a sufficiently high score to be among the final eight short-listed companies.
 

⚽ Sheffield United

Sheffield United’s first season back in the Premier League since 2006/07 exceeded all expectations, with the club finishing 9th. The Blades not only performed beyond expectations on the pitch, but also financially as the club turned wages-to-revenue ratio from 195 percent in 2018/19 into the second best in the league at 54.4 percent. The club had an EBITDA-margin of 26.2 percent, second highest proportion of all UK clubs in 2019/20. United also managed to generate significant profits from their very limited assets, achieving one of the highest returns after taxes at 16 per cent. A very impressive season given the limited financial resources at the club.
 

⚽ St. Mirren

St. Mirren finished 9th in their second consecutive season in the Scottish Premiership. The Scottish club also managed its finances highly satisfactorily in 2019/20, as it improved its EBITDA-margin from a negative 12.3 percent to a positive 2.7 percent. The club doubled its cash at hand, ensuring it against liquidity bottlenecks in the pandemic, keeping the club’s equity ratio at a very high 90 percent. 
 

⚽ Tottenham

Tottenham had the highest EBITDA-margin in the Premier League in 2019/20 at 29.1 per cent, largely attributable to the new stadium generating higher matchday and commercial profits, despite the abrupt conclusion to the season. This was also reflected in the capital structure, as the club proceeded to operate with higher leverage due to debt related to the new stadium. Yet equity still made-up 18.1 percent of Spurs’ asset funding in 2019/20.