Category: David Owen
Published on Tuesday, 27 August 2013 22:13
After a weekend in which none of the Premier League's big three managed to win, it remains tough to predict who will emerge as the 2013-14 champions. But you don't need too powerful a crystal ball even at this stage to foresee which club is likely to make the season's biggest pre-tax profit.
Assuming the soap opera of Gareth Bale's transfer to Real Madrid (or A.N.Other) reaches a consummation before the window closes, and assuming the fee is anything like the £80 million-plus we keep reading about, then the Welshman's current club - Tottenham Hotspur - will probably be propelled, no doubt temporarily, to the top of the league's profitability rankings.
This is just what happened to Everton eight years ago, after they sold a teenage prodigy called Wayne Rooney to Manchester United.
Of course, the amounts involved were much smaller; nonetheless, the £23.4 million profit on disposal of players' registrations, mainly due to the Rooney deal, enabled Everton - with £23.5 million - to report the biggest pre-tax profit by a Premier League club in 2004-05, ahead of Arsenal (£19.3 million), Manchester United (£10.8 million) and Liverpool (£9.5 million).
This was partly down to the way in which player valuations are accounted for.
Rooney was a player 'home-grown' by Everton, and home-grown players, whether Messi-esque in their talent and accomplishments or the lowliest squad member of the bottom team in division 25, carry a value of zero for accounting purposes.
This meant that Rooney's transfer fee was essentially pure profit for Everton. By contrast, had Manchester United decided, for unfathomable reasons, to re-sell him for the same fee the very next day, their profit would have been zero.
Bale was not home-grown by Tottenham, having been acquired from Southampton in 2007.
However, the other strange thing about the way that accountants, as opposed to football managers, value players is that their value generally declines the longer they stay at a particular club.
Once again, whether they play like Cristiano Ronaldo or, well, me makes not a jot of difference. The key determinants of value in accountant-speak are the player's transfer fee and the length of his contract, with the fee usually being amortised over the timespan that this contract covers.
Since Bale has been on Spurs's books for more than six years, I would be surprised if the £7 million paid to Saints had not been fully, or almost fully, amortised.
If it has, then the transfer fee received for Bale could provide a meaty £80 million-sized boost to the club's bottom-line.
To put this in some sort of context – while remembering that the Premier League's new TV deals should provide a positive push to many clubs' 2013-14 figures – Manchester United's pre-tax profits for the first nine months of 2012-13 amounted to £19.2 million.
Ah, but, people may say, what about the spending spree Spurs have embarked on this summer, in apparent anticipation of Bale's lucrative departure?
And, indeed, the north London club is reckoned to have shelled out well over £50 million on a quartet of newcomers, headed by record signing Roberto Soldado.
These signings will indeed affect the club's 2013-14 profits, but not to the tune of £50 million-plus, or anything like it. This is because those hefty transfer fees should be amortised over the length of those players' contracts.
Moreover, Bale, if a deal goes ahead, will not be the only player on whom Tottenham will have turned a profit this summer.
Steven Caulker, home-grown, has gone to newly-promoted Cardiff City for a reported £8 million-plus, which should be pure profit for Tottenham. Midfielder Tom Huddlestone, who spent over eight years with Spurs after joining for around £2.5 million, has gone to Hull City, also newly promoted, for a fee believed to be about £5 million. Once again, probably pure profit.
I also think the club should register a profit on Clint Dempsey; and if they are out of pocket at all on the disposal of Scott Parker, I doubt it will be by very much.
All in all, I would not be surprised if the positive financial impact of these transfers out did not more or less cancel out the negative impact of the new arrivals on the club's 2013-14 amortisation charge.
As I write this, Spurs are sitting pretty in third place in the table, with a match in hand on leaders Chelsea, who are just a point ahead.
The season, of course, has barely started - and Bale is not yet on his way.
However, if Tottenham can conjure a top-four finish while also shooting to the top of the league's profitability table, the irony, I think, is unlikely to be lost on fans of Arsenal, their north London rivals, who have been clamouring for the club that made the league's biggest pre-tax profits in 2011-12 to strengthen its squad in a bid to end an eight-year trophy drought.David Owen worked for 20 years for the Financial Times in the United States, Canada, France and the UK. He ended his FT career as sports editor after the 2006 World Cup and is now freelancing, including covering the 2008 Beijing Olympics, the 2010 World Cup and London 2012. Owen's Twitter feed can be accessed at www.twitter.com/dodo938