The Financial Performance Of Middle Ranking Football Clubs In Spain

The Financial Performance of Middle-Ranking Football Clubs in Spain in the Context of Relegation Ángel Barajas Alonso ( [email_address] ) Birkbeck College Wednesday 27th February 2008

INTRODUCTION

Some highlights about finances of Spanish football.

Sports performance influences highly in economic results.

Relegation could carry with a profound alteration of management conditions.

Football clubs ought to seek for management tools that guarantee business viability.

Experienced effects and applied strategies in the case of a relegated football club.

HIGHLIGHTS

Financial Situation:

Annual Accounts:

Irregularities in valuation

Delay of the deposit at the Companies House

Adverse opinion in auditors’ reports

Taxes

Players valuation

Amortizations

Sources of revenue:

Competition

Tv rights

Players trading

Real State operations

HIGHLIGTS: TURNOVER DISTRIBUTION

HIGHLIGHTS: P&L

HIGHLIGHTS: P&L (2005)

HIGHLIGHTS: P&L Maximum profit Maximum utility Minimum profit restriction Team performance Profit Performance Frontier Max. Result Max. Prof. Gerrard (2002 and 2005)

34 different clubs First and Second Division “A” during playing seasons 1997/98-2001/2002

55.9% of the clubs present a negative economic average result during the period

big concentration of profit and loses around zero

changes in trend of economic results are rather common

we can accept that the behaviour of Spanish Football clubs follows a satisfaction model

Most of Spanish football clubs announce poor economic results

Spanish clubs profits tend to be zero

Spanish clubs do not have as a primary goal to reach profits through their sports performance

HIGHLIGHTS: P&L

HIGHLIGHTS: COST & EFICCIENCY

HIGHLIGHTS: FINANCIAL STRUCTURE

The average non financial debt is over €30 million in the First Division.

This means that a great part of funding comes from creditors.

It is common among Spanish clubs to have a net debt position with banks, but some clubs have a net cash position.

Net cash positions in absolute terms are notably lower in Second Division clubs than those in the First Division.

Furthermore, the yo-yo clubs have a much higher level of indebtedness than Second Division clubs.

Most of the clubs do not have the ability to cover the interests with their operating profit and profit from transfers.

HIGHLIGHTS: FINANCIAL STRUCTURE

HIGHLIGHTS: FINANCIAL STRUCTURE 100,0% 38,5% 61,5% 100,0% 46,4% 53,6% 3,8% 0,0% 3,8% 7,1% 3,6% 3,6% Same Classification 61,5% 30,8% 30,8% 50,0% 28,6% 21,4% Worse Classification 34,6% 7,7% 26,9% 42,9% 14,3% 28,6% Better Classification  Debt  Debt  Debt  Debt 00/01 99/00

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