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The Financial Performance of Middle-Ranking Football Clubs in Spain in the Context of Relegation Ángel Barajas Alonso ( [e...
INTRODUCTION <ul><li>Some highlights about finances of Spanish football. </li></ul><ul><li>Sports performance influences h...
HIGHLIGHTS <ul><li>Financial Situation: </li></ul><ul><ul><li>Annual Accounts: </li></ul></ul><ul><ul><ul><li>Irregulariti...
HIGHLIGTS: TURNOVER DISTRIBUTION
HIGHLIGHTS: P&L
HIGHLIGHTS: P&L (2005)
HIGHLIGHTS: P&L (2005)
HIGHLIGHTS: P&L Maximum profit Maximum utility Minimum profit restriction Team performance Profit Performance Frontier Max...
<ul><li>34 different clubs First and Second Division “A” during playing seasons 1997/98-2001/2002 </li></ul><ul><li>55.9% ...
HIGHLIGHTS: P&L
HIGHLIGHTS: COST & EFICCIENCY
HIGHLIGHTS: FINANCIAL STRUCTURE
HIGHLIGHTS: FINANCIAL STRUCTURE
HIGHLIGHTS: FINANCIAL STRUCTURE
<ul><li>The average  non financial debt  is over €30 million in the First Division.  </li></ul><ul><li>This means that a g...
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...
CELTA DE VIGO CASE <ul><li>Case study approach. </li></ul><ul><li>Interviews: </li></ul><ul><ul><li>February 2005 until Fe...
CELTA DE VIGO <ul><li>Analysis of Financial Statements.  </li></ul><ul><li>Study of turnover evolution and split of revenu...
FINANCING STRATEGY CASH FLOWS NET INVESTMENT PLAYERS STADIUM INVESTMENT OPERATING CASH-FLOWS CLUB STRATEGY FINANCING <ul><...
FINANCING STRATEGY
TURNOVER <ul><li>Turnover evolution suddenly truncated in season 04/05 </li></ul>
TURNOVER
TURNOVER
TURNOVER
TURNOVER <ul><li>Change in marketing strategy. </li></ul>
TURNOVER
PLAYER AMORTISATION AND TRADING Includes €6,984,500 in homegrown players
PLAYER AMORTISATION AND TRADING
PLAYER AMORTISATION AND TRADING Loss on players’ trading: €4,074,683 Net profit: € 6,413,170
PLAYER AMORTISATION AND TRADING
PLAYER AMORTISATION AND TRADING
CLUB PROFIT – TEAM PERFORMANCE
EFFICIENCY
EFFICIENCY
FINANCIAL PERFORMANCE OF PLAYERS COST
FINANCIAL PERFORMANCE OF PLAYERS COST
<ul><li>Advertising spaces with prices far below the market </li></ul><ul><li>Non professional marketing department </li><...
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The Financial Performance Of Middle Ranking Football Clubs In Spain

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The Financial Performance Of Middle Ranking Football Clubs In Spain

  1. 1. 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
  2. 2. INTRODUCTION <ul><li>Some highlights about finances of Spanish football. </li></ul><ul><li>Sports performance influences highly in economic results. </li></ul><ul><li>Relegation could carry with a profound alteration of management conditions. </li></ul><ul><li>Football clubs ought to seek for management tools that guarantee business viability. </li></ul><ul><li>Experienced effects and applied strategies in the case of a relegated football club. </li></ul>
  3. 3. HIGHLIGHTS <ul><li>Financial Situation: </li></ul><ul><ul><li>Annual Accounts: </li></ul></ul><ul><ul><ul><li>Irregularities in valuation </li></ul></ul></ul><ul><ul><ul><li>Delay of the deposit at the Companies House </li></ul></ul></ul><ul><ul><ul><li>Adverse opinion in auditors’ reports </li></ul></ul></ul><ul><ul><ul><ul><li>Taxes </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Players valuation </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Amortizations </li></ul></ul></ul></ul><ul><ul><li>Sources of revenue: </li></ul></ul><ul><ul><ul><li>Competition </li></ul></ul></ul><ul><ul><ul><li>Tv rights </li></ul></ul></ul><ul><ul><ul><li>Players trading </li></ul></ul></ul><ul><ul><ul><li>Real State operations </li></ul></ul></ul>
  4. 4. HIGHLIGTS: TURNOVER DISTRIBUTION
  5. 5. HIGHLIGHTS: P&L
  6. 6. HIGHLIGHTS: P&L (2005)
  7. 7. HIGHLIGHTS: P&L (2005)
  8. 8. HIGHLIGHTS: P&L Maximum profit Maximum utility Minimum profit restriction Team performance Profit Performance Frontier Max. Result Max. Prof. Gerrard (2002 and 2005)
  9. 9. <ul><li>34 different clubs First and Second Division “A” during playing seasons 1997/98-2001/2002 </li></ul><ul><li>55.9% of the clubs present a negative economic average result during the period </li></ul><ul><li>big concentration of profit and loses around zero </li></ul><ul><li>changes in trend of economic results are rather common </li></ul><ul><li>we can accept that the behaviour of Spanish Football clubs follows a satisfaction model </li></ul><ul><li>Most of Spanish football clubs announce poor economic results </li></ul><ul><li>Spanish clubs profits tend to be zero </li></ul><ul><li>Spanish clubs do not have as a primary goal to reach profits through their sports performance </li></ul>HIGHLIGHTS: P&L
  10. 10. HIGHLIGHTS: P&L
  11. 11. HIGHLIGHTS: COST & EFICCIENCY
  12. 12. HIGHLIGHTS: FINANCIAL STRUCTURE
  13. 13. HIGHLIGHTS: FINANCIAL STRUCTURE
  14. 14. HIGHLIGHTS: FINANCIAL STRUCTURE
  15. 15. <ul><li>The average non financial debt is over €30 million in the First Division. </li></ul><ul><li>This means that a great part of funding comes from creditors. </li></ul><ul><li>It is common among Spanish clubs to have a net debt position with banks, but some clubs have a net cash position. </li></ul><ul><li>Net cash positions in absolute terms are notably lower in Second Division clubs than those in the First Division. </li></ul><ul><li>Furthermore, the yo-yo clubs have a much higher level of indebtedness than Second Division clubs. </li></ul><ul><li>Most of the clubs do not have the ability to cover the interests with their operating profit and profit from transfers. </li></ul>HIGHLIGHTS: FINANCIAL STRUCTURE
  16. 16. HIGHLIGHTS: FINANCIAL STRUCTURE
  17. 17. 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
  18. 18. CELTA DE VIGO CASE <ul><li>Case study approach. </li></ul><ul><li>Interviews: </li></ul><ul><ul><li>February 2005 until February 2006 </li></ul></ul><ul><ul><li>Celta de Vigo executives </li></ul></ul><ul><ul><li>Sponsors </li></ul></ul><ul><ul><li>Financers </li></ul></ul><ul><li>Flexible questionnaires were designed considering papers about the effect of relegation and promotion. </li></ul>
  19. 19. CELTA DE VIGO <ul><li>Analysis of Financial Statements. </li></ul><ul><li>Study of turnover evolution and split of revenues. </li></ul><ul><li>Analysis of the objectives summarized in the Annual Report of the last five seasons. </li></ul><ul><li>Checking if financial evolution of the club fitted in with the ordinary financing strategies for football clubs. </li></ul>
  20. 20. FINANCING STRATEGY CASH FLOWS NET INVESTMENT PLAYERS STADIUM INVESTMENT OPERATING CASH-FLOWS CLUB STRATEGY FINANCING <ul><li>Match takings </li></ul><ul><li>Media </li></ul><ul><li>Commercial </li></ul><ul><li>Merchandising </li></ul><ul><li>Wages and salaries </li></ul><ul><li>stadium project </li></ul><ul><li>new marketing strategy </li></ul><ul><li>new financing strategy </li></ul><ul><li>overseas merchandising </li></ul>Grundy (2004)
  21. 21. FINANCING STRATEGY
  22. 22. TURNOVER <ul><li>Turnover evolution suddenly truncated in season 04/05 </li></ul>
  23. 23. TURNOVER
  24. 24. TURNOVER
  25. 25. TURNOVER
  26. 26. TURNOVER <ul><li>Change in marketing strategy. </li></ul>
  27. 27. TURNOVER
  28. 28. PLAYER AMORTISATION AND TRADING Includes €6,984,500 in homegrown players
  29. 29. PLAYER AMORTISATION AND TRADING
  30. 30. PLAYER AMORTISATION AND TRADING Loss on players’ trading: €4,074,683 Net profit: € 6,413,170
  31. 31. PLAYER AMORTISATION AND TRADING
  32. 32. PLAYER AMORTISATION AND TRADING
  33. 33. CLUB PROFIT – TEAM PERFORMANCE
  34. 34. EFFICIENCY
  35. 35. EFFICIENCY
  36. 36. FINANCIAL PERFORMANCE OF PLAYERS COST
  37. 37. FINANCIAL PERFORMANCE OF PLAYERS COST
  38. 38. <ul><li>Advertising spaces with prices far below the market </li></ul><ul><li>Non professional marketing department </li></ul><ul><li>There was no data base of companies and no clear distribution of marketing responsibilities </li></ul><ul><li>Agreements signed on Second Division </li></ul>Points to improve ADVERTISING & COMERCIAL MANAGEMENT +24% +26% SPONSORSHIP SEASON TICKET HOLDERS

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