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Sd europe conference


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Sd europe conference

  1. 1. Financial Fair Play<br />Barcelona<br />July 17th 2010<br />
  2. 2. WHY is action needed? Overall picture of clubs’ finances<br />WHERE did the idea of new financial controls come from?<br />HOW has it been developed? Consultative approach<br />WHAT are the objectives?<br />WHAT are the financial fair play rules? Proposed concept<br />HOW will the new rules be implemented?<br />WHEN will new rules be introduced? Planning and Timeline<br />Open discussion, suggestions….<br />AGENDA<br />
  3. 3. WHY is action needed:Overall picture of clubs’ finances today<br /><ul><li>After 10 years of nearly continuous income growth, losses remain and many balance sheets also weak. Some clubs reporting relatively massive losses.
  4. 4. 10% of European clubs (sample c400) had Going Concern emphasis of matter or qualification in 2008 Audit Report
  5. 5. Preliminary figures suggest modest income rise in FY2009 with second tier clubs in particular struggling to meet commitments
  6. 6. Longer term investment in football has not matched spending – Less than 1 in 4 clubs own stadium and less than 1 in 3 own training facilities
  7. 7. Increasingly difficult for clubs with sustainable business plans to compete with those living beyond their means</li></li></ul><li>WHY is action needed:Almost half clubs reported losses in 2008<br /><ul><li>Most leagues reported losses in 2008
  8. 8. Despite revenue increases 47% of all clubs reported losses and 37% of larger clubs (revenue >€5m)
  9. 9. 145 clubs spent more than €6 for every €5 income
  10. 10. 57 clubs reported salaries > total income
  11. 11. The worst 20 clubs reported combined losses of €735m </li></li></ul><li>WHY is action needed:Many clubs with reported assets < liabilities<br /><ul><li>35% of clubs reported negative equity in FY08
  12. 12. 155 clubs reported losses and negative equity
  13. 13. This included 15 of TOP 60 largest revenue clubs
  14. 14. Net equity deteriorated in 44% of top division clubs
  15. 15. Clubs from 47 different countries reported negative equity
  16. 16. €5.5bn reported level of bank debt and commercial loans</li></li></ul><li>Multitude of reasons<br />Relevant factors often differ<br />Short term environment:<br />Classic zero sum game<br />Nature of football competitions (cups/leagues)<br />Nature of success based prize money<br />Transfer system<br />Presidential terms & elections<br />Separation of directors/owners personal risk and risk to club<br />Lack of transparency – awareness of problems<br />WHY are the finances so poor?<br />
  17. 17. WHERE did the idea of new financial controls come from?<br />UEFA investigated financial controls particularly salary controls 1999-2000<br />Salary caps also on agendas at club meetings<br />UEFA concluded salary control not feasible at that stage but introduced its club licensing system in 2003 including some financial criteria<br />50+ clubs prevented from participating in UEFA club competitions and receiving financial reward due to licensing<br />Prior to recession many stakeholders including prominent club owners requesting intervention at European level<br />UEFA President took up invitation and investigations performed<br />Agreed that new financial control panel should be set up and new financial controls included on top of current licensing system<br />
  18. 18. HOW have new rules been developed?<br />Financial situation of European club football – stakeholders calling for change;<br />Extensive consultation with all stakeholders (NAs, EPFL, ECA, FIFPro Europe, SD Europe);<br />New financial rules to be built on top and integrated with existing club licensing regulations in effect since 2004;<br />New regulations approved by UEFA EXCO on May 27th 2010.<br />
  19. 19. WHAT are the objectives of new rules? Agreed ‘objectives’<br />As approved by UEFA’s Executive Committee and key stakeholders, the new<br />requirements aim principally to:<br />Introduce more discipline and rationality in club football finances;<br />Encourage clubs to operate on the basis of their own revenues;<br />Protect the integrity and smooth running of the competitions; <br />Encourage investment for the long-term benefit of clubs;<br />Ensure clubs settle their liabilities on a timely basis;<br />Protect the long term viability and sustainability of European club football.<br />
  20. 20. WHAT are the objectives of new rules? Net benefits to club football<br />Use carrot of UEFA competitions (‘ultimate stage’ + €1,400,000,000 per year) to encourage sustainable business models and reward fair play<br />Tighten noose on clubs with questionable business practices<br />Make clubs directors/owners aware that finances independently monitored<br />Require transparency in owner’s objectives and LT business model<br />Realign salaries with ability to pay salaries<br />
  21. 21. WHAT are the new rules?Break-even requirement<br /><br />The cornerstone of the Financial Fair Play concept;<br />A club must not repeatedly spend more than its revenues (assessed over rolling 3 year period)<br />A tailored approach with exemptions for small clubs, relative advantages to medium sized clubs and more relaxed requirements for clubs not exhibiting warning signs. ‘Investments’ in youth football, community schemes and infrastructure differentiated to ‘spending’ and excluded.<br />Introduction of an ‘acceptable deviation’ over three years;<br />Assessment of other factors (quantum, trend, budgets, debts);<br />A web-based IT tool to be developed for use by clubs, licensors and the CFC Panel.<br />
  22. 22. WHAT are the new rules?Break-even requirement<br />RELEVANT EXPENSES<br />Cost of Sales<br />Employee benefits expenses<br />Other operating expenses<br />Player transfer amortisation or expense<br />Finance costs<br />RELEVANT INCOME<br />Revenue:<br /><ul><li>Gate receipts
  23. 23. Broadcasting rights
  24. 24. Sponsorship & advertising
  25. 25. Commercial activities
  26. 26. Other operating income</li></ul>Player transfer profit or income<br />Finance income<br />Excess proceeds on disposal of tangible fixed assets<br />NO LIMIT:<br /><ul><li>Infrastructure costs
  27. 27. Youth development activities
  28. 28. Community development activities</li></ul>Note: Only represents a simplified version of calculation.<br />
  29. 29. WHAT are the new rules?Warning signs/ indicators<br />If club breaches the following indicators then further information required:<br />Audit opinion in annual and/or interim financial statements includes emphasis of matter or qualified opinion regarding going concern;<br />Annual or interim financial statements disclose deteriorating net liabilities;<br />Club reports a break-even deficit in period t-1 and/or t-2;<br />Club has overdue payables as of 30 June in year club competitions commence.<br />
  30. 30. WHAT are the new rules?Other rules<br />In support to the “break-even” rule<br />Enhanced overdue payables rule (backward mechanism)<br />To ensure that clubs have honoured their commitments when these were due<br />Enhanced Future Financial Information (forward looking mechanism)<br />To monitor clubs’ projected results;<br />To monitor that clubs will dispose of sufficient liquidity to continue servicing their commitments in the future.<br />
  31. 31. HOW will the new rules be implemented?Integrated approach<br />Club licensing<br />Club monitoring<br />
  32. 32. WHEN will the new rules be implemented?Introduction<br />May 2010<br />May 2011<br />May 2012<br />May 2013<br /><ul><li>Licensors update national regulations
  33. 33. Training of licensors and clubs
  34. 34. Prepare for implementation of enhanced requirements
  35. 35. Implementation of new financial rules
  36. 36. Creation of CFC Panel
  37. 37. Development of enhanced requirements
  38. 38. Consultation process
  39. 39. EXCO approve new Regs</li></li></ul><li>WHEN will the new rules be implemented?Assessment<br />
  40. 40. Supplementary slides<br />