José Pedro Pereira da Costa, CFO of SAD at FC Porto, presented, this Friday, at Estádio do Dragão, the Report and Accounts for the 2023/24 seasonaccompanied by President André Villas-Boas.
The Porto director immediately warned that the accounts are mostly the responsibility of the previous administration (11 of the 12 months in question). The year, it must be said, ended with a negative result of R$21.063 million.
Pereira da Costa highlighted the «positive growth in all operational revenue lines, in particular commercial ones», such as revenue from participation in UEFA competitions, ticketing, merchandising (with emphasis on the success of last season’s third kit) or advertising. However, he detailed that «operational results were penalized by non-recurring costs», while «transactions with player passes were insufficient to compensate for increasing financial costs».
Let’s look at the main topics in the blue and white SAD accounts, from debts owed to suppliers, clubs and agents, to revenue from television broadcasting rights already anticipated and with no positive impact on the accounts and where FC Porto intends to seek revenue to combat the millionaire liabilities.
Current situation of SAD
UEFA and Club World Cup revenues: loss of revenue of around 40/45 million euros in 2024/25, due to failing in the Champions League. The prize received in September therefore had a loss of around 30 million. The Club World Cup will have a prize to be counted in the next year, but the value is expected to be lower than the 50 million initially mentioned.
TV rights: the amounts (43 million per year) are deducted until December 2027. Therefore, of the four years remaining until the end of the contract, FC Porto has already received the amounts of 3.25 of those years in advance. Furthermore, you are still required to pay a fee above ten percent to pay off these advances. Over the next three years, therefore, FC Porto will declare revenues of 43 million per year, but without the money actually entering the treasury. Which means a discrepancy of 43 million between what you claim to have received and what you actually received. In reality, by 2028, FC Porto will receive 32 million (and declare 172 million) in TV revenue.
Commercial revenue and agreement already signed with Ithaka, which will be a “growth engine”: inflow of 50 million euros. The agreement was signed this week and the amount is already in FC Porto’s accounts. Of this amount, R$15 million is intended to finance investments to modernize the stadium, to provide a better experience for fans. They deducted R$6 million from amounts that had already been deducted and had to be reimbursed.
Treasury situation: liquidity in May was at «historic minimum levels». FC Porto received a current account from customers with player transfers of seven million euros: in other words, the amounts to be received for transfers made before the entry of the current administration were all advanced, leaving only seven million to receive. On June 30, 2024, FC Porto SAD therefore had a cash imbalance of 86 million euros between liabilities and current assets. It had R$7 million to receive and R$93 million to pay with transfers of players from the former administration.
Initiatives already implemented or underway to ensure liquidity
- Organization of the commercial paper program;
- Initiatives to increase commercial revenue at zero cost;
- Campaigns with partners, such as annual seats and ticketing;
- Cost containment with player salaries and administration, with an impact of -6ME;
- Transfer window with revenues of 59ME fixed and 20ME variables relatively easy to implement, in addition to reduced intermediation costs (2.6ME).
Increased revenue: UEFA prizes, TV rights, merchandising, ticketing and advertising
+5 percent in revenue from UEFA events (from 61.9 to 65 million euros)
Value attributed at the beginning of the season increased, as a result of FC Porto’s improvement in the 10-year UEFA ranking (from 12th to 10th).
0 percent on TV rights (42.6 million euros)
The contract is closed until June 2028 and has a fixed value per year. This will be the recipe every year.
+14 percent in commercial revenue (from 46.9 to 53.2 million euros)
Merchandising (+21 percent, from 9 to 11M), highlighting the success of the third jersey from last year’s equipment; ticketing (+10 percent, from 10.8 to 11.9M), with emphasis on the games with Arsenal and Barcelona; corporate hospitality, which is fully booked (+12 percent, from 8.8 to 9.8 M); increase in advertising revenue (+13 percent, from 18.2 to 20.6M).
SAD with a loss of two million
Operating costs of R$10 million offset an increase in revenue of R$8 million. What were these operating costs? UEFA fine (1.5M); Impairment Porto Canal (2.1M); Impairment of fixed assets (2.2M); Provisions (6M, includes dispute with third party club and awards to players; without these non-recurring costs, the operating result would be positive).
Results with player pass transactions (largest transfers and the Otávio case)
2020/21: 30.8M (Fábio Silva, Danilo and Alex Telles). Net profit: 19.3 million euros
2021/22: 45M (Luis Díaz, Vitinha and Fabio Vieira). Net profit: 20.8 million euros
2022/23: -24.2M (Diogo Leite). Net profit: -47.6 million euros
2023/24: 9.2M (Otávio). Net profit: -21.1 million euros
With Champions and SAD’s cost structure, we need to generate 25/30 million results from player passes to have positive net results, given the revenue structure we have today. Below 20/25 million with pass transactions means a negative net result and that is what happened last year.
Financial charges (very significant) went from -22.6ME to -29.7ME: very high rates, namely the Otávio installment operation, which was brought forward to the end of March and had a cost of around 2.2ME. 12 percent cost for a period of three months.
Player payments until September 30th (mandatory to avoid incurring UEFA financial fair play)
Total of R$34 million, highlighting:
5.6M: David Carmo
5.3M: Gabriel Veron
3.3M: Alan Varela
3M: Otávio
2.1M: Francisco Conceição
1.5ME: Samuel Portugal
Payments to agents: awaiting completion of the ongoing audit.
Impact of Dragão’s revaluation on equity
- Stadium value before December 31, 2023: 112M
- Revaluation on December 31, 2023 (challenged by CMVM): 279M, which allowed equity of 132M
- Revaluation on June 30, 2024: 213M. There was a reduction of 66M, with an impact on equity of -47M. New appreciation of the stadium is 213M.
SAD’s plan for the future (importance of the Champions League and player sales)
Given the gigantic volume of payments of 93 ME in payments to clubs, we are working to have operations with long reimbursement periods and with normal costs. On this front, with the Ithaka operation now complete, we will be able to reinforce equity, with an improvement of 65ME in equity. The 35ME [restantes do acordo] We can only register when we achieve objectives. We have other financing operations underway, we have been talking to the international bank to set up an operation and we hope to have news soon. We are working on other operations that will bring the liquidity we need to act as a normal club, which pays on time and honors its commitments on all fronts.
- Boost commercial revenues;
- Invest in the main team to ensure regular presence in the Champions League;
- Review the business group to have a lighter structure and lower costs;
- Generate relevant results in player pass transactions.
