FIFPro CONGRESS CYPRUS NEW CLUB LICENSING SYSTEM Amsterdam, 1 October 2014 Nick Nicolaou- CFA Vice President Nick Nicolaou • CFA Licensing Manager (since 2001) • CFA Vice President • Member of UEFA Financial Working Group for CL FFP (since 2003) Agenda • To provide you with an analysis on how Cyprus club Football has developed over the last 5 years as the financial situation is concerned and what this meant for our clubs • Measures taken by CFA and new rules on Club Licensing • To provide picture of the financial state of club football today Where Cyprus Football stands compared to other countries CYP Clubs presentation UEFA Benchmarking Financially comparable European leagues PEER GROUP Peer group members – by divisions TOP ENG ESP LARGE FRA GER GRE NED BEL BLR BUL CRO CYP CZE FIN ISR KAZ MICRO ALB IRL 5 €50m + 63 12 €5m - €50m 156 13 €1.25 - €5m 126 10 €350’000€1.25m 109 12 < €350’000 132 POL SRB ROU SVK SVN SMALL HUN PG Size NOR POR RUS SCO SUI SWE TUR UKR MED BIH by clubs ITA AUT AZE PG Size ISL LVA LIE LTU LUX NIR AND ARM EST FRO GEO MDA MLT MKD MNE SMR WAL KEY FIGURES • TOTAL INCOME 45 m • AVERAGE ATTENTANCE AT MATCHES 4.000 per game. Top clubs : 8.000 per game How much income did Cypriot clubs report last year? €3.2m €8.6m €13.5m €20.8m €46.1m 7% 19% 29% 45% Commercial Gate Receipts Advertising & Sponsorship Broadcasting and other How do income levels differ? • Clubs in the 5 largest leagues represent 13% of the top division clubs but generate 69% of the total European income How many fans attended domestic championship matches across Europe? • An estimated 101 million people watched 11’500 top division club matches during 2009/10 representing just over 8’800 spectators per match • However, this is a decrease of 3 million since 2008/09 where ENG, SCO, RUS, TUR and POL experienced the most significant impact • GER maintains the highest average match-day league attendance and for the first time overtook ENG in terms of total attendance Nicos Nicolaou How are Cypriot European club rankings looking? • Generally improving with APOEL highest achievement but also many other clubs reaching group stages of uefa competitions • Contributes to CYP country coefficient and ranking and access lists; Source: UEFA Research Nicos Nicolaou How are Cypriot clubs performing on the pitch in Europe? • Clear improvement in UEFA club ranking since 2008 from 28th to 15th in 2013; Source: UEFA Research – Included within “The European Club Footballing Landscape benchmarking report” Club Licensing CYP Clubs presentation Club licensing overview Operation of licensing across Europe ISL FRO FIN RUS NOR SWE SCO NIR EST LVA DEN IRL LTU WAL ENG BLR NED BEL KAZ POL GER LUX UKR CZE FRA LIE SUI ITA POR ESP AND SVK MDA AUT HUN SVN CRO BIH SMR ROU GEO SRB MNE ARM BUL MKD ALB TUR GRE MLT CYP One licensing system domestic / UEFA 14x No domestic licensing – Only UEFA 15x Two parallel systems domestic / UEFA 24x ISR AZE CYPRUS CLUB LICENSING • Since 2002 • 2006 Domestic license • 2009 stronger rules and sanctions than UEFA • 2013 Monthly overdue payables checks Notion of ‘overdue payables’ (Annex VIII) • Overdue payables = not paid according to the agreed terms • At the assessment date, payables are not considered as overdue if: 1. Relevant amount paid in full; or 2. Written agreement to extend deadline for payment; or 3. Admissible legal claims and/or relevant proceedings opened; the club must prove that it is not just buying time and that there is an actual dispute. 4. A claim or proceedings against the club are contested and demonstrated to be manifestly unfounded. The Financial development of Cyprus clubs Situation and key figures of Cyprus clubs back in 2009 • Uncontrolable spending • No long term planning • No balance of success on the pitch and off the pitch As a result: • Total debt : 80 m Euros • Total income 45 m Euros • Total expenses 60 m Euros • Total payables to employees : over 10 m Euros Other signs of financial distress • Bad relationship between club-players • Nearly all top division clubs loss making • Average employee costs to revenue ratio near 100% • Most cases employee cost to sales ratio 150% • Nearly all clubs auditors expressed a qualification or emphasis of matter regarding going concern. • Ranked number 1 in number of cases in front of FIFA • Many clubs suspended football activities or declared bankrupt • (Pafos, ALKI, APOP Peyia etc) How many Cypriot clubs were loss making? • Cypriot clubs made losses over €4m in FY10 and over €10m in FY11 of which 6 clubs had losses equivalent to more than 20% of revenue 50% 20% -10% -40% -70% -100% -130% -160% -190% -220% -250% Club 1 Club 2 Club 3 Club 4 Club 5 Club 6 Club 7 Club 8 Club 9 Club 10 Club 11 Club 12 Club 13 Club 14 What type of liabilities have Cypriot clubs reported? • Cypriot clubs reported nearly €45m in liabilities in FY09 €11m 25% • Of these 25%(€11m) were in bank and other commercial loans €22m 49% €8m 19% • Outstanding amounts payable on transferred totalled €1.5m and account for 3% of total liabilities €1.5 3% Bank & commercial loans Group & related parties Other LT Liabilities Taxes & Social charges Transfers Other ST liabilities • 2% (€1m) were tax and social charge liabilities €1m €0.6 2% 2% How many clubs have liabilities larger than reported assets? • Only 5 Cypriot clubs reported positive equity • Most clubs had negative net equity more than 20% of their asset base and two reported negative net equity more than 500% of their asset base • Total net equity for Cypriot clubs in FY10 amounted to €-4.8m Measures taken by CFA CFA Objectives As approved by CFA Executive Committee and key stakeholders, the new requirements aim principally to: • Introduce more discipline and rationality in club football finances; • Encourage clubs to operate on the basis of their own revenues; • Protect the integrity and smooth running of the competitions; • Encourage investment for the long-term benefit of clubs; • Ensure clubs settle their liabilities on a timely basis; • Protect the long term viability and sustainability of European club football. Approach for developing the new requirements • Financial situation of European club football - stakeholders calling for change; • Consultation with stakeholders (Local Player Union FIFPro ); • New financial rules to be built on top and integrated with existing club licensing regulations in effect since 2004; • New regulations approved by CFA EXCO • Now focus on the challenges of robustly implementing the new requirements. The new CFA Club Licensing and financial fair play rules rules) •(Monitoring 2011- Introduced 30 June and 30 September audit on overdue payables on top and second division clubs (6 point deduction) • 2012 Encourage clubs to operate on the basis of their own revenues by introducing break even- lowering the 5m UEFA max loss (9 point deduction) • 2013 Monthly check on clubs on overdue payables to current employees (2 point deduction) • Higher point deduction and ban on transfers introduced as a sanction on above. • Stricter Budget controls and scrutiny What new rules clubs had/have to meet? National Licensor and Club Financial Control Panel National Licensor Licensed clubs in UEFA competitions Break-even No overdue payables – during season Future financial information liquidity Guidance: - debt level - salaries & transfers Monitoring process All Licence applicants Audited annual financial statements Interim financial statements No overdue payables Written representations Licensing decision Future financial information Break-even calculation - simulations Scenario 2: Aggregate break-even surplus for monitoring period Reporting period T-2 T-1 T Annual break-even result (€M) +2 -1 +3 Aggregate break-even result in monitoring period (€m) Conclusion +4 Break-even deficit in T-1, so must look at aggregate break-even result over 3 year monitoring period. Break-even surplus over monitoring period of +4, so requirement fulfilled Break-even calculation - simulations Scenario 3: Break-even result within acceptable deviation Reporting period T-2 T-1 T Annual break-even result (€M) -8 -1 +5 Aggregate break-even result in monitoring period (€m) Conclusion -4 Break-even deficit in both (T-2) and (T-1), but aggregate break-even result over the monitoring period is -4, which is outside acceptable deviation (2), so requirements are fulfilled. Results and situation today 1. Total debts reduced to near 60 million (from 80 million) 2. Employee debts reduced by 20% (around 6 million) 3. In 2013 total losses reduced substantially and better forecast in 2014 4. Salaries to revenue ratio reduced 5. FIFA cases reduced substantially 6. Many of our clubs have improved their financial capability 7. Generally a better picture and out look. Reasons for improvement • New FFP rules encouraged reduced and feasible budgets • New monitoring requirements (monthly checks on Overdues) exerted big pressure on clubs to reduce salary levels and made a massive favourable difference • Clubs are now constantly monitored Role of the Cyprus Professional Footballers Association (PASP) • Significant role • Consider PASP as a partner rather than a third party • Constant (daily) communication • Constructive input (deferral agreements, player contracts etc) Summary and conclusion • Stricter monitoring rules (checks on overdues and FFP) gave positive results and provides us with a positive outlook • Constant monitoring protects the clubs • Good cooperation and communication with local player Union Our aim and duty: • TO PROTECT THE PLAYERS, CLUBS AND FOOTBALL AS A WHOLE Thank You!