A better box than expected thumbnail

A better box than expected

With the arrival of the pandemic, the Real Madrid offices set a clear objective: to tighten their belts to safeguard the economic health of the club. Now that the public has returned to the stadiums and the clubs are beginning to recover part of the lost income, at Madrid the box is even better than they expected. As reported by 2Playbook, A portal specialized in the sports industry, the Madrid club will once again exceed 800 million euros in turnover in 2021-22 and will repeat profits.

“The club is going to be one of the few great clubs in Europe that does not incur losses,” celebrates Real Madrid in its 2020-2021 annual report, a year in which it once again saved the net profit and even increased it, up to 874,000 euros. This result has special merit, because Florentino exposed to the partners a possible hole of 70 million euros due to the pandemic if no steps were taken to contain spending. Finally he managed to avoid losses thanks to measures such as a 10% reduction in salary for part of the workforce and senior managers.

With an average net profit of 34 million annually between 2011-2012 and 2018-2019, according to data extracted from 2Playbook Intelligence, One of the great virtues of Pérez and his executive team has been to create bags through provisions or impairment of the value of assets that, when necessary, have been released. In this way, it has been avoided to pay in excess of Corporation Tax in high profitability years and accounting cushions have been created for the worst moments, such as the pandemic.

A priori there are no new possible extraordinary items in sight, so sustaining profitability in 2021-2022 will depend on prudence in spending and increasing revenues. The direction headed by José Ángel Sánchez foresees that the turnover will improve by 7% year-on-year, to 695.5 million euros. The main reason for the progress is the gradual reopening of the Santiago Bernabéu, which will allow revenue from membership fees, subscribers and box office to multiply by eight, up to 85.53 million euros.

Along with ordinary activity, capital gains from transfers stand out, which for the fourth consecutive year will be above 100 million euros; in particular, 108.1 million euros that would have already materialized, since Real Madrid does not usually budget for operations not executed. Raphael Varane went to Manchester United for 40 million and 35 million more were obtained by Martin Odegaard, to which are added 3 million for the transfer of Brahim to AC Milan and the departure of Usman Garuba to the NBA, respectively, as well as numerous collections variables for performance or training rights of players already transferred.

Effects of COVID

Real Madrid insists in its annual report that the pandemic has deprived it of some 300 million euros in income between the two affected seasons, since its turnover – excluding transfers – was already around 750 million euros. “This loss of income has only been able to be compensated by the club through the implementation of intense savings measures in all areas,” explains the club in the report sent to the delegates. The plan made it possible to reduce spending items by 36 million euros.

The plan contemplated both sales or rescissions of players with high chips, as well as a review of all suppliers and procedures in search of greater efficiency in management. “Different operating cost reduction scenarios were proposed, in order to be able to adjust to the evolution of the pandemic and the expected impact. Finally, we worked in a scenario of reduction of between 30% and 35% of operating expenses that were not expenses directly linked to income or expenses related to holding matches with the public ”, he adds.

It is a control policy that will extend to 2021-2022, as Florentino Pérez’s board understands that “the economic circumstances of the 2021-2022 financial year will continue to be difficult for the club. For this reason, it is unavoidable to persist in saving measures this coming season ”. All these economic matters will be exposed in the Assembly of delegated members that will take place next Saturday, November 20.

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