May 31, 2023
Revenue recording, debt reduction, commissions... See details of Flamingo's budget |  sports business

Revenue recording, debt reduction, commissions… See details of Flamingo’s budget | sports business

Flamengo is taking its 2021 balance sheet to a vote of 25 while showing positive numbers. It should be noted that the result was boosted by additional related revenue, such as that obtained from Brazil 2020, which only expired at the beginning of the following year due to the pandemic. However, the club plans to keep total revenue above R$1 billion in 2022, with revenue from games returning and growth in marketing revenue.

However, at several points of the financial statements, the club distinguishes the values ​​without entering these revenues which will be at the beginning of 2020. Thus, the total revenue is R$992 million.

The club crossed the 1 billion reais mark of total revenue in 2021, achieving 1082 million reais according to Brazilian and international accounting standards. This level of revenue is unprecedented in Brazilian football and symbolizes the level the club has reached in terms of resource generation. Even if part of this amount is due to account for part of the 2020 Brazilian Championship in 2021, the 2021/A revenue, amounting to R$992 million, represents a growth of 31% in relation to 2020/A and 4% compared to 2019” – Says an extract from the document.

Flamingo scale – photo: reproduction

The red and black financing report shows a surplus of R$177 million, with R$152 million in cash, including R$25 million in restricted cash, a value temporarily blocked due to bank loans (see chart below). Total revenue amounted to R$1.082 billion.

Flamingo Budget 2021 – Photo: Reproduction

The club explains the restoration work done to the cashier, as well as protection from exchange rate fluctuations, with “almost half” of its cash in foreign currency, as shown in this excerpt from the document.

– Over the past decade, Flamingo has made strong efforts to rebuild its monetary position, not only in terms of the volume of liquid resources, but also in terms of exchange rate protection. Today, nearly half of its funds are available in foreign currency, dollars or euros. This gives the club peace of mind in times of exchange rate fluctuations so that there will be no pressure on foreign currency payments flows.

Amounts received by the club from player negotiations – Photo: clone

During 2021, there was a significant drop in net operating debt in red and black: from R$380 million to R$263 million, a figure similar to 2017 and the second lowest since 2013. Another indicator, net financial debt, was R$82 million. Negative, indicating that the club has more cash than it has to pay the banks.

The indebtedness graph is shown in red and black – Image: Reproduction

Committees, gloves and rights

In 2021, Flamengo spent 190 million Brazilian riyals on player rights. And some core committees. The transaction amounts are described in the table below, which is shown in the balance sheet. The values ​​also appear on commissions to appoint Pedro, Andreas Pereira, Gabigol, Bruno Henrique, Michael, Leo Pereira, Gustavo Henrique and others. Check the table below (values ​​are in thousands, so 4,368 correspond to R$ 4,368 million).

Flamingo scale – photo: reproduction

Flamingo scale – photo: reproduction

In connection with the purchase of player rights, the report makes the following considerations.

Investment in economic rights was less than in previous years, although this effect was not reflected in cash flow, since, as is usual in the industry of clubs with good financial credibility, part of the transaction payments for the purchase and sale of athletes is divided. To illustrate this difference, it should be noted that Flamengo spent 190 million Rls to pay economic rights in 2021 (including payments related to new and old contracts), the highest amount in the historical series, despite the relatively low value of the investment. In new signings compared to the previous two years.

In the presentation of the 2021 financial statement, the club also discusses the goals and budget for 2022. The first is to keep revenue above R$1 billion. The club believes this will be possible with the readjustment of broadcast contracts and the reconfiguration of game day revenue, such as the box office. The club is dealing with “a high probability of confirming these expectations at the end of the year”.

In the segment dealing with budgeting and planning for 2022, the club does not ignore recent events in Europe. The invasion of Ukraine by Russia has potential impacts that the club has already identified, as shown below, in an extract appearing in the financial statements.

– Regarding the recent events of the Ukrainian-Russian War, the main effects identified so far in the macroeconomic scenario have been (a) appreciation of the rial against foreign currencies, (b) increased input costs, particularly fuel and (c) interest rate increase in Economy. In the case of the flamingo, none of these effects has been evaluated as being particularly relevant. The club has sufficient natural protection against exchange rate fluctuations because it maintains the balance of payments in foreign currency, and always has close amounts of “payable” and “receivable” in each quarter. In the case of input cost, it will be higher on the costs of international flights, whether functional or charter, but since they are one-time events, their economic significance will be limited. Finally, the increase in interest rates has little impact on Flamengo, given that today we need low leverage as well as low cost lines of credit due to the financial market’s high confidence in Flamengo’s ability to pay.

The relaxation of health and safety measures due to the Covid-19 pandemic has also been addressed by the Red and Black Department. The club considers that “there is a perspective for the normalization of the scenario” and that there is “little risk of resuming significant restrictive measures”, but stresses that it has capital reserves for potential “stress scenarios”.