Sports Balance in 2021 has a deficit of R$70 million and the largest commitment in history

Chart of the evolution of Leão do Recife’s revenue and pending cases in the last 7 years.

In a year with five different presidents, with the current manager, Yuri Romao taking over only on July 23, the sport’s financial outcome ended up being relatively chaotic. Although it posted its highest gross revenue in the past three seasons, at R$94.1 million, it ended up with a negative balance of R$70.2 million!

Subtracting net revenue (R$83.6 million) by expenses between January 1 and December 31, 2021 was the club’s worst result in this century. I say this, starting in 2001, because it’s the lowest cut that can be examined, as this deficit tends to be the largest in a longer period – or even of all time, until it requires a currency conversion, of course.

How did you arrive at an absolute “expense” of R$153.9 million in one year? It wasn’t just football. By the way, the expenditure on sports activities amounted to R$65.1 million, or 42.3% of the total, of which R$49.1 million is in salaries, R$9.0 million in expenditures with competitions and R$6 million in .9 million on the basis of contractual rights. The value, considering Series A, is acceptable even for a Leo level, but as a result it ended up going down to Series B – which would significantly jeopardize the next balance sheet, which will be released by April 30, 2023.

Interest close to 40 million Brazilian riyals

Going back to the huge expenditures in 2021, the problem lies in the financial grip the sport has had in recent years, with the Petty Liability bill finally arriving. An example is the “negative interest” tranche, which needs no explanation, which rose from R$177 thousand in 2020 to R$36.8 million. The largest share was from “financial expenses”, including bank commissions, exchange rate changes, discounts, etc. In total, this amount jumped from R$ 4.0 million to R$ 42.1 million. Recognition of lawsuits also weighed with the prospect of a heavy defeat, adding R$29.6 million to this entire account. This is a warning. Beyond the 2021 balance sheet, those stocks are a much bigger concern.

In contrast to the last balance of red and black, this balance better illustrates “contingency provision”, actions against the club at an advanced stage. Defeat, say. In the field of work, the Legal Department classified 87 labor lawsuits as “potential losses.” This amounts to R$29.8 million. These cases were completely “provided” in the accounting structure of the club. In practice, it counts as debt – the sport may pay less, but it depends on the sentence. Legal advisors also identified 137 other lawsuits as “potential losses,” which could be as high as R$54.10 million — lawsuits that should require more effort in the courts. In other words, the 224 operations add up to R$83,944,198.

In addition, there are still 100 civil suits filed by service providers and material suppliers. They are also considered ‘potential losses’. This amounts to 16.3 million Brazilian reals. Therefore, the actions stipulated, or already “excluded” in terms of success in the sentence, between business and civil, will require payment of R$46,171,965.

The ninth consecutive deficit

The scale of problems, which generated such a frightening deficit, as the ninth consecutive annual negative balance, ended up affecting, unsurprisingly, the sport’s commitments. With an increase of 28%, the sum of current liabilities (pending up to 12 months) and non-current liabilities (pending for more than 12 months) totaled R$258 million, the highest in history. In addition to the “contingency provisions”, which introduced non-current liabilities, the jump in tax liabilities, which rose from R$63.5 million to R$98.9 million, weighed a lot.

Worse in this case, they are short-term commitments. The trigger for this debt was the non-payment of the “withholding income tax”, IRRF, which in the last accounting period increased from R$26.1 million to R$56.8 million. R$ 8.4 million in social security debt was also recognized by the Public Prosecutor’s Office of the National Treasury, PGFN.

At least more clarity in the report

Although the sport’s financial scenario is very sensitive, there was at least more clarity on the problems, between debts, potential debts and premiums. The official budget was released on the deadline set by law, unlike its predecessor, with a delay of 22 days. However, the document still lacked improvements, such as the need for a review by a famous company involved in Brazilian football. It also needs more care in defining recipes, something that is still not matched by the detail recently introduced by regional competitors in Salvador and Fortaleza.

As an example, money from TV broadcasts, which is not detailed, has a high probability even of being misclassified, as marketing “made” 68 million R$, or 10 times what was expected. Another “indication” of this is the value of the marketing itself in 2020 (in the 2021 balance sheet), as well as the football revenue in the last statement.

Below, a comparison of the four important fronts of revenue formation in professional football, found in the sport’s last five budgets – and related series in BR.

TV broadcasting rights
2017 (A) – 41257138 BRL
2018(a) – R$43113030 (+4%; R$1.8 million)
2019(b) – R$22,423,579 (-47%; -20.6 million R$)*
2020(a) – R$40,901,349 (+82%; +18.4 million)*
2021(a) – R$68,968,734 (+68%; +29.0 million)*

*Unlike other clubs, the sport has not broken down ‘football revenue’ in the latest data by adding income, TV shares and other sources.

Supporters List
2017 (A) – 12912158 BRL
2018(a) – R$ 13865.621 (+7%; +0.9 million R$)
2019(b) – R$6,416,249 (-53%, R$7.4m)
2020(a) – R$4,476,553 (-30%; -$1.9 million)
2021(a) – 3,244,856 R$ (-27%, -1.2 million R$)

Income in games
2017 (a) – 19,517,910 BRL
2018(a) – R$8,065,506 (-58%; -11.4 million R$)
2019(b) – Unspecified*
2020 (A) – 4,282,081 Brazilian Real
2021(a) – R$17.088,133 (+299%; R$+12.8 million)

Sponsorship / Marketing
2017 (A) – 14943,190 BRL
2018(a) – R$5,656,479 (-62%; -9.2 million R$)
2019(b) – R$ 4,588,752 (-18%; R$ -1.0 million)
2020(a) – R$7,665,675 (+67%; +3.0 million)
2021(a) – Unspecified*

Next, the history of sports revenue, with three revenue of over R$100 million in the past eleven years. Remember, Assad released a budget of R$59 million for 2022.

Annual club revenue (total revenue)
2011 (b) – 468,75544 BRL
2012(a) – R$7,807,538 (+70%; +32.9 million R$)
2013(b) – R$51,428,086 (-35%; -28.3 million R$)
2014(a) – BRL 6,079,294 (+18%; +9.3 million)
2015(a) – R$87,649,465 (+44%; +26.8 million)
2016(a) – R$129,596,886 (+47%, +41.9 million)
2017(a) – R$105.471.746 (-18%; R$-24.1 million)
2018(a) – R$ 104,098,716 (-1%; R$ -1.3 million)
2019(b) – R$39,208,327 (-62%; -64.8 million R$)
2020(a) – R$54,527,382 (+39%; R$+15.3 million)
2021 (a) – R$94,131,145 (+72% +39.6 million)

Income for the year (surplus/deficit)*
2011 (b): +321305
2012(a): +22,541,556
2013(b): -4,963,656
2014(a): -8,627,606
2015(a): -26,528,983
2016(a): -566.411
2017(a): -18,313,641
2018(a): -14,382,986
2019(b): -22,644.360
2020 (A): -2.586,638
2021(A): -70.284.816
* Balance subtracting net income from annual expenses

Evolution of the club’s accumulated liabilities (current + non-current)
2011 (b) – 45278851 Brazilian Real
2012 (a) – R$ 27,381,926 (-39%; R$ -17.8 million)
2013(b) – R$22,751,467 (16%; -4.6 million R$)
2014(a) – R$73,396,626 (+222%; +50.6 million)
2015(a) – R$121,167,577 (+65%; +47.7 million)
2016(a) – R$125,080,279 (+3%; +3.9 million)
2017(a) – BRL 183,562,095 (+46%; +58.4 million)
2018(a) – R$193,439,749 (+5%; +9.8 million R$)
2019 (b) – R$ 189,540.801 (-2%; R$ -3.8 million)
2020(a) – R$200,535,111 (+5%; R$+10.9 million)
2021(a) – R$258,049,760 (+28%; +57.5 million)

Read more about this topic
The official balance sheet for sports on accounts for 2021, published in Folha de Pernambuco

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