Annual Report 2003•2004

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Annual Report 2003•2004
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Annual Report 2003•2004
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Futebol Clube do Porto
1
111 years of success.
2 European Champions Club’s Cup
1 UEFA Cup
1 European/South American Cup
1 UEFA Super Cup
4 Portuguese Championship
20 Portuguese Championship 1st League
12 Portuguese Cup
14 Portuguese Super Cup
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Chairman’s Message
The 2003/04 season will be forever etched in the memory of fans of FCPorto.
Our football team reached unmatched and unimaginable heights and won a
competition that everyone would like to win, though few are capable of.
Our triumph in the UEFA Champions League proved that FCPorto - Futebol,
SAD has made the right choices by insisting on a coherent and secure sporting
policy. The market in athletes is becoming an increasingly demanding and hostile
one. Investments cannot afford to fail, choices must be wise and responsible.
Figureheads such as FCPorto must live within their means, without embracing
foolish daydreams that compromise the future.
FCPorto - Futebol, proved itself equal to the task of defining its strategies and
capabilities. Results for the financial year of 24.8 million euros constitutes
unequivocal proof that the excellence of the sporting feats had clear financil
results. We should therefore be doubly satisfied.
Company activities generated an operating cash flow of close to 44 million
euros. Victories took place, and our strength as a company was reinforced.
FCPorto - Futebol, SAD projected its assets and achieved all that it hoped to. It
is with great pride that I realise, once again, that which I have always held to be
true: the path we are following is the right one, and the future is auspicious.
Jorge Nuno Pinto da Costa
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Go
l!!!
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Contents
Management Report
1. Chairman’s Message
2. Governing Bodies
3. Evolution of Company Business
4. Relevant Facts Ocurring after the close of the year
5. Outlook
6. Proposal for application of net results
Consolidated Financial Statements and Annexes
1. Consolidated Balance Sheet
2. Consolidates Statements of Profits and Loss by Nature
3. Consolidates Statements of Profits and Loss by Functions
4. Notes to Consolidated Financial Statements
5. Consolidated Cash-Flow Statements
6. Notes to Consolidated Cash-Flow Statements
7. Legal Certificated of Accounts
8. Audit Report
9. Report and Opinion of the Statutory Audit Board
Report
1.
2.
3.
4.
on Corporate Governance
Flow of Information within the Company
Voting Rights and Shareholders’ Representation
Company Regulations
Administrative Body
Qualified Shareholders
Governing Bodies
General Assembly
Chairman, Fernando Arnaldo Sardoeira Pinto
Secretary, Miguel Angelo Abreu Bismarck
Board of Directors
Chairman, Jorge Nuno Lima Pinto da Costa
Adelino Sá e Melo Caldeira
Fernando Soares Gomes da Silva
Reinaldo da Costa Teles Pinheiro
Rui Miguel Duarte Alegre
Statutory Audit Board
Chairman, Domingos José Vieira de Matos
Member, Ledo, Morgado & Associados - Sociedade de Revisores
Oficiais de Contas, represented by Jorge Bento Martins Ledo
Member, Joaquim Manuel Sousa Ribeiro
Substitute, Jorge Manuel Felizes Morgado
Advisory Board
Company Secretary
Daniel Lorenz Rodrigues Pereira
Substitute, Urgel Ricardo Santos Brandão Horta Martins
Chairman, Alípio Dias
Adolfo Roque
Álvaro Pinto
Álvaro Rola
Américo Amorim
António Gonçalves
António Lobo Xavier
Armando Pinho
Artur Santos Silva
Domingos Matos
Fernando Pimenta
Fernando Póvoas
Ilídio Pinho
Ilídio Pinto
João Espregueira Mendes
João Pinto
Jorge Armindo
Jorge Nuno Pinto da Costa
Ludgero Marques
Rui Moreira
Evolution of Company Business
Annual Report 2003•2004
Football
The 2003/2004 season consisted of a very real and demanding challenge in the fight to maintain the high levels of quality that had been
seen in the brilliant 2002/2003 season. As it turned out, the story was written in blue and white, specifically the unforgettable episode
in Seville, where in front of an enthusiastic crowd and in an extravaganza of emotion and fantasy, FCPorto won the UEFA Cup for the
first time in its history.
From this team we lost Hélder Postiga, Capucho and Clayton, and acquired players Benny McCarthy, Pedro Mendes, José Bosingwa
and Ricardo Fernandes. Young hopeful of Brazilian football Bruno Moraes was also acquired, and he started the season working with
the B team.
The 2003/2004 season kicked-off in Marienfeld, Germany, with pre-season training. This peaceful environment turned out to be an ideal
base in which to prepare for a year which we could see was going to be to be demanding and wearing, as well as an excellent way of
integrating new players into the working group. During this period, the team played three preparatory games, with increasing levels of
difficulty, against adversaries such as Paderborn, Fortuna and Hannover. Before the start of official competitions, FCPorto encountered
PSG in Paris, Deportivo in Corunha and finally, Groningen here in Portugal. These particular encounters led to five victories and a draw.
The first official competition was the Cândido de Oliveira Supercup, in a game which saw FCPorto play União de Leiria, in the new and
lovely D. Afonso Henriques Stadium in Guimarães. The atmosphere was electric, with the capacity crowd of 30,000 witnessing the
conquest of yet another cup by FCPorto, as a result of the 1-0 victory, goal by Costinha.
The season started with bang. On 29th August, in Monaco, the European Super Cup saw AC Milan and FCPorto face-to-face, respective
winners of the UEFA Champions League and the UEFA Cup. In an extremely balanced game, victory smiled on the Italians, giving them a
1-0 win to add to their already brilliant list of prizes.
In the Portuguese League, everyone watched and admired the victorious progress individual style of a truly all-conquering FCPorto. In
34 match days of competition, there were 25 victories, 7 draws and 2 defeats, 63 goals scored and 19 goals conceded. We were the
team that scored the most goals and conceded the fewest number, with the most victories and the fewest defeats; in fact the number
of goals conceded in total competition is a measure of the quality of the team’s playing strategy and the solidity of its football.
Portuguese League
Position
Points
Best FCP
Goal-Average
Europe
2001/2002
2002/2003
2003/2004
3rd
1st
1st
68
86
82
Deco (13)
Postiga (13)
McCarthy (20)
66-34
73 – 26
63 – 19
2nd Round CL
UEFA Victory
CL Victory
This chart shows the sporting performance of FCPorto in the last three seasons.
17
Annual Report 2003•2004
FCPorto clearly dominated the national footballing panorama in these last two unforgettable years, but it is worth stating that this area
of activity today has a leader, a leader that has, in the last 20 years, gained more titles than all of its competitors in the national market
put together, and that has conquered 7 out of the most recent 10 championships in question. This point is perfectly illustrated by the
following chart:
Champions over the last 20 years
FC
3
,1
r to
Po
,4
ca
nfi
Be
or
Sp
g,
tin
2
Bo
a,
ist
av
1
FCPorto contested the final of the Portuguese Cup on the 16th May, in a game against Benfica in the national stadium, and emerged as
the loser by 2 goals to 1.
In relation to European competitions, the 2003/2004 season saw the return of FCPorto to the UEFA Champions League, and what a
return! The draw for the 1st phase of the competition gave us Real Madrid, Marseille and Partizan as adversaries. The task ahead looked
difficult, but the decisive victories against Marseille opened the way for the second round. These were two intense and even dramatic
games, fought by two spectacularly attacking teams that demonstrated on the pitch everything that makes the UEFA Champions League
the most important inter-club competition in the world. Another highlight must be the draw, in Santiago Bernabeu, against Real Madrid,
considered by many to be the best team in the competition. Luck dictated that the adversary in the second round of the competition was
to be Manchester United, the legendary and powerful English club. Fans present at the game were witness to 180 minutes of top-quality
competitive football, an emotional roller-coaster ride right up until the final whistle. The Porto game will stay in the memory of those
who were present at the beautiful Dragão stadium as a night of pure magic. In Manchester, Costinha’s goal in the final stretch of the
game decided the match and placed FCPorto in the quarter finals. Luck of the draw gave French champion Lyon as the next adversary,
an adversary of attacking and captivating football but who were demolished by FCPorto, in the Dragão stadium, 2-0, in a cerebral and
terribly effective game. Goals from Deco and Ricardo Carvalho set the game on the road to victory. In Lyon, in a high-quality game, a
new victory of 3-2 and once again, in the spotlight of European football, our players shone brilliantly, playing, creating play and lifting the
show to a quality level that is almost unbeatable.
In the semi-finals, the duel of northern Iberia. Porto and Corunha, two growing cities, two great capitals of football in the last few years.
A meeting of brothers, but with a target that only one team can meet: a place in the final of the UEFA Champions League. A tactically rich
game in Porto resulted in a goal-less draw, leaving the decision to be made in Riazor. There, with the support of a fantastic crowd that
travelled from Portugal, FCPorto and the returning Derlei made history. A notable collective strength got in the way of the fluid Galician
game, and the quality of Deco and Derlei in the last stretches, decided a game that was balanced, and showed a tactical richness that
was impressive to behold. Gelsenkirchen, here we come.
The final of the UEFA Champions League was fought in Germany, in the Shalke Arena, a model for this type of building: functional,
comfortable and ready and able to receive all types of event. It was a fitting stage for the game to be played. FCPorto and Monaco
fought a game that was both original and unexpected by many at the beginning of the competition. The shrewdness of the French trainer,
however, and the unarguable quality of the players that included Morientes, Giuly, Prso, Evra and Rothen, took this team for the first time
in its history to the finals.
The off-pitch atmosphere was festive and the show put on in the stadium contributed to this. The game started, and it was immediately
apparent that it would be a good game. Giuly’s speed unnerved the Portuguese defence and the technical quality of Deco and Carlos
Alberto did not allow the Monaco players any respite. With the game balanced, an inspired Carlos Alberto scored the first goal, leaving
18
Evolution of Company Business
FCPorto the winners at half time. The crowd was a frenzy of blue and white. The second half allowed FCPorto to show its efficiency.
Alenichev went on, scored the decider, and once again entered into the club’s history books. That magnificent Seville goal showed Dimitri Alenichev at his decisive best. There was still time for one more goal, an elegant and fitting one for Deco, and the culmination of a
sublime year for the Portuguese magician.
It was already history, FCPorto was the European champion and the country was celebrating. The whole of Portugal, from top to bottom,
and many parts of the globe rejoiced, demonstrating the magnitude and breadth of the club. We had reached the end of a stage, which
showed that were right to have followed this path. The UEFA Champions League is the greatest and best competition in the world between clubs, and generates fabulous cash-flows. We wanted to be there, and hoped to win one day. And we did.
Economic Activity
Analysis of accounts in relation to the financial year 2003/2004 goes to show that it is possible to combine excellent sporting results
with economic efficiency. If on the sports side, FCPorto – Futebol, SAD took part in the best season ever, the financial side of the business was notable for the turnaround, hopefully definitive, in the direction of budget surpluses.
Before analysis of the consolidated results, or rather, of the sum of the results obtained by each one of the companies of the group
included in the consolidation, net of transactions effected between them, we can look at an overview of the results obtained by each
company individually:
Porto SAD
PortoComercial
PortoEstádio
PortoMultimédia
Total Income
110.04
7.15
3.58
0.39
Total Costs
85.27
6.97
3.55
0.48
Net Results
24.72
0.17
0.03
-0.09
Cash-Flow
43.08
0.71
0.17
-0.08
EBITDA (Oper.CF)
43.86
0.74
0.25
-0.08
As can be seen, three of the four companies included in consolidation show positive results, which translates as the individual economic
efficiency of each company, and gives an even more consistent consolidated performance.
When the consolidated results are looked at once again, the evolution in net results registered over the three last sporting seasons can
be seen:
Net Results
2001/2002, -16.1
2002/2003, -18.1
2003/2004, 24.8
This positive evolution of net results also has repercussions in terms of the EBITDA, which confirms the operating efficiency of this
financial year, as seen in the following graph.
19
Annual Report 2003•2004
EBITDA (Operating Cash-Flow)
44.8
3.4
-0.9
2001/2002
2002/2003
2003/2004
In relation to generated Cash-Flow, galloping growth was also seen, exceeding the 1.8 M€ of 2002/2003 to 43.9 M€ in this financial
year.
Cash-Flow
43.9
1.6
1.8
2001/2002
2002/2003
2003/2004
The evolution of company EBITDA and Cash-Flow reveal a tendency towards improvement of the company trading account.
The trophies won throughout the season, and specifically the brilliant performance in the UEFA Champions League as well as the quality
demonstrated by players that was translated into capital gains by transfers, allowed an exponential increase of income, to the order of
117%. The greatest impact was registered in relation to income obtained in European competitions and by the transfers that took place,
respectively 21 and 44% of the total of operating income.
Breakdown of Income
Others, 4%
Transfers and Loans, 44%
UEFA Competitions, 21%
Advertising and Sponsorship, 7% PC Merchandising, 3%
Ticketing, 13%
Financ.+Extraord. Income., 3%
TV, 5%
20
Evolution of Company Business
The capital gains realized occur within a context of stagnation throughout the whole of the European transfer market. The compensation,
however, of equipping a team with valuable players who then give great sporting results, is that they bolster the majority of sources of
income for the company, particularly the growth in income related to transfers, a factor which is essential to the financial equilibrium of
the company.
FCPorto gained the title of European Champion, having won the 2003/2004 UEFA Champions League. This competition pays out large
sums for entering, as well as in relation to performance, victories obtained and for passing into the higher levels of the competition, as
well as paying out monies received from television coverage, which are paid in proportion to the sums paid by the television network of
each respective country. The importance of this item can be clearly seen on the previous diagram.
Income from the ticketing which includes season tickets, tickets sold for each game and FCP quotas paid by club members, represented 13% of total income, but has an important economic role as it represents a more independent income in relation to sporting
performance.
Other items, though they have generally increased, had, this season, less influence on the income structure. The ‘others’ item includes
income from PortoEstádio and from PortoMultimédia that were not annulled in consolidation.
Looking at each one in detail:
Transfers and Loans
Transfers
00
2
Loans
01
/2
Transfers
00
3
20
Loans
02
/2
Transfers
20
03
/2
00
4
20
Loans
Capital gains from transfers arose from sales of the sporting rights of Deco to Barcelona for 21 million euros, Paulo Ferreira to Chelsea
for 20 million euros and Ricardo Carvalho, also to Chelsea, for 30 million euros.
Costs resulting from the organization of these operations as well as of the net book value must be deducted from the aforementioned sums.
In none of the above cases did FCPorto - Futebol, SAD hold 100% of the respective rights, as they were the results of partnerships established with groups of investors such as for example the FP Football Players Fund. Income deriving from the sale of the 11 players who
made up the first portfolio on the constitution of the FP Football Players Fund - Porto, are also accounted for here. These players are:
• Deco
• Ricardo Carvalho
• Paulo Ferreira
• Pedro Mendes
• Hugo Almeida
• Benny McCarthy
• Ricardo Costa
• Bruno Moraes
• Vieirinha
• Ivanildo
• Paulo Machado
21
Annual Report 2003•2004
Income received from the lending out of players confirms their quality, given that even though they are not included in the top team of
FCPorto, they are still requested by both national and foreign teams.
UEFA Competitions
20
01
/
20
02
9.8
02
/2
00
3
8.8
20
03
/2
00
4
20
25.1
In relation to participation in European competitions, the excellent sporting performance seen throughout the season permitted a notable
financial reinforcement, arising from the victory in the UEFA Champions League, and went on to ensure, unequivocally, the place in the
final of the European Super Cup, as well as that of the Intercontinental Cup. This being the case, income arising from a place in these
finals, which rose by about 4.4 million euros, are, in accordance with current accounting practices, registered in the financial year under
analysis.
20
01
/2
00
2
Sponsorship
20
02
/2
00
3
9.1
20
03
/2
00
4
10.4
8.5
In spite of the tendency of income resulting from commercial partnerships towards sustained growth, these have suffered a slight decrease. This decrease was exclusively due to the reduction of income that arose from the current contract with PortoComercial. This was
manifestly less due to the fact that PortoComercial had been deprived of income relating to corporate hospitality, a group of services
that it sold to companies. The entire right to this income was attributed to the club in 2003/2004, and in the remaining 14 financial years
to EuroAntas, under the contract drawn up between various companies of the FCPorto group, in order to meet the demands of project
finance for the construction of the Dragão stadium.
Agreements with FCPorto’s principal commercial partners such as Nike, Revigrés, PT and BES, have revealed themselves as important
sources of income, whose variable component, which depends on victories won during the season, have shown a marked increase.
22
Evolution of Company Business
Ticketing
Season Tickets
FCP Quotas
20
01
/
20
02
Tickets
20
02
/
20
03
Tickets
Season Tickets
FCP Quotas
Tickets
Season Tickets
20
03
/2
00
4
FCP Quotas
On the 26th November 2003, FCPorto inaugurated its new home, the Dragão stadium. With a capacity of around 50,000, It is the most
important work that the club has undertaken since its founding. Of outstanding architectural merit, the work of Architect Manuel Salgado
has exceeded all expectations in relation to economic performance. The income resulting from football matches belongs to FCP-SAD,
as do sales of season tickets or seats sold at the ticketing. Income from commercial areas, parking or events and visits are operating
income for PortoEstádio, the company created for the management of the stadium itself.
An increase of 65% in ticket sales was obtained as soon as the new Dragão stadium came into use. The sale of season tickets at the
new stadium was a success, with an increase in the region of 95% in relation to the same period of the previous year. We have around
32,000 season-ticket holders, which represents 65% of the stadium sold for the whole season. The concept of re-selling of season-ticket
seats, involving the seat-holder selling their right to attend a specific match, was introduced experimentally at the end of the season. As
the experiment proved positive, this area of business will be promoted in following seasons.
In this particular area, as well as in other parts of the business, the move to the Dragão stadium has led to a considerable increase in
turnover. Shows put on for the fans have risen in quality. Victories and other moments of great spectacle and emotion were lived through,
and the team had a brilliant career in the UEFA Champions League. All these factors played a decisive part in the 7M euros obtained in
individual ticket sales per game.
TV
01
/2
00
2
5.9
02
/2
00
3
20
6.4
20
03
/2
00
4
20
6.2
In spite of the fact that the television market has undergone a slight cool-down, FCP-SAD had already signed a contract ceding the broadcasting rights of Portuguese League matches, which will bring in growing income over the seasons. The fact that in 2002/2003 the
highest value in the last three years was achieved, is due to the fact that in that sporting season, FCPorto had participated in the UEFA
Cup, whose financial model allows the teams to sell television rights to the matches played.
The breakdown of costs reveals that costs relating to personnel have a determining weight in the company budget. Athlete’s salaries are
actually the factor that has the greatest influence on economic performance. These costs represented, in 2003/2004, a specific weight
23
Annual Report 2003•2004
of 46% in relation to total costs. In this period, values registered under personnel-related costs include bonuses paid for winning the
UEFA Champions League, the Portuguese League and the Cândido de Oliveira Supercup, as well as payments related to the rescinding
of the contracts of employment of various athletes, namely Quintana and Tiago. The strategy of rescinding contracts of those athletes
who are not part of the squad anticipates costs and allows for improved financial performance in subsequent years.
Breakdown of Costs
Financ. Extraord. Costs, 4%
Personnel Costs, 46%
Depreciations, 20%
Other, 14%
External Suppliers, 14%
Costs of Goods Sold, 2%
It is not only costs related to salaries but also those related to depreciations, for the most part intangible and reflecting the investment
made in the acquisition of players, that carry a considerable weight, reaching 20% in 2003/2004.
Salaries vs Operating Income
01
/2
00
2
66%
37%
20
03
/2
00
4
20
02
/2
00
3
20
65%
An important gauge for a sporting company is the one that relates to the percentage of total income that is absorbed by salary costs.
This ratio should preferably be lower than 60%. The efforts that have been made in pursuit of this objective are evident, allowing salary
costs to consume only 37% of the total operating income obtained in this period. Management strategy continues to point in the direction of stabilization of this ratio at about 55%.
Depreciations
01
/2
00
2
17.7
02
/2
00
3
20
19.2
20
03
/2
00
4
20
18.7
24
Evolution of Company Business
Depreciations occurring in this period diminished relative to the previous year, which translates into a lessening of investment in fixed
assets, mainly made up of athletes’ registrations.
Analysis of the structure of company capital indicates a change in the tendency to diminish shareholders’ equity. The results obtained,
which were frankly positive, enabled the increase in shareholders’ equity by more than 150%, this being, on 30th June 2004, 40.9M euros. In spite of the growth in liabilities, the increase in assets that can be observed more than compensated for these, ensuring company
stability. The main reason for the strong increase in assets is the item Trade Accounts, where the values related to players transfers
effected are registered when payment has not yet been received due to differing payment deadlines.
30/06/2002
30/06/2003
30/06/2004
Net Assets
85,606,863
89,985,571
153,992,024
Shareholder’s Equity
34,606,346
16,163,833
40,921,441
Liabilities
51,000,517
73,821,738
113,070,583
40%
18%
27%
Financial Autonomy
The qualitative structure of company liabilities underwent positive changes. In spite of their significant increase, more than half refer to
medium and long-term liabilities. One of the reasons justifying this tendency rests on the debenture loan contracted this semester to
the value of 11.5 million euros, with an interest rate fixed at 5.35%. This operation was carried out in order to finance current costs,
by way of recourse to an alternative source of finance, which was only possible due to the credibility of the company in the eyes of the
investors.
Confirmation of the inversion of the tendency of the structure of company capital can be found in financial autonomy. This ratio shows
that shareholders’ equity is equivalent, on 30th June 2004, to 27% of company assets. This percentage deserves highlighting as, in
spite of assets having increased around 64M euros, the increase in shareholders’ equity was more striking as it allowed the structure
of company capital to be consolidated.
Book Value of the Players
30/06/2002
30/06/2003
30/06/2004
37,680,483
35,277,163
36,725,210
Book value of the athletes under contract increased slightly this financial year. The tendency has been towards the gradual containment
of this figure, by diminishing the number of players under contract and the value invested in new players.
PortoComercial
PortoComercial is the company that develops the commercial component of football in all its areas, namely: merchandising, sponsorship
and licensing, and is 93.5% owned by FCPorto - Futebol, SAD.
20
01
/2
00
2
Turnover
20
02
/2
00
3
8.4
20
03
/2
00
4
9.3
7.1
25
Annual Report 2003•2004
An exclusive look at turnover of this company of the group is inconclusive. This value has decreased in relation to the two preceding
years due to the fact that the Corporate Hospitality business has been transferred to EuroAntas (exceptionally FCPorto in 2003/2004).
This alteration is included in Project finance designed for the financing of the construction of the Dragão stadium, with EuroAntas keeping the respective sales rights, mandating PortoComercial for the effective sales of tickets to companies, for which it will receive a
commission for services rendered.
Keeping in mind the other areas of business, we can conclude that although we are in a period of economic stagnation, PortoComercial
continues to expand its business and significantly increase invoicing.
Merchandising
20
01
/2
00
2
2.2
20
02
/2
00
3
2.6
20
03
/2
00
4
3.3
As can be seen, income from the sale of products via the different distribution channels that exist, namely the network of Blue Stores,
obtained a significant increase, to the order of 28%. This growth of more than 0.7M euros in relation to the same period in the previous
year was mainly due to the opening of a new shop in the Dragão stadium. As the shop only opened to the public in the second half of
the tax year, a significant increase in income from next season’s merchandise is already anticipated.
Royalties
20
01
/2
00
2
0.3
20
02
/2
00
3
0.4
20
03
/2
00
4
0.5
Income related to the licensing of products bearing the registered trademark FCPorto has increased significantly, as can be seen on
the following bar-chart showing the growth in income related to royalties between 2001/2002 and 2003/2004, giving a growth rate
of 66%.
26
Evolution of Company Business
PortoEstádio
PortoEstádio is a company conceived and aimed at the operation and management of sporting infrastructures, which include the Training
and Sports Education Centre and the new Dragão stadium, and which is wholly owned by FCPorto-Futebol, SAD.
Although the company was created and began its activity in 2000, it was only in this financial year, with the inauguration of the Dragão
stadium, that PortoEstádio truly assumed the role for which it was created. In 2002/2003 some operating activity took place due to
the start of the Training and Sports Education Centre, but this represented a low turnover considering the potential income hoped for
from this company. For this reason, comparisons with previous financial years should not be made, as the operational structure of the
company has been totally reformulated, as turnover confirms, reaching the value of 3.4M euros this financial year, in comparison to
previous years where turnover did not exceed 0.1M euros.
Breakdown of Income
Other Services Rendered, 6%
Events, 44%
Euro 2004, 30%
Advertising Areas, 3%
Supplementary Income, 5%
Commercial Areas + Parking, 12%
On analysing the income structure of PortoEstádio for the financial year 2003/2004, the impact of the holding of events on total company income, which rose to 2.7M euros, becomes evident. These include the holding of sporting events, the matches of the FCPorto
principal team, as well as income obtained by allowing the use of the Dragão stadium for the holding of the European Football Championship, Euro 2004. The holding of this event surpassed all the expectations for PortoEstádio, especially because the Dragão stadium
was awarded top marks for organization. This permitted the awarding of the top fee from the variable scale of fees. The holding of Euro
2004 netted PortoEstádio around 1M euros.
Income obtained from the ceding of areas for commercial operations and offices is the second largest slice of the total, with a total of
0.4M euros. The supplementary income item includes visits to the stadium and the exclusivity fees paid by the bars. Visits to the stadium
have been successful and permit an increased turnover in the Blue Store situated in the Dragão stadium.
Income obtained from advertising displayed on the two electronic panels inside the stadium constitute a smaller part of total income.
These panels are fitted with a system of rotation that enables them to be seen from outside the stadium, namely from the VCI of Porto.
The Dragão stadium trademark has already been created. It has an image of radical modernity and beauty. The stadium is a work of
reference in the region, and the centre of attention of visitors to the city. Our aim is to consolidate its brand image.
Breakdown of Costs
Depreciations, 4%
External Suppliers, 68%
Personnel Costs, 25%
Other Operat. Costs, 1%
Financ.+Extraord., 2%
27
Annual Report 2003•2004
The cost structure, representing a total of 3.6M euros, is made up almost exclusively of Supplies and External Services, and by costs
with personnel. Of the supplies and services presented, more than half were those needed for the putting on of events in the stadium.
The rest relate to the day to day running of the company, its personnel and infrastructure.
In this financial year, PortoEstádio presented a turnover of around 3.4M euros, in spite of the fact that the Dragão stadium was only
inaugurated during the year in question, in November 2003, and a net profit for the period of approximately 25,000 euros.
Next period, the first in which the Dragão stadium will be available for use from the start, an increase in turnover of more than 50% is
expected.
Turnover
20
03
/2
0
04
3.4
Bu
dg
.,
20
04
/2
00
5
Re
al,
5.2
This increase of 1.8M euros is mainly due to the longer period of operation of the Dragão stadium, which will allow PortoEstádio to
increase income by the ceding of areas for commercial operations and offices. In spite of the fact that there is no event planned of the
size of Euro 2004, the holding of a greater number of matches and non-sporting events in the stadium will lead to a global value for
services and events that is superior to that of the period under analysis.
PortoMultimédia
The activity of PortoMultimédia consists of the management of the FCPorto website on the internet (www.fcporto.pt).
This company, in which FCPorto-Futebol, SAD, has a holding of 59%, seeks to fit the commercial necessities of FCPorto and the interests
of the fans to the contents of the website, making it possible, for instance, to buy official FCPorto products online, as well as offering
ticket sales and the acquisition and renewal of season tickets.
The inauguration of the Dragão stadium, a modern sporting infrastructure prepared to receive the most important football matches and
which offers excellent conditions of hospitality and comfort to its visitors, created a new business opportunity for PortoMultimédia. This
company is preparing its involvement in the management of some business that is directly related to the stadium, namely the internal
television system (CATV). This mechanism permits the management of contents and sales of advertising and MMS and SMS services
FCPorto has also launched an innovative concept for the sales of season tickets at the Dragão stadium: DragãoNET. This service will
allow fans of FCPorto who are not club members to attend all the team matches in the Portuguese League and the first stage of the
UEFA Champions League, thereby being a part of the show that will surely be held in the Dragão stadium.
PortoMultimédia developed the re-sell service for season tickets, a product sold by FCPorto-Futebol, SAD that allows holders of these
tickets to attend matches played by FCPorto as a home team throughout the season. This service should encourage higher attendance
at matches as well as fulfilling the expectations of our fans.
This company is in the final stages of putting its services online, by means of direct access to the ticketing data base, amongst others.
Services offered are ticket sales, payment of FCP quotas, member registration and consultation and updating of members’ files.
In this period, PortoMultimédia presented a turnover of around 0.4M euros, the quality of its specialization being reflected in the advance
received by the ceding to Sportinveste Multimédia, exclusively and for a period of 10 years, of a group of rights related to online commerce. Net profit for the period was approximately (- 90,000 euros).
28
Evolution of Company Business
4
Relevant Facts Occuring After the Close of the Year
After the sporting success of the last two years, the market has reacted, with players at FCPorto as a main target. In fact, the loss of
players such as Deco, Paulo Ferreira and Ricardo Carvalho (whose capital gains are accounted for in this period) or of Pedro Mendes
(whose capital gains will only appear in 2004/2005 as this agreement was only finalised in July) as well as of Alenichev, was the motivating factor behind the drive to acquire assets that would facilitate the work towards the re-conquest of the national title and dignified
defence of the European title. Investments were therefore made in acquiring the registrations of players Seitaridis, Pepe, Diego, Luís
Fabiano, Hélder Postiga and Ricardo Quaresma, amongst others. It is, in fact, relevant that the public presentation of the contracting of
Diego, and especially of Luís Fabiano, was held publicly at the Dragão stadium in front of thousands of fans, in a dynamic demonstration
of the belief that the fans have in the unequivocal quality of these athletes.
The Cândido de Oliveira Supercup was fought in Coimbra, and matched FCPorto with Benfica. The national champion emerged the winner
with a goal from the new right wing of the team, ex-Barcelona player, Ricardo Quaresma.
On 27th August, the final of the European Super Cup was played out, in a game which pitted FCPorto, European champion, against
Valencia, winner of the UEFA Cup. The Spanish team emerged the winner with a 2-1 result.
Meanwhile, a variety of products have been created and sold to fans, such as season tickets for the 2004/2005 season. Expectations
have been met with the sale of around 32,000 places, which corresponds to 64% of the stadium sold for the whole season. Given that
the average price per seat has risen by around 18%, the cash-flow generated has already increased by almost 20%.
The structure of company capital improved considerably in the first few months of 2004/2005, as a result of the diminishing debt due
to the cash-flow generated by the campaign in the UEFA Champions League and with the transfers that took place.
5
Outlook
The company AGM re-elected the Board of Directors with a mandate that terminates in 2007. Shareholders elected the new members
of the governing bodies unanimously.
Financial forecasts point towards balanced activity in 2004/05.
Taking a wider view, it is important to highlight the fact that in the 2005/06 UEFA Champions League, two Portuguese clubs are guaranteed direct entry, with a third club having the right to participate in a qualifying round. This fact, which comes about as a direct result
of the competitive capability of FCPorto as seen in the last few years of European football, lessens the financial risk inherent to our
activity.
Strategy for the next few financial years continues to point towards greater negotiation of contracts with players favouring a variable
component in their remuneration.
FCP-SAD has formed a working party to study the impact of IAS on the net worth and economic situation of the company. This has led
to the formation of an action plan which is currently being implemented. The implementation of IAS is obligatory, in the case of FCP-SAD,
from 01st July 2005.
In relation to the recurring question on compliance with Art. 35 of the Company Code, it can be noted that the structure of company
capital has improved significantly this financial year, in accordance with results presented. At the end of this period, FCPorto - Futebol,
SAD will meet this obligation, as company shareholders’ equity is 40.9 million euros, well above half of share capital (37.5M euros).
6
Proposal for Application of Net Results
In the financial year 2003/2004, in relation to the individual accounts, Futebol Clube do Porto - Futebol, SAD obtained a positive net
result for the period of 24,722,913.64 euros (twenty-four million, seven hundred and twenty-two thousand, nine hundred and thirteen
euros, and sixty-four cents).
In accordance with the terms of article 376 of the Company Code, the Board of Directors proposes the following application of the profit
verified for this period:
For Retained Earnings : 24,722,913.64 Euros
Porto, 1st October 2004
29