8. Financial Performance and Outlook

8.1 Historical Performance

FFA’s business is operated on a four year budget cycle corresponding with the four year FIFA World Cup cycle. This reflects the fact that the Socceroos program drives the commercial engine of FFA, with qualification and participation in the FIFA World Cup providing the basis for revenue generation.

Largely driven by the Socceroos program as well as the growth of the A-League, since its formation in 2004 the core revenues of FFA have grown from $23 million in 2004–05 to in excess of $74 million in 2010–11.

This growth has been supplemented by significant Commonwealth Government investment since 2007 which has allowed FFA to fund activities such as men’s and women’s national teams participating in AFC qualifying competitions, coach and referee education programs, the televised national W-League and the National Youth League.

Despite annual fluctuations in operating results, FFA has recorded a modest cumulative surplus over this period. The corresponding growth in revenues and expenditures has meant FFA has restricted capacity to make long-term strategic investments, which is illustrated by the level of Member’s Equity over the period to 30 June 2011.

8.2 Football Federation Australia Projections

Underpinning the strategic plan for the period up to and including the Asian Cup in 2015, FFA has developed a four year Financial Plan. The key objective of the Financial Plan is to make FFA independently sustainable by the end of 2015. In achieving this outcome FFA would create a modest level of members’ equity and remove the need for ongoing special government assistance.

The Financial Plan reflects the operations of FFA which fall into three ongoing strategic pillars being: national teams and elite player development; the three national leagues; and Community Football. The 2015 Asian Cup is treated as a fourth, one-off pillar.

There are several major assumptions in delivering the Financial Plan. However the key premise is an uplift in broadcast revenues from July 2013 when a new broadcast agreement is due to commence (discussed further below). In turn this broadcast revenue uplift is premised on a deferral of listing of Socceroos World Cup qualifiers on the anti-siphoning list.

The Financial Plan that was developed for the period to 30 June 2015 incorporates the current funding platform that Socceroos success provides for the other non-revenue generating areas of the game. It also reflects the importance of a strong A-League and retaining, growing and converting players into lifelong supporters of the game. This is reflected through continued investment in the women’s national team program and W-League, the National Youth League, a succession program for the next generations of Socceroos and Matildas, community engagement initiatives, grassroots coach, referee and volunteer programs and an indigenous strategy.

The Financial Plan also identifies areas of strategic investment to support the move towards sustainability. The level and speed of these investments is heavily dependent upon the following key funding variables and risks:

• inability to fund existing commitments in the bridging period leading up to a new broadcast agreement in 2013
• inclusion on the anti-siphoning list leading to a material reduction in the value of the next broadcast agreement
• financial stability of A-League clubs particularly from rising player costs and stadium hiring arrangements
• reliance on a private investment model for A-League clubs with inherent vulnerability to economic factors outside of football

8.3 Review of Football Federation Australia Projections

The Financial Plan is based on key assumptions and necessarily there is risk and variability associated with the projections. The plan includes key assumptions on the value of the next broadcast agreement, sponsorship revenue, Socceroos performance in World Cup qualifying and the level of financial support provided to A-League clubs in the form of annual grants and where additional assistance is required.

It is noted that the financial performance of the A-League clubs represents a contingent risk to FFA. FFA is required to support clubs that are struggling financially, and to take ownership of clubs when licenses are relinquished, until new investors are found.

The projections in the FFA Financial Plan will be materially impacted by these variables. As a result the level and speed at which FFA commits to major investments must be constrained until their outcome is known. For these reasons, the recommendations made in this report are focused on constraining or reducing costs in the short to medium term until financial independence and sustainability are achieved.

Financial contribution by the A-League

FFA’s Financial Plan reflects the current funding subsidy that Socceroos commercial success provides for the other arms of the business. This confirms the importance that the broadcast deal and deferral of listing of Socceroos World Cup qualifiers on the anti-siphoning list makes to FFA’s financial capacity to sustain investment in: the future of the domestic game, in particular a strong A-League

• non-revenue generating areas related to the development of the game including the W-League and National Youth League
• The current financial reality is that the A-League and its clubs are not self-sufficient. As previously noted, the A-League currently depends on centralised FFA revenues which are largely derived from the Socceroos program.

This financial summary has been drawn from a comprehensive financial analysis undertaken by the review team.

References

Standing Committee on Recreation and Sport, ‘Participation in Exercise, Recreation and Sport’, Annual Reports 2001–2010, Australian Sports Commission

Australian Bureau of Statistics, ‘Children’s participation in Cultural and Leisure Activities’, 2001-2009

Richards, B. 2011, ‘Grounds for Concern’, The Mercury, 17 July 2011, <http://www.themercury.com.au/ article/2011/07/17/246171_tasmania-news.html>

Football Federation Australia, ‘National Facilities Audit 2010’

Australian Athletes Alliance Inc and Braham Dabscheck, ‘The Linkage Between Player Payments And Benefits To Revenue Sharing In Australian Sport’, August 2010

Holmes, S. 2004, ‘Soccer: Time to kick it up a notch’, Business Week Online, 22 November 2004, <http://www.businessweek.com/magazine/content/04_47/b3909099.htm>

Japan Professional Football League 2011, viewed 5 September 2011 and 4 October 2011, <http://www.j-league.or.jp/eng/>

Major League Soccer 2011, viewed 7 September 2011, <http://www.mlssoccer.com/content/2007-full-season-stats>

Fédération Internationale de Football Association 2011, FIFA/Coca-Cola World Rankings, viewed 5 August 2011, 4 October 2011 & 27 November 2011, <http://www.fifa.com/worldranking/rankingtable/index.html>

Football Federation Australia 2011, viewed on dates between 4 July 2011 and 18 November 2011, <http:// www.footballaustralia.com.au/>