RUNNING A SUCCESSFUL FOOTBALL CLUB IN AFRICA: AN INSIDE LOOK INTO THE FINANCIALS OF AL AHLY - AFRICA’S MOST SUCCESSFUL FOOTBALL CLUB

Running a successful football club in Africa requires more than just passion for the sport. It demands a solid financial foundation and an effective organization structure. Al-Ahly Sporting Club, one of Africa's most successful football clubs, provides an insightful template for aspiring club owners and managers.

Establishing a Strong Financial Base

Al-Ahly's journey began in April 1907 as a social sports club. Over time, it evolved into a sporting powerhouse with a specific organizational structure dedicated to marketing and investment management. To navigate the complex world of football management, Al-Ahly adheres to Egyptian laws and accounting standards, ensuring transparency and clarity in its financial operations.

The club's financial statements are prepared annually, relying on the historical cost basis. This approach is consistent with the decision of the Minister of Youth and Sports, emphasizing accurate currency measurement, translation of foreign currency transactions, and proper accounting for fixed assets, financial investments, stock, cash flows, and more.?

To understand Al-Ahly's financial success, it's crucial to analyze the club's financial data over a significant period. This analysis covers nine financial years, from 2004 to 2012, providing valuable insights into revenue sources and expenditures. These insights can guide other football clubs in Africa on their path to financial success.

Revenue Sources

Al-Ahly's revenue streams are diverse and include:

Memberships and Annual Fees: The club derives income from annual subscriptions, replacement and renewal fees, membership card fees, and more.

Miscellaneous Income: This category encompasses various income sources such as donations, gifts, rentals, ticket sales, and advertising.

Units Revenues: Income generated from sources like the net café, Nasr City library, tenders, and fines.

Social Activity Revenues: Income from services like swimming pools, physical therapy treatments, telephones, medical clinics, and more.

Games Revenues: Al-Ahly's performance on the field results in significant revenue from soccer and other games, both locally and internationally.

Al-Ahly Magazine Revenues: Income generated from subscriptions, advertisements, and other magazine-related activities.

Ahram Contract Revenues: Income resulting from a contract with Ahram, including soccer matches and advertising.

Centenary Revenues: Special revenues associated with significant events like the club's centenary celebration.

Total actual income for Al-Ahly club from 2004 to 2012: L.E. 1,284,496,621.

Highest annual revenue achieved in 2009: L.E. 175,997,413.

Lowest annual revenue recorded in 2004: L.E. 80,365,818.

Revenue increased consistently from 2004 to 2007, with the highest increase of 3.7% in 2007.

The period from 2008 to 2012 saw the highest revenue despite fluctuations, with L.E. 162,589,825 in 2008.

In 2012, there was a slight decrease in revenue compared to the previous year, totaling L.E. 164.496 million.

The primary sources of revenue include membership fees, miscellaneous income, units revenues, social activity revenues, games revenues, Al-Ahly magazine revenues, Ahram contract revenues, and centenary revenues.

Athletics (games) revenues accounted for the largest share, contributing 34% of total revenues.?

This is particularly attributable to Al-Ahly's dominant position in African football, boasting multiple CAF Champions League victories and consistent success in the Egyptian League and Super League. Recent achievements, including winning the African Champions League title, have further bolstered their earnings, with rewards totaling $4 million (approximately LE 124 million).

Additionally, qualification for the 2023 Club World Cup presents an opportunity to earn an additional $1 million to $5 million based on their performance. Furthermore, Al-Ahly's participation in the inaugural African Football League (AFL) promises substantial prize money, with $4 million allocated for the winner and significant rewards for other top-performing clubs.

The AFL will kick off on Friday 20 October 2023 in Dar es Salaam, Tanzania and will feature Simba SC (Tanzania) and Al Ahly SC (Egypt).

The Prize Money for the AFL is as follows:$4,000,000 for the Winner, $3,000,000 for the Runner-up, $1,700,000 for each of the Semi-finalists, $1,000,000 for each of the Quarter-finalists.

Membership fees and annual fees contributed 33% to total revenues, ranking as the second-largest source. Over the 8-year period, membership fees amounted to an impressive L.E 424,887,124.

Miscellaneous incomes accounted for 14% of total revenues.

Expenditures

Al-Ahly's expenditures can be categorized into:

Administrative Expenses: These include salaries, bonuses, utilities, maintenance and repairs, printing expenses, and more.

Social Activity Expenses: Costs related to social activities like trips, camps, summer resorts, and billiards.

Games Expenses: Expenses tied to the club's participation in various games and competitions.

Unit Expenses: Costs associated with maintaining club facilities like swimming pools, physical therapy treatments, and more.

Centenary Expenses: Expenses related to significant events and celebrations like the centenary caravans.

Total expenses for Al-Ahly club from 2004 to 2012: L.E. 953,983,196.

Highest annual expenses incurred in 2012: L.E. 170,975,000, representing 17.9% of total?

Expenses.

Lowest annual expenses reported in 2004: L.E. 58,852,019, comprising 6.2% of total expenses.

Expenses increased by 0.9% in 2005 and 2% in 2006, then showed a 3.9% increase in 2007.

In 2008, there was a 2% decrease in expenses compared to the previous year.

The primary expense categories include administrative expenses, unit expenses, social activity expenses, games expenses, Ahly magazine expenses, and centenary expenses.

Games expenses accounted for the largest share, representing 59% of total expenses.

Administrative expenses were the second-largest category, contributing 30% to total expenses.

Social activity expenses and unit expenses comprised 4% and 1% of total expenses, respectively.

Strategies for Success

Al-Ahly's exceptional financial success can be attributed to a series of well-crafted strategies that have transformed the club's financial outlook:

1. Significant Financial Growth:

Under the leadership of President Mahmoud El Khatib, Al Ahly achieved remarkable financial growth. He disclosed to club members that the club's budget soared over the past four years, reaching an impressive EGP 2.54 billion in 2021. This monumental increase reflects a strategic commitment to expanding the club's financial resources. In 2014, the budget stood at EGP 333 million. By 2018, it had already surged to EGP 1.2 billion and in 2021, the budget reached the remarkable milestone of EGP 2.54 billion, signifying an ambitious financial vision.

2. Innovative Stadium Financing:

Al-Ahly has embarked on innovative financing methods, particularly in the development of their new stadium. While rumors suggested a 6 billion Egyptian Pound naming rights deal with Allianz, the club denied this, and the focus remains on the transparent development of naming rights through a bidding regulation.

Notably, the club has adopted a Build, Operate and Transfer (BOT) Model for the stadium's funding, showcasing a forward-thinking approach to infrastructure development.

The club has explored financial instruments such as securitization, selling future rights of the under-construction stadium, and the initial public offering (IPO) model. A dedicated company has been established for the IPO model, although Egyptian sports law permits the sale of only 49 percent of the company's shares to investors, fans, or club members.

Mohamed Serageldin, a board member at Al Ahly in an interview stated: “We are mainly relying on securitization as the stadium funding model, like selling the future rights of the under-construction stadium. For naming rights, as I had mentioned, we are already receiving offers. We are also selling the VIP Boxes in advance as well as resorting to the initial public offering (IPO) model. We have set up a company for the IPO model and right now the club is owned 100 percent by this company. But, Egyptian sports law allows only 49 percent shares of the company to be sold to investors and fans or the club members.”

3. Sponsorship Deals:

Al-Ahly's sponsorship deals have significantly bolstered their financial stability. One standout partnership is with the Saudi Arabian electronic trading systems firm Sela Trading Company. The agreement, as reported by Al Ahram newspaper, spans three years, from the 2015-16 season to the end of the 2017-18 campaign.

This landmark deal is valued at $30 million (€27.1 million), setting a record for Egyptian football. Notably, it surpasses the club's existing agreement with UAE-based telecommunications firm Etisalat by over $10 million.

4. Competition Winnings as explained above.

For African football clubs aspiring to emulate Al-Ahly's financial success, several key takeaways emerge:

1. Leverage Membership Fees: Membership fees played a pivotal role in Al-Ahly's financial stability. Building a strong and enduring relationship with fans is essential. Focusing on fan engagement and loyalty can enhance membership revenues significantly.

2. Pursue Sponsorships and Contracts: Seek partnerships with local businesses and organizations to boost revenue. Al-Ahly's success with "Ahram Contract Revenues" and "Centenary Revenues" underscores the potential benefits of these collaborations.

3. Implement Yearly Budgeting: Creating annual budgets aligned with the club's financial objectives is crucial. Effective budgeting can help control expenses and allocate resources wisely.

4. Diversify Income Streams: Clubs should explore a range of income sources, including merchandise sales, fan engagement activities, and sponsorships, to build a stable financial foundation.

5. Prudent Expense Management: Managing expenses with precision is vital for financial sustainability. Monitoring and controlling costs are key to maintaining profitability.

OTHER NEWS

• IMG signed a deal with CAF to be global sponsorship agency.
• CAF unveiled prize pool for the inaugural African Football League (AFL).
• If you love my NIL, then read a long-piece written by the Athletic