2017 ITF Annual Report and Financial Statements

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3 The financial statements of the ITF Trust ("ITF") record a consolidated surplus of $5.3m a er inves ng ac vi es and tax, an improvement of $3.8m on the 2016 surplus of $1.5m. This consolidated surplus is comprised of $0.3m from opera ng ac vi es and $5.0m from inves ng ac vi es. ITF2024 is the ITFs long-term plan for sustainable growth. With eight key strategic priori es, ITF2024 provides the framework for strategic and sustainable growth over the period to 2024, allowing the ITF to become a more efficient and effec ve organisa on, and give more opportunity to realise the primary goal of developing, growing and promo ng tennis around the world. In June 2017 the ITF Board agreed that addi onal expenditure and investment which is in direct support of the objec ves of ITF2024 may be funded from reserves to the extent that they are not able to be funded from opera ng and non-opera ng surpluses. These addi onal expenditure and investment items have been defined as 'strategic ini a ves'. Despite expenditure of $1.1m on strategic ini a ves the opera ng result is a net surplus of $0.3m a er tax. The published result also takes account of the performance of the ITF's long-term investment por olio which increased in value by $4.7m or 11.0% in 2017 (2016: increase of $2.5m, or 6.3%) to $47.1m. In total, inves ng ac vi es generated a net surplus of $5m in 2017 (2016: $2.8m). As a result of the posi ve opera ng and non-opera ng results, reserves have increased to $57.8m as at 31 December 2017 (2016: $49.6m). OPERATING INCOME Opera ng income for 2017 was $68.9m (2016: $55.6m), an increase of $13.3m reflec ng upli s in media rights revenues ($4.6m), data rights revenues ($6.4m), an -doping income ($1.0m), and other income ($1.3m). Media rights income increased by $4.6m (52.1%) in 2017 to $13.5m (2016: $8.9m), due to the first year of a media rights partnership agreement with beIN SPORTS which is in place un l 2021. It is important to note that $3.0m of this increase reflects the reclassifica on of payments made directly to Na onal Associa ons previously ne ed off against income. Under the new agreement income is recognised gross and payments to member na ons are recorded as an expense. Data rights income amounted to $12.5m, an increase of $6.4m from the previous year (2016: $6.2m), arising from the first year of a new five year contract with Sportradar. 80% of the net income, a er deduc on of integrity costs, is paid to member na ons in support of ITF Pro Circuit tournaments and the mission of developing and promo ng tennis around the world. Total sponsorship for the year amounted to $18.9m, a decrease of $0.1m or 0.7% (2016: $19.1m). Exis ng sponsorship revenues remain substan al through our key partnerships with BNP Paribas, Adecco, Rolex and Uniqlo. REPORT OF THE CHAIRMAN OF THE ITF FINANCE COMMITTEE Receipts from events increased by $0.8m to $6.3m in 2017 (2016: $5.5m) represen ng the ITF's share of cket sales from the Davis Cup compe on, ITF tour event sanc on fees and player iPIN revenues. An -doping income increased by $1.0m to $3.6m from the ITF providing enhanced an -doping services to the Grand Slam tournaments and ATP/ WTA tours and from the forfeiture of prize money as a consequence of viola ons. Income from the Olympic Games is recognised in the Consolidated Income Statement evenly over the four-year period of the Olympiad. Total income received from the IOC rela ng to the 2016 Olympic Games amounted to $24.3m with net income of $5.8m being recognised in 2017. Further detail is provided in note 31 to the financial statements. Other development income is a new income stream for 2017 mostly comprising funding for regional 12-and-under team compe ons in all con nents. OPERATING EXPENSES Opera ng expenditure for 2017 was $67.3m (2016: $56.5m) an increase of $10.8m in the year. Professional Tennis costs increased by $4.6m to $35.8m (2016: $31.2m) with data rights distribu ons rising by $4.8m to $8.5m. Davis Cup and Fed Cup prize money increased by $0.5m (3%), and there was a reduc on of other Professional Tennis costs of $0.7m with the Development department taking on the cost of running ITF 14-and- under and 16-and-under regional qualifying tournaments, as well as ght cost control. Tennis Development expenditure increased by $2.1m, or 33%, to $8.4m in 2017 (2016: $6.3m). The increase represents a key ITF2024 objec ve of increasing development spending worldwide and benefited over 150 countries in 2017. The development strategy plans for further expenditure increases for 2018 and beyond. The rise for 2017 includes the $0.5m for 14-and-under and 16-and-under regional qualifying transferred from Professional Tennis department as described above. Commercial costs increased $2.7m to $5.9m in 2017 (2016: $3.2m). As discussed within the Opera ng Income sec on, there is a $3.0m increase associated with the reclassifica on of payments previously ne ed against income. In 2017 the Science and Technical department took on responsibility for integrity becoming the Integrity, Science and Technical department. Expenditure in this area rose by $1.6m to a total of $5.8m in 2017 (2016: $4.2m). Increases in an -doping tes ng, as well as increased legal expenses associated with high profile appeals accounted for the majority of the increase along with addi onal staff costs for new posts. Finance and Administra on costs remained constant at $4.9m. While the ITF has con nued to increase spending on security, providing an enhanced service to ITF events worldwide, this is offset by ght cost

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