ITF

42 I ITF FINANCIAL STATEMENTS Report of the Chairman of the Finance Committee INTERNATIONAL TENNIS FEDERATION • ANNUAL REPORT AND ACCOUNTS 2015 The fi nancial statements of the ITF Trust ("ITF") record an overall operating defi cit of $1.4m for the year. This refl ects a shortfall in commercial income arising from unsold sponsorship packages, which was anticipated, and the result is in line with expectations. The Board has set aside up to $6m from reserves over a three year period to cover the anticipated shortfall whilst new sponsors are sought. Operating income for the year was $52.1m compared to $58.7m in 2014 and operating costs were $53.5m compared to $56.7m contributing to an overall defi cit before taxation of $2.7m for the year. The variance is primarily due to the change in the recognition of revenue and expenses for the Hopman Cup. 2015 was the fi rst year in which the Hopman Cup was operated under a licence fee agreement with Tennis Australia and the change from reporting full income and expenditure for the event to reporting net income received is the major factor in the reduction in operating income and operating expenditure. Like-for-like operating income, after the impact of the Hopman Cup is removed from both the current and previous years, remained level at $51.7m in 2015 compared to $51.6m in 2014. Within this overall result various income lines have shown normal increases and decreases which compensate for each other to result in the like-for-like position. Factors showing a decrease from 2014 include income generation from the Davis Cup, which fell to more normal levels after an exceptional result in 2014, reduced sponsorship income after the non-renewal of Wilson and NH Hotels and a fall in tie specifi c sponsorship for the Davis Cup contributing to an overall fall in income of $1.9m. These factors are offset by increases including revenue received for the sale of Data Rights and the sharing of the increase in Anti-Doping costs with the ATP, WTA and Grand Slams as a result of the TADP agreement which combine to give an overall increase in income of $2.0m. Once the effect of the Hopman Cup is removed, like-for-like operating costs increased by $3.2m to $53.3m (2014: $50.1m). This increase is explained by cost increases including $1.0m for Data Sales (which is simply the distribution of the increased income); $0.8m increase in prize money for the Davis Cup and Fed Cup; $0.5m for the Grand Slam Development Fund; $0.4m for Anti-Doping expenditure; and $0.3m to reinstate part of the bad debt provision released in 2014. Although costs increased overall, tight cost control ensured the operating defi cit was in line with a level that was expected. The published result takes account of the performance of the ITF's long-term investment portfolio which decreased in value by $1.0m or 2.5% in 2015 (2014: increase $1.0m, 2.5%) to $39.8m, an overall performance of 1.0% below the portfolio benchmark. The underperformance was due primarily to worldwide market performance and investment strategy. Investing activities in 2015 generated a net loss for the organisation of $1.3m, signifi cantly less than in 2014 (net profi t $0.2m), refl ecting a diffi cult year for global markets. The overall defi cit for 2015, after investment losses and tax, was $2.9m (2014: surplus $1.9m). Operating income The decrease in total operating income of $6.7m in 2015 arose entirely from the change in the accounting treatment of the Hopman Cup. The 2015 income is the licence fee from Tennis Australia of $0.4m whereas in the previous year, operating the event internally generated gross revenues of $7.1m. Once the effect of the Hopman Cup is removed, income has remained stable with a $0.1m increase to $51.7m in 2015. Whilst global Sponsorship sales remain challenging, total sponsorship for the year amounted to $17.6m, a decrease of $0.3m (or 1.4%) from 2014. Although NH Hotels and Wilson have withdrawn as sponsors, an early termination agreement for Wilson to pay substantially all of the remaining sponsorship partially offset the loss of sponsorship for the year. Despite the loss of these two sponsors the picture for the future is positive, with each of the three main sponsors (BNP Paribas, Adecco and Rolex) renewing contracts in the year at levels comparable with previous contracts, and the addition of new sponsors Betway and Sportradar which take effect in 2016 and 2017 respectively. In addition, Uniqlo remain valuable partners through their continued investment in Wheelchair tennis. Television and licensing income decreased by $0.4m (5%) in 2015 to $8.0m due to sporting results in the Davis Cup and Fed Cup and represents a more normal level after the exceptional year in 2014. The outlook is more positive with the BeIN contract due to provide increased guaranteed revenues from 2017 onwards.

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