Interpreting Milan’s 2020/21 financial results

The financials from Milan’s season of achieving Champions League qualification was finally out admist Milan publically announcing a 95 Million loss which was a 100 Million improvement over the 2019/20 season.

With Financial analyst Swiss Ramble breaking down the numbers and splicing Milan’s accounts to delve into how they reached a 95 Million loss, we highlight some of the key points and the positives and negatives from Milan’s finances last year

THE POSITIVES

• Milan’s Revenues have increased from 172 Million to 241M. (69 Million increase)

• Milan’s tv revenue increased from 63M in 2019/20 season to 138 Million in 2020/21.

• Commercial revenues (sponsorship deals, kit deal, advertisments etc) increased from 77M to 94M.

• Our Wages to turnover ratio ( wages to turnover is calculated as what % of the total earnings of a club is given as wages) has decreased from 93% to 70%. This means that 70% of the money the club earns is given as wages for players and administrators.

• Our Net transfer debt (Net transfer debt= Money we gave to pay to clubs for transfers – Money we have to receive from clubs for buying our players) is 1M. This is a very healthy sign of how Milan have controlled their debts.

• Milan’s net interest ( Net interest is the interest a club has to pay for the loans they have availed. For example when we take a loan from the bank we have to pay Interest) has been reduced 23M to only 5M per season.

• Player Amortization ( Amortization is the yearly cost of a player’s transfer fee) has reduced from 95 Million to 66 Million.

• Player write downs (writing off losses) decreased from 18 Million to 2M (2M loss made on Musacchio)

THE NEGATIVES

• Milan only made a profit of 18M in the transfer window last season (20Million from Suso minus 2M loss from Musacchio)

• Wage bill increased by 9M owing to bonuses paid by the club to the players on achieving Champions League qualification. (161 Million to 170 Million)

• EBITDA (Earnings before Interest Tax Depreciation and Amortization), a real metric to the real profitability of a business because it considers only the core operations of the business (revenue minus expenses like wages, losses in transfer market) is still negative 15M.  This is still a metric where Milan is one of the worst in Italy.

• Milan only made 17M from their Europa League performances last season despite making it to the round of 16.

• Milan’s gross debt has increased by 10 Million owing to the bank loan availed by Elliot to buy Casa Milan

• Milan made 0 Million from Matchday income (stadium ticket sales etc) owing to matches being played under closed doors.   However this season will mark a change since Stadiums have been opened up for fans to attend games and Milan can make revenue up to 35M.

WHERE WE NEED TO IMPROVE

• Milan’s transfer market activity needs to improve further if they have to make more pure capital gains. They average only 12M profit in the market ever since 2014.

• Milan need to consistently make it to the Champions League more as their earnings from Europe have been paltry. While Milan only made 17M from Europe last season Inter made 50M, Lazio 54M, Atalanta 51M and Juventus 83M.

• Milan have the third highest revenue from commercial revenue aka sponsorships but they are still a 100 Million behind Juventus. Milan earn only 13M from Fly Emirates which is lower from what Fiorentina get from Mediacom and Sassuolo make from Mapei.

• Obviously it is not in the hands of the club but the broadcasting revenue of the league needs a total revamp if they have to compete with the likes of EPL and La liga as you can see from the graph below.

THE THREATS AND ELLIOT’S COMMITMENT

• Milan had agreed with UEFA to sit out a year from Europe in 2019/20 season and have a settlement agreement where they will control their finances as per the metrics set up by UEFA.

• UEFA asks clubs to cut down their losses to 30M within 3 years. However as per the calculation of Swiss Ramble, Milan have exceeded this by roundabout 273M. Milan have set a meeting with UEFA later in the season to discuss its finances

• A lot of criticism from fans have been directed towards Elliot for their lack of splurging money towards the club unlike passionate owners. However company accounts indicate that Elliot have spent 130 Million on Milan last season and this has taken their gross spend on Milan towards 540 Million in the last 3 years.

CONCLUSION

Milan have made real improvement ever since Elliot have taken real control of the ship and has somewhat steadied the ship. They have somehow managed to balance performance with financial stability thanks to strong figures in the management in Maldini, Gazzidis and Massara.

However with absolutely no support from institutions like FIGC or even UEFA, Milan are more likely to stay the same with the large possibility of Premier League swallowing football on its own which is why Perez and a group of other clubs proposed the European Super League

Amanda Staveley, Co-owner of Newcastle in an interview stated that the infrastructure of Serie A is not an attractive proposition for investment which itself is a huge threat for Elliot who are in the club only for the medium term.

The only positive factor seems to the approval for the stadium seems to have arrived and a design has been selected. Milan estimates about 70-80M revenue from the stadium alone.

Milan’s €95M isn’t even close to the highest loss in the league. League winners Inter had the highest ever losses in Serie A at €246M followed by Juventus with €213M.