I have done a prelim analysis of Inter's estimated P&L in the last 2 years, and compared to how we are doing vis-a-vis FFP criteria.
A pinch of salt - this type of analysis will never be completely accurate as most financial figures for the last 2 years are not available. There is also a lot of ambiguity around reported stuff like Transfer fees, wages, bonuses, etc. So the approach I have taken is to focus on the material changes over the years, and assume that the rest more or less remains the same. So take these numbers with a pinch of salt, and don't cry over a million here or there
First, lets quickly understand FFP guidelines. Clubs don't have to break even immediately. Infact, in the first monitoring period in 2013-14 which takes into account losses made in the two preceding years (2011-12 and 2012-13), the clubs are allowed losses of upto 45m (as long as Moratti is covering those loses). Here is the FFP guideline table explained:
Also, some costs are excluded from FFP consideration like:
1. Investments in youth development or community as well as depreciation on tangible fixed assets. Looking at listed clubs of Inter's size, these can be quite significant - about 12-18m. For the purpose of this analysis, I have assumed this cost for Inter at 12m, just to be conservative.
2. Wages of players signed before 1 Jun 2010 are excluded from 2011-12 season only. For Inter, this is extremely significant and relates to at least 75m! Just this will ensure we meet the FFP guideline for the first and maybe even the 2nd monitoring periods.
So what does Inter FFP situation for the first monitoring period look like?
Inter and the First FFP Monitoring Period
Rationale & Assumptions:
Before we do any analysis, lets look at the rationale of some of these numbers:
1. Revenue: For 2010-11 and 2011-12, these numbers are from Deloitte Money League, which is as accurate a source as any. For 2012-13, those are my realistic assumptions based on no CL.
2. Wage bill: This is calculated by evaluating the impact of the significant arrivals and departures as compared to last year. For example, the key wages changes in 2012-13 included:
Which means that the wage bill reduced in 2012-13 over the previous year by 25.8m. I understand that many different numbers are floating around regarding the gross wages of each player, I have just used the best figures I had. If there are any major errors, happy to make those changes. Also, there were a lot of transfers/loans than the ones mentioned above, like Coutinho for example, I have only included the significant impacts with the assumption that the smaller INs & OUTs more or less balance each other out.
3. Other Expenses: One can assume that for a club with severely declining revenues, Moratti would be cutting these costs significantly. And maybe he has done that, there is no published info at the moment. But then, knowing Moratti & his idiotic management, its quite possible that nothing significant has happened in this regard. So for now, just to be conservative, I am assuming that our other running expenses remain the same as at 2010-11 levels.
4. Profit from Player sales: This is basically the total transfer sales - book values of the players we sold. Or to explain in easier language, this is the total value of a player's sale (for eg, Coutinho was sold for 11m) minus what wwas his book value in our accounts (Coutinho's book value was close to zero as his transfer fee was already amortised). This gets tricky, coz not only do we not know the accurate sales figures (for which I have used Transfermarkt** just for the sake of consistency), but also it can get difficult to estimate the book value of players who may be on a 2nd or 3rd contract with Inter when they were sold. I have used my best estimates in this case.
**I am not happy with the transfermarkt sales figures, they look a bit bloated to me. What might help this analysis, is if one of you can list down the key transfers for 2011-12 and 2012-13, and estimate more accurate sales figures from more reliable sources.
5. Other income from exceptional items: In 2010-11, we sold the rights to use our library to RAI for 13m. I am not aware of any exceptional items for the last 2 seasons where we may have gained significant income. If anyone has any info, please let me know.
6. Player Amortisation: This is basically the amortisation cost of players we bought in a particular year, minus the amortisation cost of players we sold. For example, in 2011-12
So our annual amortisation cost increased by 2m.
7. Depreciation & Net Interest: I have assumed these as constant. Though considering that last year our debt was just south of 50m, an interest cost of 12m sounds way too high - perhaps Moratti has already worked at reducing this cost.
So this brings us to the following loss estimates:
2010-11: Loss of 86m
2011-12: Loss of 68m
2012-13: Loss of 68m
But from FFP point of view, how are we doing for the first monitoring period? We have a total FFP loss of 37m for the first monitoring period, which should be acceptable as long as Moratti/New Investor puts in equity to cover it. Which means we will not get disqualified from CL for the 2014-15 season, should we qualify for it on the pitch this season.
A few quick observations:
- But this leaves very little space for the 2nd monitoring period, we have to almost break even in 2013-14. That is going to be challenging without any European football. The writing is on the wall - Inter need to get rid of some serious wages this summer.
- Inter are surviving due to a significant revenue from sales of past champions every year. But this model can only go on for so long, soon there will be no "family silver" left to sell.
- Inter cannot survive another season without CL money. If we don't make it to the CL this season, our FFP situation will become so bad that we will get disqualified from Europe for a few years. No pressure, Mazzari!
- Oh, we need a new stadium ASAP - it is quite evident why that is a necessity now... these falling revenues cannot sustain this club, specially not with our idiotic overpaid management and overheads!
I plan to expand on this analysis over the next few weeks, to cover projections for next 2 years and how that impacts our transfer budgets - thanks to FFP, these things are very co-related now, and can be estimated rather accurately. But before I do that, I need to do some more research on the accuracy of the above numbers, or else projections make little sense. You can help me, specially regarding transfer values, wages and contract lengths of players we have signed/sold in the last 2 years. Just post away below with a link to your source, and I will incorporate them into the analysis.