Inter has seen a big revolution this summer. 11 new players brought in - 9 of whom are potential starters. 27 players got sold or loaned out. Thohir has clearly backed the coach, and the overall feeling is that Inter are going for broke this season in order to qualify for the CL. A big question that remains, how does this window impact Inter financially? Does this cripple us from the FFP perspective? How are we justifying this to UEFA? Thohir has mentioned that we made a promise to UEFA and we plan on sticking with it... then how does this huge investment make any sense?
As promised, I analysed the impact of this summer's business. However, the scope of this analysis is only to look at the impact of THIS summer's business - vis-ŕ-vis what we were in May 2015. This is not a analysis of Inter's overall financial situation, we all know we were already in deep shit. Its about the financial impact of the mercato from May 2015 to Sep 2015, and how these transfers impact our P&L (i.e. FFP). Lets take a look:
Ljajic (loan), Telles (loan), Melo, Perisic, Jovetic (loan), Biabiany, Montoya (loan), Kondogbia, Murillo, Miranda (loan), Manaj (loan).
The total transfer fees paid this summer = €78m (Kondogbia, Murillo, Perisic, Melo, Santon & Shaqiri)
Increase of annual amortisation cost this year = €19m
Total new loan fees from new players = €10m (Jojo, Telles, Ljajic, Montoya, & Miranda).
Gross annual wages of new players = €45m
Total annual cost of new players = 19+ 10 + 45 = €74m
Schelotto (free), Belec, Andreolli (l), Hernanes, Taider (l), Kovacic, Shaqiri, Biraghi (l), Puscas (l), Longo (l), Camara (l), Bardi (l), Duncan, Krhin, Crisetig (lp), Silvestre, Pereira, Botta, Obi, Kuzmanovic, Benassi, Bianchetti (l), Campagnero, Felipe, Alvarez, MBaye, Jonathan.
Total sales revenue = €88m (Hernanes, Shaqiri, Kovacic, Kuzmanovic, Obi, M'Baye, Krhin, Duncan, Botta, Alvarez)
Book value of players sold = €36m
Total Loan Income = €3m (Crisetig, Andreolli)
Annual gross Wage savings of outgoing players = €35m (Players who were out on loan last season like Schelotto, Taider, etc are not considered here, as we were not paying their wages last season anyways)
Annual savings from amortisation costs of outgoing players = €11m (Kovacic, Hernanes, Shaqiri)
Total profit from outgoing players = (88-36) +3 +35 +11 = €101m
Total P&L impact in 2015 = €101m - €74m = €27m Profit.
So basically, we have made a "Profit" of €27m this year from the summer mercato. I am sure this will come as a surprise to some people here, but P&L works quite differently to your bank balance (for a detailed understanding, refer to my article here). This is the figure that impacts FFP, and possibly is in line with our commitment to UEFA. However, there are a few other points to consider:
1. Contingent Liabilities: We have committed to pay another €21m next summer for obligatory signing of Jovetic and Miranda, added to the previous commitments of €13m for Dodo and Brozovic. Thats €34m to be paid next year. However, this also will be amortised, so annual additional cost of this from next year will be about €8m. Which is similar to what we are paying as loan fees this year for these 4 players. So the P&L will not be impacted.
2. Cash Flows: We have managed our cash flows well, €91m coming in, €88m going out. In order words, our bank balance was marginally increased, and we did not need to take any new loans or investment to specifically cover for these transfers.
3. Wage Bill: The above analysis only covers relevant costs of players bought and sold this summer. Any additional costs like salary hikes of existing players have not been taken into account. For example, we tripled Icardi's contract, which will now cost us about €5m more per annum. By my estimates, our wage bill has grown from about €80m last season to about €97m next season. The mercato is responsible for only about €10m of this increase. If we had managed to get rid of Vidic and Nagatomo, the mercato would have been wage neutral i.e. no increase in wage bill due to the transfers! That said, next summer the contracts of Vidic, Nagatomo and Palacio will be over, which will reduce our wage bill by about €15m.
4. Black Hole: As mentioned previously, this does not mean we are profitable as a company. Inter's black hole remains, and Thohir will still have to cover our last season's losses by investments or loans.
5. Inter "formula": Before someone says that we did this because of the Inter formula, that is incorrect. The "formula" has certainly helped us from a cash flow point of view, but are profit would have been very similar with or without the formula (as mentioned in point 1 above).
6. Transfermarkt figures: I have used their figures for consistency. I am sure not all figures there are accurate, but these do look more or less similar to what we have heard everywhere.
In summary, Inter haven't crippled ourselves (any further) financially due to the summer spend. We are in fact in better financial situation after the summer than we were before. And hopefully we have made ourselves much stronger from a sporting point of view. Which is why I rated this summer so positively.
However, our financial problems still remain. CL is still extremely important, as those revenues are desperately needed to cover the pre-existing black hole in our financials.