Inter's Financial Situation

sdvroot

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I understand the difference but the reality is we did NOT pay United 65m€ immediately. The whole point of my argumentation is that both amortization and cashflow are important. And they MIGHT go hand in hand, but they surely not always do. Sometimes we might pay immediately, but more than often the payment schedule is over multiple years. In Lukaku's case it was 5 years. With Hakimi I don't know exactly, but what I know we paid like maybe 10m€ out of the 40m€ before we already sold the guy.
Yes, it is, as it was prescribed in the contract of the transaction and so we pay.But the indicator that we have losses amortization book 100mln as wrote .h. fundamentally not true, and most likely there is 0 in reality at the moment.
 
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.h.

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put together by pplay - ill write up my post later but our amortisation cost thisyear is circa 88m.
 

.h.

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Okay so here we go. My comments:

  1. Cash basis vs accounting basis. You've picked and mixed in your numbers - Swiss Ramble, Deloitte, etc, all report on the accounting basis. Whilst I think (not an accountant) that in the sum-to-infinity limit, cashflow vs accounting basis probably are reflections of each other (e.g. no fundamental difference, cynical attempts to game them aside, cough cough Juve), it would be much easier to do everything in an accounting basis. Just to highlight a few of the problems - UEFA cashflow is typically not immediately after the end of the season. Our sponsorship revenues are booked on an accounting basis, NOT a cashflow basis. One of the reasons (I suspect, TBC when our books are released) we had massive losses for 20/21 is because we had a bunch of expected cashflow from commercial sponsorship agreements (e.g. Chinese) that never materialised, and we had to do write-downs on those. I dont remember the exact figure, but the amount of delinquent money from sponsorship was something like 100m euros in recent seasons, some of it as old as like 3 or 4 seasons. *With this in mind, can I propose we use the accounting basis, since everything is reported that way?*
  2. Your treatment of 10% of debt = our transfer costs is just ridiculous. For one, debt doesnt matter on the accounting basis barring the cost of servicing it - to the P&L viability of the business, it doesnt matter if its from debt or revenue, the money was still spent. Two, your approximation that the 'servicing the debt at 10% interest = our transfer costs) is clearly ridiculous
  3. If you want to go on a cashflow basis, ironically, you'd be better off using the amortisation schedule - as a rough approximation assuming our transfer costs are evenly spread across the (first) contract of the player is NOT unreasonable, and its certainly closer to the reality than assuming it comes out (or in) as a single lump sum on the day of the transfer
  4. Similarly, treating player amortisation as 'not real money' is just ridiculous. Lukaku will ultimately cost us 65mil in the end - just the fact that we're doing an international standard for the treatment of his depreciating value to help smooth the P&L impact
  5. To my previous points, if you want to go on a cashflow basis, you'd need to look at the previous ~5 years of transfers and obligations and estimate the impact on our 19/20 P&L because of the outstanding cash we still owe on those transfers. Which again *is why I suggest the accounting basis*
  6. Even if you work on the basis of 100% payment on the day of transfer, on a cashflow basis, its not just about what we're paying to service the debt - debt financing should be treated differently. If we made obligations to buy 5 players TODAY for 100mil, you wouldnt report to any financial authority that your balance sheet is 100m in players for the price of the 10m (the 10% interest on the loan of 100m). Not in any fucking world.
  7. Accounting entries are what matter for the valuation, our statuatory loss/profit, reporting authorities, FFP compliance, etc. Don't get me wrong, its perfectly plausible (Enron/Juventus/etc) that there is accounting fraud on our books, but I'm not aware of anything really significant (Inter Media Co as a one off might draw some suspicion, some of our plusvalenza deals may do as well but those are actually, ironically, traded with actual cash in general so its less of a concern)

Your numbers dont add up, because you've taken (mostly) our accounting position, and then ignored one of our major costs (the cost of actually buying players). You've nicely illustrated, though, that if we didnt have to ever pay any transfer fees, that's the scenario in which this club is profitable. But not all of our players (or nearly none) are home grown, which is why we have to pay fees, which is then where our costs go.



As I posted pplay's spreadsheet, he's done an amazing job roughly approximating our costs over the last few years. I'm sure its not perfect, but its easily useful enough for the purposes of our discussions - you can see that our amortisation bill between 2020/2021 and 2021/2022 has reduced about 35mil, wages have decreased as well, etc. Our amortisation bill is not a million miles off our gross wage bill (albeit less severe now that Hakimi and Eriksen and Lukaku are off the books, benefitting from the growth decree).


What we DO know is that Suning have had to bring in 275m from Oaktree to cover our losses in the last two seasons (I think we'll find in the 20/21 report that maybe 50-100m of our 240m losses will be non-cash, e.g. the sponsorship piece I mentioned). I, like many people, also dont really understand how our losses ballooned so much last year - revenue was down, but not THAT much. I think we'll find that there'll be increase costs, probably reduced transfer income from players we would have expected to sell if it wasnt for the pandemic, as well as increased amortisation (e.g. Hakimi, Eriksen for a full year). I'll do a bit of a year on year comparison when the data is available, because at face value, our revenues went down like 100m and our costs went up like 100m as well, so I'm a bit baffled by how those figures arrive


Key points still being:
1 - As far as anyone knows, suning have never taken a penny out of Inter
2 - Inter is very far from profitability even on an annual basis, let alone considering the debt we've got coming due
3 - Our amortisation and wages book drive a large part of our losses, with reduced player churn I'd hope amortisation will start to decrease over the next couple of seasons
4 - Revenues have now started to increase quite sustainably, e.g. new sponsors that are not potentially linked to our ownership
5 - the only time this club has ever turned a profit that I could find (off the top of my head for ~20+ years) was in like 16/17 when the Inter Media Co set up was created and our brand rights were transferred to it - the 100m or so that raised turned a profit for Inter that season, but otherwise, this club has been losing somewhere between 50 and 250m every season I've been a fan of it.
 

sdvroot

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Thanks for the explanation, I think because of these financial calculations for the convenience of accounting but not relevant to reality and there are all these financial bubbles, it is not just about a football club, but about everything in the world and the bubble is inflating and inflating.
So without transfers Inter is profitable? If next season we only take free agents, will we be in profit? In reality, we have already paid for all previous transfers?
and how can you calculate the loss from not yet received money from sponsors, etc. ?
 

.h.

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No, our amortisation schedule means we're still likely to lose money next year, even without new signings.

Keep an eye on the spreadsheet as we come into the window, ppiere does a really good job of keeping it up to date and you can see how things shift, etc

It should be possible to find out our outstanding transfer debt, I'm not sure what the figure is - bear in mind we've had a lot of poor transfers out, and expensive transfers in in recent years, but clearly the huge plusvalenza of Lukaku and Hakimi could help that a lot

If we focused hard on profitability (e.g. making it a main aim but not the only one - we need to keep competitive as a football team) we could be profitable within 3 or 4 seasons - that's ignoring the debt question (or assuming someone buys the club and pays it off). If you dont change our team too much (E.g. stick to Barella, Bastoni, Skriniar, etc) our amortisation schedule could drop quite quickly - if we assume we're on an average of 4 year contracts then within 2 years we could probably halve our amortisation costs, and as I post a few times there's some sustantial salary savings in, imho, non-performant players.

If we take our current book, and roughly assume that Sanchez, Eriksen, Vecino, Vidal, Gagliardini, Perisic, Kolarov, Handanovic leave without any write downs, our net book position will be improved by 66mil - which is just under a third of our current wage+amortisation costs. That, coupled with reduction in coach costs (e.g. no Conte costs), and a bit of new sponsorship would be basically break even for Inter

Clearly, though, replacing that many players does cost money



The key thing, IMHO, is that we should be operating profitable (e.g. amoritsation & wages considered, but not new transfers), and its okay for us to lose money when we sign players because that's going straight onto the balance sheet anyway. Where we are right now is that even from an operating basis, outside of COVID, we'd be losing money - and we desperately need to improve that


RE the loss from not yet received money, I'm guesstimating. We'll find out when the books are published hopefully by the end of Jan, but in effect everthing you see here is guess work. Our books in previous years quite publicly listed the year, and amount of delinquent money from that year - IIRC it was like 80-100m, dont remember exactly. Some of that money has been recovered in the mean time, so I dont think we'll write it all off, but I think its not unreasonable that >50% of it wont get recovered
 

sdvroot

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If we take our current book, and roughly assume that Sanchez, Eriksen, Vecino, Vidal, Gagliardini, Perisic, Kolarov, Handanovic leave without any write downs, our net book position will be improved by 66mil - which is just under a third of our current wage+amortisation costs. That, coupled with reduction in coach costs (e.g. no Conte costs), and a bit of new sponsorship would be basically break even for Inter

Clearly, though, replacing that many players does cost money
With so many free agents and players on loan it's quite possible to do it without an infusion of money and without much loss in quality all these players are at the level of crap.
Sanchez -Lorenzo Insigne or Andrea Belotti
Eriksen - Hakan
Vecino - Cesare Casadei
Vidal -Lucien Agoume or Remo Freuler
Gagliardini - Gagliardini
Perisic - Cristian Tello or some old left-back there are a lot of them on the free market
Kolarov - Vanheusden
Handanovic - Onana
D'Ambrosio - Luiz Felipe
De Vrij - Ginter
 

.h.

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Yeah, the problem is that increases our salaries as well. The 66m I quoted includes the reduction in salary costs sadly. Belotti or Insigne probably 10m gross, Onana is like 4m? it all adds up quite quickly.

Profitability shouldnt be what we optimise for right now. Operating profitability is,imho, but primarily focused through increasing revenues
 

sdvroot

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Yeah, the problem is that increases our salaries as well. The 66m I quoted includes the reduction in salary costs sadly. Belotti or Insigne probably 10m gross, Onana is like 4m? it all adds up quite quickly.

Profitability shouldnt be what we optimise for right now. Operating profitability is,imho, but primarily focused through increasing revenues
Nope, they will all have a salary less than the ones they replace.
 

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I dont think so, tbh. Bosmans generally come with a signing on fee, and the point is my 66mil included all the salary savings - if we're doing like for like on Sanchez (for example), that takes us down to 56mil already.
 

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INTER’S CAPITAL GAINS ARE BEING INVESTIGATED BY MILAN GUARDIA DI FINANZA​

Inter’s capital gains are being investigated by Milan’s Guardia di Finanza after suspicions of false accounting.

The Milan Public Prosecutor’s Office, on the orders of deputy prosecutor Giovanni Polizzi, have opened an investigation on the Nerazzurri’s books following a report sent by the Guardia di Finanza which suggested that there were some criticalities in the club’s financial statements.

As reported by Corriere della Sera, the Guardia di Finanza visited Inter and Lega Serie A’s headquarters today in order to acquire documentation on all the capital gains declared in the 2017/2018 and 2018/2019 financial statements.

The investigation is focusing on some issues in the financial statements linked to the purchase and sale of players which may have been inflated in order to balance the books. Milan were also briefly investigated, but nothing irregular emerged after the first set of checks.

Inter have not yet commented on the investigation but are expected to issue an official statement at some point soon.
 

YoramG

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What are they gonna do, strip us of a 4th place? Still, not great.

I don't remember anything flagrant, Zaniolo and Pinamonti are high profile ones but the former is a starter for Roma and the latter is on 5 goals and an assist for the season, more than a lot of established names.

Vanheusden and Salcedo maybe? I dunno. Time for Mr Plusvalenza to show his worth.
 

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What are they gonna do, strip us of a 4th place? Still, not great.

I don't remember anything flagrant, Zaniolo and Pinamonti are high profile ones but the former is a starter for Roma and the latter is on 5 goals and an assist for the season, more than a lot of established names.

Vanheusden and Salcedo maybe? I dunno. Time for Mr Plusvalenza to show his worth.
Bastoni's deal was the only one that looks crazy, for a player we bought for 31m and kept at his club for 2 years (it was later cut to 1 because Gasperini stopped using him). Eguelfi is probably a Lega Pro reserve now. That was the only deal made for Bastoni, but perhaps we made arrangements for them to buy 2 kids the following summer (Bettella and Carraro were the ones), which makes it Eguelfi 5m, Bettella 7m and Carrraro 5m iirc. 16m + those three over 2 seasons for Bastoni, something like that.

Zaniolo's cost was actually less than Eguelfi's. Santon was double the amount of Zaniolo, for example.


These were all capped at Italian NT youth sides, it's not as if we handed them damaged goods for the sake of money laundering. There's risk involved.
 

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Official document says we're investigated for false social communications.

What are they gonna do, strip us of a 4th place? Still, not great.

I don't remember anything flagrant, Zaniolo and Pinamonti are high profile ones but the former is a starter for Roma and the latter is on 5 goals and an assist for the season, more than a lot of established names.

Vanheusden and Salcedo maybe? I dunno. Time for Mr Plusvalenza to show his worth.
Deep down i knew this post would come in handy.

 

Harpsabu

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Official document says we're investigated for false social communications.


Deep down i knew this post would come in handy.

What are false social communications? What could that mean?
 
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