Inter’s Finances Explained Part 3: How Does UEFA’s FFP Effect & Affect Inter?

January 18, 2018 11:30
( 34 ) Comment

Since the Financial Fair Play (FFP) has enter the mainstream football debates, people are absolutely torn about its usefulness or indeed how fair it is. This is mainly due to poor understanding of the rules. As it’s common when it comes to company finances – which is essentially what football clubs are nowadays – there are a lot of articles regulating operational functions, many grey areas, countless adjustable rules and exceptions.

Earlier in the week a brief introduction into what a bank bond is was published here on SempreInter.com, whilst yesterday the first of a three-part series was published explaining how the FFP generally applies. This is the second part of the FFP series and this time we’ll take a look at Inter’s finances and how the FFP affects them.

Inter’s incredibly serious – underlying – problem nobody paid attention to, was always money. The beloved Massimo Moratti, gave his heart and soul for the club. Nobody ever doubted that, but as far as managing the club, saying that he did a less than satisfactory job would be an understatement.

Moratti repeatedly spent lavishly for Inter. His support was absolutely essential, repeatedly funding spending sprees; record deals for Ronaldo and Vieri, splashing out for Crespo and Veron etc. again and again, year after year. This finally culminated in the legendary treble-winning season but the cost was high, essentially ruining the team.

Inter virtually made no profits under his administration, ever. Let’s take a look at the seasons that led to the treble:

2008: 
Turnover: €172.9m
Expenses: -€285.3m
Operating Profit/ Loss: -€112.4m
Player Trading: -€26.7m
Profit/ Loss before Taxation: -€142.4m/ After Tax. -€148.3m

2009:
Turnover: €196.5m
Expenses: -€307.8m
Operating Profit/ Loss: -€111.3m
Player Trading: -€38.4m
Profit/ Loss Before Taxation: -€153.5m/ After Tax. -€154.4m

It’s bad right? Not even close. In 2007 Inter recorded another loss of -€148m and in 2006 a staggering loss of -€208m. That’s a sum of -€658,7m.

Let that sink in. Over half a billion in four years.

Even when our loses were limited, it wasn’t because the team made money. In 2004 the club recorded a loss of only -€31m, but the truth is that our finances were boosted by the sale of Inter’s brand to a subsidiary. The true loss was -€180m.

According to Il Sole 24 Ore (the Italian equivalent of the Financial Times) Inter’s loses during the Moratti era amounted to €1.5bn, of which €730m were covered by the President’s own pocket. That was unacceptable and in no way sustainable. The club was on the verge of bankruptcy. Now, Moratti didn’t do all this out of negligence. This team was his passion, what he did was out of love and that was his mistake: He ran the club not as a business, but as his hobby. Surrounding himself with a team of yes-men didn’t help either, since nobody was determined to keep things under control.

Enter Erick Thohir. He started off well, came with big promises but committed the same mistakes in reverse. He tried to run the club as a business without fully understanding the peculiar nature of managing a club. He also flat-out refused -or was unable- to properly invest in the club. At the same time he made some highly irresponsible moves. In his first year he managed to temporarily boost the team’s finances by re-negotiating our deals with some of our big sponsors increasing the revenue. But that came at a long-term cost, one we’re paying for today, because he chose to try and sign long term deals by selling our commercial rights at a time we would receive the lowest prices possible.

And this is were Suning stepped in. Amidst the FFP and the Chinese government’s restrictions, Suning managed to do an admirable job within a very small time-frame. They refused to get carried away with spending, opting for a slow but steady rebuilding process from within. That is made clear in the team’s revenues.

Let’s have a quick look in the club’s finances in the past three financial years.

2015:
Commercial Revenue: €39.3m
TV Revenue: €77.8m
Operational Revenue: €172.7m
Capital Gain: €25.7m

With the addition of the rest of the various profits, we had a sum of €198.6m in revenues.

With running costs of €338.8m the team ended up with a Net Loss of €-140.5m.

It got better during the next season:

2016:
Commercial Revenue: €47.6m
TV Revenue: €79m
Operational Revenue: €202.3m
Capital Gain: €39.1m

With the addition of the rest of the various profits, we had a sum of €241,4m.

With running costs of €295m the team ended up with a Net Loss of €-59.6m.

And finally this season:

2017:
Commercial Revenue: €110,4m
TV Revenue: €83.8m
Operational Revenue: €268,6m
Capital Gain: €49,6m

With the addition of the rest of the various profits, we had a sum of €318,2m.

With running costs of €342.8m the team ended up with a Net Loss of just €-24.6m.

It’s clear as daylight that whatever Suning is doing, it’s working. Essentially doubled the income and cut in half the expenses. Two especially encouraging facts, are the almost €70m increase in Operational Revenue and the incredible rise of Commercial Revenue to €110m. The club also placed at par value €300m of senior secured bonds in an effort to boost their financial situation.

What seems worrying, and it is, is the increase of running costs. That was largely due to the overpriced acquisitions of João Mário and Gabriel Barbosa, but that was hardly Suning’s fault; they wanted to announce their arrival with a couple of marquee signings as a gift for the team and they were coerced into making the wrong choice (mainly by Kia Joorabchian). Boards don’t have a habit of signing players without the approval of the staff and while not everyone at the time agreed with that move, someone did.

Speaking of transfers, people complaining about our lack of spending power, couldn’t be more wrong. We splashed out almost €300m in transfer fees within three seasons. We are spending, just not well.

All in all, Suning may look like they don’t invest in the team but they do. It’s just subtle, mostly behind the scenes and following a tightly structured program. Many fans do not like it, many call Suning “frauds” that only look to benefit from the club but the numbers are there and the results are already visible.

So, after reviewing the basics of our club’s finances, let’s take a look at what our agreements with the Financial Fair Play are, what our responsibilities and how do we fare in meeting them.

In 2014, two years after the implementation of the Financial Fair Play regulations, the club failed to comply with the requirements set out in Articles 53 to 68. The most serious of which were the break-even requirements of Articles 58 to 63. That forced the club to reach a settlement (spanning from 2015 to 2018) with the CFCB which required the club being brought into compliance with the rules in the near future, the club’s finances to show a stable and positive trend of improvement, proof that the club had already taken steps to comply with the regulations and also required the club to present a reasonable and realistic business plan that would lead to full compliance no later than 2018. At the time the club was hit with fines and a lower limit to the number of players allowed to register.

It’s been a long and arduous procedure but the above have been achieved.

The team fully met the FFP requirements and is awaiting approval from UEFA. The immediate problem now is the team’s glaring need for reinforcements. There are no money to go around and failing to strengthen the squad could mean the loss of continental qualification. This is a scenario the team absolutely wants to avoid and this is what makes things tricky.

If the club makes a desperate move, using an “internal loan” from future revenues to fund transfers this month, it could derail our financial plan. What if the team uses €30m now, €30m that will have to be deducted by this summer’s financial report, and we miss out on continental football? All of a sudden the club will find itself with a self-imposed added debt and in a lot of trouble. As Spalletti told reporters “To keep saying that we must spend a lot in this transfer window, after the club has already set limits, seems to be the best way to harm ourselves”. He couldn’t be more clear.

This is the reason Suning is being very, very strict with the club’s transfers. They already wasted too much money in transfers that didn’t work out and their planning clearly states that the club will not be using money it doesn’t have. The general feeling and expectations across the club is that we’ll manage to be in a situation this summer where FFP restrictions are lifted and the team is once again competing in the Champion’s League. After that, it’s only a matter of responsible management for the club to finally be financially healthy.

Next Up: What can Inter do to remain on the right path?

George Theotokides
By George Theotokides
  • George Theotokides

    Thank you for your feedback. I did my best to shed some light in to the more complex side of football.

  • satriawan wiguna

    Superb article, George. My eyes are widely open now regarding the other side of our beloved club. Now I hope Suning keep doing whatever they’re doing now, so many issues within the club but this financial things absolutely should become the priority. I can live with the fact that the club’s transfer wouldn’t be as I expected as long as in the next 5 years our behind-the-pitch issues are solved. There’s no point to spend big in every window now if that would only leads us to bankruptcy and eventually sends us to serie C

  • ibaldaus

    Nice article man..

  • Asyrof Syarif

    Learn a lot from these part articles. Marvellous.

  • Herak Bhowmik

    good article. explains a lot.

  • victor oladipo

    If our owner want to really spend money on inter and prioritize taking inter to where it belong… They have to think like a passionate fan and not like a business.

    Why can’t we sign star players to our China brother and just loan them to inter..

    • ezekiel

      UEFA is not stupid, and jiangsu management won’t allow it. they are owner of jiangsu but they are not the only stake holder there. jiangsu have die hard fans too, they won’t allow such a thing to happened. btw what they do now is great, running the team like a blind fan would send us to serie c. we have perfect example in moratti. with new regulation like FFP we need to be more profesional, and make sure that we can have a long term success.

  • ran

    I hope inter produce their own star. Inter primavera been doing great for two years but why nobody has shown on starting list. But i believe in spalletti regarding young player.
    Forza inter

  • M. A

    What a great article!

  • igo

    What can Inter do to remain on the right path? imo from the simplest way (effect of playing game too much, lol) don’t do fire coach in every 6 months, and hunt the players that they really need (making agreement with exception not wasting youths, cause what the academy are for?)

  • Naves

    The best thing Sunning can do is sack Aussilo. This guy is cancer to Inter. Imagine small clubs (financialy) are better managed in the past couple years. Sevilla, Napoli, Roma, Schalke, Monaco, Ajax heck even Jube rise from Serie B and now have one of the best squad.
    -Second thing is that sunning is not sugar daddy type owners, so fans should not expect PS, city-isk spending from them but then again clubs like RMA, Barcelona and even M.UTD are not sugar daddy owned from business prospect.
    – The best course of action for Inter will be to qualify for Cl and instead of buying 3-4 shaqiris and Gabis. They should buy one or two world class players to create image for Inter to chinese fan base. Look at M.Utd Pogba and how much they acquired from his image rights.
    -This path will bring no immediate results but in couple years Inter will be back to Top clubs financially.

    • ezekiel

      sugar daddy’s type of investment only possible if they bought clubs like man city and PSG that have healthy finance. they basicaly take a big risk to invest in a team that have big chuck of debt. as an entrepreneur my self, i see this as a very risky investment. one wrong decision, we’re doomed.

      • Naves

        Before sugar daddies PSG and city were not that healthy either but yes they didnot have cumulative debt like some other clubs have. I would rather have a stable financial club rather than daddies…. Look at what Moratti did to Inter in the long term.

        • ezekiel

          psg was in healthy condition, they’re not rich but they’re in good shape. city was already rich before the arabian investor came.. yeah.. moratti blind love for inter was a double edge sword.

          • Naves

            Well I am not sure about their financial power but P$G was regular club in cl. On the other hand city was small club and many players joked about going there. In italy we have udinese as one of the most healthy club over the years, but no one is interested in buying them.

          • ezekiel

            wow.. you forget that in early 2000’s they were took over by former thailand’s prime minister, thaksin sinawathra. there was no FFP back than. thaksin inject a lot money to the club. they sign erickson(one of the best manager in europe at the time) as manager. they sign many good players including anelka. they spend like crazy but won nothing. and then 2008 the arab came. they sign mancini at 2009 and they start winning something in 2011.

          • Naves

            I am not too informed about their history but they were never the big boys of EPL. Heck Leeds were better than them and look what happened to them and their loan deals gamble. City were not as ambitious as leeds back then and was small club with no pressure.

          • ezekiel

            yeah.. if we’re talking about 90’s footbal, city was nothing.. but like any club in england, they run the club profesionally. they make profit. and they got rich after they bought by thaksin in 2007(without FFP, so the owner can freelly inject their capital in the club). since then they started their quest as EPL big boy.

          • Naves

            Yeah perfect time for them to spend money. Most of the credits go to Mancini for building them a capable squad like he did for Inter.
            Monaco also did the same, spend big on potential before FFP kicks in and then sold all of them for huge bucks. I really like their model( this season they are playin terrible tho)

        • Herak Bhowmik

          City were not ambitious before their takeover. so they did not spend a lot on their players. same goes to PSG. but one thing I can’t fathom is our lack of good scouting network or how we don’t have any decent players from our youth academy. even small clubs have better scouting network than us.

          • Naves

            That is what I told our bro Ezekiel that City had small team mentality before the take over and there are many examples like this. Couple years back it was malaga? I think under peligrini and then their sugar daddy abandoned them.
            Credits mostly goes to Mancini (city) and Leonardo (PSG).

    • Boudou

      If we had a solid sporting director since Suning took over, we’d be in the UCL by now for sure. They did their part albeit some mistakes but with baldy handing out new contracts to all the shitty/average players we have instead of replacing them with better players, it is tough

      I 100% agree with the article when the author said we actually been spending money, but just not wisely. That is for all the fans defending baldy saying he doesn’t have the funds…

      • Naves

        Will you believe it that couple months back I was reading a Roma fans comment and they were very happy with Inter transfer plans. They admitted that the only thing that is floating Napoli and Roma a top Serie A is because both Milan clubs are spending money on the wrong and washed up players. Else there is no way for both of those teams o compete with the might of these clubs. Roma can only dream about spending 150m (inter) 220m(BBilan) in single transfer window.

  • Eli Dejourayev

    WOW! WOW! What an amazing article. The best article I have read regarding football finance. Maybe because it’s about my beloved Inter. It gives me hope to see how the new owners work with inter. How can we see the finance of inter yearly?

  • il Biscione

    Good article. Suning want to invest 150 millions to the stadium and 100 millions to new training facilities, but some people still call them frauds. They are not Arab owners backed by a state, but they are good owners. It´s incremental change and not all in immediately. In 2-3 years time we can judge them better. Milan went all in on mercato, failed, and now without CL money they will be in big trouble with FFP for a long time.

    • ezekiel

      yeah, i hate it when people call them frauds, some people even use racist slurr on them.. but we clearly have bettter player in the squad now.. people need to chill down a bit. stop putting all the mistake by older management in this new owner shoulder. we’re in new era, with more profetional owner. who looks for long term sollution, not a short term success..

  • ezekiel

    sunning actually do a great job in their short period of time.. i hope fans can be more educated about FFP now.. we’re almost broke in moratti’s hand, in other words, we’re almost gone to serie c. so we need to be patient, let sunning correct our mistake in financial sector first. then slow but surely we would coming to european stage again. the reason sunning sign a profesional like sabatini was because they’re been ripped by kia the snake due to their inexperience in european footbal(they learn fast), and inter really need to spend wisely. and sabatini is the man with the reputation on profitable mercato. that’s what we need now.

    btw this is great article..

    • Naves

      There is no doubt that sunning is doing great from financial aspect but they must improve the sporting side and most of the blame goes to Italian directors and Thohir.
      -Sacked Mancini, then brought a coach who doesnt knew shit bout Serie A or italian language. That doomed one of our season.
      -this season they failed to fill some crucial holes in the squad and it hurt Inter badly recently and heck even Frodoinone halted Inter B squad.
      -If they sell Icardi, I will call it epic failure on the sporting side.

      • ezekiel

        they make some mistake when they take over due to their inexperience in italian football. but there must be somebody in the club who make the suggestion too. sacked roberto mancini a week before the season start was big mistake IMHO. believe in the snake called KIA was second big mistake. but at least they learn their lesson after all. they realize that something wrong with the management, they start to make change from the management. signing sabatini was a good move.
        they won’t sell icardi, but if somebody pay his release clause, they can’t refuse it, only icardi can. and looking at icardi who reluctant to sign the new contract with new release clause, make me think that icardi have other plan next season. we need new striker btw, with or without icardi. icardi alone is not enough. a good team must have at least 2 good striker.

        • Naves

          I am more pissed with those who was already here before sunning and as I see some of those dummies have left but some still remains aka Fassobeli as BBilan fans so, proudly calls them lol.
          The problem is that their is not many quality strikers available in the market and if there are, they will be snapped by RMA as they are in desperate situation.

          • ezekiel

            yeah.. it’s difficult to find a good striker with reasonable price nowaday. we can only take a gamble like we did on icardi. crutone is one of the good young striker. young and great finisher. i hope we can take him from bbilan,, LOL

          • Naves

            I dont see him coming. He is a die hard BBilan fan but yes he is a quality young striker.

          • ezekiel

            yeah.. but it would be nice to piss off some bbilan fans.. they’re about to lose dondaruma, if they have to lose crutone too, would be too much for them to handle.. LMAO..XD

          • Naves

            That will be mini heart attack for them XD