AC Milan's Financial Situation Thread

rocknrolla1v1 said:

Than why the fuck hasn't he invested buying players? WTF if the logic

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That's the aggregate net value of his personal portfolio of assets (total value less debt). Think of it like a stock portfolio. He would need to sell out of one in order to fund Milan or use his $3.0B or so in cash or other assets. Unfortunately Milan right now is like quick sand for ones cash. While Milan is worth a lot, this is mostly due to its brand, and the high valuation placed on sports content (high multiple on earnings before interest, taxes, depreciation & amortization). That does not mean it makes money. With its debt load, high salary requirements, weak local economy, and subpar stadium, it loses money, in spite of the lack of recent spending.

Berlusconi certainly can't imagine that any dollar he puts into Milan will earn a return on his capital invested (actually, he'll probably lose his capital and have to invest again in 10-15 years, depending how much he puts in). That means, he'd have to do it out of either a) Ego or b) charity. Berlusconi doesn't seem like a "b" kind of a guy, and he had 20 years of ego inflation with Milan's success. I don't think he'll put much more into Milan.

The best option is for him to sell it to an owner that is looking for an opportunity to swing his you know what. Look no further than the Middle East. Additionally, these owners have the capabilities to take the steps require to build the infrastructure necessary for permanent financial improvement. Think lucrative sponsorships from Qatar (PSG now has the highest commercial revenues - yes, they went from 20+ to 1st in 3 years), a new stadium (which would improve pricing flexibility and the fan experience), new players (which would help sustain the international brand), market expansion (build the brand in Asia, and the Middle East through increase marketing spend).

Berlusconi should sell the team...It's really a no brainer. Serie A requires foreign capital. The local market even when it improves isn't enough to compete with inflated player valuations, and the movement to truly global brands. The slow way is to do what Roma/Napoli/Inter are doing and getting new owner that isn't obscenely wealthy, but is savvy and smart. Roma is run by a hedge fund manager who is doing a great job at creating value without having to continually pump money into the business. He is very good at opportunistically selling players (as is Napoli), and I'd expect a similar situation out of Merda. The quick way is to sell to an obscenely rich person, and a brand like AC Milan, in a market as large as the region of Milan, it can definitely attract that kind of buyer...

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so, he should sell his share if he want to fund new stadium project?

mummila said:

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so, he should sell his share if he want to fund new stadium project?

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Well he could sell partial share for just the stadium or he could personally invest more. I don't think thats attractive to him though because the return is very long term, and the team doesn't just need a new stadium.

I think if Berlusconi wants to see AC Milan go anywhere near its former glory, he needs to pass on the torch and sell his entire stake and concede ownership to a wealthy owner with a global vision, and the capacity to invest hundreds of millions and be ok with a return on his capital that may take 10 years to realize. He could always stay on in some capacity (consultant).

I don't believe an improved Milan is with Berlusconi, its with a new owner, and ultimate it should be apparent that given the value of sports content/franchises, and the current state of the team, now is the right time to sell. He gets to monetize almost a $1B in team value, and not see his company deteriorate in front of him (which he'd be blamed for).

http://acmilanfinance.com/player-contracts/


nice overview of the wages


probably posted here before but it's new to me

ItaliaCalcio10 said:

Well he could sell partial share for just the stadium or he could personally invest more. I don't think thats attractive to him though because the return is very long term, and the team doesn't just need a new stadium.

I think if Berlusconi wants to see AC Milan go anywhere near its former glory, he needs to pass on the torch and sell his entire stake and concede ownership to a wealthy owner with a global vision, and the capacity to invest hundreds of millions and be ok with a return on his capital that may take 10 years to realize. He could always stay on in some capacity (consultant).

I don't believe an improved Milan is with Berlusconi, its with a new owner, and ultimate it should be apparent that given the value of sports content/franchises, and the current state of the team, now is the right time to sell. He gets to monetize almost a $1B in team value, and not see his company deteriorate in front of him (which he'd be blamed for).

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Spot on, if he doesn't sell Milan soon he is going to pull a Madrid-Kaka situation.

Friday March 28 2014 Serie A debt at €1.5bn

Serie A clubs increased revenue last season by eight per cent, but also spending by four per cent, with total debt set at €1.5bn.

The Gazzetta dello Sport have followed up a recent report on the state of the Italian top-flight clubs’ accounts, which revealed earlier this month that only six teams ran a profit during 2012-13.

A more in-depth look at the accounts of the 20 clubs has produced overall figures for the League and shows that total revenuehas increased on 2011-12’s figures by eight per cent, to €1.772bn, whilst total spending increased four per cent to €2.365bn, resulting in a loss of an aggregate figure for last season between the clubs of €203m.

Total debt remains at €1.572bn between Serie A’s sides, with every club posting a debt, Fiorentina with the lowest at €5.1m and Inter the worst at €293m. League leaders Juventus hold a debt of €227.1m whilst Milan owe a total of €221.6m.

Roma with €136.3m and Lazio with €102m are the only two other clubs with debt into nine figures.

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Some thing on financial fair play mostly its on EPL clubs

financialfairplay

A post on whether Liverpool will be safe or unsafe under those guidelines.

will-liverpool-face-any-ffp-punishment-


latest

uefa-financial-fair-play-update-%E2%80%93-nyon-28-feb-2014

Man. City >> -80m pound. (Average last 3 seasons ) . How did they pass ?
It says 80m pound 2011 wages. 80 + (-80) = 0 . So City in safe. These rules re BULSHIT.

rocknrolla1v1 said:

Than why the fuck hasn't he invested buying players? WTF if the logic

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Berlusconi actually claims to invest 50mill of his personal money every year. Don't know whether that's true or not however.

Don Dada said:

Berlusconi actually claims to invest 50mill of his personal money every year. Don't know whether that's true or not however.

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It would have been true in 2002. It would have been a lie in 2010. Now it's a bullshit.

Don Dada said:

Berlusconi actually claims to invest 50mill of his personal money every year. Don't know whether that's true or not however.

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Berlusconi actually claims to invest -50mill of his personal money every year. Don't know whether that's true or not however.

The fifth ensures more money and does not give up the tour
The fifth and sixth place in Serie A provide the pass for the Europa League. The fifth fly to the playoffs, the sixth in the preliminaries. The difference is economic. The sixth ranking will come into play in the third qualifying round (31 July and 7 August), the fifth directly to the play-off for access to the group stage (21 and 28 August). Who will start from the preliminaries will therefore have to give up any tour. Milan has set its sights on the United States, the U.S. tour brings into the coffers Rossoneri 3 million and a half, but the Europa League is an opportunity for the revival.

not good enough galliani, needs to be in positive for this shit squad

#orphans

I think that an idea to reduce the squad size and the wage bill would be relying on the ability of some player to play in more positions, and reduce the number of backups

Another would be using more players from our youth team, which would also make a lot of our supporters happier, especially those who doesn't like Essien-like signings.

Young players fill supporters with enthusiasm and hope which would be good for the club marketing.

Examples

- De Sciglio can play RB or LB
- Bonera can be back up for CB and RB
- Poli can be back up for every midfield position and also RB.
- Pinato (Primavera player) can play as DM, LB and LW
- Albertazzi (co-ownership with Verona) can be back up for CB and LB
- Tamas (Primavera player) i wish he could be our next LB starter.
- Simic (Primavera player) can be back up for CB and RB

Immagine we have all of them togegher with 2 starter CB (Rami and Mexes if he reduces his wage, otherwise someone else).

That would mean a lot of rotation chances and solution for all possible defence emergencies, having 5CB, 4RB, 4LB with a total of 9 players, and 2 of them being also midfield backups.

Now we have 10 defenders, we pay too much wages for players warming the bench and we don't have a decent LB solution.

I know Albertazzi is not that good, but it's not easy to find someone that is good, versatile, left-footed and cheap.

Our starting line would still be good (i'm sure Tamas is already a significant improvement compared to Constant and Urby and i think Mexes would play good next season with Rami) and our wage bill would be reduced A LOT

looks like self sustainability is a no go even without big salary players. time to sell again

Buying Marco Sau to replace SES next summer. #thebigcoup
Sau- Matri duo. Milan

milanazkals said:

Buying Marco Sau to replace SES next summer. #thebigcoup
Sau- Matri duo. Milan

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Don't need him, Nocerino can play as left wing.

A deficit isn't necessarily reflective of profitability. There are often many non-cash charges. The important metric is free cash flow. If Milan is burning cash that's a problem - if its losing money on an accounting basis, well thats not a big deal.

ItaliaCalcio10 said:

A deficit isn't necessarily reflective of profitability. There are often many non-cash charges. The important metric is free cash flow. If Milan is burning cash that's a problem - if its losing money on an accounting basis, well thats not a big deal.

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Sorry but,I don't understand very well.
Can you Explain?

delete duplicate post

montex said:

Sorry but,I don't understand very well.
Can you Explain?

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Basically in accounting there are a lot of weird rules where things are "accrued" or "amortized".

Here's an example:

I'm going to keep it very simple meaning it won't be factually accurate nor will it take into to consideration the many items that run though a P&L statement (Called an "Income Statement").

ASSUMING
1) Milan makes $200 million in REVENUE
Broadcast, Match, Commercial

2) Milan has $190 million in CASH OPERATING EXPENSES
WAGES, RENT, INTEREST, TAXES, etc
3) Milan has NON-CASH "DEPRECIATION & AMORTIZATION" expenses:

4) Say in 2005 Milan purchased a facility for $150 million for cash because their old one burned down. That money is long gone, but according to accounting rules, that property will be amortized annually as an expense. We'll say that the useful life is 15 years for example...That would be an expense of ~$10 million that is recognized in the profit&loss statement every year but has no impact on cash flow.

5) Say in the same year another facility burned down. They don't replace it because it isn't mission critical. Let's say its balance sheet value (ie: how much the asset is worth on the company's books) of the facility is $30 million. Well that needs to be written down to $0. That loss needs to be recognized in the P&L statement.

So Milan's P&L (or "INCOME STATEMENT") would look like:

Revenue: $200 million
Cash Expenses: $190 million
Depreciation & Amortization: $10 million.
Facility Impairment: $30 million

INCOME STATEMENT Net Loss: $-30 million

However, on a CASH FLOW BASIS, it is different.

"OPERATING CASH FLOW or 'OCF' " is $10 million (REVENUE Less CASH EXPENSES)
This is recognized on another accounting financial statement called a "CASH FLOW STATEMENT")

Assuming no asset purchases (CAPITAL INVESTMENT OR "CAPEX"), such as buying a building, FREE CASH FLOW would be +$10 million.

Free Cash Flow = Operating Cash Flow - Capital Investment

There are a lot of aspects in Football that are treated this way, and they muck-up the P&L statement.

The biggest examples are player right acquisition. Certain player right are still being amortized even though the cash was gone long ago.

For example, if Milan went out an bought Ronaldo for $200 million and amortized his rights over 5 years, it would only recognize a $40 million expense each year (in addition to his wage bill).

So if Milan were to acquire Ronaldo:

Revenue: $200
Cash Expenses: $190 (This in reality would increase due to Ronaldo's wage, but lets ignore that)
Depreciation of Facility: $10
Facility Impairment: $30
Depreciation of Ronaldo: $40
-----------------------------------
Net Loss: $-70 million

Cash Flow would be calculated:

OPERATING CASH FLOW
Revenue: $200
Cash Expenses:$190
----------------------
TOTAL OCF: $10 million

CASH FLOW FROM INVESTMENT
Capital Investment: $-200 (ie: Ronaldo purchase)

Free Cash Flow = ($190 million)

Real Life Applications:

Real life examples that may run overstate the company's loss (and I'd have to see the financial statements to confirm)
- Older Transfer fees for Mexes, Robinho, Mexes, Abate, Emanuelson, Montolivo, Pazzini, De Jong, Balotelli
Other than Balotelli (whereby Man City is paid in instalments), the fees should have been mostly paid (or at least I'd hope they are.)

Considering the company has spent very little in the transfer market fees in terms of player rights acquisitions other than the brainfart that was Matri (which would run through the "CASH FLOW" statement), depreciation expense should be greater than capital investment meaning that holding all things equal Free Cash Flow (CASH P&L) should be greater than Net Income (or the ACCOUNTING P&L) There are a lot of other moving pieces though, so I can't say that after considering all the pieces that run through a company's financial statements that this would be the case.

Conclusion:
If there was no cash loss, the accumulated profit of the company (on the "BALANCE SHEET") would shrink, but there would be no real alarm as cash would still be positive.
If there were a cash loss, the company would need to either borrow cash or get an equity investment from its parent. That would run on the CASH FLOW statement under "CASH FLOW FROM FINANCING".

Illlustration:

Cash Flow from Operations
$10 million
Cash Flow from Investment
($30 million)
Cash Flow from Financing
$20 million would be required in order to be CASH FLOW NEUTRAL

Yes, I'm studying for a finance exam, so this stuff is on the forefront of my mind.

“@Milanello: Currently reading Milan's financial report for 2013. The club spent €11.4m on scouts and sports agents in 2013.”
“@Milanello: Milan spent €4.3m on food and beverages for the players in 2013.
€3.06m was spent on housing for the players.”