The balance sheet for June 30 2019 has Milan €145.9 million in the red, around €20 million worse compared to last year – but there’s an explanation for it.
At the end of the month, there will be a Board of Directors meeting at Casa Milan to confirm the budget for the 2018/19 and today some information was revealed.
Earlier indications had suggested that Milan will close the 18/19 financial year with losses of €90-100m but as reported by La Repubblica and then later by Milannews.it, the reality is different.
According to the online version of the Rome-based newspaper, Milan’s financial statements for the year that ended on June 30 2019, shows a loss of €155.9 million, which is higher than the losses of last year – €135.6m. Antonio Vitiello of Milannews.it adds that the consolidated financial statements have Milan at a loss of €145.9 million, which is about €20m worse than what recorded in 2017/18.
La Repubblica and Milannews.it both agree, however, that despite the high loss there’s no reason for concern. In fact, CEO Ivan Gazidis – who handled the budget – did something that, as explained by journalist Luca Pagni, is considered common practice in finances, a ‘rather predictable and typical move for directors in their first year in office’. In practice, he did a ‘clean-up’ of the budget, discounting all possible losses in just one year in order to ‘start from scratch’ in the following financial year.
Comparing the financial statements from 2018/19 and the year before shows: lower income from ‘player management’ by €16.5m; higher personnel costs by €35.3m; higher costs for services by €5m; and lower income from sponsorships, commercial sales and royalties by €6.8m (€31.2 million this year). These increases were partly mitigated by: higher income from the sale of audiovisual and media rights by €4.5m, lower depreciation and write-downs by €17.8 million; lower provisions for ‘different risks’ by €10.7m; and lower net financial charges by €13.5 million. There was also a net increase in revenues and non-recurring costs of €4.9m, together with lower taxes for €2.4m.
Elliott has already allocated the money to cover for the losses and to finance the current season. These funds will be converted into shares and therefore there will be no need for a capital increase. Vitiello writes that the shareholders equity in 2018/19 amounted to €83.3 million, an increase compared to last year’s -€36m. The club’s costs amounted to €373 million (an increase of 5.1%) while revenues amounted to €241.1m (a decrease of 6.1%).
Vitiello reports that Elliott made big investments to improve the club and this also contributed to the substantial loss. The ownership spent around €265.5 million on the club, both on the squad and on infrastructure. For example, Milanello was improved with modernized pitches, a new press room and adjustments to the Vismara Training Center (where the Youth train) were also made. Additional investments were made in the digital communication and commercial areas.
As for players, Krzysztof Piątek and Lucas Paquetá had the biggest impact on the budget. As learned from the financial statements and reported by Milannews.it, the Polish striker cost €35m to buy from Genoa, while the Brazilian cost €38.4m to bring from Flamengo. The contracts Elliott inherited from Yonghong Li’s time continue to weigh heavily on the accounts as well.
The financial statements disclose the numbers of Milan’s transfer market in the summer of 2018 and winter of 2019. The loan of Gonzalo Higuaín from Juventus cost the club €10.208m while Tiémoué Bakayoko cost €2.931 million to loan from Chelsea. This doesn’t include their salaries.
In the financial year of 2018/19, Milan made mercato investments worth €153.1 million, while exits were worth €49.9 million. The capital gains generated by sales amounted to €12.6m while capital losses amounted to €0.4m. The documents also confirm the contracts of Ivan Strinić and Tiago Dias were terminated by mutual consent, while the loan of Higuaín was terminated mutually as well.
There was a paragraph in the financial statements dedicated to ‘Business Continuity’, in which the following was specified: “The majority shareholder, Rossoneri Sport Investment Luxembourg S.r.l., has guaranteed the commitment to financially support the companies of the Milan group for a period of not less than 12 months from the date of approval of the consolidated financial statements.
“On the basis of the above considerations, the Directors prepared these consolidated financial statements in the perspective of business continuity.”