Hello friends,


I was recently working on a project with two institutions to bring AC Milan’s Junior Camp to Kuwait (for ages 6 to 16). Today, we have almost 150 kids signed up, and showing good potential. Some of which might be recruited to Milan’s Youth project. This is great, considering the exposure Milan has on the global spectrum of football and for which it has allocated several Junior Camps in each continent. The same supports the premise of Galliani’s statements in ‘Milan is focusing on its youth’s sector to build for the future’.

And given Berlusconi’s words post our Arsenal match (early 2008), whereby he showed his fondness of how Arsenal is run both as a business and as a club. And for which initiated the era we are in today.

With the above in mind, I started to research into Milan’s financial capacity and how well it has been doing thus far with the new project, only to find myself consumed with so much material for which I wanted to make sense out of … After several hours, I found myself doing an analysis on what Financial state we are in.

Above all, keep in mind that the club will no longer be run the way it has for two and a half decades. Instead, it is being carved from the inside out to be self sufficient and capable of standing on its own.






Below are my findings:

AC Milan is known as a marketing patent, while the entity as a whole is known as Milan Group. As the same holds Subsidiary & Affiliate Companies. Simplified description of the same furnished below:



Affiliates:
Milan Group has two affiliates in Consorzio San Siro 2000 with a Capital of EUR 1MM & Asansiro S.r.I with a Capital of EUR 20M; of which Milan Group owns 50% & 45% respectively.


AC Milan’s Financial Findings for 2009, 2008, & 2007:

NOTE: All figures are in EUR 000’s.
NOTE2: 2009 Financials have not been furnished yet. However, we do have highlights on the same.




Milan Group Financial Highlights for 2009:
Milan Group recorded an increase in Revenues by 37.7%, hence EUR 327.6MM vs. EUR 237.9MM in 2009 & 2008 respectively.
Milan Group carry’s an Operating Cost of EUR 310.9MM.

Milan Group’s Revenue for 2009 was supported by the sale of Kaka, contributing to EUR 66MM and hence representing approx. 20% of total Revenue for the period.

Milan Group carry’s on average EUR 300MM in Operational Costs, dedicated to sustain Company’s activities within a year. Hence, Milan Group needs to generate Revenues over EUR 300MM to remain consistent with its costs.

Keeping the above in mind, and considering Kaka’s sale improved Milan Group’s top-line by 20%, it is forecasted that 2010 will generate drastically lower Revenues. The same could be mitigated if Milan group sells its more accomplished players in order to meet an Operating Cost of approx. EUR 300MM.

Other Major Costs are as follows:

Wages & Salaries EUR 171MM
Amortization of Intangible Fixed Assets EUR 41MM
Specific Charges for away matches (Serie A) EUR 21MM
Finance Charges EUR 13MM

Furthermore, Serie A clubs will be sanctioned by the Melandri-Gentiloni law, which will be in place starting from 2010/2011 season and for which stipulates the distribution of Television Rights. Furnished below is a breakdown of the same:

40% will be distributed equally between all 20 Serie A clubs
25% will be divided up based on number of fans
5% on the population of the club’s city
5% based on the classification achieved on the current year
15% on the classification achieved in the last 5 championships
10% club’s historical sporting result starting from 1946/1947 season and up till the 6th football season before the current one.


Balance Sheet Analysis:



Assets Analysis:

Receivable contribute to 51.4% of Total Assets totaling EUR 167MM in absolute terms. The biggest items are receivables from clubs purchasing our players @ EUR 33.5MM.
Milan Group has mitigated Receivables risk by putting in place a series of procedures in order to minimize the risk of the same. Specifically, receivables from Italian Clubs are guaranteed through the “Compensation Provision’ mechanism of the ‘National professional Football Clubs’ League. The receivables from Foreign football clubs are largely guaranteed by Bank securities (i.e. LG’s) or other types of Guarantees given by these clubs themselves. Receivables relative to fees coming from the negotiation of contracts for television rights are guaranteed by bank securities that are given by the customers involved in the negotiations. Lastly, any receivables that are not covered by guarantees are constantly monitored so that any eventual credit risks can be managed and covered through postings to a specific bad debts reserve.


Tangible Fixed Assets contribute to 32.8% of Total Assets totaling EUR 106.8MM in absolute terms. The biggest item is the multi-year rights to football players’ services (ie our players value) @ EUR 88.2MM.

Liabilities Analysis:

Milan Group’s Borrowings/Debt fund its assets by 80.4% translating to EUR 261.8MM in 2008, an increase of 23% from 2007 levels (EUR 212.8MM). In other words Milan Group is very much dependent on bank & other financial institutions to finance its assets, the sale of Kaka reduced Milan Group's Borrowings by 25%.
Notable to mention, Fininvest S.p.A. (Parent Company) supports Milan Group by way of comfort letters towards the financiers of value EUR 329.9MM. Moreover, Milan Group’s debt instruments all carry a contractual due date, and as such Milan Group has set aside an SPV (Special Purpose Vehicle) to pay them off with an average yield of 6.25%.

Milan Group’s Equity has been hit hard, due in most part to the losses sustained over the years. Had this been any random organization, it would have been bankrupt years ago.



Summary:

Revenues increased in 2009 against 2008 by 37.7%, this due in most part to the sale of Kaka.

Milan Group carries an Operating Cost, on average, of EUR 300MM. This figure is clearly not covered by Revenues, and hence a burden lies on the management to cover that expense.

Milan Group's debt structure stands @ 80% of Total Assets. Such a figure would mean the organization as a whole should be bankrupt. Yet it is being backed by Fininvest S.p.A. (Parent Company) by giving financial guarantees to Milan Group's banks & financiers of up to EUR 329.9MM.

Okay. And yet we're considered healthy. Holy crap!

YOU GOT OUT OF THE PIRANHA TANK!!!!!

Clearly, I'm slipping. Must be all of that pirate's rum I've been drinking.

To be serious for a moment...wow. Very detailed financial analysis of the club. Lot of work went into that and I appreciate it - even if you're out of the tank without permission.


(HIHIHIHIHI and it is awesome to see you posting here!)

Maybe I missed it, I am not sure. But if you don't mind my asking, where did you get your numbers? AC Milan is a private company correct? If so then they are not required to share their financial statements with anyone, but maybe they do somewhere. I am more curious than anything.

And I was so happy for Barcelona
I hope we'll be fine cos' I don't see us passing all our financial problems.

EDIT :

Rossoneri7 , do I have premission to translate it in albanian and post it in my web ?

Great research and post! Thanks very much for sharing.

The numbers don't exactly make great reading do they. I'm wondering how we compare to other top clubs?

Dracoris, Milan puts its annual audit up on its website. Italian version only but very very detailed (usually somewhere around 80 pages). I can vouch for the numbers, I've read the audits.

And m1ke, we're actually in better shape compared to United (I've read their audit too- it was their 08 audit but I doubt things have changed drastically). inert aren't in the greatest shape either (they lost around 100 MM last year and the oil industry tanked which means Saras - Moratti's fism - doesn't have loads of profit to throw into the company).

I guess this justifies Silvio's reluctance to invest in new players, and Marina's unhappiness. But if the club incurs such heavy losses every year, what's Silvio's incentive to keep up with it? Pride, I'd say. I'm positive he wants to die as the president and owner of A.C. Milan, that's just how he is. That also means, as soon as he passes away, the club will most probably be sold to the highest bidder by his sons.

Amazing work! But the results are not very pleasurable. We obviously need to lessen our dependence on TV rights by boosting ticket and fanstuff sales.
About other clubs...from what I know Chelsea and ManU are in an even worse shape.

Ah ok very cool. I had no idea they did that, and with numbers like that I don't know why. Does Italian law require it?

Only on my phone so can't view it all properly, I'll have a better look when my nets back up. Looks like fantastic work from yourself, R7, welcome back, hope you decide to stay on!

Thank you R7. Glad to see you back


Not surprised. This believe it or not is actually very good. You should see the teams in La Liga LOL! Then you'll see why Spain has issues.


I have no problem with the route were going; its the way of the future. You'll see other big clubs going this route very shortly.

The bottom line is that European football is dying. If they don't do something and fix this fast; MLS; J League, etc etc will be the leagues to go to.


Other big clubs who are following this route currently or are starting to:


Man U
Liverpool
Bayern
Chelsea
Barcelona
Arsenal
Inter (one of the best youth systems in the world)
Juventus (have been for years)

I think you can take Bayern off the list - they're financially sound the last I read.

And you could/should add Real.

EDIT: Of course, I could stop drinking Jack's rum long enough to realize Blue's list is of teams doing things the right way, not teams screwing up.

If it's teams doing things the right way, I'd take Chelsea, MU and the scousers off. They're in really seriously bad shape financially.

They are planning to do so in the long run. Chelsea had bought alot of youth last year and ancelotti replaced some of their youth coaches as well when he took over.


Man United have no choice but to follow this route as they have no money. Liverpool will follow this route shortly as well as they are in the same boat as united.



There are two clubs in the world that don't have to sell to buy: Real and Man City. Everyone else has to generate revenue in one way or another before spending.


Barca= Villa= toure + chigrynsky sale

Blue, I think you'll find you're wrong about Real and their finances: they're in horrible shape.

Yeah I know that but they have the spanish government on their side If they run into problems they will just sell one of their pools for 300m to the gov.

Hah. True enough but they might rethink it a bit given that a team with a majority of guys from Catalonia won them the world cup this year.

Also Arsenal aren't anywhere near that sort of amount of debt and are repaying the stadium loan with ease and made a small profit last time their results came out!

I posted it somewhere else but I think Arsenal, Milan and the German clubs are really gonna be the big guns of the future.

The others have put themselves into a position where they need to win to keep things on an even keel. To win, they need to spend on players, to spend on players they need money, to keep getting money, they need to win.

Inter's in a crucial period. Man U might struggle post Fergie. Chelsea? Well they're trying...but their youth are not as good as they'd like it to be.

AC Milan publishes them, they review for each fiscal year in March, so the 2009 financials have not been made public yet.

AC Milan is part of the Fininvest Group, which is a listed company, and hence they are required by law to publish



You do



The numbers are staggering, I never saw anything like it, where 80% of Assets are funded by debt (keeping in mind that Fininvest offers support up to EUR 330MM), while Equity is at a negative figure, this due to the compounded losses that this club has been sustaining for such a long time.

Most 'A tier' clubs have high debts, but that does not mean it is the norm of the industry, if you take the Arsenal objectives into consideration.

If you ask of my personal opinion, I doubt any investor would be willing to purchase this club as an 'investment', because of the all round financial performance and sustainability of this club. Then again, if for example someone comes for 'personal interest' ala Silvio Berlusconi, then I could see why the club is still running.



It is not about that, or I believe it isn't.

I think Silvio got what he wanted from Milan, he took it out of bankruptcy, invested over a billion in 20 plus years, transformed it into a European Giant which over those years claimed most of it's honors. Today, he isn't the man he was 20 years ago, he is 71 years of age now. Not the same enthusiasm I believe, nor the same motivation.

About the highest bidder, I don't believe it will come to that, I personally believe if a suitor does come, Milan will be sold. But looking at the figures, you tell me, would you invest in it ? Bar the history ofcourse.



I believe so, we are spending more than than we are making. On average we spend EUR 300MM per season on keeping this team competitive, yet we cant even cover that. But with an increase in ticket sales and fanstuff, I believe we could cover it.

Moreover, the new TV rights looks in our favor. So thats a breath of fresh air

Unfortunately we can't raise ticket prices or any fan stuff atm. We already struggle to sell out games. We need a legit trophy winning year (not the club world cup) before we can do anything like that.

The stadium issue is another big problem since it's not the club's. The lucky factor it that Milan and Inter share it, if they do put enough pressure they could buy it together, but I don't see that happening anytime soon since both would probably prefer to get a new one...

http://www.forbes.com/lists/2009/34/soccer...ations_DOV.html

why does it say here Milan has no debt?
or am I reading this wrongly?

That says our current value is 990m, Barcelona's is 960m. Hmmm.

Plus, when you dont buy any players, you don't really go into debt.

Debt/Value % , I am guessing that is what you are reading ?

If so, it is in other words debt/equity, and considering our equity is 'negative', hence the outcome would be negative and as such a negative number does not exist, hence the zero.

okay... I always was bad at math haha

I wish we could get more commercial deals, like Bayern, they are amazing!

Bayern play in a healthy league, Milan don't, that makes a big difference. Look at all the teams from the list you posted, most of them who have 0 depth are German teams