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Juventus strategy is to invest funds in top players

The authoritative Swiss Ramble blogger analyses the accounts of Juventus. The pre-tax loss widened from €10m to €27m (€40m after tax), despite revenue growing €83m (20%) from €411m to €494m and profit from player sales rising €33m (35%) to €127m, due to significant cost growth of €130m. Revenue (club definition) up €117m to record €621m.

All revenue streams increased. Commercial income rose €41m (28%) to €187m (largely the Ronaldo factor); match day was up €14m (25%) to €71m; broadcasting was €6m (3%) higher at €207m; and player loans shot up €22m to €30m.

Revenue has grown by €123m (36%) in three years, mainly on the commercial side €84m, though also growth in match day €27m, player loans €20m and broadcasting €12m. The club's revenue of €494m is by some distance the highest in Italy, around €120m more than the closest challenger, Inter €377m, followed by Roma €236m, Milan €228m, Napoli €185m (2017/18) and Lazio €124m. All other clubs in Serie A have revenue less than €100m.

Juventus have significantly increased the gap against all other Italian clubs. Since 2012 they have grown revenue by over a quarter of a billion (using the Deloitte Money League definition), while the next highest increase is Inter €173m. Milan’s revenue has actually reduced.

Commercial income rose €41m (28%) to €187m, comprising sponsorship and advertising €109m, merchandising €34m & other €44m (including museum and stadium tours). The highest in Italy, just ahead of Inter €183m, then a big gap to Milan €76m, Roma €55m & Napoli €45m. Much of the growth is linked to the arrival of Ronaldo. Club president Andrea Agnelli said, 'He brings us worldwide profile'. Resulted in main sponsorship deals more than doubling from 2019/20: Adidas from €23m to €51m (and paid €15m bonus in 18/19), Jeep from €17m to €42m.

The increases in Juventus sponsorship deals are necessary if they want to financially compete with the leading clubs in Spain, England, Germany and France, as their commercial income is much higher, e.g. five clubs were well above €300m in the 2017/18 Money League.

Notwithstanding the Ronaldo effect, the Swiss Ramble notes, 'It is imperative that Juventus do well in the Champions League to boost their broadcasting income, as the TV rights in Serie A are relatively low. Indeed, in 2019/20 there are big increases in England, Spain and France, while Italy is unchanged.'

Juventus saw large cost growth: wages increased €69m (27%) from €259m to €328m, player amortisation grew €42m (39%) from €107m to €149m, while other expenses were up €6m to €130m. It also cost the club €15m to pay-off Allegri and his staff.

The wage bill shot up €69m (27%) from €259m to €328m, mainly due to Ronaldo’s arrival plus the renewal of some player contracts. Thanks to the revenue growth, they managed to restrict the increase in the wages to turnover ratio from 63% to 66%. Wages have grown by €106m (48%) in the last three years, which is much more than other Italian clubs The wages to turnover ratio is, however, mid-table in Italy.

The €27m loss before tax is the third worst in Italy, only surpassed by Inter €40m and Milan’s awful €143m. Just over half the clubs in Serie A lose money. The most profitable are Atalanta €35m, Sampdoria €19m & Sassuolo €13m.

So after four years of profits, Juventus have now reported losses for two years in a row. However, the club is no stranger to losses, having racked up €151m in the three years between 2011 and 2013. They currently forecast that 2019/20 will end up in another loss.

The profit on player sales is increasingly important for Juventus averaging €120m a year over last three years. Excluding this activity, 2018/19 loss would have been €154m.

Based on the Swiss Ramble's estimate, Juventus earned €91m from the Champions League after going out in the quarter-finals, much higher than the prior season’s €80m, due to the new 2018/19 deal and distribution method. Other Italian clubs: Roma €55m, Napoli €47m and Inter €46m.

The Champions League is extremely important for Juventus, who have earned an impressive €447m from it in last five seasons. Not only is this much higher than other Italian clubs (Roma €282m, Napoli €185m, Inter €67m), but the most in Europe (next highest Real Madrid €383m).

Gross financial debt increased from €329m to €473m, including a €175m bond issue in 2019, as well as amounts owed to factoring companies €180m, bank loans €87m and Istituto per il Credito Sportivo €31m. This debt has almost quadrupled since €124m in 2011. The gross debt of €473m is the highest in Italy, just ahead of Inter €436m (Goldman Sachs financing).

Much of Juventus debt was down to funding required for their new stadium development, but is increasingly to finance investment in the squad. Using the broadest possible definition of debt, Juventus total liabilities of €911m are one of the highest amounts owed in Europe, only behind Barcelona €1.2 bln, Manchester United €1.2 bn and Tottenham Hotspur €1.1 bn.

The Swiss Ramble concludes, 'The Juventus strategy is to invest funds in top players to drive success on the pitch to increase revenue, as exemplified by the purchase of Cristiano Ronaldo. This will require good progress in the Champions League (or they need profitable player sales) to cover growing debts.'

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