How Juventus can afford their expensive new signing

Juventus have signed Serbian forward Dusan Vlahovic from Fiorentina for a €70m transfer fee (plus €10m add-ons) and €11.6m agent fees/FIFA solidarity payments. Given the financial challenges outlined by chairman Andrea Agnelli, some fans are wondering how this is possible.   The authoritative Swiss Ramble explains the underlying finances.

Juve reported a massive €210m net loss in 2020/21, only “beaten” in Europe by Barcelona €481m and Inter €246m. The club has lost money 4 years in a row, including €300m in the last 2 years alone, and has forecast another “significant loss” for this season.

The operating loss, i.e. excluding player sales and interest, has been on a steady downward trend, falling from just €1m in 2015 to €228m last season. In fact, their €234m deficit in 2020 was the highest (worst) in Europe.

Clearly, the pandemic has had an adverse impact on Juventus revenue, which has fallen by €45m (9%) from the €494m pre-COVID peak to €450m, though 2021 was boosted by revenue deferred for games played after 2020 accounting close. Still have 10th highest revenue in the world.

Gross financial debt has doubled in the last 6 years from €196m to €400m, one of the highest in Europe, though a fair way below Tottenham Hotspur and Manchester United.  Much of this was for stadium development, but has increasingly been used to finance investment in the squad.

Following the debt growth, annual interest payments have also doubled from €6m to €11-12m, which again is on the high side for a football club, though in fairness is only around half as much as Barcelona €26m and Manchester United paid in 2019/20.

The gross transfer spend fell in 2021, but was still €122m. In the preceding three-year period between 2018 and 2020, they splashed out €801m, only less than Barcelona in Europe, but more than big spending Chelsea and Manchester City. Their outlay in last 5 years is an amazing €1.2 bln.

They have partly funded their expenditure by taking on more debt, but just as important have been capital injections from shareholders. The club has received over €900m since 2007, including around €700m in last 3 years alone: €298m in 2019/20 and €400m in 2021/22.

Payment of Vlahovic transfer fee will be in 3 instalments (assumed to be even).  Juventus have recently arranged deals on very favourable terms, e.g. Federico Chiesa (Fiorentina) and Manuel Locatelli (Sassuolo), where payments were spread with main fee only paid after 3 years.

The €323m wage bill is almost back to the pre-pandemic high, so they will be looking to trim this to reduce their loss. They want to offload high earners like Aaron Ramsey, while there are reports of the club’s intention to cut salaries by 15% if players renew contracts.

The challenge for Juventus is to remain competitive with the elite. Their €323m wage bill in 2021 was much higher than other Italian clubs (e.g. Inter €262m, Milan €170m), but they would fall far behind their European rivals if they were to cut salaries too aggressively.

They also need to again generate profits from player sales. They only made €31m in 2021 compared to an average of €132m in the previous four years. COVID has greatly depressed the transfer market, but this may open up as the pandemic eases.

Player trading has been very important to Juventus, who made more money from this activity than any other leading club in Europe in the 5 years up to 2020. For this model to work, they will have to invest in young players, who perform on the pitch, but are also saleable assets.

They have been successful on the commercial side with €194m income comfortably the highest in Italy. After signing Ronaldo in 2018, sponsorship & advertising grew by nearly 70% from €87m to €146m. It will be interesting to see how this develops after the sale of CR7.

One important question on the Vlahovic deal is whether Juventus can afford not to buy him? They are currently battling to qualify for the Champions League, a key element of their strategy, worth at least €80m in TV money. In the last 5 years they earned a chunky €454m here.

Vlahovic is the second most expensive purchase ever by an Italian club, but when it comes to making transfers work, it’s a case of “where there’s a will, there’s a way”.