Major turnaround in Inter's finances

2023/4 was Inter’s first full season under the control of Oaktree Capital Management, who became the new majority shareholder in May 2024, after the previous owners, the Chinese conglomerate Suning Group, had failed to repay a loan from Oaktree by the agreed deadline.    The Swiss Ramble reviews their progress.

Even if they narrowly missed out in terms of silverware, Inter hit the bullseye off the pitch, as they swung from a €27m pre-tax loss to a €50m profit, a hefty year-on-year improvement of €77m. 

This was driven by revenue, which shot up €144m (35%) from €407m to a huge new club record €551m, though profit from player sales fell from €65m to €14m. Growth in operating expenses was restricted to 4% (€18m), as these rose from €462m to €480m.

All three main revenue streams set new club records, led by broadcasting, which surged €88m (50%) from €176m to €264m. Match day rose €29m (39%) from €75m to €104m, while commercial increased €28m (19%) from €147m to €175m.  Inter have overtaken Juventus, who have traditionally had the highest revenue in Italy. In the last years, revenue at the Old Lady has fallen by €55m, while Inter’s has increased by €181m, i.e. a swing of €236m.

Inter’s large net profit was particularly impressive, given that it hardly benefited at all from profit on player sales, which slumped from €65m to €14m.

Since Inter’s annus horribilis in 2020/21, when they lost a horrific €239m, they have steadily improved four years in a row, first reducing losses, before returning to profit last season. That being said, Inter had lost an amazing €840m in the previous 10 years (pre-tax), so it was clear that Oaktree had to apply more financial discipline than the ambitious (or reckless) strategy employed by Suning.

Champions League TV money is vital for Inter, especially as the new format has helped to deliver a 20% uplift in central distributions.  This was abundantly highlighted last season, when Inter’s run to the Champions League final earned them €134m (as per the Swiss Ramble’s model), even though they were soundly defeated by PSG in Munich.

Inter have earned an impressive €413m in UEFA TV money in the last five years, which is comfortably the highest of Italian clubs, well ahead of Juventus €291m, Milan €264m, Atalanta €190m, Napoli €179m and Lazio €170m.

Importance of European money

It’s difficult to over-emphasise the importance of European money to Inter’s business model, so the return to the Champions League has been absolutely crucial to the club’s recovery.  As a result, they have earned a staggering €526m in the last seven years, a period when they have twice reached the Champions League final, which is around ten times as much as the €53m in the preceding 7-year period.

Inter were boosted by €31m income from the expanded FIFA Club World Cup, having reached the last 16, where they were beaten by Brazilian club Fluminense. This was a fair bit more than the other Italian representative, Juventus, who received €13m, even though both clubs went out in the last 16.

Inter had the second highest average attendance in Italy last season with 70,129, which was just below Milan’s 71,512. These two were a fair way above other Italian clubs, so the next highest were Roma 62,435 and Napoli 51,037.

Last month the city council approved a proposal to sell the current San Siro stadium and surrounding area to Inter and Milan for around €200m.   The project envisages a 71,500 capacity stadium as part of a broader plan that will include executive offices, a hotel, a shopping centre, a sports medical facility, a museum, as well as cultural and recreational activities.

The entire project is estimated to cost €1.3 bln with completion scheduled for 2031. It will be funded by a combination of equity and debt, while ongoing revenue should also be boosted.  The impacted revenue streams will include naming rights, sponsorships, corporate hospitality and food & beverage. In addition, there will be an increased number of seats dedicated to corporate hospitality, which will effectively subsidies tickets for normal supporters.

Inter’s wage bill rose €26m (11%) from €227m to €253m, though this was still lower than the €262m peak in 2020/21.   The club has taken decisive action in the last few years to reduce wages by moving on many of the high earners, even terminating player contracts and allowing them to leave for free in some cases.

Inter’s wages are on the low side in the wider European arena, which highlights how well they did to reach the Champions League final.   For some perspective, their opponents in Munich, Paris Saint-Germain, enjoyed a €659m wage bill, which is well over twice as much as Inter.

Inter have adopted a far more disciplined approach to the transfer market, where the goal is “maintaining a high level of competitiveness, combined with financial sustainability”. The focus is “on new young talents to complement the core group”.

Inter‘s gross debt was reduced for the second year in a row, falling by €44m from €442m to €398m, the club’s lowest since 2016. This comprised €346m bonds, €31m shareholder loans and €20m bank loans.

Inter’s €35m net interest payable was by far the highest in Italy, much more than Juventus €20m. and Roma €11m. It is worth noting that Milan’s charge was less than €1m.

Last season’s financial results represented a major turnaround in Inter’s finances, as they set a new revenue record, while posting a profit for the first time in ages.  The improvement owed a lot to success on the pitch, which cannot be taken for granted.