Juventus Financial Analysis
Written by Umberto Pelà (20.01.2024)
Juventus’ pedigree within Italian football will always be respected. Their history of winning within Italy’s borders is – even with the Calciopoli scandal – second to none. As of recent years, however, that winning culture has been notably challenged by other teams around Italy. The rebirths of Inter Milan, AC Milan, and SSC Napoli, particularly, have threatened and dethroned Juventus from being the sole, dominating team in Italy. On top of that, questionable internal choices have made it so that the club has been stumbling, to say the least, over the past 5 years.
Caso Plusvalenze e Stipendi Falsati
Before examining the club’s latest financial statement, it is essential to first grasp the financial circumstances Juventus has faced in recent years. This understanding is crucial to comprehend why, in my opinion, the club has encountered difficulties in recent times. In particular, we must address the elephant in the room: not Calciopoli, the historic match-fixing scandal which involved various clubs around Italy in 2006, but rather the more recent Caso Plusvalenze e Stipendi — which was officially settled in December of 2023. In this scandal, the firm was accused of false accounting on capital gains and wages. In November 2022, UEFA and the Italian authorities gave birth to investigations on Juventus’ potential breach of licensing and financial fair play regulations. Specifically, the club was accused of inflating transfer fees to register capital gains — with the most prominent example being a transfer deal between Miralem Pjanic and Arthur Melo in which both players were valued at extraordinarily high price points. Further, the club was accused of paying players off the books to avoid taxes on those same payments, thus reducing apparent costs (and losses) on their financial statements. In this case, the example which left many eyebrows raised was the club’s settlement with Cristiano Ronaldo. An official note sent to the Portuguese superstar (when he still used to play for the club) insinuating this off-the-book payment emerged on the web — signed by Sports Director Fabio Paratici. This alleged tax fraud and messy situation created a lot of uncertainty around the club. In a court case that has lasted over a year, Juventus has emerged and resolved the issue with radical change.
The club’s directors all resigned: Pavel Nedved, Fabio Paratici, Maurizio Arrivabene, and CEO Andrea Agnelli all left with immediate effect. On top of this, the club, other than fines to the Italian state for around €1M, had to pay the price internationally. €10M to UEFA as the club breached the Settlement Agreement from May 2022 (which could become €20M if the club doesn’t respect new parameters set by UEFA in their financial statements from the next 3 seasons), a deduction of 10 points in the league, and a ban from participating in the UEFA Conference League for this season.
Severe, or just? To me, it is unclear and tough to say.
Bureaucratic matters in Italy are always tough to objectively analyze. What appears clear to me is that once again, institutions in positions of power are able to bend the rules and get out of sticky situations with a simple “slap on the wrist”. And while I may be saying this for Juventus, I wouldn’t be surprised to see how other clubs may have been involved in pesky business as a result of COVID-19’s implications on businesses and their finances.
CR7: Transfer of the Century?
What had caused instability and led to extreme measures like the ones adopted with the “Caso Plusvalenze” by Juventus executives, however, is particularly interesting. To many, the sole reason behind this goes by the name of Cristiano Ronaldo dos Santos Aveiro. In 2019, with the aid of the Decreto Crescita Law, Juventus pulled off what is arguably the most jaw-dropping transfer of the 21st century.
€120M to Real Madrid, €30M net to the player. Excitement flooded the streets of Turin as fans sang: “Portaci, portaci, portaci la Champions” (“Bring us the Champions League”) following Cristiano Ronaldo’s arrival at Juventus’ J Medical facilities.
The move was clear. The Turinese club was going all in: increasing expenses like they had never done before to create revenues and success like they had never seen. The Bianconeri wanted it all: Serie A, Champions League, and the Coppa Italia. What fans failed to see, however, was that this was out of line with the vision the club had led with for the past 10 years. High-risk investments like these weren’t something Juventus was famous for — they built their success through CEO Giuseppe Marotta’s undisputed talent for recognizing cheap, frugal opportunities: Andrea Pirlo, Paul Pogba, Carlos Tevez, Fernando Llorente, Patrice Evra, Fabio Quagliarella, Giorgio Chiellini, Andrea Barzagli, Arturo Vidal. Players who cost the club pennies, but would end up cementing themselves as global superstars and club legends.
This CR7 move created chaos for the club. Not only did it arguably push Giuseppe Marotta out of the club, but it also required the creation of a bond, the “CR7 Bond”, to finance the operation. A bond is a way for an organization to gather money (liquid cash) that it promises to pay back at the date of maturity, with interest. The bond has a maturity date of February 24th, 2024, and has a total face value (amount of money) of €175M to be paid with an Interest Rate of 3.375%. In this year’s financial statement, the club has refrained from specifying what their intention is with this bond. I personally expect the bond to only be paid in part this year, and for the rest of the €175M to be paid at a later date (with an extension of the maturity date that will be renegotiated) or to be paid through the gathering of additional debt (from loans, for example, with banks). The interest rate, while “kind” if we compare that 3.375% to the average market rate for similar long-term bonds in 2024, is also a burden for the club we must consider.
The CR7 Bond, other than financing the move for CR7’s amortization and wage costs, was meant to support the club’s expansion to a global level. Following COVID-19, instead, it became a sort of “bail” for the club, as it used that cash to cover up any leakages that had been created as a result of the pandemic.
With COVID-19’s effects on revenues, 2 years on from CR7’s departure, we can deem the move something close to catastrophic, and the financial statements tell us that. Bar from last year, the club’s revenues have been constantly decreasing. From 2018/19 to 2021/22, revenues crashed from €622M to €443M. That’s a €179M decrease. In three years. Almost €60M per year.
CR7’s Transfer: Financial Repercussions
Today, if we look at Juventus’ most recent financial statement as of the 30th of June 2023, the picture has changed a lot. As mentioned, the club hasn’t been performing to its standards lately (both on and off the field), but this year, it seems to have found some sort of stability in the midst of this storm.
Not only have the club put together a competitive roster that can choose to focus only on Serie A and Coppa Italia under manager Massimiliano Allegri, but they are also in a better financial situation. Revenues have grown 14.5% – to €507M – compared to last year. Sponsorships, Ticket Sales, Revenues from Players’ Registration Rights, Revenues from Sales of Product, and Revenues related to the Allianz Stadium’s facilities and the J Hotel, have all increased significantly. In fact, the only source of revenue which has registered a decline is the TV Rights and Media Revenues, as the club participated in the UEFA Europa League last season, not the UEFA Champions League. To put this lost revenue in perspective, Inter Milan earned €99M in Television revenues from UEFA competitions as they reached the Champions League final. This goes to show the importance of competing – and being successful – in European competitions for all clubs which desire to make that next step within global rankings.
If we look at these increases more carefully, we see that Ticket Sales saw a huge, 90.4% spike, from €32M to €62M. If anything this is a testimony to the importance of fans and ticket revenues for clubs around the world — and how much that money, and those fans, were missed throughout the COVID-19 era. In the statement’s notes, we learn that specifically, the club sold 20 200 season tickets which amounted to €22.9M: a hefty amount guaranteed upfront with all things considered.
Further, for those who struggle with the terms “Revenues from Player’s Registration Rights”, let me simplify that. This category simply includes capital gains from the disposal (temporary or permanent) of players at Juventus (p97). The total figure for the latest transfer campaign was €70M, which makes it particularly impressive because it increased 72.1% compared to the previous transfer campaign (€41M). For example, the club included the disposal of Matthijs de Ligt’s rights in the most recent financial statement (p80), which generated huge capital gains of €29M — hence why he was sold without hesitation when Bayern Munich offered a monstrous €67M for the Dutch center-back.
Finally, one last source of revenue worth pointing out is Sponsorships and Advertising, which continues to produce a notable sum for the Bianconeri: €150M, up 7.5% from the previous year. Positive trend.
If we then look at the costs that the club has incurred this financial year, we can see that it has also done an excellent job in that scope. Specifically, the heftier costs, wages for players and technical staff, have decreased by 17.8% from €310M to €255M. Amortization of players’ registration rights (which, in this financial statement, comes with write-down and provisions) has decreased 4.7% from €196M to €179M. This means that the club has found players which had hefty financial impacts (see Angel Di Maria, earning around €8M net last season), and made sure to remove them from the roster. On top of this, by remodeling their transfer policy, Juventus have saved €28M in expenses from Players’ registration rights (also known as FIFA agent fees).
At the same time, the club has struggled with expenses such as External Services, Personnel, Purchase of Products and Consumables, and Other Expenses, which have all increased — even though it is tough to determine what the increases were effectively due to. As a result of this, total costs have decreased by €42M, which is a respectable amount considering the club doesn’t have immense pressure on operating at a net positive — this is because it isn’t filled with debt like other sports firms around Italy.
With this in mind, we can start to put the pieces together. The club has operating costs of approximately €427M, with amortization (including write-down and provisions) of €179M for total costs of roughly €606M. Now, compared to the revenues of €507M, we can see that it operates at a loss of almost €100M — not ideal, but not atrocious. Most clubs around Italy (with exceptions like SSC Napoli) operate at a loss. If we then consider taxes, Juventus’ net loss for this year is €123M. While that isn’t a great number to look at, in the greater scheme of things, it shows great improvement from last year’s net loss of €239M.
On a separate note,iIn terms of debt, the club now stacks up net financial debt of €340M. Specifically, an increase of roughly €187M. Debt, as explained in previous articles, isn’t inherently bad or directly correlated with net yearly losses. Having said that, it is something to consider when thinking about the long-term financial stability of an organization. Continuous losses and continuous debt can lead to restructuring of debt payments and interest rates until the organization is effectively unable to pay back the money it owns. It can also cause problems with cash flow, which is something Juventus luckily don’t have to worry too much about. In fact, if we look at their statement of cash flows, there is a lot to infer. The club burns a lot of cash: €42M from operating activities and €127M from investing activities. With new loans (e.g. a recent one for €70M), it is able to cover most of these activities as it ended up this year with a net change in cash flow of -€21M (Financing Activities stood at €148M). As aforementioned and probably due to a healthy line of management in the prior decade, the club has a huge line of credit with banks which ensures that they’ll be fine whenever cash shortages occur. To be precise, the club mentioned that they have credit lines of €246M with banks, and “as of 30 June 2023, the company had liquidity of €48.7 million deposited in various current accounts”.
What about the Future?
So, does this mean that Juve are fine now? Are they due to win again, soon? Are they out the tunnel?
Yes, and no.
The club is immensely powerful with over €830M in total assets (current and non-current, p54) — more than double of AS Roma’s €400M in total assets, for comparison. The Juventus Stadium, now named Allianz Stadium, for example, was something that previous management set up and the club has had huge success with. Not only has the stadium, combined with the local shopping center, generated and continues to generate thousands of jobs for the community, but it is a huge asset for the club to have. Naming rights from Allianz (German Insurance Company) bring in notable funds, and the stadium contributes to large portions of the “other revenues” section, which is roughly €40M. Most importantly, Juventus also has a stellar roster: Federico Chiesa, Dušan Vlahović, Adrien Rabiot, Manuel Locatelli and many others defend La Vecchia Signora each weekend as they currently sit in 2nd in the Serie A. Downwards trends with costs, upwards trends with revenues, and immense credit lines generally paint the picture that Juve are out of the mud, and may be seeing the end of a tunnel that has been rather dark, unclear, for the past 5 years.
With this in mind, there are some final considerations to consider. These especially arise when looking at the notes from the most recent Board of Directors’ Meeting to plan the next 4 financial years and set a capital strengthening operation. This meeting has allowed the board of directors to acknowledge a significant loss of €75M in the quarter ending September 2023. This loss has, in turn, made Shareholders’ Equity turn to a (negative) -€31M, meaning that liabilities have now surpassed assets. This is a particular issue because in Italy, under Article 2447 of the Italian Civil code, this is a reduction in capital below the legal minimum. As a result, the Board of Directors has decided to increase the company’s share capital by up to €200M by issuing new ordinary shares to (primarily) existing shareholders. This has proved to be and will continue to be an undoubtedly successful move as it is a way for shareholders to pump more money into the club. EXOR N.V. – majority shareholder of Juventus with 63.8% – has supported this plan and committed to buying new shares for this new capital increase. In fact, on October 27th 2023, EXOR N.V. made an advance payment of €80M for the future share capital to increase financial health in the short-term. In essence, this capital increase has turned Shareholders’ Equity back to positive.
With all of this in mind, we can now draw final conclusions. To me, Juventus is a club that has, through its ups and downs, set itself up for major success in the following years. Regardless of all the activities that have occurred off the field, it remains a dominant force in Italian football, and trust me, it will be back to winning ways in a future that isn’t too far away from us. Financially, it is in a slightly precarious situation, but with new management led by Gianluca Ferrero, I believe it is discovering the road that had created so much success for them in the past decade. What it currently misses, is that extra revenue from success in international competitions. The €99M that Inter Milan got from UEFA as a result of reaching the Champions League final would be game-changing for Juve. As long as they continue to cut useless costs and adopt a smart player trading strategy (like they have over the past year), also by giving space to youngsters like Nicolò Fagioli and Kenan Yildiz, they will see a reality full of success in the upcoming years.
