Europe – GAME OF THE PEOPLE

JUVENTUS have not had the best start to 2022-23 and already some people are calling for the head of coach Max Allegri. After a decade of dominating Italian football, Juve now have stiff competition in Serie A and in the past two seasons, Inter Milan and AC Milan have won the scudetto. Moreover, Juve haven’t been quite the same club since the Cristiano Ronaldo years.

The pandemic exposed some of the shortcomings of Italian football’s business model and Juve have suffered more than most. In 2020-21, they made a loss of over € 200 million and in 2021-22, the deficit widened to a net loss of € 254.3 million, the highest ever in Italian football history. They have now made a loss for five successive years.

It’s a very worrying situation, but Juve’s finances would have been even more challenging if they hadn’t completed a capital raising exercise in December 2021 that generated close to € 400 million. While this strengthened Juve’s equity, it was the second such exercise in a three-year period, following € 300 million raised in 2019.

In 2021-22, Juve’s revenues fell by 7.8% to € 443.4 million, largely due to under-performance in Serie A and the UEFA Champions League. After the complete collapse of income from ticket sales in 2020-21, Juve’s matchday revenues recovered to € 32.3 million, but around half the peak year of 2018-19. Broadcasting earnings dropped by 28% to € 170.5 million, a reflection of the club’s decline on the pitch since the highs of 2017 when TV income was over £ 234 million.

Juventus last five seasons

	Revenues €m	Pre-tax loss €m	Wages €m	Wage- income ratio
2021-22	443.4	252.5	351	79%
2020-21	480.7	208	323	67%
2019-20	573	82	284	50%
2018-19	621	27	328	53%
2017-18	505	10	259	51%

Commercially, Juve’s income was also down, from € 206 million to € 199 million. And yet, Juve’s wage bill went up by 9% to £ 351 million, representing a wage-to-income of 79%, seven percentage points higher than 2020-21. More positively, Juve have cut their net debt to € 153 million and have cash liquidity of around € 70 million. Of their gross debt (€ 223 million), € 176 million is owed to bondholders and € 6 million to banks.

The club has proposed a three-year plan for the years 2022-23 to 2024-25, which includes strategic and operating initiatives to maintain sporting competitiveness, economic and financial balance as well as improved operations and brand development. Interestingly, it also highlights the intention to take an active role in the reform and evolution process of the sporting industry. Juve’s ambition is to go shoulder-to-shoulder with Europe’s top clubs such as Real Madrid, Bayern Munich and Manchester City. The club was among those advocating the creation of a European Super League in 2021, a proposal that appears to have been aborted for now. However, the club’s chairman, Andrea Agnelli, was among the most enthusiastic supporters of this controversial project, so if global economic conditions worsen, it is likely another attempt will be made.

Juventus were beaten in two Champions League finals in 2015 and 2017, but since then, they have reached one quarter-final and three times could not get beyond the round of 16. It is arguable that the Cristiano Ronaldo experiment was not a big success, from both a playing perspective and financially.

Juve have been one of the most active clubs in the transfer market over the past five seasons (2018-19 to 2022-23). Only Chelsea (€ 900 million) have spent more than Juve’s € 877.9 million and their net spend of € 288 million is among the 10 highest worldwide. Clearly, this level of spending is unsustainable. In 2022-23, their transfer balance sheet is currently a positive after they sold Matthijs de Ligt to Bayern Munich for € 67 million. They picked up two notable big names on free transfers in Ángel Di Maria and Paul Pogba, both of whom are older than the likes of de Ligt.

Juventus cannot afford many more slip-ups in the Champions League in 2022-23, they’ve lost their first two games in the group stage, against Paris Saint-Germain and Benfica, so more setbacks may consign them to the Europa League in the knockout phase. That would surely impact their revenue generation into 2023.

REAL MADRID are on a bit of a cautious high at the moment; European and Spanish champions, in the middle of a stadium redevelopment programme and seemingly starting to bounce back from a financial perspective. Preliminary figures for 2021-22 issued by the club provided further evidence of the resilience of their finances, despite losing around € 400 million through the pandemic.

Real have also started the 2022-23 season well and have a 100% record in the league and Champions League. Although Real were part of the aborted European Super League project, they remain at the forefront of European football.

Real have just reported a remarkable profit of € 13 million for the 2021-22 season, which continues their profitability through the covid-19 years. Their profit for was € 12 million higher than 2020-21 and even higher than 2020’s € 313,000. Their financial performance is in marked contrast to their bitter rivals, Barcelona, who have been mired in crisis over the past couple of years.

When Real won the Champions League last season, it was something of a surprise as many people wrote them off. Their squad has looked a little aged at times, but in 2021-22, they profited from a stellar year from one of their veterans, Karim Benzema who scored 44 goals. Likewise, their coach, Carlo Ancelotti, who returned to the club in 2021, demonstrated his skill in getting the best out of a bunch of seasoned professionals.

Real Madrid (the whole club), generated € 721.5 million in revenues in 2021-22, a 10% increase on 2020-21. This figure is higher than the last two seasons, but still around € 30 million below the peaks of 2018 and 2019. In 2022-23, the club anticipates revenues to head towards € 800 million and make a pre-tax profit of approximately € 5 million.

Interestingly, Real’s cash position has improved, rising from € 122 million to € 425 million. Furthermore, the club has a net liquidity position of € 263 million, a spectacular turnaround from 2021 when they had net debt of € 46.4 million. During the crisis, Real have reduced debt by more than € 300 million. The club’s liquidity felt the benefit of the € 360 million 20-year deal signed with Sixth Street/Legacy for use of the stadium.

During the pandemic, Real had to be relatively conservative around player acquisition and this may have contributed to their failure to land some of their targets in 2021 and 2022. Their net position across 2020-21 to 2021-22 was € 111 million in gross spend and € 274 million receipts, translating to a net positive of € 163 million. In 2022-23, they have spent € 80 million and recouped € 92 million. In the summer of 2022, there were a number of departures of players who had been on Real’s books for some years, notably Marcelo, Gareth Bale, Isco and Casemiro, the latter who was sold to Manchester United for € 70 million. As for the younger players, such as Vínicius Júnior and Rodrygo, they are starting to really flourish, although there are continued rumours they will try and secure Paris Saint-Germain’s Klyian Mbappé in 2022-23.

Real’s president, Florentino Pérez, met with shareholders before announcing the closure of the books for 2021-22 and pointed to the club’s operational efficiency, investment capabilities and cost containment measures, all of which had contributed to the healthier cash and debt positions. Although the effects of the pandemic are clearly subsiding, they are still impacting revenues.

The Bernabéu remodelling is a major project and Real have taken further cash from the loan facility allocated for the project, making the total drawings so far to € 800 million. Real have had problems with their pitch this season, largely due to the new turf which has come from a part of Spain – Extramadura where summer temperatures have soared. The new-look stadium will include a mechanism that will allow the pitch to be stored underground.

Real’s full and segmentalised financial figures will be published in due course.