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Business Spotlight: keeping Inter in the black

Author: ICAEW Insights

Published: 30 Nov 2020

Tim Williams, CFO of Italian football giants Internazionale, tells ICAEW Insights editor Tom Herbert how the club is coping with the challenges of coronavirus.

“For a CFO in football, your measurements of success as a business are very different – it’s not all about the financials. You need to be a certain type of personality to cope. It’s not like manufacturing or retail. It forces you to think differently, more creatively, about the risk of things happening, or not happening.”

For FCA Tim Williams, who has worked as Internazionale’s Chief Financial Officer for the past five years, that creativity has been working overtime to keep the Milan giants financially stable during the pandemic.

Speaking to Insights ahead of ICAEW’s Financial Controllers’ Update on 2 December, Williams explains that football has been hit by coronavirus in multiple ways. The most obvious aspect is the loss of stadium revenue – from March this year Inter, along with the vast majority of professional football clubs, have played their matches behind closed doors. And this immediate loss of revenue has had a more severe impact than you’d think.

“There’s a lot in the press about how football clubs could give their tickets away and still make money from TV revenue, and there’s a grain of truth in that,” says Williams. “But if you look at a club like Manchester United [where he worked as Financial Controller for five years], they make £100m a season from it. Inter’s matchday revenue per season is around £55m, which is still a big hit. Because of the way football clubs work, it’s an immediate loss of cashflow, and we don’t have visibility over when it’ll come back.”

Fixed costs versus variable income

As Williams explains, most football clubs operate a fairly fixed cost base versus a variable level of income. “Along with many other clubs, during the pandemic we’ve seen a material loss of revenue without a significant loss of cost – for example, we’re talking about €250,000 just to stage a game, which hasn’t reduced that much just because there are no fans in the stadium. Then you have training, salaries, flights to Europe – it’s hard to move the dial.”

Some things he thought were set in stone back in February like sponsorship rights and season tickets turned out to be more fluid and towards the end of last season, the club offered fans with season tickets the choice of a cash refund or voucher.

As a CFO in football, Williams believes a strong risk management strategy and the right processes, checks and balances are crucial for success (at least off the field). One example of this planning proving beneficial was in the unlikely field of insurance.

“We actually had stadium disruption insurance, and the wording of that policy meant we were covered during the FY20 season,” he explains. “We lost €13m in stadium matchday revenue and recovered €10m of that. We were the only club in Italy with such a policy, and there were only very few in Europe. The downside of this is that it’s now impossible to get a similar communicable disease policy!”

Flatten the cashflow curve

So how has Williams managed this during the pandemic? According to the former KPMG trainee, a lot of it comes down to cashflow.

“Short-term, you try to close the gap,” he says. “You do exactly what the government is doing with the virus – flatten the curve. You’re ultimately trying to avoid running out of cash, so you look at any possible opportunity to increase cash coming in and reduce cash going out. It’s the same principle for big or small companies – there are just a few extra zeros on the end.

“Look at the forecast: what can you defer, stretch out, renegotiate, save on further costs. There’s a huge variety of things that go on to protect revenues. Deferring player salaries but not reducing them. Sponsorship rights are generally based on matchday exposure – digiboards, social media etc. Will this have to be refunded, or can the club ‘make good’ on what’s been lost? Ultimately, actions like this save a material amount of cashflow.

“As a CFO, you have to take everything into consideration,” he continues. “If you have a cashflow deficit, what can you do? Can I go to the capital markets? This is what we did, and we raised €75m on the bond market in July this year. There wasn’t a huge amount of transfer activity going on this year but there are opportunities to help shore things up the deficit, and we took ours in May [with the departure of forward Mauro Icardi to Paris Saint-German for €50m]”.

For someone who describes himself as “the world’s worst footballer,” the Manchester Met graduate is revelling in his role at the 18-time champions of Italy. “I understand the game and the business of the game,” he explains. “And as an accountant, it’s exciting that roles like this are available where you get a unique insight into how a business runs not just financially but strategically.

“Why do I enjoy doing what I do? The truth Is, it’s the variety. In any single day, we are a broadcaster, sponsorship asset, ticket retailer, sports club, clothing retailer, content provider and many other things too. That’s the joy of it. Whilst we are nothing if we are not a football club, we are so much more than just playing football at the San Siro 25 times a season.”

Tim Williams will be speaking at the Financial Controllers’ Update on Wednesday 2 December, on the ‘Business spotlights: experiences during the pandemic’ panel.