David Gill: "financial woes? you're having a laugh"

FreakyJim

no debt/glazer related thread for a while I think

so 43 million pounds a year to service the debt? thought it is more than that

Escobar

We're doing quiete well form a financial perspective, a lot better than some on here predicted. Nevertheless, we have to remain careful and hopefully we can somehow get the debt away in the near future. Key is that we remain succesfull. I agree with Gill that it wont be a problem to find a new shirt sponsor, although I am not sure if anyone would want to pay as much as AIG

Brophs

I wonder does an (unspoken) part of that business plan involve reviewing the collective agreement when it comes up for renewal? Or is that a realistic possibility?

didsbury1982

Well ticket sales haven't stood up to the downturn as far as I can see. Wigan is on general sale tonight. The club have put ads in the newspapers today to try and sell tickets. If families are looking to cut spending season tickets will be high up the list i'd imagine with no waiting list of people waiting to take them up. And with pressure building regarding the ACS it's not as rosy as Gill would have you believe!

Cling Bak

Competition money since 2005 would've helped. Bare in mind we finished that season with nothing, we've since added:

League Cup,
Premier League,
Premier League,
Champions League
World Club Cup.

You wouldn't have predicted that in the following 3.5 years.

FreakyJim

Though in reality I cannot see us decreasing the debt anytime soon. I imagine most if not all of our profits are going towards servicing the debt atm and the really weird part is Glazers aren't scared when it comes to investing in our squad. You could argue it's clever in the long run but imagine an unsuccessful manager with this kind of support...scary. Sir Alex is a vital part of Glazer's plans.

ralphie88

It is more than that. Gill, as usual, is doing his best possible effort of polishing the turd though.

The debt has increased, not reduced, despite a period of unprecidented income growth (thanks mainly to the new TV deal and 60% increases in ticket prices). I don't consider that "doing well" from a financial perspective.

However, as I predicted on here a few weeks back (a) AIG will see out their contract, and (b) I don't think United will have any problems getting a shirt sponsor deal after that which is of the same or increased value to the AIG one.

As for ticket sales standing up, I see the following games are on General Sale on the website - Wigan Athletic, Derby County, Everton and Fulham...

theimperialinn

How do you know that we have no figures to look at? From a financial perspective we would be doing well if we were making a profit. We are obviously about to announce another big loss when the next accounts are released otherwise Gill would make reference to profits rather than the ability to service debt.

The debt will never be repaid the Glazers will just re-finance which may not be on as good terms when it's due. They didn't buy a club with borrowed money to have to stump up £xm a few years down the line. When they do come to sell united the debt will be repaid from the proceeds and they will stick the difference in their back pocket.

MDFC Manager

My economics is quite weak but i was wondering whether the yearly payments reduce our debt as we go along?
I mean if we are having a debt of 600 million and pay 60 million yearly does it mean the debt is gone in 10 years? Note that i havent included interest in my example.

Escobar

Some predicted that we will go down and have no chance to survice.
Although the debt has increased, we're still not doing bad in terms of financial results. More debt does not mean you're doing bad, not necessarily. If you look at the financial statements, we're still making a lot of profit, increase our turnover etc. So if you look at United as a business (as an example), they are doing well, eventhough there's a shit load of debt. But then again, it's usual in business and as long as United is doing well on and off the pitch, generating money, explore new markets etc etc, we're in a more or less good position

Escobar

You have the reports, financial statements etc. So far, we increased our turnover and made profit. So to now think we wont do that is a big assumption.

ralphie88

The structure is much more complicated than that. To put it very basically, the problem for the Glazers is that the annual interest payments owed are more than the profit that is coming in to the club. Hence the debt is going up.

ralphie88

Red Football's financial results are available. And they show that we have increased our turnover (as any season ticket holder will tell you - this is hardly a surprise ).

However what the results also show is that United's income is still not sufficient to pay the interest due on the debt. So the debt is going up.

Now my basic economics tells me that where your income is less than your outgoings, you're not making a profit at all. In fact it tells me that you're making a loss.

Number7

To be fair aren't most midweek prem games normally on general sale?

The only one I managed to get out of about 10 applicatins last season was Pompey midweek.

Utd heap

Thanks for outlining that for us Ralphie mate

ralphie88

Now for my basic understanding of biology.

If it growls, shits in the woods and likes honey, it may well be a bear.

p_ps_sock

Is there any interest which is being added to the debt rather than being paid immmediately by the club? If so I wonder if thats included in the £43m.

If £43m is all the interest including any being added to debt then its much better than the MUST figures I read a few years ago.

ralphie88

I suspect it can't include the interest being added to the club. The last lot of figures (which came from the official Red Football Ltd's accounts said the company were making a loss).

Had a quick look for latest figures but couldn't find them - Channel 4 News gave this summary of the last lot of Red Football figures though:

Last Modified: 01 May 2008

Richest club in the world? Latest Glazer brother accounts show United now owe £765m.
One rich list named them as the richest football club in the world today, but Manchester United may not be rolling in quite as much cash as they seem to be.
The holding company established by the US sports millionaires the Glazer brothers to buy the club, has filed its latest accounts today, and they make grim reading for the club's fans.
So if the Glazers walked away from Manchester United, the creditors could still call pursue the club for the majority of Red Football's debts.
The Glazers borrowed more than half a billion pounds to buy the club, and the cost of servicing that debt is taking its toll on the club's profits.
The accounts show that the holding company - Red Football Shareholder - made a loss of £62.6m for the financial year which ended in June 2007, on a turnover of £212m.
The loss may have fallen from the previous year's figure of £138m, but the company's borrowings soared - from £641m to £765m.
The borrowings include £152m of 'payment in kind' loans - an ultra-high interest form of borrowing which attracts 14.25 per cent interest per annum.
And £425m of the loans are secured against the assets of Manchester United football club itself.
So if the Glazers walked away from Manchester United, the creditors could still call pursue the club for the majority of Red Football's debts.

MDFC Manager

So basically we arent paying the actual necessary payments to the bank?


I mean if we are supposed to pay 50 mill and we are paying only 30 mill then it should mean the debt is decreasing at the rate of 10 mill a year. No?

ralphie88

As I said, it's much more complicated than that and hopefully an accountant will be along in a minute to explain. My understanding is that at the moment we are meeting the required payments but that the debt is increasing (presumably to an agreed amount). At somepoint (2014 rings a bell) this needs to be paid off (or presumably refinanced).

MDFC Manager

Yeah I just wanted to know how that bit works. But whatever it is the situation doesnt seem to be getting better I guess.

peterstorey

There's quite a good article here:

http://www.dailymail.co.uk/sport/foo...each-760m.html

Escobar

Again, it depends. Profit is usually after interest is paid, so it depends whether you see EBIT or the profit in the financial statement. Will check the statement

ralphie88

Yeah I saw that, but didn't want to quote the Daily Mail!

Tnis is an interesting (geddit?) part of the article though: "The Red Football figures showed that the club still owes £152m to hedge funds, at an annual rate of interest of 14.25 per cent, and that it paid off only £42m of the £81m in interest due on their debts last year."

EDIT: So trying to get my head round this,it would appear that we did only pay £42m in interest, although we should have paid £81m - and this goes on to the sum we have to pay in 2016 or whenever it is. Not sure how Red Football still made a loss though.

lysglimt

What one should remember though - is that last fiscal year did not include the new TV-deal and our new sponsor agreements with numerous companies valued at £2-2.5 mill a year (I think we have signed 2 new ones - in addition to the Smirnoff deal I read about in another post - but I don't know how much that one is worth)

So this alone easily adds up to £30-35 million a year - in addition to the higher ticket prices (which we could have done without), doing better in the C.L etc

I would be surprised if we don't break £100 million profit for next fiscal year

peterstorey

I think what they've done there is quote the £42 million paid on the senior debt then quoted all the rolled up interest on the PIKs which started off at about £112M and has now rolled to £152M = £40M (typical crap Mail journalism).

Sky1981

Don't worry too much, in the worst case scenario, someone new will just buy the debt and own United, it's not like the bank will raze OT to ground, come on guys, they're not stupid. United worth more alive and kicking rather than to be sold as scrap.

peterstorey

Not if the debt is worth more than United they won't - and you're heading there quite quickly.

Bearded but no genius

Peter Storey praying to God for the demise of Manchester United in a finance thread?

Quelle surprise.

Any time now he'll be asked about his own club and claim that the Emirates is actually the financial salvation of the club.

peterstorey

I have no desire to see ManU go bust - I would like to see the back of Glazer et al including Usmanov.

GAngel

you should worry more about your team getting champs league money next year.

peterstorey

Even if we didn't we'd still make a (small) profit unlike you lot who even if you win it will make another loss.

FreakyJim

you're both right I'm sure peterstorey would enjoy a United demise though that's not really the point

It seems to me that our recent success distracted people from the issue. Not that there's too much to be done about it, but certainly things aren't as "cool" as Mr. Gill presents them.
I'm yet to see any real statement from the Glazers about the things considered. Apart from the usual "well run business", and "there are more money to be made from: tv, tickets, sponsors, etc" of course.
Not that anyone confronts them with questions too.

oh well

Chris H

This could be an ongoing series deserving its own thread. I recommend you do geology next - something snappy involving rocks maybe.

kuanteen

Surely the declining interest rates are helping us out so long as the revenue continues growing or at least remains constant?

WeWonItTwoTimes

The most recent PIK loan started off at c£138m on Aug 16 2006 and rose to c£152m by June 30 2007, which explains c£14m of the ''missing'' c£40m.

The other c£26m was down to c£12m rolled up on the old PIK loan in the first month and a half of that financial year (remember that loan had an average interest rate of 18%, increasing rapidly and was £350m by the time it was refinanced). The rest was due to early redemption fees (c£13m) and some nominal debt issue costs (c£1m). That c£26m was paid for by using the new borrowings the club took out as part of the refinancing deal in Aug 2006.

MU Limited's headline figures for the financial year ending June 30 2008 should be announced in the next week or so with the accounts available for viewing within a month.

I expect MU Limited's EBITDA to be £100m-£105m with a pre-tax profit of £80m-£85m. Virtually no tax is paid on that profit due to the tax deductible interest payments and of course because of the way the business is structured with MU Limited being a subsidiary undertaking to Red Football Shareholder Limited.

Red Football Shareholder Limited's headline results (07/08) will be announced sometime in April if the last two years are anything to go by (probably just after the Champions League Semis in order to piss off Ralphie ).

I expect Red Football Shareholder Limited's EBITDA to be £95m-£100m with a pre-tax loss of £25m-£30m.

This loss obviously includes the debt related interest payments both accrued (c£22m on the PIK loan) and cash payments (c£43m on the c£500m Senior debt).

Significantly the loss also includes a number of paper losses (non-cash losses) such as c£35m in amortisatiion of goodwill, c£35m of amortisation of intangible fixed assets (players) and a further c£10m of depreciation of fixed assets (Stadium, facilities etc).

There will also be a paper profit of c£20m on the disposal of players.

If you look at the £25m-£30m loss without considering these factors then obviously you can easily gain the wrong impression of what the real financial state of the business actually is (*cough* Ralphie *cough*).

To try and make Red Football's results a little clearer I'll take out the paper losses and accrued interest on the PIK loan and deal with the cash transactions of the 07/08 year.

Net cash inflow from operations - £100m-£105m

Set against

Interest paid - c£45m

Principle debt repayment - c£5m

Capital expenditure and financial investment (players and facilities) - c£30m

Therefore, increase in net cash in the period - £20m-£25m

Now of course the accrued interest on the PIK loan is very significant in that it will have to be paid at some stage but these results illustrate that the capacity is there to deal with that added burden when it becomes necessary to do so.

WeWonItTwoTimes

That really isn't a good article. Again, written by a sports journalist who doesn't know what he's talking about, trying to create something out of nothing.

WeWonItTwoTimes

The first tranche of the Senior debt facilities (I believe £150m) is due for repayment in Aug 2013.

WeWonItTwoTimes

There is at the very least a £250m positive gap in that comparison.

Must try harder.

MrK

Cheers for that, nice to hear about it from someone who seems to have more than a basic understanding of economics