Net Spend

[thegregster]

Fans have been saying for years that we'll spend a ton and transform the team before a window. Then when the window closes we're once again left with dead wood to clear.



Bang on. We have not spent more than 150m net in one window post-SAF despite having the financial clout to do it. That is because we have reactive and low risk management at the top that wants their financial security. We could easily spend 250m net to transform the team then spend a small amount the next season to compensate, but that involves risk and less dividends.

Add in our lack of capital spend and you can see how little is being invested.

This is from 2015:
http://swissramble.blogspot.com/2015/

In the last six years United have generated over £1 billion of cash: £736 million from operating activities plus £318 million from share issues. Just over £300 million (29%) of this has been spent on player purchases and £63 million (6%) on capital expenditure, but the vast majority £658 million (62%) has been used to finance the Glazers’ loans: £412 million of interest payments and £246 million of debt repayments.

Our capital spend since they took over has been very small.

I doubt it has increased very much since 2015.

 

[youmeletsfly]

Fans have been saying for years that we'll spend a ton and transform the team before a window. Then when the window closes we're once again left with dead wood to clear.



Bang on. We have not spent more than 150m net in one window post-SAF despite having the financial clout to do it. That is because we have reactive and low risk management at the top that wants their financial security. We could easily spend 250m net to transform the team then spend a small amount the next season to compensate, but that involves risk and less dividends.

Well, the club did extremely well not to "spend a ton and transform the team" under absolute useless managers like Moyes, LVG and the Portuguese idiot. Just imagine us spending 300mil under any of those 3. We'd have players like Cesc, Kroos, Perisic and Mguire here.

It's good that we haven't spent enormous amounts of money when we had the wrong type of managers at the club.

Also, in regards to the "dead wood". This needs to be done in a few windows with the same manager, the right manager that we know for sure he'll replace the dead wood with proper players that suit the plan put in place to improve the team.

For example, under Jose, you couldn't sell Jones, Smalling, Valencia, Fellaini, Young in a single window. You usually buy 2-3 players in a window and, if you sell 4-5, you need 4-5 replacements. No big club buys 6-7-8 players in a single window. It's too big of a risk and it's too big of a change in the dressing room.

 

[HackeyC]

While I haven't looked at the accounts in detail, net spend is only part of the story. For example, Sanchez was purchased for what I assume was a nil spend, but brought with him incremental wages over Mkhitaryan of somewhere in the region of £12m per year. That in itself is an investment and internally most businesses would refer to it as such, even if it is not increasing asset values.

Granted this is just one example, but the point being that absolute spend does not always reflects investment and that is before we get in to the question of value. I can drop £100m on a player and while this looks great on paper, if he doesn't deliver his market value halves in 24 months then it doesn't really matter how much cash we have to spend, we're bleeding capital.

 

[Johan07]

While I haven't looked at the accounts in detail, net spend is only part of the story. For example, Sanchez was purchased for what I assume was a nil spend, but brought with him incremental wages over Mkhitaryan of somewhere in the region of £12m per year. That in itself is an investment and internally most businesses would refer to it as such, even if it is not increasing asset values.

Granted this is just one example, but the point being that absolute spend does not always reflects investment and that is before we get in to the question of value. I can drop £100m on a player and while this looks great on paper, if he doesn't deliver his market value halves in 24 months then it doesn't really matter how much cash we have to spend, we're bleeding capital.

We paid 30m for Sanchez + around 10m in agent fees but it just makes it a very more relevant example of why "net spend" is a completely irrelevant measure of anything really. Sanchez is the most expensive transfer all-inclusive in the PL; wages, fees, bonuses included and he still does not affect our "net spend" in any significant way.
On the other hand we have Pogba who we paid 90m for and is probably worth 150m plus today. That transfer does affect our "net spend" in a major way even if we actually have made money on the Pogba-transfer considering his asset value today.
Those two examples should really be enough to explain why net spend is a totally irrelevant measure of anything.
Add to that that there is no evidence whatsoever that United is not ready to invest (not spend) major amounts on transfer fees as long as (like Pogba) its for a top young world class player. Its actually sound to do so financially.
Why we have not spent more on players like Varane, Dembele, Neymar or whoever you want has much more to do with these players not wanting to come to United to begin with.
Net spend is crap. I wish we could proceed from something that is just used to throw shade at the owners and Woodward.
The wage bill combined with asset depreciation (when buying old players like Sanchez and Matic) is the only fair measure of investment in a football club.

 

[HackeyC]

I assumed that the net spend on Sanchez was nil given it would have been offset by a write down of Mkhitaryan's at that point, but obviously without working at United it's difficult to say for certain how they recognise this. Potentially they assigned a notional value at whatever Mkhitaryan's carrying value was, amortised over the length of Sanchez' contract. I however think we've landed firmly on the same page that net spend via transfer fees, particularly within a short time frame is not as important as some seem to think.

 

[Johan07]

I assumed that the net spend on Sanchez was nil given it would have been offset by a write down of Mkhitaryan's at that point, but obviously without working at United it's difficult to say for certain how they recognise this. Potentially they assigned a notional value at whatever Mkhitaryan's carrying value was, amortised over the length of Sanchez' contract. I however think we've landed firmly on the same page that net spend via transfer fees, particularly within a short time frame is not as important as some seem to think.

Yeah, I actually totally agree with your initial post barring the factual issue about Sanchez.
And what you are highlighting now is another good point: when people on here refers to "net spend" they just take transfer fees paid minus transfer fees received; without any consideration to what the players value is considered to be on the balance sheet.
Its so much more complex than that.
The recent Fellaini transfer is another good example, where he will be considered a "negative net spend"; when we in reality got 10m for a player that was probably booked at zero asset value in our books and could have left for free last summer.
Net spend is just not a good measure of anything.

 

[Cockney Phil]

Well, the club did extremely well not to "spend a ton and transform the team" under absolute useless managers like Moyes, LVG and the Portuguese idiot. Just imagine us spending 300mil under any of those 3. We'd have players like Cesc, Kroos, Perisic and Mguire here.

It's good that we haven't spent enormous amounts of money when we had the wrong type of managers at the club.

Also, in regards to the "dead wood". This needs to be done in a few windows with the same manager, the right manager that we know for sure he'll replace the dead wood with proper players that suit the plan put in place to improve the team.

For example, under Jose, you couldn't sell Jones, Smalling, Valencia, Fellaini, Young in a single window. You usually buy 2-3 players in a window and, if you sell 4-5, you need 4-5 replacements. No big club buys 6-7-8 players in a single window. It's too big of a risk and it's too big of a change in the dressing room.

We’re in a dilemma thanks to the ‘idiot’ because the squad is in a mess. Rom, Sanchez, and Fred are expensive players all under achieving. Sanchez and Rom in particular vis-a-vis their overall costs. After the rotations we are very brittle and probably need 8 players but as you say that’s too big a change. Unless younger players step up and I think this was what Ole was referring to when he said they would get game time before the end of the season. If we can find 3 good players in house and buy three in the summer that would be good work on Ole’s part and represent positive rebuilding.

 

[cyril C]

We don't need to buy 7 or 8 players in 1 go. Our Best 11 is more or less there, except 1 experienced CB to partner with Lindelof, and 1 RB, who can be Dalot if we are lucky. So we really need to buy 1 CB, 1 LB/RB, 1 MF and 1 winger this summer. We can leave the LB out for 1 season if necessary. Then further strengthen on backup in the following summer. 2 Summer signing is good enough, meanwhile need to assess Fred, Dalot, Bailly as to how good they are.