Kudos OP
A Detailed Look at United's Finances
- Thread starter Lentwood
- Start date
-
In the latest episode of the United Hour Podcast, Nik and Imran hold a long overdue conversation about United's awful league form with 1 win in 7. They discuss a disappointing draw at Bournemouth, a not so disappointing draw against Liverpool and a crushing defeat at Chelsea - Is time nearly over for Erik Ten Hag?
Then in a special second half of the pod, Nik welcomes Natalie ( https://twitter.com/natalie_17) to discuss the fortunes of Manchester United Women as they booked a place in the FA Cup Final after a historic first ever win vs. Chelsea.
You think the Glazers and Woodward care about anything else?
In addition to the logical financial reason that have been discussed he'll also have 2 years left on his contract this summer with no intention of signing a new one. Ole knows he's gone, anything he says in the media is to protect his value.
I think we do not know. The Glazers have been doing some shady stuff for sure, but right now, the plan outlined by Ole is a serious one focused on football and I think Pogba plays a key role in it. Pogba doesn't want to sign a new contract if he's not helped with the team. This is a guy who considers Manchester United his home so... I hope Ole can show what he can do.
Remember Manchester United plc, a company incorporated in the Cayman Islands, is the ultimate parent company of Manchester United Football Club.
Nice tax loopholes here for the Yanks and also more importantly the company articles, as to how they operate are somewhat less stringent under Cayman law and provide other loopholes for governance purposes. I know I was invested in a UK listed oil company and there is a whole host of differences that allow the owners to expedite decisions and powers in a completely different way to one registered in the UK or USA. The Plc bit is kudos and allows the Glazers to draw money as and when by converting their voting shares via flotations on NYSE etc.
As I said before this in effect is family owned "cotton picking, tooting rooting, redneck" business.
Screw the average fan with ex PWC man Ed at the helm (oh our auditors are PWC). These Chartered accountants always run back to Daddy where they were trained.
Nice tax loopholes here for the Yanks and also more importantly the company articles, as to how they operate are somewhat less stringent under Cayman law and provide other loopholes for governance purposes. I know I was invested in a UK listed oil company and there is a whole host of differences that allow the owners to expedite decisions and powers in a completely different way to one registered in the UK or USA. The Plc bit is kudos and allows the Glazers to draw money as and when by converting their voting shares via flotations on NYSE etc.
As I said before this in effect is family owned "cotton picking, tooting rooting, redneck" business.
Screw the average fan with ex PWC man Ed at the helm (oh our auditors are PWC). These Chartered accountants always run back to Daddy where they were trained.
Absolutely brilliant posts in this thread by @midnightmare. Thanks a lot, mate. I do also believe that Pogba will be sold. Disney Land, other clubs can only dream of what we can do, my arse.
TLDR : The man in control of increasing revenue is absolutely inept at all football affairs.
Everyone knows the problem.
Hiring managers without a 3-5 year plan is insane.
Paying squad players more than world class players earn at other clubs is insane.
Overpaying on transfers is insane.
We are still repeating the same mistakes.
Bailly is a potentially world class centre half. But he’s not progressed since he signed. You can guarantee that his latest contract pays him more than he could earn anywhere else.
The same is true for most of our squad. The football side of the club is fcuked. We still operate like a top club. We’re not. We have a disparity between what we pay and what we receive from players. There’s no mystery there.
I think Ole is doing a good job, laying a foundation for what needs to come next. But the ‘Next’ needs to be planned and actioned.
Woodward is good at many things. Sadly he’s tasked with things he’s not good at. We’ll remain a shambles if our current operating model doesn’t change.
Everyone knows the problem.
Hiring managers without a 3-5 year plan is insane.
Paying squad players more than world class players earn at other clubs is insane.
Overpaying on transfers is insane.
We are still repeating the same mistakes.
Bailly is a potentially world class centre half. But he’s not progressed since he signed. You can guarantee that his latest contract pays him more than he could earn anywhere else.
The same is true for most of our squad. The football side of the club is fcuked. We still operate like a top club. We’re not. We have a disparity between what we pay and what we receive from players. There’s no mystery there.
I think Ole is doing a good job, laying a foundation for what needs to come next. But the ‘Next’ needs to be planned and actioned.
Woodward is good at many things. Sadly he’s tasked with things he’s not good at. We’ll remain a shambles if our current operating model doesn’t change.
Thanks Lentwood and midnightmare.
Excelent posts and so informative. As a member of several boards I understands some of it but not as detailed and deeply informative us you do. Thanks again. Best thread by far in ages.
My only conclusions is that these owners will never takes us forward to the point that we will be competitive to win the PL again. If not our academy starts to produce another golden generation.
Edward Woodward must take the majority of the blame of how poorly the football side of the business is doing. Absolutely chocking numbers. In my small little world of business he would be sacked with immediate effect with this information available. His involvement can’t be underestimated and he deserves every single criticism he gets. (I heard of some owners and c- level management who had been “taken care of” for less negative numbers -some Georgian and Ukraine fellows says hi. Yes. That’s the world we are living in)
I know I’m in minority but a Saudi takeover can’t be worse then this. I know my moral standards will be questioned but apart from wanting the best for my club I also believe in transparency. The best way IMO to challenge evil governments is by taken them out to open air and question all their dodgy decisions. Maybe I’m naive but the day I stop believing in progress of humans willingness to get better is the day to say eternal goodbye,
Excelent posts and so informative. As a member of several boards I understands some of it but not as detailed and deeply informative us you do. Thanks again. Best thread by far in ages.
My only conclusions is that these owners will never takes us forward to the point that we will be competitive to win the PL again. If not our academy starts to produce another golden generation.
Edward Woodward must take the majority of the blame of how poorly the football side of the business is doing. Absolutely chocking numbers. In my small little world of business he would be sacked with immediate effect with this information available. His involvement can’t be underestimated and he deserves every single criticism he gets. (I heard of some owners and c- level management who had been “taken care of” for less negative numbers -some Georgian and Ukraine fellows says hi. Yes. That’s the world we are living in)
I know I’m in minority but a Saudi takeover can’t be worse then this. I know my moral standards will be questioned but apart from wanting the best for my club I also believe in transparency. The best way IMO to challenge evil governments is by taken them out to open air and question all their dodgy decisions. Maybe I’m naive but the day I stop believing in progress of humans willingness to get better is the day to say eternal goodbye,
Its a long term approach for sure. All those yelling for his head ought to save their energies for another year or two.
I'd disagree on this - simply because I feel that the Saudis would never leave - and they just don't give a hoot what anyone thinks of them (let alone what they do when they do take offence). The Glazers, I believe will ultimately "cash out". When, remains to be seen. Unfortunately, it's a bit of a Catch-22.
Say the club churns out some absolute gems. Assume, if you will, that Mason delivers per potential, Brandon improves further and 3-4 of Laird, Garner, Levitt, Mejbri, Ramazani become stars. Suddenly, the need to buy eases a lot and the club would be getting CL football, potentially winning the odd trinket (maybe even the league someday) and they'd still be able to take tons out for themselves. Easy-peasy and everyone will drop their ire (as people did when we were crushing opponents under Fergie). Downside? We could have been dominating Europe, but would still be prioritizing money so would never do so. Upside? Well, we'd not have the Saudis in charge...
The other scenario sees us needing desperately to buy - but not doing so properly. The club slips further in revenues and valuation becomes tenuous. Now, this would see the Glazers sell - but would also mean we're in for more misery on the pitch till we get to that stage.
Personally, I wish they'd just float the bulk of stock on the market, take the money and leave. We go back to being a PLC and - specially if we list on the LSE - would be forced to have a proper governance structure. Put that in place and the club would absolutely crush all comers - and it would be a damned sight better than being run by oil barons...
We did hire a manager with a 6 years contract. Overpaying on transfers is a MUST. Do you think any EPL clubs can get away with 10m buy? Unless we disguise as Leeds Utd and only until the last minute reveal our true identity, still won't get any player cheap. The real problem, is that we have been recruiting players that don't fit in, or never good enough to be starting 11. We finally have Dalot and Bailly on the bench, but will you start them? We never have a true squad of 20 players fighting for starting 11, 1 or 2 injury and we are done.
I found this thread to be the most enjoyable and educational I've read in this forum. Here's an article from yesterday's New York Times about how private equity wrecks the organizations it obtains by leveraged buyouts. The parallels to Manchester United are obvious.
How Private Equity Buried Payless
Finance-driven capitalism was supposed to make the economy more dynamic. A failed shoe chain shows why it hasn’t happened.
https://www.nytimes.com/2020/01/31/...odule=Well&pgtype=Homepage§ion=The Upshot
How Private Equity Buried Payless
Finance-driven capitalism was supposed to make the economy more dynamic. A failed shoe chain shows why it hasn’t happened.
https://www.nytimes.com/2020/01/31/...odule=Well&pgtype=Homepage§ion=The Upshot
I dont really understand why people are blaming woodward for everything. There is no evidence that he has bought player that the managers did not want like some managers want. Sure he has not grotten every single player the managers want but that does not happen at any club. Its not as easy as a manager pointing to a player and woodward logging into his internet banking system and transfering any amount of money to the club the player currently is under contract to. Sure there are some bad handlings done, like the whole herrera signing and then the contract renewal. But i party blame the contract renewal due to mourinho.
I know it's a popular view that the Glazers curtailed spending between 2005 and 20010, but the reality is that we spent £156.8M on players in the 5 years before the takeover and £212M in FYs 2006-2010 (the five years after). If you think about it we bought VdS, Vidic, Evra, Park, Carrick, Nani, the twins, Anderson, Hargreaves, Berbatov, Valencia and a whole load of bit part players (not mention bringing in Tevez). (In the three years before the takeover, the PLC spent £84.2M; in the three years after we spent £112.2M.)
We also sold a lot of players - mostly those that were brought in in the previous five years and just didn't make it (think of Carroll, Howard, Ricardo, Forlan, Djemba squared, Kleberson, Saha, Heinze, Smith and many others). But also, of course, Ronaldo. In the three years before the takeover our net spend was £44.1M; in the three years after, £68.9M. In the two years after that (FYs2009 and 2010) we spent £99.5M, but that was swamped by the £99.2M that Real gave us for Ronaldo and the £13.9M in sales in 2010. It's worth pointing out that, in the three years around the Ronaldo sale we spent £154.2M on players (that's £53.5M more than we'd ever spent in a three year period before) and had a net spend of £21.8M, but did that count as spending some of the Ronaldo money?
I've got a few more quibbles but no time right now - hopefully I'll get back to it later.
(All the numbers come from audited Statements of Cash Flows - the only way of knowing how much we really spent on transfers.)
Last edited:
Again, nice try but not quite accurate. Let's think about the situation after the 2006 refinancing. At that point our capital base was £514M of Bank debt (at LIBOR plus a margin ranging from 2.125% to 5.0%), £138M of payment in kind debt (at 14.25%) that was secured by the Glazers personally, and £272M of equity financing supplied by the Glazers. The PIK debt was allowed to accumulate until November 2010 when the Glazers paid it down (by then it was about £220M) by putting another £250M of equity into the club. The Bank debt had been replaced by bonds (£250M at 8.375% and $425M at 8.75%) earlier that year.
(As before, all figures from audited accounts)
An interesting point about the PIK debt: although we never actually paid a penny of cash interest, we got to deduct the "notional" interest against income when we calculated our tax liability. So it actually made us money.
Looks who's back to defend the Glazers.
Well at least he is giving numbers to defend someone and that too from official financial reports. If you find difference in any of the number that he mentioned then go ahead and contest that. Or maybe you prefer Glazers took 1.8 Billion pounds group of Twitter?
So the refinancing gave us better terms. Just like every refinancing ever. I don’t see how this changes the fact that the club was forced to carry debt that was literally taken to help the owners become the owners. It had nothing to do with club requirements
Go on mate. Do show me the math for this. I’m a Finance M.B.A. myself (even if not a very good one). In the simplest terms - the debt made us pay shed loads of money to banks and later other institutional investors. 15 years later, we’re still carrying an almost identical level of debt as what we started out with - with the small issue being that we’ve paid a billion pounds in finance costs (730 Mn in the last 10 years alone - based on the club’s audited financials).
Debt only benefits shareholders in terms of “Return on Equity”. In businesses, this also helps the promoters / management deploy funds in multiple areas simultaneously as they multiply available funds through leverage. However, an LBO doesn’t allow that as the leverage is simply to get ownership and it takes away liquidity instead of creating it. For United, we lost the ability to deploy funds as most funds were now funneled towards finance costs.
Unlike Real Madrid or even Arsenal and Spurs, our debt isn’t going towards building a revenue-generating asset. We’ve not built anything out of our debt!
So stop with the Glazer-defending. Specially when you’re not presenting a single piece of data to show how the debt helped us. And it’s easy to see why. Because it didn’t
What number? The whole thread is replete with posts citing numbers and analysis showing how and where the club has lost funds and monetary power under the Glazer debt. What more evidence is needed? A Chapter 11 filing?
Some good work, Lentwood.
Operating profit\ profit and loss figure is not a good metric for determining our ability to invest in players and facilities.
For one thing, it already accounts for amortization (around 130m in 2019), which is a reflection of player investment. You're essentially saying that annual surpluses are too low for significant investment because, among other things, expenditure in players is high.
The profit and loss figure also reflects immaterial repeat, and non-repeat, non-cash items. For instance, the loss of 37m in 2018 is primarily due to a one-time, non-cash, 50m tax asset adjustment following on from the Trump tax cuts.
For your purpose, the best figure to use is probably Adjusted EBITDA (also quoted in the accounts); It's roughly the cash profits generated by the club in a given period.
With salaries at about 50% of revenue, other cash expenses at 20%, EBITDA comes in at about 30% of revenue. In 2019, Revenue was at 627m, EBITDA at 186m (30% of revenue).
It's roughly this figure that supports capital expenditure, cash interest payments, Dividends, etc. So, a rough approximation of the maximum net spend available in a year is EBITDA less dividends less interest less tax less other capital spend. With dividends and interest of around 40m, current cash profits would support a maximum net spend of around 130m yearly or thereabouts (without eating into cash reserves). You could say we're currently operating near peak capacity.
Operating profit\ profit and loss figure is not a good metric for determining our ability to invest in players and facilities.
For one thing, it already accounts for amortization (around 130m in 2019), which is a reflection of player investment. You're essentially saying that annual surpluses are too low for significant investment because, among other things, expenditure in players is high.
The profit and loss figure also reflects immaterial repeat, and non-repeat, non-cash items. For instance, the loss of 37m in 2018 is primarily due to a one-time, non-cash, 50m tax asset adjustment following on from the Trump tax cuts.
For your purpose, the best figure to use is probably Adjusted EBITDA (also quoted in the accounts); It's roughly the cash profits generated by the club in a given period.
With salaries at about 50% of revenue, other cash expenses at 20%, EBITDA comes in at about 30% of revenue. In 2019, Revenue was at 627m, EBITDA at 186m (30% of revenue).
It's roughly this figure that supports capital expenditure, cash interest payments, Dividends, etc. So, a rough approximation of the maximum net spend available in a year is EBITDA less dividends less interest less tax less other capital spend. With dividends and interest of around 40m, current cash profits would support a maximum net spend of around 130m yearly or thereabouts (without eating into cash reserves). You could say we're currently operating near peak capacity.
Nothing to do with defending anybody. I just hate to see stuff that's wrong. It's as easy to attack them with the right numbers as the wrong ones.
The OP asked for advice/correction if he was getting things wrong. He was, so I gave him the information he wanted. You seem very hostile to the presentation of verifiable figures - you shouldn't be, they can only make your case stronger.
I kind of hate to think that you're a Finance MBA - I ran an MSF program for several years and I would hope that you got more from your degree than you are showing. First, read what I said - I referred only the PIK debt. As you should know, with PIKs, the imputed interest can be allowed to be rolled into the principal - there is no cash out flow. However, the imputed interest is deductible in calculating your tax liability - which saves you money (you also get to deduct the issue costs). In the end the Glazers provided the funds to retire the Piks so they didn't cost us anything and they improved our cash flow situation. It has nothing to do with the rest of the debt - you can form your own opinion on that (which you obviously have and I don't disagree).
Where have I said anything in defense of the Glazers? All I've done is provide the OP with the information he requested. If you feel that somehow that threatens your case, then your case is not built on a strong foundation. Relying on lies and misinformation is never a good strategy - you can build a perfectly good case against the Glazers without it. With your MBA in Finance this should not be difficult for you.
Some great posts from OP and a few others in here, even if OP is off on numbers.
@midnightmare and @ravelston - I'd be interested in seeing some key takeaways of your thoughts on where the blame lies and the direction of the club from here.
@midnightmare and @ravelston - I'd be interested in seeing some key takeaways of your thoughts on where the blame lies and the direction of the club from here.
@ravelston - Mate, mate, mate! I already pointed out what I'm objecting to! The whole issue has to be seen and not just one aspect. The interest tax shield is a real thing, sure, but it does mean you have more debt! We did pay a lot of interest and finance costs. I see no investor reports from 2005-2012, so no data beyond 2009, but the fact remains that we paid out (net) 730 Mn GBP from 2009 to 2019! That's 73 Mn a year. And we still carry a similar amount of debt today to what we did when it all began.
Now, the Glazers haven't actually paid debt off themselves. Indeed, they drew loans from United! And took fees and salaries and dividends too. The thing with debt financing is that whether it's good or bad depends on how you use the debt. If you use debt to increase ability to deploy funds for profit-generation, then debt is great. It creates a multiplier and immediately helps RoE and of course valuations. But in our case, that doesn't work!
All of our spending since the takeover has been from operating cash surplus after covering finance costs as well as dividends. The only positive of the debt account has been our ability to spend 100 Mn or so at times when we don't have this surplus (which has resulted in the periods when debt has risen) but these situations would not have arisen at all were it not for the finance costs we carry. The Glazers have been the worst type of corporate raiders in that sense.
Now, the Glazers haven't actually paid debt off themselves. Indeed, they drew loans from United! And took fees and salaries and dividends too. The thing with debt financing is that whether it's good or bad depends on how you use the debt. If you use debt to increase ability to deploy funds for profit-generation, then debt is great. It creates a multiplier and immediately helps RoE and of course valuations. But in our case, that doesn't work!
All of our spending since the takeover has been from operating cash surplus after covering finance costs as well as dividends. The only positive of the debt account has been our ability to spend 100 Mn or so at times when we don't have this surplus (which has resulted in the periods when debt has risen) but these situations would not have arisen at all were it not for the finance costs we carry. The Glazers have been the worst type of corporate raiders in that sense.
Great read. Thank you
That's a tough one. The OP is absolutely correct in that there has been no shortage of spending over the last 7 years. We've actually added players with total booked fees (you get that from "Increases in Intangible Assets") of £1,076.6M in that period. Unfortunately that's left us with fees still to be paid of about £224M - basically around £100M for each of the next two years and then a little in the third year. If you assume that our EBITDA (essentially the cash we generate before interest and taxes) is going to be in the £180-200M range, then we don't have a lot of room to spend - also remembering £23M in interest has to be paid. We can spend more and push payments out into the future, but sooner or later the merry-go-round has to stop. As to how we spent so much and have so little to show for it - I'm in the Director of Football camp. You can't have a series of managers with different visions buying players that the next manager is just going to have to ditch. There has to be a consistent vision that the managers work within. That comes from a Director of Football and a dedicated footballing infrastructure. Whatever you think of the financing, I think the Glazers major fault has been not establishing that infrastructure. Woodward plus whoever the manager is has been a disaster.
Thanks for the insight.
You do know that surplus, and any other money generated by MUFC is their money? Right? You know... the principle of ownership and all that?
The bit in bold was exactly my point
Whether you use EBITDA or profit/loss, you can see that there is not this big pot of gold sat in reserve at the end of every financial year, like some fans seem to believe there is
Indeed. 'sell to buy' is pretty much the situation this year and next. Maximising the Pogba fee is going to be crucial for us - let's hope he has a good Euros.The bit in bold was exactly my point
Whether you use EBITDA or profit/loss, you can see that there is not this big pot of gold sat in reserve at the end of every financial year, like some fans seem to believe there is
Last edited:
My point is that operating profit is a poor indicator of what we can spend and isn't comparable to EBITDA. An EBITDA of 180m (current levels) supports a maximum net spend of 130+m annually, an amount that very few other clubs could match. Our predicament isn't the result of an incapacity to produce sufficient gold.The bit in bold was exactly my point
Whether you use EBITDA or profit/loss, you can see that there is not this big pot of gold sat in reserve at the end of every financial year, like some fans seem to believe there is
Net spend in 2019 was around 135m, this year (first quarter only), net spend is already at 159m. A further net 50+M falls due within a year. At which point our position in relation to what we owe/are owed in transfer fees improves. Net spend in 2020 will be heavy (even without further player expenditure) and probably a tad beyond what is currently sustainable. 2020 YE will likely see a dip in cash reserves, buts it's worth noting that the 307m we had in the bank at the beginning of the current year is a record high (meaning that despite heavy expenditure in the past few years, the club was operating within its limits).
Nobody is arguing with that though. My whole argument is based on the idea that over the last seven years, we've been operating at the ceiling of what we can realistically afford to spend (net) on transfers and wages
If you go back to the very first paragraph in the OP, you'll see that my point is United can't spend £200m+ net every Summer like some fans seem to believe we can.
Just to add to that - I think some fans are misled by certain prominent LUHG posters on social media into believing that the Glazers are somehow pocketing huge amounts of cash from the club that could be being spent on transfers....I don't really see that as being the case and I think the figures back that up.
Tweet
— Twitter API (@user) date
Depressing reading, if there’s a time for the Glazers to sell it’s now!
391m debt... Yikes.
So we are borrowing money to sign players.
So we are borrowing money to sign players.
And people wonder why Ole didn't replace lukaku, herrera and sanchez
It all makes much more sense now. We are shit broke.
That doesn't depress me at all, to be honest. A well-run enterprise should leverage (take debt) for asset acquisition as this improves returns and allows the enterprise to remain profitable while acquiring more assets than routine cash flows would allow. The alarming part really has been our operational expenditure and the inability to invest much if at all, while we continually focus on in-year returns and remaining a cash cow for the owners.
We aren't broke - and this debt will not cripple us. If we do - for example - end up in CL because of the leveraged acquisitions, we'd be able to wipe out that part of the debt with the next year's added CL income alone! The point we should however realize here is that there is no way we keep Pogba and add players this summer. We are desperately in need of a good deal to sell Pogba, any deals at all to offload Sanchez, Rojo, Jones and Smalling and then we can actually start additions.
Note:
1. Adding debt / acquiring assets (players or stadium improvements) does not hit the P&L beyond the first year's depreciation cost
2. Adding debt would save us money on tax
3. Wages however go directly to the P&L - so savings or increases there have a dramatic effect on ability to spend (within FFP as well)
4. Our net debt remains significantly lower than gross debt - which means we are ok on that aspect
The key question now is, "Will the Glazers be willing to spend enough to return to the top? Or will they choose to spend just enough to make it to CL?"
Always love the 'we have no money' argument by some fans. It's like saying someone with a mortgage is flat broke. There is still £140m in the bank.
I get all of that but if you look into what we have been doing since 2013 is we have spent poorly and have increased operation cost close to where it doesnt make any sense. But while we have been doing that our CL hit rate is close to 50% and we haven´t been competitive in any way or form. There is a need for investments both on the pitch and into the infrastructures of the club, with the current cash flow and going by our past 5 year form we look strapped for cash to realize either of these and would be betting on something that we haven´t been reaching consistently for the last 7 years. The tasks in hand will cost huge amount of money and it looks like we don´t have the money or the success to borrow for it.
No it's not. Read the thread! We're spending about the ceiling of what we can afford to spend currently. The debt has nothing really to do with that argument, other than the financing costs