Are United in Financial Trouble?

[midnightmare]

No. We do not have financial trouble.

The MUFC financial statements and obligations are publicly available and they show no signs of a struggling enterprise. The club is managing its debt just fine and has a healthy overhead.

I just did go through the financials and my interpretation is that while we're not "struggling", we don't have the money to spend without selling. And selling a lot. We had a net outflow on player acquisitions of 135 Mn for the year ending 30 June 2019. The acquisition costs cover (largely) Pogba, Fred, Lukaku and Dalot - and do not include Maguire, AWB. For the next (ongoing now) year, excluding any bonus-linked payments (75 Mn potentially, excluding Maguire, AWB and James), we already have 225 Mn due in payments already. That's 225 Mn over and above wages (332 Mn last year) that we have to pay. Our forecast is that revenue will drop to 560-580 Mn for this ongoing year.

Now, regardless of all else, our financials are also clear that:
1. We need to maintain an EBITDA level of 65 Mn+
2. We need to maintain a D/E of <2
If we don't do this, our interest (financing) costs rise - across the term facility as well as on the senior secured notes.

You need to look into the financials in more detail if you're to assess spending capability. All the numbers above are there in the annual report and this is before I delve into the schedules. Note also that this is not everything - since the club isn't forced to make disclosures to the extent demanded by the SEC from an American firm. Fact remains that unless the club decides to dip into reserves (thereby hitting EBITDA and also D/E) or draws down significantly more debt, we can't buy without selling significantly.

PS - managing debt just fine? We have gross debt of close to 650 Mn GBP. This is after the club took on 660 Mn nearly fifteen years ago, refinanced and has paid 800 Mn in financing costs in the last 10 years alone. I don't think that is (by any measure) a sign of the club "managing its debt just fine".

 

[ivaldo]

We spent a NET of about £60m last summer and so far this window we've spent nothing. On top of which we've removed millions off the wage bill. The cut backs are there and are staring you in the face.

Why do you keep regurgitating this made up number? It's not a net spent of £60m, no matter how often you repeat it, it doesn't make it true.

 

[midnightmare]

We spent a NET of about £60m last summer and so far this window we've spent nothing. On top of which we've removed millions off the wage bill. The cut backs are there and are staring you in the face.

Untrue. See the image below - it's from the annual report.
Note - this does not include the transfer spend on Maguire, AWB and James (as per the annual report it's mainly for Fred, Lukaku, Dalot and Pogba)
There's more too - which I've posted below.

What you say is correct, but it would be a tedious argument if we looked up all the different amounts which we are paying, in installments, to various clubs, for different players.
An easier metric is the net spend. We can also use total spend.
IMO net spend is a good indicator of how willing we are, to pay top dollar for the best talent.

Ummm. No. Easiest thing in the world is also the best - a simple look at the annual report - which shows the below.
We owe (before factoring AWB, Maguire and James or another 75 Mn in attainable bonuses for past purchases) 225 Mn for next year.

We have spent almost as much as City in past 7 years, but we don't have the benefit of a sugar daddy. BUT alot of our transfers are paid via staggered instalments and apparently we still owe £200m+ to be paid via instalments for transfers already happened .... have we basically already spent our transfer budget for the next few years? Add to that the suspicion that Glazers also underinvesting because they want to sell ASAP.

Anyone know what the cashflow demands on the club are for next few years, given existing contracts and delayed transfer instalments? Maybe I'm completely wrong, but this is where I also share suspicion with the OP regarding another 'Leeds United' scenario.

Combination of those 2 factors would make sense to me: a qualified accountant could tell me if that was true with a good look at our published records. Howson covers this in below VDO (start @ 4m10sec)

You don't need a qualified accountant. See above. This is plain reading - and it's there in the official annual report which is carried on the website.
I am not even going into the dirty details. These are just the highlights!

 

[Nou_Camp99]

Breaking it down over years of re-payments is obviously how it works but fans don't look at it that way. Pretty hard to keep track of.

Essentially we bought Maguire (80) AWB (50) and James (16) and sold Lukaku (74) plus 1/2 other cheaper squad players. Fellaini also sold in the previous January window. Not to forget the loan deals (Sanchez, Smalling etc) and letting Herrera go. Lots of wages off the books.

NET spend was pathetic and showed no ambition whatsoever.

 

[midnightmare]

Breaking it down over years of re-payments is obviously how it works but fans don't look at it that way. Pretty hard to keep track of.

Essentially we bought Maguire (80) AWB (50) and James (16) and sold Lukaku (74) plus 1/2 other cheaper squad players. Fellaini also sold in the previous January window. Not to forget the loan deals (Sanchez, Smalling etc) and letting Herrera go. Lots of wages off the books.

NET spend was pathetic and showed no ambition whatsoever.

I literally just showed how you're wrong in saying this. "Pretty hard to keep track of" doesn't mean you ignore what's there right in front of you.
Our NET spend (before Maguire, AWB and James) was 135 Mn - and the second highest in our history. If you can't see that, I'm lost for words.
We didn't spend more because "FINANCE".

 

[Nou_Camp99]

I literally just showed how you're wrong in saying this. "Pretty hard to keep track of" doesn't mean you ignore what's there right in front of you.
Our NET spend (before Maguire, AWB and James) was 135 Mn - and the second highest in our history. If you can't see that, I'm lost for words.
We didn't spend more because "FINANCE".

Yeah before Maguire, AWB etc. That's including fees from previous windows etc. I totally get that.

When you ask an average football fan how much money they spent in the window do they give you all the fees from deals from previous years? No, no they don't. People are interested in what we spent THAT window.

That window we didn't do enough because of mistakes from the past clearly. Jesus people like you are hard work.

 

[red thru&thru]

I literally just showed how you're wrong in saying this. "Pretty hard to keep track of" doesn't mean you ignore what's there right in front of you.
Our NET spend (before Maguire, AWB and James) was 135 Mn - and the second highest in our history. If you can't see that, I'm lost for words.
We didn't spend more because "FINANCE".

Thanks for all the above. So would you say, we are being more stringent with our finances because turnover is due to drop this coming financial year and we have to show profits of about £50m due to loans from banks?

 

[midnightmare]

Thanks for all the above. So would you say, we are being more stringent with our finances because turnover is due to drop this coming financial year and we have to show profits of about £50m due to loans from banks?

Combination of things.
1. FFP - we do need to stay profitable and manage the wage:turnover ratio; this becomes tough when turnover will drop by 10% instead of increasing
2. D/E - if D/E rises, we face an increase in interest rate; now D (Debt) is computed after netting off "cash in hand" so dipping into "reserves" will impact D/E; not doing so needs us to sell massively to fund buying

Note that we will be facing a monumental net spend if we spend now without big sales. 225 Mn obligations would still mean 150 Mn even if we take out a full 75 Mn for Lukaku (can't as that'll be installments too). So ideally, we'll sell Pogba for a bunch (knocking the obligations off for him) and also sell Alexis and maybe 3-4 more. That could make (theoretically) funds available to buy a few - but even then, it won't be too many we can afford so I think another summer of 2/3 purchases is likely.

EBITDA requirement of 65 Mn should be very easy to meet since amortization comes after this (and that's where transfers hit the financials).
Our big issue will be how well we can sell players given the ridiculous wages they're on (Alexis, for example).

 

[elmo]

Something definitely isn’t right. I’m no more in the know than anyone in here but there has to be a reason why:

a) we’ve gone from being arguably the best team in the world with a strong and committed squad to this. I mean, our squad is a disgrace for a club of our size and supposed wealth.

Key positions have been neglected, we’ve made do with players that anyone of us can see isn’t the quality we should have on the field if we have aspirations of winning anything. No other top team would dream of being in a situation where playing Lingard, Mata, Perreira, so regularly is a real option.

b) Why haven’t we replaced Rashford? We sold Lukaku and now Rashford, the source of the bulk of our goals this season, is injured long term. We should have identified a replacement the moment that happened. The window is open. Anyone of us can clearly see that without him we are going to struggle to score. If we don’t replace his goals then it is going to be a long season.

c) Look at Liverpool’s, City’s and Spurs bench. Look at ours. Our squad is so thin. Someone has let it go that way. Ed? Ole? Jose? Whoever it is, the fact is we haven’t invested in our squad properly and no one is taking charge and sorting it out.

We hear we’re rebuilding but at the pace it is happening it will never be enough.

It’s a shambles and last night was an embarrassment. I don’t like savaging our club but we clearly have negligent, apathetic and profit driven owners that are unconcerned that we aren’t winning. But we also have a manager who is so far out of his depth I feel sorry for him.

Anyone can see that we need to do some serious shopping and players who would improve our squad could be found easily, we don’t even have to look at the ‘World Class’ players.

Woodward thought all he had to do was sign players for expensive amount and that would do because he knows feck all about football.

 

[Tom Cato]

I just did go through the financials and my interpretation is that while we're not "struggling", we don't have the money to spend without selling. And selling a lot. We had a net outflow on player acquisitions of 135 Mn for the year ending 30 June 2019. The acquisition costs cover (largely) Pogba, Fred, Lukaku and Dalot - and do not include Maguire, AWB. For the next (ongoing now) year, excluding any bonus-linked payments (75 Mn potentially, excluding Maguire, AWB and James), we already have 225 Mn due in payments already. That's 225 Mn over and above wages (332 Mn last year) that we have to pay. Our forecast is that revenue will drop to 560-580 Mn for this ongoing year.

Now, regardless of all else, our financials are also clear that:
1. We need to maintain an EBITDA level of 65 Mn+
2. We need to maintain a D/E of <2
If we don't do this, our interest (financing) costs rise - across the term facility as well as on the senior secured notes.

You need to look into the financials in more detail if you're to assess spending capability. All the numbers above are there in the annual report and this is before I delve into the schedules. Note also that this is not everything - since the club isn't forced to make disclosures to the extent demanded by the SEC from an American firm. Fact remains that unless the club decides to dip into reserves (thereby hitting EBITDA and also D/E) or draws down significantly more debt, we can't buy without selling significantly.

PS - managing debt just fine? We have gross debt of close to 650 Mn GBP. This is after the club took on 660 Mn nearly fifteen years ago, refinanced and has paid 800 Mn in financing costs in the last 10 years alone. I don't think that is (by any measure) a sign of the club "managing its debt just fine".

The current EBITDA projection is £155-165 million. Adjusting from £185m the past fiscal year that accounts reduced operation profit for EL football. We're not anywhere near a £65million mark, nor will we ever get there with the current income models, so that is not a concern of any significance. However we as a club don't have infinite financial reserves and don't have a bottomless pit of money either. Or are you confusing EBIDTA with Operating Margin?

By managing the clubs debt I mean that the club is in accordance with its loan obligations and paying shareholder dividends thanks to continued net profits. Unfortunately we keep paying shareholder dividends when that money would obviouly be better invested into the club. The club is saddled with debt, but is in no danger of defaulting on its obligations. That is what i mean by managing the debt just fine. Most companies that debts of this size unless they are in a cash position to not have to take enormous loans. It's really nothing "new" that MUFC would have a large bank loan. The annoying thing is how we got that loan in the first place.

The club has a large cash reserve to pull from, and structures payment obligations to not affect EBIDTA negatively. Which is (in small part) why for example we're haggling on the Fernandes evaluation.

I believe (without checking, its just something I heard without bother to factcheck it) that Maguire was paid upfront. Either the whole sum or a large chunk of it.

Woodward has been very clever and ensured that the club reduces its wage bill significantly in the case we don't pull income from CL participation. Wage expenditure is down -8.8% this season compared to last.

Since our Net spend has been kept so low (this season by chance rather than intention), we are in a comfortable place with regard to taking on new purchase obligations. The key is obviously what amount of money is upfront. No doubt the bank have a cash reserve obligation to the club as to not fail to not default on its loan terms.

Now, we can obviously only take on so much before we have to sell. IF the club buys Jadon Sancho, Maddison, Grealish and Koulibaly (I read a report that a purchase has been agreed for the summer, not sure if thats a reliable source) we have to sell Paul Pogba, there's no way around that. Most likely we can only afford 3 of those, even with the departure of Pogba at an assumed £150million valuation. Unfortunately Pogba playing injured an entire season will put a damper on his value.

 

[ivaldo]

Breaking it down over years of re-payments is obviously how it works but fans don't look at it that way. Pretty hard to keep track of.

Essentially we bought Maguire (80) AWB (50) and James (16) and sold Lukaku (74) plus 1/2 other cheaper squad players. Fellaini also sold in the previous January window. Not to forget the loan deals (Sanchez, Smalling etc) and letting Herrera go. Lots of wages off the books.

NET spend was pathetic and showed no ambition whatsoever.

Still not responding hey? Seriously, stop lying. It’s a bit sad at this point. Your made up NET spend has been debunked countless times; just accept you're wrong. Why would you lied about it? It's pathetic.

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[Nou_Camp99]

The people on here who go to great lengths to defend this club are also part of the problem. Feck me you're delusional and deserve what's happening !!!

Ask a Chelsea fan what they spent last summer. They will say ZERO because of the transfer ban. They won't include monies going out that they still owed from previous windows. More spin than Woodward you lot. Shameless.

 

[ivaldo]

See my response above. You can twist things and spin things however you like. You're just all delusional zombies. You deserve the Glazers.

No, see EVERY available source that quotes NET spend. There's enough wrong with this club without having to make up shit. It really is damning that, despite being corrected on this repeatedly, you persist with it.

We are all delusional zombies? None of us are enamoured with the Glazers. I don't like how my club is being run. Does that mean I have to pretend every half arsed lie is the truth? As I said, it's a little sad at this point. Try a little critical thinking.

 

[midnightmare]

The people on here who go to great lengths to defend this club are also part of the problem. Feck me you're delusional and deserve what's happening !!!

Ask a Chelsea fan what they spent last summer. They will say ZERO because of the transfer ban. They won't include monies going out that they still owed from previous windows. More spin than Woodward you lot. Shameless.

So because they're brainless farts ignoring facts, we should be too? Even when confronted with data? Fair enough...
There is so much to criticize legitimately. Indeed, the actual numbers form the basis for the most damning indictment of the owners - but you choose to go off on a tangent on clearly incorrect "data". And yet, others are delusional?

 

[Nou_Camp99]

So because they're brainless farts ignoring facts, we should be too? Even when confronted with data? Fair enough...
There is so much to criticize legitimately. Indeed, the actual numbers form the basis for the most damning indictment of the owners - but you choose to go off on a tangent on clearly incorrect "data". And yet, others are delusional?

Brainless? Fans don't include money going out from transfer deals that happened 3 years ago when they talk about one specific window. Jesus wept. Are you Woodward in disguise on here? You'd make a terrific spin doctor.

 

[Flying high]

The best thing about our current situation is that people are starting to wake up to the Glazers. We simply cannot afford 100m a year in dividends and loan costs.

People have busy lives, they want to watch the football, not join protest groups or study financial reports. I get that. But we are a in a dire position and I don't think a couple of mediocre signings in the summer will be enough to calm the natives.

 

[midnightmare]

Brainless? Fans don't include money going out from transfer deals that happened 3 years ago when they talk about one specific window. Jesus wept. Are you Woodward in disguise on here? You'd make a terrific spin doctor.

Ummm. Fan opinion doesn’t change facts. Nor does it shape financials. I have absolutely no idea what you’re on about.

 

[Nou_Camp99]

Ummm. Fan opinion doesn’t change facts. Nor does it shape financials. I have absolutely no idea what you’re on about.

I'm on about that our club is a shit show. You seem to be defending it. Delusional Glazer apologist !!!

 

[midnightmare]

I'm on about that our club is a shit show. You seem to be defending it. Delusional Glazer apologist !!!

Are you absolutely unable to read and understand? Look at the numbers. We’re in a financial mess but that’s not because of net spend. We’re in a mess and that’s why we can’t spend. We have a very high net spend for next season despite not having bought anyone.
We’re in this mess because of Glazer debt and bad purchasing.
You want to slam the Glazers? Use the data and find the right sticks. There’s so many to choose from.
By choosing to ignore those and pick fake facts you only undermine yourself.

 

[Nou_Camp99]

Are you absolutely unable to read and understand? Look at the numbers. We’re in a financial mess but that’s not because of net spend. We’re in a mess and that’s why we can’t spend. We have a very high net spend for next season despite not having bought anyone.
We’re in this mess because of Glazer debt and bad purchasing.
You want to slam the Glazers? Use the data and find the right sticks. There’s so many to choose from.
By choosing to ignore those and pick fake facts you only undermine yourself.

You're the one defending them, not me.

 

[GiddyUp]

You think Manchester United needs to make profit on players to be financial stable? Sure extra money is nice but Manchester United dont have to sell players to be financial stable... atleast not as long as sponsors bring in the money.

Never said anything about financial stability. I said our negotiations for ins and out have been very poor, especially outs. That is indisputable.

 

[red thru&thru]

Combination of things.
1. FFP - we do need to stay profitable and manage the wage:turnover ratio; this becomes tough when turnover will drop by 10% instead of increasing
2. D/E - if D/E rises, we face an increase in interest rate; now D (Debt) is computed after netting off "cash in hand" so dipping into "reserves" will impact D/E; not doing so needs us to sell massively to fund buying

Note that we will be facing a monumental net spend if we spend now without big sales. 225 Mn obligations would still mean 150 Mn even if we take out a full 75 Mn for Lukaku (can't as that'll be installments too). So ideally, we'll sell Pogba for a bunch (knocking the obligations off for him) and also sell Alexis and maybe 3-4 more. That could make (theoretically) funds available to buy a few - but even then, it won't be too many we can afford so I think another summer of 2/3 purchases is likely.

EBITDA requirement of 65 Mn should be very easy to meet since amortization comes after this (and that's where transfers hit the financials).
Our big issue will be how well we can sell players given the ridiculous wages they're on (Alexis, for example).

Aah thanks. Makes sense. But big deals from Alibaba and Haier should help.

 

[red thru&thru]

You're the one defending them, not me.

I'm no Glazer apologist and most on here will tell you. But we are where we are, in terms of finances, mostly because of Ed. Now I do blame the Glazer's for a lot but we they have given Ed money to spend in the past. But we just could not sustain spend and increase in wages, along with hiring and sacking managers. That is all on Ed.

But what has been suggested a shift has begun to take place in terms of finances and recruitment, due to the mismanagement of the money. There were 6 Glazer siblings, who could call the shots. All must have different views. Now it's likely to be Joel and Avram. So now we should see some changes, with Alibaba and Haier deals coming in.

 

[ivaldo]

You're the one defending them, not me.

He says the club are in a financial mess because of the Glazers, and your take from that is he’s defending them? Jesus wept. You seem incapable of differentiating between ‘disputing your made up numbers,’ with ‘defending them.’ You must be Wumming at this point.

 

[Nou_Camp99]

He says the club are in a financial mess because of the Glazers, and your take from that is he’s defending them? Jesus wept. You seem incapable of differentiating between ‘disputing your made up numbers,’ with ‘defending them.’ You must be Wumming at this point.

Oh the irony. He isn't saying that at all. He's saying it's Woodward's fault surely.

However it all just feels like excuses for them. Bad spending needs to stop for sure. Nobody can argue that. I don't think spending £74m net in the summer (let's not go into details from previous fees owed again) was anywhere near enough given our squad. And guess what? It's going to cost us again because with how average Chelsea, Spurs n Arsenal have been we could have walked a CL place this season. They will never learn though. More drop offs next season from another season of no CL football and Adidas deal going down too. The walls are closing in for the parasites. I'm delighted.

 

[ivaldo]

Oh the irony. He isn't saying that at all. He's saying it's Woodward's fault surely.

However it all just feels like excuses for them. Bad spending needs to stop for sure. Nobody can argue that. I don't think spending £74m net in the summer (let's not go into details from previous fees owed again) was anywhere near enough given our squad. And guess what? It's going to cost us again because with how average Chelsea, Spurs n Arsenal have been we could have walked a CL place this season. They will never learn though. More drop offs next season from another season of no CL football and Adidas deal going down too. The walls are closing in for the parasites. I'm delighted.

He said, "We’re in this mess because of Glazer debt and bad purchasing." Your take? He's defending the Glazers and blaming Woodward. Man alive. He's literally mentioned their name as a route cause of our failing in the very message you responded to, saying he's defending them.

 

[midnightmare]

He said, "We’re in this mess because of Glazer debt and bad purchasing." Your take? He's defending the Glazers and blaming Woodward. Man alive. He's literally mentioned their name as a route cause of our failing in the very message you responded to, saying he's defending them.

Let it go. I just stopped after I realized what I was up against.

 

[Black.Ghost]

The club cannot spend what it does not have.

Why not, the Glazers did!

We have clearly over paid for a lot of our players, a combination of bad decisions by both the Glaers and Woodward. But the managers have been the ones asking for the players (the majority of time) and they have just been getting it horrendously wrong. So what options does that leave us with?

Stick with Ole, and see where the youth plan goes. Offload any we can make real money for (Pogba, Maguire, Martial, Sanchez), and buy players in the £30-40 million range to supplement the youth. There will still be players who want to play for Utd. Yes, it's a dire situation, but at the moment, I think we still have enough pull, added to the fact that they can't all play for Liverpool or City. After those two, where else would you want to go in PL realisitically? Utd, all day long. We can still get some good players.

Switch manager. Poch is absolutely the obvious candidate. He has already shown he can do well and improve players with a limited budget. That being said, be in a position to allow new players each window. I am sure there are many factors as to why it didn't work at Spurs in the end, but the lack of new talent in the squad to keep the others hungry and on their toes will surely have played a big part.

In addition to both of these, remove the current scouting network because they are clearly inept. Go shopping in Latin America, Africa and Asia, forget Brisith / Europe. The rest of the world isn't stupid by any means, but the money goes a lot further in other places. There's so much talent around that we are missing out on.

I'm in favour of youth, definitely, but we need 3/4 older heads in there of the Roy Keane ilk to drag them along, but coupled with at least looking at what managerial options are available, and would they support this approach. We need leaders all the way through the organisation. I like OGS, I just don't see him as that leader.

Whether we need money or not, if the Saudis come in, I'm done, but that is more suited to the other thread than here. I'm only making the point due to the money link.

 

[KevinJoh]

What we have is basically that we are still paying for the bad decisions made in transfer market with LVG and Jose. With current prices, we need to:
- clean up the obligations
- sell players we can't afford and cut the wage bill
- transform the club back to the one that is not paying big transfer fees, unless for specific players, and finding value in the market
- all of that while managing results good enough to take us to top 4 so we are not laughing stock and we can get commercial partners
I would say it is not possible with current setup, but lets be optimistic.

 

[red thru&thru]

Most of a problems can be sorted with a proper and experienced structure.

 

[DartMaverick]

clean up the obligations

How can you do this? We are talking about 400-500 mln pounds.

 

[KevinJoh]

How can you do this? We are talking about 400-500 mln pounds.

well, you have to right? So, at the end of the year you can for example sell De Gea for around 100m and play Henderson. You will lose something (if any in current form), but you can fix one position and lower wage bill. You can sell Pogba, and do the same. We already cleaned like 10 players with bigger salaries, so I guess that process is already happening. And it will take time, therefore I don't expect us competing unless we somehow manage to find great cheap players like we used to do in Fergie's time (players like Vidic, Evra, Chicharito)