Man Utd - stock price

[Rood]

The price has actually been slowly falling for the past couple of weeks - not clear why but my guess would be that it is linked to our huge expenditure this summer, it is obviously far more than we have spent for many years

 

[KeninDC]

Hi, I'm quite new to reading and analysing Financial Statements (Just started University a few weeks ago). But may I ask how our squad having expenditure of nearly 25% of the company's actual worth not reasonable? Our Operating expenses are about 269.422m while our Revenue is at 336.943m, and profit for the 9 month period is at 29.661m. From what I understand, don't manufacturing firms operate similarly? For example, one of the largest plastic moulding firms in the world, Foxconn's expenses are about 20-30% of their firm's actual worth, which is in the hundreds of billions of dollars in terms of expenses. But their revenue exceeds it, and I would think that as an investor, Foxconn would be a relatively safe firm to invest in.

And from what I have read, many stockholders take priority in looking a firm's cash flows rather than the income/balance sheets. At 34.33m worth of available cash flows for the firm, I would think that our team is in a relatively healthy position? Isn't it good to note that our cash flows aren't too high, nor is it too low for a firm of United's size? (Not losing the opportunity cost of investing or lack of "rainy-day" funds that the fund may need to use in emergency situations)

That's just my first impression from what I currently know about Financial Statements and how I would personally assess a firm. Of course, there are major gaps in my knowledge, but United doesn't really sound like a high-risk investment to me.

United's EBITDA is running about £130M. Cash interest expenses are now running about £20M or so-leaving £110M or so cash for cap ex.

We'll see in the next financials how the transfers are structured-but typically transfer fees are paid over more than one year. Meaning that there's plenty of cash left to pay transfer fees. Assuming we pay the £130M or so fees over 3 years-the annual hit on EBITDA is £43M-or less than half of EBITDA remaining after interest expenses are paid.

And, EBITDA will increase as the Adidas deal kicks in, assuming United make it back into the CL.

The daily volume for United stock is very small-so price swings could just result from idiosyncratic factors-not sure there's much to it.

 

[Sassy Colin]

Player purchases go on the balance sheet and cash comes from the bank to pay for them. Player values will be amortised, presumably over the life of their contract but, amortisation is part of ITDA(mortisation), so has no effect on EBITDA. The loan fee for Falcao would however, go straight to P&L and would be included.

 

[C'est Moi Cantona]

It'll all be down to the impending release of the accounts.

Telegraph reckon it'll be turnover of around £430 million, Ebitda of around £130 million, maybe investors concerned that most of this has been taken up this year with transfers, on top of the new article that Moyes's reign cost us £50 million, this with our slow start to the season just got everyone a bit jittery.

It'll soon bounce back if we get CL next season, if we do, and with the new Adidas deal then the accounts for year after (2016) could see surpass Real Madrid in turnover again, reckon we'd looking at £530-£550 million, with Ebitda of £200 million +.

 

[KeninDC]

Player purchases go on the balance sheet and cash comes from the bank to pay for them. Player values will be amortised, presumably over the life of their contract but, amortisation is part of ITDA(mortisation), so has no effect on EBITDA. The loan fee for Falcao would however, go straight to P&L and would be included.

Right. Meant to that there is cash to pay the transfer fees assuming that they all aren't paid up front given EBITDA. If they are all paid up-front, then we should see a big slug of cash go out in this quarter.

 

[Will Absolute]

Coincidently I was just reading a fresh article from a fund I'm invested in. It quotes Warren Buffet and jumped to mind when I read the bolded part of your post:

Every investor has their own investment strategy and priorities though of course. I doubt your average investor is interested in sports clubs purely for financial reasons, as there must be better options elsewhere.

In his 1979 letter to shareholders, Mr Buffett stated: “The primary test of managerial economic performance is the achievement of a high earnings rate on equity capital employed (without undue leverage, accounting gimmickry, etc) and not the achievement of consistent gains in earnings per share.

Perhaps you can't apply Buffett's quote to a football club because the 'high earnings rate on equity capital employed' is so uncertain based on how these players who we've paid vast amounts for will perform. In the blink of an eye an injury can cause millions of pounds worth of wages to go down the pan, which makes this all a bit meaningless without the benefit of hindsight.

Hmm. In other words, "If you greedy b*****ds insist on big dividends, don't blame me if earnings per share drop off."

 

[C'est Moi Cantona]

Player purchases go on the balance sheet and cash comes from the bank to pay for them. Player values will be amortised, presumably over the life of their contract but, amortisation is part of ITDA(mortisation), so has no effect on EBITDA. The loan fee for Falcao would however, go straight to P&L and would be included.

So basically our amortised cost for this year's transfer would be around £30 million assuming they are all on 5 year contracts, plus £5 million for the Falcao loan?

Do you know what the cost of our previous 4 - 5 years worth of amortised fees are on the balance sheet?

 

[SirAF]

It'll all be down to the impending release of the accounts.

Telegraph reckon it'll be turnover of around £430 million, Ebitda of around £130 million, maybe investors concerned that most of this has been taken up this year with transfers, on top of the new article that Moyes's reign cost us £50 million, this with our slow start to the season just got everyone a bit jittery.

It'll soon bounce back if we get CL next season, if we do, and with the new Adidas deal then the accounts for year after (2016) could see surpass Real Madrid in turnover again, reckon we'd looking at £530-£550 million, with Ebitda of £200 million +.

Jesus.. We would be unstoppable.

 

[Castia]

It's obviously going to drop when we sell the best striker in the world, losing Danny Welbeck is like selling Ronaldo all over again.

 

[KeninDC]

So basically our amortised cost for this year's transfer would be around £30 million assuming they are all on 5 year contracts, plus £5 million for the Falcao loan?

Do you know what the cost of our previous 4 - 5 years worth of amortised fees are on the balance sheet?

According to the most recent financials (3Q 2014), United reported £162M of player registrations on its balance sheet and £13.9M of amortization of player registrations in the quarter.

 

[C'est Moi Cantona]

Jesus.. We would be unstoppable.

Love the Andersred blog (Andy Green), he estimates around £510 million but underestimates in several areas, so assuming CL we will easily make this, and yes have a bucket load to spend.

 

[C'est Moi Cantona]

According to the most recent financials (3Q 2014), United reported £162M of player registrations on its balance sheet and £13.9M of amortization of player registrations in the quarter.

So around £41 million per year from the profits then? plus this years, could get a bit eye watering for next years accounts.

 

[Shark]

This summer is probably only the beginning of our ability to finally flex our muscles in the market, as a club like United should. I doubt we'll suddenly go back to our penny pinching ways, especially with the money that'll be flowing in.

 

[C'est Moi Cantona]

This summer is probably only the beginning of our ability to finally flex our muscles in the market, as a club like United should. I doubt we'll suddenly go back to our penny pinching ways, especially with the money that'll be flowing in.

You'd like to think they've learnt their lesson that penny pinching doesn't work, and will invest properly now, maybe not £150 million every summer, but a proper budget of £60-£70 million + player sales, we can clearly afford it.

 

[KeninDC]

So around £41 million per year from the profits then? plus this years, could get a bit eye watering for next years accounts.

Assuming the £120M is all amortized over five years, the annual P&L hit is £24M. United reported a pre-tax profit for 3Q 2014 of £20M-and I assume that some of the player registrations included in the 3Q amortization will fully amortize, so not sure how much that expense will increase. But even if it increases by the full amount (£24M), there's still going to be profits.

I'm interested to see how the transfers are structured. Cash balance as of 3Q 2014 was £34M-so either a big slug of cash came in or the payments are structured over more than one year.

 

[Trizy]

I'm not sure how the stock works but my guess is that United's stock prices has no effect on the club since its the Glazers shares? i.e if the stocks fall its the Glazers that would lose money (if they sold shares) and not the football club?

 

[Rood]

Hi, I'm quite new to reading and analysing Financial Statements (Just started University a few weeks ago). But may I ask how our squad having expenditure of nearly 25% of the company's actual worth not reasonable? Our Operating expenses are about 269.422m while our Revenue is at 336.943m, and profit for the 9 month period is at 29.661m. From what I understand, don't manufacturing firms operate similarly? For example, one of the largest plastic moulding firms in the world, Foxconn's expenses are about 20-30% of their firm's actual worth, which is in the hundreds of billions of dollars in terms of expenses. But their revenue exceeds it, and I would think that as an investor, Foxconn would be a relatively safe firm to invest in.

And from what I have read, many stockholders take priority in looking a firm's cash flows rather than the income/balance sheets. At 34.33m worth of available cash flows for the firm, I would think that our team is in a relatively healthy position? Isn't it good to note that our cash flows aren't too high, nor is it too low for a firm of United's size? (Not losing the opportunity cost of investing or lack of "rainy-day" funds that the fund may need to use in emergency situations)

That's just my first impression from what I currently know about Financial Statements and how I would personally assess a firm. Of course, there are major gaps in my knowledge, but United doesn't really sound like a high-risk investment to me.

Your assesment is flawed - you cant compare us to a plastic moulding firm, the norms in one industry are completely different to another so if you want to take comparisons then you need to compare to other similar companies

and in any case the simple point here is that we have spent a lot more than in previous years and investors dont like rising costs so thats why it will impact the share price

 

[KeninDC]

I'm not sure how the stock works but my guess is that United's stock prices has no effect on the club since its the Glazers shares? i.e if the stocks fall its the Glazers that would lose money (if they sold shares) and not the football club?

Not all shares are held by the Glazers. About 16M shares are now held by the public-this will increase by another 12M as the Glazers sell some of their shares.

As you noted, changes in share prices only affect stockholders-which includes my large 10 share block. It has no effect on the club's financial health.

 

[Trizy]

Not all shares are held by the Glazers. About 16M shares are now held by the public-this will increase by another 12M as the Glazers sell some of their shares.

As you noted, changes in share prices only affect stockholders-which includes my large 10 share block. It has no effect on the club's financial health.

What about dividends?

 

[KeninDC]

What about dividends?

Dividends are paid out of retained earnings-and are at the discretion of the board. I suspect that nearly every stockholder does not anticipate receiving dividends for the foreseeable future.

Again-share price movements have zero effect on the club's day-to-day activities. And, while we can speculate as to the reasons for price changes-nobody knows for sure. The daily volume of United shares sold is very small-and so prices can have large changes for idiosyncratic reasons.

The 2014 financials are out Wednesday-we'll see what they contain. Maybe some investors want out expecting underwhelming results.

I had a teacher who used to say that financial predictions serve one purpose-they make weather predictions seem accurate.

 

[JustAFan]

Not all shares are held by the Glazers. About 16M shares are now held by the public-this will increase by another 12M as the Glazers sell some of their shares.

As you noted, changes in share prices only affect stockholders-which includes my large 10 share block. It has no effect on the club's financial health.

Also, not all shares are equal. The Shares we have floated do not carry the same voting rights as the Glazers shares. Do I have that right?

 

[KeninDC]

Also, not all shares are equal. The Shares we have floated do not carry the same voting rights as the Glazers shares. Do I have that right?

Yes-that's my understanding. The IPO created two classes of shares: A and B. About 16M of about 40M class A shares were offered to the public. The remaining Class A shares and all of the Class B shares were held by the Glazers. The Glazers announced that they are selling about 12M of their Class A shares this July.

The Class A shares have 1/10th the voting rights as each Class B share. So-even if all of the Class A shares are purchased by one investor, she would not even come close to purchasing a majority stake in the club.

 

[Sied]

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[dileno]

That's good figures. Now please let's get rid of the debt and the Glazers..

 

[Mykey]

That's good figures. Now please let's get rid of the debt and the Glazers..

Yes by selling the club again and most likely putting it back into even higher debt........ great idea

 

[Fully Fledged]

OMFG can't anybody spell "can't" or "their"?

'There' was spelled correctly it was just the wrong word to use.

 

[JustAFan]

I'm not sure how the stock works but my guess is that United's stock prices has no effect on the club since its the Glazers shares? i.e if the stocks fall its the Glazers that would lose money (if they sold shares) and not the football club?

Actually now that the Glazers do not own the shares, it really does not hurt them at all if the price falls, unless of course they want to issue some more shares. the Glazers already have their money from selling the shares that are now being traded on the stock exchange.

 

[KeninDC]

Actually now that the Glazers do not own the shares, it really does not hurt them at all if the price falls, unless of course they want to issue some more shares. the Glazers already have their money from selling the shares that are now being traded on the stock exchange.

After the announced sale of about 12M Ordinary Class A shares by the Glazers-they still own approximately 12M such shares. As you say-they can only realize income from those shares by selling them-but there are still shares for them to sell if they want to without issuing new shares.

Of course their control of United is ensured by the approximately 120M Class B shares that are not publicly traded.

 

[Sir A1ex]

'There' was spelled correctly it was just the wrong word to use.

So that was a random quote...

 

[Fully Fledged]

So that was a random quote...

Hey I'm quirky sometimes . My spelling and grammar is not always the best especially when writing on forums. But just thought I'd join in the comments on the front page. Not a dig just an observation. didn't realise until after I posted that the thread was two years old.

 

[RedTillI'mDead]

That's good figures. Now please let's get rid of the debt and the Glazers..

You do realise a big reason for our good figures is some astoundingly good commercial success. I think the Glazers have paid the debt with their commercial success, which is not only for the time they are here, but the future. You don't become billionaires being stupid. There is no reason a team the size of Manchester United cannot be both commercial successful and on the pitch, in fact as demonstrated this transfer window, success on the pitch breeds success off of it.

SAF has also been a key player in this, as has enabled the glazers to build up the commercial success and save money on players, but now a little more of the investment is coming back in. The balance is taking shape nicely and we are looking set-up as a commercial mammoth.

You could argue we would have this commercial success without the debt, but it's a moot point. The fact is they have pulled off creative and remarkable commercial deals that are are record breaking by miles. They are astute, sharp minded and critical for our longer term success.

I think the Glazers are actually a blessing in disguise. A little short-term debt investment for years and years of longer term solid commercial base. We have substantial foundations now that will be very difficult to knock.

 

[Rood]

I didnt see this article posted anywhere but Ive been away so apologies if it was, very interesting news that Baron Capital have been hoovering up Man Utd shares all year and according to the article now own 38% of the floated shares which equates to around 9% of the whole company ...

Here’s Why This Billionaire Fund Manager is Betting Big on Manchester United Stock

Manchester United (NYSE: Man Utd ) has been weak in the field and in the stock market this year. On the field, the Premier League soccer team had a slow start to the season after last year's seventh-place finish. The stock is up slightly in 2014, but it is down 6% over the last 12 months. One billionaire fund manager has raised his stake in the team even as the majority owners of Manchester United lower theirs. Read on to find out why Ron Baron is betting big on Manchester United...
http://www.fool.com/investing/gener...this-billionaire-fund-manager-is-betting.aspx​

 

[Sassy Colin]

The LvG effect? He believes good times are coming?

 

[Raoul]

Most likely because our shares are undervalued against the multiple revenue streams we have in terms of global brand, kit deals etc. Our stock price is actually down 20% in the past couple of months, which may have just been people selling their positions after it spiked when LvG came aboard. Now that there's a market dip, the big hedge funds are incentivized to buy the dip to consolidate their positions and profit once the market resumes its upwards drift.

 

[Flamingo Purple]

I'm not really interested in stocks but currently there's a few grand lying in my bank earning feck all. I'd like to learn about the stock market and I think buying stocks in United would be a fun thing to do, anyone got any advice/information?

 

[Rood]

Most likely because our shares are undervalued against the multiple revenue streams we have in terms of global brand, kit deals etc. Our stock price is actually down 20% in the past couple of months, which may have just been people selling their positions after it spiked when LvG came aboard. Now that there's a market dip, the big hedge funds are incentivized to buy the dip to consolidate their positions and profit once the market resumes its upwards drift.

in my opinion, it is down for 2 main reasons: increased supply following the new tranche of shares released a couple of months back plus worries about how much the club needs to spend in the transfer market to get back to the top.

Seems that Ron Baron is not too worried about these short term issues though and obviously sees long term value in the club. Not so sure how healthy it is for 1 investor to hold so much of the floated shares though.

 

[KeninDC]

in my opinion, it is down for 2 main reasons: increased supply following the new tranche of shares released a couple of months back plus worries about how much the club needs to spend in the transfer market to get back to the top.

Seems that Ron Baron is not too worried about these short term issues though and obviously sees long term value in the club. Not so sure how healthy it is for 1 investor to hold so much of the floated shares though.

Agree that the stock price decline is a function of so many new shares available from the Glazers.

Daily volume was thin before Baron increased their position, so the stock price was pretty variable. I was hoping that the additional supply would reduce that volatiliy-but this won't happen if Baron increases its holdings.

I'm hoping my 10 share block goes up-glad to see someone bullish on United.

 

[Raoul]

What's not mentioned very often is that George Soros owns something like 8% of the club. He could easily buy them outright if he wanted to, although its unlikely given that he's probably not interested in owning a club.

 

[Rood]

What's not mentioned very often is that George Soros owns something like 8% of the club. He could easily buy them outright if he wanted to, although its unlikely given that he's probably not interested in owning a club.

He doesn't own anything near that amount and never did - in the early days of the float he did buy around 8% of the float but that was only something like 1% of the club at the time, I think he did then sell some at a profit but I have no idea if he still even holds any.

 

[Raoul]

Could be wrong - but here's an article claiming he bought 7.85% (over 3m shares) in 2012.