A Detailed Look at United's Finances

[sp_107]

Let's start by saying this is not a defence of the Glazers. The Glazer family have been nothing short of disastrous for Manchester Utd, I don't believe there is even a debate to be had here. However, one thing has continued to frustrate me recently - and that's this idea that Manchester United can and should spend £200m+ net every single year.

I believe our fans are right to question the impact the Glazers have had on our spending over the duration of their tenure as owners of the club. I believe it is an indisputable fact that between 2005 and 2010, the Glazers dramatically curtailed transfer spending in order to balance the books. During this period, we actually had a positive net spend, which is crazy for a club who at the time where competing for major domestic and European trophies.

The reason for this is that when the Glazers initially bought the club, they did so by borrowing £275m at an interest rate of 14.25%. The debt grew steadily during the early years of Glazer ownership and this resulted in us paying back upwards of £70m in interest repayments alone up until around 2012. All during a time when the clubs annual turnover peaked at around the £363m mark.

In 2010, the debt was restructured to be much more manageable as the Glazers used a £500m bond to wipe out the high-interest PIK loans and borrow at a much cheaper rate. As of 2013, finance costs have been reduced by about 66% and now stand at about £20-25m per annum.

However, I and many others rightly believe that a huge amount of damage was done during this period. Those first ten years of Glazer ownership are often referred to sarcastically by Utd fans as the 'no value in the market years' - as this was the line the Glazer puppet Alex Ferguson would often trot out to justify their penny pinching approach. That of course is absolute, utter nonsense and looks even more ridiculous now with hindsight than it so obviously was at the time. Even before we get into the recent transfer inflation caused by the new TV deal, it's just an incredibly nonsensical statement to make because the 'value' of a player is what a club is willing and able to pay.

Some posters may remember I created a not-to-dissimilar thread to this one where I analysed the Glazer spending up until around 2017 which transfer inflation applied for context. The purpose of this thread was to disprove the notion that United had spent enough money to guarantee trophies and was partly a defence of Moyes, LvG and Jose Mourinho - who at the time was constantly beaten with the stick of having a squad costing £900m which was 20pts behind City's less expensive squad (as the gutter press constantly delighted in reminding us without context). My point at the time being obviously that we had done most of our spending during peak transfer inflation years whereas City had sensibly accumulated a squad consisting of many players purchased before fees increased exponentially (Aguero, Silva, Fernandinho, Kompany etc...etc...)

Nevertheless, this thread is not about going over old ground. So yes, the Glazer family cut costs between 2005 and 2010 (especially) and harmed the club immeasurably during this period.

HOWEVER - as I said in the opening paragraph, my frustration is with a few very prominent voices on social media who are constantly misunderstanding (deliberately or not) our current predicament and misleading a large percentage of our fanbase in the process. These social media warriors are constantly banging on about our lack of spending, the lack of investment, cost-cutting etc...etc...writing about all manner of conspiracy theories as to why Ole has been appointed, why we are focusing on young, English players, why we have missed out on certain players, amongst many other examples.

This notion of cost-cutting post-2014 simply does not stand up to any kind of scrutiny whatsoever and it's incredibly frustrating for me because I believe constantly moaning about spending (or lack thereof) ignores the real issues with how the club is being run in 2020. I personally believe that one man is responsible for our predicament right now and that man is Ed Woodward. The man who was given a warchest by the Glazer family to go and revitalise and rebuild Manchester United after the retirement of Alex Ferguson - only for him to piss this money down the drain faster than you can say "Adult Disneyland".

So, I'm not a financial expert by any means and I am happy to be corrected on any of the statements I make or the figures I put forward below. However, I have spent some time going over our Annual Reports since 2013 and have found the following (apologies if I've interpreted any of this wrong - correct me if you can)

NET TRANSFER SPEND

	2012/13	2013/14	2014/15	2015/16	2016/17	2017/18	2018/19	2019/20	Total
PSG	£131,620,000​	£98,460,000​	£42,570,000​	£83,880,000​	£67,230,000​	£157,140,000​	£101,700,000​	-£9,810,000​	£672,790,000​
Manchester City	£14,000,000​	£89,800,000​	£60,000,000​	£73,700,000​	£165,050,000​	£177,550,000​	-£2,050,000​	£91,350,000​	£669,400,000​
Manchester United	£51,100,000​	£66,700,000​	£104,200,000​	£28,150,000​	£102,000,000​	£136,200,000​	£47,030,000​	£65,500,000​	£600,880,000​
Barcelona	£29,250,000​	£65,790,000​	£76,430,000​	£11,430,000​	£81,860,000​	£127,800,000​	-£4,460,000​	£87,390,000​	£475,490,000​
Inter Milan	£11,480,000​	£44,040,000​	-£5,890,000​	-£11,760,000​	£126,950,000​	£52,480,000​	£13,950,000​	£97,970,000​	£329,220,000​
Juventus	£44,550,000​	-£11,560,000​	£24,920,000​	£67,840,000​	£17,020,000​	£16,830,000​	£134,100,000​	£20,740,000​	£314,440,000​
Chelsea	£72,000,000​	£49,309,000​	£5,100,000​	£9,100,000​	£51,300,000​	£80,200,000​	£144,600,000​	-£152,000,000​	£259,609,000​
Liverpool	£41,300,000​	£20,300,000​	£38,380,000​	£28,000,000​	-£6,460,000​	-£28,000,000​	£127,500,000​	-£28,600,000​	£192,420,000​
Real Madrid	£4,500,000​	£55,800,000​	-£12,000,000​	-£62,410,000​	-£6,750,000​	-£79,200,000​	£25,790,000​	£186,750,000​	£112,480,000​
Tottenham	-£1,300,000​	-£16,300,000​	-£1,250,000​	-£7,850,000​	£27,700,000​	£24,750,000​	-£11,000,000​	£61,000,000​	£75,750,000​

These are the net transfer spends of some sample 'big spenders' from across Europe since 2012. I picked this date as to the best of my understanding, 2013 was the last year we paid out £70m+ in interest repayments.

Quite clearly you can see from this table that the notion of any kind of cost-cutting or restrictive spending (restrictive NOT restricted - PLEASE NOTE) just does not stack up. Only the two clubs owned by countries and pumped full of oil-money have spent more than Utd net over the last seven years. I've got United supporting friends who mean well but just like this forum they seem to believe that clubs like Barcelona and Real Madrid spend £200m+ net every Summer. They don't. Simple. It's a myth. Remember, whether enough money has been spent to win trophies is not my argument here...my argument is that I think it's pretty difficult to say 'lack of spending' or 'lack of investment' is the reason we're currently 5th and playing in the Europa League when clubs like Real and Liverpool have managed to win European trophies on much more limited budgets.

OPERATING PROFIT

Operating Profit	2013​	2014​	2015​	2016​	2017​	2018​	2019​
Manchester United	£146,419,000​	£23,835,000​	-£483,000​	£36,598,000​	£39,209,000​	-£37,629,000​	£18,881,000​

Now, another common argument when you point to our net spending is 'we are Man Utd, we SHOULD be spending that every year' and very often users of this argument will point to our status as one of the richest clubs in the world, as measured by TURNOVER. However, what this clearly ignores is the amount of profit we are making. As the old saying goes, 'turnover is vanity, profit is sanity'. That certainly applies when you're measuring a companies/club's ability to invest in capital assets i.e. players! So what are we asking the Glazer family to do here? You can see the club is not making huge amounts of profit which is somehow being left sat in the bank or taken out of the club by the Glazers (hang on...before anybody jumps in at this point...will clarify shortly!)...so are we asking the Glazers to spend beyond their/our means? The facts and figures don't lie...there's barely been any surplus since 2014 to actually spend on additional transfers!

FINANCE COSTS

INTEREST	2013​	2014​	2015​	2016​	2017​	2018​	2019​	Overall
Manchester United	72,082,000​	27,668,000​	35,419,000​	20,459,000​	25,013,000​	24,233,000​	25,470,000​	230,344,000​

Now, when I said a few sentences ago that there wasn't a huge amount of surplus money sat left in the bank every year or being taken out of the club by the Glazer family, I appreciate many will have instantly thought of the interest payments the club makes every year. Now again, remember, I'm not here to defend the Glazer's ownership. They are parasites in that they have contributed nothing and only take out of the club. The interest payments above demonstrate this. United would have been £230m better off at least since 2013 had we not been leveraged with debt by the Glazer family. So in that respect and in the eyes of fans I'm sure, £230m extra could have been spent on footballers. (I realise this is too simplistic for any finance bods out there as corporate debt reduces tax etc...etc...but let's not go down complex financial wormholes here!) However, ask yourself....think back to the net spend table. Would we be significantly better off had we spent another £230m over a 7 year period under the direction of Ed Woodward? I for one am not at all convinced we would be. Looking at the interest payments and money taken out IS relevant to the anti-Glazer argument of course....but I don't think it addresses the issue of WHY we are SO bad right now. Clearly, interest payments or not, enough money has been spent since 2012 to enable us to AT LEAST be competitive and the truth is we're far from it and our squad is an appalling mess.

WAGES

Wages are often overlooked by those who often cry under-investment because it REALLY doesn't suit the narrative in any context. Now, many are aware that Utd set an upper limit of 50% wages/turnover....i.e. no more than 50% of the clubs turnover should be spent on wages. This is actually fine and many clubs have higher percentages ratios without having such a big total bill. I accept that argument and it's reasonable to expect the club to spend 50% of it's turnover on wages moving forward. No problem here. However, look at the table below;

WAGES	2013​	2014​	2015​	2016​	2017​	2018​	2019​
Manchester United	£202,561,000​	£232,242,000​	£263,464,000​	£295,935,000​	£332,356,000​	£363,189,000​	£367,056,000​

Would any fan in their right and sane mind describe those annual wage bill as 'value for money'?. I think we all know the answer to that! How on this Earth do we spend £367m annually on wages for the absolute mob that turn out for us week in, week out? This is very relevant to me for a few reasons. One, offering players insane wages makes it hard to sign new players and difficult to shift existing players on daft wages. Two, money spent on wages is a HUGE percentage of our overall expenditure, therefore reducing spending on wages COULD be re-invested in the transfer market as capital expenditure. Three, I keep seeing this 'cost-cutting' argument...well of course costs have to be cut don't they! I believe Alexis pushed us up to the 'ceiling' of 50% wages/turnover and I believe the club has recognised that if we want to remain profitable moving forward and continue to be able to invest in players, this has to be reduced before new signings can come in.

CONCLUSION

I have decided to summarise a lengthy OP with a few bullet-points for ease of review.

* Glazers undeniably cut-costs whilst high-interest loan repayments were made, especially against the backdrop of much reduced revenues compared to recent years.

* This very likely hurt us well into the LvG/Jose era, with respect to actually competing for trophies

HOWEVER

* Fans need to re-assess their expectations on what Manchester Utd CAN spend...even if the Glazers did want to benevenently pile every penny earned back into the club £200m+ summers every year put the club in financial jeopardy

* The Glazers DO drain money out of the club but this hasn't stopped us having one of the highest net transfers spends in the world over the last seven years

* The Glazers clearly threw off the shackles once Ed took over as CEO and interest payments had been reduced/TV money increased significantly.

* Ed Woodward has overseen all of that money being wasted

* I believe the club have recognised this and are attempting to remedy the situation by moving players on and setting a platform for a re-build

* I do not believe any conspiracy theories about prolonged 'cost-cutting' exercises. It makes no sense for the Glazers to deliberately weaken the team and devalue the brand. Remember, they bought the club with just £270m of their own money...the long term strategy is SURELY to increase the value of the club significantly and sell for a big profit.

* Following on from the above....why would the Glazers cut costs to make £12m a year between them in dividends when a successful Man Utd could be worth £3.5/4BN to a potential buyer. It would be like having a Golden Goose and slaying it for it's meat!

* Would United be better off without the Glazers? Almost certainly so.

* Are our recent troubles down to under-investment and cost-cutting when it comes to the playing staff....I believe not. I believe our issues sit firmly with Ed Woodward (and again arguably with the Glazers as the people who appointed him and continue to allow him to do a job he is making a right pigs ear of!)

Comments and input welcome - please read the OP carefully before critiquing, I can't be bothered fielding loads of lazy responses where posters trot out lines they've read on Twitter that have been addressed above!

Very detailed and well researched post. I am wondering why 370M wage bill as I see upto 170M on first team and academy wages. Can anyone explain what's happening to other 200Mil ?

Rashford-200K, Martial-250K, Greenwood-15K, James-50K, Alexis-250K (Another 250K from Inter)
Lingard-80K, Mata-150K, Pogba-290K, Matic-120K, Fred-120K, SMT-30K, Perrera-30K
Shaw-150K, Rojo-80K, Jones-100K, Baily-80K, Maguire-190K, Lindelof-120K, AWB-90K, Dalot-30K
DeGea-375K, Romero-70K, Grant-30K

*** What a waste of money on players in BOLD, we really need to address this ASAP.

If you add all these then its 3M/week means 156M per year, you can add another 20 mil for academy and coaching staff so wondering whats happening to other 200 Millions?

 

[midnightmare]

Let's start by saying this is not a defence of the Glazers. The Glazer family have been nothing short of disastrous for Manchester Utd, I don't believe there is even a debate to be had here. However, one thing has continued to frustrate me recently - and that's this idea that Manchester United can and should spend £200m+ net every single year.

I believe our fans are right to question the impact the Glazers have had on our spending over the duration of their tenure as owners of the club. I believe it is an indisputable fact that between 2005 and 2010, the Glazers dramatically curtailed transfer spending in order to balance the books. During this period, we actually had a positive net spend, which is crazy for a club who at the time where competing for major domestic and European trophies.

The reason for this is that when the Glazers initially bought the club, they did so by borrowing £275m at an interest rate of 14.25%. The debt grew steadily during the early years of Glazer ownership and this resulted in us paying back upwards of £70m in interest repayments alone up until around 2012. All during a time when the clubs annual turnover peaked at around the £363m mark.

In 2010, the debt was restructured to be much more manageable as the Glazers used a £500m bond to wipe out the high-interest PIK loans and borrow at a much cheaper rate. As of 2013, finance costs have been reduced by about 66% and now stand at about £20-25m per annum.

However, I and many others rightly believe that a huge amount of damage was done during this period. Those first ten years of Glazer ownership are often referred to sarcastically by Utd fans as the 'no value in the market years' - as this was the line the Glazer puppet Alex Ferguson would often trot out to justify their penny pinching approach. That of course is absolute, utter nonsense and looks even more ridiculous now with hindsight than it so obviously was at the time. Even before we get into the recent transfer inflation caused by the new TV deal, it's just an incredibly nonsensical statement to make because the 'value' of a player is what a club is willing and able to pay.

Some posters may remember I created a not-to-dissimilar thread to this one where I analysed the Glazer spending up until around 2017 which transfer inflation applied for context. The purpose of this thread was to disprove the notion that United had spent enough money to guarantee trophies and was partly a defence of Moyes, LvG and Jose Mourinho - who at the time was constantly beaten with the stick of having a squad costing £900m which was 20pts behind City's less expensive squad (as the gutter press constantly delighted in reminding us without context). My point at the time being obviously that we had done most of our spending during peak transfer inflation years whereas City had sensibly accumulated a squad consisting of many players purchased before fees increased exponentially (Aguero, Silva, Fernandinho, Kompany etc...etc...)

Nevertheless, this thread is not about going over old ground. So yes, the Glazer family cut costs between 2005 and 2010 (especially) and harmed the club immeasurably during this period.

HOWEVER - as I said in the opening paragraph, my frustration is with a few very prominent voices on social media who are constantly misunderstanding (deliberately or not) our current predicament and misleading a large percentage of our fanbase in the process. These social media warriors are constantly banging on about our lack of spending, the lack of investment, cost-cutting etc...etc...writing about all manner of conspiracy theories as to why Ole has been appointed, why we are focusing on young, English players, why we have missed out on certain players, amongst many other examples.

This notion of cost-cutting post-2014 simply does not stand up to any kind of scrutiny whatsoever and it's incredibly frustrating for me because I believe constantly moaning about spending (or lack thereof) ignores the real issues with how the club is being run in 2020. I personally believe that one man is responsible for our predicament right now and that man is Ed Woodward. The man who was given a warchest by the Glazer family to go and revitalise and rebuild Manchester United after the retirement of Alex Ferguson - only for him to piss this money down the drain faster than you can say "Adult Disneyland".

So, I'm not a financial expert by any means and I am happy to be corrected on any of the statements I make or the figures I put forward below. However, I have spent some time going over our Annual Reports since 2013 and have found the following (apologies if I've interpreted any of this wrong - correct me if you can)

NET TRANSFER SPEND

	2012/13	2013/14	2014/15	2015/16	2016/17	2017/18	2018/19	2019/20	Total
PSG	£131,620,000​	£98,460,000​	£42,570,000​	£83,880,000​	£67,230,000​	£157,140,000​	£101,700,000​	-£9,810,000​	£672,790,000​
Manchester City	£14,000,000​	£89,800,000​	£60,000,000​	£73,700,000​	£165,050,000​	£177,550,000​	-£2,050,000​	£91,350,000​	£669,400,000​
Manchester United	£51,100,000​	£66,700,000​	£104,200,000​	£28,150,000​	£102,000,000​	£136,200,000​	£47,030,000​	£65,500,000​	£600,880,000​
Barcelona	£29,250,000​	£65,790,000​	£76,430,000​	£11,430,000​	£81,860,000​	£127,800,000​	-£4,460,000​	£87,390,000​	£475,490,000​
Inter Milan	£11,480,000​	£44,040,000​	-£5,890,000​	-£11,760,000​	£126,950,000​	£52,480,000​	£13,950,000​	£97,970,000​	£329,220,000​
Juventus	£44,550,000​	-£11,560,000​	£24,920,000​	£67,840,000​	£17,020,000​	£16,830,000​	£134,100,000​	£20,740,000​	£314,440,000​
Chelsea	£72,000,000​	£49,309,000​	£5,100,000​	£9,100,000​	£51,300,000​	£80,200,000​	£144,600,000​	-£152,000,000​	£259,609,000​
Liverpool	£41,300,000​	£20,300,000​	£38,380,000​	£28,000,000​	-£6,460,000​	-£28,000,000​	£127,500,000​	-£28,600,000​	£192,420,000​
Real Madrid	£4,500,000​	£55,800,000​	-£12,000,000​	-£62,410,000​	-£6,750,000​	-£79,200,000​	£25,790,000​	£186,750,000​	£112,480,000​
Tottenham	-£1,300,000​	-£16,300,000​	-£1,250,000​	-£7,850,000​	£27,700,000​	£24,750,000​	-£11,000,000​	£61,000,000​	£75,750,000​

These are the net transfer spends of some sample 'big spenders' from across Europe since 2012. I picked this date as to the best of my understanding, 2013 was the last year we paid out £70m+ in interest repayments.

Quite clearly you can see from this table that the notion of any kind of cost-cutting or restrictive spending (restrictive NOT restricted - PLEASE NOTE) just does not stack up. Only the two clubs owned by countries and pumped full of oil-money have spent more than Utd net over the last seven years. I've got United supporting friends who mean well but just like this forum they seem to believe that clubs like Barcelona and Real Madrid spend £200m+ net every Summer. They don't. Simple. It's a myth. Remember, whether enough money has been spent to win trophies is not my argument here...my argument is that I think it's pretty difficult to say 'lack of spending' or 'lack of investment' is the reason we're currently 5th and playing in the Europa League when clubs like Real and Liverpool have managed to win European trophies on much more limited budgets.

OPERATING PROFIT

Operating Profit	2013​	2014​	2015​	2016​	2017​	2018​	2019​
Manchester United	£146,419,000​	£23,835,000​	-£483,000​	£36,598,000​	£39,209,000​	-£37,629,000​	£18,881,000​

Now, another common argument when you point to our net spending is 'we are Man Utd, we SHOULD be spending that every year' and very often users of this argument will point to our status as one of the richest clubs in the world, as measured by TURNOVER. However, what this clearly ignores is the amount of profit we are making. As the old saying goes, 'turnover is vanity, profit is sanity'. That certainly applies when you're measuring a companies/club's ability to invest in capital assets i.e. players! So what are we asking the Glazer family to do here? You can see the club is not making huge amounts of profit which is somehow being left sat in the bank or taken out of the club by the Glazers (hang on...before anybody jumps in at this point...will clarify shortly!)...so are we asking the Glazers to spend beyond their/our means? The facts and figures don't lie...there's barely been any surplus since 2014 to actually spend on additional transfers!

FINANCE COSTS

INTEREST	2013​	2014​	2015​	2016​	2017​	2018​	2019​	Overall
Manchester United	72,082,000​	27,668,000​	35,419,000​	20,459,000​	25,013,000​	24,233,000​	25,470,000​	230,344,000​

Now, when I said a few sentences ago that there wasn't a huge amount of surplus money sat left in the bank every year or being taken out of the club by the Glazer family, I appreciate many will have instantly thought of the interest payments the club makes every year. Now again, remember, I'm not here to defend the Glazer's ownership. They are parasites in that they have contributed nothing and only take out of the club. The interest payments above demonstrate this. United would have been £230m better off at least since 2013 had we not been leveraged with debt by the Glazer family. So in that respect and in the eyes of fans I'm sure, £230m extra could have been spent on footballers. (I realise this is too simplistic for any finance bods out there as corporate debt reduces tax etc...etc...but let's not go down complex financial wormholes here!) However, ask yourself....think back to the net spend table. Would we be significantly better off had we spent another £230m over a 7 year period under the direction of Ed Woodward? I for one am not at all convinced we would be. Looking at the interest payments and money taken out IS relevant to the anti-Glazer argument of course....but I don't think it addresses the issue of WHY we are SO bad right now. Clearly, interest payments or not, enough money has been spent since 2012 to enable us to AT LEAST be competitive and the truth is we're far from it and our squad is an appalling mess.

WAGES

Wages are often overlooked by those who often cry under-investment because it REALLY doesn't suit the narrative in any context. Now, many are aware that Utd set an upper limit of 50% wages/turnover....i.e. no more than 50% of the clubs turnover should be spent on wages. This is actually fine and many clubs have higher percentages ratios without having such a big total bill. I accept that argument and it's reasonable to expect the club to spend 50% of it's turnover on wages moving forward. No problem here. However, look at the table below;

WAGES	2013​	2014​	2015​	2016​	2017​	2018​	2019​
Manchester United	£202,561,000​	£232,242,000​	£263,464,000​	£295,935,000​	£332,356,000​	£363,189,000​	£367,056,000​

Would any fan in their right and sane mind describe those annual wage bill as 'value for money'?. I think we all know the answer to that! How on this Earth do we spend £367m annually on wages for the absolute mob that turn out for us week in, week out? This is very relevant to me for a few reasons. One, offering players insane wages makes it hard to sign new players and difficult to shift existing players on daft wages. Two, money spent on wages is a HUGE percentage of our overall expenditure, therefore reducing spending on wages COULD be re-invested in the transfer market as capital expenditure. Three, I keep seeing this 'cost-cutting' argument...well of course costs have to be cut don't they! I believe Alexis pushed us up to the 'ceiling' of 50% wages/turnover and I believe the club has recognised that if we want to remain profitable moving forward and continue to be able to invest in players, this has to be reduced before new signings can come in.

CONCLUSION

I have decided to summarise a lengthy OP with a few bullet-points for ease of review.

* Glazers undeniably cut-costs whilst high-interest loan repayments were made, especially against the backdrop of much reduced revenues compared to recent years.

* This very likely hurt us well into the LvG/Jose era, with respect to actually competing for trophies

HOWEVER

* Fans need to re-assess their expectations on what Manchester Utd CAN spend...even if the Glazers did want to benevenently pile every penny earned back into the club £200m+ summers every year put the club in financial jeopardy

* The Glazers DO drain money out of the club but this hasn't stopped us having one of the highest net transfers spends in the world over the last seven years

* The Glazers clearly threw off the shackles once Ed took over as CEO and interest payments had been reduced/TV money increased significantly.

* Ed Woodward has overseen all of that money being wasted

* I believe the club have recognised this and are attempting to remedy the situation by moving players on and setting a platform for a re-build

* I do not believe any conspiracy theories about prolonged 'cost-cutting' exercises. It makes no sense for the Glazers to deliberately weaken the team and devalue the brand. Remember, they bought the club with just £270m of their own money...the long term strategy is SURELY to increase the value of the club significantly and sell for a big profit.

* Following on from the above....why would the Glazers cut costs to make £12m a year between them in dividends when a successful Man Utd could be worth £3.5/4BN to a potential buyer. It would be like having a Golden Goose and slaying it for it's meat!

* Would United be better off without the Glazers? Almost certainly so.

* Are our recent troubles down to under-investment and cost-cutting when it comes to the playing staff....I believe not. I believe our issues sit firmly with Ed Woodward (and again arguably with the Glazers as the people who appointed him and continue to allow him to do a job he is making a right pigs ear of!)

Comments and input welcome - please read the OP carefully before critiquing, I can't be bothered fielding loads of lazy responses where posters trot out lines they've read on Twitter that have been addressed above!

I've collated a bunch of the financials myself, so here's what I'd highlight:

1. You've focused on the P&L and not looked at the Cash Flow statements. Hence your Net Spends are off by a huge amount annually. The key is that clubs will assess ability to spend based on P&L impact (amortization-linked) and more importantly, on cash flows. Hence, a look at the cash flows is essential. That shows our net spends annually as below:

	2010​	2011​	2012​	2013​	2014​	2015​	2016​	2017​	2018​	2019​	Total
Payments for players	(44.27)	(25.40)	(59.00)	(46.00)	(92.90)	(117.40)	(138.10)	(193.80)	(155.00)	(178.20)	(1,050.07)
Receipts from player sales	13.86	14.00	9.40	9.70	14.00	20.60	38.40	51.80	46.90	43.00	261.66
P/(L) on transfers (Net Spend)	(30.42)	(11.40)	(49.60)	(36.30)	(78.90)	(96.80)	(99.70)	(142.00)	(108.10)	(135.20)	(788.42)

2. You've not shown how the Glazers have drawn dividends even in loss-making years - for example, we paid a dividend of GBP 22 Mn in 2018 - despite making a loss! That is just ridiculous (and I run a business, so I should know). Further, contrast that with investment in Old Trafford; we've spent a total of GBP 96.3 Mn on all capital infrastructure (including Old Trafford, Carrington, Mayfair, vehicles etc.) in the decade from 2010 - 2019. By contrast, we've paid out GBP 88.7 Mn in dividends in the last four years alone! So the priority is clearly "cash back before investment"

On your point about that just increasing tax, that doesn't work. Tax applies only after all outflows, so if we invested the money instead of paying as dividends, that's tax-neutral (there'll be depreciation / amortization over the periods so even staggered payouts net off overall).

3. You've not highlighted "gross debt" - i.e. debt repayment due in future without netting off the cash balances etc. and you've also neglected showing the movement of outstanding debt. Fist, this is the figure of money repaid by Man United against debt (as reported): (Note that some numbers differ from yours given that there has been restatement of numbers as well; plus, these numbers come from the cash flow statements and therefore do not net off as the P&L will)

	2010​	2011​	2012​	2013​	2014​	2015​	2016​	2017​	2018​	2019​	Total
Interest paid	(49.49)	(167.50)	(47.10)	(73.60)	(27.70)	(42.60)	(13.20)	(19.50)	(18.90)	(19.00)	(478.59)
Debt Repaid	(507.26)	(202.50)	(28.80)	(259.30)	(5.00)	(227.90)	(0.40)	(3.80)	(0.40)	(0.40)	(1,235.76)
Proceeds from borrowings*	502.26	-	-	209.20	-	272.50	-			-	983.96

* - this shows the inflow received when the refinancing was done.

Interestingly, this means we've paid GBP 730.4 Mn in servicing our debt. So, how has this impacted debt outstanding? Should reduce, surely?
Interestingly, it's not! Despite the IPO in between (which should have been used for servicing debt in the first place).
After our initial PIKs were refinanced, we've barely made a scratch in reducing debt.

	2012​	2013​	2014​	2015​	2016​	2017​	2018​	2019​
Outstanding Gross Debt Payable in future	608.586​	488.288​	409.61​	579.179​	598.631​	681​	651.665​	650.561​
Consolidated Net Debt						503​	496​	511.232​

Why am I noting this? Simply because the Glazers aren't actually focused a jot on reducing debt burden. And that's because a large part of debt is in senior secured notes - a part of which are also with the Glazers (so they earn interest on those too). In effect, United aren't focusing on the future at all. All the focus is on year-to-year movement of the financials.

Anyway, I could go on and on but will leave just a couple more thoughts, the first of which is on what this means for the next window.
Here's a look at what we still owe for past transfers (the 2019 number does not include the AWB and Maguire fees):

	2012​	2013​	2014​	2015​	2016​	2017​	2018​	2019​
Min. Payments due for next year (Players)	77.558​	71.451​	96.765​	119.104​	214.566​	183.531​	259​	226​
Min. Payments due for next year (Debt)	39.985​	30.603​	31.099​	18.676​	22.602​	22.087​	24.205​	21​
Total Min. Due for next year	117.543​	102.054​	127.86​	137.78​	237.168​	205.618​	283.391​	246.546​

Note that this does not include any bonus clauses that may be triggered. And that's why we'll need to sell before we buy and should expect (another) quiet summer.

Final thought - what we're paying as salaries (additional to dividends etc.) to Ed, Joel and co. ("Key personnel"):

	2012​	2013​	2014​	2015​	2016​	2017​	2018​	2019​
"Key management compensation"	7.064​	8.599​	7.78​	9.751​	11.109​	12.326​	12.915​	10.729​

No time for conclusions and inferences. Maybe later...

 

[sp_107]

In brief

• We failed to capitalise the market by buying core of good players before inflation(2015).
• We failed to control wages (Sanchez,Pogba,Degea for example and still paying wages to players like Mata,Jones).
• We failed to get rid of dross for a long time and still we haven't fully addressed it.
• We failed to develop and SELL a player for more than 100M+ which could have brought our NET spend to low figures(Liverpool-Coutino, Chelsea-Hazard and Madrid-Ronaldo) did this so there is no shame to it to balance books.
• We failed to install a DOF and good scouting network to bring in some great players.
• We failed to identify the next generation progressive managers but went for finished articles.
• We failed to Improve the winning culture by not recruiting players with leadership qualities.

 

[MackRobinson]

Good post but a couple of points are misleading:

FINANCE COSTS

INTEREST	2013​	2014​	2015​	2016​	2017​	2018​	2019​	Overall
Manchester United	72,082,000​	27,668,000​	35,419,000​	20,459,000​	25,013,000​	24,233,000​	25,470,000​	230,344,000​

Now, when I said a few sentences ago that there wasn't a huge amount of surplus money sat left in the bank every year or being taken out of the club by the Glazer family, I appreciate many will have instantly thought of the interest payments the club makes every year. Now again, remember, I'm not here to defend the Glazer's ownership. They are parasites in that they have contributed nothing and only take out of the club. The interest payments above demonstrate this. United would have been £230m better off at least since 2013 had we not been leveraged with debt by the Glazer family. So in that respect and in the eyes of fans I'm sure, £230m extra could have been spent on footballers. (I realise this is too simplistic for any finance bods out there as corporate debt reduces tax etc...etc...but let's not go down complex financial wormholes here!) However, ask yourself....think back to the net spend table. Would we be significantly better off had we spent another £230m over a 7 year period under the direction of Ed Woodward? I for one am not at all convinced we would be. Looking at the interest payments and money taken out IS relevant to the anti-Glazer argument of course....but I don't think it addresses the issue of WHY we are SO bad right now. Clearly, interest payments or not, enough money has been spent since 2012 to enable us to AT LEAST be competitive and the truth is we're far from it and our squad is an appalling mess.

1st and 2nd bolded parts: It would be safe to assume part of the original debt was used to boost the clubs working capital, which funds day to day operations such as transfers and payroll. Also, it's important to note a good part of the debt was secured against the Glazer family fortune, not the club, but I'm unsure if those numbers reflect that.

3rd bolded part: You are 100% correct

 

[midnightmare]

Good post but a couple of points are misleading:


1st and 2nd bolded parts: It would be safe to assume part of the original debt was used to boost the clubs working capital, which funds day to day operations such as transfers and payroll. Also, it's important to note a good part of the debt was secured against the Glazer family fortune, not the club, but I'm unsure if those numbers reflect that.

3rd bolded part: You are 100% correct

1. No, the original debt was not secured to fund working capital. It was secured to buy the club. It's what is called a "leveraged buyout" which in this case was a lot like a standard mortgage.
2. It was not secured against the Glazer fortune. It was secured with Manchester United as collateral (hence the club carrying the debt). This is also reflected in the outstanding 425 Mn worth of "senior secured notes". In effect senior debt has first claim over the collateral, and the collateral is the club here
3. The original debt ballooned because we were starting off at something like 16.25% interest at the time and literally had no money. So, we drew more to service debt while continuing to run as a going concern. This caused debt to skyrocket

Another interesting fact that nobody mentions is how the Glazers actually took loans from Manchester United. Yup, that's right. At a time when the club was taking on more debt simply in order to continue to run, the owners (and the guys who saddled the club with the debt) went and drew debt from the club at low rates of interest.

 

[MackRobinson]

2. You've not shown how the Glazers have drawn dividends even in loss-making years - for example, we paid a dividend of GBP 22 Mn in 2018 - despite making a loss! That is just ridiculous (and I run a business, so I should know). Further, contrast that with investment in Old Trafford; we've spent a total of GBP 96.3 Mn on all capital infrastructure (including Old Trafford, Carrington, Mayfair, vehicles etc.) in the decade from 2010 - 2019. By contrast, we've paid out GBP 88.7 Mn in dividends in the last four years alone! So the priority is clearly "cash back before investment"

1. Companies sometimes pay out dividends even in years when they make a loss. This is not that crazy given the Glazers went a decade without taking any dividends and the value of United has appreciated by a lot since their purchase
2. That's cool you run your own business, but unless it's a publically traded corporation it's probably much different structure.
3. The priority seems to be to hedge liquidity against the current appreciated value, which is wise given the state of the club (fans don't want to hear this though)

 

[MackRobinson]

1. No, the original debt was not secured to fund working capital. It was secured to buy the club. It's what is called a "leveraged buyout" which in this case was a lot like a standard mortgage.
2. It was not secured against the Glazer fortune. It was secured with Manchester United as collateral (hence the club carrying the debt). This is also reflected in the outstanding 425 Mn worth of "senior secured notes". In effect senior debt has first claim over the collateral, and the collateral is the club here
3. The original debt ballooned because we were starting off at something like 16.25% interest at the time and literally had no money. So, we drew more to service debt while continuing to run as a going concern. This caused debt to skyrocket

Another interesting fact that nobody mentions is how the Glazers actually took loans from Manchester United. Yup, that's right. At a time when the club was taking on more debt simply in order to continue to run, the owners (and the guys who saddled the club with the debt) went and drew debt from the club at low rates of interest.

1. I know what a leveraged buyout is. I was under the impression if the lender believes management can improve cash flows in the future (ie. with more investment in commerical partnerships) the buyer can secure a larger amount of funds.
2. "The debt taken on by the Glazers to finance the takeover was split between the club and the family; between £265 million and £275 million was secured against Manchester United's assets" The link referenced on Wikipedia is dead now, but I read this a while ago.
https://en.wikipedia.org/wiki/Glazer_ownership_of_Manchester_United#Refinancing
3. The debt skyrocketed and so did the value of the club (luckily) which allowed them to refinance and sell shares to reduce the debt. Not disputing what you said, just adding context.

 

[red thru&thru]

Great and detailed OP. The fact is, money has been spent but just not wisely. Ed has to shoulder the majority of the blame. Glazers have to should big blame as they have left it to Woodward and not acted sooner.

Now, there maybe a shift in this happening but this mess is not just about recruitment, it's about the sheer bad planning. Our plan changes with every different manager we have.

 

[Lentwood]

I've collated a bunch of the financials myself, so here's what I'd highlight:

1. You've focused on the P&L and not looked at the Cash Flow statements. Hence your Net Spends are off by a huge amount annually. The key is that clubs will assess ability to spend based on P&L impact (amortization-linked) and more importantly, on cash flows. Hence, a look at the cash flows is essential. That shows our net spends annually as below:

	2010​	2011​	2012​	2013​	2014​	2015​	2016​	2017​	2018​	2019​	Total
Payments for players	(44.27)	(25.40)	(59.00)	(46.00)	(92.90)	(117.40)	(138.10)	(193.80)	(155.00)	(178.20)	(1,050.07)
Receipts from player sales	13.86	14.00	9.40	9.70	14.00	20.60	38.40	51.80	46.90	43.00	261.66
P/(L) on transfers (Net Spend)	(30.42)	(11.40)	(49.60)	(36.30)	(78.90)	(96.80)	(99.70)	(142.00)	(108.10)	(135.20)	(788.42)

2. You've not shown how the Glazers have drawn dividends even in loss-making years - for example, we paid a dividend of GBP 22 Mn in 2018 - despite making a loss! That is just ridiculous (and I run a business, so I should know). Further, contrast that with investment in Old Trafford; we've spent a total of GBP 96.3 Mn on all capital infrastructure (including Old Trafford, Carrington, Mayfair, vehicles etc.) in the decade from 2010 - 2019. By contrast, we've paid out GBP 88.7 Mn in dividends in the last four years alone! So the priority is clearly "cash back before investment"

On your point about that just increasing tax, that doesn't work. Tax applies only after all outflows, so if we invested the money instead of paying as dividends, that's tax-neutral (there'll be depreciation / amortization over the periods so even staggered payouts net off overall).

3. You've not highlighted "gross debt" - i.e. debt repayment due in future without netting off the cash balances etc. and you've also neglected showing the movement of outstanding debt. Fist, this is the figure of money repaid by Man United against debt (as reported): (Note that some numbers differ from yours given that there has been restatement of numbers as well; plus, these numbers come from the cash flow statements and therefore do not net off as the P&L will)

	2010​	2011​	2012​	2013​	2014​	2015​	2016​	2017​	2018​	2019​	Total
Interest paid	(49.49)	(167.50)	(47.10)	(73.60)	(27.70)	(42.60)	(13.20)	(19.50)	(18.90)	(19.00)	(478.59)
Debt Repaid	(507.26)	(202.50)	(28.80)	(259.30)	(5.00)	(227.90)	(0.40)	(3.80)	(0.40)	(0.40)	(1,235.76)
Proceeds from borrowings*	502.26	-	-	209.20	-	272.50	-			-	983.96

* - this shows the inflow received when the refinancing was done.

Interestingly, this means we've paid GBP 730.4 Mn in servicing our debt. So, how has this impacted debt outstanding? Should reduce, surely?
Interestingly, it's not! Despite the IPO in between (which should have been used for servicing debt in the first place).
After our initial PIKs were refinanced, we've barely made a scratch in reducing debt.

	2012​	2013​	2014​	2015​	2016​	2017​	2018​	2019​
Outstanding Gross Debt Payable in future	608.586​	488.288​	409.61​	579.179​	598.631​	681​	651.665​	650.561​
Consolidated Net Debt						503​	496​	511.232​

Why am I noting this? Simply because the Glazers aren't actually focused a jot on reducing debt burden. And that's because a large part of debt is in senior secured notes - a part of which are also with the Glazers (so they earn interest on those too). In effect, United aren't focusing on the future at all. All the focus is on year-to-year movement of the financials.

Anyway, I could go on and on but will leave just a couple more thoughts, the first of which is on what this means for the next window.
Here's a look at what we still owe for past transfers (the 2019 number does not include the AWB and Maguire fees):

	2012​	2013​	2014​	2015​	2016​	2017​	2018​	2019​
Min. Payments due for next year (Players)	77.558​	71.451​	96.765​	119.104​	214.566​	183.531​	259​	226​
Min. Payments due for next year (Debt)	39.985​	30.603​	31.099​	18.676​	22.602​	22.087​	24.205​	21​
Total Min. Due for next year	117.543​	102.054​	127.86​	137.78​	237.168​	205.618​	283.391​	246.546​

Note that this does not include any bonus clauses that may be triggered. And that's why we'll need to sell before we buy and should expect (another) quiet summer.

Final thought - what we're paying as salaries (additional to dividends etc.) to Ed, Joel and co. ("Key personnel"):

	2012​	2013​	2014​	2015​	2016​	2017​	2018​	2019​
"Key management compensation"	7.064​	8.599​	7.78​	9.751​	11.109​	12.326​	12.915​	10.729​

No time for conclusions and inferences. Maybe later...

Thank you for taking this much further than I could. I’m a salesman I’ve only got a limited knowledge of how corporate finance works

 

[Lentwood]

Thanks to everybody who has provided further insight into the figures it’s very useful and I find it interesting

What I will say is please do not lose sight of the key points in making

1. Enough money has been spent net to at least be competitive

2. The clubs doesn’t make anywhere near enough PROFIT to keep spending £150/200m net every year - as some seem to believe

 

[midnightmare]

1. Companies sometimes pay out dividends even in years when they make a loss. This is not that crazy given the Glazers went a decade without taking any dividends and the value of United has appreciated by a lot since their purchase
2. That's cool you run your own business, but unless it's a publically traded corporation it's probably much different structure.
3. The priority seems to be to hedge liquidity against the current appreciated value, which is wise given the state of the club (fans don't want to hear this though)

1. "Sometimes", yes. But like I said, you have to see this in context of the following:
- The Glazers announced that the club would pay a dividend annually regardless of all else. That's bizarre.
- The Glazers didn't pay themselves dividends earlier...but did earn interest on the debt of the club and earned from the IPO and took loans from the club... and are "key management personnel" too in some cases, so also drew benefits
- The club is in dire need of investment even outside the playing squad. The stadium's roof leaks... but we're supposed to be fine with their taking a dividend instead?

2. Let's not go there. It's a similar structure and regardless of publicly listed or not, you pay dividends to shareholders based on profit-pool. Similar to how a partnership would pay bonuses to partners only if there are actually profits left over after meeting all funding requirements. It doesn't take one to be a financial genius to know that funding infrastructure should really take priority over "drawing out some cash for yourself".

3. Naah. It's to see how far they can get on as little as possible - while also being marketable. The market value of United would actually have crashed were it not for market forces outside our control - the TV deals and the investments into City which reset industry benchmarks. The owners are happy to earn cash - while sitting on a ticking time-bomb of debt. The notes mature in 2027 and the owners will either sell or look at another round of refinancing. Either way, we're not running like a business that needs constant investment to progress.

 

[Flying high]

Thanks to everybody who has provided further insight into the figures it’s very useful and I find it interesting

What I will say is please do not lose sight of the key points in making

1. Enough money has been spent net to at least be competitive

2. The clubs doesn’t make anywhere near enough PROFIT to keep spending £150/200m net every year - as some seem to believe

An extra billion would have made it possible to do a full rebuild when needed, not a partial rebuild every 2 or 3 years.

Which ever way you try to cut it, the Glazers are a cancer on this club which must be removed.

 

[midnightmare]

1. I know what a leveraged buyout is. I was under the impression if the lender believes management can improve cash flows in the future (ie. with more investment in commerical partnerships) the buyer can secure a larger amount of funds.
2. "The debt taken on by the Glazers to finance the takeover was split between the club and the family; between £265 million and £275 million was secured against Manchester United's assets" The link referenced on Wikipedia is dead now, but I read this a while ago.
https://en.wikipedia.org/wiki/Glazer_ownership_of_Manchester_United#Refinancing
3. The debt skyrocketed and so did the value of the club (luckily) which allowed them to refinance and sell shares to reduce the debt. Not disputing what you said, just adding context.

That's about who guarantees. Note though that the club itself took on a full debt of 660 Mn! Note that our outstanding net debt stands at 511 Mn even today. And gross debt at 651 Mn. This is after paying more than 1 Bn in debt servicing for the period. Someone made money - and it was the Glazers. They used to take up a large chunk of the earnings and also earned from each transaction and refinancing as well as, of course, the IPO.

 

[Russky14]

1. "Sometimes", yes. But like I said, you have to see this in context of the following:
- The Glazers announced that the club would pay a dividend annually regardless of all else. That's bizarre.
- The Glazers didn't pay themselves dividends earlier...but did earn interest on the debt of the club and earned from the IPO and took loans from the club... and are "key management personnel" too in some cases, so also drew benefits
- The club is in dire need of investment even outside the playing squad. The stadium's roof leaks... but we're supposed to be fine with their taking a dividend instead?

2. Let's not go there. It's a similar structure and regardless of publicly listed or not, you pay dividends to shareholders based on profit-pool. Similar to how a partnership would pay bonuses to partners only if there are actually profits left over after meeting all funding requirements. It doesn't take one to be a financial genius to know that funding infrastructure should really take priority over "drawing out some cash for yourself".

3. Naah. It's to see how far they can get on as little as possible - while also being marketable. The market value of United would actually have crashed were it not for market forces outside our control - the TV deals and the investments into City which reset industry benchmarks. The owners are happy to earn cash - while sitting on a ticking time-bomb of debt. The notes mature in 2027 and the owners will either sell or look at another round of refinancing. Either way, we're not running like a business that needs constant investment to progress.

Some very good reflective points here.

As an accountant you are spot on. I have been in a an owner managed businesses and Utd are in reality not a millions from that putting aside the listing. I have been in the situation where greedy owners demand dividend hell or high water even when the entity has not delivered in year profits and the cashflow is being squeezed due to operating conditions. I effectively lost my job (I was FD) by saying no because of what I have just stated. The ability to distribute was not there. It was pure greed as the the what the two brothers took out anyway was ridiculous.

The debt is manageable but as you describe its a ticking time bomb. Virtually all businesses use a debt structure of some description. However, a good business would manage this down to an acceptable level. The debt not really moved in 10 years & part of this is the greedy and irresponsible owners taking out management fees and now dividends. Do not be fooled this is the golden egg for the Adams family in their portfolio (remember that investment portfolio).

We have spurned the Saudi's (lets not go there on their HR record) and so who can buy us - no one. This means the Galzers see more value in milking the asset for the next 10 years.

 

[Lentwood]

In brief

• We failed to capitalise the market by buying core of good players before inflation(2015).
• We failed to control wages (Sanchez,Pogba,Degea for example and still paying wages to players like Mata,Jones).
• We failed to get rid of dross for a long time and still we haven't fully addressed it.
• We failed to develop and SELL a player for more than 100M+ which could have brought our NET spend to low figures(Liverpool-Coutino, Chelsea-Hazard and Madrid-Ronaldo) did this so there is no shame to it to balance books.
• We failed to install a DOF and good scouting network to bring in some great players.
• We failed to identify the next generation progressive managers but went for finished articles.
• We failed to Improve the winning culture by not recruiting players with leadership qualities.

Good summation - agree with pretty much all, especially the bit about failing to capitalise before the market boomed

I fail to see how all of our “brilliant” business brains failed to anticipate clubs getting twice as wealthy would massively increase transfer fees. I learnt that in Yr.9 Economics

 

[Lentwood]

I've collated a bunch of the financials myself, so here's what I'd highlight:

1. You've focused on the P&L and not looked at the Cash Flow statements. Hence your Net Spends are off by a huge amount annually. The key is that clubs will assess ability to spend based on P&L impact (amortization-linked) and more importantly, on cash flows. Hence, a look at the cash flows is essential. That shows our net spends annually as below:

	2010​	2011​	2012​	2013​	2014​	2015​	2016​	2017​	2018​	2019​	Total
Payments for players	(44.27)	(25.40)	(59.00)	(46.00)	(92.90)	(117.40)	(138.10)	(193.80)	(155.00)	(178.20)	(1,050.07)
Receipts from player sales	13.86	14.00	9.40	9.70	14.00	20.60	38.40	51.80	46.90	43.00	261.66
P/(L) on transfers (Net Spend)	(30.42)	(11.40)	(49.60)	(36.30)	(78.90)	(96.80)	(99.70)	(142.00)	(108.10)	(135.20)	(788.42)

2. You've not shown how the Glazers have drawn dividends even in loss-making years - for example, we paid a dividend of GBP 22 Mn in 2018 - despite making a loss! That is just ridiculous (and I run a business, so I should know). Further, contrast that with investment in Old Trafford; we've spent a total of GBP 96.3 Mn on all capital infrastructure (including Old Trafford, Carrington, Mayfair, vehicles etc.) in the decade from 2010 - 2019. By contrast, we've paid out GBP 88.7 Mn in dividends in the last four years alone! So the priority is clearly "cash back before investment"

On your point about that just increasing tax, that doesn't work. Tax applies only after all outflows, so if we invested the money instead of paying as dividends, that's tax-neutral (there'll be depreciation / amortization over the periods so even staggered payouts net off overall).

3. You've not highlighted "gross debt" - i.e. debt repayment due in future without netting off the cash balances etc. and you've also neglected showing the movement of outstanding debt. Fist, this is the figure of money repaid by Man United against debt (as reported): (Note that some numbers differ from yours given that there has been restatement of numbers as well; plus, these numbers come from the cash flow statements and therefore do not net off as the P&L will)

	2010​	2011​	2012​	2013​	2014​	2015​	2016​	2017​	2018​	2019​	Total
Interest paid	(49.49)	(167.50)	(47.10)	(73.60)	(27.70)	(42.60)	(13.20)	(19.50)	(18.90)	(19.00)	(478.59)
Debt Repaid	(507.26)	(202.50)	(28.80)	(259.30)	(5.00)	(227.90)	(0.40)	(3.80)	(0.40)	(0.40)	(1,235.76)
Proceeds from borrowings*	502.26	-	-	209.20	-	272.50	-			-	983.96

* - this shows the inflow received when the refinancing was done.

Interestingly, this means we've paid GBP 730.4 Mn in servicing our debt. So, how has this impacted debt outstanding? Should reduce, surely?
Interestingly, it's not! Despite the IPO in between (which should have been used for servicing debt in the first place).
After our initial PIKs were refinanced, we've barely made a scratch in reducing debt.

	2012​	2013​	2014​	2015​	2016​	2017​	2018​	2019​
Outstanding Gross Debt Payable in future	608.586​	488.288​	409.61​	579.179​	598.631​	681​	651.665​	650.561​
Consolidated Net Debt						503​	496​	511.232​

Why am I noting this? Simply because the Glazers aren't actually focused a jot on reducing debt burden. And that's because a large part of debt is in senior secured notes - a part of which are also with the Glazers (so they earn interest on those too). In effect, United aren't focusing on the future at all. All the focus is on year-to-year movement of the financials.

Anyway, I could go on and on but will leave just a couple more thoughts, the first of which is on what this means for the next window.
Here's a look at what we still owe for past transfers (the 2019 number does not include the AWB and Maguire fees):

	2012​	2013​	2014​	2015​	2016​	2017​	2018​	2019​
Min. Payments due for next year (Players)	77.558​	71.451​	96.765​	119.104​	214.566​	183.531​	259​	226​
Min. Payments due for next year (Debt)	39.985​	30.603​	31.099​	18.676​	22.602​	22.087​	24.205​	21​
Total Min. Due for next year	117.543​	102.054​	127.86​	137.78​	237.168​	205.618​	283.391​	246.546​

Note that this does not include any bonus clauses that may be triggered. And that's why we'll need to sell before we buy and should expect (another) quiet summer.

Final thought - what we're paying as salaries (additional to dividends etc.) to Ed, Joel and co. ("Key personnel"):

	2012​	2013​	2014​	2015​	2016​	2017​	2018​	2019​
"Key management compensation"	7.064​	8.599​	7.78​	9.751​	11.109​	12.326​	12.915​	10.729​

No time for conclusions and inferences. Maybe later...

Just to add, now I’ve re-read

1. My net spends were not taken from the clubs accounts. It’s just the old lazy way they are calculated by adding/subtracting reported fees. Think I used transfer market. It’s still very relevant to the argument though. Remember, the point is about whether we’ve committed enough to transfers. Not how we’ve done it and when we spent it per se.

2. I briefly mentioned dividends. I made the point about how I don’t really see it as being a HUGE issue, although obviously difficult to take for fans of the club.

3. I never insinuated the debt was being cleared. Why would the Glazers clear it? Just manage it and then sell up. Surely that’s the strategy?

 

[Lynty]

Great post.

This was what I was after in the Glazer/Ed out thread. A detailed breakdown of the figures.

 

[Sky1981]

Great OP and well thought out. I read someone commenting on here recently that the debt was still rising though, I thought that was wrong and after a bit of googling discovered the club's debt has increased quite significantly - is this correct and if so is sustainable? Presumably the debt is on more favourable interest rates terms. But it would be interesting to know where it comes from because contrary to popular belief not all debt is bad!

For example I'm a Brighton fan and we rank in the top 10 European clubs for debt and top two in the premiership (behind United!) But the vast majority of our debt is owed to our chairman Tony Bloom on nominal interest rates with possibility of parts of it being written off, so it's not something I worry about, in fact I welcome it as it has allowed us to build a new stadium after being homeless for years and build a good team.

Off.course.

Buying maguire is on installment. With bonus addons etc counted as payable. There are future obligations, etc

Not every debt is from.the takeover era. There are alot of accounting technicalities that counts as debt

 

[romufc]

There is clear evidence that we have been mis-managed for a number of years now.

I would like to see a plan of action to get us sustainable.

The numbers about having the biggest wage bill is incorrect because people are referring to numbers from last season.

As things stand today:

We lost big wage earners in Lukaku, Herrera, Fellaini, Young, 50% of Sanchez, Smalling.

We will also get rid of Pogba in the summer, so we have reduced the wage bill down.

We are also not just signing for signing sake, rather it is alot more calculated.

I can see what the club are trying to do, I am in support of this but I feel alot more would be if the board is more open about this.

 

[MackRobinson]

1. "Sometimes", yes. But like I said, you have to see this in context of the following:
- The Glazers announced that the club would pay a dividend annually regardless of all else. That's bizarre.
- The Glazers didn't pay themselves dividends earlier...but did earn interest on the debt of the club and earned from the IPO and took loans from the club... and are "key management personnel" too in some cases, so also drew benefits
- The club is in dire need of investment even outside the playing squad. The stadium's roof leaks... but we're supposed to be fine with their taking a dividend instead?

- LIke I said before, even in the years where profits were good they weren't taking dividends. Also, providing scheduled liquidity events may not be good in the short run but may be signal to investors that the stock is worth keeping in the long run.
- Everything I've read about the money they earned from the proceeds says they used it to pay debts. It even says so in the prospectus (although I'm not sure what actually happened)
- To a fan, stadium improvements are important, but given the state of United the board most likely thinks it's the least of their concerns.

2. Let's not go there. It's a similar structure and regardless of publicly listed or not, you pay dividends to shareholders based on profit-pool. Similar to how a partnership would pay bonuses to partners only if there are actually profits left over after meeting all funding requirements. It doesn't take one to be a financial genius to know that funding infrastructure should really take priority over "drawing out some cash for yourself".

Not all companies pay dividends (at all or in similar fashions), most partnerships don't have a board and given the difference in liability sometimes it's wiser to just to distribute all or most of the profits to the partners (in terms of the US mind you). I actually was dead serious about it being cool you running your own business. I've done it before (venture-backed startup) and I think it takes a sacrifice of time, money, and peace of mind that I'm not interested at this stage of my life.

3. Naah. It's to see how far they can get on as little as possible - while also being marketable. The market value of United would actually have crashed were it not for market forces outside our control - the TV deals and the investments into City which reset industry benchmarks. The owners are happy to earn cash - while sitting on a ticking time-bomb of debt. The notes mature in 2027 and the owners will either sell or look at another round of refinancing. Either way, we're not running like a business that needs constant investment to progress.

I don't agree it's about getting on with as little as possible. It's about extracting liquidity from an investment that has appreciated by a large amount and now is in danger of depreciating. That's a sane business strategy but shitty for the fans. As for the TV deals (PL I assume you mean), I think this is overstated since this also coincided with a similar increase in transfer fees and salaries over the same time period (the increase in the PL TV deal was 20% and 8% in the last 6 years). What probably saved the club are the commercial deals and CL football. I want to say commercial deals increased by something like 90% since 2013 and the difference in CL vs non-CL football is almost double (I guess Jose deserves praise for that).

For the record: My industry is fintech (economics major) so most of my knowledge is ancillary and lot based on reading in my free time. I don't want to pretend I'm an expert.

 

[midnightmare]

Off.course.

Buying maguire is on installment. With bonus addons etc counted as payable. There are future obligations, etc

Not every debt is from.the takeover era. There are alot of accounting technicalities that counts as debt

As on the other thread, you're commenting without even having read the financial reports.
1. Bonus clauses are NOT reflected as purchase obligations.
Without the AWB, James and Maguire contracts, we have a "Purchase Obligation" of 226 Mn for this Financial (before Lukaku sale as well, of course) and another 75 Mn in potentially achievable bonus payments. Bonus numbers are not mentioned as obligations.

2. Maguire is on installments - and those installments are not even reflected in the numbers I've shared - because it was after July 1!

3. Yes - all debts are from the takeover era. Because we were debt-free before the takeover.

4. "Accounting technicalities" that count as debt? You really are having a laugh now.
The only "accounting technicalities" are when the reports offset debt obligations with the cash. Hence gross and net debt.

Great OP and well thought out. I read someone commenting on here recently that the debt was still rising though, I thought that was wrong and after a bit of googling discovered the club's debt has increased quite significantly - is this correct and if so is sustainable? Presumably the debt is on more favourable interest rates terms. But it would be interesting to know where it comes from because contrary to popular belief not all debt is bad!

For example I'm a Brighton fan and we rank in the top 10 European clubs for debt and top two in the premiership (behind United!) But the vast majority of our debt is owed to our chairman Tony Bloom on nominal interest rates with possibility of parts of it being written off, so it's not something I worry about, in fact I welcome it as it has allowed us to build a new stadium after being homeless for years and build a good team.

I've put the debt movement in a prior post. Yes, our debt has increased recently. And no, it's not "good" debt. "Good" debt is when you are finding it difficult to fund yourself and someone comes in with a low-interest investment he gives you. A benefactor, so to speak. United's debt is not of that type. Our debt mountain isn't moving because repayment of debt is low on the list of priorities.

Let's see it simply. If the Glazers wanted to, they could literally just sell off some shares and pay off a good chunk of debt. That would also reduce interest payments etc. and improve profits. But, that would mean they didn't earn as much, since people would demand investment of profits into the stadium and players and they'd be getting lower dividends (lower holding) too. So, they're simply holding on to all the voting rights, most of the dividend share and allowing market forces to drive valuations.

On another note - the "Who could buy the club?" question has a fairly simple answer. If there's no single person that could buy it, just float the stock properly. It's not necessary for the club to have "an owner". A series of FPOs could raise enough funds to wipe out debt and earn the club a warchest too. Won't happen of course and even if there is a sell-off, the Glazers would just pocket the money.

 

[Sky1981]

As on the other thread, you're commenting without even having read the financial reports.
1. Bonus clauses are NOT reflected as purchase obligations.
Without the AWB, James and Maguire contracts, we have a "Purchase Obligation" of 226 Mn for this Financial (before Lukaku sale as well, of course) and another 75 Mn in potentially achievable bonus payments. Bonus numbers are not mentioned as obligations.

2. Maguire is on installments - and those installments are not even reflected in the numbers I've shared - because it was after July 1!

3. Yes - all debts are from the takeover era. Because we were debt-free before the takeover.

4. "Accounting technicalities" that count as debt? You really are having a laugh now.
The only "accounting technicalities" are when the reports offset debt obligations with the cash. Hence gross and net debt.


I've put the debt movement in a prior post. Yes, our debt has increased recently. And no, it's not "good" debt. "Good" debt is when you are finding it difficult to fund yourself and someone comes in with a low-interest investment he gives you. A benefactor, so to speak. United's debt is not of that type. Our debt mountain isn't moving because repayment of debt is low on the list of priorities.

Let's see it simply. If the Glazers wanted to, they could literally just sell off some shares and pay off a good chunk of debt. That would also reduce interest payments etc. and improve profits. But, that would mean they didn't earn as much, since people would demand investment of profits into the stadium and players and they'd be getting lower dividends (lower holding) too. So, they're simply holding on to all the voting rights, most of the dividend share and allowing market forces to drive valuations.

On another note - the "Who could buy the club?" question has a fairly simple answer. If there's no single person that could buy it, just float the stock properly. It's not necessary for the club to have "an owner". A series of FPOs could raise enough funds to wipe out debt and earn the club a warchest too. Won't happen of course and even if there is a sell-off, the Glazers would just pocket the money.

Did glazer take any more loan after takeover?

 

[midnightmare]

- LIke I said before, even in the years where profits were good they weren't taking dividends. Also, providing scheduled liquidity events may not be good in the short run but may be signal to investors that the stock is worth keeping in the long run.
- Everything I've read about the money they earned from the proceeds says they used it to pay debts. It even says so in the prospectus (although I'm not sure what actually happened)
- To a fan, stadium improvements are important, but given the state of United the board most likely thinks it's the least of their concerns.

They weren't taking dividends all the time - but like I highlighted, it was not as if they didn't take money out of the club. There are multiple ways to earn money. "Professional fees", "management fee" etc. are several. The Glazers are running MUFC almost like a quasi-private company. Foreign listing allows them to bypass several of the SEC's rules regarding corporate governance as well as reporting and of course, constitution of the Board. Should tell you a lot.

Now, in terms of signals to investors, the best signals are actual business value being created through your own activities. We're not doing that. Nobody pushes the largest corporations to announce dividends, unless they feel the Company is either just sitting on cash (losing interest and opportunity and therefore creating future devaluations) OR feel that value isn't moving, so it's better to get the dividends. Investors look at valuation movements - not annual payments. It's how the market works. Oh and yeah, the Glazers own the bulk of the stock...
As for using the proceeds to pay debts - just look at the debt burden. A simple look at outstanding debt alone should tell you how true that statement is.

I don't agree it's about getting on with as little as possible. It's about extracting liquidity from an investment that has appreciated by a large amount and now is in danger of depreciating. That's a sane business strategy but shitty for the fans. As for the TV deals (PL I assume you mean), I think this is overstated since this also coincided with a similar increase in transfer fees and salaries over the same time period (the increase in the PL TV deal was 20% and 8% in the last 6 years). What probably saved the club are the commercial deals and CL football. I want to say commercial deals increased by something like 90% since 2013 and the difference in CL vs non-CL football is almost double (I guess Jose deserves praise for that).

And that is where we disagree so fundamentally. It's not a "sane" strategy for anyone other than someone that just wants to milk money without effort and with minimal investment. A football club like us can just keep growing if managed well - specially when you see how other clubs are growing. Look at Barca and Real for example even if you don't want to look at the oil-funded ones. A football squad has a product lifecycle. A club doesn't. It's not like a normal business and therefore "terminal values" etc. can't be computed as they would for a "normal" business. Hence my issue with the Glazers.

Oh and yeah, it says everything you wish to know about the Glazers that you say "To a fan, stadium improvements are important, but given the state of United the board most likely thinks it's the least of their concerns"

You see, for a football club, the fans should be front and center for everything in terms of service. The fans are the club's raison d'etre. Any club that can dismiss the infrastructure they build for the most core of fans (customers too in the case of the club) does not have owners that are worth any respect or anything more than contempt.

 

[Roboc7]

There is clear evidence that we have been mis-managed for a number of years now.

I would like to see a plan of action to get us sustainable.

The numbers about having the biggest wage bill is incorrect because people are referring to numbers from last season.

As things stand today:

We lost big wage earners in Lukaku, Herrera, Fellaini, Young, 50% of Sanchez, Smalling.

We will also get rid of Pogba in the summer, so we have reduced the wage bill down.

We are also not just signing for signing sake, rather it is alot more calculated.

I can see what the club are trying to do, I am in support of this but I feel alot more would be if the board is more open about this.

Have to remember that we have dished out new contracts with pay rises and also signed players as well. Overall the wage bill probably isn’t that different and Sanchez will be back on full pay when he returns.

 

[romufc]

Have to remember that we have dished out new contracts with pay rises and also signed players as well. Overall the wage bill probably isn’t that different and Sanchez will be back on full pay when he returns.

Yeah, but in the last 6 months, its only really been Rashy, DDG and Greenwood?

We will have a big wage bill but Pogba at 290k will go too and replaced with two players with that combined wage.

 

[Roboc7]

Yeah, but in the last 6 months, its only really been Rashy, DDG and Greenwood?

We will have a big wage bill but Pogba at 290k will go too and replaced with two players with that combined wage.

Rashford also signed a new contract that will have been a huge pay rise during this financial year. It’s a misconception that we are freeing up all these funds, what we are really doing is stopping it from going up.

The only way to really sort out the wage bill is not to renew contracts of players unless they will sign for what they are worth. Look back at all contracts we have renewed in last year, how many actually deserve the wages they were given?.

How many left backs in world football earn more than Luke Shaw for instance. What clubs would pay him what his previous contract was let alone the terms of his new contract. He should have been given a take it or leave it offer with no pay rise.

Until there are people with some intelligence and knowledge of football making decisions the club will remain a mess.

 

[midnightmare]

Rashford also signed a new contract that will have been a huge pay rise during this financial year. It’s a misconception that we are freeing up all these funds, what we are really doing is stopping it from going up.

The only way to really sort out the wage bill is not to renew contracts of players unless they will sign for what they are worth. Look back at all contracts we have renewed in last year, how many actually deserve the wages they were given?.

How many left backs in world football earn more than Luke Shaw for instance. What clubs would pay him what his previous contract was let alone the terms of his new contract. He should have been given a take it or leave it offer with no pay rise.

Until there are people with some intelligence and knowledge of football making decisions the club will remain a mess.

Wages are a classic case of fans not seeing the root cause. The club isn't run by football men, but by finance men. From a finance perspective, when you look at the P&L, adding a new player at lower wages vs renewing a deal at higher wages has to be evaluated as "annual amortization of transfer fee + annual wages" for new signing vs "annual wages" of the renewing player. If the latter seems financially better, that's what the accountant will go for.

Take Luke Shaw; assume he's on 190K/w. That's roughly 10 Mn a year. Say we can get a new signing at 100K/w. That would be 5.2 Mn a year. Now, the amortized value of the signing amount (plus all charges) would need to be <5 Mn a year for this new signing to be a better option than Shaw's upgraded deal (assuming Shaw left on a free). So, if we sign the said player on a 5 year deal, he'd need to cost <25 Mn. AWB for example cost us 50 Mn. On a 5-year amortization (SLM) that's 10 Mn of "cost" he brings a year to our P&L. His wages are over and above this.

That's why the accountant will always lean towards renewal as the immediate next period's P&L looks healthier.

Obviously, cash flows also impact decisions, but this is the way the finances work. Now, the only way to reverse this and not get hurt financially is to sell players well and then replace them effectively. That (most often) requires and results in a football person (Director of Football?) that drives the decision making on recruitment, renewals and outgoings with a lot of foresight and planning. If not done by this DoF, it requires continuity of a strong manager with a clear vision and with the power to drive decisions (as we had in Fergie). We have had neither of these for the past 7 years now and that's why we are in this mess.

PS: If you let the players leave on a free, you lose massively; hence the new deals "protect asset value" in finance terms while also costing less annually than replacing with a new player.

 

[Roboc7]

Wages are a classic case of fans not seeing the root cause. The club isn't run by football men, but by finance men. Now, from a finance perspective, when you look at the P&L, adding a new player at lower wages vs renewing a deal at higher wages has to be evaluated as "annual amortization of transfer fee + annual wages" for new signing vs "annual wages" of the renewing player. If the latter seems financially better, that's what the accountant will go for.

Now take Luke Shaw; assume he's on 190K/w. That's roughly 10 Mn a year. Say we can get a new signing at 100K/w. That would be 5.2 Mn a year. Now, the amortized value of the signing amount (plus all charges) would need to be <5 Mn a year for this new signing to be a better option than Shaw's upgrade. So, if we sign the said player on a 5 year deal, he'd need to cost <25 Mn. AWB for example cost us 50 Mn. On a 5-year amortization (SLM) that's 10 Mn of "cost" he brings a year to our P&L. His wages are over and above this.

That's why the accountant will always lean towards renewal as the immediate next period's P&L looks healthier.

Obviously, cash flows also impact decisions, but this is the way the finances work. Now, the only way to reverse this and not get hurt financially is to sell players well and then replace them effectively. That (most often) requires and results in a football person (Director of Football?) that drives the decision making on recruitment, renewals and outgoings with a lot of foresight and planning. If not done by this DoF, it requires continuity of a strong manager with a clear vision and with the power to drive decisions (as we had in Fergie). We have had neither of these for the past 7 years now and that's why we are in this mess.

Exactly the club is still and will continue to be driven by financial rather than football decisions. New contracts and pay rises will be dished out for the reasons you have posted, they will not reflect ability, performance or what that player would earn elsewhere if they left. It also saddles you with players that you can’t sell as their wages are too high which would be a concern if your trying to run a football club. But again when it’s driven by the financials that is secondary.

Luke Shaw should either have been sold or have been offered a deal on the same terms (at best), if he wouldn’t sign then he leaves. But truth is club aren’t willing to do that as if he chooses to leave they have to replace him, no doubt players and agents are wise to that and have and will exploit it.

 

[TheLord]

Brilliant OP.
It is almost painful to see that Chelsea and Liverpool have spent nearly 400m less than United in this seven-year period

 

[Buster15]

Firstly thank you for taking the time to put together such an important and meaningful thread.
And as any self respecting Manchester United fan, I have read it and the associated posts to make sense of it all.

And the irony is that it proves the absolutely nonsensical way this club has been (so called) managed. Or more correctly miss managed.
It is as if expenditure/costs didn't matter because we can always rely on income.

But the most important thing you have shown is the terrible value for that expenditure/costs.

Incredibly depressing stuff but worse still is that nothing much is going to change.

 

[NoLogo]

It's kinda mind-numbing to see the amount of money we have spent and only got worse in the process. Our scouting, recruiting and player improvement has been dreadful since Fergie retired.

 

[Water Melon]

I've collated a bunch of the financials myself, so here's what I'd highlight:

1. You've focused on the P&L and not looked at the Cash Flow statements. Hence your Net Spends are off by a huge amount annually. The key is that clubs will assess ability to spend based on P&L impact (amortization-linked) and more importantly, on cash flows. Hence, a look at the cash flows is essential. That shows our net spends annually as below:

	2010​	2011​	2012​	2013​	2014​	2015​	2016​	2017​	2018​	2019​	Total
Payments for players	(44.27)	(25.40)	(59.00)	(46.00)	(92.90)	(117.40)	(138.10)	(193.80)	(155.00)	(178.20)	(1,050.07)
Receipts from player sales	13.86	14.00	9.40	9.70	14.00	20.60	38.40	51.80	46.90	43.00	261.66
P/(L) on transfers (Net Spend)	(30.42)	(11.40)	(49.60)	(36.30)	(78.90)	(96.80)	(99.70)	(142.00)	(108.10)	(135.20)	(788.42)

2. You've not shown how the Glazers have drawn dividends even in loss-making years - for example, we paid a dividend of GBP 22 Mn in 2018 - despite making a loss! That is just ridiculous (and I run a business, so I should know). Further, contrast that with investment in Old Trafford; we've spent a total of GBP 96.3 Mn on all capital infrastructure (including Old Trafford, Carrington, Mayfair, vehicles etc.) in the decade from 2010 - 2019. By contrast, we've paid out GBP 88.7 Mn in dividends in the last four years alone! So the priority is clearly "cash back before investment"

On your point about that just increasing tax, that doesn't work. Tax applies only after all outflows, so if we invested the money instead of paying as dividends, that's tax-neutral (there'll be depreciation / amortization over the periods so even staggered payouts net off overall).

3. You've not highlighted "gross debt" - i.e. debt repayment due in future without netting off the cash balances etc. and you've also neglected showing the movement of outstanding debt. Fist, this is the figure of money repaid by Man United against debt (as reported): (Note that some numbers differ from yours given that there has been restatement of numbers as well; plus, these numbers come from the cash flow statements and therefore do not net off as the P&L will)

	2010​	2011​	2012​	2013​	2014​	2015​	2016​	2017​	2018​	2019​	Total
Interest paid	(49.49)	(167.50)	(47.10)	(73.60)	(27.70)	(42.60)	(13.20)	(19.50)	(18.90)	(19.00)	(478.59)
Debt Repaid	(507.26)	(202.50)	(28.80)	(259.30)	(5.00)	(227.90)	(0.40)	(3.80)	(0.40)	(0.40)	(1,235.76)
Proceeds from borrowings*	502.26	-	-	209.20	-	272.50	-			-	983.96

* - this shows the inflow received when the refinancing was done.

Interestingly, this means we've paid GBP 730.4 Mn in servicing our debt. So, how has this impacted debt outstanding? Should reduce, surely?
Interestingly, it's not! Despite the IPO in between (which should have been used for servicing debt in the first place).
After our initial PIKs were refinanced, we've barely made a scratch in reducing debt.

	2012​	2013​	2014​	2015​	2016​	2017​	2018​	2019​
Outstanding Gross Debt Payable in future	608.586​	488.288​	409.61​	579.179​	598.631​	681​	651.665​	650.561​
Consolidated Net Debt						503​	496​	511.232​

Why am I noting this? Simply because the Glazers aren't actually focused a jot on reducing debt burden. And that's because a large part of debt is in senior secured notes - a part of which are also with the Glazers (so they earn interest on those too). In effect, United aren't focusing on the future at all. All the focus is on year-to-year movement of the financials.

Anyway, I could go on and on but will leave just a couple more thoughts, the first of which is on what this means for the next window.
Here's a look at what we still owe for past transfers (the 2019 number does not include the AWB and Maguire fees):

	2012​	2013​	2014​	2015​	2016​	2017​	2018​	2019​
Min. Payments due for next year (Players)	77.558​	71.451​	96.765​	119.104​	214.566​	183.531​	259​	226​
Min. Payments due for next year (Debt)	39.985​	30.603​	31.099​	18.676​	22.602​	22.087​	24.205​	21​
Total Min. Due for next year	117.543​	102.054​	127.86​	137.78​	237.168​	205.618​	283.391​	246.546​

Note that this does not include any bonus clauses that may be triggered. And that's why we'll need to sell before we buy and should expect (another) quiet summer.

Final thought - what we're paying as salaries (additional to dividends etc.) to Ed, Joel and co. ("Key personnel"):

	2012​	2013​	2014​	2015​	2016​	2017​	2018​	2019​
"Key management compensation"	7.064​	8.599​	7.78​	9.751​	11.109​	12.326​	12.915​	10.729​

No time for conclusions and inferences. Maybe later...

Well fecking done. Take a bow. Now the picture is indeed complete. Screw these horrific owners

 

[Luke1995]

I wonder how much money are spent on these overseas pre-season tours. Would the club have more money if the players just stayed in Old Trafford all the time ?

 

[DanClancy]

Wages are a classic case of fans not seeing the root cause. The club isn't run by football men, but by finance men. From a finance perspective, when you look at the P&L, adding a new player at lower wages vs renewing a deal at higher wages has to be evaluated as "annual amortization of transfer fee + annual wages" for new signing vs "annual wages" of the renewing player. If the latter seems financially better, that's what the accountant will go for.

Take Luke Shaw; assume he's on 190K/w. That's roughly 10 Mn a year. Say we can get a new signing at 100K/w. That would be 5.2 Mn a year. Now, the amortized value of the signing amount (plus all charges) would need to be <5 Mn a year for this new signing to be a better option than Shaw's upgraded deal (assuming Shaw left on a free). So, if we sign the said player on a 5 year deal, he'd need to cost <25 Mn. AWB for example cost us 50 Mn. On a 5-year amortization (SLM) that's 10 Mn of "cost" he brings a year to our P&L. His wages are over and above this.

That's why the accountant will always lean towards renewal as the immediate next period's P&L looks healthier.

Obviously, cash flows also impact decisions, but this is the way the finances work. Now, the only way to reverse this and not get hurt financially is to sell players well and then replace them effectively. That (most often) requires and results in a football person (Director of Football?) that drives the decision making on recruitment, renewals and outgoings with a lot of foresight and planning. If not done by this DoF, it requires continuity of a strong manager with a clear vision and with the power to drive decisions (as we had in Fergie). We have had neither of these for the past 7 years now and that's why we are in this mess.

PS: If you let the players leave on a free, you lose massively; hence the new deals "protect asset value" in finance terms while also costing less annually than replacing with a new player.

A brilliant couple of posts from you. Its a model that clearly hasn't worked, United have rewarded players who aren't good enough with bigger contracts than they deserve in-turn making them nigh on impossible to obtain their true transfer value. Smalling, Jones & Rojo should be all very easily to move on but the majority of clubs who'd be interested will find it extremely difficult to match their wages.

I'm interested to see United's cash position in next years accounts, it was already down to £140m at the end of Q1 from £307m in June. It looks like and I think I've seen it somewhere in the media that United paid £80m for Maguire upfront. United are going to burn a lot of cash considering prior to the Maguire transfer they owed around £225m in transfer fees this financial year. United will be desperate to sell someone prior to June 30th to enhance the results and cash position, I think Pogba will go although alternatively they could sell a few players like Henderson, Rojo & Smalling. Next summers transfer budget will depend on CL qualification. If United don't make it then I think Ole is relying on selling players to buy, in fairness selling Pogba, Lingard, Pereira, Henderson, Smalling & Rojo could raise the best part of £200m.

 

[Sunny Jim]

I've collated a bunch of the financials myself, so here's what I'd highlight:

1. You've focused on the P&L and not looked at the Cash Flow statements. Hence your Net Spends are off by a huge amount annually. The key is that clubs will assess ability to spend based on P&L impact (amortization-linked) and more importantly, on cash flows. Hence, a look at the cash flows is essential. That shows our net spends annually as below:

	2010​	2011​	2012​	2013​	2014​	2015​	2016​	2017​	2018​	2019​	Total
Payments for players	(44.27)	(25.40)	(59.00)	(46.00)	(92.90)	(117.40)	(138.10)	(193.80)	(155.00)	(178.20)	(1,050.07)
Receipts from player sales	13.86	14.00	9.40	9.70	14.00	20.60	38.40	51.80	46.90	43.00	261.66
P/(L) on transfers (Net Spend)	(30.42)	(11.40)	(49.60)	(36.30)	(78.90)	(96.80)	(99.70)	(142.00)	(108.10)	(135.20)	(788.42)

2. You've not shown how the Glazers have drawn dividends even in loss-making years - for example, we paid a dividend of GBP 22 Mn in 2018 - despite making a loss! That is just ridiculous (and I run a business, so I should know). Further, contrast that with investment in Old Trafford; we've spent a total of GBP 96.3 Mn on all capital infrastructure (including Old Trafford, Carrington, Mayfair, vehicles etc.) in the decade from 2010 - 2019. By contrast, we've paid out GBP 88.7 Mn in dividends in the last four years alone! So the priority is clearly "cash back before investment"

On your point about that just increasing tax, that doesn't work. Tax applies only after all outflows, so if we invested the money instead of paying as dividends, that's tax-neutral (there'll be depreciation / amortization over the periods so even staggered payouts net off overall).

3. You've not highlighted "gross debt" - i.e. debt repayment due in future without netting off the cash balances etc. and you've also neglected showing the movement of outstanding debt. Fist, this is the figure of money repaid by Man United against debt (as reported): (Note that some numbers differ from yours given that there has been restatement of numbers as well; plus, these numbers come from the cash flow statements and therefore do not net off as the P&L will)

	2010​	2011​	2012​	2013​	2014​	2015​	2016​	2017​	2018​	2019​	Total
Interest paid	(49.49)	(167.50)	(47.10)	(73.60)	(27.70)	(42.60)	(13.20)	(19.50)	(18.90)	(19.00)	(478.59)
Debt Repaid	(507.26)	(202.50)	(28.80)	(259.30)	(5.00)	(227.90)	(0.40)	(3.80)	(0.40)	(0.40)	(1,235.76)
Proceeds from borrowings*	502.26	-	-	209.20	-	272.50	-			-	983.96

* - this shows the inflow received when the refinancing was done.

Interestingly, this means we've paid GBP 730.4 Mn in servicing our debt. So, how has this impacted debt outstanding? Should reduce, surely?
Interestingly, it's not! Despite the IPO in between (which should have been used for servicing debt in the first place).
After our initial PIKs were refinanced, we've barely made a scratch in reducing debt.

	2012​	2013​	2014​	2015​	2016​	2017​	2018​	2019​
Outstanding Gross Debt Payable in future	608.586​	488.288​	409.61​	579.179​	598.631​	681​	651.665​	650.561​
Consolidated Net Debt						503​	496​	511.232​

Why am I noting this? Simply because the Glazers aren't actually focused a jot on reducing debt burden. And that's because a large part of debt is in senior secured notes - a part of which are also with the Glazers (so they earn interest on those too). In effect, United aren't focusing on the future at all. All the focus is on year-to-year movement of the financials.

Anyway, I could go on and on but will leave just a couple more thoughts, the first of which is on what this means for the next window.
Here's a look at what we still owe for past transfers (the 2019 number does not include the AWB and Maguire fees):

	2012​	2013​	2014​	2015​	2016​	2017​	2018​	2019​
Min. Payments due for next year (Players)	77.558​	71.451​	96.765​	119.104​	214.566​	183.531​	259​	226​
Min. Payments due for next year (Debt)	39.985​	30.603​	31.099​	18.676​	22.602​	22.087​	24.205​	21​
Total Min. Due for next year	117.543​	102.054​	127.86​	137.78​	237.168​	205.618​	283.391​	246.546​

Note that this does not include any bonus clauses that may be triggered. And that's why we'll need to sell before we buy and should expect (another) quiet summer.

Final thought - what we're paying as salaries (additional to dividends etc.) to Ed, Joel and co. ("Key personnel"):

	2012​	2013​	2014​	2015​	2016​	2017​	2018​	2019​
"Key management compensation"	7.064​	8.599​	7.78​	9.751​	11.109​	12.326​	12.915​	10.729​

No time for conclusions and inferences. Maybe later...

This post is both informative and scary.

 

[Gasolin]

A brilliant couple of posts from you. Its a model that clearly hasn't worked, United have rewarded players who aren't good enough with bigger contracts than they deserve in-turn making them nigh on impossible to obtain their true transfer value. Smalling, Jones & Rojo should be all very easily to move on but the majority of clubs who'd be interested will find it extremely difficult to match their wages.

I'm interested to see United's cash position in next years accounts, it was already down to £140m at the end of Q1 from £307m in June. It looks like and I think I've seen it somewhere in the media that United paid £80m for Maguire upfront. United are going to burn a lot of cash considering prior to the Maguire transfer they owed around £225m in transfer fees this financial year. United will be desperate to sell someone prior to June 30th to enhance the results and cash position, I think Pogba will go although alternatively they could sell a few players like Henderson, Rojo & Smalling. Next summers transfer budget will depend on CL qualification. If United don't make it then I think Ole is relying on selling players to buy, in fairness selling Pogba, Lingard, Pereira, Henderson, Smalling & Rojo could raise the best part of £200m.

I think no matter what happens, if we stick to the plan of Ole, we are not selling Pogba. And probably not Henderson. I think a choice will be made for Smalling and Rojo and maybe Lingard / Pereira. Again, for that to happen, we need to start thinking what can be done here.

 

[midnightmare]

A brilliant couple of posts from you. Its a model that clearly hasn't worked, United have rewarded players who aren't good enough with bigger contracts than they deserve in-turn making them nigh on impossible to obtain their true transfer value. Smalling, Jones & Rojo should be all very easily to move on but the majority of clubs who'd be interested will find it extremely difficult to match their wages.

I'm interested to see United's cash position in next years accounts, it was already down to £140m at the end of Q1 from £307m in June. It looks like and I think I've seen it somewhere in the media that United paid £80m for Maguire upfront. United are going to burn a lot of cash considering prior to the Maguire transfer they owed around £225m in transfer fees this financial year. United will be desperate to sell someone prior to June 30th to enhance the results and cash position, I think Pogba will go although alternatively they could sell a few players like Henderson, Rojo & Smalling. Next summers transfer budget will depend on CL qualification. If United don't make it then I think Ole is relying on selling players to buy, in fairness selling Pogba, Lingard, Pereira, Henderson, Smalling & Rojo could raise the best part of £200m.

Thanks. And you’re absolutely correct. We had an outflow (cash) of 175 Mn this summer so clearly we’ve paid a lot up-front. Somehow though we had an inflow of just 17 Mn. That’s shocking. Does show that we probably spent all the Lukaku negotiations probably trying to get more up-front but likely compromised on that in lieu of a larger overall fee. It’s hit us on cash reserves and also resulted in a higher interest cost for Q1 as net debt rose. Let’s see how that pans out over the year. My guess is it’ll be worse after the Bruno deal (with extent depending on payment structure).

We have no option but to sell Pogba. No other asset can raise cash. DdG would have been my ideal candidate to sell - but our stupidity on wages means it’s now impossible to sell him. Unless we pay him off which would only make it worse.

I think no matter what happens, if we stick to the plan of Ole, we are not selling Pogba. And probably not Henderson. I think a choice will be made for Smalling and Rojo and maybe Lingard / Pereira. Again, for that to happen, we need to start thinking what can be done here.

Those won’t get us much if anything. We absolutely have to sell Pogba and sadly may also have to cash in on Henderson as we won’t be able to sell DdG and we will absolutely need sales to balance the books and fund any more purchases.

 

[Gasolin]

Thanks. And you’re absolutely correct. We had an outflow (cash) of 175 Mn this summer so clearly we’ve paid a lot up-front. Somehow though we had an inflow of just 17 Mn. That’s shocking. Does show that we probably spent all the Lukaku negotiations probably trying to get more up-front but likely compromised on that in lieu of a larger overall fee. It’s hit us on cash reserves and also resulted in a higher interest cost for Q1 as net debt rose. Let’s see how that pans out over the year. My guess is it’ll be worse after the Bruno deal (with extent depending on payment structure).

We have no option but to sell Pogba. No other asset can raise cash. DdG would have been my ideal candidate to sell - but our stupidity on wages means it’s now impossible to sell him. Unless we pay him off which would only make it worse.




Those won’t get us much if anything. We absolutely have to sell Pogba and sadly may also have to cash in on Henderson as we won’t be able to sell DdG and we will absolutely need sales to balance the books and fund any more purchases.

You are only thinking of numbers, but for Ole, and this has been very clear since the beginning, those 2 are certainly key to his vision. Especially since now we have Bruno, meaning that Mejbri can take his time to get into the team. I don't think we can afford to lose Pogba.

I understand the reality of the upfront cash flows, and it is very unfortunate. But we will have to also think about what we want and I don't think Pogba is out of our plans, very much.

 

[FC Ronaldo]

@Lentwood - re; OP. Best post I’ve seen on here in ages. Well thought and presented with thorough analysis for each side of your arguments. Enjoyed it. Thanks.

 

[Zen86]

Kudos OP