Yup.
I would add that the trouble with Fred's analysis is that he hasn't acknowledged that the purchased goodwill (£540m) is amortized in equal amounts over a 15 year period. So whereas you would normally expect earnings to get greater the longer you own the company, the amount of goodwill amortisation charged as an operating expense to the P&L account is the same in Year 1 as it is in Year 15.
It therefore makes no sense to say that ''they haven't made as much money as the potential they paid for suggests'' without recognising the fact that goodwill amortisation has been charged to the accounts in a completely unrealistic manner in comparison to what you would normally expect to happen to earnings in the future.
For that reason and for many others it is best left out of the discussion altogether.
I dont dispute what you are saying, but they are however the measurements that United are basing their valuation of the club upon, and using those figures to gain finance and investment.
Yes earnings will or at least should be expected to rise and thus goodwill isnt represented in a logical manner, but those are the yardsticks that they set out when they financed the business. They set those parameters. Not me, not you.. Its what they themselves set as their targets.
They have said that over 15 years they expect to realise £540 million from those assets. Its what they valued the goodwill at.
THe fact they arent meeting that valuation isnt justification to say "well just ignore it then"
They based their borrowings on the fact that over the 15 year period the goodwill would be amortized. They would have forecast that in their projections.
Do you seriously believe the banks would lend them the money if they turned up and said "heres our business plan, this is how we envisage it going, oh and by they way, just ignore those bits there because if things go bad and we fail to meet our business plan, those bits we can pretend dont exist"
The banks would have taken amortisation into account when they decided if they should lend them the money. Glazer would have taken them into account when he prepared his financing plans. If the banks and the Glazers had to take them into account, surely it follows that everyone else should too.
What those accounts show is that the business plan they prepared ( including their projections of goodwill and depreciation etc ) are not going as well as they hoped they would be.
I am not disputing theres more money coming in. My point is, they prepared a plan, and as thiings stand, its not going as well as they said it would be...
If there was a surplus after amortisation and depreciation no one would be saying ignore it.. Its only because its showing a deficit that people are asking it to be swept under the carpet.
Ultimately it boils down to this. They prepared a business plan and projected profits and earnings. They borrowed on the strength of those plans. Now those plans are showing somewhere, somehow, they got it wrong. They arent doing quite as well as they thought they would.
WHich is what I've been saying for 5 years. But everyone said "no.. no.. its fine... we arent in any bother". What happened.. they had to go to the city cap in hand with a begging letter saying "please bail us out the shit.. we fecked up"
There are some people who just wont accept that no matter what, the Glazers will keep telling you everything is fine and they are on track as per their plans. Each time it comes out that they havent achieved their desired targets, and they need to move the goalposts. THen suddenly everyone is running through hoops to suggest that the new goalposts are equally as achieveable as the last ones, even though the last ones were proven to be complete pie in the sky...
