What 'old shit' is that?
Club ownership | Senior management team talk
- Thread starter golden_blunder
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What 'old shit' is that?
In truth, A club like United should be construed as a prestige asset, rather than an investment. The normal business metrics we use in valuation do not apply.
As yet we do not know what kind of owner JR is. It's a way to early to make a call on that. Ultimately, he wants a club that is self financing, paying its own way. A club that doesn't require periodic cash injections from the owners. Currently, we are not that club. Winning and contending (revenue uplift) would get us there eventually, but in the short term some cost cutting is necessary.
And some isn't. Especially if its financially inconsequential. You would like to think that management has the wisdom to differentiate between the two, but it shouldn't surprise if they didn't. They are not infallible.
Arguing that each and every cost saving is necessary reminds me of the Glazer apologists back in the day. The Glazers could do no wrong either, right?
Anyways, a club that is continuously making break-even on the PSR\FPP test would require owners to prop it up periodically. And a club running at the permissible loss limit would require even bigger contributions.
And the reason: Costs (like youth development, Women's football) that you can deduct from your true pretax profit and loss in PSR\FPP are actual true cash paying costs. As is expenditure on facilities.
So the profit tests overstate true profitability and true cash availability.
In effect, to be truly self financing the club needs to be acing the profitability tests with a bit to spare. We were doing that, but not lately.
I have seen a huge pile of PSR\FPP workings on here and elsewhere suggesting that in theory we can spend 100s of millions easily. Most are gibberish and those that aren't fail to appreciate that what you can spend in theory isn't what you can spend in practice. What you can spend in practice is dictated by cash and cash availability. And we do have a cash flow problem.
Desperately poor recruitment has hurt both profitability (and thus PSR\FPP) and cash availability. Woodward and Arnold essentially borrowed from future earnings to buy players in the expectation that the growth in future earnings would cover both future installments for those players and new player expenditure. When the growth in earnings didn't happen, they used the RCF (credit card essentially) to bridge the gap. And then they doubled down, continuing to spend more than we could afford in the hope that earnings would recover. And soon one credit card wasn't enough, we needed another, and finally, we needed a third. And since we now quite frequently use all three, we are paying more interest. Paid interest is now around 40m annually.
The Club is currently generating about 120m cash annually from operations and this is what's available to support net spend, infrastructure, dividends, and paid interest. At current profitability, if we assume no dividends or infrastructure spend for the next 4 years we would have a maximum of around 320m available for net spend on players. Sounds good, right? The problem is that we have already spend it. As of 30/9/2024 (and after the INEOS splurge on new players), we owed other clubs around 320m net on players already purchased (we owe around 415m but are owed around 95m). That net football debt position is essentially our future net spend and it all will unwind within the next 4 years. Mostly before our earnings come through to meet it. Hence the need for using the RCFs. We don't really have much free cash lying around to support further investment in facilities or players either now or in the near future unless things change for the better. But don't we have actual money in the bank to help, you probably haven't asked? Well we did. 150m as at 30/9/2024. Not bad, but to get there we borrowed 200m from the old credit card during the first quarter.
So yeah, we are in a cash bind and further expenditure on players makes it worse. Selling players makes it better. As would (hopefully) increasing revenues through winning and contending. And being pragmatic, so too would cost cutting. Ideally, the cost cutting doesn't hurt revenues (either to hold what we have or our capacity to grow them should things pick up). INEOS believe they can achieve savings in the order of 40m to 50m annually. Even in a low growth scenario, that would greatly improve both profitability and cash generation. FPP\PSR problems become a distant memory and our cash woes ease considerably. I think they are being too optimistic. Our non-player operating costs have been hit hard by rampant inflation just like any other business. There might not be as much inefficiency to weed out as they think.
All of the changes we are witnessing aren't really being made to help with some bullshit profitability test. The really big tests are down the road. Getting our financials in shape to get the best possible terms in the next round of debt refinancing (coming soon) is a priority as is our ability to secure funding for a new stadium.
I haven’t seen anyone say anything about his age. What I have seen said (including by Ratcliffe himself) is that INEOS make enough money from petroleum chemicals and Gas to not need United to be a money making exercise.
What they won’t do however is either throw good money after bad willy nilly like Woodward did, or stand by and watch the club make huge losses.
Great post.
Ive not read all of the above, but my tuppence is this.
United was by far and away the biggest club in the world from a financial perspective under fergie. The last decade the finances have stagnated. Sponsorship deals have been rolled over at the same rate rathe than increased, due to a lack of success on the pitch. Other clubs have caught up and overtaken us.
Therefore, there is a massive upside in future years financials if we get it right on the pitch. Real Madrid are turning over more than a billion euros in revenue this year. This club can match that if it gets turned around by SJR. Utd is one of the few clubs in world football that can dominate whilst being self funded.
Sir Jimmy will be delighted that we drew Leicester at home, he'll be rubbing his hands together at the thought of all those thousands of £66 tickets he can sell
Give him money, no matter how
Does this affect us?
If we spent the way we did in the summer without considering ffp senior people should lose their jobs.
I think it was very "easy" for them to follow the rules because the owners didn't put money into the club (unlike others) so United had to do business with real cash flow which essentially is what FFP rules try to enforce.
Anyone know why this is done?
Was that part of the Ratcliffe 100m final installment?
Yes it was
It might. We pissed a lot of money up the wall when ETH was here.
It’s just a companies house filing, which is required to be filed after the fact. Probably a flow down of some of the Ineos investment.
This is what people fail to understand. Why would someone who makes billions buy a share of a club for billions if it was to make money? The return on investment isnt there buying a share of United.
Fans want INEOS to continue spending then a year later complain how they overpaid in fees and wages. Its just how some fans operate.
It’s insanity. I swear some have only attached themselves to United to complain about every little detail. They get their jolly’s off of being perpetually angry and outraged.
Think it’s old news to be fair.
No PSR fail for last season at least.
Could be wrong but I thought the last SEC filing for the additional investment promised by SJR was filed in December. There was another filing yesterday so may be an additional 80m.
Could be right to be fair mate. I assumed it was the $100 Million from last month.
It may well be the last investment filtering down, I know something else was filed with the SEC regarding shares but could be unrelated.
Ratcliffe reminds me of me.
Kieran Maguire trying to act hard on X, again, stirring the pot saying we are doing something wrong. I’d throw him from my blimp any day of the week.
Kieran Maguire trying to act hard on X, again, stirring the pot saying we are doing something wrong. I’d throw him from my blimp any day of the week.
So does this mean we have money to spend after all so?
No it doesn't, it's just a legal filing as part of INEOS deal to purchase some of the Glazer shares
Still probably not, we might have managed to meet PSR for the last period but we still have to meet it for 2025, we almost certainly need to sell before we can spend what we need to
God knows what would have happened if INEOS didn’t come in.
That much for the post season tour? Can see why they are doing it, really poor cash flow position too with their payables.
Not sure INEOS coming in helped that much with the "Coach Change" line they kindly added to.
Would you have had absolutely any faith in the Glazers to sort this mess out?
No but I think if the partial investment wasn't an option for the Glazers they would be gone bottom line as the Glazers were running further and further out of rope and an ability to take, take, take and Radcliffe it would seem has found a way to elongate that unfortunately, it may get temporarily better at points and he's a better operator than just the Glazers but I believe Joel is still involved and it ultimately won't be good enough.
We just spent knowing he was investing.
The training ground upgrade I presume is the 45M. Obviously the coach change could have been cheaper. You're nearly up to his 70M investment right there.
Without it cash flow would be negative which, If I remember correctly, is why we used to have that revolving credit facility that needing paying off at the end of every season.
Plus, this is estimates. We won't know the picture until we get the accounts.
Very interesting reading that.
Not sure I read it correctly but didn't we make 100m worth of sales in the summer, why is it showing only 37m odd?
I don't know mate. Either which way seems low. If this was owed installments it's still pretty low...I don't think its correct. That would be £3M a month in players sold. I think the OP of that has made a mistake.
I was just looking at his investment vs expenditure that wouldn't normally be there which happens to total near his investment. Without his investment I don't think we'd be fecked, we just wouldn't have spent it.
Yep, we wouldn't have spent the money on the training ground and what not.
Obviously fans dont see this, they only take investment as player investments into account. Those fans who keep saying, we need to improve our infrastructure but wont like it when SJR spends money on there but not into transfers.
We know that SJR is not keen to spend big... he did say, they want the next Mbappe not sign Mbappe. So reading between those lines, we want to sign young up and coming players.
100%
Plus taking into account PSR. I presume such an investment would be a deductable? If so, would help with transfers anyway.
I think that was just that same investment finding it's way down