By Tony Attwood
Man U’s parent company Red Football has delivered a record pre-tax deficit for the year ended 30 June. Last year it made a £21m profit largely due to the sale of Cristiano Ronaldo to Real Madrid for £80m.
This year the company suffered the £64.7m cost related to the setting up of a bond scheme to replace bank loans and the £30.2m in interest accrued on £220m Payment in Kind (PIK) loans.
The PIK loans were paid in-full by the Glazers in November though no one knows where on earth the money came from, given that virtually all Glazer business ventures are in financial trouble. The best guess is that other loans were refinanced to pay the PIKs. It is the typical Peter and Paul game that businesses in trouble pay.
The loss posted by Red Football Ventures is better than the £80m deficit of the club’s immediate holding company, Red Football Limited for the same period. The difference can only be because of the additional PIK loan interest accrued.
There are of course companies that still like to be associated with this sort of mess – and the endless anti-Glazer protest. Aon, Nike, Turkish Airlines and Telekom Malaysia all are pouring sponsorship money into Man U.
Yes, but I rather have the feeling that the people who have loaned money to the club (those bankers and the like) have insisted that the club keeps £160m in cash, just in case the whole thing tumbles over…
Well that is a big amount of money to lose…
Interesting but is it just me? Why are they allowed to continue with so much debt? I know the Spanish have been doing this for years but I always feel the Spanish Treasury bail them out year on year. If I ran a business along those lines surely the bank would forclose on me.
Do they really have all that cash sitting in a bank? Wouldn’t the banks be asking for at least some of that to reduce the amount of debt that their in?
I think their just waiting for the next Sultan of “whevever” to come along and buy them out.Maybe they already are helping?
Football wise I do think the’ve been lucky this year and as the season grows to a close I think their luck’s going to run out.
In Arsene we trust.
Gooner for life.
The thing I’d like to see is the cash flow statement.
P+L means pretty much nothing in some ways. There’s a rather large amount of ‘player amortisation’ in that, particularly at clubs which spend a lot on transfer fees. If you paid £30m in transfer plus wages for someone for a 4 year deal, then you ‘amortise’ them at £7.5m a year, assuming your accounting policies are ‘straight line’. You don’t actually lose any cash, but it reflects cash spent in previous years purchasing an asset, whose nominal value is the cost of the remainder of their contract. If the transfer fee was nothing, then the ‘amortisation’ reflects the wages you paid out. If the fee was high, the amortisation is very different to the cash flowing out the door………
There doesn’t seem to be a detailed set of accounts in the public domain to analyse and I can’t be bothered to pay to buy them, but I’d say this.
1. £150m in the bank is probably 2 years bond/interest repayments. Assuming they refinanced the PIKs at a similar rate of interest to the bonds……
2. If they thought it prudent, they could sell Rooney for £50m, Chicharito for £20m+, Fletcher for £15 – 20m, Vidic for £25m+ and Evra for £15m+. That’s another £130m of assets and a lot of spare wage capacity. If they had to. Which they say they don’t…
3. If they had to, they could prune the squad and play:
Keeper;
Fabio, Evans, Smalling, Fabio’s twin;
Fletcher, Gibson;
Valencia, Rooney, Anderson;
Chicharito.
I’m sure SAF would rant and rave if he had to do that, but they’d probably still make Top 4. Just…..
I wouldn’t swap Utd’s finances for Arsenal’s right now for sure, but I don’t think they’re as bad as people want to make out…….
A loan is an asset to the banks. As long as Manu keep paying back the loans, the banks don’t really care about their debt. Right now ManU’s financials and the Glaziers feel like a great big Ponzi Scheme. At some point the tower will collapse…..
from a laymen point of view, as long as Manu has the glamour around the club still intact, advertising money from sponsors will continue to flood in. Loans will be made. The image (goodwill) of the world’s most recognized football club is worth a zillion. Arsenal needs to win a cup or two in order to claim that right to be one of the best in the footballing world, and that includes winning admiration from critics and fans alike.
I have noticed UTD have adopted our policy on buying players, cheap and under the radar, I sont think SAF has got the energy to rebuild another squad from scratch so he may retire soon, who ever takes over will have one hell of a task
Sooner rather than later old red nose will have to retire as age is creeping up on him ,by that time two or so years Trash.United will be in so much debt and a new manager will be needed,so which manager in his right mind would want to go to Old Trafford with all it,s huge debt,we wait in anticipation for a fall from grace?
Rhys – What you say is completely wrong regarding player amortisation. This writes off the transfer fee paid over the length of the contract. Generally when you make a big money signing you’d like them to be with the club a long time so a £30 million transfer fee is written off over the length of the contract however if they extend the contract you dilute / spread the amortisation unless you sell the player in which case you can balance the fee paid against fee received. As far as it’s not cash flowing out of the door you pay a fee and that’s money gone out of the bank good or bad. If the player breaks both legs after signing his contract you can’t get a refund.
No wonder they’ve made a loss, i had to deliver some stuff to their offices in Pall Mall (LONDON), and plush is not the word. I wonder why they havent got offices in Manchester (cough cough Shithole cough cough)unfortunateley the items i delivered were damaged (Butterfingers)
This isn’t a Issue for them at all. FIFA or UEFA or the FA knows full well that they are the flagship of football in Asia and the money associated with it. So United will never be allowed to fail. However the Glaziers no one cares about so if they go bung the club can go to someone else.
I must admit that I can never understand why football is not run like any other business. Any non-football company would not be allowed to carry on offering ridiculous wages and trading with such debts. Don’t they ever get to the ‘well, this month its either pay wages or pay invoices’? Is this rule just for Stockport, Rotherham, etc? Friends say to me that the way Arsenal run their finances is to be admired, but why bother if we can get away with MU behaviour and trophies. I’m not having a go here, just feel mystified.
I think Tony knows United are in better shape than he likes to make out. United’s total debt is £497m, and the club is worth 1.5 Billion, the club pays between £43-45m a year in interest depending on the foreign exchange rates, which is easily manageable. There is £134.5m in the bank and £70m of it has to remain in the cash reserves as a condition of the bonds. The rest can be used for whatever the club pleases.
Tony touched on the huge sponsorships that are growing at OT, United have also turned MUTV into a profitable business by selling viewing rights to 8 or 9 different telecommunication companies from around the world, each are worth £2-3m each. United have signed a platinum deal with EPSOM, United are also a year away from signing a NIKE deal worth a reported £450m. This blows away the last deal of £308m.
Lets not forget the streaming rights United are working on, the same as what the WWF do in America, that could boost United’s revenue by around £40m a year. We know the £83m loss United reported in October was largely because of the £67m one-off bond payments, payments that will not have to be paid again until at least 2017. Lets not forget about the £19m United lost in the foreign exchange when paying the one-off payments. This means already United will be at least £86m better off next year.
At worst they could break even.
The key to all this is the fact that clubs are allowed to spend more on transfers and wages than they can ever win back in revenues as a result of even the most outlandish success. It’s like backing a horse in the knowledge that, even if it wins, you won’t even get enough back to cover your initial stake.
As a business stratefy there is only one logic behind it and that is to put others out of business by forcing them to over invest in an attempt to keep up with you.
In a co-operative venture like the EPL that only makes sense if you are going to walk away from it when it collapses (Euro League?) or if there was a ready made supply of other clubs to replace those going bust. Cardiff City anyone?
The likes of Man Utd. re playing a ‘devil take the hindmost’ game which, in the long run will destroy English football as we know it. That’s bad for fans and for players and that’s why UEFA want to put a stop to it.
So how much do Utd supporters pay for their season tickets and can Utd meet the finincial fair play rules that will be introduced in a couple of seasons?
Steve – United’s most expensive season ticket is just £931, Arsenal’s cheapest is more expensive than that isn’t it? And the answer to your second question is ‘YES’ United will meet the FFP rulings with ease.
There are certain outgoings that will not be calculated, old debts and interest payments are excluded, as is youth development, goodwill. United will meet the FFP rules with ease, however City and Chelsea will struggle.
Tony,
i am an arsenal fan from US. Arsene doesnt let arsenal tour to other continents. My question is, “how much profit arsenal are missing because of that?”
it is obvious that if Arsenal toured Asia or America, tickets will be sold out, plus sponsorships and tv rights and everything..arent arsenal missing out on that?
utshav – Arsenal were set to go to Japan this summer and it would have earned them £10m, but I understand it’s been called off and Austria could well be on the cards again.