Manchester United hit new financial problems; is this straw and camel back time?

The story doing the rounds  is that Manchester IOU will see a significant drop in revenue over the next two years, now that they have decided not to put up the cost of season tickets again.  Figures of around 11% decline a year are being talked about.

The figures come from a JP Morgan paper which shows the match income to be £109m last year.  It is expected to be £98m this season and £96m in 2010/2011 going back to £101m in 2011/12.

The heart of the problem is the selling of executive boxes, which many clubs have faced.  Arsenal, having the most luxurious stadium in London, and being the only one where the boxes were built into the plan, rather than tagged on later, have far less of a problem.   And London clubs in general have less of a problem, as they have a bigger choice of top businesses to pitch to.

However in Manchester even JP Morgan think that the situation could get even worse for the most indebted football club on the planet, saying, “We note that the coming two quarters will be important to gauge demand for 2010-11 season tickets and executive hospitality seating in light of the negative MUST PR campaign.”

That is interesting, since it is one of the first overt statements about the effect that the anti-Glazer campaign is having on the willingness of the top brass to be seen to be associated with a club so out of favour with its natural supporters base in Slough, Inverness, Chelmsford and Penzance.

So what difference will this decline make?  More debt to add to the debt?  Actually it is worse than that, because here we are dealing with cash – the real live money used to pay into the players’ bank accounts.   Manchester IOU can survive for a few more years because the bonds have given them that amount of time before repayment is needed.   But what they still need is cash to pay for real things like VAT.   And that is what they lose if a box is sold at half price.  Or less.

Cash flow is something that has not been speculated upon that much because cash flow is more technical and boring than the big numbers of bonds and bank repayments.  And yet if you look at business in general, cash flow is what drags companies that go into administration, down most of the time.  They simply run out of money to pay the staff.

So if we combine the issue of cash flow drops due to the recession (the first thing you cut when your firm goes bust is all the jollies) with a need to distance oneself from the greatest PR disaster in the history of football since Peter Ridsdale starting talking about living the dream at Leeds, there’s a whole new area of problem for Manchester IOU that we have not contemplated before.

And not just Manchester. Liverpool Insolvency (also known as Liverpool Weetabix, since one of the owners of Liverpool pulled the same tactic when he owned Weetabix) have the same problem multiplied by the speed of money.

Liverpool need to pay huge amounts of money to the bank each year to reduce their borrowings.  Additionally they need to cover their losses – since they do indeed lose money each year.   These are the things that we have focussed on.

Additionally they have people like the Spirit of Shankly making a noise about not wanting RBS to lend the American crooks any more money, and people like me writing to RBS reminding them that they have made it difficult for my company to borrow money, and anyway I own RBS as do you, if you live in the UK… all of which makes it another PR disaster.

So bring in the issue of cash flow, and the same problem arises.  Liverpool is a buying club, so each year it invests in new players, and that means that a historic debt builds up as the money spent has to be paid in cash terms over a five year period in most cases.  And there’s that pesky Mr Revenue and Customs always wanting his money too.

Add in to that the fact that Liverpool lost out on Champs money this year, and will probably lose out again next year, and you have a hole in the accounts equal to Bank repayment, Player cost repayment and decline in revenue.

Now I don’t know how the big money directors box revenue goes in Liverpool, but it is reasonable to assume a decline there too.  (I mean the club is in a rather unattractive part of town).   Put all that together and you have not only a problem of finding money for the longer term (to keep RBS happy) but also money in the short term.

It is thus possible that what will happen next is not another administration as Woolwich Arsenal suffered 100 years ago because the sponsor has had enough, but something far more difficult to deal with: a cash flow crisis.

Of course cash flow problems can lead into administration – and that is exactly what happened at Portsmouth, although there is the underlying thought that someone somewhere has stolen a lot of money from the club.

So overall, cash flow could well be a problem for some of these clubs.  Man U can hardly go back and raise more bond money for cash flow, any more than Liverpool can ask RBS for a bigger overdraft.  This could be the next stage in the fiasco that is English Premier League football.

Tony Attwood

There’s an index of other articles at Some of it is quite amusing.

And if it is a radically different form of writing that you want, which has you howling with laughter, and then howling at the moon, try this.

12 Replies to “Manchester United hit new financial problems; is this straw and camel back time?”

  1. Love your posts, i read them all the time…….so refreshing in comparison to all the D&G rubbish out there.

    Could you give your insights on this though, if Man IOU are so much in the doldrums as regards cash why is it that i keep on hearing (albeit rumours so far) that they are looking to invest HUGE amounts of money on the likes of Torres and Villa in the summer. I would have thought if they are in such a crippling situation they would stop the madness and curb their spending but apparently not. It is the same with Chelsea they may have converted all of their debts into shares but yet again all i keep on hearing is they are going after the big players in the summer. I feel this is definitely unfair and shouldn’t be allowed……..isn’t it stupid to do this anyway because of the new rules coming in?

  2. Well, to me it seems like LFC need to do the following:

    1. Find a sponsor who will cough up £500m to build a stadium and get 25 years naming rights, shirt sponsorship etc etc. New York got a beer firm to build them a stadium. Why can’t LFC do the same??
    2. Find a buyer who will buy LFC in cash to get rid of the debts and fund it with working capital to allow proper management to take place.
    3. Pay players on a performance-related basis i.e. your salary is dependent on ticket sales, image rights, prize money and media money and if you don’t perform then your salary goes down. Sure, this means that you might lose your best players, but it would make the players honest.

    Unless, of course, football matches are fixed on the gambling exchanges. I hope they are not. Football to me is not an italian opera. It is a mix of skill, spirit and honest graft. With the result not known before the referee blows his whistle to end the game.

    If I want to watch the Magic Flute I pay £50 to the ENO or the ROH.

    If I want to watch a game of football, I pay Arsenal FC to watch one.

    I truly hope that players, referees, officials and owners know the difference.

  3. Maverick

    I think Man U has two problems in this area.

    First, there is an expectation that they will buy, because they always buy. Ronaldo, Rooney, Berbatov… that is what they have always done, and it has been the basis of the success that Man U has had over the Ferguson years.

    Second, newspaper sales in terms of football are based on buying and selling rumours. Today it is the fact that Cesc has played his last game for us as he will be in Barca for next season.

    So everything conspires towards the notion of buying. But the fact is that the Ronaldo cash was not spent, which tells us something.

    What is happening is that the papers are running the story that Man U have serious financial trouble, but they are not connecting that up with the story that Man U are going to buy.

    It is possible that Ferguson will say, I have to buy x y z and the owners will somehow find a way to get more loans in to do this, or maybe they think that buying these players will then give them the chance to sell more corporate boxes.

    But in essence at the moment Man U and Liverpool are selling clubs because they are ruled by the markets and the banks, not by their boards.

    Chelsea have a different problem. Having converted the loan to shares, what now? How do they bring in the next £50m for the next round of purchases? If Abraomovich puts the money is, does he create more shares? Or sell some shares? Or what?

  4. @Rhys-

    Sure about that? Who donates money for a a cause… Like saying Emirates donated to Arsenal out of free will….

  5. Not sure where to post this, but awhile ago, Phil wrote an article about Michael Lewis’s Moneyball and how the team portrayed in it is very similar to Arsenal. Well, he was EXACTLY right. In fact, it even seems like Billy Beane’s model all long has been our great AW himself:

    Tony — Excellent article. Cash flow is something no newspaper talks about, and that problem not only brought down Portsmouth but Lehman Brothers…oh yes, the financial reckoning is coming…

  6. And the Arsenal ? We will just be having another good financial year with profits and a stable future ahead of us. Good to be a Gooner.

  7. as much as I’d love to see Manchester IOU and Liverpool Weetabix as you so affectionately call them go bust, I can just as easily see some thick as pigshit but twice as rich Arab/Chinese/Indian/Russian wanting a piece of arm candy and not give a toss about the money.

  8. Digger that is of course true, but what is interesting is the combination of the cash flow issue AND the bad vibes being given off by the Spirit of Shankly and the Red Knights, and the existence let us not forget of FC United of Manchester who are now negotiating with the local council for a new stadium.

    The point is, if you invest a lot of dosh part of this is because you want to be known as a goodie. If you end up being seen as someone who should be jeered at every turn, it doesn’t quite work. You might be better off buying an American football franchise, or a basket ball team, or a camel racing syndicate.

  9. There’s an old accounting saying:- Turnover is vanity; revenue is reality; cash flow is sanity. Stand by for more entrants to the asylum!

  10. Tony,

    Another excellent post. I’m not sure whether this is the right place to leave this, but I saw a comment of yours on the Guardian website under an article on Hull’s ownership, where you mentioned your puzzlement over Tottenham’s fortunes and think that you may be interested in a review of their last two accounts that I did for my own blog.

    It’s a lengthy analysis which concludes that the results are by no means terrible, but are nowhere near as good as they have been presented, both in the media and indeed the accounts themselves. There are major issues over player trading, amortisation, debt and cash flow.

    If you want to take a look, you can find it at:

    Keep up the good work.

  11. May your Easter eggs produce the results we want, the bluebird of happiness crap on the spuds and the Easter Bunny get lost and pop his head up in the Nou Camp…just in time to divert Bendy’s shot into a last minute winner.

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