Wednesday, 3 March 2010

Q4 2009 Red Football results

Apologies for the fact this post disappeared thirty minutes after I posted it this morning.  I would blame black ops but it was all me being an idiot.

Lots to write about today, but sticking to the knitting, a couple of thoughts about the Q4 2009 figures for Red Football Ltd (the parent company that owns the club but not, pay attention BBC Business team, the ultimate parent company that has the PIKS).

We've never seen quarterly figures for United before, but publishing them 60 days after each quarter end is now a condition of the bonds.  The next date for your diary will be Friday 28th May and that will be a lot more interesting.

Financially, football is a very seasonal business with all football clubs' cash balances (or overdrafts) going up and down over the season.  The main costs (wages and salaries) are paid over the year, but the revenue is skewed seasonally with season ticket renewals coming (in United's case) from April to June and TV money at the start, middle and end of the season (with the performance related element at the end).

Add the random timing of transfer fees and receipts and all this means that its wrong to pay too much attention   to any one quarter, something that is mentioned in the results release.

There is one thing of interest in these figures, and it relates to the rapid shrinking of the club's cash resources.  At 30 June 2009, flush with the proceeds from selling Ronaldo, the Aon early payment and the seaonal upswing from performance related TV money and season tickets, United had £150.5m in cash in the bank.  By September 2009 this had gone down to £146.6m (partly due to signing Valencia) and by December 2009, we can now see it was down to £122m.  The results presentation shows the following table:

So at the end of the year the actual position was £508m of debt and £122m of cash.  The middle column shows the impact of the bond issue.  The £24m (had been estimated at £23m in the prospectus) relates to banking fees of the issue and a partial payment of the loss on the interest rate swap.

The table is set out in an odd way, with the bottom figure (which you would think is a total of everything above) actually totalling the gross debt.  The total debt outstanding rises by £12m following the bond issue but the costs means the net debt rises by £36m.

The column on the right shows that around £98m was in the kitty immediately after the bond issue settled on 29 January (it would actually have been slightly more than that as the table doesn't include January's positive cashflow).  This cash balance is the justification for saying "the Ronaldo money is available".  So what has happened to this money since the end of January?  We don't know.  And we won't know whether it has been paid out to redeem the PIKS until Friday 28th May when the Q1 2010 accounts are published.  United aren't saying anything about it of course, except for this footnote at the bottom of the table:

"Further cash has been carved out and is available for the company to use at its discretion".  Note the "is".  A very odd footnote, effectively a reminder that some or all of this morning could disappear at any moment.  We know nothing about the details of the PIKS including their redemption terms of course.  I would  guess they can be bought back in on specific dates.  I'm certain we'll learn more with next quarters' figures and I'm certain that it will confirm the use of Manchester United cash to pay Glazer family debt.



Luke Robbins said...

Thanks again its good to read more technical posts on the clubs debt.

Do you have any plans setting out the kind of figures that would have to be reached if these so called 'Red Knights' are to seriously contemplate a bid?




James said...

Hi Anders,

There have been reports that the PIK debt is held by up to 20 different hedge funds so do you think there is a chance of information regarding the repayment of part of the PIK debt leaking out into the public domain before May 28th?

The May 28th date is very interesting when you consider that the deadline for season ticket renewals is normally around June 10th.

United Rant said...

The chickens will come home to roost in May. Given that the club's cash balance is going to disappear any player purchases, I suppose, will come out of the 75m overdraft the Glazers organised as part of the Bond issue. Will be interesting to see if they try and buy off the fans (and maybe even the manager??) with a couple of tasty signatures. Will the fans be fooled? I doubt it this time.