Tuesday, 18 May 2010

The £437m of Glazer costs - full sources

[Now with links to all relevant documents.]

Last week the Manchester United Supporters Trust (MUST) asked me to supply up to date figures on how much the Glazers have cost United since they took over in 2005.  For completeness I thought I’d post the numbers on this blog along with a complete list of sources for the figures.

“RF” refers to Red Football Ltd
“RFJV” refers to Red Football Joint Venture Ltd

Source note
RF takeover fees and expenses
2006 refinancing:     RF bank debt financing costs
                             RF senior facility repayment penalty
                             RFJV prefs repayment penalty
2010 Bond issue costs
Total professional fees
Loss on interest rate swap
Cash interest paid:             to 30 June 2009
                                       Est year to 30 June 2010
Total cash interest paid
Rolled up PIK interest:        to 30 June 2009
                                      Est year to 30 June 2010
Total rolled up PIK interest

Management and consultancy fees
Loans to Glazer family members
Total costs

Edit 20:32 19th May 2010:

Some extra information and clarifications following comments received:

The information is divided into RF and RFJV costs. This is deliberate so those who don't agree that RFJV costs will be paid by United can exclude them from the calculation.

One reader has correctly pointed out that the £10m of personal loans to Glazer family members is not an accounting "cost". I included it as it represented a cash outflow from the club. Let's hope they can repay the loans.

The 2006 refinancing costs are too low. I had estimated them from the two companies's accounts. The investment memorandum for the 2006 banking facilities (“Sources and uses of funds” table page 15 of pdf) shows a total cost of £29.1m vs. my £24m estimate.

People have asked for a comparison with the plc.  In the five years to 2005, the plc received net interest income of £3.9m.  Dividends during this period totalled £38m (assuming the final dividend for 2005, which was never paid, increased year on year by the same % as the interim dividend).  So the net cost of interest and dividends for the final five years of the plc was c. £34m.

If we are making comparisons, it would be churlish not mention the one saving that the Glazers’ capital structure brings, corporation tax.  United pay no cash tax because the group interest is high enough to fully offset taxable profits.  Since 2006, this has saved c. £86m of corporation tax that United would otherwise have had to pay.

[i] Total acquisition price inc fees and expenses (from RF Investment Memorandum July 2006) less value of equity acquired (from RF Offer Doc May 2005).
[ii] Calculated from financing costs annual amortisation charge note 17 RF accounts to June 2009.
[iii] Note 31 RF 06 accounts.
[iv] Note 31 RFJV 06 accounts.
[v] 2010 bond prospectus p43 "Use of Proceeds".
[vi] Ibid.
[vii] RF “Interest paid ” 14 mths ending 2006 and 12mths ending 2007, 2008 and 2009.  From RF annual accounts consolidated cash flow statements.
[viii] RF H1 results 2009/10 plus total bond issue (current FX rates) £537m, weighted average coupon 8.55% applied for six months.
[ix] £202.094m of PIKS at 30 June 2009 less £2.504m of unamortised financing costs plus a further 10 months interest at 14.25% pa compared to the £138m initially issued in August 2006.  From note 17 RFJV 09 accounts.
[x] 2010 bond prospectus page 100 “Related Party Transactions”.
[xi] Ibid.


steven said...

Not sure what the problem is. Thats87m per year which is only
6x Antonio Valencias per year,
3x Cesc Fabregases per annum
or if we're really desperate
only 1x C.Ronaldo.
What the team needs is more speculative young, unproven youngblood like err Diouf, Hernandez etc. and of course for Fergie to stay for another ten years at least.

Anonymous said...

Thank god the transfer market is narrow and lacking in value.

unitedrant said...

Don't worry peeps we'll win absolutely everything buying kids while Barcelona, Chelsea, Real Madrid, and Manchester City waste all their cash on nobodies like David Villa, Cesc Fabregas, Fernando Torres and the like.

Look at the brilliance we've achieved at the bottom of the market before - Dong, Manucho, Diouf, the Djemba twins - world class talent each and every one.


We're fucked. The end is nigh.

Rob Cameron said...

Thanks for providing the breakdown of 'costs' incurred by the club as a result of the take over. That is £437m that adds no value to the club, has not paid off any of the debt incurred and has not been used to strengthen the squad. Frightening that the transfer fee received for Ronaldo is only sufficient to service the PiKs or the professional fees incurred. Just imagine what could have been achieved if that £437m had been ploughed back into strengthening the club and the playing squad.

UndercoverPossum said...

Thank you (again) for your insights. I've been following your blog with real interest since you started writing it, and although I've never left a comment before, I thought I should say that I think you should be proud of what you've done to shine a light into the murkier recesses of football finance. LUHG.

Haakon said...

You can't link to files on your own computer; the files are in your sources are not possible for us to download...

In terms the Glazers "having costed" United £83m in PIK interest, this is not true. It is however correct that the Glazers "will cost" £83m in PIK interest (or surely even more when the PIK debt is due).

Jeremy said...

This proves that our owners have taken OUT of our club more money than City's owners have put INTO theirs. Given what they have already achieved (OK, not won anything yet...), you can imagine what we could have done with that money.

andersred said...


You're right, I am assuming the rolled up PIK interest ends up being paid off by the club.

I've removed the broken internal links and put in links to all the original documents.


Diem said...

Thanks anders, fascinating as always. It certainly puts the loans to the family in context, £10m isn't really that much in the scheme of things.

Do you have the corresponding plc data? It would be interesting to see what the pre-existing debt commitments were to compare with the £216m interest costs.

All the other numbers can be attributed to the cost of the takeover (although the loss on the Swap could be argued as unfortunate, given that no-one could have foreseen the fall in interest rates resulting from the financial crisis, and the consequent adverse impact of the fix), but unless United were debt-free in 2005 it would be more transparent to note the net change.

Jörgen said...

Interesting stuff indeed. In addition to what Diem said, it would be of interest to see what dividends were paid out too. I mean, that's the cost of having a plc, isn't it.

Without the alternative cost this doesn't say much, so it would be greatly appreciated.

Moreover, a loan isn't really a cost, but I'm sure you know this.

andy said...

Andersred - big thanks for helping bring some light into the mysterious world of football finances.

Without your blog/insight i don't think we'd really understand what is going on at the club.

thank you

Anonymous said...

Jorgen, here are the figures for shareholder dividends in the 5 years pre-Glazer:

2001 - £5.20m
2002 - £8.05m
2003 - £10.39m
2004 - £6.97m
2005 - no dividend paid

As for debt pre-Glazer...there wasn't any. I think Anders will confirm that.

"A loan isn't a cost", not sure what you mean by that.

Keep up the good work Andersred.

andersred said...

Thanks for your comments Diem (as ever), Jorgen and everyone else....

I've added to some extra information on the post that should cover most of these pints.


Jörgen said...

Thank you Anonymous. The really interesting thing here is how much dividend was paid in relation to revenue and EBITDA, though.

This way, we can assess what would be paid out during the current situation if we were still a plc.

A loan doesn't affect the profits whereas all the other posts in the lists do. Therefore, a loan is not a cost (but the interest is, in this case interest is rather the opposite, though).

A loan will affect the cash flow. Cash flow is what is needed to make investments, i.e to buy players. In this respect the loan to the Glazers weakens our possibilities by the amount of the loan.

On the other hand, accumulating the cash before making any transfers would be utterly stupid from a financial standpoint. That's another story, though.

Jörgen said...
This comment has been removed by the author.
Jörgen said...

Thanks Andersred.

EastStand375 said...

Oh how good of you to include the corporation tax savings that the Glazers business model has created!

Isn't it about time you addressed the issue of goodwill amortisation and how every year that annual write down grossly distorts the true state of the club's/Red Football's financial performance?

And no mention of how the Glazers have made far better use of the club's resources than the PLC?

Look at the growth in media, matchday and commercial revenue since they took over. Look at the EBITDA growth rate since 2005.

Why haven't you commented on the raft of new sponsorship deals that have been announced in recent months, with more to follow?

Why don't you mention these things? Why are you hiding this information from people?

One can only conclude that the reason for your lack of transparency on these issues can only be because you believe it would seriously damage the anti-Glazer campaign if the real truth on these matters was allowed to be heard.

Yourself and MUST certainly don't fool me with your 'spin' and deceit.

Anonymous said...

hey andy
can u guide us on this story. is it true?


like ur blog cheers mate for doing fine job .

andersred said...

Hi EastStand 375,

Thanks (I think) for your comments. I’ve been having discussions with some other people about a lot of the issues you raise so luckily for you and me I’ve already done the number crunching! Let me answer your points in turn (over three comments due to lack of space):

Isn't it about time you addressed the issue of goodwill amortisation and how every year that annual write down grossly distorts the true state of the club's/Red Football's financial performance?
I don’t think I have ever used a post goodwill amortisation number to measure RF’s financial performance. There is no goodwill amortisation charge in the MU Ltd accounts of course. I don’t really understand what you mean when you say it’s time I “addressed the issue”. What is the issue? None of the costs I have listed in this post relate to goodwill amortisation. All the RF costs are cash costs and I believe the RFJV costs will results in cash outflows from RF in the future. Goodwill amortisation is a non-cash cost and of no relevance.

And no mention of how the Glazers have made far better use of the club's resources than the PLC?
I’d question the phrase “better use”. Does “better use” mean redirecting the club’s resources from investment in the football club to the paying of wholly unnecessary interest, fees and charges?

continued below

andersred said...

part 2....

Look at the growth in media, matchday and commercial revenue since they took over. Look at the EBITDA growth rate since 2005.

The three main revenue lines have indeed increased substantially during the Glazers’ ownership. Let’s compare 2008/9 and 2004/5.

This has increased by 64% from £66.3m in 2005 to £108.8m in 2009. There were 30 home games in 2009 and 29 in 2008, nothing to do with the Glazers (it was back to 29 games this season). The stadium had a capacity of c. 65,700 in 2005 vs. c. 75,600 now. The increase is of course nothing to do with the Glazers either, the plc had already commenced the expansion of the quadrants before the takeover.
So in 2005 there were 1.905m available seats (65,700 x 29) which generated £66.3m of matchday income or £34.78 “per available seat”. In 2009 there were 2.268m available seats (75,600 x 30) which generated £108.8m of matchday income or £47.97 “per available seat”. The stadium was effectively sold out in both seasons. The increase in “yield” is 38%.
On a like for like basis therefore the increase is matchday income that can be credited to the Glazers is £29.9m. This “achievement” comes of course from the huge increases in ticket prices imposed by them. Something I and others have hardly failed to mention!

This has increased by 106% from £48.4m in 2005 to £99.7m in 2009. Media can be split into collective TV rights (87% of the 2009 total) and club owned rights.
The club owned rights are held by MUTV and MU Interactive, which are both separate companies. Interestingly, MUTV’s turnover has actually gone down under the Glazers, from £7.4m in 2005 to £6.9m in 2009. MUTV wasn’t consolidated into the 2005 accounts (it was an associate) so that’s £6.9m of extra income in the group accounts. MU Interactive contributed £1.7m of revenue in 2009 vs. £1.6m in 2005. Neither operation makes any money, MUTV lost £269k and MU Interactive £66k in 2009.
Al l the rest of the club’s media income is out of the owners’ control as it is set collectively. We all know the value of Premier League and Champions League TV contracts has risen hugely in the last five years. What’s this got to do with the Glazers? Arsenal has benefitted in the same way for example, should they be thanking the Glazers too?
So the Glazers can’t take any credit for 87% of the media income and the remaining piece they do have influence over has gone down since they took over. Brilliant.

This has increased by 64% from £42.5m in 2005 to £69.9m in 2009. The 2005 number has to be restated because the accounts for that year only cover 11 months. Matchday and media are not impacted by this (the missing month was July!) but commercial income (recognised evenly over the year) is. So the correct comparison is with a 2005 number of £46.4m. It would be stupid not to also increase the 2009 number by £5.9m to account for the extra Aon income compared to AIG. So the correct comparison is £75.8m pro-forma for 2009 vs. £46.4m adjusted for 2005, giving a £29.4m or 63% increase.
This is obviously a very impressive increase and much of it is undoubtedly down to the club’s new commercial operation in London. As with the other categories of income, not all the increase can be credited to our owners. The annual contribution from the Nike contract has increased by £5m since 2005, this step up was automatic. The club receives £500k more from its share of Barclays sponsorship of the Premier League, again out of the owners’ control.
The remaining £24m increase splits almost exactly evenly between the higher value of the Aon sponsorship vs. Vodafone(c. £20m vs. c. £8m) and the increase in “Platinum sponsors”. On the shirt sponsor, I’d note that the £80m, four year deal is very much inline with other clubs (Liverpool’s deal with Standard Chartered is the same value, Bayern’s Deutsche Telecom deal is greater). I don’t think it’s possible to argue that only the Glazers could have secured this sort of deal...

continued below

andersred said...

Part 3

Why haven't you commented on the raft of new sponsorship deals that have been announced in recent months, with more to follow?
See above. Nice to have, but only worth around £20m pa or 7% of turnover so let’s not get too carried away.

Why don't you mention these things? Why are you hiding this information from people?
I think that’s harsh. Let’s consider the “bottom line”.

In 2004/05, when you'll recall we came third in the league, lost the Cup Final and got knocked out of the CL in the first knockout round, the club made pre-exceptional EBITDA of £46m. Interest receivable was £2.5m and tax was £4.2m, giving net cash profits of £44.4m. As you'll appreciate that's a pretty good measure of pre-transfer profitability.
Last year we won the league, reached the CL final, the FA Cup semi-finals, won the league cup, playing 30 home games in a bigger stadium with ticket prices 40% higher. With all that and bigger TV deals too, the club made pre-exceptional EBITDA of £92m, double 2005. But knock off interest of £42m and even though no cash tax is payable, net cash profits were only £50m, a rise of 12% on 2005.
So in one of our most successful years ever on the pitch we only made net cash profits £8m higher than the pretty awful 2005 season! I haven't included the cost of the PIKs of course....

One can only conclude that the reason for your lack of transparency on these issues can only be because you believe it would seriously damage the anti-Glazer campaign if the real truth on these matters was allowed to be heard.
What lack of transparency? Show me any other website that sets out this much detail on our financial position?

Yourself and MUST certainly don't fool me with your 'spin' and deceit.
That’s just a weird comment frankly.....


Anonymous said...

re the laffable comments of eaststand 375.

Don't waste your time rising to this nonsense Anders...although i will now be on the look out for someone in the EastStand sporting highwaisted trousers and a ridiculous ginger beard.

Steven said...

A muppet could have increased sponsorship deals from pre-existing commercial deals. The PLC showed a significant increase every 3-5 year periods. Also what is the cost of employing 40-50 people in London in plush offices. Some or most extra revenue will be absorbed by these extra overheads.
The sensationalist claims (mainly in the spurious media) of the Glazers brining in £200m of so called extra income are just a total nonsense.

P.S. The "scousers" shirt deal is allegedly £21m per year i.e. 4m more than ours. Maybe the Glazers have undersold the shirt deal in lieu of getting their thieving hands on a large cash advance.

Jack said...

great blog anders,
unfortunate that some supporters have not realise that the current model will only bring us to doom.
the club would not have generate profit w/o selling ronaldo and this is without taking PIK into consideration is just shocking!

RobC said...

Another fine piece of analysis Andy, pity the masssed ranks of the meeja don't use your work more often to question Gill & co more thoroughly.

As for EastStand375's stooge-like comments, laughable really and well done for dissecting them.

However the RK's must be careful not to hide behind MUST and leave them to defend the protest and the (hopefully) soon to be made bid. They need to put a "face" to their activities and soon or the momentum of the protest will be lost forever.

And I for one don't want to them to fail. Otherwise as unitedreant said, we're fooked!

beef said...

Those points about how much or little of the increases in income can be attributed to the Glazers are illuminating.

Particularly the fact that he stadium expansion was already underway and big chunks of the income being automatic or negotiated collectively.

Jörgen said...


Although I believe you have chosen costs at your discretion here, and that you are to a certain extent choosing your truth, your basic points are probably right. There have been costs regarding the take over and ownership.

It has to be said, though, that the rolled up interest on the PIK's is not a cash flow issue until it has to be paid. Therefore, if you can place the same amount with a higher return it's going to be a net cash flow into the club. This cannot be known until the PIK's end. This is what borrowing money is all about, isn't it.

We can all have our doubts, but the fact remains that it is possible. That's why I feel that even if it may be correct to call it an accounting cost in the company where the PIK's lie, it won't necessarily hit our club from a cash flow perspective (as this will probably be paid by a potential buyer, considering this debt is on the books of the Glazers).

Considering your lesson in the theory behind LBO's on this blog, it has to be pointed out that it is not enough to manage one year of 130m in EBITDA in order to valued at a 130m EBITDA. It has to be plausible that this is a level that can be maintained over time. In fact, you may never have reached that level, but as long as it is likely that this is your mean over the investment period, this is your valuation EBITDA.

A potential buyer of the club will know this, of course. The only way the club can maintain a high value over time is on-pitch success. This is not a secret.

What do you think is the Glazers way to get the return they have in their business model? Will they try to keep United successful, while increasing earning power through commercial deals and ever increasing ticket prices? Or will they choose the path of cost-cutting and run the risk of not having success?

Either way, a buyer will know the state of the club (if nothing else, the due diligence process will reveal it) and will not buy if the future looks grim (at least not at the current valuation).

Obviously, the Glazers have a valuation that motivated them to use the PIK's as a means of buying the club. What do you reckon this valuation is? Furthermore, on what do you think they base this valuation?

I am really looking forward to your answers (if you have the time, of course). Hopefully, this will lead us to more knowledge and clarity.

I must say that I haven't had the time to read through all of the resources on your site, so if these questions have been answered before, I apologize. All I ask for, then, is to be pointed in the right direction.

Best regards

Diem said...

Thanks anders for the update.

Is there anything in the accounts about the cost / funding of the stadium expansion? i.e. have the Glazer's acquired this cost to be borne (funded through debt), or was it accounted for elsewhere?

Jörgen said...

Oooops, almost forgot.

I do think that a list like this does not say much unless it is put next to an assesment of what the same costs would be under the former type of ownership.

This means, what would dividends be with the current revenue? What were the mgmt fees under the PLC? What did we pay in interest?

You know, so we can make a comparison...

That said, it probably won't change the basic points of your article, but it's nice to know and it will probably stop a few myths.


EastStand375 said...

The trouble with you Andersred is that unlike MUST I don't really have a big problem with what you actually say, it's what you don't say that I have a serious problem with!

You know full well why I raised the issue of goodwill amortisation. You know that perhaps the most popular line from the sensationalist media over the last few months (journalists briefed by MUST and I believe also by yourself to some extent) has been how Red Football Limited would have lost £40m last year if Ronaldo had not been sold for £80m.

Now in actual fact Red Football Limited's pre-tax profit was £48m for the 2008/09 financial year so if you were to take out the £80m profit on disposal from the sale of Ronaldo there would have been a pre-tax loss of £32m.

So let's now return to the issue of goodwill amortisation. You have admitted yourself that goodwill amortisation is a non-cash loss/expense and is of no relevance. So if you were to take out this c.£35m non-cash expense from the P/L account results there would have been an £83m pre-tax profit. If you were then to take out the £80m Ronaldo profit there would be a £3m pre-tax profit. But if the media were to point this out instead of claiming that United would have made a £40m loss without the sale of Ronaldo it would have painted an altogether different picture of the club's financial health, wouldn't it? Indeed it would have painted a much fairer and more balanced picture of the club's financial position.

This is why I'm disappointed with you Anders. You haven't once made a point of dispelling this myth created by the sensationalist media and MUST. I had hoped that your intention by starting this blog was to provide Manchester United supporters with a fair and balanced view of the club's financial position. But you haven't and you've disappointed me. I want Manchester United supporters to form their opinion on the club's financial position on the basis of a fair and balanced view. That is why I played an albeit very small part in helping you with that table of ticket price rises since the Glazers takeover.


EastStand375 said...

As always with propaganda wars, and I understand perfectly well that is what it is, the real truth is always somewhere between the two extreme positions. On the one side you have MUST and other anti-Glazer factions. On the other you have the Glazer spokesman and comments from David Gill. You have on occasions accurately dealt with some of the 'spin' that has come from the Glazer spokesman/David Gill and I applaud you for that. BUT you have not afforded the same critical analysis to the people on the other extreme. Now I know why you haven't done that. I'm not naive but it disappoints me
nevertheless. I've no doubt that you will have come to the conclusion that the propaganda of that other extreme is a necessary evil,a means to an end if you like, if ultimately it helps to bring about the removal of the Glazer family from Old Trafford. That is yor calculation and I understand that. It still greatly disappoints me though. I believe, and correct me if I'm wrong, that much of your opposition to the Glazers stems from your own personal ideological and social values. Some might say that is a rather hypocritical stance for a fund manager but I would say we're all hypocrites to some extent so I'll let it go.

The problem I have you see is that there will be many people who don't share your ideological and social values who will have essentially been conned into boycotting their own club because they have been subjected to a disproportionate amount of propaganda from one of the extremes led by the sensationalist media and MUST.

This can't be right. We're talking about fellow Manchester United supporters who are being misled and deceived into giving up something that they love.

So you've disappointed me Anders. I wanted a fair and balanced view and you haven't provided it.

Maybe it is time for an EastStand375 Blog to fill this gap in the market and to give Manchester United supporters what they deserve and need.

PS. I should point out that Jorgen's comments on this blog suggest to me that there are many other people who want this fairness and balance I speak of.

andersred said...

Hi Eaststand375,

Some interesting comments.

I’m sorry you feel I haven’t made enough of the goodwill amortisation point. I totally agree with your description of the impact of goodwill on Red Football’s accounts. It’s an irrelevant non-cash item that should be stripped out of any analysis of Red Football’s (or RFJV’s) profits.

I don’t think you are on the Red Issue Sanctuary, but I was making exactly this point to various people on that forum as long ago as May 2008. To quote myself:

“Last year the company lost £63m but £35m of that was amortisation of goodwill which is just an accounting treatment - nobody ever went bust that way (Vodafone "lost" £5bn in 2003 because it had to charge £12bn of goodwill amortisation. I think that's the biggest UK plc "loss" in history and it doesn't look bust to me).”

I have NEVER used the “would have lost money without selling Ronaldo” argument as it’s spurious. I have NEVER briefed journalists along those lines and I have encouraged MUST not to (and to my knowledge they haven’t). I said the following in an email to someone and gave him my permission to post it on the Red Cafe forum (you can Google it if you want):

“The idea that United could go bust under the current structure is wrong and people saying it don't help the cause.”

The genesis of this blog was initially a desire to explain the wider technical issues surrounding football finance to a non-technical audience, this was totally overtaken on January 11th when the financial situation at United changed and the bond issue unlocked the club’s cash box. I glanced back through the 51 posts I have written, and I can’t see anywhere where I have said the club is going bust. I have focused on the bond, the PIKs, the Glazers’ record and whether football should be regulated better. These are the key issues as I see them, others can of course disagree.


andersred said...

part 2

The tragedy of the Glazers is not the risk of United “doing a Leeds”, it’s the sheer waste of their ownership and of the base built by the plc. It’s the deliberate financial squeeze placed on the supporter base, not to “live the dream”, but to enrich the Glazer family. From here the risk in my view is years of slow decline, something that absolutely should not happen. How will we replace Giggs and Scholes and Edwin? Why does the club who had Cole, Yorke, Teddy and Ole in ’99 now find itself with Rooney, a Berb who’s too expensive to move on and some kids up front?

You say my views stem from my personal and ideological stance... Who’s don’t? You come close to calling me a hypocrite because of the industry I work in. I’m sorry but that really isn’t acceptable. The extent to which the market is allowed to run unfettered through aspects of life is something everyone is entitled to have an opinion on. Left entirely to its own devices capitalism often tends to market abuse, Adam Smith wrote about this tendency many years ago. Am I not allowed a view on Tesco’s market power or subsidies for private health insurance or even financial services regulation because of my job? Nobody (not even Scudamore) believes football should be totally open to market forces. Who would allow M&A, allow Spurs to takeover Arsenal? Who would abolish leagues or national associations or relegation, each of which is a suspension of market rules? The very collective TV rights that Scudamore sells undeniably skew the market, but also undeniably improve the sport.

My “personal and ideological stance” is that English football has tipped too far in the direction of the market at the cost of its essence as a sport. United is the ultimate example of this. The plc dealt with the excess demand for tickets by holding prices down below their “clearing price” and rationing by loyalty (i.e. a waiting list). I believe this is important as football is not just another consumer good, it is part of the social fabric of our country, a mass pursuit and obsession, tied to region and identity. It generates irrational loyalty that goes beyond purchasing a service. The Glazers have exploited all that for their own benefit, further corrupting mass sport in the pursuit of bigger houses and flashier boats (did you know they have a yacht called “Red Football”?).

But you don’t have to agree with any of that. Let’s go back to my previous reply to you and just stick to the football and money aspects. All this bonanza over the last five years; all the extra TV money, the sponsorship deals, the enhanced popularity and earnings from our success on the pitch, the step up in Nike income, the extra quadrant seats, and (of course) the huge ticket price hikes and where are we? Thanks to the capital structure, we were a princely £8m better off in terms of post-tax cash profits in 2008/09 than we were in the shitty 2004/05 season, that’s enough for one more player on £150k a week.

What a waste.

Take care,


Jörgen said...

How do you feel about the rolled up interest on the PIK's? Wouldn't you agree that it's a matter of opinion to include them or not?

If you believe they will funnel cash to repay all of this until they mature, it's correct to include them as money the Glazers will take from the club. But as you mention in your article about LBO's, this is not the most common strategy.

It might also be that they will sell the club when they find an opportunity. In this scenario, isn't it more likely that they will use the proceeds from the sale to repay the PIK's. This is the scenario you portray as the most common way in an LBO. If this is the case, it is not totally correct to include the interest as a cost to United in your list.

I am ready to be convinced otherwise and I sympathise with your ideological standpoint. Moreover, I agree that it is impossible to be totally objective. But it is important to know what is your opinion and what are facts.

Jörgen said...

My questions may not be interesting (and/or intelligent)enough to answer and if this is the case, fine, no offense taken.

I understand that you only have 24 hrs a day so your time is limited and you have to choose what to answer.

Would you mind telling which is it as I am strating to feel like a woman scorned here :) .


andersred said...

Hi Jörgen,

Funnily enough I was just thinking that I hadn't replied to you and was feeling guilty!

Give me a couple of hours.

You are not being ignored.


Anonymous said...

Is that "loss on interest rate swap £35m" still valid or was that an estimate which turned out to be a bit worse than the estimate ?

EastStand375 said...

Andersred, that is a massive cop out and you know it is.

Why haven't you not once stated in one of the articles on your blog that the 'would have lost money without selling Ronaldo' argument is spurious?

In order to finally drag it out of you it needed me to question you about it in this comments section.

That line has been leading the news agenda for MONTHS and you haven't once, not ONCE, outlined to the readers of your blog that it is a completely spurious statement. It would have taken up literally two minutes of your time to do so but you ultimately took the decision not to.

You have simply IGNORED it because actually dealing with it directly would have been damaging to your 'campaign'.

Frankly, I think you owe all of your readers an apology though I won't hold my breath.

andersred said...

Hi Eaststand,

You haven't dragged anything out of me! I don't think profit numbers post g/w amortisation tell us anything, hardly a big admission from a financial analyst.

You seem to be indulging in what Derren Brown calls "misdirection".

You made a lot of points in your comments and I answered them in some detail. You then come back to reiterate that you don't think I've made enough of something you believe is important. Well I'm sorry about that.

But by coming back to the same point you are able to ignore the bulk of my responses to you.

And why the obsession with goodwill amortisation? You went onto the Red Issue forum as if you'd found the Holy Grail, the Kryptonite that will kill the anti-Glazer arguments.

What rubbish. There are a million things wrong with their ownership and someone as bright as you knows it. Don't be a contrarian just for kicks mate.


EastStand375 said...

Hi Anders,

''Misdirection''? You've got some nerve after your waffle about g/w amortisation.

Let's try again shall we.

Why haven't you not once stated in one of the articles on your blog that the 'would have lost money without selling Ronaldo' argument is spurious?

Now an actual answer to that question would be nice this time.

Let's not forget that the very same argument was headline news for days and has been by far the most popular anti-Glazer used line ever since by the sensationalist media and sadly now by many of the club's own supporters.

You have admitted yourself that in private you were advising MUST not to use that argument so why didn't you also share your concerns about it with the readers of your blog?

I know why of course, and other people who aren't totally consumed by hatred of the Glazers will also recognise why, but it would be nice for you to be big enough to tell us all why you failed to point it out in an article on your blog and I think an apology is in order.

Let's get one thing straight here. I'm not the person who should be under scrutiny. It's yourself and MUST's propaganda campaign that needs to be scrutinised. After all, let's remember that I'm not the one very subtly telling Manchester United supporters to boycott their own club for what are ultimately ideological, not practical, reasons. Now you see I think such a campaign really does need to be scrutinised very closely indeed.

And as for your point about the Red Issue forum. I think it says all we need to know about those involved in the anti-Glazer campaign that after informing the Red Issue forum of your comments I was subsequently banned from using that forum.

It is high time that both yourself and the other people involved with the camapign recognised that there are many people out there like me, other Manchester United supporters, who don't share the same opinion as yourselves.

Finally, let us also remember in your words the rasion d'etre of your blog:

''Too often, discussion and information on football finance is poor and ill informed. With a few honourable exceptions, too many sports journalists don't understand finance and too many business journalists don't care about football. This blog aims to help correct the information gap by providing information and commentary on what is going on at United.''

If you're real aim was to ''help correct the information gap'' then you would have done so by informing your readers that the ''would have lost money without selling Ronaldo'' argument is spurious.

But you failed to do so and therefore ultimately I'm afraid you have also failed to achieve your blog's mission statement.

andersred said...


"Why haven't you not once stated in one of the articles on your blog that the 'would have lost money without selling Ronaldo' argument is spurious?"

Because I don't think it's very important. I've got limited time to say what I DO think is important and so naturally that's what I'll focus on. I started working on this blog on 11th January when I got my hands on the bond prospectus (which included the RF accounts with the Ronaldo sale and the gw amortisation charge you are so concerned about).

I was the first person to analyse the structure of the bond offering and my work was used by the Guardian, the Telegraph and the FT amongst hundreds of others. Why? Because it was new and important in all their eyes too.

Who gives a toss about "would have made a loss if...."? It's irrelevant compared to a 322 page blueprint that shows our owners are prepared to double the interest paid by the club(ex-swap) in exchange for "restricted payment rights".

YOU seem to think the validity or otherwise of the "would have lost money without selling Ronaldo" argument is some sort theological core to the whole debate. That's your prerogative but I just don't agree.

I write about the things I think matter. I'm happy to discuss - as I have with you and many others - things people raise either as comments or by email.

As I said previously, you don't appear to want to respond to my other comments on your accusations. You don't want to debate the substance, but rather have a weird debate about what I should or shouldn't cover.

Anyway, let's look at the presentation of the June 2009 results if you want...

Profit before tax was £48.2m. Take off the goodwill amortisation (-£35.4m) and profit on player disposals (+£80.7m)and that leaves a profit before tax (of which of course there isn't any) of £2.8m. WOW! That really isn't very much. Now I have deliberately included the player contract amortisation charge because it captures transfer spend. Actually we are running miles below that in cash terms in the Glazer era and that tells it's own story about the diminution of value in the squad. I have also included depreciation, because fixed assets need maintenance. So excluding goodwill and Ronnie, we'd have made just under £3m in the bumper 2008/9 season. Not quite a loss of course, but not much of a profit either.

Like I say, I don't think this subject adds much to life, but I'm sorry if its absence upsets you.