Friday, 8 October 2010

Manchester United results 2009/10: first thoughts

Results review

Revenue up 2.9% year on year, compares to 10.2% pa achieved 2000-2009. Lower growth down to "poor" season vs. 2008/09 impacting matchday and TV income. Media is boosted by the start of the new three year CL deal. Commercial growth remains strong.

Costs control at United has been very good. Like all clubs, wages continue to rise sharply (up 7% despite lower player bonuses) but other costs are down 15% leaving total costs flat. Much of this is due to fewer home games than last year and lower travel costs (not flying to a CL final sadly) and there is also an impact from lower expenses relating to various commercial contracts (these are not detailed or quantified and look to be a one-off).

With costs flat and revenue up 3%, EBITDA (pre-exceptionals) was up 9.5% to £100.8m. As ever United is a very well managed football club.

Below the EBITDA line we are back in horrible world of Glazernomics.

The £35.4m goodwill amortisation charge should be ignored, it's an non-cash accounting charge caused by the 2005 takeover and isn't a real cost.

The interest bill of £40.2m includes seven months of bank interest and five months of bond interest. It will be closer to £45m in the coming year.

The "amortisation of issue discount" of £6.7m reflects the fact that the bonds were issued at c. 2% discount to their face value (of £100 or $100) but must be repaid at that face value. The difference is accounted for every year to 2017, but the cost won't actually be incurred until they are repaid in 2017.

The big "nasty" in these number is of course the cost of terminating the swaps (which we learned about at the third quarter results). These swaps are derivative contracts taken out to hedge the interest paid on the old bank debt. The club fixed at a high rate in 2007 and by the end of 2009 when it came to unwind the contracts was sitting on a £40m loss. Although the whole amount is reflected in these accounts, only £14.6m has been paid in cash in 2009/10, the balance will be paid over the next six years. These derivatives were only required because of the debt placed on the club in 2005. This is £40m of costs incurred for no benefit to the football club at all.

The final interest related cost is the unrealised foreign exchange loss of £19.2m. This is another non-cash item reflecting the fact that at today's exchange rate, the cost of paying back the US dollar denominated bonds would be £19.2m higher than their original (sterling) value. As with the "amortisation of issue discount", this can be ignored. Who knows what the exchange rate will actually be in 2017.

Other key points

No money has been paid out of the club to redeem the PIKs. I have no rational financial explanation for this and nor does anyone else I have spoken to in the market. Without sounding like a poor man's Mystic Meg, I can only reiterate that I can see no other source to repay the PIKs other than United and that £70-95m will be used to do so at some point soon.

Net transfer spending (in cash so including ongoing payments for players acquired/sold in previous years) was £30.4m. Actual "additions" in note 11 of the accounts are shown as £25.7m, i.e. players with a value of £25.7m joined the club during the year regardless of the timings of payments. The club reveal that since the 30th June year end, further players have been bought for £8.3m. I can only assume this is Bebe.

Initial conclusions

Thankfully United is not Liverpool off the pitch or on it. This is (operationally as a business) the best run football club in England, it has been for nigh on twenty years. Manchester United are at no risk of going bust.

The tragedy for the club is that so much of the profits are wasted in interest, fees and charges. To ensure the club can cover these, ticket prices are far above the level they would need to be if the club was debt free. Net investment in the playing squad is low and the coincidence with the need to service the debt is too great to ignore.

More to follow.....



Anonymous said...

Superb work as usual Anders !!

To anyone still going to Old Trafford, you are part of the problem !! STOP funding the parasites, you are helping destroy the club you love - people need to wake up but sadly the masses bury their heads in the sand - shameful

Anonymous said...

When you find a rat in your kitchen , leaving the house ? will not drive him out.

showme said...

Feeding the rat will make him stay in said kitchen however, he will leave if you don't feed him.

In case this is a bit too subtle for you, feeding him in this case means giving him money....

Anonymous said...

No matter how it's spun, it's awful the Club has to pay out millions per season to service a debt that isn't going away.
Sooner the Glazers sell the better. Red Knights where are you?

ja said...

No anonymous no2. Your rat in the kitchen analogy is nonsense. The rat is not in your own kitchen it is in the Glazer's kitchen which you have to pay to enter. By not paying to enter, the rat does not get fed and either dies or leaves.

MCrab said...

Is it possible the Glazers have taken the money to pay the PIKS post June 30th, or would they have had to declare that in the results today?

Could they take the money tomorrow and, if so, how long would it be until we'd know?

Anonymous said...

Unfortunately whatever the official results are, there are many who will believe that the Glazers are less to blame than the boycotters and splitters.

The vast majority who continue to attend Old Trafford will be no different than their scouse counterparts who are not bothered who owns the club so long as they are competing for trophies.

The boycotters, FCUM, LUHG etc. who pose a threat to this cosy little bubble and will therefore ultimately come off worse. Those that remain will get what they deserve.

Meanwhile the Glazer "spin machine" will continue to do their "divide and conquer" on the fans.

The Pigeon said...

Andy, can you get in touch with any contacts in the media, such as Sky News again, and get your opinion across to the masses?

Anonymous said...


What does this mean in terms of the ronaldo money?

Thanks for the overview on what is an extremely complex scenario for me, as a non financial person.


Steve said...

I don't understand why the Glazers' haven't taken the 70-95m carveout to pay down some of the PiKs. Several months ago I was reading an article on the proposed Uefa FFP rules which suggested that apart from clubs having to break even they also had to demonstrate their net debt was equal to their revenue. I may have misread, misunderstood or indeed this could have been a mere proposal subsequently dropped by Uefa.
Could this be a feasible reason why there is still circa £160m still in the bank?

Anonymous said...


Where have you got this info from? I've been on Companies House and it doesn't appear to be published yet...?

Darren said...

I think they've backed themselves into a corner with this £70m. As soon as they take that then it's proven once and for all that Gill, and sadly Fergie, are liars. I guess it's just about timing now, though god knows when it'll be a good time for them to take it. Maybe they think that if it's taken next quarter then it wont get as much attention as if they'd taken this time.

Darren said...

Where have you got this info from? I've been on Companies House and it doesn't appear to be published yet...?


The Red Devil said...

Anders, doesn't it depress you that you have basically just said that Manchester United is being run extremely well and that, despite a recession, despite a campaign against the owners the likes of which was unprecedented in the UK and despite an overall disappointing season on the pitch, we still managed to make more money than ever before?

And yet your sycophants are still saying "Great work Anders! Glazers out!".

Do you wonder if half of these people actually understand what is being said to them?

Oh. The £70million carve-out that you have been banging on about since January that was to be taken out to pay off the PIKs. It's not there is it?

Just thought I'd mention it because I know you certainly won't.

Perhaps it is time to acknowledge that for all the expense the Glazers have brought, they have increased revenues to compensate and they are not quite the parasitical owners you've been portraying them as?

Anonymous said...

@Red devil, you numpty. Read "Other Key Points" where Anders in the first line says the money hasn't been taken out. Maybe it is you that hasn't read what Anders has said.

Anonymous said...

Fine work again.
A few points:

The drop in operating expenses would seem to indicate that no management fee (6m) was taken.

FFP regs: The first accounting period under evaluation for break-even testing is, I think, 2011/2012. How would the careveouts be treated if exercised in that period? The bond prospectus refers to the 70m carveout as a 'dividend'. It is my understanding that the annual dividend entitlement will be a 'relevant expense'. PIK payments will thus figure as an expense but through 'Dividends' as opposed to 'Finance costs'. But how would the exceptional 70m carveout be treated? I guess I am trying to figure if there is a timespan within which the Glazers will take the carveouts? It's bewildering that they haven't exercised the 70m carveout yet; and though their own reported pik-holding buys then time, delaying is still expensive business.

John said...

Shocking that the Glazers have not taken any steps to reduce the Pik payments in any shape or form.Excellent Reporting as always andy,Looking forward to your in depth report in due course

Steve said...

What's depressing is coattos like you spouting bollocks about how the Glazers are great, fantastic for the club. Having dumped an extraordinary amount of debt at ludicrous rates of interest it's both surreal and depressing that there are people out there still championing their cause.

Anonymous said...

Is the The Red Devil another company employee like EastStand/GCHQ or just some blinkered moron?

Not quite parasitical owners?

Tell that to the fans such as myself forced out by the gimps.

John said...

Interesting to note that a provision of was made for a 2.2million Lease Payment for Property in Republic Of Ireland "which company is not using"

John said...

And as for Red Devil Perhaps you will deal with these figures and present them in the same why Andy has only with your views on them

Anonymous said...

I don't think it's correct to conclude that ticket prices would be lower without the debt to service. Ticket prices are set by demand, ManU sets the high ticket prices because people are willing to pay them.

Anonymous said...

Imagine what would happen if MUFC failed to qualify for the Champions League two years in a row.

That day will not be far off, when golden oldies Giggs, Scholes, Neville will finally have retired. Does anyone see the club spending the necessary 50+ million to replace them (and Ferdinand)?

Anonymous said...

@Red Devil:

MUFC have paid 40+ million this year for the privilege of being owned by the Glazers. That is money that would have been available for football purposes if only the club had different owners that would not unload their debt on the club.

You think the club can continue to compete for titles when they permanantly have such a handicap?

Darren said...

I don't think it's correct to conclude that ticket prices would be lower without the debt to service. Ticket prices are set by demand, ManU sets the high ticket prices because people are willing to pay them.


Rubbish. The PLC could have greatly increased ticket prices and still filled the stadium, but there was a desire from within the football club to keep tickets affordable for all and to nurture the next generation of support.

yourBusinessChannel said...

Following on from your analysis of Arsenal, I don't see these results as very impressive at all.

11.5m added to commercial for a supposed £1.5bn business?

Matchday and TV aren't really within the control of management.

Does that represent a great year's work?

I think you were on to something with your comment on the maturation of the market.

Is there really room for a dozen major brands in the football entertainment space?

Or is the revenue going to be hogged by 2-3 big players from now on?

Anonymous said...

I found your blog from therealarsenal website. Being an Analyst for a living, I was going to come over here and ask you a few questions about the ManU debt situation but your post pretty well explains everything.

I would like to point out one thing; as useful as an IS can be, it could mean nothing with out a BS. I would love to read the auditors report. It would be helpful to have a ratio analysis of the club. I always wonder what would happen if the debt was called back; would the club have enough cash equiv to stay afloat. Just some thoughts I ponder

Morten said...

Thx for a great post.

In the balance sheet, it seems 'Current Assets - Other' is increasing with 400M (from 290M to 690M). Do you know what that is?

Thanks again.

yourBusinessChannel said...

.... also Anders - presumably if they were not going to attack the war chest for the PIK debt at some time, they would have scored a PR coup on that today.

They fact they haven't bigged it would tend to suggest they can't make hay on that ;-)

UTID said...

I like to look at this on a ex-glazer basis.
EBITDA is 99m less dep/player amort/player sales totalling 36m gives a footballing profit of 63m.
Factor in the glazer goodwill/interest costs/refinancing costs totalling 142m brings us to our PBT loss of 80m.

Anonymous said...

Debt or no debt, tiket prices are not going to reduce.
Take a loook at the rise in prices at Man City and what they will charge Utd fans to visit this season. Look at the price Utd fans will pay at Chelsea (£51 this season), what Utd fans paid at Fulham (£49) and what the going rate in the Prem League is.
Look at the over 100% price rises at Utd in the last 8 years of the PLC, they were the foundation for todays prices.
The onlt thing I see is that prices wont rise again next season.

Anonymous said...

there's only one solution to get rid of those fucking bastards


I have enough of this shit i swear i'll find out where the parasite jew cunt are living in fuking palm beach and job done. I'll fucking kill em.

Old Jibber exiled

Mark said...

F*** you anon. Its the real supporters who continue to go to match days despite what's going on. In Fergie we trust!

The Red Devil said...

"there's only one solution to get rid of those fucking bastards


I have enough of this shit i swear i'll find out where the parasite jew cunt are living in fuking palm beach and job done. I'll fucking kill em.

Old Jibber exiled"

That's about the level this Blog appeals to these days, it seems Anders.

You deserve so much better.

Anonymous said...

Another great post.

To summarise - I would not get too hung up about the loss.

The real concerns are
(i) the plan to pay off the PIK debts - we need a few more of these malls to start being more profitable.

(ii) Fergie's health

Sweeney Todd said...

Good work, once again, Andy.

So, to summarise:
£111m : Operating Profit (excluding exceptional costs)
Non-Glazer fault costs
£ 9m : Depreciation
£ 40m : Amortization of Player Contracts
£ 62m : Profit that we would have made, had it not been regardless of the Glazers input
Glazer caused losses that do not affect the cash position
£ 35m : Amortization of goodwill
£ 19m : £/$ Exchange Rate Variance
£ 8m : profit we would have made implementing accounting procedures resulting from the Glazers’ actions
Glazer caused losses that have taken money directly out of the club
£ 40m : Interest charges for the year
£ 7m : Amortization of Bond discounts
£ 40m : Loss made on swaps
(£79m) : Loss as reported in the final accounts

Red Devil? Are you seriously seeing a series of posts playing the 'Hitler Card' rather than a series of concerns over the finances of MUFC?

From my pesrpective? As someone who works in finance, I regard Andy's blogs as both informative and investigative.

If you really want to know what's happening, rather than demonstrating signs of accute 'ostrich with head buried in the sand' syndrome, you might want to try and understand the points made in the original blog post rather than engage in petty arguments with people who have posted in response to the informed.

Matt said...

As a gooner coming from the swiss ramble, I'm not sure I can concur with your optimistic conclusion.
Yes the football operations at Manchester United are very well run, the best in England but as a result of the staggering interests required by the Glazer's bloodsucking scheme the wage bill will suffer and so will the transfer activity.
We can think of Ferguson, Mourinho and/or Wenger as managerial geniuses but the reality is that in the last decade (and possibly even more), the final rankings in the league have always matched almost exactly the wage bills. There has not been a single champion that wasn't either the top or second wage bill in the league.
It takes time before the financial pressure will materialize on the pitch.but it eventually will which is something the club cannot afford.

The Liverpool fans all thought it wasn't possible to drop from the top 4 before it happened. United is certainly not in Liverpool's situation as you said and United will not become bust overnight but the fact it's been the dominant club for very long is not a guarantee that it will stay that way in the future.

Whoever says the Glazers are not jeopardizing the club is either deluded or paid by them or both.

Kingstreet said...

In response to Morten's question, "In the balance sheet, it seems 'Current Assets - Other' is increasing with 400M (from 290M to 690M). Do you know what that is?"

The bond proceeds were washed through the holding companies, firstly as a loan from MU to RFJV, then as a capital contribution from RFJV to Red Football.

It is this process which allows the Glazers to remove large scale dividends in the future.

Anonymous said...

To The Red Devil - You are a cunt of the highest order.

Fuck off back onto Red Cafe with your colleagues Eaststand and GHCQ where you can continue your love in with the gimps.

PerryBoy said...

to the red devil and mark

I think we all know where these two sad twats stand don't we? Shoulder to shoulder with the Glazers.

Stopping going was a tough decision but I couldn't complain about the Glazers bastards, pay them money and look at myself in the mirror if I did what you do. You lot are a disgrace.

It's times like these that I really hate us being supported by so many glory seekers. They'll be the death of us. Look what proportion of the nay sayers aren't from anywhere near Manchester. They'll never get United, to them we're just an easy excuse for a celebration every May. They should be ashamed of themselves. I wish they'd all fuck off and support City/Chelsea

Don't fucking cry when Rooney gets sold and your season ticket gets a huge hike, it's people like you that are the reason the Glazers bought us and the reason they are still here. The scousers have better fans than you. Wankers

100% agree with the Exiled Jibber btw.

DIE GLAZERS FUCKING DIE ( and Judas Gill too)

Anonymous said...

Red devil is NOT a season ticket holder. Price hikes don't effect those who don't go anyway.
He will say that the real fans have caused more damage than the glazers though.

Exil said...


Ok. I´ve been reading alot from our latets finacial report from yesterday. I wounder if someone can clear some stuff for me and fellow reds. We that dont have all financial knowlegde of Anders people alike.

If Im correct. Our revenue was 289 milj pound, operating profit 100,08 milj pound. How come we made a loss of 80+ milj pound? I know that we paid for one-off cost, but that could not be as much as 100,8+80 + milj pound?

The acutall loss seems to me should be 180 milj pound. Please shed some ligth on this, its confusing me and others.

By contrats, last year we made a helthy profit, didnt we.

Sorry for my spelling.

Great blog andersred, you doing a terrific work, its excellent. Keep it up.

Glazers OUT!

sprite said...

so £67m is for this year only, because of the bond shit.. of course it's a huge loss, but wont happen again..

also the £35m goodwill shit should be ignored you say, why is it included in every single media report, which tells us the loss is £83,6 then..?

the season ticket argument is a bit wierd, since we are the biggest club in the league, but by far the club that charge most for the tickets..

I hate the £40m interest fees though, but they are not as extreme as Liverpool and City supporters, and of course ABU media want us to believe.

Anonymous said...

also the £35m goodwill shit should be ignored you say, why is it included in every single media report, which tells us the loss is £83,6 then..?

It's rightfully included in the breakdown of what the losses relate to, but none of the media have tried to explain what it is.

The goodwill amortisation is a non-cash expense - the purchase price has already been paid - and unlike depreciation and amortisation of player registrations isn't going to result in a future realisable outlay.

On acquisition of the club (or any business), Goodwill is the difference between the purchase price and the written down net book value of the tangible things (Old trafford, Carrington, stock etc). So goodwill relates to the excess consideration paid to reflect things like brand, fanbase, placing in the market, business health and longetivity, potential to attract sponsorship, potential for future earnings, players value over their book value (eg, Rooney on the books will be worth about £5m due to the amortisation procedure).

Of the £800 or so million the Glazers *paid* for Utd, £530m was in relation to this goodwill asset. In accounts this figure is generally amortised over x number of years to reflect the lifetime of that asset before it extinguishes. There's a limit on the number of years though which I thought used to be 40, but believe is less now. Anyways In Utd's case, it's amortised over 15 years, hence the £35m coming out each year of the P+L.

It's pretty irrelevant though, because no physical cash leaves the club in respect to this and unlike depreciation or amortisation of players registrations where a future cost will be realised (to replace disposed player/depreciated asset), it's not like the Glazers can buy Man Utd again and repurchase more goodwill.

It's £35m deduction in the value of the club on the balance sheet per year, but it's predicated on the business pretty much ceasing to be in 15 years. argument really that unless after 15 years the club does cease to be, it's likely that Utd will still retain those things that the goodwill was paid for and possibly increase them (brand, fanbase etc). ie. they're not losing the value that the yearly accounts are saying they are.

Mark Linsell said...

Anders - would love to see a post projecting all the debt and interest repayments over the next 10 years or so to see exactly how much money will flow out of the club in total.

weststandupper said...

The financials are analysed nicely here and full credit to Anders. The problem for most Reds though is the lack of investment in top quality players.
Yes. we've bought some interesting youngsters and, yes, I agree with SAF when he says that prices are far too high but we were the beneficiaries of £80M from one player and seem to have made no serious attempt to replace one of the world's best players.
If/when we spend some real cash the income streams will be tested.

Anonymous said...

I'm not sure why anyone takes The Red Devil seriously. He's drunk the Glazer cool aid so liberally that he'll defend the totally indefensible in their name. His blog is the worst on the net and he has no credibility whatsoever.

He's a typical doormat red who thinks a justified criticism of the Glazer regime is 'an attack on his club'.

He's a plastic of the highest order.

RobC said...

From todays Observer newspaper:

"Man of the week:

• January: David Gill tells Manchester United bond investors the club have a "comfortable" level of debt based on a "stable" financial model.

• October: United lose £83.64m on an operating profit of £100.8m. Interest on the debt, plus bond expenses: £81m. (Gill's position on the Glazers before he agreed a £1.7m salary to work for them: the debt model could "jeopardise 126 years of history". "Borrowing money," Gill told fans in 2004, "is not good for a football club ... it's the road to ruin.")

Nuff said........

The Red Devil said...

Oh, how I have missed the slagging off I receive on this blog.

It was good to come back and say hello the other day so I'm coming back again.

There's one figure that many people completely ignore and give the Glazers absolutely no credit for and that is the commercial revenues.

Now, it is my belief that these haven't risen by quite the amount that they had hoped for when they took over in 2005 but even so, at the end of 2006, our commercial revenue was just under £55m. Last year it was under £81.5m.

An increase of £26.5m.

As things stand, we have the £500m Bond Issue which attracts around £45m interest per year.

If the Glazers can increase commercial revenues by £19m then the debt on United will be at a stage where it is paid for by revenues generated by the Glazers.

It is simply not right to take the interest away and view it in isolation without regard for the revenues coming in to cover it.

One poster up there asked Anders to project the interest forward ten years. Well, I can project it forwards seven years quite easily.

The Bond runs until 2017 so simply multiply £45m by 7 = about £315m.

You can probably assume that the next three years will be more or less the same so let's call it £450million.

What no one can really have a stab at is what revenues will be generated over the next ten years.

All we know is that they have increased year on year under the Glazers and they currently stand at £286m.

So, even if they stay the same, we are looking at £2.86bn coming in over the same period.

If they increase by say 3% per annum then we are looking at a figure closer to £3.4bn.

When looking at the Glazers, we also have to take into account the money they have so far saved us in Shareholder dividends and corporation tax.

During the five years of their ownership, we have paid no corporation tax and monies taken for themselves over the five years has been just £23million (£10million of which was described as a "loan").

Despite all horror stories predicting the contrary, the Glazer, again, did NOT take any dividends for themselves this last financial year.

The need for squad investment remains a concern for all United fans but £160m in the bank and a £75m RCF says that the money is there should Fergie need it.

I'm sorry if this makes me a Glazer fan-boy and I'm sorry if it doesn't fit with your theories that the Glazers are bleeding us dry and need to be ousted at all costs but I just thought I'd bring another side of the story to your attention.

Fell free to resume the name-calling. It changes not a thing.

Anonymous said...

@Red Devil
Thanks for the Glazer PR.

Love the bit about Corporation Tax.

Basically what your saying is that it is better to
i) pay interest of £45m and save tax of 30% (total cost £31.5m) than,
(ii) pay the tax of £13.5m.

Great business there.

ja said...

Reddevil, what have the Glazers done to increase revenues that was so magical that the plc could not have done?
Put up ticket prices massively? Tick except the plc tried, rightly or wrongly, the tread a fine line between outpricing fans and ensuring a great atmosphere at OT.
TV revenues, hmm that is out of the Glazers hands.
Sponsorship? Having Liverpool done better on the shirt sponsor front? Whoring the brand around the world was an option for the plc, for the Glazers it is a necessity.
The online content is paved with future gold route? The jury is out on that.
All in all, by imposing the huge interest burden on the club, the Glazers have to increase revenues, but ultimately it is not about revenue, it is about revenue minus costs that is the most importnat. In other words the BOTTOM LINE.
Your gods the Glazers are sweating the brand to the max and still not making a dent in the debt! Go figure what happens when times get tougher.

Darren said...

This argument that the Glazer fanboys use that the gimps have increased revenues is a load of crap. The ONLY revenue increases that the Glazers can take credit for is the increase in ticket prices, the compulsory ACS, the abolition of discounted prices for league cup tickets, etc. And to be honest, I'm not going to thank them for pricing out so many people.

Commercial revenues were growing year on year pre-Glazer. We were the most commercially savvy club in the world. In fact I'm going to argue that the Glazers devalued the shirt sponsorship by negotiating the upfront cash payment a year before AON was even on the shirt. Nobody in their right mind would believe that AON just gave us that £36m upfront out of the goodness of their heart. There would have been an effect on the total value of the deal. Is Uniteds shirt sponsorship really only of the same commercial value as Liverpools?

Commercial revenues would, in my opinion, be more or less the same if we were still a PLC, and may even have been higher. The PLC was hardly shy when it came to whoring the brand around the world.

Commercial revenues have greatly increased at all the top clubs, at Liverpool for example I beleive it's been around 80% growth over the last three years. Are Hicks & Gillette 'great owners' too?

The difference between us and most clubs is that every time there's an increase in revenues those revenues are eaten up in never-ending financing and refinancing fees, and of course interest payments. Virtually every other club is benefitting from all these increased revenues. We're not.

Steve said...

So the Glazers increase interest payments from the bond issue by over £20m per year and also in the process take a £40m hit in an interest rate swap termination but that's okay because that's offset by bringing in an extra £11m a year in commercial income?
Red Devil, you've certainly been brainwashed by Glazernomics.

The Red Devil said...

"Thanks for the Glazer PR.

Love the bit about Corporation Tax.

Basically what your saying is that it is better to
i) pay interest of £45m and save tax of 30% (total cost £31.5m) than,
(ii) pay the tax of £13.5m.

Great business there."

I'm sorry if you can't see that this is money that would be going out under an ownership with no interest costs to offset against the profits.

I'm also sorry that you completely ignored my point about the commerical revenues they have generated since 2006.

Add that to the saving of tax and you start to see a picture which is far removed from this picture where we would be much better off if it wasn't for the Glazers.

Chuck in shareholder dividends at this stage that would have been payable under the old PLC setup and you might even be at a stage where we're better off.

Darren said...

I think The Red Devil is using Essien's calculator.

Anonymous said...

@Red devil
I'm sorry that you can't see that a net cost of £31.5m is MORE than a cost of £13.5m.

Anonymous said...

@The Red Devil "The Bond runs until 2017 so simply multiply £45m by 7 = about £315m."
Do you honestly think bondholders are not interested in getting their own money back and the annual interest payment will keep them happy? Either you are naive/stupid or assume that everyone else is and you are trying to deceive them. The interest is their profit, the bondholders will have to get their 500m back in full in 2017 so your calculation should read
"The Bond runs until 2017 so simply multiply £45m by 7 = about £315m plus the original amount of £500m = £815m".
Please explain where the club is going to find £500m in 2017? Another bond issue? Build up cash reserves in the meantime to be able to pay it down? Your projected revenue over the 10 years may not materialise and you haven't mentioned how costs will change. Large investment will be needed in the team next summer to replace the aging players and try to maintain a top-4 position. Failure to stay in the top 4 will scupper your income projections.
We're starting to get into tasty totals here when you add in the fact that £450m has already been spent as a direct result of the Glazers take-over over a time frame of 12 years (2005-2017) - £815 + £450 = £1,265million - or 100m a year average... think of the type of football team you could have spending 100m each year for 12 years...
and we haven't mentioned the PIK's...

Anonymous said...

Red Devil has no credibility on these issues.

This is a man who thinks that MUST informing people of the waste of resources has done more damage to the club than the waste itself.

They may exaggerate the waste but they are NOT the source of the waste.

His hatred of MUST clouds his ability to be objective regarding the interest costs/re-financing costs.

Darren said...

Some rough ballpark figures so The Red Devil can sod off back to Red Cafe with the other Glazerites...

In the 5 years pre-Glazer we spent £70m on dividends and tax. That was the equivalent of 30% of EBITDA.

In the first 5 years of the Glazer occupation we have paid interest of £210m, and incured financing fees of £120m. That's the equivalent of 75% of EBITDA. Add in the Glazers personal fees and loans and that increases to 80% of EBITDA.

Of course that does not include the interest that has rolled up unpaid (the debt has increased by over £200m, mostly due to unpaid interest). Much of that will come out of future earnings as the Glazers carve cash out to pay down PIK, so it'd be wrong to include it right now.

The Red Devil said...

Anonymous#145821 - They will issue another Bond Issue in 2017 and the process repeats itself.

I thought that much was a given to be honest.

I see no reason why revenues will not continue as they are and if they do come down significantly for whatever reason then the Glazers will have to re-evaluate the costs - especially the wage bill.

The fact is that the revenues are more likely to go up rather than down due to inflation.

The debt, however, remains the same and therefore becomes less of a burden, in % of turnover, as each year passes.

As for the PIKs. Given that this whole blog was established on the surety that the Glazers would be taking their £70m carve out and £25m dividend shortly after the Bond Issue was finalised in order to pay down their PIKs and the fact that these payments spectacularly failed to materialise. I think the onus is now on you to prove that they are to be taken into account when looking at United's finances.

The Red Devil said...

"His hatred of MUST clouds his ability to be objective regarding the interest costs/re-financing costs."


I am one of the most objective people in the whole discussion when it comes to the figures because I don't let personal feelings about the Glazers or what they have done cloud my judgement to the extent that I can see only bad in what are actually good figures and a manageable situation which has yet to be proven to have had an adverse effect on Manchester United.

Unfortunately, the same can't be said for a lot of other people who just see the bits they want to see and ignore the rest.

Anyway, I'm off again now. Carry on...

Anonymous said...

@Red Devil
"I see no reason why revenues will not continue as they are"

I think the onus is now on you to prove that.

What is certain though is - as a result of the bond refinancing the Glazer have now "created" distributable profits of £374mdespite the £173m P&L losses since they took over.

The ability is there to make the dividend. The cash is there in the bank. All this evidence points to it being a "more than likely" scenario the money will leave during the 2010/11 fiscal year.

Darren said...

The debt, however, remains the same and therefore becomes less of a burden, in % of turnover, as each year passes.


Does not compute.

Debt in 2005 = £559m

David Gill: "Manchester United is only supporting the senior debt, which is around £265million-£275million."

Debt in 2010 = around £800m

So, in 5 years the debt directly on the club has increased by 90% and the total debt has increased by 45%

ja said...

So RedDevil, you think revenues will go up because of inflation, which will make the debt less significant.
Well yes if we were in the Weimar Republic. But inflation has been low for years now, and with the liklihood of double dip recession, falling house prices, increasing unemployment, football tickets and sky subscriptions might become far more of a discretionary spend item for more people. which would limit scope for price increases - we already saw that with the glazer ticket price freeze this summer.
But if you can simply smear everyone as purely being irrational glazer haters rather than presenting cogent arguments as to why we should bow at their alter how much easier life is for you.

Anonymous said...

@The Red Devil, yes, it is a given that a new bond will be needed in 2017 to repay the existing bond, how come you didn't add the interest payments for these into your 10 year picture? You only allowed for 7 years of interest payments in your £315m calculation. Did you not include them as you didn't know how much they'd be? Is that because you don't know what interest rate they will be charged for the new bond? They could well be higher than the current rates, especially if the proper investment in the team is not carried out - the current rates are high and that's when things are still good, what will they be if things slow down in the pitch? Or is it that you don't know whether the new bond will be for a much larger amount to enable them to cover some of the PIK payments that will mature the same year? Obviously no-one knows but it was very remiss of you (I'm being generous, some might say you are being deliberately vague with the truth like the Glazers) not to even mention that these need to be factored in to your 10 year picture. And you make it sound like it's a good thing to have to have another bond issue in 2017. Effectively, you are saying that the club will have to have a large bond in perpetuity. Isn't it great that the money that could be spent on making united the biggest football dynasty ever, to match its record income generating capacity, is going to out of the club in this manner?
As for the onus of proof relating to the PIKs, that the PIKs exist is not in doubt. That the PIKs if left untouched will exceed £500m when they mature in 2017 is also not in doubt. What then remains is how the Glazers themselves will fund the servicing/repayment of these PIK's. That united is a cash cow for the glazers is not in doubt, they said as much in the bond prospectus and the cash reserves being built up indicate the cash generating ability united has. What is in doubt is whether the Glazers can repay the PIKs from money from other business interests. By all accounts, these other businesses are cash dead. Given they stipulated their intention to take cash from united in the bond prospectus, the onus is on you, The Red Devil, to prove that the Glazers have the means to service/repay the PIK's from their non-MUFC business interests. Without this, the only means at their disposal to service/repay the PIKs is from United and your argument is groundless.

Anonymous said...

It seems to me that the 'sensible' thing would have been for the Glazers to actually take out some cash to pay down some of the PIK debt! However they couldnt afford the negative publicity associated with doing so because match tickets are already becoming increasingly hard to sell out. And of course, the Glazers were well aware that people were watching closely.

The Red Devil said...


I did go beyond 7 years in my calculations and assumed another £45million/year interest to make it £450million over ten years.

You'll have to forgive me if I don't really know what interest rates and things like that will be in 2017 because if I did, I wouldn't be sat here talking to you, I'd be making a mint on the markets.

In fairness though, we have absolutely no idea what the revenues will be in 2017 either.

As for the PIKs. Nope. The onus is on YOU to prove that United will be used to pay down the PIKs. It's your argument.

Whatever happens, the Glazers are entitled to dividends from Manchester United and these were stipulated in the Bond Prospectus.

As far as we know though, they haven't taken a single penny of it up to the end of June 2010 even though Anders virtually assured us that the money would be taken from the account almost as soon as the ink on the Bond Issue was dry.

We actually have absolutely no idea what the situation is with the PIKs at the moment but the recent news that the Glazers purchased at least 20% of them has only clouded the issue further.

I fail to see how my argument is groundless when you are the one that cannot support his own argument with any proof.

Anonymous said...

@Red Devil
Way to ignore the arguments. Keep it up with this "proof" rubbish.

Can you "prove" that revenues will increase at this moment in time? No you can't.

All you can do is look at the evidence we currently have to hand and make a projection.

Ignore the provisions of the bond if you must. Ignore the cash in the bank if you must.

There is more than enough there to suggest the money will leave the club.

But that wouldn't fit with your agenda so keep on saying "prove it" like a 5 year old.

ja said...

The proof Red Devil, lies less in proving that the PIK money will come from OT but making a logical assessment of where the money can come from. From looking at the various Glazer businesses, the only one making any money is United, ergo it would seem the most likely source. Who knows? All we do know is that if the Glazers do not redeem the PIKS, they will eventually lose control of United. Therefore it is in their interests to pay off the PIKs, and as they are now running at 16.25% interest, it is in their interests to pay this sooner rather than later. Like the entire Glazer empire, it is very private and full of smoke and mirrors. When the PIKs are finally paid off we will be able to make a better guess at the source of this. Till then all speculation. If SAF goes on a spree and spends the alleged 160 million in the bank on replacements for VDS, Giggs, Scholes etc we will 'know' the PIKs will not come from OT, unless the spree uses the 'revolving credit facility'. In the meantime the failiure to strengthen the squad suggests the money is earmarked for other purposes.

Darren said...

As for the PIKs. Nope. The onus is on YOU to prove that United will be used to pay down the PIKs. It's your argument.

Whatever happens, the Glazers are entitled to dividends from Manchester United and these were stipulated in the Bond Prospectus.


Hang on a minute stooge boy.

It wasn't us who suggested that the Glazers might take £70m to pay down PIK, the Glazers specifically put that facility in the bond covenants and stated that it was to pay down RFJV indebtness.

It wasn't us who suggested that they might take a £25m 'dividend' every year to meet PIK interest payments, they specifically put that facility into the bond covenants.

It wasn't us who suggested that the Glazers would redistribute £400m of cash through 'the company' to allow them to extract that amount of cash from 'the club' to RFJV, it was the Glazers who did that.

So, if the Glazers have done all these things to specifically allow them to upstream huge amounts of money to RFJV...what on earth have WE got to prove?! All we have to do is wait for them to do what they've already told us they're going to do.

And no, the Glazers are not entitled to dividends. Far from it. The 'dividends' are for the corporate use of RFJV (which contrary to what Mr Gill would have you believe is part of 'Manchester United'), not the personal use of the Glazers. They would have to actually put some cash into the business if they wanted personal dividends, and putting cash into businesses is something the Glazers don't like doing.

The Red Devil said...

@Darren - At last someone tells me something I didn't know.

OK. This is news to me and if you are correct then I will have to take this on board.

What you are saying is that they can ONLY use their £70m carve out and £25m "dividends" to pay down their PIKs?

They couldn't, for example, use it to buy a yacht or something else?

Patrick said...

Can i first of all welcome Red Devils views as unlike others on here he is presenting his figures in a proper manner Like Mr Green.Now Andys Doomsday Preaching has been proven wrong and as of yet the Glazer Family Have not used any of the Businesses funds to pay down the Piks,However No Guarantee that they wont need to in the Future.The Clubs revenue has Grown Every year of Glazer Ownership with Major Sponsors Still coming on board and committing to the Brand and as for the Talk of Transfer Funds not being there then the results show otherwise.
Now we cant read 10 years into the Future(2017) but on the results available the future is bright and the Future is Red

Anonymous said...

@Red Devil
On P21 of the prospectus it outlines that there are restrictions on Red Football Joint Venture Limited and its subsidiaries (incl Red Football Limited) resulting from the PIK loan agreement.

I think it's safe to assume that this loan agreement would restrict the purchase of a yacht rather than the repayment of the PIKs.

The Red Devil said...

@Anonymous#16253 - Yes. After a brief conversation elsewhere, it does appear that it would be unlikely that the PIK holders would allow significant withdrawals from RFJV without paying off the PIKs first.

So, unless the PIKs are paid down, the dividends and the carve out would have to be used for this purpose.

Which only begs the question further - why haven't they been taken yet?

The Bond Issue provides everything they need in order to take the monies, the money is definitely there for them to take (EBITDA targets met, £160million in the bank) but they haven't taken the money.

We assume that the money to pay them off will come from United and that remains a reasonable assumption given the evidence at hand.

But it also seemed to be a reasonable assumption that they would do so ASAP.

They have just let a great opportunity go - why?

Darren said...

The latest financials only cover the four months following the bond issue. Hardly a long time.

Andy, do we know the terms of the PIKs? Would there be a good financial reason for them to defer the part-repayment of PIK until say late this year?

More than likely the reason is simply finding the best time to bury bad news. They probably never imagined that people like Andy would put the business under such close scrutiny. Taking the £70m out at the same time as headlines of a £80m+ loss would have been catstrophic for them. Sneak it through in the middle of the year, and maybe they think there wont be such uproar.

Here's something else to consider for those who still think it's just speculation. The £400m 'dividend facility' adds up perfectly for repayment of the PIKs.

(1) in 2010 pay off £70m of PIK, leaving around £160m remaining

(2) in years 2011 to 2017 take the £25m dividend per year to pay the interest (£26m or £23m) on the remaining £160m of PIK

(3) in 2017 pay down the remaining £160m PIK

Total funds needed to do all that = £405m. Not sure how (3) would be done though, probably from funds built up and as part of a 2017 refinancing.

Pure coincidence that those numbers stack up? Why did they flush £400m through the business, and not £300m, or £500m? It would appear because £400m is exactly what they need to sort 'their' PIKs out over the next 7 years.

Also you need to ask, why do the bond issue? It isn't cheaper debt than the debt it replaces. Why spend over sixty million quid to issue the bonds and terminate the loans. The only benefit is the facility for RFJV to suck cash out of 'the club'. It wasn't 'good housekeeping' or 'a better model' or 'just like a remortgage' or whatever guff Gill came out with.

If that need for RFJV for cash wasn't there then they should have left the bank loans in place and refinaced in 2012, a year before the huge capital repayments were due and when the credit markets may well have eased.

Of course the Glazers may surprise us. They may in the few months after the bond issue have come up with a genius plan for dealing with the PIKs that doesn't involve using the clubs cash or assets, they may have found £250m cash down the back of their sofa, and Darron Gibson may well be the new Roy Keane.

fattmatt said...

If the Glazers are looking for cash then they only need to wait for the next Nike deal.
Last time the Nike sponsorship and merchandising deal was announced in 2000 nearly 2 years before the start. If the glazers can repeat this they can then borrow against the future earnings and pay the PIKS early in say 2013 for just over £300M (if they pay the 80% the hedge funds still own).
The Nike deal was £300M in 2002 so the next deal will perhaps be £500M+?
Anyone have any reason that this deal cannot be used to pay off some outstanding PIKS etc?

Anonymous said...

Where are you coming up with this 500m figure?? Is it just blind hope?
If you read p18 of the investor presentation it was uncertain up until this year if nike would make a profit on the 300m deal.
What makes you think they would make a commercial decision to enter into a 500m contract if they could barely make a profit on a 300m contract?? They are not a charity you know.

ja said...

Because Fattmatt, apart from the sound logic presented by anonymous at 14.06, is that Safe Hands Gill continues to insist that the PIKs are nothing to do with United, which any Nike money would be, and therefore the Glazers will have to launder their dividend money through various companies before paying off the PIKs

Anonymous said...

I've seen alot of talk about the 164m in the bank.
However 52m of this relates to season tickets paid upfront and 66m relates to payments upfront from Aon etc.

Maybe the one-off nature of the Aon payments and the uncertainty of the season ticket sales meant the glazers didn't think there was enough buffer there to make their 95m dividend??

Anonymous said...

So let's say SAF resigns. And since we have no real funds for signing new players, we start playing like shit after Scholes/Giggs and miss out on CL football. The bandwagon mongs that can afford the ticket prices of today will stop coming to Manchester. So what happens then? After all, most of our income comes from match day revenue.

Milneonthewing said...


I see you've pulled the £500m figure out of the air, again. Also you still have negelected to account for the fact that the club would have to find a replacement for the £50 a year in commercial revenue that such a deal would bring. And they would still be paying interest on it (probably at a lower rate than the PIKs admittedly). Oh and the debt on the clubs books would be closer to £900m. Apart from that it sounds like a good plan.

Anders - can you tell us how much of the increase in commercial revenue was accounted for by the up front payment by AON (ie a one-off which will drop back by £15m next year). Over what period is the match day revenue calculated- as these are 09/10 figures, does this represent last years Season Tickets, ie pre-boycott. Or has there been some creative accounting to include the advance ST payments? Finally do you know of any covenents or penalties that would make the PIKs not cost effective to redeem early.

Finally to those who keep rolling out the Forbes valuation (apologies for the link to a scousers website) I suggest you look at this link- something is only worth what someone else will pay you for it.

Ben said...

As always this is a great analysis, but I liken it to someone giving you a detailed description of your house being burgled - when you are unable to do a thing about it!
Boycotting high profile matches is the best thing you can do - imagine the noise generated by an empty 75,000 seater stadium....