Wednesday, 19 January 2011

David Gill says Manchester United can compete with City in the transfer market – but we aren’t spending

David Gill today reaffirmed his confidence in United's business model and our ability to compete financially with City. I don't disagree that United generates excellent profits. It's also worth remembering that the club has built up (at 30th September 2010) a cash pile of £151.7m primarily from the unspent Ronaldo money and the Aon prepayment.

David says that "We can compete, we can compete for top players". That may be true, but all the evidence is that whatever we "can" do, we haven't chosen to spend very much, certainly no where near as much as City. For whatever reason we have allowed huge amounts of cash to build up on the balance sheet and have spent little on either transfers or capital expenditure (except in 2006 when c. £30m was spent on completing the quadrants).

I and many other commentators thought the cash pile was going to be used to repay the PIKs, but they have been dealt with from a mysterious, unknown source.

The Glazers retain the dividend rights (currently they can take around £120m if they wish) that were secured with the bond issue, at a cost in higher interest payments of course. Perhaps that is why we are sitting on all this money.

In any case, and rightly or wrongly, whether we "can" compete with City's funny money, we are most certainly choosing not to at the moment (see charts below, all numbers are £'000s):

Our record on the pitch in the last few years hardly cries out for a Cityesque splurge of transfers, but it's also worth remembering that none of United's cash has been used to reduce ticket prices or on expanding the ground since 2006.

Given all the surplus cash at United, the club could take £100m of the cash, cut all ticket prices (STs, members' tickets, juniors, seniors and execs) by 15% and then freeze them for seven years. We'd still have £50m in the bank plus the profits generated each year. Unless the Glazers are keeping the money there for some other reason......