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......



LSD_Eindhoven said...

Hi Anders
Thanks for this.
Are you not illustrating above the traditional criticism levelled at LBO operators? Inward investment is reduced and assets are depleted quicker than they are renewed. This is more true of the quick turnaround LBO sharks where deleveraging takes precedence over inward investment.
I am not sure where the club is in this cycle as it's hard to know whether the Glazers are sellers or stayers. Personally, I have always tended to believe that Fergie would outstay the Glazers, the outcome of an implicit pact between the man most responsible for the club's success and the people who will derive most from it. Time is running against this notion though.

Now that the PIKs have been visibly "dissappeared", what do you think will happen to those carveouts? We have received qualified assurances that the carveouts will not be used to deal with the PIKS\replacement debt; but what about the bonds? There was some indication a while back that a bond debt reduction might be in play. How are the bonds trading these days?
By the way, have you had any luck with UCC filings?
One other thing, Anders: When can we expect the release of the RFJV accounts? I think they were available around this time last year.


Diem said...

It doesn't seem that SAF really wants to spend the cash, but that it's there if he wants it.

I wonder if it's just being stashed for his retirement, a new manager will probably want to stamp his mark on the squad with some big names?

Anonymous said...

The Glazers won't reduce ticket prices. To them it's just a business and they will price the tickets as high as they can as long as the games sell out.

They also won't let us spend if they think we don't need to. They want to maximise profits.

I wonder if we will be allowed to spend much this summer if we win the Premiership? Will they just consider that not much spending is needed?

I'd like to see us spend the money we have, to try to build a team capable of competing with Barcelona and Madrid in Europe. But I think the Glazers are content with us being a big fish in the small pond of the Premiership and just having decent runs in Europe because that is more profitable.