Tuesday, 26 July 2011

Are United trying to cut the wage bill?

It pays not to believe anything Sir Alex Ferguson says about potential transfers. This is not a man who loves sharing secrets with the media. So we should all take his comments in the US yesterday with a pinch (or perhaps a bucket) of salt. Having said that, Fergie said some quite specific things about the financial implications of the club's summer sales and purchases which are worth a closer look at. This is what he said (my emphasis):
"At this moment, I can't see another addition. The type of player we might have been looking for is not available.
"We lost five players in their 30s this summer. That helped finance the three younger players I have brought to the clubI am happy with the players I have got at this moment in time." 
The "five players in their 30s" are presumably Wes Brown, John O'Shea, Owen Hargreaves, Gary Neville and Paul Scholes. In addition of course, one rather important player in his forties, Edwin van der Sar, has also left the club.

Of these six departures, only Wes and JOS were sold for a fee, so presumably when talking about exits helping to "finance" new arrivals, Fergie is talking about wages. The question therefore is how much has been saved in wages?

Needless to say, we are entering a world of guesswork when it comes to players' salaries. These are my best guesses, but if anyone can find sensible sources for more accurate figures, please let me know.


On these figures (and indeed on anything roughly near them), the club is currently sitting on some significant cost savings. The estimated £10.7m per annum in annual wage savings is 8% of the total club wage bill in 2009/10 and around 11% of the club's annual cash profits (EBITDA).

The estimated saving of c. £200k per week is also (coincidentally?) around the level that the press has speculated United would have to pay Wesley Sneijder to prise him from Internazionale.

So what is going on here? The cash for transfer spending is definitely available. As I wrote in June, when the club publishes it's full year results in October, they will show a cash balance of c. £180m at 30th June 2010. Only around £47m of this has been spent. There is over £130m still available.

The club is clearly crying out for more creativity in central midfield. Scholsey made sixteen league appearances last  season and has gone, Gibson is for sale, isn't good enough and hasn't travelled on the US tour, Fletcher is still ill, Giggsy is a stand-in midfielder entering the end of his career. Meanwhile, Barcelona passed through us and around us at Wembley in a way that makes the need to strengthen crystal clear.

I don't know why Fergie said what he said yesterday. I hope it is more smoke and mirrors to keep the rest of the world confused. I hope it isn't a sign that not only do new signings need "financing" by player exits, but that the edict has gone out to reduce the wage bill. Is the subject of dividends to the Glazer family back on the agenda? Is this an attempt to boost short-term profits for a Hong Kong float (at the cost of the long-term development of the club)?

Frankly, what's the point of being the most commercially successful club in England with a "global fan base" of 330 million and £130m+ still in the bank if we can't afford a decent new central midfielder?

Good old Glazernomics.

LUHG

44 comments:

Anonymous said...

Thanks for this, Anders. It's sad the way the club is being run, 333 Million fans worldwide and yet we can't afford a CM. Ridiculous. I hope this isn't the start of something bad, Liverpool-esque with G&H

Neil c said...

So United have spent 47m net but you're crying that it's not enough?
If you want 100m net spent each summer then City might be more to your taste.

Oli said...

Neil C,

I don't want MUFC to spend money for the sake of it, to prove they have it or to outspend City. However, when the manager (not just fans) wants the player, the board need to have a good reason not to get him. SAF wants Sneijder and it has broken down after weeks of talks.

At the moment, the club has the highest ticket prices it has ever had, the highest ever collective TV deal, the highest ever commercial revenue and the most on field success. If under those circumstances you cannot afford to buy the player you most want then when could you ever?

Also, it is sensible to look at net spending (and also profit and turnover) over 6 yerars to get a more accurate indication of the club's 'generosity' in spending. We are 7th out of 20 PL clubs despite having higher revenues by a mile.

Oli

andersred said...

Hi Neil,

I'm not about crying about anything, I just think it's farcical if a club that is making £100m+ of cash profits per annum can't afford a decent CM.

I want United to be able to spend what it earns, end of.

anders

jonathan said...

Please correct me if I'm wrong, but assuming these numbers, isn't the 10m/ per annum in salary savings the same amount that will be expensed each when the transfer fees are amortized over the five year period the players' deals run for? Thus the club have not really spent or invested any money in the squad, although any future spending this summer would fall under the category of new investment.

andersred said...

Yes Jonathan, that is absolutely correct.

anders

Daniel said...

hi andy, hope you are keeping well mate....just a thought. you know the clubs wages target to revenue of <50% could this come into the equation? ie. when we gave rooney and a few others new deals last season are we in danger to go above that threshold, and if we do could this be why the club are possibly reducing the wage bill? instead of making room for a quality addition...i worry what fergie says is the same as last year and thats that.

daniel hearn.

Anonymous said...

Hi,

Of course they are attempting to reduce the wage bill. Increasing it is the appetite of fans not business people. United were always going to be open this charge when replacing high value players with younger players on less income. However, this direct comparison is just part of the story, as changes to other player contracts need to considered too.

Let's not forget that the window remains open. Also buying players is not just about price. Availability and the reluctance of big clubs to sell to rivals is a significant obstacle to buying established world class talent. Nearly all the business conducted to date has happened between big clubs and smaller clubs or clubs in dire financial positions.

andersred said...

To Anonymous at 17.49

Of course they want to control the wage bill, but an absolute cut is unrealistic and unnecessary given the revenue growth (not to mention counter productive).

The club's wage bill has only fallen year on year twice since 1991.

anders

Anonymous said...

Way off with De Gea salary, he is on 40k a week, four times the size of his Atletico salary.

Anonymous said...

Bit premature this isn't it? The transfer window is open for another month and little point bringing in someone on Sneijders salary, whilst the rest of the team are on tour. Half a million in wages to play in the reserves for a couple of weeks; better he get pre-season with Inter.

To be fair aswell, it's all very well other posters here saying that if Fergie wants a player that the board should cough up, but if Inter are indeed pushing for £35m plus £5m for the next 3 years of commercial revenue, then I'd tell them where to stick it, or at least hold fire to see if they come down on those demands as the end of august approaches.

Not sure anything really indicates a sell to buy policy either. VDS, Neville and Scholes all retired. Given his injury history it would've been a big risk retaining Hargreaves, and Brown and O'Shea - correct me if I'm wrong - were entering the final year of their contracts, both over 30, and the former hardly getting a game.

Could renew contracts, but then presumably there'd be a signing on fee & probable increased salary, and at their ages, likelihood of decline. Whilst both been brilliant servants, don't have the inherant quality of some of the older veterans we've had in the squad. Rejecting the bid and continuing to pay their wages would've valued keeping them for the year at c.£5m each, (c.£5m missed transfer fees + £5m wages) and with the twins emergence and Smalling/Jones/Evans available for CB cover, questionable whether that would really be worth it.

Equally as the above says, with a new influx of younger players, it makes sense that they'll start on compartively lower wages, and that United will reward them with increased salaries as they progress as an incentive, as they've already done so presumably with Smalling signing a new extension, and look to be with Hernandez. Rafael and Valencia I think are only contracted until 2013, so presumably they'll get an improved offer this summer. The 2009/10 total wagebill wouldn't have included the possible increased wages of Rooney, Anderson, Carrick, Fletcher, Evra, Vidic who all signed deals last year did they not?

I'd be surprised if the wage bill was lower, or if it is, would be lower for more than a season. Possibilities of Welbeck, Cleverley, Macheda etc etc

andersred said...

De Gea £40k suggestion noted. Someone also suggested £80k for JOS from Oct 2010....

anders

Anonymous said...

De Gea £40k suggestion noted. Someone also suggested £80k for JOS from Oct 2010....
-----

JOS wage was rubbish. The sun reported that O'Shea was being offered or had agreed a deal to that amount, but there was nothing on the official site or anything reputable that he had signed, so think it was just tabloid stories.

Per my last post though, it would only take a conservative £20k p/w increase for Rooney, Vidic, Evra, Carrick, Fletcher, Anderson & Smalling, whom all have signed new contracts, to pretty much eat into most of that salary saving by the outgoing players.

And pretty sure likes of Rooney got a fair amount more than a £20k increase

Anonymous said...

I had O'Shea & Brown on 40k a week. I had Hargreaves on 75k and I had VDS, Neville & Scholes on 80k a week each. United have just doubled Smalling's wage to 40k a week, so I figure that is exactly what his mate and CB partner Jones is on. I was told that David De Gea was on 30k a week.

The last poster is right about the wage bill, it wouldn't be cut by a great amount with all of the contract extensions signed. Players like Gibson, Berbatov, Diouf & Kuszczak all likely to go too, I think the wage bill will come down another 150k, but with Hernandez & Park signing new deals, it will level itself out again.

I still have a feeling our wage bill will be lower than Liverpool's.

Georgie (Manchester)

Anonymous said...

It was reported back in November (I think) that O'Shea will have his wages doubled to 80k a week and many fans were outraged, but as we know it was all rubbish as he never had his contract extended because he was in his final year still.

This is why I think he was on 40k a week because reports said he would have his wages doubled.

Georgie (Manchester)

GCHQ said...

Christ Anders. I wouldn't want you managing my funds. Do you seriously believe that an overall package for Sneijder containing a £35m+ transfer fee and wages of c. 250k per week represents anything close to decent value for money? It's a ludicrously expensive option for a player, who in my opinion would be a terrible fit for the club. I'd be surprised if we ever seriously considered Sneijder as a realistic target to be honest.

Who knows what will happen over the next month or so but history tells us that whatever happens, Fergie gets it right and the fans (you in particular) get it wrong. If Fergie can't identify a suitable option then he'll wait a year instead of panicking and just buying any old rubbish. In the meantime he'll utilise the central midfield players at his disposal who are nowhere near as bad as people like to think.

PS. I won't repeat everything that Anonymous (18.06 and 18.17) has said but if 2009/10 was anything to go by, when the wage bill increased despite Tevez and Ronaldo having left in the Summer and being replaced by Valencia and Owen, then it wouldn't be a surprise if the 1st quarter 2011/12 results showed an increase on last year. New, improved contracts and built- in contractual increases in existing players' salaries might well ensure that's the case.

Swarbs said...

Were Hargo's wages not being paid by insurance whilst he was injured? I remember hearing that somewhere. Also, I think Scholes and Neville were on £60k a week based on links here:

http://www.dailymail.co.uk/sport/article-1216201/DES-KELLY-Yes-Gary-Neville-worth-60-000-week-El-Hadji-Diouf.html

http://www.timesonline.co.uk/tol/sport/football/european_football/article3964592.ece

I doubt the one year extensions they signed when those contracts expired included a 33% pay increase given how little they've played the last couple of years. And will the club's wage bill not already have increased by quite a large amount due to the big wage increase given to Rooney, Carrick and Evra? Those new contracts alone probably added £100k a week to the wage bill compared to last season, which takes up pretty much all the benefit from VDS retiring.

Anonymous said...

What I've been able to find for contract expiry dates and time of renewal.


Giggs 2012
Owen 2012
Gibson 2012
Park 2012
Berbatov 2012 (though club have unilateral option to extend to 2013)
Kuszczak Sep 2008 - 2012

Rio Apr 2008 - 2013
Rafael Apr 2009 - 2013
Welbeck Dec 2009 - 2013
Cleverley Jun 2010 - 2013
Valencia 2013
Obertan 2013

Vidic Jul 2010 - 2014
Carrick Mar 2011 - 2014
Fabio Apr 2010 - 2014
Nani Mar 2010 - 2014
Evans May 2010-2014
Macheda Dec 2009 - 2014
Hernandez 2014
Lindegaard 2014

Evra Feb 2011 - 2015
Rooney Oct 2010- 2015
Anderson Dec 2010 - 2015
Fletcher Mar 2011 - 2015

De Gea 2016
Jones 2016
Young 2016
Smalling Jul 2011 - 2016

Oli said...

GCHQ,

Two quick things....

1) It is not always about value. United have never minded smashing records in the past when it was for the right player. I agree Sneijder is a hell of a lot of money but to a club making over 100m a year it should not be an issue, and would not be an issue if not for our debt levels.

2) I agree we should not ever panic buy, but the worrying trend is when we lost Benzema we got Owen etc - a few bargain replacements rathen than getting the quality we needed. Luckily Chicarito made up for the Owen issue. In terms of Sneijder, it probably is worth it financially getting Nasri free than Sneijder for a fortune, but the fact remains Utd negotiated for Sneijder for weeks and would have paid 150k a week, so it is that little bit extra we just won't stretch to despite the manager wanting the player.

Oli

Anonymous said...

Hi,

As a fan I understand why you want to investment in line with profits. Given that Gill has alluded to one more signing of significance, perhaps we'll all get what we want.

Phil said...

@GCHQ - yeah, Fergie's always right and we're always wrong.

P.S. Bosnich, Taibi, Bathez, Stam, Veron, Forlan, Ricardo, Kleberson, Djemba-Djemba, Howard, Smith, Bellion, Miller, Rossi, Pique, Berbatov, Obertan, Bebe, Coolmore Mafia.

Devil's advocate said...

If United really wanted to save money, they should have cashed in on Patrice Evra. They could have got a £15m-£20m transfer fee for him in the last year or two, plus taken his wages off the bill (I presume he is on £90k-£110k per week.) The club had competent cover in O'Shea, Evans, De Laet and the twins to make up for his departure. His form has been pretty poor for two seasons at least. I think he's over the hill.

Julian said...

I don't think Fergie really knows what he's talking about when it comes to United finances. Clearly the exists have "saved" the club substantially. The three newcomers have probably come comparatively cheap in relation to VDS, Scholes and Neville. There's Gibson to go as well. On the other side you have the returnees - Welbeck, Macheda and Cleverley. However, their wages can't amount to that much at this stage.

United can clealrly afford the much needed cemtral midfielder which most have thought was lacking even last season. As things stand now we are even weaker in that dept. Let's hope Gill's comments are an indicator that we are still very much in the market for someone of quality.

Anonymous said...

Could it not be said that all of these players were coming to the end of their time at United anyway ?

Anonymous said...

Andy this posting of yours above is really shocking.Again and Again you have tried to throw stones at the Clubs transfer policy and whatever else.
It is clear this summer that the boss is investing in future talent(Jones nd DeG)along which is highly welcome given that the Last time Fergie went into the market paying massive fees we got Berba.Wouldn't be overly concerned given that Aug is a long month yet nd 1 thing is for sure andy You Know plenty about Finances and what not but very little about what catches the eye of the Boss.Also I note you have gone very quite in terms of hammering the hell out of the owners at everyturnabout,again a highly welcoming development or is it you can't get your hands on the Finances anymore

GT said...

Anders: great post once again....

Fellow Reds...
Those who are fine with the way things are (no Sneijder):
Lets just hope Anderson/Cleverly can do what Scholesy did for so long...Giggs definitely isnt an option here considering his age

Those who want Snejder (including me): I agree with Anders here. Technically Sneijder is the best who can fill the void and the team quality will go a few notches up...realistically United will be up there with Barca....(Its tough to say that, but Barca are really tough to beat now).

-Theja

p.s: die hard fan of United and Sir Alex....

Swarbs said...

GT

I think most Reds want Sneijder to arrive (tho' I'd prefer Schweinsteiger :)). Although I think most Reds also recognise how difficult it is to get such a top player, particularly one who is happy at his current club and whose current club don't seem to 100% want to sell. It seems a big leap of the imagination imo to assume that the reason we haven't signed Sneijder yet is because the money is ringfenced for some future dividend going to the Glazers. If that was the case, why did we buy Berba when we already had Rooney, Tevez and Ronaldo?

Anonymous said...

Anders,

By your standards this is a wretched and poorly timed blog entry. Let us wait for the transfer window to close before having this debate.

Part of me thinks you wrote this in a panic due to the noisy neighbours splashing the cash (again) on Aguero.

Regards,

Greville.

andersred said...

Hi Greville,

I hope I'm wrong, as you say we have all of August to go....

I just worry about our new transfer policy that seems to eschew our old strategy of occasional record breaking big deals alongside astute smaller ones. Would we be the natural home for Rooney or Rio these days?

anders

GT said...

Swarbs: Shweini is good too.But I doubt his passing is as good a Sneijder's.

Regarding Glazers willingness to "splash the cash" - I don't think they will ever bid unreasonable amounts of money on someone who doesn't bring up a decent resale value, unless of course Alex want a particular player....

Swarbs said...

Anders:

Didn't we just break the UK record for a goalkeeper? DeG is the second most expensive keeper in history iirc. Ok, he's not the most expensive player, but then we've never broken the world transfer record and have only broken the British one three times in the last 29 years.

GT:

Schweini's passing almost certainly isn't as good as Sneijder's, but his energy and defending is a world apart imo. With him in the team we may not have conceded the second two goals against Barca, both of which we long shots from players the midfield didn't close down. I'd prefer Schweini cos I'm not 100% convinced Sneijder (who's a natural no 10) would fit right into a 442 with Wayne.

Re: the Glazers willingness to "splash the cash", I don't remember the plc every bidding unreasonable amounts of money on someone who they didn't expect to bring up a decent resale value, except maybe Dwight Yorke. And to be fair to the Glazers they did bring in Hargo and Berba, neither of which could have been expected to have much resale value.

syeds said...

I hope this ending point might become the new change for us.


Sample Contracts

Anonymous said...

The money is definitely there as seen as whatever was spent on Phil Jones. It was evident they signed him this year so that Arsenal or Liverpool wouldn't.

Ditto with Ashley Young. Did they actually need him? Surely he isn't that much of an upgrade on Nani?

With De Gea, they could have found better keepers for cheaper and wouldn't have paid much higher in weekly wages (Stekelenburg to name but one).

I'll agree with Sir Alex when he says he doesn't need Sneijder. United have won 3 out of the last 4 titles and made it to an equal number of Champions League finals. When they've lost to Barcelona, its been because they haven't been able to defend, not because of attack.

Steve said...

I tend to agree with Anders' view that there is something a little fishy going on here.

When SAF made the remark about the loss of players helping to fund the new acquisitions it seemed to be an overstatement to say that £6m from sales helped £53m of acquisitions. It starts to make sense when savings from player salaries are taken into account, especially when 3 of the 5 players retired and generated no sales income.

There is another fishy factor, and that is the overall quality and balance of the squad. While I welcome the new signings central midfield remains an obvious concern, as too does right back, But c.£130m sits in the bank when at the very least one would have thought we'd have bought a proven or super promising right back and / or defensive CM while searching for the more elusive Schneider type creative player. But nothing. Zip.

I'm pretty certain there is something fishy going on but perhaps it remains to be seen whether the fishiness is due to Glazernomics or to the challenges of the transfer market.

DWS said...

Hi Anders

Events are overtaking all of us with the economy around the world seemingly on the edge again. Perhaps this means the scumbag Glazers will be getting screwed in their own back yard with problems with their shopping malls etc. Hope you can keep us informed of any problems, equally of course everything is not rosy with Tampa Bay Bucs. Sadly I think the events of the last few days will be the cue for the Glazers not to spend another penny ( PROVE US WRONG ) LUHG

ozb said...

We saved £200k a week, that's a lot of hard earned money there from hardworking mature players.

I'd be more shocked if we gave the same wage numbers to the new recruits it than kept it tbh...

We don't need to spend the £200k a week do we?. It's better saved than squandered.. Our financial prudence is excellent, in another galaxy to Man City and not bad as Cheapskate Wenger.

Money on wages saved from the retirement of mature players is a nice windfall. The wages of the new boys wages being absorbed into our current wage bill is great. It's lovely that we've got new players & have saved money.

Cleverly is back on the Man Utd wage book (as opposed to the loan club's wage book).

Don't knock financial prudence @Andersred, it's a good thing :).

Nigel B said...

Hi Andy

Is there any news on how the Glazer's shopping mall business are fareing?

Anonymous said...

Anders , Thanks for a great article. I remember the very recent past ( pre2005) when our club didnt worry about age limits for new players , never had a policy of resale value ( which I suspect is being used to partially finance new signings ) etc. And the beginning of the magnificent 1998-99 season when we signed Yorke and Stam after being pipped by Arsenal to the title..We do need a creative midfielder ( not just Tom Cleverly)....

Anonymous said...

Our onfield performances have masked the effcts of the clubs debt.Only the genius of SAF who ,when he took over management of our club in 1986 had to dig new foundations as many members of the team he inherited were "unfit", has kept us afloat on the stormy sea of debt.Howver, I suspect that any attempt to reduce the wage bill (out of necessity because of the debt , not because of a new found so-called financial prudence as claimed in an earlier comment )will eventually lead in the long term to our club struggling to keep a top four place,esp. when SAF does retire.On another note, and I apologise for going off subject, I recall the clubs explanation for Mike Phelan being appointed , after CQs departure , as assistant manager was that Utd now had a policy to bring through/recruit a new manager from within Utd itself thus to emulate the policy of Bayern Munich .( This was on BBC sports news at the time.) >> Another case of "financial prudence" I suspect...

ian said...

I am a Villa fan and same situation here and it HAS to happen and no club fan should cry about it.

Unless as football fans are you just willing to see oil money being pumped in a toy for the rich and corrupt ?

Isn't football more than that ?

Anonymous said...

c'mon sneijder, if you want to win more champions league titles, you have to join manch united.

Anonymous said...

Anders i totally disagree that the Glazers will sell up. Massive emerging (Utd loving)countries in the far east, Possible European League with self tv rights, internet screening of live matches and rocketing sponsorship deals mean IMO they aint going anywhere. If i were them, id be thinking what Utd will be 20 years or so down the line. Your talking tens of billions. Ps plus the Leeches are buying up land arround OT, so expect hotels, casinos and shopping centres ect.

andersred said...

Anonymous at 11.20,

Nobody knows for certain but trying to do an IPO suggests a change of approach. The non voting share structure definitely suggests an intention to sell more equity later, otherwise why not just sell 25% of the shares, why sell 25% with only 12.5% of the votes as suggested? The obvious answer is that the non voting shares allow further sales in the future while maintaining control....

anders

ricky said...

It is good blog for business and billing of shopping. it is better or daily life
thanks

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