Tuesday, 16 November 2010

Q1 results – running very hard to pay the going rate

Red Football Limited's Q1 results (3 months to 30th September 2010) were published today. They are available on www.mufplc.com.

No information was given on the reported PIK redemption other than confirmation that no dividend has been paid out of the club. A Glazer family spokesman has told the BBC that no equity stake has been sold in the club. We are thus left with a total mystery as to where the money to redeem the PIKs has come from. A refinancing would seem the most likely route, but neither the club nor the Glazers seem minded to tell us anything.

These were not exciting figures and mainly confirm the trends we saw in the full year results.


Matchday income was up very marginally (0.6%). This reflects one fewer home game this quarter (drawn away in the Carling Cup), offset by higher tour income. Tour income is not split out separately from home games but a back of the envelope calculation suggests it is around £6m. The club is still generally selling out home games (Wolves in the Carling Cup being the exception), but it is clearly a struggle with local newspaper adverts for home games now a common feature.

In media income, United benefitted from the new three year PL deal which began this season. Whilst domestic rights growth was low, the overseas rights bonanza added around £1.5m. This offset the £1.6m fall in CL media income (the "market pool" element) due to United coming second in the PL last season.
Commercial revenue was again the star rising 25%. This is the first quarter to included the Aon deal (worth around £1.5m more per quarter, although this extra cash was pre-paid in 2009). The growth on last year also reflects all the smaller deals done during last season (Concha Y Toro, Smirnoff, Turkish Airlines etc).

In total, revenue rose 9.8%. The profit on player sales was only £2m vs. £6m last year as Possebon, Cathcart and Tosic left.

On the cost side, I have to say the rise in salaries at 14.8% is totally staggering. Last year wages rose 7% so this doubling reflects a huge acceleration in wage increases. Note, these figures do not include Rooney's pay rise! Salary inflation shows no sign of slowing down in the run up to UEFA's Financial Fair Play rules coming in. Other costs rose 5% year on year. In total, costs rose 12%, ahead of the rate of growth in revenue.

Interest, debt and cash

The interest charge was £12.2m. This is one quarter of the bond interest paid annually. Actual cash interest paid was £22.7m (the bond payments are in February and August) and probably includes c. £1.6m in swap losses. The £26m of swop losses not paid last year are being paid over the next four years but we do not have the exact payment dates.

Gross debt (including MUTV and the Alderley mortgage) is reported at £509.4m (down from £522m at the year end). This fall is due to the strengthening of £ vs. the US$ during the quarter. The gross debt figure does not include the unamortised issue discount and financing fees of c. £22m. Total debt repayable is therefore c. £531m.

The cash balance fell £12.1m since 30th June to £151.7m. This seasonal fall is normal for the club. There was an explained inflow from working capital of £6.6m which limited the fall in cash.


These figures show United running very hard to keep up with quite extraordinary wage pressures. So far the commercial growth is delivering, which is essential as there is little growth in Matchday or Media to compensate.

These figures cast no light on the refinancing or redemption of the PIKs. The silence from the Glazer family and the club on this issue is a disgrace. If all is good, tell us the details please.