Reds’ boom goes on but the Glazer drain continues

“There is only one Manchester United,” said Richard Arnold, the Reds’ Commercial Director last month. Indeed, the club’s first quarter results, published Tuesday, once again demonstrated the cash generating monster it has become, with yet another quarter of increased turnover posted. Thanks in part to an aggressive regionalised commercial strategy, the club is generating more income than ever before. Yet amid the Old Trafford back-slapping the truly eye-watering waste enforced on United by the Glazer regime is once again revealed.

United’s financial year Q1 results showed a 17 per cent year-on-year (YoY) increase in revenues to £73.8 million in the quarter, with matchday income up nine per cent, largely thanks to the bigger US tour conducted this past summer. Meanwhile, higher Champions League pool payments led to a 17 per cent YoY increase in media income, with a 22 per cent increase in commercial income over the same period. The latter is largely thanks to the continued aggressive commercialisation of the United brand, including a £40 million four-year deal struck with DHL to sponsor the Reds’ training kit.

Amid the positive news, there are also plenty of negatives for the Glazers’ bean counters to ponder. Staff costs grew by 12.2 per cent YoY, with player remuneration increasing despite several senior squad members leaving in the summer. New contracts awarded to Park Ji-Sung, Javier Hernández, Antonio Valencia, Chris Smalling and Tom Cleverley demonstrate that wage inflation is continuing unabated in football no matter the financial chaos in the wider economy.

All this adds up to a strong EBITDA (earnings before interest, tax, deductions and amortisation) of £19.2 million for the quarter, increasing 30 per cent on the previous year, with a margin of more than 26 per cent.

Meanwhile, United’s cash position, which is typically very cyclical, was down significantly from £151 million at the end of the last financial year in June, to £65 million in Q1. United’s cash balance is always highest during the summer, while heavy spending on transfers and debt reduced the pile. The club spent £47.1 million on player transfers during the last window, £21 million on interest and £8.2 million buying properties around Old Trafford. The latter increases the amount of land the club now owns around the stadiumd, with no genuine explanation of the strategy forthcoming. They’re certainly very expensive car parks.

Although bond debt is almost £100 million less than at its peak, net debt is actually £3 million higher YoY – something not widely reported. In fact in the three months to 30 September, the club posted a £6.9 million accounting loss, in part due to increased financing costs and forex changes. The cash cow continues to be profitable until debt is factored into the equation.

Leaving all the dry accounting speak aside, United is a very strong business, with a balance sheet ruined by debt. Although the Glazer family continues to spend United’s cash buying back bonds, and paying themselves ‘management fees’ (more than £16 million in the final quarter of the last financial year), the hyper-commercialisation of the club continues unabated. United’s appeal is global in scope, with brands keen to leverage United’s reach to the reported 330 million fans worldwide. That DHL is spending so much to sponsor the club’s training kit underlines the transformation of the club’s commercial strategy under the Glazer regime.

Yet, the cost to the club of having the Glazers as owners continues to rise. Including interest spent, management fees paid, and debt repayments made, the family has now cost the club around £580 million in aggregate over six years, according to blogger Andersred. It’s a story of staggering waste – paid for, in large part, by the fans through higher ticket prices. And it is a picture unlikely to change in the near future, with the mooted Asian IPO on hold while global financial markets remain in turmoil.

And while the Glazer family draws praise for the aggressive and largely successful commercial strategy, criticism is certainly due elsewhere. The logic of swapping bank debt, at great cost, for bond debt that earns a higher yield has never been explained Unless, of course, the plan was to take a very large dividend, before the Glazers were spooked by the ‘Green & Gold’ movement. Securing seven-year bond debt, and buying large chunks back within two years, is equally inexplicable as a coherent financial strategy.

It will come as no surprise then that the Manchester United Supporters Trust (MUST) reacted with anger to the latest set of results.

“Revenue continues to grow building on the platform laid down by Sir Alex Ferguson over 25 years of unparalleled success,” MUST ceo Duncan Drasdo told the Mirror.

“However a key concern for supporters is that on top of the hundreds of millions lost in interest and fees resulting from the Glazers’ ownership we are now seeing huge amounts of additional money being paid out of the club’s cash reserves being spent on buying the bond debt incurred by the Glazers. That is the Glazers’ debt, that they dumped on our debt-free club and they are now using club funds to pay for it. A sum exceeding ‘The Ronaldo money’ they claimed would remain available for transfers has now been spent and this is on top of the £100s of millions in interest and fees already wasted.”

Even taking into account the approximate £100 million in Corportation Tax saved during the Glazer era, the damaging effect of debt is clear. That United is financially strong enough to survive more than half-a-billion pounds wasted is one thing. The moral, financial and strategic legitimacy of the waste is quite another.

Moreover, in the post-Sir Alex Ferguson era, when United will no longer be able to draw on the Scot’s brilliance, the club will face a plethora of challenges on and off the pitch. Rival clubs will mirror the Glazers’ commercial strategy, potentially eating into United’s market share, while the Reds cannot compete with the external wealth brought to Manchester City and Chelsea, let alone the TV revenue secure by European rivals Real Madrid and Barcelona.

This is a truism that many supporters will have to face in the years ahead.

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Comments

  1. Herbie Simms says

    This article is really disturbing. Fans should be really concerned with the future of Man.United with these gangster Glazers. Badges? Where is the loyalty? We need to boycott all the home games to send the Glazers a message. Where can I buy a spray to get rid of these cockroaches?

  2. Alfonso BedoyaAlfonso Bedoya says

    Sadly, none of this is new or surprising…

    We all knew what was coming the day that Mephitical Malcolm first took charge.

  3. Mike says

    I suppose the only plus side to the Glazers is they arnt gangsters or the foundation of a country that abuses peoples human rights. Other than that….

    Shame they are ruining our club, more of a shame there is nothing we can do about it. Could be worse though, we could be scouse!

  4. shauno says

    I started to write about staying away from United and not spending money to watch them and that collectively this could work to oust the Glazers. But you know what I think I’m really starting to turn a corner and finally recognising and acknowledging that football just isn’t what it used to be in this country.

    The ‘game’ and just the ‘game’ is something I love watching and playing, but the Premiership, The FA, England, Sky Sports, immoral ownership, greed, racism (or to put a finer point on it the fact that we haven’t moved on), ignorance, money, the Glazers, the rampant commercialism all these negatives and more (Anderson in midfield) seem to be finally tipping the balance against me bothering with football at all.

    I understand that when I started consciously watching football (1980ish) money, scandal racism, hooligans all played a part in football. I don’t want to sound all “jumpers for goal posts” but the negatives aside it felt like it had…well…essence i.e. playing the game in the right way for the love of playing. When you won, you won and when you lost it was rubbish.

    What we didn’t have is every aspect of the game over analysed. From financial analysis to football punditry going on for days and weeks. I’m just bored of it, I’m bored of the whole circus. It just all seems tainted to me even this website (which is a good website) is populated not by armchair pundits but armchair analyst’s. It seems no longer that someone can be crap or have a bad day without somebody suggesting that it was due to a weird formation (that I have never heard of let alone witness!) or the phases of the moon?

    Brian Clough covered some of this in an interview with Motson (quite a famous interview google it) about being incessantly lectured and then ridiculed and bated if we don’t agree or care about the finer points and how its tainting football.

    But it’s just how I feel, not even really an opinion, just my feeling towards football, not backed by evidence and I don’t intend to defend it (so cool your jets if your thinking about furiously responding)

    My only consolation is that United along with Liverpool, Arsenal and Forest to name a few, managed at some point to bring together essence and sustained success in my opinion and I was fortunate enough to witness it. As for the topic of this thread I can only hope that Man United falls back into the hands of the people and communities who have spent their lives loving the club. I don’t need a financial analyst to tell me that.

  5. dws says

    we are in this position because so many Man Utd fans chose not to do anything back in 2005 when the scumbag glazers took over.I packed in my season ticket as did my son, I despise the glazers more than ever and they typify so much of what is wrong on this world. Total and utter greed but eh what goes round comes round.When Fergie goes sooner or later the chickens will come home to roost. I have supported MUST and always will but do wish they has been as aggressive to the glazers as the glazers have been to commercialism. With a bit of luck the glazers will get their reward in hell

  6. han says

    one day the goose will stop laying its golden eggs
    the glazers will then cut it open to see where the stash is
    and that will be the day when the club is finally wiped out

  7. RedDevilInArizona says

    Doesn’t this just frost your jaw.

    Tulane University is preparing to break ground on a new football stadium. The New Orleans institution of higher learning (which also produced among others, Shaun King, Peter Brown and Gregg Rosenthal), has played football games in the Superdome for decades.

    Now, the school is building an on-campus stadium and two NFL families are helping finance the new stadium, so FOX 8 reports: Tom Benson’s family and the Glazer family.

    FOX 8 has also learned that the Benson family and the Glazer family, which owns the Tampa Bay Buccaneers, will largely fund the new stadium.

    “I want to give a huge thank you to them. I mean that’s putting us on the map,” says student Efren Lopez.

    The old Tulane Stadium was demolished in 1980. Back in the 60’s, Tulane advertised it’s stadium in football programs as the ‘world’s largest steel stadium.’

    It seems that Avi Glazer’s wife attended Tulane and she currently sits on the school’s board of trustees.

    Joe thinks this is a wonderful gesture by Team Glazer. Now the first thing Joe thought of when he learned the Glazer family would help fund a college football stadium, maybe Stu Sternberg should attend a Bucs game and talk turkey to see if Team Glazer would want to help build a sorely-needed new Rays stadium in downtown Tampa.”

    Nice to see that the ticket sales are going to a good cause!

  8. RobDiabloRobDiablo says

    RedDevilInArizona – It’s probably worse than that: the Glazers will most likely get some enormous tax break from helping the university, which means they won’t have to pay taxes on the “consultancy fees” they’re stealing from United.

  9. says

    “I suppose the only plus side to the Glazers is they arnt gangsters or the foundation of a country that abuses peoples human rights.”

    But the USA is a country that perpetrated genocide against its original inhabitants (I don’t know if we can think of that as a metaphor for what the Glazer gang are doping to our club.

    Lets park the issue of the huge loans for a moment, if they invested so much, then the profit should be used to pay back what is owed, provided that the club gets enough money to not just keep going, as a profitable concern, but to keep winning (if we start losing too much then the profitability will be adversely affected). But this means that there is enough money to make sure that we stay at the top. Signs are that we are slipping — and that we can’t disguise the fact that this is happening. Unfortunately this is occuring when City’s once wet-dream fantasies of glory are starting to look like real possibilities (a few more games of banging them in left right and centre, this time including against the big 4, or rather the other 3 of the big 4, and it will become a virtual certainty ). What I really think isn’t on is the 16 million the Glazers pull out for `management’. What management are they talking about? It’s a distortion of the meaning of the word and should be challenged. They are on weak ground here, our slimey American friends — and United fans so be very aggressive in articulating how unacceptable this is. Sixteen million: that’s like half of Wesley Sneijder. Over two years, at this rate, we could have got both halves of him.

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