Look behind the headlines – you know, the spin-driven articles pronouncing yet another quarter of glorious revenue growth – and Manchester United’s Q2/H1 financial statement once again paints a gaudy picture of the Glazer family’s ownership. It is a picture of a still heavily indebted club spending its profits buying back debt at an inflated prices, while struggling to compete in an increasingly hostile market.
United’s is a story of unfettered waste – millions lost on financing costs, interest and debt repayments; money that could otherwise have been spent in the transfer market, or on reducing ticket prices. It is an account of a club sprinting to stand still; an institution squeezing every last dime out of the market simply to keep the wolves at bay.
The good, the only news United releases and far too many media outlets lap up without question, is that revenues continue to rise – up to £175 million for the past six months, from £156.5 million a year ago – driven largely by increasing in media and commercial income, including the new training kit deal with DHL.
Elsewhere the picture is far from rosy. Operating costs rose to £110 million for the six months, from £96.9 million, as the club struggles to keep wages under control despite multiple summer departures. Wages increased by 17.3 per cent year-on-year, to £38 million during the final quarter of 2011.
Then there is the huge reduction in available cash, down from £150.6 million to £50.9 million, after a net £47 million spend on transfers last summer and further bond buy back.
Indeed, United has now spent more than £90 million on buying back bond debt since launching the £500 million notes in January 2010. That’s the infamous ‘Ronaldo Money’ and more. Season ticket sales this summer will bolster Old Trafford’s coffers, but history says that income may well be used to buy back bonds on the market.
The absurdity of the Glazers’ financial engineering is only truly understood when viewed in the full context of the Glazer family’s time in charge. Bought with debt, the family first loaded millions on to the clubs accounts, only to swap bank debt for – significantly more expensive – bonds in 2010. Now the family is embarking on a campaign to reduce bond debt, buying them back at a premium over the issue price using cash in the club’s bank account.
“Manchester United revenues continue to grow strongly although costs are increasing just as quickly so pretty much negating that growth,” said the Manchester United Supporters’ Trust.
“However the key figures of interest to supporters show the Glazers have now spent every penny of the money received from the sale of Ronaldo, and more. That’s now £92.8 million spent on buying back their own bond debt that they loaded onto our club. So statements at the time that all of the Ronaldo money would be made available for reinvestment were clearly just spin.
“Since the sale of Ronaldo net transfers have totalled just £90 million while they have taken out of the club £225 million to cover their debt payments and interest. What could the club have done with that extra £225m? Cheaper tickets for loyal fans, investing massively in the squad and stadium, developing and retaining the best youth players, competing on an equal basis with the very best teams in Europe. This is the true cost to Manchester United of the Glazers ownership.”
Yet, anger among the United fan base has waned, with too many happy to bury their collective heads in the sand and deny that any of the fundamentals underpinning United are in ill health. After all, Sir Alex Ferguson continues to work miracles even with his hands firmly tied behind his back. Almost inconceivably, United is still in the Premier League title race despite Manchester City’s vast sovereign wealth.
There is no talk about the ‘Ronaldo Money’ now of course – not with it having been spent largely on debt buy-back. Meanwhile, the new signings offer varying degrees of Sir Alex’ favourite quality: value.
But fans should be angry about the close to £500 million squandered by the Glazer regime since 2005, let alone the two hundred million since Cristiano Ronaldo was sold to Real Madrid in summer 2009.
Indeed, buried inside Old Trafford’s second quarter report, under the headline “Further development of the playing squad,” is the telling line: “New contract signed with Ryan Giggs and Paul Scholes re-joins the playing staff.” Much as those two legends remain a joy to watch, how Sir Alex must look with envious eyes at the midfield riches across town.
Yet, there is little sense in which United is still competing, as MUST might put it, on a equal basis with the continent’s finest. Financial Fair Play is yet to fully bite, but few expect the Reds to play at the top of the market come the summer. Indeed, word on the street suggests quite the opposite, especially with the Glazers’ long mooted IPO on permanent hiatus.
Moreover, with United out of the Champions League, and knocked out early in both FA and Carling Cups, headline revenue growth is likely to stall. Football remains a lumpy business no matter the club’s urgent efforts to drive income away from the staple of playing matches and selling television rights. United may lose, or rather, not profit, to the tune of £3 million per round in prize money alone from competing in the Europa League. Extra games are unlikely to make up the shortfall.
There is little cushion now either, with the stockpile of cash gained from Ronaldo’s sale and AON’s pre-payment on a four year shirt sponsorship deal, back to historical levels. This alone may indicate Ferguson’s priorities in the coming summer – a break in which ‘value’ is unlikely to be seen and Ronaldo may well star at Euro 2012.