Tag Football finances

Tag Football finances

When it comes to money, it’s all spin

March 23, 2011 Tags: , , , Reads 52 comments

Manchester United has £165 million in the bank and is bent on spending all of it strengthening Sir Alex Ferguson’s squad this summer. At least that’s the conclusion reached by the Manchester Evening News and 1,000 blogs today after director Joel Glazer broke a five-year silence to claim that the club has “sufficient cash reserves…for investment in the playing squad.”

The proclamation came just 24 hours after the club’s holding company posted £109 million losses at Companies House. Not that supporters should worry, despite the huge losses and near £600 million debt on the books, the Payment in Kind (PIK) loans “have been paid off.” It is the near universally repeated line in media coverage of Red Football Joint Venture’s finances this week. Proving once again that when it comes to United’s finances there’s lies, damn lies and the Glazers.

The massive losses included a £64.7 million charge to set up the bond last January and £30.2 million paid in interest on the PIK debt, which has since been mysteriously financed to the tune of £242 million. Indeed, the figures are in stark contrast to those of a year ago, which included income from Cristiano Ronaldo’s £80 million sale to Real Madrid.

Yet key questions remain unanswered before supporters believe the Glazer family is to invest heavily in Ferguson’s squad. Not least the bizarre fashion in which the PIK debt was “paid off,” although it is almost certain that the family refinanced the debt through an American holding company and then subsequently moved the company to super-secretive Delaware to hide the transaction from the British media. Whatever the source of funds, the family retains the right to take dividends from the club; £125 million and counting if the Tampa-based clan chooses to do so.

Then there is the question of spending, with the club investing far less under the Glazers than the previous PLC regime in both absolute terms and as a percentage of EBITDA. The much reported, yet never actually promised, £100 million plus summer transfer fund would break a five-year habit set by the family. Not least the club’s strategy of investing in young players with a high resale value.

The third strand conspicuously missed by MEN, whose contacts within the club are near non-existent according to those in the know, is UEFA’s financial fair play regulations that effectively come into play this summer. With United’s EBITDA revenues tempered by £45 million per season in bond interest payments it is inconceivable that the club will spend a hundred million or more on summer transfers. Unless there is a departure or two of course.

The spin is in marked contrast the strict ‘no value’ line oft-repeated by Ferguson last summer when the club invested in promising youngsters and not established stars. Indeed, the Scot has been fulsome in his praise of United’s scouts who picked up striker Javier Hernández for around £7 million up-front and further performance-based bonuses. It has been a brilliant piece of business. The less said about the £8.3 million spent on Bébé, the better.

Yet, invest United surely must, with domestic rivals Manchester City and Chelsea likely to spend heavily in pursuit of glory. And even if Ferguson’s reserve team is packed with promising talent, the squad will be at least a quartet short come the summer. With Edwin van der Sar retiring, Gary Neville already picking up his pension, Owen Hargreaves likely to be released and Michael Owen out of contract, a wealth of experience will be lost to Ferguson’s cause. Paul Scholes’ future is as yet undecided, with the 35-year-old mulling retirement.

Moreover, a second defensive injury crisis in as many seasons says much for the fragile nature of too many United stars. Rio Ferdinand’s injuries now fall into the chronic camp, Nemanja Vidic has an unfortunate fragility, Jonny Evans’ ankles seem unable to keep up with the Premier League’s rigours and Wes Brown has troubled the physio more often than the opposition in a decade at the club. Then there’s the immensely talented da Silva brothers, who have each suffered multiple injuries in the past two seasons.

The question of quality – one that Ferguson strongly rejects – is one that many supporters have asked too. It is, after all, hard not to conclude that this United squad suffers poor comparison with others during the Scot’s time in Manchester. Indeed, while Ferguson’s squad has performed admirably at home this season the greatest challenges now lie ahead. Recent defeats away to Liverpool and Chelsea surmised the Reds’ performances away from Old Trafford, with United’s record of four wins joint seventh best in the Premier League.

Not that United supporters should be concerned. After all, the Glazer family is about to lavish £165 million on the transfer market. MEN has said so!

Barça 0 – 1 Market

December 12, 2010 Tags: , Reads 5 comments

Some things in football are sacrosanct. Michael Owen has no place in a Manchester United team. The Football Association is populated by bumbling idiots. FIFA’s executive committee follows the money. And FC Barcelona will not take cash for shirt sponsorship. Until now. Hang up the wreaths. Pay your respects. Football. R.I.P.

One of those tenets ended on Friday when Barcelona broke with 125 years of traditional and accepted a mammoth new shirt sponsorship from the Qatari Foundation – read the al-Thani Royal Family – worth around £25 million per season over the next five years. It’s the richest shirt deal in history in the midst of the deepest global downturn since the 1930s.

Running from the 2011/12 season, Barcelona’s shirt will now bare the foundation’s logo in the run-up to the 2022 World Cup. But it’s a decision that is unlikely to rest easily with the club’s supporters, prompting criticism that the new board has sold out to the perils of the market. A decision defended by a club that is millions in debt.

“It is not a commercial brand but a non-government organisation in a country that wants publicity through education and sport, and, as everybody knows, through organising the 2022 World Cup,” said club vice-president Javier Faus.

“Barcelona needs the money to face up to our €420 million debt.”

Yet, it represents another major coup for the Qataris, who secured the rights to the 2022 World Cup at FIFA 10 days ago. If convincing 22 old-aged FIFA delegates that holding the World Cup in a country with no football tradition, during the summer when temperatures regularly exceed 40*C, was hard enough, then Qatar buying its way on to Barcelona’s shirt trumps even that.

Not that financial pressure doesn’t exist of course. Debt or no debt. The success, glamour and global profile of the Catalan outfit has created an environment in which a huge deal was always possible at a club owned and run by the fans.

Yet, the cash has always been turned down whatever the financial rewards of globalisation. Moreover, Los Cules paid UNICEF £1.5 million per season from 2006 onwards simply for the privilege of displaying the United Nation’s Children’s Fund logo. Those that viewed the UNICEF deal as a stalking horse the real deal have been proven correct.

For many United supporters this act of conciliation with the market represented the antipathy of everything the Glazers brought to Old Trafford in 2005. The over-arching obsession to generate new revenues to cover the outrageous indebtedness that the American family fostered on United caused genuine anger. So much so that thousands of supporters founded their own club – FC United – in Barcelona’s image.

While each of those clubs bookends the football spectrum, at their heart lies – or lay – a philosophy that fans not commerce comes first. That principles, not profit, is more important. That each is more than a club, it is a philosophy and a way of being.

Perhaps worse than selling this dream down the river, Barcelona has sold out not to some random bank with aspirations of global penetration or an increase in brand value – whatever that means – but an absolute monarchy with a shocking record on human rights. Barcelona, a club that grows its own; founded on the principal of mutuality and internal development, now beholden to mineral wealth’s fascination.

For those supporters who remember a time when football wasn’t dominated by finance, global television and the requirement to ‘exploit the brand’, Barcelona’s romanticism held much appeal. Indeed, this site carried an ode to a club which seemed – despite recent financial mismanagement – to understand the very core of football. When so many clubs have become entertainment businesses, United included, Barcelona stood tall as a family business.

No longer.

Supporters must at least be grateful for the mutuality enshrined in the club’s charter. One wonders whether the club could withstand the full assault of the globalised market and remain independent otherwise.

Indeed, Pep Guardiola – Mr. Barcelona – seemed a reluctant proponent of the new deal. Necessity, he said, was at its root.

“We must take into account that the numbers at the club are not quite right, and I am hoping that they will recover and improve,” said the astute and intelligent, 39-year-old coach.

It’s an argument that could justify ticket price rises, stadium naming rights and, in dreadful market speak, refinancing.

The day money came before principles. The day the football died.

United posts £83.6 million loss

October 8, 2010 Tags: , , Reads 45 comments

Manchester United’s annual accounts to 31 June 2010 shows the club made a huge loss of £83.6 million despite rapidly increasing operating profits. The huge losses, associated with refinancing, debt interest payments and a decline in the squad’s value, will further fuel the anti-Glazer protest movement at Old Trafford.

One-off costs associated with the £502.5 million bond issued in January, together with an annual interest bill in 2009/10 topping £43 million have swallowed the club’s £100.8 million operating profits, despite the club announcing record turnover of £286.4 million.

The huge losses include a £40.6 million financing charge associated with the bond issue and a £19 million loss on fluctuating exchange rates.

There is now £521.6 million book-value debt owed by the club – excluding so-called Payment in Kind (PIK) debt – most of which matures in 2017. Under the current business plan the club will not pay down the debt before 2017 and is likely to refinance when the bond matures.

The Americans are allowed to take the £70 million dividend under the terms of the bond and many analysts believe that the cash – when finally taken – will be used to buy PIK debt that is running at more than £220 million.

However, the accounts record only the financial position to 30 June 2010 and, as expected, do not show that the Glazer family drew on a £70 million dividend to that date. Indeed, noises coming from the Americans’ camp in the summer signaled as much, with fans likely to find out more when the Q1 2011 figures are published in November.

Neither was a note attached to the accounts reporting a material change in United’s financial position post reporting date, which would have signaled that the dividend had been taken. Accordingly, United’s cash position increased slightly to £163.8 million.

The family bought 20 per cent of the PIK debt in 2008 at a heavy discount, almost certainly with £10 million borrowed from the club in loans. However, the remaining PIK debt now accrues interest at 16.25 per cent annually, which explains why the January bond was specifically designed to enable the Glazers will pay off the debt through club funds. Indeed, there is no business logic behind not paying down the PIK debt immediately.

The family can also take up to 50 per cent of United’s annual post interest profits as dividends on an ongoing basis, together with £6 million in management fees. All for the pleasure of having the Glazers as owners.

The losses provide a stark contrast with the club’s activity in the transfer market over the last season, where United spent about £11 million net this summer in bringing Javier Hernández, Bébé and Chris Smalling to the club. Zoran Tošić and Ben Foster moved on to CSKA Moscow and Birmingham City respectively.

The club can point to strong growth in media and commercial income, which puts United in a comfortable position to pay off debt interest. Indeed, United’s position is nothing like as perilous as Liverpool’s, with the Anfield club unable to cover interest through profits.

United has embarked on a programme of striking territorial deals with new sponsors such as Singha Beer, Concha y Toro wines and PCCW over the past year. It has led to criticism in some quarters that the club is now over-commercialised, with little room for growth in a very competitive sports-sponsorship market.

Supporters though will remain angry that the club continues to post huge losses on the back of the Glazer regime while under-investing in the transfer market. With Edwin van der Sar, Gary Neville, Paul Scholes and Ryan Giggs all retiring within the next 18 months, fans are yet to see any evidence that Sir Alex Ferguson is allowed to invest in established talent despite the departure of Cristiano Ronaldo in June 2009.

Ongoing price rises and controversy over the debt has led, for the first time in a generation, to the club failing to sell all season tickets. 2,200 remained on the shelves as the season began, and this week the club embarked on yet another email and text message marketing campaign, designed to sell the remaining season tickets.

Despite an eroding supporter base Old Trafford has sold out for each of the matches held this season. However, it remains to be seen whether tickets for less attractive upcoming matches against West Bromwich Albion, Wolverhampton Wanderers and Bursaspor go on general sale or even sell out.

Whether the financial results offer any new impetus to a bid for the club remains to be seen. Liverpool’s distressed sale at £300 million may help set a more realistic price for the club, but the Glazer family is under no immediate pressure to sell. United’s income covers debt interest payments and allows for the family to remove any remaining PIK debt exposure.

Whether there’s enough cash left in the kity to strengthen the squad is another matter altogether. United is a well run club, with an awful balance sheet. Yet for the Glazers’ business plan to work United need only qualify for the Champions League.

Fans must ask themselves if it’s an acceptable scenario or not.

Beware owners bearing big promises

October 7, 2010 Tags: , Reads 34 comments

The proposed takeover of Liverpool by New England Sports Ventures (NESV) for £300 million has the club’s supporters excited about a new dawn. Not without reason: American owners Tom Hicks and George Gillett’s leveraged takeover in 2007 has taken Liverpool out of the Champions League and to the precipice of financial oblivion.

But are the Dippers too excited, too early, about the new takeover, just as they were in 2007?

Certainly Liverpool supporters should be cautious in welcoming the new ownership. After all, even if the legal challenge from Hicks and Gillett is seen off in the High Court next week, there is no guarantee that NESV, which also owns the Boston Red Sox baseball team,will pay-off all debt from the stricken Merseyside club, let alone plough Manchester City-style millions into player acquisition.

While NESV has promised to eliminate “all acquisition debt” potentially up to £100 million of working capital debt is also owed by the club. It is an educated but sensible guess that this so-called football debt is unlikely to be cleared by NESV in the acquisition. In fact, no promises to such effect have been made.

Neither are funds guaranteed to build the long-awaited new stadium on Stanley Park or bring Anfield into the 21st century. The new stadium is essential to Liverpool developing the revenues streams that will keep the club in touch with the new ‘big four’ of Manchester United, Chelsea, Arsenal and Manchester City.

Without new revenue, there is no guarantee Liverpool will not slip behind Tottenham Hotspur, Aston Villa and even crosstown rivals Everton in the Premier League pecking order. After all Liverpool is minuscule in financial terms. The last published accounts showed a £54.9 million pre-tax loss, with annual interest totalling £40.1 million on gross debt of £378.6 million. It’s the direct result of a leverage buyout the owners promised wouldn’t happen.

While the debt is significantly lower at Anfield than that built up by the Glazer family at Old Trafford, so is Liverpool’s operating profit, which was just £27.4 million in the last recorded accounts. The Anfield club is significantly under-commercialised in comparison to major rivals and revenues are just 60 per cent of that at Old Trafford. Without Champions League football Liverpool may not even break even under the new UEFA financial fair play rules.

It’s a situation that has led Royal Bank of Scotland to take control of the Anfield board, marginalising the American owners and forcing through a sale. The £300 million sales price is tantamount to a firesale given the £500 million value placed on the club by this year’s Forbes magazine valuation.

No wonder Hicks and Gillett are willing to take the sale to court or face losing up to £140 million in equity they have loaned the club. Liverpool’s dilemma; the alternative to takeover by NESV is probably administration, with RBS now keen to liquidate whatever assets it can from the club and walk away.

Liverpool’s financial turmoil has, of course, resulted in chronic under-investment in the playing squad over the past two seasons. Not that Rafa Benitez did much with the millions the board handed him in six years on Merseyside.

The irony in Liverpool supporters’ understandable protests over Hicks and Gillett is that the leverage buyout was previously greeted by jubilant celebration. It proved yet another false dawn in more than 20 years of domestic failure down the East Lancs Road.

However, United supporters should be cautious in celebrating Liverpool’s recent decline as amusing as it may seem. There but for the grace; the risks associated in a leveraged buyout having been amply demonstrated at Anfield.

The Glazers have more time than their compatriots 30 miles east, having paid off bank debt through the £504 million bond issues last January. But if the wolves have been kept from the door then under-investment in the playing squad is perhaps only 18 months behind Liverpool. There is every risk that retirements will materially affect the playing squad’s quality at Old Trafford.

Meanwhile, Anfield waits to see which owner will squeeze the club next.

MPs demand action on football governance

September 9, 2010 Tags: , Reads 8 comments

MPs have called on the government to reform football’s governance, making good on a pre-election pledge. In a lively debate held this week, members called on the government to follow through on a promise to press the football authorities into reforming rules on football finance and ownership, including supporter involvement.

The debate, held in Westminster Hall, was led by Labour MP Steve Rotheram in whose Liverpool Walton constituency both Anfield and Goodison Park are located.

It proved one of the best attended Westminster Hall debates in recent memory, according to reports, in no small part to a successful campaign ran by the Manchester United Supporters Trust (MUST), which sent letters penned by members to more than 600 MPs in the past fortnight.

Westminster Hall sits alongside the main Chamber, and is aimed at fostering a new style of debate. Sessions are open to all MPs, who sit in a horseshoe arrangement which is meant to encourage constructive rather than confrontational debate. Although this week’s debate is not necessarily a precursor to legislation, it is a clear signal that MPs are taking the football supporter community seriously.

Among those in attendance were Sports Minister Hugh Robertson, former Sports Ministers Gerry Sutcliffe and Kate Hoey, and former Culture Secretary Andy Burnham, who though an Everton fan has been known to don a Green & Gold scarf.

The debate was part of an ongoing movement to place pressure on both the Football Association and Premier League over the growing spiral of debt in English football, which has so angered supporters at Manchester United, Liverpool and Portsmouth, among others.

It was also an opportunity to press Robertson, whose government has promised to “encourage the reform of football governance rules to support the cooperative ownership of football clubs by supporters” during the five-year Coalition Agreement.

“There is a crisis of governance at the top end of the football industry,” said Rotheram, former Lord Mayor of Liverpool and lifelong Dipper.

“The government has no excuse to procrastinate on this. It made an explicit commitment in its coalition agreement.

“It will not be enough merely to “encourage” reform. Ministers must create the incentives and conditions for reform and proactively coax, cajole and – if necessary – compel football’s governing authorities to initiate change.”

It might be required. The Premier League has taken a laissez-faire approach to governance and only recently introduced rules on football finance, which few in the industry expect to make any difference to the nation’s leading clubs. Meanwhile, the FA has become so impotent during the 18 years since the Premier League’s foundation that it is no longer fit for purpose under almost any definition.

The result is an environment where the debt-fuelled takeovers at Liverpool and Manchester United have been accepted without question by the authorities. Meanwhile, Portsmouth dropped into administration and out of the Premier League after successive owners played fast and loose with the club’s finances.

Elsewhere, financial problems at Notts County, Cardiff, Crystal Palace, Sheffield Wednesday and Cardiff have dominated negative headlines about the state of the football industry in the past year.

No wonder, with the only conditions applied to the much derrided “fit and proper person” test being that owners are neither criminals, nor disbarred from being directors. With neither the FA, Football League or Premier League seemingly ready to take meaningful action, supporters have become increasingly militant, and not just at Old Trafford.

While the Labour Party made a pre-election manifesto commitment to legislate supporter ownership into a reluctant football industry, the Coalition Government’s promise has been more lukewarm to date.

But while traditionally loathe to intervene in failing markets, even Conservative Party members whose communities do not include a football club have pressed the Minister towards legislation unless the FA takes heed. It seems unlikely, with successive Chief Executives of the governing body failing to institute reform within the walls of its Soho Square headquarters, let alone the wider industry.

“The strength of this morning’s debate lies in its representing the feeling throughout the House that something needs to be done,” said Robertson.

“This debate is a pretty good weather vane, showing the strength of feeling on this issue. I am determined to make progress and to push ahead with both the wider reform agenda and football supporters’ involvement.”

It’s good news for organisations such as MUST and its counterparts across the country that have lobbied for action on debt and supporters’ interests.

Elsewhere in Europe legislation that places supporters at the heart of clubs and financial prudence as the bedrock of good governance is commonplace. In Spain the four leading clubs are supporter-owned, while legislation ensures 51 per cent all each German club is controlled by the fans.

While that goal is not likely achievable in the short-term in England, there is now wide recognition of governance problems in the corridors of power because of work undertaken by MUST and other groups.

“In 2005 the Glazers took over Manchester United. The club is now £700 million in debt, with £69 million a year being paid in interest—and that money comes from the fans through tickets and merchandise. It is an appalling situation,” said Labour MP Hazel Blears, who called for a fit and proper person test in respect of takeovers.

“In Germany, every club has to be 51 per cent owned by the supporters. Such a scheme would make a real difference.”

It’s a long-term goal that United fans must surely aim towards. After all, if the Glazer family is focussed on paying down debt, the PLC before them on generating profits and the Edwards family on lining its own pockets, then the only true guardians of the club are – and will always be – the supporters.

Weak UEFA rules offer little protection

May 26, 2010 Tags: , , , Reads 4 comments

UEFA will ratify its new financial regulations tomorrow, trumpeting them as a step forward in fair play. But the rules, which essentially outlaw the sugar daddy subsidisation of football clubs, will do little to prevent the kind of leveraged takeover that has placed Manchester United in more than £700 million debt.

UEFA will phase in the new rules after President Michel Platini finally found agreement on the long-standing proposals for financial fair play in European football. From 2012-13 onwards clubs must not spend more than they earn if they wish to play in European competitions, although the governing body will introduce the regulations over an extended six-year period.

UEFA denies that it is trying to create greater diversity in competition winners, rather to ensure better financial management in football, with no Chelsea or Manchester City-style subsidisation.

“We’re not trying to level the playing field,” a UEFA spokesperson told Reuters today.

“We want to make sure that the middle-ranked clubs don’t go spending millions which they don’t have as they try to compete with the big clubs.

“The underlying principle is that clubs cannot repeatedly spend more than their generated revenues.”

Between 2012-13 and 2015-16 total losses at any individual club must not exceed €45 million – effectively €15 million per season – unless club owners put money into the organisation as hard equity. In the following three years the total losses cannot be more that €30 million and by 2020 UEFA hopes all clubs will run on an even keel.

The rules do not cover infrastructure investment such as that in youth facilities, training grounds or new stadia, which leaves Arsenal in the clear over the Emirates Stadium but Liverpool in the red due to interest payments. Chelsea and City fall foul based on the continuing losses at each club, although Sheihk Mansour and Roman Abramovich have sought to convert debt into equity this season.

UEFA will preclude clubs that do not meet the rules  from European competitions.

Today a United spokesperson insisted that the club meets the new regulations, with pre-tax profits around £91 million during the last full accounting period and revenues rising sharply. But this is tempered bythe knowledge that the club’s parent company, Red Football Limited, would have made a huge loss had it not been for the sale of Cristiano Ronaldo last summer.

While the club itself is increasingly profitable, the mountain of debt interest has a draining effect on the books and the parent company will continue to lose money for the foreseeable future.

Moreover, the UEFA regulations seemingly do not cover Red Football Joint Venture Limited which holds the Payment in Kind loans that the club is now committed to paying down after the January bond issue. The Glazers can effectively milk the club with impunity despite the new rules.

“We support the financial fair play measures. We are confident that we pass them and that we will continue to do so,” a United spokesperson added today as part of the ongoing public relations drive by the club ahead of the 13 June season ticket renewal deadline.

Indeed the regulations are not designed to cut indebtedness per se but the subsidisation from rich owners that has resulted in massive losses at Chelsea and Manchester City. Around two-thirds of Premier League clubs and 50 per cent across Europe will fail to meet the regulations according to football analysts.

“The many clubs across Europe that continue to operate on a sustainable basis are finding it increasingly hard to co-exist and compete with clubs that incur costs and transfer fees beyond their means and report losses year-after-year,” Michel Platini claimed recently.

“For the health of European club football, those many clubs that operate with financial discipline and sustainable business plans must be encouraged

“This is why the entire football family requested and expressed full and unanimous support for the principles of financial fair play.”

Indeed, the football community now recognises that outside intervention will ensure clubs, such as Portsmouth, do not spend themselves into oblivion, while City, Chelsea, Real Madrid and Barcelona can no longer lean on wealthy benefactors or the banks without consequence.

It is perhaps ironic then that United’s position in European football would be strengthened by the new rules were it not for the Glazer family’s ownership of the club. Compared to leading domestic and European rivals, United is highly profitable but for debt interest payments. The same is true of the Premier League as a whole, which generates more revenue than major European rivals.

Platini’s is not an anti-English agenda.

But this is the UEFA regulations do fall well short of the over arching framework for football finances that many in the community have called for. United’s debt will likely reduce the club’s competitiveness over time, with transfer and wage spending only permissible once the club has made interest and debt payments.

In the longer term should the Glazers ever wish to pay off the bond, United must raise revenues, sell players or reduce spending in the transfer market to stay within the regulations.

Indeed, the new rules should only increase the anger of fans, with the £437 million wasted by the Glazer family so far dwarfed in the next seven years by interest, dividends and management fees.

Platini will obtain greater fair play in European competition but United will benefit little from it.

Transfer policy exposes Reds’ finances

April 11, 2010 Tags: , , Reads 20 comments

Sir Alex Ferguson’s assertion that Manchester United’s summer transfer policy will focus on targeting younger, cheaper players who maintain a resale value, exposes the financial lie which both manager and board have perpetuated in the past year. The oft-repeated insistence that the transfer market “has no value” made a mockery.

The Scot’s revelation that United will spend only on players who can be sold at a later date says much of the club’s financial thinking. Firstly, that quality is secondary to financial considerations. Secondly, that United is now – by policy – a selling club.

“We prefer to do these kind of signings,” explained Ferguson after 21-year-old Javier Hernández’ signature this week.

“There is the odd exception when we get a mature player, like Berbatov. He was 27 when he signed.

“When you sign a player for that kind of money you know there is not going to be a resale value if he stays with you for six years. That is always in the back of your mind.”

For United supporters it’s a concerning equation both from a footballing and financial point of view. The policy only makes financial sense if acquired players are sold on at a later date.

More worrying still, United’s policy is logical on the pitch only if younger players develop into the finished product. That comes with no guarantee while the club continues to ignore established talent, such as Valencia’s David Villa who will now play for Chelsea or Manchester City next season.

United has found mixed success with those players brought to the club under the policy in recent seasons. Cristiano Ronaldo is held up as the poster boy of buy-to-sell but he is, arguably, the only success.

The signings of Nani and Anderson, for example, at more than £34 million between them are yet to realise  full value on or off the pitch. Reports suggest that United turned down an £8 million winter move from Juventus for the Portuguese winger, while Anderson tried desperately to leave on loan.

At the cheaper end of the scale Gabriel Obertan, Mame Biram Diouf and Zoran Tošić, bought for a joint £15 million, are little more than expensive reserves. Meanwhile virtual freebies Federico Macheda, the da Silva brothers and Ritchie de Laet may prove good value but there are no certainties.

It is telling that United’s move for Hernández saw the light as much for the financial consequences of missing out on the player as his current qualities, according to Ferguson.

“The feeling was to wait because he was young,” said the Scot.

“But then he got into the national team, which created a problem for us because if he went to the World Cup and did well, there would be a danger of losing him.

“I sent Jim Lawlor, our chief scout, over there for three weeks to get some background on the boy and watch him. He filed a fantastic report on the boy and said we really needed to do something.”

Given the fee, which could rise from an £8 million base to more than £10 million, Ferguson hopes Hernández makes the kind of instant impact that has not been forthcoming from Obertan or Diouf.

The same can be said of £12 million, 21-year-old defender Chris Smalling, signed from Fulham in January.

The numbers now suggest United’s transfer policy is even more restricted than previously thought; shopping at the bottom of the market among its European peers. It’s a point amply made last summer when the club refused to increase an €25 million bid for 22-year-old Karim Benzema.

After all, United’s business model works only if the club sells players, with annual financial losses now built in. Red Football Joint Venture Ltd, United’s parent company, posted a profit of £6.4m in 2009 on debts of £716m. The year the club sold Cristiano Ronaldo for £80 million.

United made a loss of £47 million in 2008.

While United remains competitive this season laregely due to the extraordinary exploits of Wayne Rooney, it is perhaps only fair to ask whether United could have concluded a bid for the striker under the Glazer regime.

Ferguson and United supporters alike are lucky that the former Evertonian joined a year before the Americans’ buyout.

Video: Is football a vote winner?

April 9, 2010 Tags: , Video 1 comment

The Labour Party’s recent proposals to put fan ownership at the heart of football regulation has sparked a debated about supporters’ role. As part of the Observer Conversation series, Rant joined the Guardian’s Paul MacInnes (a Norwich City fan), Kevin Rye from Supporters Direct (AFC Wimbledon) and Phil Lythell from CaughtOffside.com (Chelsea) to discuss finances, regulation and the general election!

United slips down salary league

March 24, 2010 Tags: , Reads 15 comments

Could Manchester United’s determination to cut costs be reflected in the latest European football salary league? The annual list published by France Football magazine, with an expert extension by Futebol Finance this week, shows that the club has just four players in the top 50 best paid players on the continent. Down two from a year ago.

Even though United, the self-proclaimed best supported club in the world, is aiming for a third straight Champions League final, the latest analysis offers further backing to the belief that the club is on a cost cutting exercise. United’s four – Wayne Rooney, Rio Ferdinand, Dimitar Berbatov and Ryan Giggs – were supplemented by Cristiano Ronaldo and Carlos Tevez in last year’s list.

By this time next season it is likely that the four will become three, with Ryan Giggs’ final year as a pro unlikely to net the Welshman the £82,500 per week that his current deal comes in at.

Moreover, with the club’s transfer policy set squarely on bringing younger players into the squad, who will retain a re-sale value through a four-year contract, it is highly unlikely that United will recruit any further superstar players with commensurate salaries in 2010.

Indeed, supporters can forget reports that United will buy £40 million-rated David Villa this summer, who at 27, is outside the current transfer policy. Meanwhile, long-term Sir Alex Ferguson target Karim Benzema earns £2.25 million more than Wayne Rooney per season at Real Madrid. The Frenchman is hardly likely to move for a pay-cut.

Talking of which, Ferguson is just the 7th best paid coach in European football. Not that the former shop steward will struggle to get by on ‘just’ £5.7 million per year, including endorsements.

This list is of course dominated by free-spending Real Madrid, Manchester City and Chelsea, although Barcelona heads the table with eight players in the top 50 best paid in Europe. While Lionel Messi is the world’s highest earning player, including endorsements, former United winger Ronaldo has the largest basic salary package at Real Madrid on €13 million per season.

Madrid will almost certainly add Franc Ribéry to their roster in the summer, while Valencia’s David Villa will surely leave for one of the continent’s biggest. Neither will head to United.

Perhaps it is not surprising that United has fallen down the spending league, after all the club now generates less revenue than both Real Madrid and Barcelona, according to the annual Deloitte & Touche revenue rankings. While the club has recently announced regional sponsorship deals in Turkey, South Africa and Asia, United cannot match the Spanish giants’ television revenue with Premier League rights collectively sold.

Football at the highest level is, of course, very much about finances and while the club’s transfer policy appears prudent in the current economic climate, it is uncompetitive over the long-term. Just ask Arsène Wenger if he agrees with this statement.

However, as United’s debt repayments inevitably continue to pinch on the club’s ability to spend on transfer fees and wages, the risk of the the Reds falling behind leading rivals both domestically and on the continent is very real.

The question remains: if United is unwilling or unable to match rivals’ spending, can Ferguson’s side continue to compete at the highest level? After all messrs. Giggs, Paul Scholes, Gary Neville and Edwin van der Sar will need replacing, if not summer 2010, then the year after.

Top 50 Highest Earning Players By Club

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