Financial meltdown?

[NE5]

I was happy with Allardyce being appointed, but I think Ashley was right to sack him because the team was quite clearly on a slippery slope, you can't stick to a "plan" when you are looking down at relegation. He did right to do it, although there is also a case for saying you can't expect a manager to succeed if you don't provide him with the tools, hence my point that if you want success, then you MUST back them, or its virtually impossible.

 

This is what I just can't understand about keeping Kinnear on and subsequently not getting someone else when he was taken ill. You'd think Kinnear was doing brilliantly or something.

 

Ashley was ruthless with Allardyce; he wasn't impressed and thought we were in bother. Well we're in far more shit now than we were when Allardyce was here, and they're just sat there doing nothing about it.

 

thats true. It has been said that he is loyal to people he likes etc whether they are good at what they do or not ? A recipe for disaster in football, that is.

 

 

 

 

[madras]

we were once in a position to speculate like that, you've been going a long time can you help me remember the actions of the board last time we qualified for the champs league, we bought woodgate in the winter before qualifying then in the summer of actually qualifying.........s*** i can't remember, will someone please help me out ?

 

We didn't qualify for the CL though did we.

 

Arguably in part due to spending the Summer budget early and buying Woodgate we had our highest finish under Robson and finished in a CL qualifying round position, but by no means were we guaranteed the money from getting into the CL proper. We lost out in a 2 legged game, didn't qualify, and didn't get the cash bonus that would have paid for the players you are suggesting we bought. Anyone who goes on about not spending that Summer is advocating being far more reckless with the clubs finances than the old board is ever accused of being. What you are saying is that we should have gambled money that the club couldn't budget for without the CL money in the hope that the player(s) bought with that money would make a significant difference in their first couple of competitive games for us (ie would be the difference between losing the tie with the existing established players and winning it with the new one's involvement). That's a ridiculous risk to take.

 

Of course hindsight is a wonderful thing, especially when it's combined with the surety that doing something differently would have had a positive outcome - if only we'd bought unidentified player X he'd have stopped the Partizan goal/scored the home equaliser/scored the pen that Shearer or Dyer or Woodgate or Hughes missed. Bollocks. New players not fully integrated are as likely to cost you a game as win you one.

 

The hilarious irony is that had we spent more money that Summer in the assumption that we were going to qualify, and had we still lost that tie, you and those like you would be slating the old board (not the manager who would have chosen the player btw, but the board) for spending that money before we were guaranteed the income.

no we didn't qualify but we had our best chance to build and put some distance between us and those behind us.

 

lets not forget woodgate was bought in january.........8 months later we'd added bowyer on a free.

 

i find it quite striking that those saying we shouldn't have invested then....good team, chance of boosting the coffers by 20mill a season,cementing it for a while,on top of a decent financial position ie bringing in more money than your forking out, are the same people who say we should be now investing on a much larger scale even before we think about transfer fees, we are not taking in enough to pay the bills.

[Shearergol]

I was happy with Allardyce being appointed, but I think Ashley was right to sack him because the team was quite clearly on a slippery slope, you can't stick to a "plan" when you are looking down at relegation. He did right to do it, although there is also a case for saying you can't expect a manager to succeed if you don't provide him with the tools, hence my point that if you want success, then you MUST back them, or its virtually impossible.

 

This is what I just can't understand about keeping Kinnear on and subsequently not getting someone else when he was taken ill. You'd think Kinnear was doing brilliantly or something.

 

Ashley was ruthless with Allardyce; he wasn't impressed and thought we were in bother. Well we're in far more shit now than we were when Allardyce was here, and they're just sat there doing nothing about it.

 

Perhaps there really were no other options, and there still aren't?

[Dave]

I was happy with Allardyce being appointed, but I think Ashley was right to sack him because the team was quite clearly on a slippery slope, you can't stick to a "plan" when you are looking down at relegation. He did right to do it, although there is also a case for saying you can't expect a manager to succeed if you don't provide him with the tools, hence my point that if you want success, then you MUST back them, or its virtually impossible.

 

This is what I just can't understand about keeping Kinnear on and subsequently not getting someone else when he was taken ill. You'd think Kinnear was doing brilliantly or something.

 

Ashley was ruthless with Allardyce; he wasn't impressed and thought we were in bother. Well we're in far more shit now than we were when Allardyce was here, and they're just sat there doing nothing about it.

 

Perhaps there really were no other options, and there still aren't?

 

They read my post.

 

[Thespence]

A nice eye opener for people with there peepers still shut about football clubs & debt.

 

Game's up for clubs that took their eye off the ball

 

Excessive debt and massive wages for players have left vulnerable teams facing financial meltdown. The industry must change, say Simon Bowers and Elena Moya, but can it ever be match fit?

 

 

Britain's beautiful game faces some ugly off the pitch financial meltdowns this summer, as clubs of all shapes and sizes struggle to rein in the excesses of debt financing and spiralling player wage bills - toxic trends that raise fundamental questions about the sustainability of the business of football.

 

Player salaries and levels of indebtedness make the bonus culture and risk-taking of the investment banking industry look conservative by comparison. As a result, the companies behind some of the best-loved names in the game have been left perilously exposed.

 

About £7 in every £10 of turnover is paid out to players in the Premier League and Championship, according to figures from accountancy firm Deloitte. Danny Davis, head of insolvency at law firm Mishcon de Reya, says: "There is no other business that I know of that borrows, as a percentage of operating profits, as much as football."

 

In the midst of one of the deepest recessions in living memory, many clubs locked in annual end-of-season relegation battles are fighting not just to stay up but to stay alive financially. So stretched are their finances that the inevitable drop in revenues that accompanies demotion - even after it is offset by a "parachute payment" - could be enough to push them to the wall.

 

Bankruptcy experts suggest that clubs in the Championship and, in particular, the lower leagues, are the most vulnerable because, in the absence of the substantial media rights income enjoyed by top-flight teams, they are heavily reliant on gate receipts, which are expected to dip sharply next season.

 

This has been the story at Southampton, where the parent holding company last week called in administrators as a securitisation deal - that is, a loan secured against future ticket sales - appeared to be turning sour. The move comes less than six weeks after League Two's Darlington called in insolvency experts for the second time in six months. Both have spent substantial sums on new stadiums in recent years.

 

Lawrence Schechter, a director at boutique finance house Schechter & Co, says: "Southampton used to be run very well, by former investment bankers who managed the club like a business. But the fans got upset that they weren't spending ridiculous amounts of money on star players.

 

"Now the fans should point the finger at themselves and say: is this what you wanted? They forced the guys out in 2005, those who were doing a good job, but the fans wanted Southampton to be like Chelsea or Man United. The fans bit the hand that fed them."

 

A string of other clubs, including Chester, Port Vale and Stockport County, have been forced to issue statements amid rumours of looming bankruptcy. Charlton Athletic's chairman, Richard Murray, has played down fevered speculation about the financial health of his club, which is bottom of the Championship, after its bankers withdrew overdraft facilities. The club relies on directors for 70% of its £21m borrowings.

 

However, even among the most successful top-flight teams the financial question marks are growing. Wigan Athletic owner David Whelan has suggested that at least one Premiership club will topple. Davis, of Mishcon de Reya, suggests that the situation is likely to be most acute for relegation contenders Portsmouth, Middlesbrough, Blackburn and Bolton.

 

"If you look at Middlesbrough, for example, you can't imagine Steve Gibson being too enamoured by the prospect of relegation. And I imagine that for Portsmouth, too, it would be a horrendous experience." Others facing relegation, particularly newcomers to the Premiership, may be better financially prepared for the financial shock of demotion.

 

Meanwhile, those fortunate enough to remain in the Premiership can rest assured that they will - for another season at least - receive a generous slice of media rights earnings from viewers at home and abroad. With the league's global audience, however, comes pressure to attract the best players in the world, whatever the cost. The likes of John Terry and Frank Lampard at Chelsea, and Cristiano Ronaldo at Manchester United, are reportedly earning more than £120,000 a week.

 

Philip Long, partner at PKF accountant and business advisor, says: "I think there will be quite a few insolvencies during the summer - in that period clubs have little income and the same expenditure on overheads, so you get the pressure on the cash flow." Falls in season ticket sales, sponsorship earnings and corporate box deals could transform the fortunes of clubs that are highly geared, both financially and operationally.

 

Even among some of the biggest Premiership clubs, having built huge amounts of debt during the years of the credit bubble, many find themselves straining to meet loan commitments and their lending banks are now less willing to give waivers or inject more capital after losing billions of pounds in the credit crunch.

 

"Football is in the same boat as every industry, if you are adequately capitalised, people will weather the storm, but if today is the day you have to raise debt or equity, it's tough to do it," says Lawrence Schechter.

 

The parent company of Manchester United, which hasn't delivered last year's accounts yet, lost £58m in 2007 as it bears the debt borrowed by US investor Malcolm Glazer to buy the club. Though its future earnings arguably look as if they are the most secure of any football club in the world, United was bought in 2005 in a deal valuing the business at £777m, or a record 4.7 times its revenues.

 

The latest published accounts also raise questions about the club's ability to pay an annual interest bill of £81m in 2007 - almost twice the profits of the club. The accounts of the parent company show debt of £682m, about 8.5 times the company's stated equity of £79m.

 

"If the Manchester United accounts show further debt, like they did last year, they will be in trouble," Long says.

 

Elsewhere among the Premiership's "big four", Liverpool is battling with RBS and Wachovia as some of its more than £300m of debt has to be refinanced by July. Part of the club's borrowings were to build a new stadium - a project now on hold.

 

For years, clubs around Europe saw new stadiums as the main profit driver, with numerous new owners pursuing ill-fated real estate ambitions. Even financially conservative Arsenal looks as if it has been caught out over its property dealings. The club is renegotiating a £135m loan from Highbury Square Development, the company set to develop flats in its old Highbury stadium. The loan, which matures in April 2010, will have to be extended as sales have been disappointing, according to one source familiar with the situation. Arsenal is believed to be expecting a fall in the planned £50m to £60m profit from the development.

 

Overseas, meanwhile, other top clubs are rushing to rein in costs. Financially-sound Barcelona may postpone, or cancel, its Norman Foster-designed facelift of the Camp Nou.

 

Valencia, one of the oldest and most prestigious clubs in Spain, started building a new stadium without selling the old one. The global credit crunch struck in the middle of the process and the new building has stalled, while the club remains collapsed under almost €500m of debt. Valencia hasn't paid its stars, such as David Villa, since February. Bancaja, a local savings bank, has already appointed a director to start selling some land at knock-down prices to recover money as soon as possible.

 

Clubs owned by wealthy individuals who bought them as trophy assets may survive, depending on the wealth of the main holder - such as Mike Ashley in Newcastle or Roman Abramovich at Chelsea. Other clubs that don't have such support, such as Everton, may suffer.

 

"If you look at the accounts, some clubs, without their wealthy owners, would have trouble supporting themselves," Schechter says.

 

And even if a club has an owner's support, the credit crunch may have reduced some of their holdings, forcing them to start selling some assets.

 

Owners looking for an exit won't have it easy. About 10 Premiership clubs are believed to be up for sale, but bankers can't find buyers - not even in the richer countries of the Middle East and Asia.

 

Mike Ashley's proposed sale of Newcastle never materialised, while Liverpool's co-owners Tom Hicks and George Gillett have failed to find someone who will buy one of them out. At West Ham, meanwhile, the club's parent holding company is effectively bust, and last month agreed to settle a legal claim against it by Sheffield United for a reported £26.5m. It faces intense pressure to find a buyer before next season.

 

Banks have also cut their football deal groups as the crisis has forced them to focus on their traditional markets. Société Général got rid its sports banker in New York, while General Electric, which established a team in London to help finance club expansion, also dismantled the group.

 

Some clubs, however, may survive purely for public relations reasons - few financial institutions would like to see their name associated with dumping a local team, or sending it to administration, bankers say.

 

Still, the recession will change football and impose tighter limits on its finances. "It's a big reality check," Long says. Others believe the game will move towards its origins.

 

"Football has become a lot more about the money and a lot less about the sport, so the events that will happen will help the league realise this has to be about the sport and not about the money," says Schechter.

Time for a new formation?

 

So with football in crisis, should its owners be dreaming up new financial tactics? Here are some ideas for a new football model:

 

Salary caps: Limits on players' salaries could reduce gearing at football clubs, which now spend on average more than half of their income on paying stars. John Terry and Frank Lampard, of Chelsea, are the Premier League's top-paid footballers with a weekly salary of £140,000, more than Manchester United's Ronaldo, who receives £125,000 a week, according to the UK Football Finder website.

 

Financial controls: German clubs submit their accounts to the Bundesliga every season. Introducing a similar requirement would let the league ensure that debt levels don't spiral out of control.

 

No relegation policy: This applies in the United States but would be unpopular in Europe, where relegation or promotion is a key part of the competition.

 

Lower ticket prices: The credit crunch will make fans more choosey about which matches to attend. Some clubs charge almost £50 per game, making it expensive for a family to go together.

 

If a club with a 50,000-seat stadium reduced the number of season ticket allocations from 30,000 to 20,000, it could lower the price of match-day tickets and still make more money, says Larry Schechter, director of Schechter & Co, an investment banking boutique that has raised funds for football clubs throughout Europe.

 

Let members take control of the club: Spanish giants Barcelona and Real Madrid are owned by their members - more than 100,000 in the case of Barcelona. This prevents the club being bought and sold and gives stability to the institution.

 

"I do not believe football clubs are designed to be public companies in that the goal of the fan is for the club to have the best performance on the pitch while the goal of the shareholder is to make a profit - the two goals do not always go hand in hand," Schechter says.

 

http://www.guardian.co.uk/business/2009/apr/05/football-finance

[Thespence]

Numbers in from Manc U

 

Manchester United have posted the most spectacular profits for any British football club – while at the same time being part of its biggest debt.

 

Accounts to June 2008 reveal that annual turnover at the club has risen an incredible 22 per cent to £256.2m, underpinning a 7.5 per cent increase in profits to £80.4m. However, Red Football – the umbrella for United and its various offshoots – confirmed a loss of £44.8m, taking their overall debt to £649.4m.

 

Critics are bound to pounce on the figure as evidence of an unsustainable financial structure, questioning how it is possible for the Glazer family to make a profit if their losses are so high in a season as successful as the last one. Yet Manchester United's owners have never given any impression of being too concerned about the debt mountain itself, the payments for which were restructured two years ago and currently take £45.5m annually out of United's profits.

 

Instead they prefer to maintain a drive for profits at a club whose overall value is estimated at over £1bn. Whether, in the current financial climate, they can continue to squeeze even more from the United brand is open to doubt.

 

http://www.independent.co.uk/sport/football/news-and-comment/debt-burden-knocks-gloss-off-uniteds-record-profits-1666766.html

 

 

 

[matta]

why are the big 4 allowed to keep dealing like that?

 

 

 

at some point some clubs are bound to end up fucked. Hopefully they will threat the big clubs the same way the dealt with the smaller clubs.

[mrmojorisin75]

Numbers in from Manc U

 

Manchester United have posted the most spectacular profits for any British football club – while at the same time being part of its biggest debt.

 

Accounts to June 2008 reveal that annual turnover at the club has risen an incredible 22 per cent to £256.2m, underpinning a 7.5 per cent increase in profits to £80.4m. However, Red Football – the umbrella for United and its various offshoots – confirmed a loss of £44.8m, taking their overall debt to £649.4m.

 

Critics are bound to pounce on the figure as evidence of an unsustainable financial structure, questioning how it is possible for the Glazer family to make a profit if their losses are so high in a season as successful as the last one. Yet Manchester United's owners have never given any impression of being too concerned about the debt mountain itself, the payments for which were restructured two years ago and currently take £45.5m annually out of United's profits.

 

Instead they prefer to maintain a drive for profits at a club whose overall value is estimated at over £1bn. Whether, in the current financial climate, they can continue to squeeze even more from the United brand is open to doubt.

 

http://www.independent.co.uk/sport/football/news-and-comment/debt-burden-knocks-gloss-off-uniteds-record-profits-1666766.html

 

 

oh god to see it go tits for them; i'd LOVE it   

[themanupstairs]

Numbers in from Manc U

 

Manchester United have posted the most spectacular profits for any British football club – while at the same time being part of its biggest debt.

 

Accounts to June 2008 reveal that annual turnover at the club has risen an incredible 22 per cent to £256.2m, underpinning a 7.5 per cent increase in profits to £80.4m. However, Red Football – the umbrella for United and its various offshoots – confirmed a loss of £44.8m, taking their overall debt to £649.4m.

 

Critics are bound to pounce on the figure as evidence of an unsustainable financial structure, questioning how it is possible for the Glazer family to make a profit if their losses are so high in a season as successful as the last one. Yet Manchester United's owners have never given any impression of being too concerned about the debt mountain itself, the payments for which were restructured two years ago and currently take £45.5m annually out of United's profits.

 

Instead they prefer to maintain a drive for profits at a club whose overall value is estimated at over £1bn. Whether, in the current financial climate, they can continue to squeeze even more from the United brand is open to doubt.

 

http://www.independent.co.uk/sport/football/news-and-comment/debt-burden-knocks-gloss-off-uniteds-record-profits-1666766.html

 

 

oh god to see it go tits for them; i'd LOVE it   

 

Rather it happened to Liverpool myself tbh. True Man Utd fans are sound, and I tend to discount and ignore the glory hunter element of their support. However, the Liverpool fans I know (true and glory hunting) are masters of cuntery, wummery, and sour bindippery. s***-spinning c*** buckets. The lot of them.

[madras]

http://www.telegraph.co.uk/sport/football/leagues/premierleague/manutd/5130064/Manchester-United-debt-soars-to-700m-despite-record-season.html

 

in particular.......

Look deeper however and the picture that emerges confirms the trends established during the Glazers' relatively short tenure. United remain the pre-eminent money-maker in English football, but profits at the football club level are wiped out by the need to service rising levels of debt.

 

Club sources argue that as this debt is effectively secured against the Glazers' assets, rather than the club, there is no need for concern. They also point out that the losses are swollen by the accounting device of writing off "goodwill", effectively the amount by which the Glazers overpaid to buy the club, which amounted to £35 million in the last year.

 

What will worry supporters and, those in the Government and the Football Association concerned by United's reliance on such a heavily-leverage business model, is that even the bank debt is increasing, by £8 million. Interest is being serviced, but debt is not being reduced.

 

In theory none of this will matter if United continue to perform on the pitch and commercially, and if the banks retain their appetite for carrying the club's debt as the impact of the credit crunch, which largely post-dates these accounts, plays out.

 

The questions concerning supporters last night were what happens if the pre-eminence of recent seasons is threatened. Will the recession impact on the club's ability to sell out Old Trafford and more importantly the 10,000 executive seats that contribute close to half the revenue? Will a significant bid for Cristiano Ronaldo prove irresistible?

[NE5]

can't quite grasp the fact that one or two people are so deluded they appear to think manu, Liverpool are getting it all wrong, while the route we have taken to eventual inevitable relegation is right.

 

Amazing.

 

 

[Teasy]

 

Manure aren't getting it wrong, they're making massive profits as a Football club, its just that the Glazers are bleeding them dry to finance there own debts.

[Frazzle]

can't quite grasp the fact that one or two people are so deluded they appear to think manu, Liverpool are getting it all wrong, while the route we have taken to eventual inevitable relegation is right.

 

Amazing.

 

 

 

They're aren't getting it wrong, they're in the Champions League, we're not.

 

Leeds tried to budget on getting CL football every season and look what happened.

[Thespence]

 

Manure aren't getting it wrong, they're making massive profits as a Football club, its just that the Glazers are bleeding them dry to finance there own debts.

 

Man Utd are the GLAZERS!!!

[OzzieMandias]

Man U are sustaining this kind of debt because they're regularly in the Champions League, not the other way around.

 

 

[J7]

can't quite grasp the fact that one or two people are so deluded they appear to think manu, Liverpool are getting it all wrong, while the route we have taken to eventual inevitable relegation is right.

 

Amazing.

 

 

Who thinks we're doing it right?

[Teasy]

 

Manure aren't getting it wrong, they're making massive profits as a Football club, its just that the Glazers are bleeding them dry to finance there own debts.

 

Man Utd are the GLAZERS!!!

 

Not really like, there certainly has to be a distinction made between the two when comparing Manure's finances to ours IMO

[OzzieMandias]

And Liverpool are teetering on the edge of real trouble.

[NE5]

can't quite grasp the fact that one or two people are so deluded they appear to think manu, Liverpool are getting it all wrong, while the route we have taken to eventual inevitable relegation is right.

 

Amazing.

 

 

 

They're aren't getting it wrong, they're in the Champions League, we're not.

 

Leeds tried to budget on getting CL football every season and look what happened.

 

......... and we have tried to balance the books - or make a profit in transfer windows -  and look whats happened.

 

 

[NE5]

can't quite grasp the fact that one or two people are so deluded they appear to think manu, Liverpool are getting it all wrong, while the route we have taken to eventual inevitable relegation is right.

 

Amazing.

 

 

Who thinks we're doing it right?

 

you and numerous others trying to say that Ashley hasn't been getting it right now then ? Biggest u-turn ever, and thats saying something.

 

 

[Thespence]

 

Manure aren't getting it wrong, they're making massive profits as a Football club, its just that the Glazers are bleeding them dry to finance there own debts.

 

Man Utd are the GLAZERS!!!

 

Not really like, there certainly has to be a distinction made between the two when comparing Manure's finances to ours IMO

 

They own the club so how are they not Man Utd.

[Guest Phil K]

Basic common sense.

Massively overpaid....ahem..."stars".....fans so badly short changed by the idiots in charge will leave in droves in a similar way to what they did before the arrival of John Hall - so yes, I think its a valid piece.

[madras]

can't quite grasp the fact that one or two people are so deluded they appear to think manu, Liverpool are getting it all wrong, while the route we have taken to eventual inevitable relegation is right.

 

Amazing.

 

 

Who thinks we're doing it right?

 

you and numerous others trying to say that Ashley hasn't been getting it right now then ? Biggest u-turn ever, and thats saying something.

 

 

i really think you ought to name names. as far as i'm aware the vast majority just knew we couldn't go on as we were.

[madras]

can't quite grasp the fact that one or two people are so deluded they appear to think manu, Liverpool are getting it all wrong, while the route we have taken to eventual inevitable relegation is right.

 

Amazing.

 

 

 

They're aren't getting it wrong, they're in the Champions League, we're not.

 

Leeds tried to budget on getting CL football every season and look what happened.

 

......... and we have tried to balance the books - or make a profit in transfer windows -  and look whats happened.

 

 

don't even think they've attempted to balance the books yet...just tried to stop losing soooo much money.

 

 

i'll make it easy again for you. just copy and paste what i type below,saves you typing it out.

 

I believe we should just borrow more and more until we achieve success.

[Teasy]

 

Manure aren't getting it wrong, they're making massive profits as a Football club, its just that the Glazers are bleeding them dry to finance there own debts.

 

Man Utd are the GLAZERS!!!

 

Not really like, there certainly has to be a distinction made between the two when comparing Manure's finances to ours IMO

 

They own the club so how are they not Man Utd.

 

Because its a club which was around a long time before the Glazers came along, they own it, doesn't mean they are it.  Not really bothered about arguing semantics today anyway   My point is there should be a distinction between debt generated by the club and debt generated by its owners when making an argument that "look Manure make losses so Newcastle should".  Our situation is entirely different.