A series of interviews by Sir Jim Ratcliffe have covered a number od topics in relation to Manchester United. Here the focus is on what he had to say about club finances.
“The simple answer is the club runs out of money at
Christmas if we don’t do those things,” Ratcliffe told the BBC, referencing the
cost-cutting measures that have been put in place over the past year (more on
that below). He repeated the line to The Telegraph and Times: “It
(United) goes bust at Christmas (without change)”.
Those statements stretch credulity in the extreme. Quite
simply, United would still be operating as a company in nine months’ time had
the staff restructuring and money-saving not taken place. Going bust means the
club would have been forced to close, but United is an SEC-listed company that
Ratcliffe bought into at a $6.4billion (£5bn) valuation, and there are numerous
mechanisms to avoid such a fate.
United do have a cash problem, as outlined by The
Athletic in January, with last season’s total of £74million only
possible due to the £159m investment by Ratcliffe as per the terms of his deal
with the Glazers. Otherwise, the flow of cash out of the club compared to money
generated would have seen United hit by an £86m fall.
But it was not staffing levels or free lunches that have
been putting United in the red for the past five years; it was player trading
and interest payments on the debt. Last season United spent £191m on new
signings and £36m servicing the bank loans, partly those forced on the club by
the Glazers’ leveraged buyout.
To put this into context, European football’s governing body
UEFA recently released its report on European club finance and investment
landscape, which listed United top for operating profit at €144m (£121m,
$156m), above Arsenal (€141m), Real Madrid (€133m) and Tottenham Hotspur
(€87m). That is the money made from the day-to-day functioning of the club
through ticket sales, merchandise, sponsorships, broadcast revenues, minus
running costs such as wages, travel and bills. United signed a deal with
Qualcomm worth $225m over three years.
Undoubtedly, there were areas of spending excess within the
organisation, but Ratcliffe’s decisions on the running of the club come more
from the INEOS ideology than an absolute financial imperative.
According to the most recent accounts, United expect to
save £40m to £45m on the first round of 250 redundancies, so a similar number
seems plausible for the next round. But Ratcliffe put the changes as much
higher, adding: “We reduced the cost of running the club by about £125m, so
that transforms the club.”
Ratcliffe’s regime has incurred extra costs however, notably
£4.1m for the episode which led to the departure of sporting director Dan
Ashworth, £10.6m for Ten Hag’s departure, and £11m for hiring Amorim. Finishing
in the bottom half of the Premier League costs in the region of £30m in prize
money. United, under Ratcliffe, also made a £200m drawdown on the revolving
credit facility to pay for last summer’s transfers. It was also Ratcliffe’s
call to spend £50m on revamping the training ground.
For all the implied criticism of the Glazers’ stewardship of
the club, Ratcliffe stepped back from attacking them over the interest payments
on the club’s debt. “Interest is one of the costs but it isn’t the biggest cost
in this club,” he said. Interest payments recently hit £1bn cumulatively.
He said the exact picture of United’s balance sheet had not
been “crystal clear” in the due diligence stage amid a “forest of numbers”. But
there were several months to analyse the accounts during the sale process and
United is a public company.
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