Andy Green on United’s adidas Deal Announcement

Andy Green – @andersred on Twitter – has long been the ‘go-to’ guy when news regarding Manchester United’s financial situation breaks. You can check out his website here  – in the wake of the news about United’s record breaking kit deal with adidas, we caught up with Andy to ask a few questions about how things stand at the club moving forward.

It’s been a very mixed summer in terms of news regarding Manchester United’s finances, though in recent weeks it’s almost wholly positive… the first thing to do with things like this is address ‘headline’ statements and you made one on Twitter when you said, the ‘debt story is pretty much over’ in the wake of the announcement of the adidas deal… How soon do you expect United to be debt free, and what should we expect until that point?

I don’t think the club will ever be “debt free” whilst owned by the Glazers. From a financial point of view for shareholders it makes sense to have some debt (the plc made a mistake by having none).

What should matter to supporters is how much debt is loaded on the club and what it costs. It is worth remembering of course that ALL the debt is there purely for the privilege of being owned by the Glazer family, nothing has been borrowed to invest… There has however been a clear improvement in the position since 2010. At that point there was £754m of debt and it was costing around £72m in interest a year (if you include the PIKs) or £45m a year (if you don’t). As at 31st March this year (the last point we have figures for) there was net of around £317m and it has an annual cost of around £20m. That’s £20m a year wasted but is only around 15% of annual profits. Earlier on in the Glazer years around 75% of profits were going on interest payments.

The Glazers took an enormous gamble with United, that Fergie would continue to deliver titles and Champions League runs on a transfer budget well below all our major competitors. Let’s not forget that we sold the best player in the world for £80m and replaced him with Antonia Valencia. The money went to buy back bonds on the market.

The Chevrolet and adidas deals were record breaking announcements at the perfect time considering the lack of Champions League football. Financially – theoretically anyway – the club should be perfectly fine so long as we qualify again this coming season. That’s far from a guarantee – although there’s plenty to be optimistic about, is there any financial complications that may arise from long term failure to qualify for the Champions League aside from the obvious ones such as wages… is there still a long term debt problem if we fail on the pitch, or do these deals nip that fear in the bud?

The deals certainly show the incredible appeal of the “brand” (yuck) to companies. To be fair the same thing (on a smaller scale) has been evident at Liverpool who haven’t played in the Champions League since 2009/10. Despite that record they’ve got the sixth highest commercial income in world football. But you are right about wages, United will need to pay a premium this summer as we can’t offer CL football.

[su_quote cite=”Andy Green on the Glazers”]I don’t think they will all look to sell out because they are “believers” in the financial growth of football as evidenced by these sort of deals.[/su_quote]

Having finally gotten to a position where they have almost got past most of the debt, the Glazers still nonetheless remain deeply unpopular owners. Two questions here, has the death of Malcolm earlier in the year affected their collective stance on whether they will remain in charge, and secondly, will the club’s current health encourage them to stay or sell up?

I don’t think Malcolm was ever very involved. It was all down to the children, especially Joel and Avram. I believe some of the other children would like to sell out. The IPO on the New York Stock Exchange makes it theoretically easier for them to sell shares in the future. I don’t think they will all look to sell out because they are “believers” in the financial growth of football as evidenced by these sort of deals. I don’t dispute that growth, I just think it is very, very hard to run a club to make big profits and stay competitive at the same time. Unlike almost all other industries, football is essentially “not for profit”, every penny gets recycled into wages and transfer fees.

United’s ability to compete in the transfer market has undeniably been hamstrung by the debt. In normal circumstances, without the debt, our revenue would surely have seen us able to compete with the likes of Chelsea and Man City… with three major signings in this calendar year, are those days here again now?

I think we will spend. I think the post Fergie collapse suddenly opened the Glazer family and Ed Woodward’s eyes to the need to. The business model is about profits however and so the inherent bias in the club will be to spend the minimum after this year’s splurge. Contrast that with Real Madrid for example. They re-invest everything they make every single year.

Obviously we know that Chelsea and City’s resources are theoretically limitless but for FFP regulations, but are we now on either a level playing field or greater?

FFP hasn’t worked because fundamentally however much you and I might think the sponsorships from “related parties” are phoney, nobody can prove it. Everytime a club like United sign a new record breaking deal for (say) a shirt sponsor, it creates a “benchmark” for PSG or City to say “look, our shirt deal is at market values”. I suppose that creates a level playing field in the long-term but one where the subsidised clubs like City will always be at the top table. Thankfully United can get real deals.

[su_note note_color=”#e5c72e”]“We expect total sales to reach £1.5bn during the duration of our partnership.” Adidas chief executive Herbert Hainer [/su_note]

There are some fans who point to the number of record breaking advertising deals (for shirts and official snack partners alike) as a suggestion that in recent years, the Glazers have turned out to be good owners for the club. There are obviously many more in the other camp who point to the debt and the impact it has had – you’ve been prominent in your analysis throughout the ownership, and always firmly in the “anti-Glazer” boat – have you wavered at all in the last year?

Some of the commercial work has been ground breaking and clearly world class. So far however the club and its fans haven’t seen much benefit from it. You can add up all the interest costs and bankers’ fees and it still towers above the commercial income. Furthermore, until the Chevrolet and Adidas deals, United’s commercial revenue was still behind the two big Spanish clubs and Bayern’s. They’ve done very well compared to other English clubs but just so-so on a European level.

I’m more relaxed about the issues now that the debt has been partly paid down and the refinancings have made the interest cost tolerable. The essential principle remains, football clubs are not normal companies that can be bought in leveraged buyouts. It has cost matchgoing supporters £250m in higher ticket prices since the takevoer for one thing…..

Under the presumption that the club will remain under the ownership of the Glazers, what do you think they could do in order to repair the relationship between themselves and the fans?

Ed Woodward is already talking to fan groups like MUST and IMUSA which is a huge improvement on David Gill’s attitude. The Glazer family are missing a trick on this however. If they made shares available to fans (B shares that carry proper voting rights that is), you could have an element of supporter ownership. It works elsewhere (look at Bayern; part fan, part corporately owned). Football as a whole is missing a trick. How many industries have “customers” who are so loyal? Those customers want to become owners and yet football keeps shutting the door. Stupid.


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