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United’s Third Quarter Financial Results - Some thoughts...

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  • United’s Third Quarter Financial Results - Some thoughts...

    United’s Third Quarter Financial Results

    - United has announced its third quarter results for the three months from January 2020 to March 2020. United’s financial year runs July 2019 - June 2020.

    - The full financial impact of the Covid crisis will not be known until the fourth quarter results (April to June) are announced later in the year. Nevertheless, United’s revenue and profit took a big fall compared to the same three months a year ago. Partly as a result of no Champions League this season and partly the cessation of football altogether from mid-March. The club reckon Covid related effects reduced revenue by £23m for the quarter.

    - The big question is whether United has enough cash to pay its bills over the next few months? As we’ve said before, the club was generating less cash this year even before Covid. As at March 2020, United had £90m in cash which was £100m smaller than the same point in 2019. United has an unused overdraft facility of £150m - giving a total headroom of £240m if it’s needed. 

United has three big costs. a) Salaries. £70m every three months. b) Transfer fees. We’ve been told that the club owes transfer fees of approximately £125m although we’re not sure of the dates these are due. United is owed c.£50m from other clubs (primarily Lukaku which is being paid in instalments by Inter although the majority is not due this year). c) Other operational costs such as property cost, fees to casual workers which are still being paid; utilities etc. Annually c£108m. 

The club has detailed cash flow forecasts based upon different scenarios but we do know that as a result of Covid United is “closely controlling costs and reviewing planned capital expenditures”. No surprise there. The usual Glazer tactic is salami slicing costs whereby they hammer down on every cost line. It’s pernicious and harmful. The expansion and refurbishment of Carrington will get kicked into touch. We would not bet on any big transfer fees this summer.

    - In the nine months between July 2019 to March 2020, the club paid out £211m in cash for transfer fees - Maguire’s £78m fee was paid up-front plus several other arrivals and payments on Fred’s £53m fee from 2018. On top of this United still owes a further £125m in transfer fees to other clubs. 

    - Commercial revenue was up slightly compared to the same period last year. Well done Dickie, have a cream cake big boy. That said, the fourth quarter numbers will be interesting. Much will depend on the ‘force majeure’ clause in the contracts with each sponsor. This is a clause that frees both parties from liability or obligation when an extraordinary event occurs beyond their control such as a pandemic. With no football being played, commercial partners may try and negotiate reduced payments although the club did say that it does not expect any disruption to commercial revenues. Let’s see.

    - Previously, United had been forecasting revenue for the full year of £560m to £580m. Unsurprisingly, it has cancelled this forecast and will not give a fresh one at the moment. 

    - It is incredible that 15 years after the Glazers’ leveraged buy-out, the club still has a debt mountain of $650m. These loans were taken out in the US and are denominated in dollars. £519m is the amount showing in the accounts. It costs c.£25m to service the debt each year.

    Confirmation of no summer tour. India had been planned but is now binned.

    Full-year financials to 30th June 2020 will be announced September.
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