Manchester United Financial Report 2: Cash flow is almost exhausted + debt interest is rising, results are life-saving straw

Hupu reported on October 8 that TheAthleticUK sports and finance reporter Chris Weatherspoon analyzed Manchester United’s financial report.

(The following is the second part. Manchester United’s financial report analysis is the longest in the history of TA financial report analysis)

[Gossip Board] Manchester United Financial Report: Relying on layoffs and cost-cutting to significantly reduce losses; it is not expected to violate PSR

Manchester United’s cost-cutting measures have not affected transfer expenditures.

In the year to June 30, they spent 343 million pounds on player registration, setting a new record for the club's single-year expenditure and nearly 100 million pounds higher than before. They spent a further £167.8m in the two months before the summer transfer window closed on September 1 (Matteus Cunha's transfer fee was recorded at less than £343m as he signed in June), taking the total transfer spend since Ratcliffe's arrival to £510.8m.

Only Chelsea and Liverpool spent more than Ratcliffe's Manchester United during this period.

As of the end of June, Manchester United's lineup construction cost had reached 1.1 billion pounds, ranking third in football at the time; after the deadline, this figure was as high as 1.2 billion pounds.

Transfer debt is rising across football, especially in England. The Athletic has recently reported on Manchester United's ballooning transfer debt. However, it is still worth highlighting the scale of their transfer debt: at £344.5 million after tax, it is probably the highest in global football.

In addition, 182.8 million pounds of debt needs to be paid before the end of June 2026, which means that Manchester United's cash flow pressure is unlikely to be relieved in the short term.

Between July and September, they drew down a further £105m of their revolving credit facility (RCF) - effectively a corporate overdraft used to supplement day-to-day liquidity - partly to repay their huge transfer debt.

One way to reduce your transfer debt and improve your overall financial situation is to become a better seller in the market.

Manchester United has never been good at selling players at high prices. This is because they have invested heavily in players, but their performance at Old Trafford has not been satisfactory. Other clubs have made player trading an important part of their business models. In the ten years to the 2023-24 season, Manchester United made a profit of 174.2 million pounds on player sales, ranking only 18th in England, 400 million pounds behind Manchester City and more than 650 million pounds behind Chelsea.

Before the Glazer family took over, the club had no debt, but in June 2010 and December 2023, the club's debt reached its highest level of 773.3 million pounds.

At the end of June this year, this figure was 637 million pounds, but subsequent events have caused it to rise further. The drawdown of these credit facilities totaling £105m, combined with United's long-term debt of $650m (£484m at current exchange rates), brings total debt to an estimated current level of more than £750m.

The long-term unused RCF was extended again in July. Manchester United currently has £350 million of short-term borrowing capacity, of which £265 million has been utilized.

Even after Ratcliffe injected £238.5 million last year, United still need to borrow money, which reflects United's spending.

While we are still awaiting the latest financial reports from most teams, debts of over £750 million make Manchester United one of the most indebted clubs in world football.

As of the end of the 2018-19 season, Manchester United had £307.6 million in cash. Six years later, the balance has shrunk to £86.1m, less than half of the short-term transfer debt. Manchester United's existing reserves are no longer sufficient to support various activities.

In the past six seasons, the club has received £390.3 million in external funding: £238.5 million of which came from Ratcliffe's shares, and £151.8 million of after-tax low-interest loans from banks.

Their free cash flow (FCF), which is the amount left after deducting capital expenditure (such as transfer fees) and interest costs, lost more than £200 million last season, which is not far from the lowest point during the epidemic.

This explains exactly why an additional £130m of borrowing was needed, as well as Ratcliffe's final £80m equity injection.

Another recent cash drain is the increase in infrastructure construction. The condition of the Old Trafford roof attracted widespread attention a year ago, but United have at least begun to increase spending on stadium improvements: an average of £11.6 million per season over the past three years, compared with an average of £5.8 million per season over the past decade.

The more substantial investment is in Carrington, where the majority of Ratcliffe's funds have been invested - £42.7m was invested last season and £13m in the two previous years; and a further £13.3m of capital works contracts were signed as of the end of June, although how much of this relates to the Carrington training ground is unclear.

Reduction in capital expenditure for the 2025-26 season will help Manchester United's cash position.

Manchester United's financial recovery still has a long way to go. Transfer payables have increased instead of decreasing, as has total debt. Annual interest payments on the debt are creeping back towards the £40m mark.

However, the choices made over the past two years have had a clear impact. United posted a profit for the first time in five years after wage bills fell and after interest and special charges related to restructuring inside and outside the dugout.

There will be more layoffs in the future: Manchester United has already spent a lot of money on layoffs; in the next few years, Manchester United will still save money even if it is not offset by the layoff plan.. If Amorin can continue to work hard on the weekend's victory over Sunderland, perhaps there is no need to increase the cost of firing the head coach.

If the team's record improves, the former will be easier to achieve. Manchester United's current salary spending is far lower than other clubs, which naturally makes it more difficult to compete. The huge transfer expenses are obviously a means to make up for this loss, which seems like a bold strategy; the salary is much more relevant to the team's performance, although there is evidence that patience will eventually pay off for big-tied transfer players.

However, it is still unknown how much patience Manchester United can have. It is impossible to advance to the Champions League every season, which will make it more difficult for it to catch up with its opponents.

What's more, this does not include the construction of a new and old Trafford stadium that costs more than £1 billion. Building a new stadium may be easier with the revenue from participating in top European club events, but returning to the UEFA top league requires more efficient use of resources.

Overall, Manchester United's prospects are mixed. The

club has made significant progress and has implemented a clear (although somewhat cruel) plan to repair the club with a precarious financial situation. In the short term, even if it is heavily in debt, Manchester United can breathe a little relieved. But now, achieving good results on the court is the top priority.