Matt Scott: Manchester United – where £50m is not all it seems

Manchester United’s three defeats from their first six Premier League matches have left the reigning champions in 12th place and the jokes are out already. Wags have begun calling them “Port Talbot” because they’re somewhere between Swansea and Cardiff.

This industrial-scale mess has prompted the new manager, David Moyes, to adopt a risky strategy. After defeat to West Bromwich Albion at home on Saturday he said his side lacked the “world-class players” required to win the Champions League.

How his dressing room might react to such implied criticism remains to be seen. Given he manages Wayne Rooney, Rio Ferdinand, Nemanja Vidic, Patrice Evra, Nani, Michael Carrick and Jonny Evans it is unlikely to be positive. They all won the Champions League with United five years ago and might feel entitled to indignation.

Still, the dressing room was not the intended audience of his belittling remarks and it seems he has hit his target. For, two days after he spoke, a Guardian journalist was briefed by a United ‘suit’ that there will be £50 million for Moyes to spend in the January transfer window.

Good news, United fans might think. But the number perhaps reveals more than the club might have intended.

United’s 2012-13 accounts were released last month and all eyes were on the headline figures. Record annual revenue up 13.4% to £363.2m! Sponsorship revenue for the year increased 44.1%! (The exclamation marks are mine but the club’s news release did scream its highlights in capital letters.)

Yet there was more of much greater interest to be found in the detail of those accounts. First, the amount of cash held in the bank. The balance-sheet date of 30 June 2013 meant this reflected the position [OPEN ITALS]after[CLOSE ITALS] season-ticket sales had been completed and the £94.4 million, though substantial, would pay little more than half the club’s full-year wage bill of £180.5 million.

Of course United have other income streams that pay up throughout a season to ensure June bank balances are not a matter for concern. Premier League television income and commercial revenues are expected to push United’s turnover to between £420m to £430m this season. (Provided they finish third in the Premier League and reach the quarter-finals in Europe and the domestic cups, none of which currently seems assured.)

But turnover is one thing and cash inflow – the amount left over after all committed spending is taken care of – quite another. Of their £363.2 million turnover United earned £129.9 million in cash from their general operations across the 2012-13 season. This was after wages were paid for, as well as a few other minor items known collectively as working capital.

But not all of that could go straight to the bank account. For as everyone knows, the Glazers’ 2005 takeover of the club loaded significant debts on it and these cost £76.7 million to look after. Then there was spending on property infrastructure of £12.5 million and a net £36.4 million on player signings after sales.

A share issue and a refinancing of bonds brought £16.1 million extra into the club. It should also reduce future debt-interest payments by £10 million a year.

All things considered United had £24.4 million more in their bank account at the end of the 2012-13 season than they had at the start of it and that is an interesting number. This is pretty much equivalent to United’s net expenditure in a summer transfer window of relative inactivity.

So if there is £50 million to spend this January, Moyes is being given only what United spent on players and general property infrastructure the year before. This despite a new Premier League tv deal and commercial revenues pushing turnover to up to £430 million in the 2013-14 season.

United have indicated that they expect to be £20 million to £25 million better off in terms of cash inflows next season and the debt refinancing might give them another £10m more in cash terms. Where will that all go? For all the talk of £50 million January spending it does not look like Moyes will be the beneficiary.

It should not be forgotten that the partial stockmarket float means there are now institutional shareholders to look after as well. The Investor FAQs section of the Manchester United website claims it currently has no dividend policy.

“At this time, the company does not pay a dividend,” it reads.\

Not “at this time”, sure. But one of those investors, the US financier George Soros, famously “broke the Bank of England” with a massive short on the British pound in 1992. And as the then UK chancellor, Norman Lamont, discovered: the piper must always be paid.

Contact the writer of this column at moc.l1701959068labto1701959068ofdlr1701959068owedi1701959068sni@t1701959068tocs.1701959068ttam1701959068