Data: Manchester United's latest quarterly report

Tools: R, ggsankey

Maybe elon can buy manu and make them play only on 20% of players

They are more than likely making money, the amortization and depreciation is used to decrease tax liability. The assets they are depreciating against (stadium?) will be around longer than the set depreciation schedule

Yeah, I feel there must be something missing here. It's unclear to me how long an organization could run sinking 87m a year.

Only £15m of the amount is depreciation, £150m is primarily player registration amortisation.

When they buy a player, they are really buying their registration, then that registration is amortised over the life of their contract.

What it doesn’t account for is when players increase in value, until they are sold.

Oh very interesting, thank you for the correction

Yes there are things that can’t be accounted for, e.g. increase in brand value, that would increase the company’s market value even though its equity is decreasing every year.

Chelsea were just sold for £4.25 billion. That sets the price for their similar clubs in the league. Id imagine they are worth north of £5 billion now. Current owners have made millions from the club since their leveraged buyout years ago.

As much as this is interesting data, it's really lacking in any meaningful detail. For example, this is a one year view of the club. Nobody should be buying a business based on a single year of operation. The club is also spending a fortune on dividends to the Glazers and on Interest payments.

The title sounded in my head ‘Yo Reddit, should I buy ManU?’

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Just like any real estate. Homes can last for 100+ years but the amortization schedule is 27.5 years

Most players just stand around on the field anyway

Wouldn't that normally refer to the amortization of the mortgage, rather than the house itself?

Elon buys ManU and does a Twitter poll about un-releasing Romaldo?

Depends but in the UK it’s generally based on the ‘useful economic life’ of the asset (minus the land portion which doesn’t suffer depreciation).

If it were priced at a P:E of 20, they'll give you four million quid to take it off their hands. You should go for it.

Ronaldo seems to think that the Glazers have been bleeding equity into their pockets the whole time.

The fact that the amortisation and depreciation are double the operating loss suggests more that this has been engineered in such a way to put a loss on paper and reduce the tax liability. This is why things like EBITDA are important, so you can get a general overall sense of their totals before they've had the opportunity to "optimise" the balance sheet.

God I’m such a sucker for a sankey. 😍

Not sure I can afford it right now, I just ate McD

You are looking for a cash flow statement.

The company takes on debt or raise new equity to cover the short fall in cash. I don’t know what Man U does. Also they had £165M in depreciation. That’s not real cash spent. It’s possible they had positive cash flow even before accounting for cash raising activities

2-0-0 formations are the future of football!

read this as

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"Man, Utd spends more than it makes"

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spent a while trying to figure out who Utd was

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"Exceptional Items"

Come on

You still amortize expenses if you pay cash for them.

Was just looking for this 😁 thanks! Great work, nice visuals

Yeah the income statement is almost irrelevant for valuing an asset like this. Like trying to figure out the value of a house by looking at the rent table and expenses. It isn’t totally irrelevant but comps are much more informative.

These are luxury goods for billionaires.

They are likely cash flow positive and their value is increasing each year.

This summer Manchester United bought Antony for roughly €100 million. They gave Antony a 5 year contract. So the transfer sum gets depreciated over the duration of the contract. This has nothing to do with dodging taxes this is just the way the finances work for a football club.

I imagine its the value of a players contract. If you bought in a player for a transfer fee of £10 million and they signed a 3 years contract, you would write it down 3.3 Million a year.

Generally used to show one offs that don't effect the underlying profitability of the company. Often settling legal disputes would fall under that.

Other expenses are going to be cut soon. What are they in detail?

Also player transfers is such a volatile number and utterly useless in helping understand the financial vialbility of the club. This year they have spent 240m euro and taken in 13m, but you can't just plug those numbers into this chart.

It is not a secret that the Glazers have been taking money out of MU for years, we don't need Ronaldo to do our forensic accounting for us.

Amortization (misspelled in graphic) and Depreciation is not a real outflow of funds. It's a book keeping number only, representing the gradual loss of value of assets. For example, a $20,000 car bought 5 years ago will result in a -$4,000 entry every year over 5 years, which stands for the value of the car tending towards 0 as it ages and is used up. It does not mean you are actually paying those $4,000 every year. So, with the above 'operating loss' being -90m, and A&D being -165m, the reality appears to be that they still had roughly 70m more at the end of June 2022 then they had 12 months earlier.

I can only assume that’s Ronaldo’s Ego

This is useless - show me EBITDA metrics

But it’s an EBITDA gain, so there is value

Because the majority of football Clubs are not for Profit. Actually most Fans sneer at the idea of a for profit club. Or buying a club

Is that an NFT?

If it was it’s now only worth $30

No they’re not. If you swap D&A (which is an accounting concept and non-cash expense) for their Capex and acquisition of intangible assets (which is the annual cash outflow) they’re still running at a loss. That D&A line primarily consists of the amortized value of acquired contracts, which is to say there were recent cash outflows tied to that and it isn’t just an accounting / tax avoidance concept.

The other years look like this.

They are not cash flow positive, they’ve needed to take out debt to fund the business nearly every year.

Be glad it's not his soul. It's worth $0 because he has none.

You have a very loose understanding of the accounting concepts here. They are cash flow negative, this isn’t just amortization coming off some long held or stepped up intangible. Their amort is the expensing of acquired player contracts, which they have to pay actual cash for, so it isn’t just a tax shield they’ve fabricated. If you look on a cash basis (eg swap out D&A for Capex and acquisition of intangibles) the business is still CF negative.

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Exactly we need the cash flows

Don't think United have sold a single player for a profit in the last decade!

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This is a dumb way to visualize a P&L

Future dividends is what will attract investors to buy United. If United is not producing enough profit to pay dividends it doesn’t become an attraction, and vice versa.

But completely agree with your points

That's the kind of figure you present when you want to buy something cheaply.

As someone who doesn’t give a shit about ManU, I’m hoping Elon gets them.

Dan James. Cheers Leeds.

Depreciation and amortization are non cash charges so if you are looking at this on an EBITDA basis they are indeed profitable.

Depends a lot how much of amortization and appreciation is based on reality and how much of it based on GAAP. Some things depreciate to basically worthless in two years according to GAAP but often still sell for half their value later. So it’s quite possible some of these losses are paper losses rather than actual losses.

It's been a while since I took an accounting class but doesn't "spend" imply cash flows while stuff like depreciation is strictly income statement stuff that doesn't really reflect whether a company is "making money"?

Don't think 118m marked as 'other' should be a thing it's not 1-2k. 118m 🤣🤷🏽‍♂️

They pay the Glazers money in the books in the form of a loan instead of paying taxes as a dividend.

Most of the capital used by Glazer to purchase Manchester United came in the form of loans, the majority of which were secured against the club's assets, incurring interest payments of over £60 million per annum

The debt may be to buy capital goods and expand future business which would not make it cash flow negative if they can make the payments on it.

It’s not doing that, it’s a football club. They don’t have any capital equipment of note to invest in, they are not a manufacturing business. Their only property is their stadium, which is a fraction of their spending (8m in FY2022) compared to their acquisition of contracts and intangibles spend (115m in FY2022). The amort is real business expense that gets consumed once the player’s contract expires. The team is a money pit.

The way this is accounted for in the profit and loss statements (which this maps out) smoothes our those year to year fluctuations. Acquiring contracts / transfers are treated as asset acquisitions and so the full cost is not booked to the P&L but to the balance sheet as an asset. Then that cost is booked as expense in the P&L statements over the life of the contract. So if you buy a 5 year contract for 100m, then you don’t book 100m immediately as expense but you amortize 20m per year over 5 years. That is the bulk of that depreciation and amortization line in this mapping of expenses. They buy players year over year consistently so it isn’t a one-time event but a recurring cost of operating a top tier football club.

They have it in their financial statements. They have 115m of player acquisitions netted against 30m of player sales this year for a net outflow of 85m in FY22. 138m netted against 46m for a new outflow of 113m in FY21. They do this every year, it’s effectively an operating expense which is what that amort line is meant to represent. But people with amateur understanding of accounting think that amort is a tax aberration - it isn’t, it represents the expensing methodology for real material cash outflows the business has very recently spent cash on.

It does account for that because their sale of contracts is netted against acquired contract costs in that amort figure

You don’t buy teams to make an operating profit.

Many people in here treat football clubs as corporations that need to earn money. Most, if not all, privately owned football clubs are just advertisement/whitewashing platforms for their owners. They were never meant to earn them money, in fact it's kind of expected to loose money on those in return of good publicity. And that's not even limited to English clubs only. The most recent examples of those are PSG, City and Chelsea, but you can go as far back as Berlusconi's Milan in the 90s or Umberto Agnelli's Juventus in the 50s and 60s, all of the state-founded clubs in the late 40s and 50s by the respective communist parties (any variation of CSKA or Red Star/Steaua in the eastern block - army clubs).

EBITDA is probably not a great proxy either since player acquisitions won’t show up there. Probably want to look at FCFF.

Agreed - both are more useful than net income

Depreciation is the loss of value of assets that will eventually need to be replaced. So it might not affect immediate cash flow but if you don't manage it you will have potential large expenditure later, so it is a loss.

No they don't. I believe this is the first year without a profit.

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Somewhere Ryan Reynolds is tapping his fingers

Back out the non cash amortization and depreciation and they made $80 million.

I believe this refers to Legendary Armor and Weapons for Diablo 3 characters

This is actually one QUARTER. Not even a year. And yeah, agreed with the last statement. These are probs just 'paper losses'. That or the team may lose money to act as a tax shelter for the owner. That's pretty much how auto and horse racing work for the rich owners. They get to have their fun etc and lose some money to mitigate other gains.

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They have overpaid on nearly every transfer they've done in the past 10 years and nothing to show for it other than an Europa league.

What is this sort of chart called?

You can pay yourself a huge salary and make your company not profitable.

this is a shit way to compare income and expenses lol might as well have just posted a text table

Another Sheik takeover in the works.

Still cash flow positive, net loss ain’t mean shit

The image says it's for the 12 months ending June 30, so not one quarter. Unless you're saying it's mislabeled?

D&A is an add back to cash flows. So they are cash flow positive. :)

Amortisation is of player contracts. It’s what they pay for the players divided by the number of years on the contract. So if a player cost 100m on a 5 year contract, then they will amortise 20m a season. If he renews then the remaining will be split over the new contract. So no they aren’t quite making money here. Big contracts, missing out on champions league (poor performances in the league for the last 10 years really) and constant dividends to the owners (uncommon in the industry) weigh down their finances.

I’m pretty sure it the dividends they pay to the shareholders.

So the amortisation is players and their contracts

No, the last 3 years in a row have all been loss making

ManU has had a 15% annual growth rate from 2005. Compare that to 9% for the S&P 500 over the same time period. Better deal than Twitter according to my maths.

Could the value go from 7B pounds to 100B pounds in the next 20 years? Absolutely.

Comparing the different values and this visual is not very well scaled

He probably saw the "Source: Manchester United Q4 2022 earnings release" at the bottom (which just tells us when the information was released) and not the subtitle at the top

It’s probably a thousand various things that don’t fit in any of the other categories.

Lose. For the last time, it's lose.

This year was 87.4m in operational losses

What were the last two years

There is 165M depreciation. Thats a paper expense, great for taxes, but no real money leaving hands. Im sure they structured depreciation of prior capital investments over period of time to maximize tax subsidies

I feel like this chart should be flipped around. Could be wrong though.

That's how they account for player purchases (and sales) - it's amortised over the length of the contract.

The player purchases are often themselves paid in instalments, the structure of which differs from how it's amortised, but it's not typically all paid in one lump sum either.

I'ma be real by looking at the graph idk. Maybe I can't read this graph right

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they have

And DSCR

interest on shareholder loans and mgt fees too

Same shit happened to Barca and they had to let go of Messi because of it, kinda weird how history is repeating itself with the whole Ronaldo situation.

You cannot claim depreciation in the UK for tax purposes. You have to use capital allowances

On the contrary, for tax purposes you would prefer to expense the whole thing immediately rather than have to amortise over several years. Actually I suspect that is what happened for tax purposes - the UK is unusual in that tax treatment of assets does not follow the accounting treatment but uses a system of 'capital allowances' instead, and the HMRC manuals do not seem to suggest there are capital allowances on football players.

Football teams are extremely profitable for anyone looking to launder large amounts of dirty money. That's the plain truth.

Depreciation reasons? Like I get there's a stadium etc but that's a big write off year. Also is depreciation real money?

That’s what I meant by “until they are sold”, Garnacho might have appreciated by £30m for example but that’s not reflected in the accounts

And most payments for player transfers are spread out over many years.

This is a feature, not a bug.

Operating at a "loss" means a write off for the owners.

Maybe this could be another case for Wagatha Christie.

That doesn’t look profitable

Pay football players less. Problem solved. Do this for the entire industry, problem solved for pretty much every club.

Yeah, or ManU drops down to the second league and is worth little if anything.

Using sports Clubs as an investment vehicle is imho both everything that is bad about modern football and rather risky

That, my friend, is why you are poor. Check out the comparison between sports teams vs stock market over the last three decades:

https://mercercapital.com/article/investors-view-major-league-sports/

No, that,my friend, is why i'm happy with my life and i can enjoy football.

I don't invest in Clubs just as i don't buy slaves :)

I've got a job, a house and have financial security for about 12 months - why should i chase after more money?

They have historically acquired contracts at a far higher rate than selling any. It is a net cash outflow every year for the past 5 years.

It still could be cash flow positive once you take out the amortization and depreciation, and who knows what those other expenses are.

You have a job so you obviously are chasing after more money. If you only had 10B pounds, you could enjoy your football and get paid to own a team.

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> The club is also spending a fortune on dividends to the Glazers and on Interest payments.

Dividend payments don't show up on earnings, if it did, it would make these numbers worse not better.

And interest payments are real expenses.

>There is 165M depreciation. Thats a paper expense, great for taxes, but no real money leaving hands.

Depreciation and amortization are real expenses that cost real assets to make up for them.

Actually no, i do i job in a company where i earn a lot less than in other companies because i really like my job :)

With 10b i would simply do nothing at all which i unhealthy

With 10b, you can pay other people to be healthy for you.

that you can do with 4 mill. There is absolutely no sensible reason to ever have more than a few million dollars.

And, just accept it, some people don't want to enrich themself on the work of other people. I believe in the value of work, and thus I deem getting rich off stock options as asocial.

By spend they just mean expenses. So this is a very basic P+L of sorts, spitting out the operating loss at the bottom

Do you really know anything about accounting or business?

I have degrees in both, so yes