Addicted to buying a lot! The truth about cash flow under Manchester United s transfer frenzy

Manchester United fans often say something that is more prominent when the team is not good at playing a good record, and the ending of this sentence is often "We have never been ignored." This summer, this proverb is being confirmed.

Last season, Manchester United set the worst domestic game record in half a century. Neither there is a European game to play, and the club is still laying off employees significantly. Just five months ago, the team owner also said that if costs are not taken, the club will go bankrupt on Christmas. Logically speaking, under such a background, this transfer window of Old Trafford should have been calm.

But that's not the case.

As of now, Manchester United has only introduced two new players - Mattus Cunha and Brian Mbomo, but their fixed transfer fees totaled 127.5 million pounds (about 169.5 million US dollars). Even with such investment and no player left the team permanently (although Marcus Rashford's loan to Barcelona includes a buyout option), Manchester United's name is still frequently seen in various blockbuster transfer rumors.

Despite its recent sluggish state, Manchester United is still one of the top clubs in world football at least in the business level.

Now, they are about to finalize the deal to sign Benjamin Sesco from Red Bull Leipzig. On Wednesday night, TA also reported that Manchester United is exploring the possibility of introducing Brighton midfielder Carlos Baleba.

Brighton has always been good at winning favorable conditions in transfers and has no intention of selling Baleba this summer. Like Cunya and Mbomo, Cesco is not cheap either. Manchester United followed up on Tuesday after Newcastle United submitted an initial offer of €75 million plus €10 million floating terms after Newcastle United submitted a bid to Leipzig on Monday. Sesco himself prefers to join Manchester United.

Manchester United can invest such a huge amount of money in the transfer market this summer, perhaps confusing some people. In addition to existing expenses, the club is also considering midfield signings and even goalkeeper positions - although main goalkeeper Andre Onana is expected to stay. Meanwhile, despite rumors of leaving the team, no players have been sold for any price this summer.

Naturally, the question is: Why can Manchester United be so active? Even in the context of financial tightening, they are still considering more large spending.

says "more" not only because of the deal between Cunya and Mbomo, but also because of previous investment. In fact, it is these "past expenses" that have made small shareholder Jim Ratcliff complain in March this year that Manchester United still need to pay large installments for the long-finished transfer.

Cunha's signing is completed before the end of Manchester United's fiscal year on June 30, which means that the total cost of introducing him to £71.3 million (according to the club's third-quarter financial report) is accounting for fiscal 2024-25. Adding to the £272.1 million spent in the nine months ended March 31, Manchester United spent as much as £343.5 million on player registration last season - the third highest spend in English football history (although Liverpool may soon squeeze it to fourth place). It should be noted that transfer expenses will be amortized in installments during the player's contract period. Therefore, although Manchester United's lineup cost has increased by more than £300 million, expenditures in fiscal 2024-25 will affect the team's expenses in the next few years, and in turn affect the compliance results of the Profit and Sustainability Rules (PSR).

This is Manchester United's highest expenditure in a single season, but it also conforms to its usual style. They have invested more than £200 million in new players every year in the past three seasons, and the funds they have recovered by selling players are relatively small. Last season's £66.3 million player sales revenue was Manchester United's second highest figure in the past decade - even so, their net transfer spending last season was still as high as £277 million, a record.

This includes Cunha's expenses, so if you look at the transfer window, spending this season has decreased, but Manchester United's total spending in recent years is still amazing. This directly led to the financial difficulties Ratcliff mentioned this year and the continued layoffs that followed.

In today's football world, two aspects need to be considered when evaluating a club's consumption capacity: PSR, and actual cash holding or acquisition channels.

Manchester United's so-called PSR dilemma is not as serious as people have imagined recently. As TA disclosed in June, partly because the club's PSR calculation is based on the performance of Red Football Co., Ltd., excluding some large costs that are not within the scope of football activities at the listed company level.

The specific data for last season has not been released, but TA estimates that Manchester United can lose up to £141 million in fiscal 2024-25 without violating PSR. They did not exceed the standard, and it is likely that Manchester United will still lose money due to the growth in commercial and game-day income (which offsets a significant decline in broadcast revenue) and a significant reduction in salary bills, but the range is still controllable within the three-year £105 million PSR limit.

Although Manchester United hopes to make a big improvement in the Premier League, they will not be able to obtain any TV revenue from the European game this year, and the continued high transfer expenses will not help reduce the amortization costs of nearly £200 million a year for players.

However, there are some factors that help reduce or at least control losses in fiscal 2025-26. Although Rashford's departure did not bring any transfer fees, it could save the team a £14 million salary this season.

Manchester United has not sold any players, but thanks to the transfers of other clubs to introduce their former players - Alvaro Carreras, Anthony Elanga and Maxi Oyedelai, it has brought the team a second transfer share of more than £20 million. Chelsea failed to transfer Jaden Sancho's loan to a permanent transfer and paid £5 million to Manchester United, but if Sancho is not sold this summer, Manchester United will repaid its full salary, which will be offset.

These transactions help improve Manchester United's profitability and may also improve the team's cash position based on the payment time of the second transfer share. In fact, compared with the PSR dilemma, cash situation is the most obvious factor limiting Manchester United's high transfer spending.

It is difficult (or even unwise) to predict Manchester United's PSR space for fiscal 2025-26, as it requires estimating the financial situation of a club that is undergoing major changes (especially in terms of spending). But according to Manchester United's third-quarter earnings statement, it seems reasonable that the losses last season were on par with the deficit in the 2022-23 fiscal year. This result will be removed from PSR calculations this fiscal year and replaced by new data.

In other words, our estimate that "Manchester United can lose up to £141 million in fiscal 2024-25 without violating PSR" may still hold this fiscal year.

Past expenditures may have an impact in other ways. Manchester United's net transfer debt - installments owed to other clubs minus money owed to them - has soared sharply in recent years, from less than £100 million in June 2021 to £308.9 million at the end of March. The signing of

Cunya and Mbomo further increased this number, and both of them used installments to pay. This is better than a one-time payment of nearly £130 million in the short term (also giving Manchester United more room to invest more this summer), but they are about to face large payments - as of the end of March, the net transfer payments to be paid by the end of March 2026 reached £175.5 million. Cunha’s deal is in a three-year installment payment method, and Manchester United had previously tried to fight for five-year installments, which clearly demonstrates their need to manage cash carefully. Manchester United has recently invested in infrastructure, the most obvious of which is the Carrington training base, which further squeezes the cash space. As of the end of March, even with the £238.5 million equity funds injected by Ratcliffe, the club's cash balance was still £73.2 million. By the standards of most clubs, this is still a considerable amount of cash, but Manchester United is not an ordinary club, they have a lot of bills to pay.

Manchester United has long held multiple revolving credit lines (essentially corporate overdrafts, used to alleviate daily liquidity), but it did not start to be used until the COVID-19 pandemic. Surprisingly, at the end of April, they paid back £50 million in existing revolving credit loans.

This indirectly provides them with more room for lending this summer. On April 28, after repaying £50 million, Manchester United had withdrawn £160 million from three revolving credit lines, with the total limit of these lines of credit being £300 million. So, as of the end of April, Manchester United could have withdrawn another £140 million, but it undoubtedly bears additional interest costs. The relevant activities after the release of the third quarter report on June 6 are not yet known, and they must be confirmed after the club's annual financial report for fiscal 2024-25 will be released. But on July 10, the UK Corporate Registration registered a new mortgage for several Manchester United entities, with the beneficiary of Bank of America, which has long been the guarantee trustee of the existing £300 million revolving credit line.

One year ago on June 28, 2024, Manchester United registered a relevant mortgage right to extend the £150 million revolving credit line to June 2027. The new mortgage could mean a further extension of the revolving credit line, or it could be that Manchester United has improved its borrowing capacity and withdrawn even more than the £140 million available at the end of April as we know. When TA contacted Manchester United, the club declined to comment, saying only that any changes in the nature or size of the revolving credit line will be detailed in the annual report for fiscal 2024-25, expected in September.

In addition, layoffs and other cost-cutting measures have had a tangible impact on cash flow. Compared with the money saved by Manchester United if they can immediately get rid of millions of pounds of players' salaries, these savings may be just a drop in the ocean, but they cannot do this, and the layoffs made by Ratcliff after taking over will obviously have a certain impact.

Manchester United also expects adjusted EBITDA (the accounting indicators they use to measure operating performance) to be between £180 million and £190 million for fiscal 2024-25, a significant increase from £147.7 million in fiscal 2023-24, which should translate into stronger operating cash flow last season.

Even now, Manchester United still has the ability to invest as long as they are willing. Old Trafford needs to be more cautious in cash management compared to the past, but a series of recent measures, coupled with the club's borrowing capabilities if needed, means they still have viable funding channels.

However, both inside and outside the club are expected to sell players this summer. It is not controversial to say that Manchester United needs to do better in player sales, as they have long lagged behind their peers in this regard. The ever-inflating transfer debt is enough to prove that they urgently need to improve their player trading status – and now is the perfect time.

Alejandro Garnacho and Anthony are the players most likely to bring considerable income to Manchester United this summer. In addition, Cesco's potential joining will increase the possibility that Rasmus Hoylund will leave the team after signing only two years (the contract lasts five years).

Hoylund was originally from Atlanta for an initial price of £64 million, plus brokerage fees and Premier League transfer taxes, and its current book value is £43 million. Manchester United will consider a £30 million offer (although the player himself expressed his desire to stay in the team). From a PSR perspective, this will result in a loss of tens of millions of pounds, but it can bring much-needed cash to the team.