Sancho wants the move. Dortmund wants £108M and Manchester United won’t pay up. As reported in the UK, “it’s a high-stakes poker game” between Woodward and BVB Sporting Director Michael Zorc. The press make it sound like it is only a formality, and we should wait on the edge of our seats all summer for a deal to be announced.
The real question the press should be asking is — can Manchester United afford Jadon Sancho given their current financial position, exasperated by COVID-19 and the uncertainty around future matchday revenues at Old Trafford?
Follow the Money
Look no further than the fact Manchester United recently drew down £140M on their revolving credit facility, due to a pre-COVID-19 cash crunch, and you begin to understand the obstacles the club faces completing a record transfer deal in this environment.
Manchester United currently has an eye-watering £660M in debt on the books, and the prospect of no fans in seats during the 2020/2021 season could cost the club upwards of £110M. Ed Woodward himself was quoted in late April discussing the challenges that face the club in the current transfer window.
Nobody should be under any illusions about the scale of challenge facing everyone in football and it may not be ‘business as usual’ for any clubs, including ourselves, in the transfer market this summer,Ed Woodward – Vice Chairman of the Manchester United Clown Show
At the moment, there is a lot of risk in doing a record deal for Jadon Sancho for Ed Woodward and the Glazers. They have played hard and fast with the club’s balance sheet through the best of times, and got caught with their pants down during the worst of times.
It’s hard to imagine a giant club like Manchester United being worried about cash, but when you bleed over £1BN out of a club through debt service and dividends for over a decade, it is inevitable.
To get a clearer picture of the financials, I dusted off my financial model and updated the forecast to include the additional Champions League revenue Manchester United will receive in the 2020/2021 season.
In my financial projections I made the following assumptions:
- Manchester United host fans at 25% capacity to start the 2020/2021 campaign in September 2020 and are able to host 50% capacity at Old Trafford starting in January of 2021. Note: I consider this assumption optimistic; I want this analysis to set the upper limit of what the club can accomplish from a top-line revenue perspective
- Manchester United does not take a significant hit to sponsorship and merchandising revenue. I believe this assumption to be conservative as they surely will not earn as much sponsorship income due to a lack of match day events.
- Manchester United do not layoff significant portions of their staff and maintain a similar level of operating expenses as FY2019
- Manchester United pay out a £20 million dividend, as is tradition
- Manchester United does not sell any players
Less Money, Mo Problems
Manchester United dodged a severe cash crunch by making top 4 and qualifying for next season’s UCL. The estimated £85M from UCL gives Manchester United some flexibility, but given their revolver is over 90% drawn they have little room to work with on the downside.
In my projections, they will hit a low of £73M in cash in 3Q FY21 (March 2021) before matchday revenue starts to pick up again.
What does this mean for Eddy? Well, it means he has to make sure Manchester United have enough liquidity to weather the storm. £73M sounds like a lot, but for a multi-billion company like Manchester United facing an uncertain future, it really isn’t.
Anything lower than £40-50M on the books at Manchester United, especially with COVID-19, is cutting it way too close. If you accept £40-50M as a floor for the club’s cash balance, then Eddy only has £20-30M in net spend to work with at the moment.
So how can Manchester United Afford Jadon Sancho for £108M?
Well they can’t, not upfront at least. The rumors are that the £108M would be heavily structured, with ~£60-70M upfront, and the remainder of the fee paid over the next two years. If Eddy could offload some players (Jones, Lingard, Smalling) and raise £30-40M, he could be in striking distance of a deal like this, but there wouldn’t be much dry powder left for additional signings.
Still, this scenario does not take into account that the situation with matchday revenue could be worse than my assumptions above. If you look at a downside case, where (god help us) fans don’t return until January 1st, 2021, and only at 25% capacity – Manchester United’s cash balance hits a scant £52M. In this case, which is not completely out of the realm of possibility, Eddy is left with a paltry £0-10M in net spend for the upcoming window.
Eddy’s number one concern at the moment is not Jadon Sancho, it is managing the downside risk of COVID-19. The club did not prepare for this crisis and they have found themselves in a situation where they need to be conservative with their cash balance, and by extension their transfer dealings.
At these levels, the club cannot confidently spend large sums of money until they get certainty on the future of matchday revenues (which in the uninterrupted 2018/2019 season represented £110M). In my estimation, you can say goodbye to record transfer deals until the summer of 2021, and that is only if the club anticipates a packed Old Trafford to kick-off the 2021/2022 season.
Green and Gold Till The Club Is Sold
Ole defied the odds and made top 4 with a squad desperately needing depth. We can all see what the manager has been building over the last 18 months and now is the time to invest in this team. Ole deserves the opportunity to get the reinforcements and kick on to challenge for the title next season.
Unfortunately, with the Glazers as our owners and their top clown Ed Woodward running the show, this most likely won’t be the case. They will point the finger at COVID-19 and make excuses about how the lack of matchday revenue is the reason they can’t do deals.
We all know that is a bullshit excuse, and the real reason we are where we are is the £1BN the Glazers have bled out of the club over the last 15 years. Something has to give. When the Glazers and Woodward serve up a pile of shit excuses about why we didn’t spend during this window, it will be laid bare for all fans to see.
Next season will be a moment when we need to band together, wear the green and gold and demand the Glazers invest in not only the squad, but Old Trafford, the staff, and the brand of Manchester United by aspiring to win trophies and bring this club back to the top of world football where it belongs.
Glory, Glory, Man United