Ricky1985 wrote:
Kel Varnsen wrote:
This is one of those things that seems baffling to me. I don't know a lot about the situation (maybe there is a good explanation), but it seems we essentially wasted a lot of money by not spending it when player prices were far lower.
Can someone explain this? Was the transfer fee inflation of players really that surprising? Was the money tied up into other things?
The cash reserve stories circulated every season in the press were always right after the money from season ticket sales. We also had to keep a substantial amount of money in the bank as part of the terms of the loan refinancing.
I don't think the problem is that we didn't spend enough; I'm pretty sure we nearly always soent what we had. The problem is we made error after error on what we spent the money on. New contracts for poor players chief among those bad decisions.
IIRC the criteria regarding our original financing not only included a 30% holding of revenues against debt servicing, but also included a clause that we would continue to spend the remaining revenues on the team so as to maintain our status. It was for these reasons that we converted the debt to the stadium bonds in about 2006 with a flat 20-25m payment rate over 25 year to 2031 = we're still paying the stadium off.
The issue wasn't the revenues (although it will be going forward from now), but in the way we set our finances up for the season as well as our non-existent cash flow during that first decade.
Yes the Cash Reserves was always inflated because they came after we received not only the season ticket revenues but also the end of season payments re league position & prize monies. Whilst this boosted the cash reserves at that time for us to show a healthy ongoing pre-tax profit for the season, we then undid all of that financial muscle at the start of the next season by then deducting ALL known expenditure/operating costs and then using the remainder to form the budgets for the season. Also remembering that the same pot also paid for all the developments at the training and medical facilities and any other investments made by the club. As such our budgeting is done when we have the most cash on hand, and we receive the majority of our season revenues at the end of the season when we can't use it.
The biggest give away re the cash reserves was that prior to the current TV revenues we had more in cash reserves than the rest of the PL bar MU, and we had double what they had despite their annual revenues being over 90m more than us.
Likewise because we don't count revenue until we receive it in the accounts, the entire PL spent their new TV revenues at the start of the season already knowing what their equal portion was going to be at the time payment was received at the end of the season, except us.
IMO the issue with expenditure is that we do not spend enough to address all the issues, and the spending we have done has been poor - we've been doing little more than rearranging the deck chairs on the Titanic.
