No, there is right amount of debt(or gearing) and the wrong
amount of debt(gearing).
The right amount of gearing is when a company has sufficient
cashflow to run the biz and invest for future growth.
The wrong of amount of gearing is when most of the company
profit went into payment of interest and debt with no fund for
investment.
For example Liverpool, they want to invest in a new & bigger
stadium but they do not have the funds, banks are
concerned about their current debt and the ability to svc new
loan,till now they still don't have the fund for it.
You talk about profitability in absolute number which is totally
wrong, ManU profit are USD150mils, Spurs are USD35mils, therefore
you conclude that ManU is more profitable.
For investment, we should talk about profitability based on
return, for example you buy over Man U for USD1,835mils, you get
profit of USD150mils in 2009 which means a return of 8.17%
for your investment, If you buy over Spurs for USD372mils and
get profit of USD35mils which means a return of 9.41% for your
investment.
I did the above for 3 years for to show which is more
profitable, if you average the figures, you will see that Spurs is
actually more returns (ie.profitable & t)herefore better
managed than Man U.
As for one do valuation for a company, future
earnings are also included in the calculation, there is no 2 way
about.
As for brand name , is like goodwill generated by the company,
for football club,it is equivalent to the size of the fan base is
it not?
As for the size of the fan base will determine the future
earnings of that football club right?
So since future earnings of that football club is already
included in the valuation,therefore your assertions are all
wrong.
And since you talk about Liverpool , let look at the number
again,now using only absolute profit instead of returns.
Pool profit for the last 3 years were 60, 50,37 mils. Spurs were
64,70,35mils.
Pool actually has a larger stadium than Spurs(slightly less than
9K), has CL football for the last 3 years, as you said has much
better brandname(ie.larger fanbase) and yet Spurs has overall
earned more profit than Pool, & if I calculated based on
returns , Spurs will be very even much higher than Pool,
this show how well Spurs is managed.
Glazers are the owner and make high impact decision for the
club, therefore you could say they are part of mgt of the
club, in fact they behave like CEO of the club. The loan is
still a mgt decision.
You are wrong again, Spurs did not shrink, it is british pound
that shrank 17% against the USD!
Forbes reports is based on USD , therefore Spurs look it
has shrank, but in reality in pound, Spurs actually grew slightly
larger. As for why it did not grew as much as ManU, it could be due
to large outlay of players by Spurs last year and Man U sold
Ronaldo for 80mils pound.
That is becos they have CL football for years, whereas Spurs
don't, 30mils pounds per year, that is a lot of money when multipke
by # of years of CL football.
And yet w/o CL football, Spurs profit is either higher or
almost equal to Pool, and have been higher than Chelsea most
of time, that is good mgt!
Spurs already has a large squad, and I believe Levy will
be prudent on spending on transfers and wages, that is his mgt
style, no point having CL football and incur a large amount of debt
just to stay in CL.
As for the new stadium , it is an investment for the future,
with Spurs profitability and low debt, it should not be a
problem.
The question I ask you now is, United don't have funds for
investments on new players? You are very sure about this?
You are making it sound as though they can't afford to buy any
player thesedays... It wasn't too long ago that they splash
more than $50m on Nani, Anderson and Hargreaves with Tevez
taken on loan all in one season. And did they not spent $30m on a
certain Berbatov 2 seasons ago? Cos Spurs were the biggest
beneficiary there along with another Robbie Keane... What happen to
the $50m?
And were United debt free during this period of transfers? A
simple answer to you is No.
Of course everyone would like to have a lower debt sum but if
you can't, do you settle for a less profitable company or a very
profitable one?
And when you take Liverpool's accounts into the picture
it's very simple... The picture gets very much clearer... This is a
direct example of a club poorly manage over the last 20 odd
years. Why do I say this, cos 20 yrs ago, they were by far the
bigger and richer club. Probably the richest to
any in England and probably the biggest in the world. Poor
management over the years and failure to maximize their brand new
is a result for their shortcomings today. Nevertheless,
despite the poor management through the years, they are
still seen as a more worthy investment than Spurs cos they
still do have a bigger brand name.
Anfield and Old Trafford wasn't very much different in terms of
capacity those days...
You said, For investment, we should talk about profitability
based on return. You are absolutely correct here but you fail to
take into account on better or higher potential returns forecast
for different entities...
Your example of Pool is rather too straight forward... So Spurs
may have about 8k less but they are selling London prices. It's
like Arsenal sells 16k lesser in tickets sales than United but they
have the biggest gate collection on match days you get it?
Or when a Pool shirt sponsor becomes available, they get a $20m
offer from a reputable company while Spurs get a lot lesser and it
still has to be from a gambling company .
Yes, Pool indeed have CL football but did you take into account
that they have a bigger wage bill to go along with that? It comes
with a price that Spurs looks like they are about to get
into. What is the highest earner at Spurs may i ask you? Well,
at Pool, Glen Johnson is paid $139k per week... How much is Modric
earning and how much is Gerrard? Think about it. If Spurs aspire to
get into the CL, very soon their players will aspire to be paid
like they should or other clubs will take them away... Its
inevitable... Already we have seen a 50% lost from their operating
income for better showing this season possibly due to more quality
in the squad. But they are not even there yet... And even if they
do, it will cost them much more to keep them there next year...
You give us the profitability of Spurs and Liverpool for the
last 3 yrs for ? To show us Spurs earned more than Pool these
last 3 yrs? Base on the figures you provided, their earnings
are about the same in their latest financial year.
Let me ask you this question... Why is Liverpool valued almost
2.5 times more than Spurs? They don't have a new stadium to
pump up the price either. What's the reason here maybe you can
enlighten us all here..
On to the management again, I think you are greatly confused
here... Glazers are indeed the owners. But the same management
team of David Gills has been there long before the Glazers came.
Therefore it is wrong to say the Glazers are behaving like the CEO
and the management team are the ones that got the club into
debts.
David Gills has been the CEO for a good number of years... The
management aspect of the club like looking for new investments,
planning for the club's future paths, keeping existing
sponsorship going are all down to him... The club isn't paying him
millions per annum for nothing. He is answerable to the owners and
directors. It's his job to keep them profitable.
The Glazers are behaving like owners, they don't run the day to
day activities, the CEO along with his team does so. Have we ever
seen the Glazer involve in any transfer of players coming in when
its not the manager's choice? Did the Glazer sold Ronaldo despite
the big offer the year before he left? No, the players himself
wanted to leave and an agreement was made with the manager to
let him go a year later which was what happened. Look
at the risk the Glazer took in leaving it to the
management to decide. Had Ronaldo got seriously injured or Real
decided not to get him a year later who is going to give them $60
to $80m? From here we can see this whole episode was left to
the management to decide.
Do not be mistaken. The loan is solely the owner's decision and
not the management cos as a going club / business, they are very
profitable, they don't need a loan. It is the owner who can't
afford so laid his own property as collateral to the bank. So
you are greatly mistaken to assume the management team are the ones
that got them into debts...
Now this is the most ridiculous statement i have came
across in this thread... The shrinking of the pounds is
inconsequential to the percentage lost... Cos isn't United,
Arsenal gauge with the same formula? Both lost only 2% compare
to Spurs 16%.
Also your assumption of $30m pounds is overly excessive isn't
it? You only get $10m for making the first round and probably $30
winning it... Do they win it that often these last 10, 15 yrs?
Spurs do have a large squad for the premier league... But it
will be a step up if they plan to stay in the CL (if they do get
there). How prudent Levy could be on their spending I am not sure,
it's still open for discussion but 50% dropped in one season where
they are only trying to get that 4th place doesn't seem very
assuring... Cos it's a big step up to balance the premiership with
the CL together...
And for the new stadium... you make is sound like a small
problem and brush it off like no big deal... Well, look at
Arsenal... They are already a lot weaker from it and have proven it
will take a few years for them to get back. But at least they are
already enjoying the fruits of their labour. Spurs still has a long
way to go before enjoying the first ticket sale in their new
stadium... And if their current debts is already US$108m, trying
adding another US$540m ($350m pounds) to it for the new stadium...
It could potentially cripple the club for a few years or even a
decade and if they can't manage it like Arsenal, spend little and
rely on young and cheaper players and still get into CL... They
could face more problems than the Gunners with no CL football and a
high debt to repay not to mention the interest each year...
I am not saying Spurs are poorly manage, just not the best
that's all...
