Thread by @SwedishRumble

(1/24) The Glazers have decided to not back ETH this January window while the #MUFC faithful are seeing all rivals do the opposite. But in this 🧵 we look into how much #MUFC possible could spend in the summer under the new #FFP rules with #GlazersOut. #BestCaseScenario

(2/24) In this best-case scenario, we assume that the club (a) is cleared from debt, (b) deadwood including Maguire, McTominay, Henderson and AWB are sold for a total of 80m, and (c) #United finish top 4. #BuckleUp

(3/24) I mark the quality of my forecast on a scale from 1-10 depending on available information. In this case, the mark is a 7, since Manchester United plc has published both the annual accounts for 21/22 and the Q1 report for 22/23.

(4/24) The main rules #MUFC must comply with in the new FSR are the #FootballEarningsRule (“FER”) and the #SquadCostRule (“SCR”). Let’s first look at the FER.

(5/24) UEFA’s licensing system is backward-looking. Hence, United’s spending in the summer of 23', impacts its license in 24'. The FER monitor period in 24' covers the 22/23 season and the 23/24 season.

(6/24) To ensure compliance in 24', United must in the summer of 23' determine its outcome from 22/23 and prepare a budget for 23/24 based on a forecast for its financials from that season. Since we do not have any 22/23 data, we must forecast both 22/23 and 23/24 seasons.

(7/24) The basis for our forecast is of course the Q1 report for the 22/23 season published in December 2022.

(8/24) To these, a great number of adjustments are made to get projections for 22/23 and 23/24 year-end reports. Given the assumptions made in tweet (2/24), these include (a) adjusting merit and broadcasting income to a top 4 finish, …

(9/24) …(b) clearing the financing costs (but still adjusting for FX effects relating to our debt this season), (c) updating costs for squad amortization and wages, and (d) calculating the profit on transfers. Some of these adjustments are described in the following.

(10/24) To determine the impact on our earnings of players leaving, #MUFC’s amortization costs must be detailed. This chart shows the amortization costs for each player, determined by dividing the transfer fee paid for a player with the length of the player’s initial contract.

(11/24) When we sell a player, it impacts #MUFCs Earnings in three ways. (1) A profit or loss is made on the transfer fee, calculated by deducting Remaining Book Value (see above) from the transfer fee received, (2) the club rid itself…

(12/24) of the yearly amortization of each player, and (3) the club will no longer pay the player’s wage. If Maguire – with a Remaining Book Value is £26.6m and yearly salary £8.46m – is sold for £20m the saving is 20m – 26.6m + 8.46m + 80/6 = £15.2m.

(13/24) The performance under the #FootballEarningsRule is calculated as follows: Relevant Earnings – Relevant Expenses + Relevant Investments = Football Earnings. Football Earnings can not be less than minus €70m (minus €60m if our debt remains).

(14/24) With the above assumptions and adjustments, we get the following forecasted performance by #MUFC under the #FootballEarningsRule, meaning that the Club theoretically could incur additional costs for the 23/24 season of £136m:

(15/24) So what does “incurring additional costs of £136m” mean? Can United spend £136m on transfers? No. Signing a player results (1) in an amortization cost, totaling the transfer fee divided with the contract term. (2) The players wage. For #MUFC squad:

(16/24) Since for example Sancho’s yearly cost is £35.2m, with the ability to incur £136m additional costs, #MUFC could buy 3.9 more “Sanchos”. This is just in relation the FER, we must still test the SCR.

(17/24) Over to the #SquadCostRule, under which a licensee’s squad cost ratio for the licence season must be no greater than the defined limit of 70%. What is the Squad Cost Ratio? It is calculated as follows on a 12-month basis:

(18/24) The SCR is however implemented in three steps, 31 December 2023 the defined limit is 90%, in 2024 its 80% and in 2025 its 70%.

(19/24) Under the above assumptions, we get the following result under the Squad Cost Rule, i.e. that we could incur an additional £123.7m in costs under the SCR:

(20/24) As a result, we can see that the amount of costs United can incur in the summer of 2023 will be limited by the SCR (£123.7m) as opposed to the FER (£136m).

(21/24) So what does it mean that #MUFC can incur an additional £123.7m in costs in the summer of 2023?

(22/24) By the same principles as set out in tweet (15/24), it means that we pretty precisely for example could buy three players for a total of £400m and pay them 300k a week. But, that would put us right at the limit.

(23/24) To really be able to go on a spending spree, we need a new owner to be able to sponsor the club. Ineos could do that, for a US consortium its probably harder.

(24/24) I do not have the biggest Twitter following, so if you liked this thread, please retweet and follow if you want more. Will make a thread per day for the foreseeable future. Threads on Newcastle and Arsenal can be found under my profile. Tomorrow, #CFC is up.