Mathew Garrahan in FT writes that investors were far
from happy to see the arrival of another record signing by United.
He writes
Shares in the club fell 8.5 per cent to close at 110p as the City expressed
doubt over the Manchester United board's decision to break the British
transfer record for the second consecutive year. The deal followed last
year's £28m purchase of Juan Sebastian Veron.
I can think of no other industry in the world where this sort of money
would be spent on a depreciating asset," said one seller of the shares.
Manchester United is expected to pay Ferdinand wages of about £3.5m a year
and will write off the transfer fee over the length of the contract.
Including wages, the deal will cost the club about £10m a year over the
next five years.
Analysts are forecasting £30m of pre-tax profit for the 12 months to August
31 and there were fears yesterday that the Ferdinand purchase could dent
bottom-line profits for the current year.
These concerns may increase if Manchester United fails to offset the cost
with some player sales before the European transfer deadline at the end of
August, which prevents clubs buying and selling players.
Manchester United said recently players would be sold to finance the
Ferdinand deal, while a number of highly paid players were released by the
club during the summer in an attempt to control spending on wages.
Despite these disposals, analysts questioned whether the Ferdinand purchase
could be justified. "The cost to Manchester United is a minimum of £9.4m
per annum over the five years and the return for shareholders uncertain,"
said Stephen Ford, an analyst with Collins Stewart. "These funds could have
increased the dividend payable to shareholders by 170 per cent if Ferdinand
had not been bought."
He added: "While football clubs must clearly buy players, Manchester United
shareholders who have seen the share price fall over the last couple of
years may have preferred to see less money risked in player trading and
more returned through the certainty of dividends."
The club will sell players to offset the deal but could struggle because of
a shortage of likely buyers.
Barring the sale of one of its bigger stars, such as Verón, Manchester
United will struggle to earn back its outlay on Ferdinand and the task will
be made more difficult by the financial problems facing clubs across Europe.
The Manchester United board had no qualms about spending such a large sum
and hopes Ferdinand can shore up the team's defence, which last year was
responsible for a number of key defeats. Peter Kenyon, chief executive,
said: "Buying a 23-year-old England international who has played in the
Champions League and the World Cup finals represents a sound long-term
investment in the team's future."
David Pope, of Brewin Dolphin, joint house brokers, said: "Manchester
United is a content business and content needs actors. If you mix the squad
so you get an exciting team, you get bums on seats around the world and a
return on your investment."