Manchester United’s malaise hits the bank balance
Posted on November 19, 2019
SIX YEARS on from the retirement of Sir Alex Ferguson, Manchester United have become rich under-achievers. After all, this is the world’s wealthiest club bar one or two, with one billion fans but they are absent from the competition that was created for their like – the UEFA Champions League.
United have released their first quarter results this week and although their revenues are more or less flat on the first quarter of 2018-19, the club was prevented from making a quarterly loss by the sale of striker Romelu Lukaku to Inter Milan for £ 59 million.
United’s revenues totalled £ 135 million, slightly up on the corresponding period last season. The club’s strong commercial prowess meant they increased this revenue stream by 5.9%, mainly due to new sponsorship deals and income from touring. Matchday income also increased by 35.6%, despite the fact the club froze season ticket prices for the nine season in 10. This compensated for a 23% fall in TV income, mainly attributable to the absence of Champions League football. The impact of another season out of the top European competition will truly be felt in the second and third quarters as 1Q is usually one of the weaker periods in terms of revenues.
The club’s net profit totalled £ 1.1 million versus £ 6.6 million, a drop of 83.3%, EBITDA was £ 34.8 million compared to £ 29.4 million, a rise of 18.4%.
The club’s wage bill for the quarter reduced by almost 9% to £ 70.2 million. The wage to income ratio for the period was 51.8%, lower by more than six percentage points on 1Q 2018-19 and less than FY 2018-19 (53%) and 4Q 2018-19 (70.5%). United’s wage bill was reputed to be the highest ever in Premier League history in 2018-19, totalling more than £ 330 million. Of the current squad, players like David De Gea and Paul Pogba are earning around £ 300,000 per week. Alexis Sanchez, on loan at Inter Milan, has an even higher wage.
United anticipate total revenues for the current financial year will eventually come in at around £ 580 million. That would represent a 6% drop on 2018-19, which, at £ 627 million, was a record for the club. It is worth noting that between 2013-14 and 2017-18, United’s revenues rose by 29%, significantly less than the two Spanish giants, Real Madrid (+37%) and Barcelona (+42%) and a lower growth rate than the top six Premier clubs. In Deloitte’s Football Money League, United have fallen from top in 2016-17 to third in 2017-18, a position they will probably retain in the next report, due in January 2020.
United’s biggest problem is not financial, however. The club, while undoubtedly strong financially, appears to have lost its joie de vivre, from the performances on the pitch to a certain disconnect between the fans and the club’s owners. There have been rumours the club’s main shareholders have expressed a desire to move on, which would undoubtedly please a certain faction among United’s huge fanbase and perhaps stop the fly-past protest banners.
Supporters are frustrated by the club’s erratic transfer strategy which has seen United fail to get the best out of some high profile signings. CEO Ed Woodward, a former investment banker, has also come in for a lot of criticism over the apparent concentration on United as a commercial enterprise. Of some concern is the increase in net debt, a 55.5% rise to £ 384.5 million. This is due to lower levels of cash as gross debt remains unchanged, said the club.
Yet Woodward insisted in his results presentation the club has a very clear vision and that the investments made in the club’s academy and infrastructure are paying off. Certainly, United’s most recent line-ups have included a number of younger players, such as Brandon Williams and Scott McTominey, as well as England striker Marcus Rashford.
Since the retirement of Sir Alex Ferguson in 2013, United have struggled to live up to an unprecedented era of success. From being Champions League regulars, they failed to qualify for any form of European football in 2014 and have played in the Europa League in three seasons, 2015-16 (after finishing third in their Champions League group), 2016-17 and 2019-20. At the same time, United have enjoyed an average attendance of 75,000 for over a decade, proving their fans remain as loyal and committed as ever. The waiting list for season tickets – United sold 53,000 for 2019-20 – is allegedly 20 years.
Until Manchester United stumble across a manager and playing strategy that makes them title contenders once more, the state of flux at Old Trafford is likely to continue. A club with its huge resources should have been able to cope with the post-Ferguson era, but once more it proved that succession is not just an important aspect of corporate life, but also in the modern football world. Poor succession can, if extended across a significant timeframe, have a negative impact on club morale, playing success and the balance sheet. United will emerge at some point, and may go through another manager or two before some stability and clear direction is achieved – but at present, they are scarcely nearer rediscovering the secret elixir of success. At present, they should be faring much better.