United need to spend more wisely

09/16/2024 03:16 AM

Manchester United have published their financial results for the 2023/24 season, which even their most fervent supporters would admit was not a great success on the pitch.  Manchester United's results were a mixed bag.

On the plus side, revenue rose £14m (2%) from £648m to a new club record of £662m, and profit from player sales increased by £17m from £20m to £37m, their best result for 15 years. However, the good news ends there, as the pre-tax loss quadrupled, widening by £98m from £33m to £131m, the second worst in United's history.   United's £131m pre-tax loss was higher than any other club in the previous season's Premier League, though ten others lost more than £50m that season, led by Aston Villa £120m, Tottenham £95m and Chelsea £90m.

The revenue growth was driven by the return to the Champions League, which ed to an increase in broadcasting, up £13m (6%) from £209m to £222m, while match day was slightly up from £136m to £137m, though this was a new high for the club. Commercial was flat at £303m.

Despite the improvement over the last two years, United's £35m growth since 2018/19 is the smallest of the Big Six. Manchester City are miles ahead of the rest here, growing their revenue by £178m, while the others have all increased by around twice as much as United.

The impact of interest payable on United's accounts is also clearly evident, amounting to a hefty £61m in 2022/23, which represents a significant increase over the prior year.  This is due to a combination of factors: rising interest charges on the club's revolving facilities, a change in the value of derivatives and an unfavourable swing in exchange rates.   United's £36m interest payment is comfortably the highest in the Premier League, ahead of Tottenham's £25m and Everton's £23m. Every other club in the top flight paid £10m or less interest in 2022/23.

Player sales

United's profit from player sales almost doubled from £20m to £37m, mainly thanks to the moves of Dean Henderson to Crystal Palace, Anthony Elanga to Nottingham Forest and Fred to Fenerbahce. This was United's best result from player trading for many a year, but it was still a fair bit less than some of their Premier League rivals, e.g. in 2022/23 four clubs generated more than £70m with Manchester City £122m and Brighton £121m leading the way.

However, their record before last season had been pretty miserable, as they only made £68m in the previous four years, averaging just £17m. They even managed to lose £10m in 2015/16.

This will surely be an area of focus for the new management group, so this summer's activity is encouraging, as they managed to offload a few players for decent transfer fees, including Scott McTominay to Napoli and Mason Greenwood to Marseille.

Europe

United's unexpectedly early elimination from the Champions League hurt them financially, as their €60m was much lower than the two other English clubs, who both reached the quarter-finals, i.e. Manchester City €109m and Arsenal €93m.

United's patchy record in Europe has hurt their finances. Even though they have earned a more than respectable €281m in the last five years, this was nearly €300m less than Manchester City's €567m and also well below Liverpool €399m and Chelsea €386m.

Their failure to qualify for the Champions League this season will adversely impact their revenue, especially as the amount available for distribution in this season's expanded competition will be around 20% higher.

The club has warned that 2024/25 revenue will be approximately £30m lower than last season, due to the participation in the Europa League.

United's £32m wages growth since 2018/19 is one of the smallest in the Big Six, significantly lower than Chelsea £118m and Manchester City £108m.

United have paid out more than £900m in the last five years  on transfers, so they have clearly spent a lot of money on player recruitment, but maybe not as well as their fans would have liked.

United's gross debt decreased for the second year in row, falling from £613m to £547m, while net debt was also down from £537m to £473m, as the cash balance slightly reduced from £76m to £74m.  Even after last season's decrease, United's £547m gross debt is still the third highest in the Premier League, only surpassed by Tottenham £851m and Everton £792m, though much of this went on financing new stadia, as opposed to simply paying for the privilege of having the Glazers as owners.

Despite setting a new revenue record, the fact remains that they still posted an enormous pre-tax loss. This was partly due to the inclusion of once-off costs linked to the share sale, but the loss would still have been substantial without this exceptional charge.

Furthermore, the club's operational cash outflow had to be covered by a significant capital injection from the new owner, while debt remains high even after last season's reduction, leading to significant interest payments.

However, this is a period of significant change at United following the completion of Ratcliffe's investment. The club is ambitious, as noted by Berrada, "Our clear objective is to return the club to the top of European football."

Given that United failed to qualify for this season's Champions League, this will obviously take time, but the new leadership has shown a willingness to spend as much as the old guard, splashing out more than £200m this summer.

In fairness, spending money has never been an issue at United. The problem has been the quality of the recruitment, as a lot of money has clearly been wasted in the transfer market.