The accounts of Red Football, the parent company of Manchester United, for 2016-17 have just been published. They make fascinating reading, not just in terms of the club itself, but as an illustration of how a major football club is seen as a brand to be marketed.
Among the stated objectives is 'treating fans as customers'. Many fans object to this as they see it as downgrading their identification with the club so that they become the mere object of marketing ploys. Elsewhere they are referred to as 'the follower base' which reflects the fact that many of them never come to Old Trafford. Another objective is 'leveraging the global brand'. Leading the list of key business risks is 'maintaining and enhancing our brand and reputation'. 'The performance and popularity of our first team' is listed third.
The report states, 'To be successful in the future we must preserve, grow and leverage the value of our brand across all revenue streams. Unfavourable publicity regarding the first team's performance or their behaviour off the field, our ability to attract and retain certain players ... could affect our brand and reputation. Failure to respond effectively to negative publicity could also further erode our brand and reputation. In addition, events in the football industry as a whole, even if unrelated to us, could negatively affect our brand and reputation.'
However, one cannot deny that the approach has been financially successful. Group revenues for the year were up from £515.3m to £581.2m, an increase of over 11 per cent. Profit before tax for the year was up from £48.9m to £55.6m. Net debt was down from £261.1m to £213.6m.
A number of playing performance indicators were not achieved. The aim was to finish at least 3rd in the Premier League and the club finished 6th. The club aimed to be in the last 16 of the Champions League, but finished up participating in the Europa League (which it won). It hoped to be in the last eight of the FA Cup, but exited at the 6th round.
However, commercial revenue (excluding shirt sponsorship) was up 1.7 per cent. Customer relationship management fan records were up by 8.2 per cent.
Commercial income at £275.4m accounts for 47 per cent of all revenue. Broadcasting revenue accounted for 33 per cent. Matchday revenue accounted for 19 per cent.
Three sources accounted for more than 10 per cent of revenue. The Premier League accounted for £147.8m, up from just under £100m, an increase of nearly 50 per cent. The deal with Adidas produced £79.2m and £59.4m came from General Motors (Chrevrolet).
Total wages and salaries cost amounted to 45 per cent of revenue, below the 50 per cent level recommended by Deloitte. Total staff were 865, of whom 74 were players and 136 were technical and coaching. Key management compensation amounted to £12.3m.
Brexit
It is admitted that Brexit 'may adversely affect our operations and financial results.' The club's ability to compete with the top clubs in Europe could be affected. Three paragraphs are devoted to this topic. The principal concerns identified are:
- Stability of global financial markets and reduction in market liquidity
- Decreased foreign investment in the UK
- Depressed economic activity
- Restricted access to capital
- Greater restrictions on the movement of players between the UK and EU
- Increased regulatory complexities
However, these effects could be diminished by acceptable withdrawal terms.
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