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United lose over £200m from Covid

The authoritative Swiss Ramble reviews the latest annual accounts of Manchester United, once again deploying his in depth knowledge and forensic analytical skills.

The pre-tax loss was up from £21m to £24m, as revenue dropped £15m (3%) from £509m to £494m and profit on player sales fell £11m to £7m, while expenses rose £16m (3%). Operational decline offset by interest swinging £39m from £26m payable to £13m recoverable thanks to forex gains.

Net loss after tax rose £69m from 23m to £92m, due to April 2023 increase in corporation tax from 19% to 25%, which meant that United wrote down the value of a US deferred tax asset, as it is no longer expected to give rise to a future economic benefit. This is a non-cash impact.

The main reason that revenue only fell 3% was £115m (82%) increase in broadcasting to £255m, mainly due to return to Champions League, which compensated for COVID driven reductions in match day, down £83m (92%) to £7m, and commercial, down £47m (17%) to £232m.

As a sign of the club’s resilience, their £24m pre-tax loss is better than most Premier League clubs in 2019/20, even though their figures are the only ones to include a full year of the pandemic. For 2020/21, Barcelona and Juventus have announced massive losses of €481m and €210m.  United had by far the smallest operating loss of major European clubs in 2020.

Revenue was significantly impacted by COVID.  The Swiss Ramble estimates the revenue loss as £170m in 2020/21 (match day £113m, commercial £47m & broadcasting £10m). Added to 2019/20 £31m loss, that gives a total of £201m. Around £24m TV revenue deferred from 2020 to 2021.

Club strategy has not been overly reliant on player sales, so their £7m profit from this activity is one of the lowest in the Premier League, down £11m from previous season.  results have rarely been boosted by player sales, only averaging £12m a year over last decade. In the 5 years up to 2020, United’s £63m profit from this activity was significantly lower than rest of the Big Six.   [Player sales are a volatile source of income and some clubs have become too reliant on them in my view - WG].

This is the second year in a row that United have posted a loss (due to COVID), but they have managed to limit these to £21m in 2020 and £24m in 2020. Before then they had accumulated an impressive £159m profit in the preceding four years, averaging £40m annually in that period.

Despite reflecting a full season of COVID, the £494m revenue is still currently the highest in England, just ahead of Liverpool £490m and Manchester City £478m (2019/20 figures), though these clubs had been significantly closing the gap with United pre-COVID.

The commercial income fell £47m (17%) from £279m to £232m, mainly due to no pre-season tour, COVID sponsorship “variations” and closure of Megastore. United’s commercial engine has essentially stalled (revenue flat for 5 years before 2021 decrease), while big growth at rivals.   The lucrative commercial deals are trending down: the new £47m TeamViewer shirt sponsorship is much lower than Chevrolet £64m, while no replacement announced for Aon training ground £15m deal that ended this summer. However, the £75m Adidas kit deal runs to 2025.   [United have been praised in the past for the sophistication of their commercial operation, so it would be interesting to probe more deeply here - WG].

That said, £232m commercial income is higher than all other PL clubs except City £246m. The fact that so much of United’s revenue is from commercial (55% in 2019/20) gives them a degree of protection from the impact of the pandemic that others don’t enjoy.

The broadcasting revenue of £255m is the second highest ever reported by an English club from this revenue stream, only below Liverpool £264m in 2019, partly due to the money deferred from the 2020 accounts. In fact, it’s the third highest anywhere, as Barcelona had £263m in 2019.

Relatively poor performance in Europe, including not even qualifying in 2015, means that they have earned “only” €284m in the last 5 years. That’s not too shabby, but it is a hefty €138m less than City €422m. Also below Liverpool €361m, Chelsea €311m and Spurs €293m.

The wage bill rose £39m (14%) from £284m to £323m, mainly due to higher bonuses for playing in the Champions League, almost back to £332m club high in 2019. After many years with the highest wages, United are still only third highest in England, below City £351m and Liverpool £326m.    However, United  estimate that their wage bill will rise by “around 20%” this season, as a result of signing Cristiano Ronaldo, Raphael Varane and Jadon Sancho. That would mean £65m increase to £387m in 2022, the highest ever in England, around the same level as Barcelona in 2020.

The wages to turnover ratio increased from 56% to 65%. This is United’s highest ever (it was only 45% in 2017), but it is still one of the lowest (best) in the Premier League. Last year it was also one of the best in Europe, sandwiched between Bayern Munich & Borussia Dortmund.


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Comments

  1. Binky Binky21 September 2021 at 01:53

    Yes but think of all those Mancunians who have had to go out and buy a Ronaldo shirt two sizes bigger than the ones they already own?

    ReplyDelete

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