Debt balloons at United

Manchester United’s pre-tax loss in Q1 was more or less unchanged at £33m, even though revenue increased by £13m (9%) from £144m to a first quarter record of £157m and profit on player sales rose £12m (78%) from £17m to £29m.

All three revenue streams increased, especially match day, which rose £6m (29%) from £21m to £27m. There was also good growth in broadcasting, up £4m (12%) from £35m to £39m, and commercial, up £3m (3%) from £87m to £90m.

The impact of interest payable on United’s accounts is evident, amounting to more than £30m in the first quarter in each of the last two years, which represents a significant increase over the previous periods.

This is largely because the majority of the club’s debt is denominated in USD and unhedged. Therefore, the weakening in the Pound against the Dollar has led to higher interest charges in the club’s accounts, which are reported in Sterling.

United’s profit from player sales increased from £17m to £29m, mainly thanks to the departures of Dean Henderson to Crystal Palace, Anthony Elanga to Nottingham Forest and Fred to Fenerbahce.

Looking at player sales profits in the five years up to 2021/22, we can see that United’s £92m was firmly in the bottom half of the premier League table, miles below the likes of Chelsea £467m, Liverpool £263m and Manchester City £254m.

United’s inability to match their rivals in terms of player trading goes a long way in explaining the club’s challenges with Financial Fair Play.

The difference in United’s earnings in the seasons when they qualify for the Champions League is stark. For example, it is estimated that United will earn €60m this season from the Champions League, even after their disastrous fourth place finish in the group, which meant that they didn’t even drop down to the Europa League. That is around twice as much as the €31m they received last season in the Europe League, when they got as far as the quarter-finals.

United’s wage bill increased £8m (10%) from £82m to £90m, mainly due to higher bonus payments as a result of qualifying for the Champions League, allied with investment in the squad and contract extensions. Wages had fallen last season from £384m to £331m, though the £90m this quarter is United’s highest ever for this period. That said, they are unlikely to match City’s £423m Premier League record.

Manchester United spent £211m on bringing players to the club this summer, which was their third highest outlay ever, though not as much as the previous season’s £247m. Following this significant investment, United’s £1,023m squad cost is now second highest in the Premier League, only surpassed by Manchester City’s £1.1 bln, though Chelsea will almost certainly join them (and probably overtake them) when their 2022/23 accounts are published.

Even after all the various refinancings, United’s £733m gross debt at the end of the first quarter is higher than the £604m owed after the Glazers’ leveraged buyout nearly 20 years ago. Indeed, the current balance of £793m is the club’s highest ever, overtaking the previous peak of £773m in 2010.

Although it has fallen from its (sizeable) peak, United’s £32m interest payment in 2022/23 was still the highest in the Premier League, well ahead of Tottenham £22m and Southampton £8m. United have now paid nearly £800m in interest since the Glazers’ leveraged buy-out in 2005.

In stark contrast to owners at most other clubs, the Glazers have taken a lot of money out of United. Defining owner financing as owner loans plus share capital less dividends, the club has paid out £187m since 2012, split between £166m dividends and a £21m share buyback.

Sir Jim Ratcliffe would also do well to acknowledge some of the financial challenges facing United. Despite setting a new revenue record for the first quarter, the fact remains that United still posted a large £33m pre-tax loss. Furthermore, the club’s operational cash outflow had to be funded by taking on an additional £100m of debt. As a result, total debt has ballooned to around £1.2 bln, including a huge amount owed for transfers.

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The Political Economy of Football V2

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