It’s not just on the football field that debt-laden Manchester United is struggling. For the first time in 20 years, the club has dropped out of the top three in the Deloitte Football Money League.
Sir Alex reviews the figures
Whilst during the 2012-13 football season United’s total revenue increased from £323.7m to £346.5m, they were still overtaken by Bayern Munich, who won a treble and dominated European football with a 17% boost in revenues to £352.5m.
Prize money from winning the Champions League, together with match day income from a sold-out Allianz Arena and a number of lucrative commercial deals all helped the Bavarian giant.
Austin Houlihan, senior manager in the sports business group at Deloitte said United’s fall to fourth place could get worse this season as they are already out of the Football League and FA Cups and on present form; it doesn’t look like they will qualify for the Champions’ League this season.
He did however comment that it isn’t all doom and gloom for the UK’s richest club, as a number of the club’s recent commercial deals will boost revenue in the 2013-14 season.
“These deals, combined with the impact of the improved three-year Premier League TV broadcast deals from 2013/14, mean they are likely to get close to the €400m revenue mark in next year’s money league,” Houlihan said.
Despite United’s commercial revenue surging in recent years and the increased TV revenue from Sky and BT, its ability to continue to generating additional income is crucial to a smooth transition from Sir Alex Ferguson’s retirement in May 2013 to a new era under David Moyes.
The new United manager saw his team lose three games in seven days earlier this month, including an exit from the FA Cup at the hands of Swansea City. The club has all but given up hope of retaining the league title it has won 12 times in the past 21 years and to add insult to injury, Manchester United missed out on a lucrative Wembley final after losing the semi-final on penalties to Sunderland last week.
Many pundits and financial analysts point to deeper problems arising from the Glazer family’s 2005 takeover of United and their private-equity management philosophy that has drained significant sums from the club and consequently dramatically reducing investment for new players.
The new owners completed their £790m leveraged buyout in 2005 and their investment in United is now worth at least double what they paid for it. However, they had to borrow most of the money to buy the club and as a result, have taken out in excess of £500m in interest, management fees, bank charges and debt repayments to service the £525m borrowed capital.
David Moyes
The Deloitte report also highlighted the imbalance between players’ wages and revenue at many clubs. Unsustainable losses and debt levels at clubs with super-rich owners, such as Chelsea and Manchester City, led to the introduction of Financial Fair Play (FFP) rules, under which sanctions will start to apply against Premier League clubs whose 2013/14 financial results breach the conditions.
Deloitte also commented that there are now growing signs that the FFP rules are already modestly slowing growth in players’ wages; but whether we will ever get a level playing field with owners like Abu Dhabi’s Sheikh Mansour around, remains to be seen.
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David Jones is the Senior Partner and Founder of Morgan Jones & Company. Born in Liverpool and an Accountancy graduate of the University of Wolverhampton, David spent twenty years working for the Customs & Excise in London then Shrewsbury before starting his own business. David's depth of knowledge of the UK tax system and his ability to communicate this learning has seen Morgan Jones & Company grow into Shropshire's most respected Accountancy Practice.