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Sunday, January 29, 2023

Explained: Manchester United’s quarterly accounts

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Manchester United’s quarterly financial accounts for the three months ended September 2022 were released on Thursday.The headline news was that the board of directors did not approve the payment of the semi-annual dividend for the 2023 fiscal year.There were increases to United’s matchday and commercial revenues, while their broadcast income took a hit due to them missing out on Champions League football.Cristiano Ronaldo’s departure via mutual consent in November was highlighted in the accounts and they detail how much his exit will save the club over the fiscal year.The Athletic has analysed their latest set of financial accounts…What are the standout notes from these results?Aside from the news that the Glazer family have not taken a dividend, a positive is that United’s overall revenue climbed to £143.7million ($177m) having totalled £126.5m in the same three-month period last year. This is an increase of 13.6 per cent.Commercial revenue alone grew to £87.4m from £64.4m (2021) thanks to a strong retail performance, where they achieved record first-week sales of their home and away kits, and a lucrative pre-season tour.United generated £35m from broadcasting revenue, which is a decrease of £8.3m over the prior year quarter. They attribute this to competing in the Europa League as opposed to the Champions League.A knock-on effect of missing out on Europe’s elite club competition has seen them save seven per cent on player wages, though, as the first-team squad had their salaries cut.The quarterly results also detail how the value of their playing squad has increased by £5million — or 14.2 per cent — over the prior year quarter to £40.1m.“The unamortized balance of registrations at 30 September 2022 was £494.1m,” their accounts read.But this has come at a cost. United spent £218m on transfers in the three months from July 1. That has left them with outstanding transfer instalments to other clubs of £306m.That is a Premier League record, and is something that will need to be managed carefully over the coming years.Manchester United Women’s team are currently second in the Women’s Super League and, the accounts note, have “experienced continued momentum with Leigh Sport Village ticket sales at the end of the first quarter approximately 25 per cent higher than the entire 2021-22 season”. Avram and Joel Glazer, the co-chairmen of Manchester United (Photo: Michael Regan/Getty Images)Have they saved money on Ronaldo leaving?United’s latest set of accounts for the three months ended September 2022 revealed an interesting projection that sheds light on the cost of Ronaldo’s departure by mutual consent in November.The club raised their guidance on EBITDA — earnings before income taxes, depreciation and amortisation — to £125m to £140m “as a result of reduced player wage costs”.United’s previous expected range was from £100m to £110m.This tells us that their bank balance is expected to benefit from an additional £15m to £30m, and it can be attributed to Ronaldo’s salary coming off the wage bill along with their underlying revenues also improving.What does it say about the value of pre-season?For a club of Manchester United’s size and global reach, not forgetting they claim to have over one billion fans worldwide, pre-season tours are an invaluable source of income.The coronavirus pandemic and subsequent travel restrictions meant they were unable to travel overseas during the 2020 and 2021 summers, but they made up for that this year.United embarked on tours of Thailand and Australia before heading to Norway, which saw their sponsorship revenue for the quarter grow to £57.8m from £36.3m.This is “an increase of £21.5m over the prior year quarter primarily due to the men’s first team pre-season tour”.How has the pound collapsing impacted United?While their debt level has remained at $650m, the cost of paying that off has increased due to the pound collapsing against the US dollar. Their USD non-current borrowings climbed from £476.2m to £577.4m in the three months ended September 2022.United attribute this notable increase to the British pound weakening against the US dollar in the autumn.“As a result of the year-on-year change in the USD/GBP exchange rate from 1.3506 at 30 September 2021 to 1.1173 at September 2022, our non-current borrowings when converted to GBP were £577.4million, compared to £476.2m at the prior year quarter,” their accounts read.Why did the board not pay a dividend?The Glazer family has taken around £155m out of Manchester United since they started paying themselves dividends in 2016.When news emerged of the Glazers’ decision, it was positively viewed by United supporters, who have long campaigned against money coming out of the club.On November 15, the board of directors, which is mostly made up of the six Glazer siblings, did not approve the payment of the semi-annual dividend for the fiscal year 2023.The reason for this has been noted as an economic one, which reflects factors including the £200m investment made in the first team during the summer transfer window.Joel Glazer was questioned about the issue surrounding dividend payments during a United fan advisory board meeting in October, as previously reported in The Athletic.At this meeting, he was asked why money is paid to shareholders from club funds despite the team having had its worst season since the Premier League was formed and the company having made a £115m loss.Are United in good financial shape?Even though the club’s accounts are littered with positive snippets, their overall losses for the period grew from £15.5million (Sep 2021) to £26.5m.In addition to that, an investment-heavy summer, which saw them sign Antony, Casemiro and Tyrell Malacia among others, resulted in their cash balance falling from £121.2m (June 2022) to £24.3m (Sep 2022).This expenditure has seen what they owe to trade suppliers, including future payments on transfer fees, climb from £322.9m to £431.4m. The figure of £306m on transfers is particularly noteable.The fact they are continuing to grow their revenues will be viewed as a positive step in the right direction ahead of a potential sale.It was announced in November that the Glazer family plans to identify “strategic alternatives” that could lead to a full sale of United, and that they have appointed the Raine Group, who were previously employed by Roman Abramovich to manage the sale of Chelsea, to act as the club’s ‘exclusive financial advisor’ during the process.(Top photo: Christopher Furlong/Getty Images)

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