2nd October 2022


30th September 2022

Margaret Thatcher famously said, “You can’t buck the markets”. With this in mind, it is that time of the year again when Manchester United has released its latest 12-month numbers and we ponder the financial conundrum laid out before us. Did we tell you that it has been 9 years since the club last achieved an economic profit?

This year, however, English football itself is somewhat different following two years of Covid and a weakening economy. The American invasion is now in full swing with Chelsea having fallen into the hands of Todd Boehly and Co. who have quickly embraced the operational nuances of the local game by spending a net value of £221m on new talent and firing the manager in double-quick time.

Meanwhile, AFC Bournemouth is currently subject to a bid from a US-based consortium whilst Wolves’ Chinese owner Fosun is facing difficulties with its domestic business and may offload the club in the not too distant future. The club’s minority US investor, Peak6, will no doubt be monitoring closely…

For the other English clubs with minority US shareholders, the strength of the US Dollar presents an opportunity to become a major shareholder at an exchange rate that is almost 20% cheaper due to the collapse in the British Pound than would have been the case this time last year. Fans of Leeds United should take note.

Indeed, with English football getting cheaper to foreign investors by the day, the attraction of buying a loss-achieving club must be overwhelming…

Yet, for those who have already trodden this path from the shores of the western Atlantic, the picture is less than rosy and this is certainly true for Manchester United’s owners and shareholders.  At the time of writing (27th September 2022), the share price stands at $12.70. By way of context, a year ago it was $14.54 (October 2021) and five years ago it stood at $17.95 (October 2017).   Arguably, following the ravages of Covid and what should have been a revenue-recovery-and-diminishing-of-costs season, the numbers are sadly more challenging. 

Set out below is a summary of the latest 2022 financial performance with a year-on-year movement:

The good news is that revenue year-on-year increased by £89m or 18%. The more worrying development is that the cost base increased by £154.1m or 28%.  Included within the expense line is an annual record staff cost level for English Football (£384m).

Even before we get to consider the charges for capital, the net operating profit before tax for 2022 comes in at a negative £82.7m, some £41.6m worse than the 2021 negative number of £41.1m. When the charge for capital is applied (assuming a WACC of 7.00%), the economic loss totals £145.85m – some £35.05m worse than the 2021 loss of £110.80m.

Looking over the 9-year period from 2013 to 2022, despite revenues of just under £5.1bn, the total economic loss comes in at £484.59m. Not exactly small change.

More concerning is the overall movement when comparing the 2013 performance with the latest data (see below). Even though revenue has improved by £220.0m over the 9-year period, costs have risen by £374.3m or by a value 70% greater than the revenue improvement. This has resulted in an economic loss differential of £153.5m. Little wonder that the share price is delivering sub-optimal performance.

In a wider context, the club’s economic losses are less than those achieved by Manchester City (£553.6m) and Chelsea (£639.2m) between 2013-21 (both clubs have yet to publish their 2021-22 accounts) but the direction of travel in terms of economic performance is firmly downwards. And yet, despite losses and poor share performance, the Glazer family continues to extract dividends from the business. Whilst they may be a fraction of annual turnover in terms of value, the optics of doing so are not easy on the eye.

The declining British Pound (and arguably, very recent events in terms of financial market turmoil) places American business owners of British businesses in a difficult position. When we compare the US Dollar version of United’s financial performance since 2009 to the British Pound version, it becomes increasingly clear that Sterling (the currency, not the player) has been declining at such an alarming rate that the club’s revenues have essentially flatlined in US Dollar terms since 2014, coupled with increasing economic losses.

Further afield, football continues to fret over its future. Not a week goes by without a soundbite from Gary Football or Jamie Banter on Sky TV about the state of the game. Those of you who are familiar with our work will have noted that the themes which we previously highlighted in the last decade such as the potential ramifications from increasing American investment in English football have suddenly become a cause célèbre for our pair of pundits.

Indeed, the latest round of angst concerns the proposed adoption of an independent regulator.

We have, of course, previously offered our own considered opinion with regard to the role of an independent regulator in football. Broadly speaking, we believe it is something that we think would be of benefit to the game. We also maintain that the role will require the support of the Government of the day in terms of providing concessions to the sport in company law and giving broader powers to the regulator when compared to similar oversight roles in other industries/markets.

The example we have previously referred to is that of the energy regulator. Given the ongoing turmoil concerning energy pricing despite the presence of a regulator, the football version may only end up being a facilitator of an improved owners and directors’ test. What is clear is that operational reform is required within the game. Whether an independent regulator will be given the bandwidth to enact just that is still very much open to debate. And we maintain that without the implementation of a robust financial framework, the game will continue to struggle against a tide of self-interest and increasing losses.

Additionally, the current Conservative government remains ideologically opposed to increased regulation. However, the free market approach almost allowed football to financially digest itself into a Super League with the remainder of the sport picking up the crumbs. And, of course, the Americans were never too far away having given us all a big clue with the Project Big Picture opener.

Against this backdrop of heightened anxiety, United’s results provide the first and telling insight into the 2021-22 financial reporting season and from our perspective the picture is not good . Given the current travails in the markets with rising interest rates, rising energy costs and a general financial squeeze in the offing, football finds itself drifting further into a financial offside position.

One could argue that United is a special case, but the balance sheet reveals the challenges of fluctuating currency rates, increasing labour charges and a continuation of costs rising faster than revenue (see above). All are common characteristics for the majority of Premier League clubs. In this case, the position of the club in falling behind its peers in terms of the trophy count and the pressure to perform to expectations has amplified the numbers. Nevertheless, the TV revenues are designed to offset some of this financial turmoil as they always increase in value, no?

Thus, we suspect that football’s recovery from Covid will not be the profit bonanza that some might hope for. With just two collective economic profits achieved by Premier League club cohorts since 2009, the odds and omens are stacked very much against a profitable recovery play. But with a cheap British Pound and a ‘can do’ attitude, the game remains an intriguing punt from the shores of the USA. Except for the owners of Manchester United and its sub-IPO level share price.

Bucking the market really is a long shot.


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