As a publicly listed company, Manchester United has the distinction of being the first club to release their Season 23/24 results.
By their standards, the season was disappointing: the team finished in 8th place, their lowest position in 35 years, exited the Champions League at the group stage (finishing bottom of their group), and overall, the club appears to be far from its ideal state. The one bright spot was winning the FA Cup which ensures their continued participation in European competitions.
Financially, the club has been a powerhouse, driven by substantial matchday revenue, immense commercial strength, and a global brand. However, there has been criticism that a significant portion of this income has been diverted to non-footballing purposes, such as servicing their substantial debt and, as a listed company, paying dividends to shareholders—a practice that's quite rare in the Premier League. Critics argue that this has led to under-investment in the club and its facilities. On the other hand, it's worth noting that investment in the squad has not been lacking, with spending on players over the past five years trailing only Chelsea and Arsenal.
Overview of Financial Results 2023/24
With a return to the Champions League, turnover reached a record £662 million. However, pre-tax profit suffered, with a loss of £131 million compared to a loss of £33 million the previous year.
This downturn was primarily due to increased salaries, higher amortization costs, and a one-off expense related to the 27% stake sold to Sir Jim Ratcliffe. Over the past five years, total pre-tax losses have exceeded £350 million, but the club states that they do not anticipate breaching profit and sustainability regulations.
Turnover
Turnover reached £662 million, marking their highest figure to date. However, growth has been modest over the past five years, with this result being just 8% higher than the 18/19 season.
Although other clubs have yet to release their financial results, it is anticipated that United will rank second in turnover, trailing only their city rivals and maintaining a lead of £50 to £60 million over Liverpool.
With their large capacity and high per fan revenue, United continue to lead the league in matchday revenue. Last season revenue reached £137.1 million, slightly higher than the previous year and another record. A good result considering there were eight fewer home games. Revenue per fan per match grew an impressive 15% from £67 to £77, which United attributes to strong demand for hospitality services. This figure is behind the big London clubs but significantly ahead of their city rivals who generate around £50 per fan per match.
A return to the Champions League boosted broadcast revenue and should return around £50 million. This is offset by the lower league position, but still returns an overall increase in broadcast revenue of £12 million compared to season 22/23.
Commercial revenue was affected by a one-time sponsorship credit because performance fell short of the sponsor's benchmarks, leading to an £11.7 million decline in sponsorship revenue from the previous season. However, this shortfall was fully offset by a boost in retail and merchandising income, with strong returns reported from their megastore.
Staff Costs
At £364 million, United’s salaries and wages increased by 10% from the previous year, though this amount is lower than season 21/22. The participation in the Champions League is cited as the reason for this increase. Additionally, amortization costs, which reflect the write-down of player acquisition expenses, rose by 12% due to significant investment in the squad during the 22/23 season. Together, staff costs and amortization are the third highest in the league, behind only Chelsea and City. Comparing this to their 8th place position highlights the underperformance of the team.
Expressing staff costs as a percentage of turnover (before factoring in profit from player sales), United stands at 83%. This is on the lower end of the league and should not raise concerns regarding UEFA ratios or potential changes to Premier League rules. Given their substantial turnover, this proportion is to be expected.
Historically, United hasn't been known for profiting significantly from player sales. However, the 23/24 season saw a profit of £37 million from the sales of Elanga, Henderson, and Fred. This figure is slightly above their average over the past five years.
Profit and Loss
Back to the profit result. Combined with a poor on-pitch results, a pre-tax loss of £130 million is very concerning for a club of this scale. Based on our estimates for 23/24 we expect only Chelsea to post a worse result.
There’s no denying that high interest expenses, which surged to £63 million due to significant debt levels, are a major burden. Additionally, one-off costs of £47 million related to the 27% sale to Sir Jim Ratcliffe also impacted the financials. However, if we exclude these factors and focus on operating profit—before exceptional items, profit from player sales, and interest payments—we observe a significant decline over the past four seasons. The simple reason is that increases in salaries, amortization (due to high player acquisitions) and other expenses has out striped any gains in turnover, which have been modest.
Change appears imminent. With CEO Omar Berrada and a new management team in place, the club aims to establish a "leaner, more agile, and sustainable structure" and “realize annualized cost savings of approximately £40 million to £45 million, before implementation costs of £10 million”. This transformation has already begun with the recent announcement of staff redundancies.
Player Trading
In the 23/24 season, United continued to invest in their squad with the acquisitions of Höglund, Mount, and Onana. While this spending was lower than the previous season and still significantly behind the league's top spender, Chelsea, United remains the fourth-largest spender over the past three years. After accounting for player sales, they move up to third highest, trailing only Chelsea and Arsenal. It's fair to say that only Arsenal can be satisfied with this ranking.
This summer window saw a further £180 million invested in players, although they followed several other clubs and off-loaded academy players such as McTominay and Greenwood to generate profits. Ten Hag even claimed that McTominay had to be sold because of PSR regulations which seems rather ironic and somewhat embarrassing for a club with United's resources.
Debt
High debt has been a longstanding issue for United since the Glazers' leveraged buyout. It peaked at over £660 million but has since been reduced to approximately £550 million, partly thanks to funds provided by Sir Jim Ratcliffe. This level of debt remains the third highest in the league, trailing only behind Tottenham and Everton, who are funding the ongoing stadium development at Bramley-Moore.
Trading debt is high due activity in the transfer market over the last two seasons.
United's balance sheet has faced significant strain over the past five years. Net assets, which stood at over £400 million in 18/19, fell to $104 million by 22/23. Without Sir Jim Ratcliffe's financial injection, net assets would have dipped into negative territory. This decline highlights the ongoing impact of high debt and persistent losses during this period.
Cash Flow
United continues to generate robust operating cash flows—£270 million over the past three years, which is on par with their peers. However, this cash flow falls short of covering their net investments in players and facilities, which total £400 million. As a result, additional funding was necessary.
There has been considerable media attention on United's previous lack of investment in their facilities. Recently, funds have started to be directed towards improvements, including upgrades to the training complex. This investment will extend into 2025, with an additional £60 million allocated for these efforts. However, the major topic of discussion now centers on the future of the Old Trafford area, with debates ongoing about whether to build a new stadium or undertake a major renovation.
Outlook
As a publicly traded company, United provides financial guidance for the upcoming year. They project revenues between £650 million and £670 million (so not much change), anticipating improved commercial revenue despite not participating in the Champions League, and cost reductions of around £30 million. While another loss is likely, the club has affirmed its commitment to adhering to Profitability and Sustainability Rules.
To access all the numbers, sign up to the Matchday Finance platform.
Comentários