The Red Devils have been hit hard by the economic effects of Covid-19, but things will only get worse if they miss the elite European competition
As Manchester United executive vice president Ed Woodward spoke to club investors on Thursday to discuss the club’s latest round of financial results, the numbers looked grim.
More than 40% increase in net debt, declining revenues and about 23 million pounds sterling ($ 28 million) already lost due to Covid-19 made headlines, and the worst is yet to come. The closed-door games, the club shop and museum remaining closed and a huge reduction in broadcast revenues will ensure that next quarter’s results will have a similar negative impact.
But is it as bad as it sounds?
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As Woodward pointed out in the appeal, United is facing “one of the most trying and extraordinary times” in its 142 years of history. “We have to recognize that this crisis will not go away overnight and that the world that will emerge will be different from what it was before,” he said.
The test times are coming, and not just for one of the biggest clubs in the world. Lower down the football pyramid, it is predicted that some clubs will not survive the financial impact of the pandemic, and the estimated loss of £ 23 million – an amount that will continue to increase if matches are longer are not played – will be replicated in all other Premier League clubs.
“The absence of the Champions League and the impact of Covid-19 have been seen in United’s latest financial results. They are poorer than they normally would be, but they are not horrible,” said Kieran. Maguire, football finance expert. Goal. “The fourth quarter results will be pretty horrible.
“They still have a huge payroll to pay and without matches there won’t be as much money to come, so they will expect further deterioration in the fourth quarter.”
The real impact of the pandemic will be visible in the next financial results, published in three months, but United is confident that its business model and strong business partnership should, in a way, help them weather the storm.
“There is no doubt that the economic ramifications of this global pandemic will continue to resonate for years to come, but we remain optimistic about the long-term prospects for sponsorship activities and our ability to remain a market leader”, Richard Arnold said the general manager of the club group.
The increase of £ 127.4 million ($ 155 million) in club debt is not considered to be of concern to Old Trafford. Goal learned that the amount is so high due to their recent high profile signatures, Leicester City having asked for money in advance for the transfer of £ 80 million from Harry Maguire in the summer of 2019, while certain payments have already been made to Sporting CP since Bruno Arrival of Fernandes in January.
It is understood that this figure will not have a detrimental effect on any potential transfer activity in the future, the financial results showing that the club has 90 million pounds sterling (110 million dollars), plus 150 million additional pounds sterling ($ 183 million). in credit reserves. Money is available for the transfer window, but, as Woodward warned, they don’t expect a “status quo”.
United’s cash balance will put them in a solid negotiating position when the transfer window opens, and it is understood that it is hoped that the club will remain active whenever agreements can be reached again. But any expectation that they will spend hundreds of millions of pounds is considered unrealistic.
And if United’s debt is not yet a concern, the impact of non-participation in the Champions League, which is also reflected in the third quarter results, should be.
United’s failure to qualify for elite European club competition this season has had an impact on revenue, although there has been a slight drop in player wages due to Champions League clauses in their contracts. This turnover will only get worse if they no longer qualify for 2020-2021.
Their contract with kit supplier Adidas, for example, contains a clause which means that failing to qualify for the Champions League for a second consecutive season would cut income by 30% – an amount estimated at around 22 million pounds sterling ($ 27 million). . Factor that in another year of lost television revenue as well as the blow it will give to their overall brand, and the problems would start to mount.
For now, United is also expected to miss around £ 12 million (US $ 15 million) as it cannot participate in a preseason tour abroad this summer, and overall revenues will continue to be affected while the pandemic is on. The final figures will make the reading even darker than today.
And while this is largely beyond the control of the club, a positive end to the season on the field, leading to the securing of Champions League football, puts them in a much stronger position than if they failed to new.
While Manchester City’s appeal against their two-year Champions League ban is scheduled to be heard by the Sports Arbitral Tribunal (CAS) between June 8 and 10, United may well know whether a fifth of fourth place will be enough for the Champions League. qualification when they finally return to action. Of course, they could still win the Europa League too, and as such, they are well placed to reserve their place.
Off the field, United’s trade deals mean they are in a more stable position than many of their rivals. Arnold described the support they received from their partners in these uncertain times as “phenomenal”, and business revenues this quarter increased.
And while these deals are essential for United’s finances in the future, it is the field performance in the last games of the season – if it goes as planned – that will determine the team’s fortunes and balance sheets in the future. .