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A first glimpse into the impact (-ish) of COVID-19 on the finances of football clubs was revealed in Manutd's June 2020 annual report. Following an abridged version released on 21/10/2020, the full accounts were published on 23/10/2020. Thread.
For only the second time in 7 years, Manutd reported a loss before taxation. However, earnings before interest, taxes, depreciation, and amortisation (EBITDA) remained at a healthy level. Manutd's EBITDA underlines the strength of the club's core business activities.
Much has been made of Manutd's commercial focus post-Ferguson (SAF). Rightfully so. The graph shows that commercial revenue has been on the rise from 2005 (Glazer's takeover) but substantially increased in 2013, the year SAF retired.
Without a doubt, Manutd's strong commercial revenue has provided financial buffer and kept the club profitable, especially as on-field performances have declined.
Manutd's matchday revenue (ticket and hospitality income) fell by £21m (19%) between 2019 and 2020. COVID-19 and playing in the Europa League are responsible for the decline in revenue.
Only three of the 38 matches of the EPL were played behind close doors. However, even if fans were allowed into the stadium, only revenue for the Sheffield United game would have been accounted for as the other home games were played in July (Manutd’s year end is 30 June).
It is important to note that match day revenue and portions of broadcast revenue were already paid to clubs, but due to IFRS 15, clubs initially recognised these revenues as liabilities.
Upon performance of obligations (matches being played) clubs recognise the revenue.
Upon performance of obligations (matches being played) clubs recognise the revenue.
Similarly, UEL games began in August and were played at neutral grounds. Hence no matchday revenue for June 2020 year end.
Nevertheless, UEL matchday revenue is significantly lower than UCL. See extract from Manutd's annual account which shows the differential.
Nevertheless, UEL matchday revenue is significantly lower than UCL. See extract from Manutd's annual account which shows the differential.
Broadcast revenue shrunk by £101m (42%). Once again, playing in the UEL and the fact that 8 of the 12 post lockdown games were played after 30 June 2020 year end. The revenue for these games would be recognised in the 2020/2021 annual accounts.
This excerpt from the account means that Manutd has to improve on-field performances. When a team wins titles, they receive more matchday and broadcast revenue and their brand value increases (potential for improved commerical revenue).
Liverpool's on-field resurgence exemplifies the point.
By winning the UCL and having strong performances in the EPL, the clubs commercial, broadcast and matchday revenue have increased.
By winning the UCL and having strong performances in the EPL, the clubs commercial, broadcast and matchday revenue have increased.
Manutd's wage bill has been an area of concern for fans. The club had made moves to improve the wage bill and COVID-19 has no bearing on this.
With the release of Sanchez (loan), Smalling (loan), Darmian (sale), Lukaku (sale), Herrera (free), ...
With the release of Sanchez (loan), Smalling (loan), Darmian (sale), Lukaku (sale), Herrera (free), ...
... Fellaini (sale), Valencia (free), and Young (all reportedly on high salaries) Manutd's wage bill has reduced considerably.
Cavani, DVB, Pellistri and Telles are unlikely to significantly increase the wage bill. Also, Sanchez and Smalling are now completely off the books.
Cavani, DVB, Pellistri and Telles are unlikely to significantly increase the wage bill. Also, Sanchez and Smalling are now completely off the books.
The graph below shows how much of Manutd's revenue is spent on player related expenses. Player expenses is an addition of wages and annual transfer fees paid for players. The constant nature of these measures is arguably responsible for Manutd's impressive EBITDA.
Now to transfers. With the exception of 2009 - when Manutd sold Ronaldo for £80m - the club has spent more than it has received for transfers.
A subtle but important thing to note is the spike from 2014 through to 2020 in comparison to 2005 - 2013.
A subtle but important thing to note is the spike from 2014 through to 2020 in comparison to 2005 - 2013.
That's the Fergie effect! Manutd spent far less when the Scottish coach was at the "wheel". Also, the club won more silverware in that period.
This might be controversial, but the facts are right there, the Board has spent a lot of money, post-fergie.
This might be controversial, but the facts are right there, the Board has spent a lot of money, post-fergie.
Furthermore, no club has spent more than Manutd since SAF retired. During this period the club has had four Managers. Make of that what you will.
Nevertheless, the word from Old Trafford has been a "cultural reset" and subsequent signings are finally following a pattern.
Manutd's debt has increased over the years. Historically high and positive cash flows from operation has given providers of credit comfort.
This is unlikely to change, even though for the first time in 10 years, the club's cash flow was negative.
This is unlikely to change, even though for the first time in 10 years, the club's cash flow was negative.
The financial risk of COVID-19 is temporal (touch wood) and with the club back in the UCL, cash flow is expected to return to similar or even higher levels.
Also, the agreements for the loan requires Manutd's EBITDA to not fall below £65m. EBITDA currently stands at £132m.
Also, the agreements for the loan requires Manutd's EBITDA to not fall below £65m. EBITDA currently stands at £132m.
A worry might be that the loans £341m (3.79%) and £175m (LIBOR +1.25% to 1.75%) mature in 2027 and 2029 respectively.
The club also has a £150m (LIBOR +1.25% -1.75%) revolving loan facility which it is yet to draw from.
The club also has a £150m (LIBOR +1.25% -1.75%) revolving loan facility which it is yet to draw from.
The cost of the current ownership structure is seen the graph below.
Manutd has paid out dividend at a rate of 9% per share which has translated to between £20m and £23m annually.
[It could be argued that this is the cost of increased revenue mentioned earlier].
![The cost of the current ownership structure is seen the graph below. Manutd has paid out dividend at a rate of 9% per share which has translated to between £20m and £23m annually. [It could be argued that this is the cost of increased revenue mentioned earlier].](https://pbs.twimg.com/media/ElVekqCWkAA5oNJ.jpg "The cost of the current ownership structure is seen the graph below. Manutd has paid out dividend at a rate of 9% per share which has translated to between £20m and £23m annually. [It could be argued that this is the cost of increased revenue mentioned earlier].")
Manutd has paid out dividend at a rate of 9% per share which has translated to between £20m and £23m annually.
[It could be argued that this is the cost of increased revenue mentioned earlier].
In comparison to other football clubs, Manutd is a financial juggernaut even without on-field success. If the club can rediscover half of its success under SAF, the financial performance would be staggering.
Was the signing of Sancho possible on the terms Dortmund reportedly wanted? Amidst the financial climate caused by COVID-19? maybe (£150m revolving facility etc).
But it would have been too risky. Especially as fans are yet to be allowed into stadiums.
But it would have been too risky. Especially as fans are yet to be allowed into stadiums.
The full effects of COVID-19 would only be apparent if fans are not allowed into stadiums by January/February, when Q1 financials of Manutd is released.
End of thread.
End of thread.
