Man Utd post £20m loss, but commercial strength limits the Covid damage

Manchester United - a football club

By David Owen

October 21 – Manchester United today fired the first shot in what is set to be an extremely sobering Premier League financial results season, reporting a pre-tax loss of £20.8 million for the year to end-June 2020.

The loss for the April-to-June period, while Covid-19 was laying waste to global sports, was actually more than twice as big, at £46.5 million.

With the Red Devils restructuring their squad having failed to qualify for the 2019-20 Champions League, spending on players was also heavy, although wage costs fell appreciably.

Net debt ended the year at £474.1 million – well over double the end-June 2019 level, reflecting a severe drawdown of cash from £307.6 million to £51.5 million. The club said it had access to a further £150 million under a revolving credit facility. This provided the “financial flexibility to support the club through the disruption caused by Covid-19”.

The top-line impact of the pandemic and other negative factors was limited to 19%, with revenue dropping from £627.1 million to £509 million, due largely to stability of commercial revenue. This edged up from £275.1 million to £279 million, providing  a cushion that few of the Old Trafford outfit’s main rivals will enjoy to the same extent.

Full-year match-day revenue was down 19% at £89.8 million, with broadcasting revenue, affected by the Champions League absence, tumbling almost 42% to £140.2 million.

The final quarter figures provided a warning that not even United will be entirely immune from an expected Covid-related downturn in sponsorship earnings, however, with revenue from that source in this period dipping 5.5% to £39.2 million.

The total revenue figure compared with a range of £560 million-£580 million initially forecast, implying a Covid-related impact of between £51 million and £71 million in the first half of the calendar year alone.

The club did manage to cut employee benefit expenses from £332.2 million to £284 million, “primarily due to the impact of net player disposals, loan deals and contracted reductions in player salaries as a result of non-participation in the UEFA Champions League”.

While it reported a profit of £18.4 million on the disposal of intangible assets (ie players), the consolidated cash flow statement revealed a net spend of a whopping £190 million-plus, consisting of payments for “intangible assets” of £220.6 million offset only slightly by £29 million of sale proceeds.

The main departure in the period was that of centre-forward Romelu Lukaku to Internazionale, with defenders Chris Smalling (on loan), Matteo Darmian and Ashley Young joining an exodus to Serie A.

Arrivals included Harry Maguire, Daniel James and, in January, the Portuguese midfielder Bruno Fernandes, who has had an impressive early impact, helping to fuel the club’s late surge to third place in a Premier League reduced to a procession by Jürgen Klopp’s Liverpool.

The cash flow statement also disclosed that £23.2 million was paid in dividends during the year, similar to 2018-19.

The 2018-19 figures included exceptional costs of £19.6 million, relating to “compensation to the former manager and certain members of the coaching staff for loss of office”.

Former striker-turned-manager Ole Gunnar Solskjaer took over from José Mourinho in December 2018. There were no exceptional items in the latest figures.

Ed Woodward, executive vice chairman, said the club’s “top priority is to get fans back into the stadium safely and as soon as possible”.

He went on (somewhat cryptically in light of recent developments): “We are also committed to playing a constructive role in helping the wider football pyramid through this period of adversity, while exploring options for making the English game stronger and more sustainable in the long term.

“This requires strategic vision and leadership from all stakeholders, and we look forward to helping drive forward that process in a timely manner.”

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