Manchester United in economic turmoil

ARSALAN MAHAMOOD

During his 26 years at the helm of Manchester United, Sir Alex Ferguson has won it all. A total of 38 trophies, including 13 Premier League titles, and 2 Champions League titles had turned Manchester United from just another English club into a global phenomenon. But since his retirement as the club’s manager on May 8 2013, the club has gone into a severe downward spiral.

manchester united

David Moyes was handpicked by Ferguson to be his replacement, and after a difficult transfer window of pressure purchases, Moyes soon realized that he had very big shoes to fill. To many of the United faithful, Moyes’ appointment was a mistake. They wanted a higher profile manager to replace their long surviving legend. Through the first six months of his tenure as Old Trafford boss, Moyes had broken a lot of records on the negative spectrum and speculation already surrounded his evident sacking. Manchester United finished a measly seventh position on the English league-unimaginable during the golden era of his predecessor.

After the end of the 2013-2014 season, Manchester United had to spend £5.2 million(M) just to terminate the contract with David Moyes and were already adding negative cash flows to their financial stability.

Having failed to qualify for the Champions League for the upcoming term, the Red Devils franchise is predicted to be suffering financially. The prediction comes as it reports a plunge in profits, despite record revenues for 2014. Net income fell 84 per cent for the year, being £23.8M, compared to£146M a year ago. Such is the world of sports entertainment. A failure to bring results and mismanagement from the board and the coaching staff has sent the world’s most commercially successful soccer brand into potential oblivion.

But there still remains light at the end of the tunnel. Having spent over $236M on this past transfer window, the United faithful may still muster high hopes on their new signing. The likes of Angel Di Maria, Ander Herrera and Radamel Falcao among others add heavily to their squad strength.

However, after Louis Van Gaal’s appointment as manager of the club, Manchester United have recorded only 2 points in their first 3 league games of the season. Should the club continue its heavy spending into the January transfer window, LVG’s United will boast one of the most expensive squads on the planet.

In July, Manchester United announced a record-breaking £750M 10-year shirt manufacturer sponsorship deal with Adidas, after Nike decided to end its association with the club at the close of the 2014-15 season.

Nike had been given a period of exclusivity to negotiate an extension with United and also retained the right to match any other offer.

However, the company decided against exercising either option, claiming the terms “did not represent good value for Nike’s shareholders”.

Champions League winner Real Madrid’s £31M-a-year deal with Adidas was previously the biggest club deal.

Adidas will provide training and playing kits to all the club’s teams and will have the exclusive right to distribute dual- branded merchandising products worldwide.

The club, majority-owned by the American Glazer family, said revenue increased 19 per cent to £433.2M in the 2013-14 financial year, thanks to improved TV and sponsorship deals.

However, that is now predicted to fall to between £385 and £395M.

Similarly, underlying profits were £130.1M for the year up until June 30 and that is now forecast to fall to between £90 and £95M.

The results also showed that David Moyes and his back- room staff received a total of £5.2M in compensation following the former Manchester United manager’s sacking in April after less than a year in the job.

The question then arises, how do the numbers add up? The answer is simple: if the disastrous run on the pitch continues, the era of Manchester United may finally come to a bitter end.

Manchester U in Numbers
  • The Glazer family bought the club for £790M in 2005
  • Club’s commercial operations grew by 30% to £34.9M in 2012–13 (Deloitte)
  • The club still owes about £400m in loans used to finance the takeover
  • £10m-a-year interest payments due on the club’s debt
  • Revenue for the 2013–14 financial year £433.2M
  • Angel Di Maria is the club record signing-bought for £59.7M
  • Net profit of £23.8M for 2013–14
  • Wayne Rooney’s new four-year deal worth a reported £300,000 a week
  • Chevrolet will pay £53M a year to have its name on United’s shirts
  • Staff costs £214.8M in 2013–14 financial year
  • Aon paid £120M to sponsor the club’s training — ground and kit
  • No Champions League football will cost £50M — 10% of annual revenue (Deloitte)

Source: BBC

 

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