Manchester United shares have declined to trade at the lowest levels since 2012 as the market grows impatient with woeful performances on the pitch and a weakening of their finances.
Indeed, the Glaziers may be regretting they didn’t sell more of the club when they cashed in around $19 in late 2021.
The Glazers took advantage of a post-Ronaldo boost in the share price and the Manchester clubs shares have fallen over 35% since then and traded at lows of $12.10 this week.
Manchester United rot runs deep
The pandemic ravaged football clubs’ revenues as gates shut to fans and extended periods of no games at all hit revenues.
However, as many teams are bounce back from the period of disruption, its seems as though Manchester United have become an entirely different club, both on the field, and financially.
There is still delusion among their fans that Manchester United are the biggest club in the world. It is evident by their performances on the pitch this is no longer the case, and a quick look at their finances confirms this.
Earnings outlook
Manchester United break their earnings down into three categories; commercial, match day, and broadcasting.
Not one of these categories has a strong outlook and all have failed to bounce back in the post-pandemic world to the extent investors would like.
Manchester United have consistently seen sponsorship revenue drop off over the past year. In their quarterly Q2 2022 update, sponsorship revenue had declined by 6.9% to £35.2m year-on-year. Q1 2022 saw sponsorship revenue 0.5% drop to £36.2m.
Manchester United recorded an overall reduction 16.8% in commercial revenue in 2021.
They reasoned the destruction in commercial revenue was down to COVID-19 and inability to partake in certain tours.
This may be acceptable for the 2021 FY, but the continued decline in 2022 FY will make difficult reading for shareholders.
You could point to other areas of the business if you wanted to look past this to something more optimistic. But you can’t get away from the fact sponsors aren’t as interested in the club as they once were, and the argument United are the biggest club in the world, is simply for the birds.
Falling broadcast revenue
In their most recent update, the club said broadcast revenue fell by 20.5% to £86.4m. This was attributed to four matches being moved or cancelled in the period.
However, falling broadcast revenue is something shareholders may have to get used to as their chances of qualifying for the Champions League looks all but dead. This will be particularly painful if United miss out on the new enhanced fees level clubs starting from 2024. A long spell out of Europe’s top competition will likely increase the gulf between England’s top teams and Manchester United.
In addition, broadcast merit fees are set to fall for the upcoming season. Merit fees are based on where a Premier League team finishes. This season, Manchester United are set to slide down the league and see their broadcast payments go with them.
Looking forward, investors may be concerned that they also see their facilities payments hit, which are payed when a game is televised.
If United performances on the field are persistently abysmal, the neutral – and maybe even their own fans – will switch them off and the attraction for broadcasters such as Sky and BT to play their games on TV will diminish.
Matchday revenue is starting to bounce back but this could be short lived should results continue to disappoint.
Financial Health
Manchester United fans are furious at the way the Glazers are treating the club, and well they should be.
The club has been racking up substantial debts and all of the club’s retained earnings have evaporated to amount to a deficit of £40.2m as of 31st December 2021.
This isn’t a disaster, but given adjusted basic loss per share accelerated 27.41p in 2021, and Reuters estimates this will deepen further to 35p in 2022, it is likely the club could soon need to raise further finance, if they want to buy their way out of the rut they are in.
Manchester United’s debt stood at £495m at the end of 2021 which is £40m increase over the prior 12 months.
There is an argument the Glazers are trying to improve the club finances by provisioning resources for new players, and the blame lays with the players who seem not to care about the clubs woeful performance.
We will, one day, get this club back to where it deserves to be. Today was another bad moment in a difficult season but when we still have this shirt to defend we will not give up. 🔴 pic.twitter.com/dkHn98yHSn
— David de Gea (@D_DeGea) March 6, 2022
However, hopes that interim manager, Ralf ‘the godfather of gegenpressing’ Rangnick, will ‘one day’ turn the club’s fortunes around need to become a reality soon, or the Manchester United share price will be facing persistent pressure.