Season review
Manchester United went into the 2020/21 with cautious optimism following a strong end to the 2019/20 season and three semi-final appearances. The season did not start as planned with the club exiting the UEFA Champions League (UCL) at the group stage. Runs to the latter rounds of the domestic cups were achieved again, however a trophy still alluded Ole.
Optimism near the end of the season to finally win a trophy was growing with the club reaching the final of the UEFA Europa League (UEL). However, Manchester United was bested by Villareal to end the season on a sour note. A positive was a 2nd placed finish in the Premier League, its joint-best performance since Sir Alex retired.
The season was partly overshadowed by the infamous European Super League plans which following fan backlash were quickly killed.
From a financial perspective, fans absence from stadium was felt as United saw a decline in revenue driven by this. This once again highlights the importance of fans both on and off the pitch.
COVID-19 once again heavily impacted profitability and Manchester United recorded back-to-back losses for the first time since 2013.
This article analyses the 2021 finances of Manchester United.
Revenue
Manchester United saw its revenue drop from £509m to £494m (3%), its lowest levels since 2015. COVID-19 was the main reason, with no fans being in attendance seeing significant declines in matchday and commercial revenue.
Matchday
Matchday revenue was non-existent for Manchester United in 2020/21, falling from £90m to £7m. Manchester United welcomed 10,000 fans for its final Premier League home game and will be looking forward to full attendance in 2021/22 and the return of matchday revenue.
Broadcast
Broadcast revenue grew significantly from £140m to £255m (82%). This was driven by the club’s return to the UCL. Also playing a major factor was revenue deferred into the 2021 financial year from 2020. 10 games relating to the 2019/20 were played in the 2021 financial year and recognised as such.
Broadcast revenue was at its highest ever level in 2021 due to a bumper year including some 2020 revenue. It will be difficult for United to match this figure in 2022 but a strong run in the UCL may be enough to do it.
Commercial
Commercial revenue fell from £279m to £232m (17%), its lowest level since 2015. This was driven by the closure of the megastore for large periods due to COVID-19 restrictions and the lack of preseason tour. With no preseason tour ahead of the 2021/22 season commercial revenue is likely to be suppressed again.
In addition, a new main shirt deal with TeamViewer on reported lower terms than the Chevrolet deal will also hurt commercial revenue.
Manchester United felt the full impact fans have on club finances with a huge reduction in matchday revenue and impacted commercial revenue. 2021/22 will see revenue likely back above the £500m mark. The size of the increase will be driven by performance in the UCL and also in the Premier League to a lesser extent.
Operating costs
Manchester United saw its operating costs rise slightly from £395m to £414m (5%) despite falling revenue, hurting profitability.
Wages
United’ wage bill rose from £284m to £323m (14%) following bonuses related to UCL qualification and playing squad investment. This saw its wages to revenue ratio rise to 65%. This is still below the recommended maximum level of 70% by UEFA.
Manchester United had a star studded 2021/22 summer transfer window with the arrivals of Ronaldo, Varane and Sancho. This is likely to have a significant impact on wages in 2022.
Other costs
Manchester United saw other operating costs fall 18% to £92m as a result of reduced business activity due to COVID-19. This is largely because of no stadium tours, preseason tour or matchday operations.
Manchester United can expect a rise in operating costs due to wages growth and increased business activity in 2022. The club will be banking on a rise in revenue to more than offset this and look to achieve a profitable year.
Transfers
Manchester United spent significantly less in 2021 as the transfer market was suppressed as clubs approached with caution following the pandemic.
Joining Manchester United were Van De Beek (£35m), Diallo (£19m), Telles (£14m), Pellistri (£8m) for a total £75m.
Leaving Old Trafford were Smalling (£14m), Lingard (loan – £2m), Fosu-Mensah (£2m) for £17m (rounding).
Amortisation
Manchester United incurred £127m of player amortisation charges, remaining relatively flat. A similar level of spending in 2021/22 means there is likely to be little movement in 2022.
Profit on player sales
Manchester United only recorded £7m in profit on player sales in 2021 due to limited sales. The sale of Daniel James in 2021/22, plus any winter sales will likely see a higher number in 2022.
Transfer debtors / creditors
The Red Devils are unsurprisingly a net transfer creditor, owing more in transfer fees than it is owed. Manchester United owe £136m in transfer fees while only being owed £43m, a net creditor position of £93m.
Manchester United is a financial powerhouse who do not need to rely on transfer sales for income. The club has the resources to spend significant sums in the transfer market without massive losses due to its high revenues.
Profitability
United recorded back-to-back losses for the first time since 2013 as the full impact of COVID-19 was felt.
Operating profit / loss before player trading
Operating profits before player trading fell from £114m to £80m (29%) due to the dual effect of a decline in revenue and rise in costs. With revenue expected to rise in 2022, Manchester United will be hoping this number exceeds £100m again.
Operating profit / loss after player trading
After player trading, Manchester United saw a £5m profit turn into a £37m loss. This was mainly driven by the fall in revenue but an £11m lower profit on player sales figure was also a factor.
The sale of Daniel James in 2021/22 will help boost this number.
Profit / loss before tax
Manchester United recorded a £24m loss before tax due to £13m in finance income due to substantial foreign exchange gains on its US dollar borrowings.
Manchester United suffered back-to-back losses for the first time since 2013 and will not want to make it a hattrick. The quantum of revenue growth will be important and a run to the UCL knockout rounds may be the difference between a profit and a loss.
Assets / Liabilities
It is well documented the level of debt held by Manchester United in the Glazer era and 2021 was no different.
Cash flow
Cash levels more than doubled from £52m to £111m. This was largely driven by £113m in cash inflows from football operations. This more than covered its £92m outflow in transfer fees and £6m in capital expenditure.
Manchester United also benefitted from a net £48m in new financing from a new £60m revolving facility arranged.
Debt
Manchester United’s debt levels remained relatively flat at £530m. This debt has remained relatively consistent across the last five years, fluctuating around the £500m mark.
The debt does have the impact of sizeable finance costs however this year due to favourable hedging movements a £13m net finance income was generated.
Net debt
Net debt now stands at £429m, lower than the £474m in 2020 following a spike due to COVID-19. This debt is part of the current financial fabric of the club ever since the Glazers completed their leverage buy-out.
It has not stopped United being a financial powerhouse and the club remain one of the highest revenue-generating clubs in world football. The Glazers have however shown a willingness to divest, putting some of its voting shares up for sale which will be one to watch in the coming years.
Final Remarks
Despite back-to-back losses, Manchester United appear well positioned to return to profitability in the near future. UCL performance will be key to this, and the Red Devils will be hoping to mount title challenge which may help increase revenue elsewhere.
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