By Geraldine Ryan and John Considine
In a previous post on this blog (here) the link between sporting and financial performance was highlighted using Chelsea and Bolton Wanderers. Last Thursday the sports pages carried stories of Manchester United's exit from the Capital One cup while the financial pages carried stories about a slip in its relative financial performance. There is no denying that the two are linked but it can be a bit more complicated that it seems on the surface.
The financial stories on Thursday were based on the Deloitte Football Money League report (here). The report stated that, for the first time in the 17 years of its publication, Manchester United had slipped outside the top three. This financial bad news arrives at the same time as the penalty defeat to Sunderland. It is easy to believe that the empire is crumbling. It is also easy to believe that all this is the fault of David Moyes.
It is not that simple. Two points should be noted. First, these results refer to 2012/13. It is hard to link these figures to Moyes. Second, and much more importantly, these results are pretty good ones. Admittedly, United have slipped to fourth but there are some unusual circumstances. For example, Bayern Munich had an exceptionally successful year on the field and reaped the rewards that came with it. Even Chelsea posted profits for the year they won the Champions League. Deloitte point to Bayern's on field success and to "unfavourable movements in the Sterling exchange rate" as the main reasons the Old Trafford club swapped places with the German giant.
It is not that simple. Two points should be noted. First, these results refer to 2012/13. It is hard to link these figures to Moyes. Second, and much more importantly, these results are pretty good ones. Admittedly, United have slipped to fourth but there are some unusual circumstances. For example, Bayern Munich had an exceptionally successful year on the field and reaped the rewards that came with it. Even Chelsea posted profits for the year they won the Champions League. Deloitte point to Bayern's on field success and to "unfavourable movements in the Sterling exchange rate" as the main reasons the Old Trafford club swapped places with the German giant.
In addition, to providing a financial performance comparison between teams, Deloitte also provide details on how teams perform relative to previous years. When we examine these figures the United performance is impressive. The revenue profile shows a steady increase. A 7% increase over 2012. The swapping of positions with Bayern can be explained by Bayern's super year.
Of course, the above financial performance relates to the past. But the immediate future also looks pretty solid as United will benefit from their new shirt deal with Chevrolet for the seven seasons begining in 2014/15. The deal was signed last year. Another deal signed last year is for the sponsorship of their training ground (with Aon). But will United remain as attractive a partner for sponsors if their current on-field performances continue? Unlikely.
Many point to the movements in the United share price as a better indicator of how the markets forecast the prospects for United. Using the share prices the outlook for United is not so rosy. There is little arguing with the decline from $18 when Ferguson announced his retirement to the current value of approximately $15. The share price took a dive in late December possibly driven by their position in the Premier League and possible driven by short selling by Odey Asset Management (see Daily Mail story here). Since Moyes took over it is said to have wiped £150m off the value of the shares (here). If performances on the field do not improve then expect negative financial implications. This can only be sustained so long before the financial performance will damage the sporting performance. Nobody expects Manchester United to follow the example of Leeds United but the negative feedback between sporting and financial performance can become a vicious cycle.
Of course, the above financial performance relates to the past. But the immediate future also looks pretty solid as United will benefit from their new shirt deal with Chevrolet for the seven seasons begining in 2014/15. The deal was signed last year. Another deal signed last year is for the sponsorship of their training ground (with Aon). But will United remain as attractive a partner for sponsors if their current on-field performances continue? Unlikely.
Many point to the movements in the United share price as a better indicator of how the markets forecast the prospects for United. Using the share prices the outlook for United is not so rosy. There is little arguing with the decline from $18 when Ferguson announced his retirement to the current value of approximately $15. The share price took a dive in late December possibly driven by their position in the Premier League and possible driven by short selling by Odey Asset Management (see Daily Mail story here). Since Moyes took over it is said to have wiped £150m off the value of the shares (here). If performances on the field do not improve then expect negative financial implications. This can only be sustained so long before the financial performance will damage the sporting performance. Nobody expects Manchester United to follow the example of Leeds United but the negative feedback between sporting and financial performance can become a vicious cycle.
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