Friday, May 18, 2012

Can United maintain competitive standards?

How does Manchester United finishing without any domestic silverware or European success factor into the long-term future of the club?

Associate Press reports on Thursday showed that Manchester United revealed earnings dropping and cash reserves being halved in the first three months of the year.
United was deposed as Premier League champions by Manchester City on Sunday and eliminated from the lucrative Champions League at the group stage in December.

The quarterly accounts show that earnings for the club owned by the American Glazer family dipped by almost 10 percent year-on-year to 20.4 million pounds ($32.3 million) and revenue dipped by six percent by 70.8 million pounds ($112.1 million).

United’s cash reserves also dropped from 50.9 million pounds (then $80 million) at the end of 2011 to 25.6 million pounds (then $41 million) by March 31. The figure had stood at 150.6 million pounds (then $238 million) at the end of 2010.

“I do think everyone at the club, from (manager) Alex (Ferguson) down, agree we underperformed in Europe this year,” United chief executive David Gill said earlier this week.

Despite earnings and cash reserves being cut in half, the 19-time English champions have been ranked football’s most valuable club for eight years in a row by Forbes magazine, which valued them at $2.24 billion last month.

The club remains English football’s biggest moneymaker, with enhanced sponsorship deals offsetting the drop in revenue from failing to advance further in the Champions League.

In fact, commercial revenue rose 15 percent year-on-year to 27.3 million pounds ($43.4 million) and exceeded match-day revenue, including ticket sales, in the first three months of 2012.

“We should recognize we’re a very successful club, one of the top three in terms of turnover in world football, and it generates a lot of cash to invest in players,” Gill said. “We will continue to do so and our style is both buying players and giving youth a chance.”

United continues to invest in developing Old Trafford and its training ground while spending more on its squad, with wages rising by 9 percent year-on-year to 112.4 million pounds ($178 million).

“This increase largely relates to growth in player remuneration, driven by new player acquisitions and further contractual negotiations together with increased costs and headcount arising from the continued growth in our sponsorship and commercial operations,” United’s quarterly report says.

The club’s debt, resulting from the 2005 takeover by Glazers, has been cut by 61 million pounds year-on-year to 423.3 million pounds ($673.8 million) despite incurring 18.2 million pounds ($28.8 million) in interest payments in three months.

So what does this mean?  Manchester United are able to continue to do business as usual, but have proven to be more frugal with spending than their domestic rivals in Manchester City and Chelsea.

Manchester United chief executive David Gill is confident United will be able to challenge their big-spending rivals in the transfer market this summer.

However, Gill admits his club could quite easily be 'out-muscled' by Manchester City when going for certain targets and concedes they may have to resort to charm to persuade some players to snub the millions on offer at the Etihad Stadium.
'We believe we can compete,' Gill said.

'Our turnover and our cash profits demonstrate we can invest in players as necessary. Other clubs may pay slightly more but we pay very good salaries.

'The romance of United is there for everyone to see.

'A player coming to Manchester United has the benefit of working under Sir Alex Ferguson, playing in front of 76,000 every week, and there is our history and heritage and the commercial spin-offs.

'We shouldn't be shy or embarrassed or worried about not being able to attract top players because I firmly believe we can.

'You can play with great players in a fantastic environment. That's a very good package so why wouldn't you choose that?'

Last summer Ferguson thought he had pulled off a transfer coup by persuading Samir Nasri to move to Old Trafford after the France midfielder decided to leave Arsenal.
But the 24-year-old opted instead to join City in a deal that reportedly saw his wage soar to £175,000 a week.

Gill admits United may lose out on some signings this summer if a player's wage is a major factor in the transfer.

'If a player says 'I'm relaxed I can either go to City, United or Chelsea and it will just come down to a money thing' then they may out-muscle us,' Gill said.

'But that's their choice. We say: 'fine, have our own parameters'. We have to make sure our salary ranges are appropriate.'

This process of being more frugal with spending was magnified when Manchester United sold Cristiano Ronaldo to Real Madrid in 2009 for a transfer worth £80 million (€93.9 million/$131.6 million), and not replacing him with a big signing. 

Despite taking a more fiscally responsible approach with the money made from the Ronaldo transfer, United still finished with a championship in 2010-11, and two runner-up finishes in 2009-10 and 2011-12 (with this past season ending with a tie for the highest number of points earned).

United appears to be taking a more responsible approach to spending the past 2-3 years, and the hope is that they can maintain their high standards of domestic and European success without being compromised with financial challenges.

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