Manchester United: Moyes 'given less time due to debt'

Manchester United's mountainous debt pile and wage bill meant its owners could ill afford to give David Moyes the same amount of time to succeed as his predecessor Alex Ferguson, it was claimed today.

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The costly failure to qualify for the Champions League and potential longer-term impact on the value of sponsorship deals added to pressure on the bottom line of a business that has recorded growing pre-tax losses for the last two years.

Investors in the club, whose shares are publicly traded on the New York stock exchange, may even already have "priced in" the assumption that Moyes would leave.

Shares had fallen to around 14.50 US dollars (£8.60) a couple of months ago but were already back up to 18 US dollars (£10.70) ahead of today - a similar level to where they were when his appointment was announced last year.

Manchester United is labouring under the weight of vast debts, which were reported as £389.2 million in June, and which cost the club £70.8 million to service over the course of the financial year. Meanwhile wages were up 12% to £180.5 million.

Pre-tax losses were £8.8 million, up from £4.7 million in the year ended June 2012. The club reported a pre-tax profit of £12 million the year before that.

Analyst Louise Cooper said under Moyes, all the main revenue streams had been put under pressure by the failure of the team to make an impact on the pitch.

"Clearly Nike and other sponsors are paying for one of the best and most recognised football brands in the world - not one that cannot even make the Champions League," she said.

"Poor performance on the pitch threatens match day revenues at exactly the time when season ticket renewals are being sent to fans for next season. And of course the fees from broadcasters will be lower if the club does not reach the top slots."

The failure to qualify for the Champions League this year would cost an estimated £25 million this year alone. Large debts and wages were also a factor in precipitating action by owners the Glazer family, she added.

"The debt levels are so large, the Glazers cannot afford to let him stay. And the staff costs are also so large and predominantly fixed that he had to go.

"It took Sir Alex Ferguson some years as manager to achieve the performance that he later become famous for. But the financial position of Manchester United is different now. The Glazers bought the club to make money, even if it is a trophy asset.

"The financials ensured that Moyes was not given the time to perform."

Commercial revenues were up sharply to £152.4 million and these may be expected to hold up in the short term as the global Manchester United "brand" is not likely to be shaken immediately by the unhappy end to the Moyes era.

Richard Hunter, head of equities at Hargreaves Lansdown stock brokers, said: "It is obviously destabilising from a football perspective but in terms of a brand perspective, the momentum is not going to disappear overnight."

But he said another year or two of relatively poor performance on the pitch may begin to concern investors.

A £150 million float of the club on the New York stock exchange in August 2012 saw half the proceeds pocketed by US owners the Glazer family and some of the rest being used to pay down the debt pile.

The share sale of a 10% stake followed the highly-leveraged takeover of Manchester United by the Glazers in 2005.

That resulted in angry protests by fans' groups and subsequent unsuccessful attempts to wrest control of it from the family. Much of the £800 million price tag paid by the Glazers had been financed by borrowing.


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