Still plenty to cheer for Manchester United shareholders despite David Moyes disaster

The replacement of Manchester United’s stalwart chief Sir Alex Ferguson has been an embarrassment for fans used to high footballing standards, but the club is not doing so badly off the pitch.

Former Manchester United manager David Moyes. Darren Staples / Reuters

Manchester United’s worst season since at least 1992 was underscored this week by the departure of the English Premier League champions’ manager David Moyes.

As a business, the club still has few peers in “the beautiful game”.

The team has lost 11 of its 34 league games under Moyes and is in seventh place with four games to go, a year after winning a record 20th English title.

Off the field, United boosted sponsorship sales by 39 per cent in the quarter ended December 31, the most recent for which results are available.

It has bigger ticket and other match-day sales than any club in the world, according to Deloitte. Moyes was less than a season into a six-year contract.

“It’s an unsettling time for the team but sales aren’t going to drop off a cliff,” says Dave Chattaway, who helps compile an annual football club brand ranking for the London-based Brand Finance. “Most other teams are still playing catch-up.”

United is using what the executive vice chairman Ed Woodward calls a “scalpel, not a spade” approach to snagging sponsors from Chile to Vietnam.

Since the Glazer family — Americans who also own the National Football League’s Tampa Bay Buccaneers — took over in 2005, United has set up commercial offices in London and Hong Kong. FC Barcelona followed United last year by agreeing to rent a Hong Kong office.

The English club’s profit for the three months ended December 31 was £19.8 million (Dh122.2m), compared with £19m in the year-earlier period. That is about the same profit Spain’s Real Madrid and Barcelona, football’s biggest teams by sales, make in an entire year.

United had gross debt of £356m at the end of last year, down 2.7 per cent from a year earlier, according to its most recent earnings report. The team was debt-free before the Glazers’ purchase, and it has paid about £600m in interest and other financing costs since then.

The debt sparked fan protests and attempts to buy the team, with thousands of supporters wearing green and gold to represent the club’s origins as Newton Heath.

Some of the newest sponsors in United’s 35-company portfolio — the South Korean food company Ottogi and the Thai confectionery maker European Food — were announced this month.

“It’s a very robust business,” says Dominic Curran, the managing director of London-based sponsorship consultancy Synergy.

“They’ve always been slightly ahead of the crowd. One poor season won’t affect that.”

Randal Konik, a Jefferies Group analyst, says he will keep his “buy” rating, with a US$21 price target.

Manchester United’s share price rose 6 per cent to $18.78 in New York Stock Exchange trading on Tuesday. The Glazers held an initial public offering in August 2012, raising $233m by selling 10 per cent of the club at $14 per share.

Some of the IPO shares were purchased by fans, which also helps support the stock price, says Andrew Wilkinson, the chief market analyst at the US-based Interactive Brokers.

At the same time, investors’ view of United’s earnings outlook could be too optimistic, he adds.

There could be “deeper disappointment at stake should the trophy cabinet remain bare for a second season”.

United will miss out next season by not qualifying for the Champions League for the first time in 19 years. The elite European competition earned the club €35.6 million euros (Dh181m) in prize money last season as well as extra ticket and corporate hospitality sales.

It had match-day sales of €127.3m last season, 35 per cent more than London-based Premier League competitor Chelsea, according to Deloitte.

United’s slump under Moyes will limit future sponsorship deals and affect shirt sales, says Edward Freedman, who headed United’s merchandising unit in the 1990s. A 13-year deal with Nike, worth £303m, expires next year and Mr Woodward will try to increase that income.

United is “living on former glories at the moment”, Mr Freedman says.

The club has no option but to spend on talent if it is to retain its status and value, according to Jim O’Neill, the former Goldman Sachs executive who led a consortium that wanted to buy the team following fan dissatisfaction with the Glazers in 2010.

“They’ve handled the past year so badly I don’t see any other path for them,” says Mr O’Neill, a former member of the club’s board.

“Let’s say we fast-forward to October and United were outside the top four, one would imagine the market would completely derate the share price and then they’ve got problems.”

Making the slide especially painful for United fans is this season’s success for Liverpool, the record English champions before the arrival of United’s previous manager Sir Alex Ferguson.

Liverpool, the 18-time champions, leads the Premier League by five points with three games to play, while Chelsea and Manchester City, whose 2011-12 title was its first since 1968, are still in the chase.

Most United fans will stay loyal while the 136-year-old club seeks to recover its form, and commercial partners will also remain in place, Mr Chattaway says.

General Motors is paying $559m to put its Chevrolet brand on United’s shirts through 2021.

“They have plenty of markets locked up,” Mr Chattaway says.

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