Why Manchester United will need to work smarter as PSR woes loom

Manchester United published their quarterly financial results this week.

As a listed company, United must update shareholders and the New York Stock Exchange on the club’s financial position every three months, with the most recent set of results showing a pre-tax loss of £89.2m sterling for the third. quarter of the financial year, ended March 31.

The club still has three months to run in the 2023/24 financial year, until the end of June, and after such heavy losses at the start of the year, which the club attributed largely to costs associated with the purchase of shares. by Sir Jim Ratcliffe and Ineos, as well as nine fewer home games than the same period last year.

The published financials have put a spotlight on the club’s position on the profit and sustainability rule (PSR), with the club sailing close to the wind on what is allowed.

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The acronym PSR has become part of footballing parlance over the past 18 months, with Everton twice and Nottingham Forest receiving points deductions for PSR infringements during the 2023/24 season.

PSR, the Premier League’s financial controls which were introduced in 2012, allow clubs to lose up to £105m over a three-year period, with deductions allowed for losses related to investment in infrastructure, academy, women’s team, initiatives community. , as well as the impact of Covid-19 on finances.

A number of clubs had to make moves to stay in line with the PSR last month, with June 30 being the end of the year for all but three Premier League clubs, and the transfer of players taking place to maximize profit as clubs to get below the £105m threshold. .

Manchester United were not one of those clubs struggling to sell players ahead of the June 30 deadline, indicating confidence from the Old Trafford hierarchy that they would honor the PSR. But with United’s quarterly results out Wednesday, it looks like they just managed to get into compliance, and that requires a significant cost to be an allowable deduction.

The 27.7% stake in the club acquired by Ratcliffe in January carried with it a cost of £34.4m related to the strategic review and share sale agreement, paid to merchant bank Raine Group. It also included £5.5m in severance pay as part of the review and departing staff. If the total figure of £39.9m was an allowable deduction, which United chiefs will surely argue as an exceptional cost, then the club are probably almost over the line in terms of PSR compliance on end-of-year estimates financial year.

However, £5.5m could be difficult to pass as an allowable deduction as loss of function is not usually allowable, as is the case when managers and backroom staff leave.

The lack of willingness to spend in January should be instructive regarding United’s financial position for 2023/24, with the club not looking to add any further financial burden.

The club is now in a new financial year with the prospect of an expected increase in revenue, although the lack of Champions League football will have an impact given the lower revenue available in the Europa League.

The club, given there was no real urgency to move players before June 30, will likely be confident they can almost get over the PSR line and will have the full picture soon enough given the financial year ended two weeks ago . .

But for the additions to come this summer, high-profit players like academy graduates Marcus Rashford and Mason Greenwood are very likely to be on the market, while players like Jadon Sancho will have some profit but ease salaries. burden.

Concerns about a points deduction seem unlikely, but to achieve the kind of competitive growth Ratcliffe wants at a time when he wants to address the significant cost burden on the club’s balance sheet, Erik ten Hag and the club’s new management team of Dan Ashworth, Omar Berrada and Jason Wilcox will have to work smarter.