Manchester United (NYSE:MANU) is on a collision course for a 9% drop in earnings should the NYSE listed, English football club miss out on qualification for next year’s lucrative Champions League competition, says City broker Nomura.
Due to the on-field slip in form under new manager David Moyes, United linger in seventh place, six points away from the all-important fourth spot with sixteen fixtures remaining in what has been a disappointing season thus far.
United faces a sharp drop in prize money and television revenue if it is does not secure a top four finish and thus qualify for next year’s Champions League, Nomura said in a note to investors.
The broker says the drop in earnings will be approximately 9% if, instead, United participate in the secondary Europa League completion, and will slip further, to a 17% fall, if misses out on European qualification altogether.
Worse financial consequences would befall United should it spend more than one season out of European competition, Nomura predicts, because of the pending step up in television revenues from BT Sport’s new exclusive Champions League broadcasting rights from 2016 onwards.
The broker estimates earnings for 2016 would take a 14% hit if United play in the Europa competition rather than Champions League in 2016, and would be 22% lighter if the club qualifies for neither competition.
It is widely predicted that United will make substantial investments in player acquisition, either in the current transfer window or in the summer, in an attempt to arrest the slide.
Nomura, echoing reports in the media, suggests the club may spend between £100mln and £150mln, though the broker also points to the high level of competition for the best players and says failure to qualify for next year’s Champions League will make it harder.
Now trading at US$15.20 each, Manchester United’s New York listed shares have lost around US$500mln (£300mln), or 20% of its market value, since Sir Alex Ferguson retired at the end of last season.