Man United's debts down, record profit

Manchester United badgeManchester United has reported a record annual operating profit of £110.9m in its latest annual accounts. That comes after winning the Premier League for a record 19th time and reaching the final of the Champions League.
So what do the results tell us about the finances of one of football's top three brands? Let's do the numbers first. Revenue was up to a record £334.1m for the year ending in June 2011. Pre-tax profit was £29.7m – the club made a loss the previous year. Turnover in all three main areas of the business, matchday revenue, media revenue and commercial revenue, was also up.

The matchday take netted £108.6m, media deals brought in £119.4m and commercial revenue rose to £103.4m. Net debt is down to £308.3m from last year's figure of £376.9m. This needs to be seen alongside the £108.9m loss made by Red Football Joint Venture, the parent company which owns the club.

Anders Red says

United fan and financial expert Andy Green says on his Anders Red blog that "This is a really as good as it gets for matchday income with virtually the maximum number of games played at 99% of capacity crowds."

The new Premier League TV deal helped boost media income, but it's on the commercial side that United are driving forward. Income in this area rose 27% as main sponsor deals were strengthened and secondary sponsors added. Nike and Aon now provide almost half the club's commercial income, and the figures don't include the recent £10m training kit sponsorship deal with DHL.

So far so good, with a successful football club taking full advantage of its position to push income to the max. But, as Andy Green observes, "The club thus remains a prodigious cash machine attached to a lot of debt." Last year it paid £51.7m in interest.

Glazer debt

That means £373m has been spent on interest and fees since the Glazers took over the club in 2005, with another £105m spent on repaying debts taken on by the Glazers. Green says this total of £478m "is equivalent to 67% of the money spent on wages since the takeover or more than 7.5x the net transfer spend of the club".

With the club planning to float in Singapore in the middle of next month, the publicity battle over what all this means about the club's financial health will intensify. The club says the results point to health and growth, while reform campaigners point to the cost of servicing the club's debts.

Green calls this "a prudent waste of the club's money" and says that while "a debt-free club is not unimaginable" that comes "at the cost of almost half a billion pounds of unasked for expense over the last five years".

Chelsea and Man City

The debt certainly raises important questions, and the shape of the IPO will be very important. But United have a very healthy wage to turnover ratio compared to rivals such as Chelsea and Manchester City, a manager who is backed by the board and a massive global profile.

The football team's not half bad either. So despite the very genuine questions about debt and ownership transparency and despite the vast resources at their disposal, United could quite legitimately be posited as proof that – even in money-mad modern football – being good at the game still counts.

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