Manchester United announce record profits as Glazer family reduces Premier League club's debt
Manchester United have posted record operating profits of almost £111m for last season, underlining the club’s commercial growth under the ownership of the Glazer family.Money matters: Manchester United have released their figures Photo: PA
United’s gross debt stands at £458.9m
Cash reserves stand at £150.6m at the end of the financial year
Reducing the club’s net debt to £308.3m, the lowest since the Glazer’s bought the club in 2005.
You can view the full press release in a separate pdf.
The reigning Premier League champions saw turnover increase by £45m to £331.4m in the year to the end of June, a record for an English club, exceeding the £313m recorded by Arsenal for the same period.
United’s gross debt stands at £458.9m and the club paid £51.2m in interest payments to bond holders in 2010-11, equivalent to 46 per cent of annual profits.
Interest payments and other costs such as amortisation of player contracts and depreciation reduced the pre-tax profit to £29.7m.
The commercial growth saw cash reserves boosted to £150.6m at the end of the financial year, reducing the club’s net debt to £308.3m, the lowest since the Glazer’s bought the club in 2005. The Glazers also bought back £63.8m in bonds issued in the 2009 re-financing.
The cash reserves may have altered since the end of June but the figures released today do include the £52m spent on Phil Jones, David de Gea and Ashley Young in the summer transfer window.
The rise in turnover was driven by a £22m (37 per cent) increase in commercial revenue, which exceeded the £100m barrier for the first time at £103m, and the club’s on-field success which included a 19th English league title and progress to the Champions League final.
Commercial growth was driven by the first year of the new shirt sponsorship deal with AON, and will increase again in 2011-12 following the £10m-a-year training kit sponsorship agreed by DHL last month.
While turnover increased so did costs, with increased player wages and bonuses contributing to a £35m increase in operating expenses, which rose from £185.2m in 2009-10 to £220.5m in the year to June 2011.
Staff costs rose by £21.2m, £9.7m of which was paid in bonuses and the remaining £11.5m in increased wages.
Operating expenses also grew by £11.8m, which the club attributes to the cost of staging the pre-season US Tour and, somewhat curiously, the cost of travelling to the Champions League final, which was staged at Wembley.
The strong financial performance will be used by the Glazer family to help boost interest in the partial floatation of the club on the Singapore stock exchange scheduled for next month.
The Glazers are hoping to sell 25 per cent of the club for around £600m to reduce the club’s debts, and will hope that the strong commercial performance and deals such as that with DHL will convince investors that their pricing - which gives the club a total valuation of around $4bn - is not optimistic.Edited by zocoss 02 Sep `11, 3:29PM
Manchester United turn record loss into £29.7m profit
• United's revenue passes £300m for the first time
• Half of £110m operating profit goes on servicing debtAshley Young of Manchester United celebrates with Ryan Giggs after scoring his second goal against Arsenal. Photograph: Alex Livesey/Getty Images
Manchester United have converted last year's £79.2m pre-tax loss into a £29.7m profit, reflecting onfield success and strong commercial growth, and reduced their debt levels.
The strong figures will strengthen the hand of the Glazer family ahead of a planned IPO share flotation in Singapore next month, but will also spark renewed criticism of the effects of their leveraged business model.
The results show revenues rose to a record £331.3m in the year ending June 2011, an increase of 16% on the previous year's £286.4m.
But with £51.2m in cash interest paid out over the year to service the borrowing loaded on to the club, almost half its record operating profit (before depreciation, amortisation and exceptional items) of £110.9m went on servicing debt.
The results also show a sharp rise in costs, up to £220.5m from £185.2m the previous year, and a 16.1% increase in staff costs. Those who have campaigned long and hard against the Glazers' ownership model, will point to the £51.7m paid in cash interest to service the bond debt as evidence that is still acting as a drag on the club's finances.
But Manchester United executives are likely to point to continued success on the field and strong growth in response. Last year's record losses were largely due to one-off charges relating to the £526m bond issue.
The rise in revenues and operating profit has been driven by a 27% increase in commercial revenues, largely as a result of a string of deals signed with overseas partners, to £103.4m. It does not include the recent £10m a year deal with DHL.
Media income also increased substantially, mainly as a result of the first year of the Premier League's new £3bn-plus TV deal, from £104.8m to £119.4m. And matchday income was also up 8.4% on last year, largely due to an extra home game and the club's take of the Champions League final gate money, to £108.6m.
Those representing the Glazers will highlight the fact that net debt stands at its lowest level since they bought the club in a £790m leveraged deal in 2005. With £150.6m cash in the bank, and £63.8m of debt repurchased during the year, the net debt stood at £308.3m at the end of June.
Upward pressure on wages, in part due to Wayne Rooney's new £180,000-a-week deal and bonuses paid to players, has seen staff costs rise by 16%. However, since the accounts were filed high earners including Gary Neville, Paul Scholes, Edwin van der Sar, Wes Brown and John O'Shea have been moved off the wage bill.
The wages-to-turnover ratio is still extremely healthy compared to the club's rivals, in particular Manchester City and Chelsea. Executives believe Manchester United will have no problem complying with Uefa's new financial fair play restrictions.
Ahead of a planned mid-October IPO in Singapore to float a minority stake in the club, the club will point to the results as evidence of its health and growth. But campaign groups will concentrate on the interest payments required to service the club's debt.
Sources close to the float have promised that the proceeds will be used to pay down debt and boost commercial operations in Asia. That has prompting fans' groups such as the Manchester United Supporters Trust to begin campaigning for the club's debts to be paid off in full and for the money not to be diverted to the Glazers to repay their refinanced payment in kind debt, which has now been moved off the balance sheet of the club's holding company.Edited by zocoss 02 Sep `11, 3:42PM
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