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Debt Costs Send Man Utd To Record Loss
3:48pm Friday October 08, 2010
Hazel Baker
Manchester United have posted an overall loss of £83m, after costs associated with the club's massive debt wiped out record operating profits for the year.
Increased income from commercial and media deals helped the club to become the first English side to make over £100m in operating profit. But Manchester United then had to make interest and other payments to service the £0.5bn debt brought to the club by the Glazer family. These costs resulted in an overall record loss for the club. The figures will give more ammunition to the many critics of the Premier League team's American owners.
Supporters who are opposed to the Glazer ownership will claim the losses are proof that United are being deprived of transfer funds - at a time when rivals Manchester City have spent heavily on new players. "In terms of the day-to-day running of the business - selling jerseys, selling tickets, arranging sponsorship deals and so on - it's doing really well," said Sky's business reporter Tadhg Enright.
"But it is generating a net loss, because it is burdened with servicing the huge debts the Glazers took out five years ago to buy the club. "The Glazers will say that the strength of the brand will continue to serve it from a business perspective, but the fans of course are more interested in the performance on the pitch."
Many fans object to the Glazers' reliance on hefty loans to buy the club in 2005
In recent months observers have also suggested that opposition to the Glazers has deterred companies from associating themselves with United. However, the club's financial report shows a £11.5m increase in commercial turnover to £81.4m, suggesting this has not been the case."This increase was a result of additional sponsorship revenues generated by an increase in the number and value of our global, regional, mobile and supplier sponsors," said the club.
Media turnover rose by £5.1m, to £104.8m, meaning these deals now bring in more than matchday turnover, which fell by over £8m to £100.1m. Wages rose by 7% to £131.7m and there was a steep reduction in revenue gained from the disposal of players compared to last year, when Cristiano Ronaldo was sold to Real Madrid. United's overall debt rose to £521.7m from £514.5m last year, and accounts show the club had cover a one-off cost for the successful £504m bond issue earlier this year.
The Glazers have never shown concern over the debt burden and the bond issue has offered greater flexibility with their financial dealings - even though it has an annual interest rate of 8.75% and has to be paid back in 2017. The news of Manchester United's record loss comes in the week that Sky's City editor Mark Kleinman revealed that Liverpool FC was to be sold to the owner of the Boston Red Sox in a deal that eradicates its long-term debt.
