Manchester United has released some profit numbers for their last financial year. Depending on your source of information United's profits were either up, down or flat. No matter they do make for interesting reading but they also leave a very large unanswered question.
Here are the numbers - converted to dollars - they released with the previous year's results in brackets.
Revenue $331 million ($315 million)
Operating profit $98 million ($92 million)
Profit before tax $62 million ($22 million)
Operating profit usually relates to normal transactions, while profit before tax would take into “unusual” items such as transfer fees. Hence, one of the reasons why the profit before tax has increased so much is that the $24 million received from Chelsea from the transfer of John Obi Mikel was included.
As they are now a privately held company, Manchester United is not required to publish financial statements, but it seems that they certainly want to leave the impression that their financial house is in order.
All seems well, except for the issue of interest payments on the debt that the Glazer family has assigned to the club. You may remember that in July 2006 the Glazer family secured a refinancing deal that saw the interest payments dropped from hundred and $180 million a year to $124 million a year - a substantial saving.
However at the same time, the overall borrowings of the club increased from $1.16B to $1.32B an increase of $160 million. So how come borrowings went up so dramatically?
Without detail financial statements it is impossible to say what exactly was done so I freely admit to a bit of speculation. Could it be because the Glazer family opted to capitalize the interest payments incurred during the first year of operations? (It is the equivalent of opting to not pay interest on your mortgage but rather adding it to your principal - so you pay interest on interest).
We can't tell for sure from the results released, but it would certainly explain why interest payments of approximately $180 million don't appear to have shown up in last year's financial results.
If the interest payments were capitalized it is not a trick that can be turned every year and a charge of $124 million will surely show up in next year's accounts. Certainly United is looking at some substantial increases in many of the revenue streams and in particular, the premiership TV rights deal.
However, it is difficult to see how the club is going to stay in the black with such a crippling level of debt and interest repayments.
To date the media stories have focused on the profit picture and so it will be interesting to see whether the British papers decide to dig a bit deeper over the next few days.
Or there again maybe United is in unbelievable financial health - why else would they offer $40M for Owen Hargreaves?
Bobby;
For the moment speculation aside: I am of the opinion that the money and behind the scene machinations by the Glazer’s and their financial staff involve every dodge known to man and then some.
These guys, and many others, did not get where they are by conservative or even legitimate means. Frankly it boggles the mind.
Do you recall the disaster at Leeds United with their higgery-jiggery valuation of a players worth and how that was reflected in their account books? It was the start of player and facility sell-offs and by virtue of the ripple effect they are now L2 bound.
My point is that sooner or later a true picture of the financials will emerge and while I don’t see ManU falling out of the EPL, at least not this week, the long term effects of creative financing will be felt and guess who figuratively and literally will pay for it. The support.
However, ManU fans should be comforted to read the club reassure’s these actions are… wait for it - good housekeeping!
Other bits:
As to SAF’s infatuation with Hargreaves and the bid of $40M., I just don’t see the value or the health, in fact it is delusional, and if that is the case then it would suggest AC Milan may get a real bargain with today’s announcement regarding Frank Lampard at $15.7M.
Plantini’s election as based on his main platform of restricting the number of entrants from a single country (to 3) and his new gushy relationship (read; another lap dog) with Sepp the Blether suggests to me we would have been better off with old Johansson.
I think Bobby made the point sometime back that although Glazer is rich, he's not *that* rich. The ManU house of cards also largely depends on the economy in general keeping share prices high, and if disaster strikes this particular billionaire doesn't seem inclined to sink his personal wealth into the club. Devoted ManU fan, welll...
ManU's form at least looks likely to keep them from the pit Leeds landed in, missing the Champions League by finishing 5th in 2002 and then 15th the next season. The trouble is, the numbers are so much bigger. The fire sale of Kewell, Bowyer, Woodgate, etc. barely made a dent for Leeds; what would ManU have to do?
I should note that I nearly always root against Manchester United, but a collapse of their finances in the long run wouldn't help anyone.
Hello Bobby. This is Drew AKA Yukon Red (Devil) up in the Yukon. I have claimed, on a few occasions, to be the most Northern Man United fan -though I suspect this is probably not correct, as WE are everywhere.
I've been thinking a bit these past few weeks about the Busby Boys. And about the state of the club in a bigger picture sense - and about the current swirling minutae like the Ronaldo situation. It was funny that this evening, when I had a moment to do something for myself (I am a new father since Jan. 23 of this year, I turned on what was probably the 11th repeat of the Fox Sports World program and there you were talking about Ronaldo and imparting the wisdom of a man who can deeply read people, understands the multifaceted dynamics of the Beautiful Game, and is not afraid to admit that he doesn't have the easy answer that others seek. You are one of many wise men (There are women too but not as many. I've recently discovered Marcela on the Guardian website.) that understand and write of the beautiful game. I am familiar with Gabriel Garcia Marquez (actually a friend named Billy - a Glaswegian Rangers fan now in St. John's, NF - helped the Spanish-to-English translator understand deep footie points), with Buford (who went Among The Thugs), with the work of a writer whose name escapes me who recently wrote of how Soccer Explains Globalization (a book that at it's best is very, very good, but has it's limitations - check out the story of Red Star Belgrade and the Troubles in the Balkans, if you have not already.
This website appears to limit comments - as mine were hacked off at probably the 20% mark. I have deep thoughts about footie and MUFC, but not the time to re-write. I have other letters to write to other people. If you are interested in my comments, please feel free to contact me via this website and we can have a proper conversion in a more conduicive environment than this limited website. I will bear no grudge if you decide you don't have the time.
Peace, happiness and Manchester United,
Yukon Red (Drew)
I am the soccer analyst for the Fox Soccer Report and appear twice a week - every Monday and Friday at 10:00 EST. I have also been a regular contributor to the Fox Soccer Channel website since the summer of 2004. Over the last twenty years I have contributed to various radio and television programs throughout North America as well writing about the game for newspapers, magazines and websites.
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