Manchester United’s annual accounts to 31 June 2010 shows the club made a huge loss of £83.6 million despite rapidly increasing operating profits. The huge losses, associated with refinancing, debt interest payments and a decline in the squad’s value, will further fuel the anti-Glazer protest movement at Old Trafford.
One-off costs associated with the £502.5 million bond issued in January, together with an annual interest bill in 2009/10 topping £43 million have swallowed the club’s £100.8 million operating profits, despite the club announcing record turnover of £286.4 million.
The huge losses include a £40.6 million financing charge associated with the bond issue and a £19 million loss on fluctuating exchange rates.
There is now £521.6 million book-value debt owed by the club – excluding so-called Payment in Kind (PIK) debt – most of which matures in 2017. Under the current business plan the club will not pay down the debt before 2017 and is likely to refinance when the bond matures.
The Americans are allowed to take the £70 million dividend under the terms of the bond and many analysts believe that the cash – when finally taken – will be used to buy PIK debt that is running at more than £220 million.
However, the accounts record only the financial position to 30 June 2010 and, as expected, do not show that the Glazer family drew on a £70 million dividend to that date. Indeed, noises coming from the Americans’ camp in the summer signaled as much, with fans likely to find out more when the Q1 2011 figures are published in November.
Neither was a note attached to the accounts reporting a material change in United’s financial position post reporting date, which would have signaled that the dividend had been taken. Accordingly, United’s cash position increased slightly to £163.8 million.
The family bought 20 per cent of the PIK debt in 2008 at a heavy discount, almost certainly with £10 million borrowed from the club in loans. However, the remaining PIK debt now accrues interest at 16.25 per cent annually, which explains why the January bond was specifically designed to enable the Glazers will pay off the debt through club funds. Indeed, there is no business logic behind not paying down the PIK debt immediately.
The family can also take up to 50 per cent of United’s annual post interest profits as dividends on an ongoing basis, together with £6 million in management fees. All for the pleasure of having the Glazers as owners.
The losses provide a stark contrast with the club’s activity in the transfer market over the last season, where United spent about £11 million net this summer in bringing Javier Hernández, Bébé and Chris Smalling to the club. Zoran Tošić and Ben Foster moved on to CSKA Moscow and Birmingham City respectively.
The club can point to strong growth in media and commercial income, which puts United in a comfortable position to pay off debt interest. Indeed, United’s position is nothing like as perilous as Liverpool’s, with the Anfield club unable to cover interest through profits.
United has embarked on a programme of striking territorial deals with new sponsors such as Singha Beer, Concha y Toro wines and PCCW over the past year. It has led to criticism in some quarters that the club is now over-commercialised, with little room for growth in a very competitive sports-sponsorship market.
Supporters though will remain angry that the club continues to post huge losses on the back of the Glazer regime while under-investing in the transfer market. With Edwin van der Sar, Gary Neville, Paul Scholes and Ryan Giggs all retiring within the next 18 months, fans are yet to see any evidence that Sir Alex Ferguson is allowed to invest in established talent despite the departure of Cristiano Ronaldo in June 2009.
Ongoing price rises and controversy over the debt has led, for the first time in a generation, to the club failing to sell all season tickets. 2,200 remained on the shelves as the season began, and this week the club embarked on yet another email and text message marketing campaign, designed to sell the remaining season tickets.
Despite an eroding supporter base Old Trafford has sold out for each of the matches held this season. However, it remains to be seen whether tickets for less attractive upcoming matches against West Bromwich Albion, Wolverhampton Wanderers and Bursaspor go on general sale or even sell out.
Whether the financial results offer any new impetus to a bid for the club remains to be seen. Liverpool’s distressed sale at £300 million may help set a more realistic price for the club, but the Glazer family is under no immediate pressure to sell. United’s income covers debt interest payments and allows for the family to remove any remaining PIK debt exposure.
Whether there’s enough cash left in the kity to strengthen the squad is another matter altogether. United is a well run club, with an awful balance sheet. Yet for the Glazers’ business plan to work United need only qualify for the Champions League.
Fans must ask themselves if it’s an acceptable scenario or not.
45 thoughts on “United posts £83.6 million loss”
Appalling & a sign of the times. Greed prevails yet again. Disgusting.
All the snooty smug financial cunts on the Caf say it’s not as bad as the media are making out
It’s based on the fact the business is growing (United are making more money) and everything will be reet, or something
Anyone care to explain?
sidney – United essentially a very well run business, with very sound financial growth and profits that is undermined by a horrible balance sheet. Costs kept under control, strong growth in media and commercial sides of the business. There will be less exceptionals next year and presumably a much smaller loss but there is the looming dividend. The Glazers will take it, its a miracle they haven’t. It makes NO FINANCIAL SENSE whatsoever to not pay off the PIKs.
Oh, and they haven’t taken money from the club to pay down the PIKs
Suppose that’s a good thing… but bad, also, as the interest on the loan is still arse raping us
Caf – How the hell can the club making a 80+ mill loss when there is an operating profit of 108.8 mill be a good thing!!! FACTS! Wrong Wrong Wrong!
The only way i can reconcile those figures is if its being assumed that the 70 million has been taken as well which it hasnt as well as other unclear tweakings. Imagine my surprise at almost every single media outlet being creative with the figures they use to produce this 80million plus loss. It may look bad bad but it really isnt and is simply being portrayed that way as per usual to cause maximum panic and maximum negative exposure for United. Now I want the Glazers out as much as the next red but this is really being manipulated to look so awful trust me.
Care to clarify this a little?
Thats the point though Bill its not 100% pure facts. Its assumptions/speculation/sensationalism all made form a list of figures whereby the gaps are filled in by the outlet releasing the story when they dont know all of the facts or the clubs intentions. All im saying is dont press the panic button yet as the ABU’s will be breaking their necks to make this look like the end for us and it simply isnt. They would love to have us believe year on year our empire is crumbling, we are finished , its the end of Uniteds time etc etc etc etc and every year we leave them looking like the bitter prats they are.
You may be correct in writing that things aren’t as bad as they’re being made to look in the media. Admittedly, the business plan looks strong enough to get the Ginger Troll through to better economic times (providing that they remain cyclical), but what cannot be argued against is the fact that the on-field product has been in decline for at least the past two years, and looks, barring any unexpected investment in proven talent, set to continue on its downward trajectory. United will survive, but it won’t be pretty to watch.
Danny – It’s quite easy really the accounts are on the MU Finance PLC website so its not speculation, its open. United posted operating profits of 100.8m, but interest payments and exceptional items mean an accounting loss of 80.6m. Fundamentally United is a strong business – the strongest football club on the planet, financially – but is being dragged down by debt. Next year’s figures should look better, fewer exceptional items. United isn’t going bust any time soon and there’s no pressure for the Glazers to sell.
That’s not the point though – the real point is why is spunking 45m per year on interest and another 40m refinancing good for the club? It’s not, not even nearly. Could we have used that for better players or cheaper tickets – absolutely yes. It gets worse, despite spending all this money on interest and financing we’ve paid not a penny of the debt off and won’t until at least 2017. There’s nothing in the Glazer business plan that shows they intend to deleverage at any point at all.
Worse still – the Glazer family will use 70-95m of United’s cash reserves to pay down PIK debt at some point very soon. There is absolutely no reason why they wouldn’t. It makes no financial sense to anyone why they wouldn’t. After that they’ll use 50% of United’s profits per year to take out in dividends, and then you can add 6m per year in management fees.
United is a wonderful club, a fantastic business, being raped by the Glazer family. That’s not speculation or sensationalism. It’s 100% pure facts as you like to call it.
Lads all im saying is that based on the figures ive seen in various articles not one of them has specified all of the figures that take us from 100 mill in the black to 83 mill in the red and even in this article it doesn’t cover 183 mill going out in detail. Granted I havent seen the accounts as you say so perhaps i have jumped the gun and should research more before posting. Im just cynical with everything i read about us these days cos as i say all of the b*stards can’t wait to write negative crap about us and i should be used to it. One thing we can all agree on though LUHG.
Heres looking forward to a future without the ginger spawn of satans midget brother
Danny – I think you’re misinterpreting the figures. Some of the 183m is adjustments for accounting purposes – amortization, depreciation, forex swap etc. The figures to focus on are the 43m interest and the 40m finance swap charge. United a very health business except for the 500m that has disappeared out in the last 5 years and the 500m that will leave in the next six.
The figures reported are largely correct – just take a look yourself at http://www.mufplc.com
glazer got man u for 800mil so that he can make profits later on after he has sucked all the money out of it.. he will be the owner with no debts in 7-8 years time… and then he can sell it for a huge personal profit. thats how these rich business men think.. its all about the money. and its real big money and all in millions which we dont even get a sniff off..!
Look if every media outlet is saying we are making an 80 mill + loss for the year that is what happened.
The club is a massive global brand that operates at a general profit due to the maximisation of merchandising & the regular stream of income (gate receipts/tv revenue) generated due to its success on the pitch. Not to mention the sale of Ronaldo in 2009.
So how do we make a loss then?!
David Gill – “We have money in the bank so there is zero pressure on that, no pressure at all to sell any star player whether it is Wayne Rooney or X, Y or Z.
“I can categorically say that.”
Oh thanks for that! We are making an operating profit of 100 mill & we might not have to sell players! We should be buying a 30 mill player out of profits each season.
Fergie is going to have to Wenger (i.e. buy you cheap players with potential) & instead of the making a profit the money will go paying off Glazer debt.
Bill – thats happening already. ‘Wengering’.
It might be a well run business, shown by record income streams… but let’s not forget that those record figures are largely the result of higher prices for all things United… including match tickets.
A club as financially strong as United genreates enough income to be competetive, and still maintain much more family friendly ticket prices, if we were’nt run by these leeches, who NEED to generate more, and more money just to pay THEIR debts.
The cunts at Red Cafe would do well to remember, who pays the tab, for things to “not be as bad as some are making out”.
This is it… United is a football giant… but it doesn’t make all this money just so some American family of twats can come along and decide how that money could be better used for THEIR purposes.
What could MANCHESTER UNITED use that money for? How about cheaper tickets, or even family days, and special events like free tickets for local charities? How about expanding our youth academy, and scouting networks… How about buying the properties below the south stand, to eventually expand the stadium to one day make Old Trafford 90,000 plus?… How about just giving some of that money to charity? How many English clubs could compete with that kind of publicity? Anything… has got to be a better use of all that cash, than paying for some cunts personal financial agenda.
When a football club like United that maximises income by a quality brand on the pitch, excellent marketing/merchandising & a realistic wage structure (unlike Madrid/Barca/Chelsea) makes a loss like this only a redneck would think its acceptable.
Whether in the long term things aren’t “as bad as some are making out” is irrelevant – these imbeciles are stopping us from winning another treble whilst degrading one of the great sporting organisations.
Their actions reflect all that is wrong with the world. People like this are the reason why the global economy crashed in 2008 & we will feel the ramifications for years to come.
We can forget about any world class midfield reinforcements then.Can’t see united buying anyone of any classs for the forseeable future.
Just went on their website and read that thread about the Glazers. They’re a shower of wankers, basking in their own smug insularity that they can somehow use facts and figures to prove that the debt is manageable yet again missing the point about what people are so angry about.
A lot of the smalltime financial cunts on the Caf (who talk as if they’ve spent 10 years on Wall Street) are speaking from a knobhead financial point of view, not from a fans point of view. It’s us that has to foot the bill with rising prices etc. and that’s why the Glazers have to go, even if they manage to pay the debts off.
Just maintaining the status quo is risky Sid… what if the fans actually DO start boycotting home games? What if instead of 70 + thousand, we start seeing 10/15 thousand less attendance? The Glazers financial plan can’t accomodate that over the whole season…. and then you can see Ferguson and Gill publically condemning any stay away fans, and protests, claiming they’re the ones hurting the club… as if we, the fans OWE it to United to pay these inflated prices, like it or not.
Aye, one thing the books show is how susceptible they are to a boycott
The message from Fergie & Gill is “Get behind the team, hand over your money” and no fucking wonder
Another question for the financial experts – how long do we have to maintain the fine margins of success before we can relax somewhat i.e. when the debt is paid off or made more secure? 2017, when the PIKs are due?
nothing wrong with the Glaziers business plan. i have complete trust in them, remember back in 2005 when everyone thought Chelsea were unbeatable and the initial debt would f*ck us up? well, what happened after 2006? please remind me you mongs, 3 back to back league wins and a CL victory. all you Glazier haters need to take a serious look at yourselves FFS. un-f*cking-grateful or what?!?!? without them, we would be nowhere near our current level. the recession will soon be over and the Man Utd boom will provide incredible growth clearing the entire debt along with unprecedented success on the pitch.
TNRSalford – yeah that’s right the Glazers personally picked the team, played up front, and scored the goals. Without them we were nothing. Fuck me we were City before the Glazers turned up!
Oh and if you’re going to PR them at least spell the name right. Comments such of that come from only two places: City fans or the mentally retarded. Fortunately, looking at your IP, I can see it’s both.
We have a strong balance sheet * £163m cash, £777m net assets. We have increased in Media and Commercial revenue aswell strong matchday revenue making overall turnover of £286m. The overall lost of £83m is misleading due to complications and if those are ignored than we would of made a profit of about £25m. Manchester United are a financially strong run club, the biggest club in football and only getting bigger and stronger. The one flaw is the Glazers and their £521m debt/£200m PIK, Glazers OUT.
Why don’t you fuck off, you shit eating cunt?
Just why the fuck should we be grateful to the Glazers… If you’re going to come on here and make such an inflamatory statement, you at the very least have to answer that question… What the fuck have the Glazers done for United?
I hate it when I let internet cunts get under my skin… not like I can do anything about it… like smack you across the mouth.
Just read a piece from 2005 on Glazers plans with takeover, stated that he was going to up ticket prices by 54% within 5yrs (to the current prices) and planned to up our revenue to £248m within 5yrs – he has exceeded the revenue target as we sit on £286m. Glazer has improved the marketing network with a successful territorial plan, we maintained success and there are even blueprints to up our stadium to 90,000+ held by the club. NO I do not support them and there is no valid reason for the debt/PIK.
Manchester United #1 – Let’s be clear there isn’t a blueprint to expand the stadium to 90,000 plus. The facilities manager mentioned this in an interview with a trade rag last year but it’s not realistic under the current regime. United had already done a project scope on this under the PLC and concluded that rebuilding the South Stand would cost more than £100m – to rebuild, to buy houses on railway road and possibly even a rev share problem with Network Rail.
One more thing – not Glazer related – Manchester United has just invested £11.5m in improving Carrington, just throught I mention it. So a strong financial balance sheet proving we have money to spend, investment in talented youngsters, Fergie recently stating we will spend big to replace the Old Guard when the time comes (hopefully not for 2/3yrs), improved contracts to retain important players and investment in Carrington – Good business. Now all we need is the debt gone and Glazers out.
Manchester United #1 – Carrington upgrade is a 3 year programme by the way.
i think the media have overplayed this. for one thing 20m of that loss in unrealised, i.e. a paper loss, based on the movement of the dollar which may well turn into a profit by 2017 when the loss/profit is realised. Secondly 40m seems to be a one off cost of using the bond money to pay off bank loans. Granted, these losses could be said to be due to the takeover but I think if it was any other company, analysts would look at the underlying performance of the group, which is still sound.
also while everyone’s talking about the interest payments/management fees, its not right to look at that in isolation, but to compare it to the dividends that used to be paid when the club was listed. The club was still paying out to the owners then, just in a different way.
Look at this article from 2002- wow those greedy shareholders giving themselves an extra dividend! that money could have been spent on players…
I am not supporting the Glazers, I think that we didnt get a good deal on the takeover, and these guys clearly didnt have enough cash to buy us, but its not nearly as bad as the media make out.
ichiro – I think the total amount of dividends paid out under the PLC was something like £14m. Not per year. Total ever.
Even if things are ‘not as bad as the media makes out’, even if we only take cash losses not accounting losses – there’s more than £80m this year wasted. Just thrown away. That’s a Ronaldo we chucked down the Glazer toilet. There’s another £500m coming up over the next 6 years that’s cash losses not accounting losses.
14m total? – cant be correct…it was plc for about 15 years, profits were about 30-40m a year. Dividends must have been about 10m a year. Anyway even if it wasnt paid out what happened to that profit? i doubt it was all reinvested into the club and players.
Anyway, the accounting can be misleading thats all.
this article explains a little bit
Ed, I know Carrington is a 3yr thing and I said we had blueprints but not that there was a plan to act. Is good that we are improving Carrington.
When a company makes an operating profit of 100 mill then it should be able to spare 10 mill upgrade the facility that world class sportsmen use everyday as their place of learning/work.
I know my last comment can be viewed the wrong way if you dont see what I said before or misread how I put it. £11.5m has been invested into improving Carrington and I said we had blueprints for Old Trafford to expand to over 90,000 but I never said we will.
Aye, and you don’t want a squad rebellion on your hands
But yeah, we need to make sure the facilities are top class to please all the future top class players we can’t afford
call me stupid, but can somebody explain why the 160mill in the bank hasnt been used to pay off the debt yet? forget the PIK debts, which are apprently “glazer” debt. there is still another 500mill or so debt that’s been loaded onto the club. surely it would make sense to use money in the bank to pay that off? i mean it doesnt look like we are gonna buy the next ronaldo with that money, so why not use it to get rid of some debt?
and if i’m not mistaken, the glazers already sold off the houses we had owned behind the southern stand. i dont think there is a plan in the near future to expand OT. though if the projected cost is just 100mill, then surely its something worth investigating. 12,000 extra seats per game, 25-30 home games per season. they’d make that money back within 5 yrs
Discussion of the Glazers on “Sunday Supplement”.
they’re intolerable, sum it up