Financial news

Man United parent company posts £44m loss

April 9, 2009

Manchester United's continuing debt repayments have led to their parent company posting a £44.8m pre-tax loss for the year ending June 2008.

That figure takes Red Football Joint Venture Ltd's overall debt to £649.4million, despite an operating profit of £80.4m over the same period.

That profit represents an improvement of £5million on the previous year, achieved partly thanks to United's triumph in the Champions League final last May.

United posted the most spectacular profits for any British football club at the same time.

Accounts to June 2008 reveal turnover at the club has risen an incredible 22% to £256.2m, underpinning a 7.5% increase in profits to £80.4m.

Critics are bound to pounce on the debt figure as evidence of an unsustainable financial structure, questioning how it is possible for the Glazer family to make a profit if their losses are so high in a season as successful as the last one.

Yet Manchester United's owners have never given any impression of being too concerned about the debt mountain itself, the payments for which were restructured two years ago and currently takes £45.5m annually out of United's profits.

Instead they prefer to maintain a drive for profits at a club whose overall value is estimated at over £1bn.

Whether, in the current financial climate, they can continue to squeeze even more from the United brand is open to doubt.

Attendance figures, while still extremely healthy, are showing signs of dipping slightly, suggesting further controversial increases in ticket prices might have more of a negative effect than has previously been the case.

Income from media streams, which show up a mammoth 30% rise to £90.7m, might offer more scope for improvement given the domestic Premier League TV deal has gone up five per cent, with the overseas contracts likely to exceed that figure.

However, balanced against that is a rare surplus of £21m on transfers, generated by the sales of Gabriel Heinze, Giuseppe Rossi and Gerard Pique amongst others, plus an uncertain commercial market.

United are already touting for new shirt sponsors after AIG confirmed they will not be extending an overall £18m annual deal when it expires next year.

Indeed, given the company is now effectively in the hands of the US government, some politicians believe the entire contract should be ripped up.

Another financial institution, Prudential, is the latest to confirm they are in talks with Red Devils officials, joining a group that also includes Saudi Telecom and Indian corporate giant Sahara.

However, the deal United are eventually able to strike will offer a good indication of whether Old Trafford can continue to ride out the global recession.

What cannot be argued is that as a club, United remain a worldwide phenomenon.

In the week when dire warnings have been issued about the future of former Premier League rivals Southampton and top flight clubs are slashing prices to try and fill embarrassingly large spaces in their stadiums, chief executive David Gill is leading one of the most in-demand sporting organisations on the planet.

Sponsorship deals with Saudi Telecom, Diageo, Budweiser and the Seoul Metropolitan Government have been struck, with interest in the Far East particularly high.

A crowded pre-season programme is already in place that will take in a four-match Asia tour immediately followed by a four-team tournament in Munich.