Monday, 11 January 2010

Manchester United announce pre-tax profit of £48.7m...

An extremely concerning time for all Manchester United fans such as myself ahead of the announcements made today and numerous articles on the topic. Roger Blitz on the The Financial Times website discussed the bond issue, £500 million to be repaid by 2014 and rumours circulated as early as last year of such debts and now the reality has hit home. How the situation has progressively worsened, I assume is in part to due to global financial crisis restricting the interest rate thus no foreseeable buyer will approach the club which is what's required as current owners seemingly have no chance of repaying the bond. Gone are the days of complete financial supremacy; Match-day revenues accounted for 39.1 per cent of total revenues, media 35.8 per cent and commercial deals 25.1 per cent with net interest payments almost £42m and operating profits were just £9.3m: the importance of transferring star player Cristano Ronaldo for £80 million is now more evident than ever as the Guardian highlights.


This is an interesting business model of the club's financial hierarchy: http://av.r.ftdata.co.uk/files/2010/01/Man-Utd-corporate-structure-and-financing.jpg

Conflicting reports on the total of the debt, reported at £699 million 12 months ago as it's not disclosed in this morning’s press release – although it will be recorded in the documents that have been lodged with Companies House – but the Glazers’ growing concern over their existing borrowing arrangements has led them to the bond. But how will they manage this if the club's fortunes on the pitch spiral as the £75 million set aside for transfers are nowhere near enough. There's Sir Alex Ferguson's impending retirement along with ageing iconic midfielders Ryan Giggs and Paul Scholes also goalkeeper Edwin Van Der Sar all of whom need replacing with the financial might of rivals Manchester City and Chelsea (who have just cleared their debt) and Arsenal look to flourish in the long term.

At least, according to Bloomberg, the latest figures include an 'up-front' payment of 35.9 million from next year's sponsors AON - whose 4 yr sponsorship is worth 80 million. Clever deals and financial nous is required if the bond is to be recuperated with sustained efforts on the pitch with an helpful raise in interest rate as the high interest rates on loans already are severely damaging profits as it's clear the Ronaldo deal was a necessity. Let's hope things turn for the better.

2 comments:

Ewarwoowar said...

There is absolutely no way we have £75m to spend!

Since the Glazers have been here, they have spent a net amount of about £6m per season. The problems have been there for a while, just now the cracks are beginning to appear in public.

I'm not incredibly worried, as I still fancy a rich Arab would snap up the club at the first available moment.

You are spot on though with the names you have mentioned that need to be replaced. Add Gary Neville to that list as well. If nothing else, it's an interesting time.

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