United spending more on Glazer's debt than on new players
Published 23:00 08/10/10 By David McDonnell
Manchester United could have bought Cristiano Ronaldo back from Real Madrid with the staggering £83.6million they lost last year.
It is a measure of the enormous drain on United’s profits by the Glazer family that the club’s record loss equate to the amount they received for the world’s most expensive player.
United’s annual figures, released yesterday, revealed they are now paying more on interest repayments and costs related to refinancing their debt, than they are on signing new players.
Despite an increased turnover, United posted record losses of £83.6m, which was largely due to interest repayments and one-off financial charges relating to the refinancing of their original debt by switching to a bond issue.
The bond issue, billed as a way to restructure United’s long-term debt but which also made provision for the Glazers to take out up to £127m in the first year, resulted in a string of one-off costs that caused the record loss.
The figures have given the anti-Glazer brigade fresh impetus in their ongoing campaign to oust the American family from their power base at United, despite the club announcing a record turnover of £286.4m.
Duncan Drasdo, chief executive of the Manchester United Supporters Trust said: “Ostensibly we are the best-run football club in the UK for the last 20 years, generating amazing revenue, but the problem is that that under the current ownership that’s all being wasted because it’s going into paying interest on debt.”
“We could be competing with Man City and Chelsea for the best players. Instead of squeezing spend on players and pushing up ticket prices we could be giving supporters who are being priced out, those that have supported the club for many years, the opportunity to watch their team.
“All of this is because one family decided they wanted to own our football club. The problem is that the model of ownership we have should never have been allowed.
“There is an underlying anger that has been there for some time and every time these results come out we see how much money is being wasted.
“It sickens people that they are paying increased ticket prices every season under the Glazers but the money is just being wasted and not invested in the playing squad.”
Yet although the recently-implemented bond issue was revealed to have cost United an extraordinary one-off payment of £67m, on top of their annual £40m interest charge, the Glazers have no intention of selling up.
The Green and Gold campaign, with fans opposed to the Glazers sporting the colours of Newton Heath, the club United evolved into, may have been a huge symbolic success, but its impact has been purely visual.
The bond issue was a smart move on the part of the Glazers and. Crippled by exorbitant interest repayments, switching to the bonds - even with the huge one-off £67m hit - has bought the Glazers time.
It eased the tough financial conditions imposed on them by banks under the previous repayment plan and has allowed them to take out up to £280m from the club until the bonds mature in 2017.
By that stage, with United’s revenue expected to continue to grow in line with anticipated on-field success, the club could be worth up anything up to £2billion, at which point the Glazers would be able to sell up at a huge profit.
But with United continuing to enjoy unrivalled revenue streams from their 333million fans worldwide, an operating profit of £100.7m and continued success on the pitch, the Glazers hailed the club’s positive long-term future.
A Glazer spokesman said: “Despite the loss, we have covered the debt comfortably and still have £160m in cash reserves, which is more than a lot of other clubs.
“That money will continue to be re-invested in the club and in the playing squad. We continue to support Sir Alex Ferguson in terms of providing finance for him to strengthen the squad.”
Despite the positive rhetoric from the Glazer camp, critics of their ownership view United’s meagre activity in the transfer market in the past financial year - £20m - as evidence of Fergie’s lack of spending power under the current regime.
United’s latest figures were in stark contrast to those released last year, which showed a profit of £48.2m, the only time the club has been in the black since the Glazers took over, thanks to the sale of Ronaldo.
Gill, predictably, put a positive spin on United’s loss and said that if “goodwill” losses - which should be recovered next year - and depreciation are ignored, United would actually be profit to the tune of around £25m.
“There are very good results for the club with records here, there and everywhere but they are complicated with non-cash items and exceptional one-off hits,” said Gill.
Gill also denied United were heading for the kind of financial crisis that has engulfed their arch rivals Liverpool. “I can’t speak for any other club but United fans should not be concerned,” said Gill.
“We have a long-term financing structure in place, excellent revenues that are growing, we are controlling our costs - total wages are 46% of turnover - and we can afford the interest on our long-term finance.
“In our opinion if something changed in the ownership this club will survive and continue - it is covering the financing cost more than adequately.”
United’s wage bill rose by seven per cent to £131.7m but is still less than half of their turnover, compared to the £133m wage bill of local rivals City, which eclipsed their own turnover of £125m.
With their huge profitability and a record turnover, United can arguably claim - operationally at least - to be the best-run football in the country, and as such are at no risk of going under.
But the real scandal revealed by the annual figures is the enormous waste of money in terms of interest fees and charges, with United fans bearing the brunt of the ongoing need to service that debt.