The English Premier League Blog

Manchester United revealed a record loss of £83.6M for the year ended June, 2010 – but reported on their web-site they had made record profits – which we find interesting.

Having dealt in financial matters at IBM, we are interested that the famous Manchester club are saying they have made profits of over £100M, and they call that an operating profit.  Translation – not really a profit.

But that new style of accounting, which completely ignores some of the costs of the business (an inconvenient truth) –  including massive interest payments of over £40M, and a one time cost of  £107M relating to the club’s bond issue launched in January to restructure the massive debts accrued by the Glazer family, in buying the club –  cannot just be ignored – convenient though it may be.

You just cannot ignore the costs to the business when reporting these financial figures,  and this is what some companies were doing in the late 1990s to make their financials look better – that was just before the stock market collapse on Wall Street.

This is how the club announced the figures on their web-ste today:

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Reds announce record figures

United announces record revenues and operating profits.

Manchester United has announced record operating profits of over £100M for the year ended 30 June 2010.

The results, which show a significant rise in commercial and sponsorship revenue, were announced at lunchtime today.

Chief executive David Gill said:

“These results show record turnover, record operating profits and exceptional growth in our commercial activities. We will continue to concentrate on generating the resources to invest in the team and the club to keep us at the top of world football.”

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That’s hardly accurate financial reporting,  and is swayed far too much towards the good news, and never even mentions the club actually made a loss on the year.

Manchester United’s revenue was £286.41M, for the year ended June 2010.

Wages rose by 7% to £131.7M, while the overall debt rose to £521.7M, on which they seem to be paying an average of around 7.77%, if the total interest payments were £40M – that seems to be too low somehow.

The previous financial year’s profit figure was £77M, largely due to the world-record sale of Cristiano Ronaldo to Real Madrid.

Gill told the UK Press Association:

“We are not a club that needs to sell. 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,”

“There was no desire at all from anyone at the club to sell Cristiano — he wanted to go, and as a result we managed to extract a world-record fee. The philosophy is to retain and attract the best players.”

“We have £165M in the bank, but in some ways we would prefer to have £80M in the bank and Ronaldo on the pitch.”

We wonder why £165M is in the bank when the club have a debt of over £500M, and why not pay down some of the debt and save on interest payments.

Overall,  it shows Manchester United can still generate very good revenue, and that’s the good news, but the club is still weighed down heavily by the half billion pounds in debt the Glazer family are still carrying, since buying the club.

It seems the club did not want to report their financial figures in that way – true though it may be.

Comments welcome.