Manchester United is counting the cost of last season's shock early exit from the Champions League, announcing the double whammy of a pre-tax loss of £4.7m and sharp revenue decline.
The full-year results to the end of June for the company, which recently listed in New York, show revenues contracting from £331m to £320m, a drop of 3.3 per cent, whereas a £12m profit in 2011 turned into a pre-tax loss. Only a one-off tax credit of £28m pushed the club into the black after tax.
Lower TV revenue and gate receipts resulting from the Champions League elimination in the group stages, and to a lesser extent the club's early exit in the FA Cup, accounts for the poor numbers. Its wage bill has also risen by close to 10 per cent in the past year.
The blow to the bottom line was softened by greater commercial activity – the club has 34 partners, which brought in £117m over the year to the end of June, up £13m on the previous 12 months. A major, £10m training kit sponsorship was signed with DHL, while a $559m (£344m), seven-year shirt deal with General Motors has been signed.
In total, Manchester United has 34 commercial sponsors and partners which makes it the most marketed club in the UK, with rivals such as Arsenal – who have only two such deals in place – left behind.
"There is no doubting that Manchester United is a good business, but as these results show, everything depends on the performance of 11 individuals on a pitch," David Bick, the chairman of Square One Consulting and a football finance expert, said.
"Their business model doesn't just rely on qualifying for the Champions League but having a good run in that competition. If they have a bad season profits can be wiped out."
In its statement to the New York Stock Exchange, the club forecast revenues of £350m-£360m for the 2013 financial year, but this was dependent on it reaching the quarter finals of both the Champions League and FA Cup.
Executive vice-chairman Ed Woodward said: "Our world-record $559m shirt sponsorship deal and the Premier League's new, £1bn a year UK television rights deal (a 70 per cent increase) highlight the outstanding growth prospects for the future. We also expect a substantial increase in the value of the Premier League's international television contracts scheduled to be announced later this year."
Last month, the US-based Glazer family floated about 10 per cent of the club they acquired for £790m in 2005 on the New York Stock Exchange.
At the time, the shares were priced at $14 – below the Glazer family's original lower-end estimate of $16. However, they have since fallen to $12.6, 10.2 per cent down on the float price.
Analysts have said 11 per cent of Manchester United shares are in the hands of short sellers – a far higher proportion than the average for the S&P 500 – suggesting many expect the club's share price to fall further over the coming months. An early Champions League exit this season could help this come true.
Nevertheless, Manchester United is still comfortably the biggest club in Britain – in terms of revenues – and the third richest in the world, behind Spanish giants Real Madrid and Barcelona. Real Madrid's revenues for the 2011-12 financial year were €514m (£415m), a 7 per cent rise, and Barcelona's of €494.9m (£399m) a 4.5 per cent increase.
Celtic in the red: Players hit profits
Glasgow giant Celtic had a taste of things to come in the Ranger-less Scottish top flight when it announced a pre-tax loss of £7.37m for the full year to the end of June. The Scottish Premier League champions saw its revenues dip slightly from £52.6m in 2011 to £51.3m in 2012. Contract renewals to retain players pushed the club into the red from a profit of £0.1m a year ago.