Manchester United are under no pressure to sell players even after posting losses of £83m yesterday, according to the club's chief executive, David Gill, who also insisted that United have £165m in cash in the bank to improve the squad if Sir Alex Ferguson wants, and are maintaining "significant growth" in the business.
The reason for the optimism is that United simultaneously became the first British football club ever to post operating profits of more than £100m (they made £100.8m on record earnings of £286.4m), with Gill arguing, with some justification, that a large proportion of United's losses were down to one-off costs and accounting practices.
For those fans who find it hard to get their heads around how a balance sheet drenched in red ink can be a good thing, Gill's explanation is relatively simple. United made £100m profit, paid interest on debts of £40m and payments on transfer fees of £40m, and much of the rest of the deficit was down to one-off payments related to financing, plus accounting practices like writing off a notional £35.4m as "amortisation of goodwill".
Even the arch sceptic, anti-Glazer analyst, Andy Green, aka "Andersred", the man behind the recent Panorama exposure of the Glazer family's failing US mall business, wrote on his blog yesterday: "Thankfully United is not Liverpool off the pitch or on it. This is [operationally, as a business] the best-run football club in England, it has been for nigh on 20 years. United are at no risk of going bust."
He didn't stop there, of course, because many United fans remain angry at the Glazers for spending (or wasting) so much cash in interest and other fees related to their leveraged buyout. And Duncan Drasdo, the head of the Manchester United Supporters Trust, echoed Green's other sentiments by saying: "The financial results today continue to demonstrate the tremendous revenue generated by Manchester United – directly or indirectly through the unparalleled loyal support the club receives.
"Sadly those supporters are let down by owners who continue to extract millions from our club. Imagine how successful we could be without the millstone that is the Glazers' ownership. Under a supporter ownership model, or even the debt-free plc model prior to the Glazers' takeover, this huge revenue stream could largely be reinvested in the football club (squad, stadium, ticket prices) rather than being leached out by the Glazers."
But the reality is that an apparently terrible bottom line loss of £83.6m is not so terrible after all. United are a cash cow, have lots of money in the bank, and are "completely confident" that they will be able to meet Uefa's Financial Fair Play (FFP) criteria that will set a limit on losses from 2011-12 onwards. Most of United's key losses this time were one-offs or not applicable to FFP calculations.
What happens next to the money in the bank is open to speculation. The suspicion is the Glazers will dip into it at some stage soon to start repaying around £220m of high-interest "time-bomb" pay-in-kind (PIK) debt. Gill does not normally comment on the PIK debt because it is a Glazer debt, not a club debt, and he reiterated that yesterday. But he did add that there was no imminent plan to raid the club's cash reserves to repay the PIK.
"We have a long-term financing structure in place, excellent revenues that are growing, we are controlling our costs – total wages are 46 per cent of turnover – and we can afford the interest on our long-term finance," Gill said.
"We still have cash to invest in players and to give good contracts to players and we are comfortable with the business model. We have money in the bank so there is zero pressure to sell any star player whether it is Wayne Rooney or X, Y or Z."
While United's earnings are healthy, and the largest in English football, they have fallen further behind Barcelona and Real Madrid in total income. Both the Spanish giants posted their 2009-10 result earlier in the summer and are about £70m-£80m ahead of United now in earnings, mainly because they keep a vast majority of all La Liga TV income for themselves.
Real, of course, now have Cristiano Ronaldo on their books, after an £80m move in 2009. Gill reiterated that the sale was a football decision – the player wanted to go and Sir Alex Ferguson eventually let him – and not down to finance.
"The philosophy is to retain and attract the best players," Gill said. "We have £165m in the bank but in some ways we would prefer to have £80m in the bank and Ronaldo on the pitch."
The Headline Numbers
Manchester Utd's income in 2009-10 from match day (£100m), media (£105m) and commercial deals (£81m)
Total costs, including staff and player wages (£131.7m) plus £53.9m in other operating costs
Interest on bank loans to the club £40m Amortisation of players' transfer fees
One-off costs relating to refinancing, including £41m interest rate swap, £19m in currency deviation and £6.7m in fees
Amortisation of goodwill, an accountancy practice involving no "real" cashflow
Total loss after tax
Cash in the bank
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