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Monday, September 28, 1998 Published at 11:45 GMT 12:45 UK

Business: The Company File

Spending dents record Man Utd profits

Profits have risen despite a fall in merchandise sales

Manchester United's ambitions to win a major European trophy, which has prompted a spending spree on players, has halved the club's annual profits.

However Manchester United has revealed the strength of its off the pitch activities by announcing a rise in pre-transfer profits to £29.6m for the year to July thanks to a jump in television revenues.

The most profitable football club in the world has seen its earnings rise from £27.3m last year, with the results coming in higher than City expectations.

Spending spree

Manchester United spent a net £15m on new players since August 1997, investing £28m in its team while selling players worth £13m.

Big money purchases such as Dutch defender Jaap Stam and Swedish midfielder Jesper Blomqvist led to a fall in overall pre-tax profits to £14m compared to £27.6m in the previous year.

[ image: Players' wages are on the rise]
Players' wages are on the rise
However the results have been overshadowed by Rupert Murdoch's BSkyB's £623m takeover bid for the club.

BSkyB's bid has created a wave of protest from Manchester United fans.

Wage demands

Manchester United profits rose despite a sharp rise in players wages. The total wage bill rose by £4m in the year to July.

The club says that its ground is enjoying slightly higher average attendances at 54,900, while television income rose by a third to over £16m as a result of the enhanced BSkyB contract with the Premier League.

However merchandising turnover was down by 16%.

The club attributes the fall to a decrease in kit sales in the UK and abroad, partly due to World Cup distractions and the high value of the pound.

The club is now looking at developing its overseas merchandising operation.

It has set up a new subsidiary, Manchester United International, to build up sales in Asia, the Middle East and Scandinavia.

Manchester United has also announced a 10% rise in its annual dividend to 1.7p from 1.55p.

Competition concerns

BSkyB's offer for Manchester United is being scrutinised by the UK competition watchdog, the Office of Fair Trading (OFT).

Interested parties have until today to submit their views on the deal to the OFT.

Reports have suggested that the bid is being opposed by the Premier League and the Professional Footballers' Association.

City analysts believe the takeover is likely to be referred to the Monopolies and Mergers Commission, which will launch a much wider review of the deal.

The BSkyB deal has heralded a flurry of speculation about various other media companies buying out football clubs.

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