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Tuesday, 26 March, 2002, 16:33 GMT
Man Utd profits sound warning bell
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by Briony Hale
BBC News Online business reporter

It's time to face up to facts - Manchester United are simply the best.

Well, financially speaking anyway.

United, one of the few clubs to have turned success on the pitch into money in the bank, has just reported record earnings.

Mixed fortunes: six month results
Newcastle United 1.4m loss
Leeds United 13.8m loss
Manchester United 30.9m profit
The English football champions chalked up pre-tax profits of 30.9m in the six months to 31 January, a rise of 79% over the same period the previous year.

The profit figures were boosted by the sale of Jaap Stam for 16.5m to Lazio, and Andy Cole's 8m transfer to Blackburn.

But the financial gap between United and most other clubs is growing ever wider, with United's success standing in stark contrast to the dismal losses racked up by the likes of Leeds and Newcastle United.

So when the clear winner of football's financial league begins to make warning sounds about future balance sheets, it's time to worry.

Crippling wages

The reason for United's warning is the perennial problem of players wages.

The club forked out a cool 50m in total for top players such as Juan Sebastian Veron and Ruud van Nistelrooy last year, and with big transfer fees come big wages.

Juan Sebastian Veron
Veron: Britain's most expensive footballer
The secret of Manchester United's past financial success has been that the combined salaries of its players have remained a relatively low proportion of its revenues.

But the club is now warning that the likes of Mr Veron means its wage bill will eat up half its revenues this year, compared with 39% a year earlier.

Manchester United has a strong advantage in keeping the crucial wages-revenues percentage down.

Its turnover is far bigger than any other British club - thanks to its strong combination of ticket sales, television and merchandise turnover.

With one of the biggest fan clubs in the world, merchandise and ticket sales are not showing any signs of waning.

Indeed, the club has just hired brand guru Roy Gardiner - famed for British Gas, the Goldfish credit card and the AA - as its new chairman.

TV squeeze

And the Premiership clubs are not facing the prospect of a sudden drop in television money, unlike those clubs in the Nationwide Football League currently in dispute with ITV Digital.

"You have to distinguish between the Football League and the Premier League," chief executive Peter Kenyon told BBC Breakfast News.

Manchester United are the biggest TV draw both domestically and internationally

Peter Kenyon
Man Utd chief executive
"The Premier League is in the first year of a three-year deal, attendances are up and there is no sign that television audiences are declining."

"Manchester United are the biggest TV draw both domestically and internationally."

While that's all very well for United, it makes the struggle to avoid relegation from the Premiership all the more critical.

Far greater worries

Investors in Manchester United have not been under any illusion about the firm's financial outlook.

The shares have been falling steadily from 400p in May 2000 to 124p on Tuesday.

But the woes of Manchester United are nothing compared to its rivals.

Its 50% wage-revenue ratio is the envy of smaller clubs such as Wimbledon, where wages have eclipsed turnover altogether.

Such difficulties has caused some clubs to begin reporting their profits by stripping out the costs of players.

But that's like, well, trying to play football without any men.

Manchester United's wage bill looks set to cause the club a minor headache in the future.

And it has stressed that future financial success is dependent on its performance in the European Champions League.

But United's financial future is still far more secure than nearly any other club in the league.

See also:

08 Mar 02 | Business
Leeds United seeks transfer income
20 Mar 02 | Business
Newcastle slip into red
04 Dec 01 | England
Money advice for Man Utd fans
01 Oct 01 | Business
Man Utd scores profit goal
18 Sep 01 | Business
Adidas buys slice of Bayern
19 Jul 01 | Business
Racehorse owners buy Man Utd shares
02 Apr 01 | Business
Manchester United's profits soar
07 Feb 01 | Business
City view: Utd's Yankee tie-up
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