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Bucking the trend Manchester United reports 48 percent profit risePosted: Monday September 30, 2002 10:38 AM
LONDON (Reuters) -- Manchester United, the world's richest soccer club, reported a 48 percent rise in annual profits on Monday. The English Premier League champions for three years before Arsenal won the title this year, also kept players' wages below their target of 50 percent of turnover. United reported pre-tax profits of 32.3 million pounds (US$50.26 million) for the year to July 31 compared with forecasts of around 31.5 million pounds. Profits were boosted by player trading profit of 17.4 million after a previous year profit of 2.2 million pounds, due largely to the sale of Dutch defender Japp Stam and forwards Andy Cole and Dwight Yorke. The club said wages soaked up 48 percent of group turnover for the year as a whole after accounting for 39 percent in the previous year. "We think a ratio of 50 percent is sustainable going forward, our job is to keep the commercial revenue moving ahead," said group managing director David Gill. In March, United warned that after reporting a nearly 80 percent leap in first-half profits, this rise would not be repeated in the second half due to soaring player wages, which rose about 40 percent in the six months. Wages have been rising since United bought Argentine midfielder Juan Sebastian Veron and Dutch striker Ruud van Nistelrooy in 2001 and negotiated new contracts with captain Roy Keane and England captain David Beckham. The recent signing of England defender Rio Ferdinand for 30 million pounds will keep the pressure on wages. Gill said although Ferdinand had been added to the wage bill in the offseason, veteran defender Denis Irwin and goalkeeper Raimond van der Gouw had found new clubs and Ronny Johnsen had been released. United did not win a trophy last season as Arsenal took the honours with the domestic double of Premier League and FA Cup, but business is still thriving from deals with club sponsors Vodafone (VOD.L) and kit sponsor Nike (NKE.N). Group turnover rose 13 percent at 146.1 million pounds and the total year dividend was up 55 percent at 3.1 pence a share (2.0 pence previously) including a special dividend of one pence to reflect player disposal profits. The group's shares have underperformed the FTSE 100 index by five percent over the last year and ended on Friday at 99-3/4p, valuing the company at 260 million pounds. United bucks trend of financial gloom in world gameLONDON (Reuters) -- Manchester United bucked the trend of financial gloom in world soccer on Monday when the English Premier League club announced healthy profits despite sluggish performances on the pitch. At a time when rivals are dipping into the red with spiraling wage costs and shrinking television revenues are threatening the future of many European clubs, the world's richest club reported a 48 percent rise in annual profits. The start of Europe's new club season has been dominated by financial rows in the continent's major leagues with lucrative television deals -- the raw material behind soccer's 1990s boom -- getting harder and harder to find. The game is suffering the pains of an industry facing a serious reality check as clubs are threatened with bankruptcy after a decade when salaries have reached unmanageable levels. But United reported pre-tax profits of 32.3 million pounds ($50.26 million) for the year to July 31 compared with forecasts of around 31.5 million pounds. With 54 million fans worldwide, all but 10 million of whom are outside Britain, United has arguably the strongest brand name in world football and is in a unique position to prove football clubs can be successful businesses. Although it did not win a trophy last season with Arsenal winning the Premier League and FA Cup double, the Manchester club has cashed in on deals with U.S. sportswear manufacturer Nike and telecoms giant Vodafone in the past few years. Significantly the 1999 Champions League winners, who have made their worst start to a Premier League season and two weeks ago lay 10th in the table, also kept players' wages below their target of 50 percent of turnover. Sharp contrast The figures contrast sharply with Premier League rivals Leeds United which said last week that it planned to cut its wage bill and rely more on home-grown players after plunging deeper in the red last year. A report published two weeks ago said Scotland's 12 premier league clubs were $205 million in debt for the year 2000/01. Leeds plan to trim their 30-strong squad to 24 and complained that their ratio of players wages to turnover was far too high at 66 percent and would be cut to 55 percent. In Scotland, the Premier League ratio has risen to a staggering 75 percent. At some Scottish clubs wage bills are even higher than turnover. "We think a ratio of 50 percent is sustainable going forward, our job is to keep the commercial revenue moving ahead," said United group managing director David Gill. This has been achieved despite rising wages since United bought Argentine midfielder Juan Sebastian Veron and Dutch striker Ruud van Nistelrooy in 2001 and negotiated new contracts with captain Roy Keane and England captain David Beckham. The recent signing of England defender Rio Ferdinand for 30 million pounds will also keep the pressure on wages. But the sale of Dutch defender Jaap Stam and forwards Andy Cole and Dwight Yorke helped boost player trading profit to 17.4 million from 2.2 million pounds. United have a massive fan base in emerging markets in Asia such as China. There are few clubs who have their potential in global marketing because of worldwide fans. The Nike partnership meant United was able to launch this season's new kit simultaneously at outlets all over the world. United says it is the best-selling, most successful kit ever.
Copyright 2003 Reuters Limited. All rights reserved. |
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