United’s results see profits fall

POOR on-field performances by the biggest club in world soccer, Manchester United, were reflected in the company’s financial results as profits fell from €57.7 million (£39.3m) to €41m (£27.9m) in the year to the end of July.

And in a bid to outplay rivals Arsenal, unbeaten in 47 League games, and Roman Abramovich’s Chelsea, United spent its entire transfer budget up to 2006 to buy wonder kid Wayne Rooney from Everton for €39.7m (£27m).

While United, coached by Alex Ferguson, may boost their playing performance thanks to Rooney, things do not look well in the board room. United said earnings from broadcasting, a third of the total, may plunge 25% next year as losses on the pitch last season hurt future fees from TV games.

The club said television income will drop by €20.5m (£14m) in fiscal 2005 and will not grow in the following two years, resulting in a “significant impact” on profit.

Profit for the year ended July 31 fell to €41m (£27.9m) compared to €57.7m (£39.3m) a year ago, the club said.

Revenue fell to €248.5m (£169m) from €254.4m (£173m). Despite the fall in bottom-line profits from €57.7m (£39.3m) last year, Manchester United said its performance at an operating level showed a 6% improvement to €85.6m (£58.3m).

The shares closed down 2.87% at 253.5 pence following the release of the results and the profit warning.

Club chairman Roy Gardner said: “Short-term results will be affected by a sharp drop in media revenues. The exact amount will depend on our final position in the league and the number of live games on TV. If we continue to improve, as we have in the last couple of games, we’ll move up the table and that’ll benefit us.”

Chief executive David Gill said: “To challenge right to the latter stages of the Champions League is also critical to our business model.”

Arsenal Holdings Plc, who have eclipsed United on the playing field, are fast catching up in the financial arena. Last month the London club said annual profits doubled after revenue rose 33% to a record €230.6m (£156.9m).

Manchester United said it will not pay a special dividend this fiscal year because it’s adding 7,800 seats to its stadium, bringing the total capacity to 75,600 spectators.

The club said it was setting a benchmark by providing full and transparent disclosure of all player transfer activity and agent fees.

The figures showed more than £5m (€7.3m) was paid to agents in the year to July 31. The decision to make the fees public followed questions over corporate governance put to the board earlier this year by its largest shareholders, Irish racehorse owners John Magnier and JP McManus.

Additional Reporting Reuters and Bloomberg.