Manchester United debt increases; stand to lose millions if they don't qualify for the Champions League
Manchester United released their latest financial figures today which has revealed an increase in the club’s net debt from £286.2m to £337.7m – an 18 per cent rise. The worrying figure is compounded by the fact that United will lose as much as £21million if they don’t qualify for the Champions League.
United’s £750m Adidas deal has a clause which says that if United don’t qualify for the Champions League for two consecutive seasons, they would lose 30 per cent of annual payments.
The club’s chief financial officer, Cliff Baty, elucidated the clause, “There is a clause in the Adidas contract that if we are missing from the Champions League for two years in a row, there is a 30 per cent reduction of the following year's receipt. So what that really means is that we would get, if we did miss out again, that would kick in and we would see 30 per cent of the future annual payment reduced.
“For example, if we received £70m, 30 per cent of that would be £21m, that we would not receive. But that is spread over the remaining terms of the contract.”
United’s coffers will also take a hit if they fail to qualify for the knockout stages of the Europa League, but Baty said the loss will be in “single digit millions” and not as high as the losses in the Champions League.
Net debt increases by 18 per cent
It doesn’t look too rosy for the Glazer-owned club in the net debt front, too. United’s debt has risen to a staggering £337.7m, a huge 18 per cent increase. The increase in debt has been attributed to "the impact of foreign exchange rate movements" – the value of the pound falling against the dollar after the Brexit referendum in June.
The club also reported that first quarter net profits have fallen from £5m to £1.2m, while total revenue has also decreased to £120m. It all sounds gloomy and doomy, but Chief Executive Ed Woodward sounds positive about the future and predicts record revenues this season for United.
“While our financial results for this quarter reflect the impact of our non-participation in the UEFA Champions League, we are pleased that we remain on track to deliver record revenues for the coming year.
“During the quarter we added a number of top-quality players to our squad, which once again demonstrates our determination to challenge for trophies,” said Woodward.
The club brought in record revenue of £515.3m last year and predict the revenue to beat that number this year and bring in around £530m.
These latest financial numbers will not please the already frustrated and angry United fans, who’ve already shown their displeasure of the Glazer ownership. With results on field not very positive and United’s huge debt, we could see a return of the ‘Glazer Out’ banners and protests outside and inside of Old Trafford on the ownership of the club.
The United faithful, though, cannot criticise the Glazer’s intent in the transfer market as they have provided all the recent Manchester United managers ample transfer budget to buy quality, world-class players.
Manchester United face the old enemy, Arsenal, at Old Trafford on Saturday, with 3 points vital for the Red Devils as they are already 8 points behind league leaders Liverpool and 6 behind Saturday’s opponents.
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