Manchester United reached a new financial high by revealing today it was the first Premier League club to generate more than £500m in revenue.
Annual revenues for the year to 30 June were £515m, beating expectations of between £500m and £510m – but still trailing the global record set by Spanish giants Barcelona at £570m, reported this July.
The commercial side of the business was fundamental in growing revenues from £395m to £515m. In particular, the club said replacing kit manufacturer Nike with Adidas and bringing merchandising back in-house were profitable moves.
Adjusted earnings were also ahead of expectations, with Ebitda of £192m compared to predictions of between £178m and £188m.
Net debt nudged up slightly, from £255m to £261m – the club said this was primarily due to the significant devaluation of the pound against the dollar, offsetting positive cash generation.
Operating cash flow for the year was £186m, which funded transfer fees for new players of £138m and was offset by receiving incoming transfer fees of £38m.
As the accounts are drawn to 30 June, they do not include the effect of world record signing Paul Pogba in August for £89m.
Executive vice chairman Ed Woodward said:
Our record fiscal 2016 financial performance reflects the continued underlying strength of the business and the club is on target to achieve record revenues in 2017, even without a contribution from the Champions League.
This strong financial performance has enabled us to invest in our squad, team management and facilities to position us to challenge for, and win, trophies in the coming years.
Failure to make the Champions League will hit earnings
Finance chief Cliff Baty explained on a earnings conference call that while the club expects revenues to increase to between £530m and £540m as the new Premier League TV deal kicks-in, earnings are expected to fall over the next 12 months.
Baty said the club was forecasting Ebitda to drop to between £170m and £180m – primarily driven by the loss of Champions League revenues in the form of payments from UEFA and reduced matchday receipts.
On the same call Woodward refused to be downbeat after the derby loss to Manchester City on the weekend.
"Despite the result on Saturday there is positive momentum. We are writing the next chapter in our history [and these] are exciting times for Manchester United," he said.
It was also the first results announcement since the appointment of United's new manager.
"Jose Mourinho needs no introduction from me," said Woodward.
A year is a long time in football
Overall revenues increased by 30 per cent compared to 2015, with earnings rocketing from £120m of Ebitda to £192m.
Broadcasting revenues increased by 30 per cent taking the Red Devils from £108m to £140m.
However, commercial revenues grew outstripped this rate of growth, jumping 36 per cent from £197m to £268m.
Net player expenditure was £99.7m a small increase of £2.7m in comparison to 2015.
The taxman will also welcome the results as in 2016 the club paid £12.5m of tax, compared to the credit of £2.7m generated last year.
Commercial not broadcast
Broadcasting revenue between 2015 and 2016 grew at the same rate as overall revenue growth. It accounted for around 27 per cent of total revenues in both years.
However it was the commercial revenues that increased proportionally, from 49.8 per cent to 52.1 per cent. Matchday revenues moved the opposite direction, down from 22.9 per cent to 20.7 per cent.
Underpinning the increased trend was a whopping 208 per cent increase in retail and merchandising – from £31.6m to £97.3m. The club said that this was primarily as a result of Adidas taking over from Nike as kit sponsor and increasing the minimum guaranteed revenues.
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