AS Manchester United nurse wounded pride and dented profits after being knocked out of the European Cup before the quarter-finals, the club’s leading officials are calling for past form in the tournament to count beyond the group stage.

David Gill, the United chief executive, said yesterday that he had raised with Uefa, European football’s governing body, the issue of a seeding system in the last 16 that would give the bigger clubs a better chance of progressing.

AC Milan, United’s conquerors this season, are among the clubs that support the idea of a restructure, after other big teams went out at that stage, including Arsenal, Real Madrid and Barcelona, the last two of which expected a better run. Gill said that while big clubs moaning about being knocked out may appear selfish, their absence would not be good for television, either. “For no team from Spain to be there cannot be good for TV,” he said.

The 32 qualifying teams for the Champions League are seeded in the group stages according to their track record. After that, it is only the winners of each group who benefit from a ranking system in the first knockout round. The only other intervention prevents two teams from the same country meeting in the last 16.

United, who rely heavily on the money available in Europe’s premier club competition, want the ranking system extended, but they do not expect any changes next season.

Their financial results for the six months to the end of January showed a £5.8 million reduction in Champions League income compared with the same period a year ago. This was caused by United’s third-place finish in the Premiership last season, which cut their share of the pot for English clubs from 30 per cent to 15 per cent, and the fact that there were more English clubs sharing that pool.

The negative impact helped to create a slump of more than half in pre-tax profits, from £26.8 million a year ago to £12.4 million. Turnover was relatively stable at £91.6 million.

United’s problems were exacerbated by the revised income distribution arrangements under the FA Premier League’s new deal with BSkyB, the pay-TV operator. The contract has seen a drop from £650,000 to £350,000 for each live match, a change that has hit United hard, as one of the most televised teams in the Premiership. Equal central payments have also fallen, by 13 per cent.

Apart from the lower media income, the accounting period also took in a £10 million downpayment on Wayne Rooney, whose transfer from Everton helped to push up player acquisition costs and the wage bill, which stands at £42.7 million.

By the end of the financial year, United’s wage bill was expected to edge above 50 per cent as a proportion of turnover, a point widely regarded as the limit of good practice.

Sir Alex Ferguson, the manager, who has spent £60 million in the transfer market in the past two years, knows that he has to sell players if he wants to buy new ones. “We do not need significant expenditure and Alex is comfortable with that,” Gill said. “We have got some good players coming through. Everyone on the outside thinks there is major surgery required. It is not the view inside.”

Over the coming months — the takeover situation permitting — United intend to focus on the expansion of the Old Trafford capacity to 76,000. Construction begins in May and is scheduled for completion by the start of the 2006-07 season. The cost of the project has risen to £43 million, the bulk of which will be funded with a £32.2 million cash reserve. The balance is likely to be made through increases to ticket prices, but Gill said that he would not make those public until next month after consultation with fans’ groups.

The United board was unable to give much update on the proposed £800 million takeover by Malcolm Glazer, the American billionaire. While United remain unconvinced of the structure of the offer, despite conceding that 300p a share was a “fair” price, they are expected to mount a vigorous defence of any formal bid.

The unwanted attention had cost the club £500,000 in advisory fees by the end of January and that sum will rise farther now that they have employed Tricorn, an independent corporate finance house, to assist Cazenove, their retained advisers.