Tax credit covers fall in United’s revenues
English soccer club Manchester United has revealed increased profits despite a fall in revenues in the 2011/12 financial year.
The mixed set of financial results came in the first set of trading figures released by Manchester United since issuing an IPO on the New York Stock Exchange.
The Premier League giants have reported an UK£11.1 million drop in overall earnings but a 79.2 per cent rise in net profits while its debts were cut by 4.8 per cent to UK£436.9 million. The UK£23 million profit, however, came about as the result of a UK£28 million tax credit. The club's cash reserves have also fallen by 53.1 per cent, from UK£150.6 million to UK£70.6 million.
Manchester United's commercial revenues, however, have risen considerably to become its most lucrative source of income for the first time. A training kit sponsorship deal with DHL - a Premier League first - has contributed to a 13.7 per cent uplift in sponsorship income while the club has also reported a 20.3 per cent rise in its earnings from new media and mobile deals to UK£20.7 million. Further growth is expected in this area after partnerships were agreed with the likes of Bwin, Toshiba Medical Systems, Yanmar, Fuji TV, Santander, Shinsei Bank and MBNA, while United will also receive US$37 million in 'pre-sponsorship support and exposure' from new shirt sponsor General Motors over the next two financial years.
General Motors agreed a world record seven-year, US$559 million deal with Manchester United in July for its Chevrolet brand to replace Aon as the team's front-of-shirt sponsor in the 2014/15 season.
Those earnings have helped to offset a 10.9 per cent fall in matchday revenues - from UK£110.8 million to UK£98.7 million - and a drop in broadcast revenues from UK£117.2 million to UK£104.0 million. Both have been attributed to the team's first-round exit from the Uefa Champions League in the 2011/12 season, as well as a failure to progress to the later stages of the FA Cup. The club will benefit from the Premier League's new domestic television rights deals with Sky and BT Vision - worth a combined UK£3.018 billion over three years - when they begin in 2013/14.
The release of Manchester United's financial statement comes as the club fights to arrest a stall in its share price after its IPO issue in August. Around ten per cent of the club was made available at US$14 a share last month aimed at raising US$233 million. However, their value has since dropped to around US$12.575 apiece, with the Daily Telegraph reporting claims from financial analysts Markit that the shares may now be targeted by short-sellers.
The failure to stimulate an increase in Manchester United's share price has come despite the headline signings of Borussia Dortmund's Japanese midfielder Shinji Kagawa and Dutch superstar Robin van Persie from rivals Arsenal. The club has also trumpeted an internally commissioned survey that revealed it has '659 million followers' across the world.
The independent Manchester United Supporters Trust has gone on record with its opposition to the share issue, expressing particular displeasure that the club's owners - the Glazer family - will profit personally from it rather than using the full proceeds to pay down debts of UK£436.9 million.
Manchester United renews deal ahead of market windfall - 04 July 2012
Town of Amherstburg agrees 40-year naming rights deal - 10 November 2010
Anheuser-Busch and SUM renew expansive soccer deal - 22 March 2011
Racing Metro star signs new contract - 22 November 2012
McGladrey Classic renews with title sponsor until 2015 - 30 November 2011
Related blog posts
US college sports struggle to generate profit - 27 August 2010, Notes & Insights
Manchester United set for further financial woe - 01 April 2010, Notes & Insights