Manchester United may have been struggling by their standards on the pitch recently, but they continue to be a considerable financial success. The results issued today relate to the club’s second fiscal quarter, i.e., the last three months of 2013. Pre-tax profits were £30.3m compared with £28.4m this time last year.
Manchester United may have been struggling by their standards on the pitch recently, but they continue to be a considerable financial success. The results issued today relate to the club’s second fiscal quarter, i.e., the last three months of 2013. Pre-tax profits were £30.3m compared with £28.4m this time last year.
The most serious threat to their income would be if they failed to qualify for the Champions League this year which is now a very real risk. In its press release, the club refers to ‘forward-looking statements’ and warns ‘You should not place undue reliance on such statements because they are subject to numerous risks and uncertainties relating to the Company’s operations and business environment, all of which are difficult to predict and many are beyond the Company’s control.’ Although this is a relatively standard form of statement, it presumably covers drawing at home to the bottom club, the loss of the fear factor by clubs visiting Old Trafford and the fact that ‘Fergie time’ seems to be as much a threat to results as a help.
Nevertheless, they remain a strong global brand and have a very sophisticated marketing operation. These incomes streams are like to remain buoyant, but even so they have had to make reassuring noises in a conference call with bond holders and others in New York on Wednesday (starting at 8 a.m. EST).
Asked whether a failure to qualify for the Champions League would harm commercial revenue plans, executive vice-chairman Ed Woodward said, ‘It takes a long, long time to build up a huge fan base … people can understand from a commercial perspective why it makes sense to partner with us. I don’t think that will go away for a long time.’ However, he did admit that the club would be more active in the summer transfer window than usual. The shares fell 4 per cent in afternoon New York trading.
The club reports that commercial revenues of £42.3m were up 18.8 per cent for the quarter and 30 per cent for the year to date. Six new sponsorship deals were activated in the quarter, often in Asian markets. Whereas sponsorship revenue was up 39.4 per cent, retail, merchandising, apparel and product licensing revenue was down £0.4m, but up 4.8 per cent over the year. Broadcasting revenues were up 18.7 per cent for the quarter.
In the three months ended December 2013, commercial was 34.4 per cent of total revenue, broadcasting was 38.2 per cent and matchday 27.4 per cent.
Staff costs for the second fiscal quarter were £51.6m, an increase of 16.7 per cent, primarily due to player acquisitions and the renegotiation of existing contracts. Also, the number of employees rose by 70.
Operating profit for the three months ended December 2013 was £36m, but £5.7m of this was absorbed by financing costs. However, these fell by £3,5m. Gross debt was cut by £10m to £356.6m. Quite substantial foreign exchange losses were made. These accounted for a large proportion of the £20.3m other operating expenses which were up 29.3 per cent.
For the fiscal year 2014 Manchester United expects revenue to be in the range £420m to £430m which is line with previous expectations.
The range of its marketing operation is shown by the fact that the club has struck deals to create ‘official partners’ of; global spirits, diesel engines, savoury snack, carriers (airline), office equipment, timekeepers, beer, telecoms in Malaysia, wine, logistics, Japan, betting, motorcycles, telecoms in Vietnam, Cambodia and Laos, paint, telecoms in Bulgaria and finally, noodles in Asia, Oceania and the Middle East.