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Manchester United: the best football investment ever?
by James Phillipps on Feb 27, 2013 at 13:54
The three times European champions completed six new sponsorship deals, increasing its footprint across Asia, and also announced it had signed an eight-year sponsorship deal with a new training kit partner after buying out DHL from its previous arrangement.
Pre-tax profits rose from £19.2 million to £28.4 million year-on-year, despite staff costs rising by 14.2% to £44.2 million over the same timeframe.
Commercial revenue hit £35.6 million, up from £27.6 million, but broadcasting revenue remained the biggest source of income, up 4.8% to £39.5 million over the three months, contributing to total revenue growth of 8.7% from £101.3 million to £110.1 million.
The club expects revenue for fiscal 2013 to come in between £350 million and £360 million, up from £310 million year-on-year.
Some £62.6 million of the flotation proceeds were used to buy back senior secured notes reducing the company’s net finance costs by 25.2% to £9.2 million. Gross debt has fallen by 16.1% to £366.6 million from £438.9 million at the end of June.
Although last week saw the announcement that long-standing chief executive David Gill is to retire in June to be replaced by current executive vice chairman Ed Woodward, Gill will stay with the club as a director to ensure continuity.
So with the club proving a powerhouse both on and off the pitch this season, is it worth a punt or has the easy money been made?
‘It trades on a 12x Ebitda, which looks pretty punchy to me,’ says Simon Reeks, head of private client investment management at Midas Investment Management.
‘The real risk to the upside is that they start selling a lot more regional sector licences to advertise, such as regional licences in China, that would then justify the premium valuation.’
Kaitcer similarly praises the club’s commercial strategy of breaking down licensing and merchandising agreements by individual country rather than region to maximise returns, but believes that realistically it can only ever be seen as a punt.
‘It has a fantastic brand name, but it’s not cheap,’ he says. ‘I have been surprised at how well it has done but think it is more for institutions or diehard fans.’
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