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Man United Report 74% Increase In Profits

Old Trafford NewManchester United has reported a 74% rise in profits for the second half of 2012, driven by surging commercial revenues. United signed six new deals with companies across the world, helping to boost its sponsorship revenue by almost 50% to £20.8m.

United announced that revenues rose from £175.1m to £186.4m for the six months to December 31 and that pre-tax profits grew from £12.8m to £22.3m.

Revenues during the quarter to the end of December alone stood at £110.1m, up from £101.3m the year before. Commercial income in those three months increased by nearly 30% from £27.6m in 2011 to £35.6m.

Staff costs rose by more than 10%. The club said it spent a total of £84.5m, mainly on signing new players, player wage increases and on increasing its commercial staff numbers.

Ed Woodward, Manchester United’s executive vice chairman, said the club’s commercial operation

“continues to experience extremely strong growth particularly in sponsorship”.

We are potentially entering the golden era for Manchester United as their financial power could allow them to dominate English football for the next decade, especially after the introduction of Financial Fair Play Rules.

According to Andy Green, who has the most in-depth analysis of United’s financial situation, there are a number of factors which mean United’s revenue growth is highly likely to accelerate in the next three years:

  • Chevrolet. The new shirt deal adds £11.6m pa for the next two years (on top of what Aon pay) and then a further £11.9m pa (for a total of £43.5m pa) from the 2014/15 season.
  • Premier League rights. We have already seen the value of domestic live PL rights rise 70% in the next three year cycle. Total domestic rights (including highlights, online etc) will probably increase around 60% and we are awaiting the outcome of the international sales processes. Taken together, a rise of at least 50% in PL TV income is virtually guaranteed in 2014. Assuming only low growth from the CL and owned rights (MUTV), that would still drive media revenue up 35%.
  • Nike renewal. The long running Nike contract is beginning to pay out back ended profit share AND is up for renegotiation. Looking at other kit deals, an increase of £25m on the current £35-38m pa looks very achievable. Some analysts think the deal will double in value and they could easily be correct.

These three areas alone will add almost £110m to revenue by 2015 (35% of the 2011/12 figure). To put that in context, that’s the equivalent of doubling matchday income.

Green goes on to say that he predicts that United’s revenue will increase by over £150m (c. 50%) over the next three years and that by 2016, they will be the first club to go over the £500m in revenue mark.

The new financial fair play rules both in the Premier League and Uefa, limit club’s spending ability to their revenues. But in Man United’s case, there revenues will be at least £100m more than everyone else in England. Nobody will be able to compete with them financially for players, which is one of the reasons why United are such big supporters of financial fair play.