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Manchester United Independent Business Review

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The business report about one of the most famous football clubs in the world. It contains information about football industry, key aspects of managing a football club possible strategy for the club and financial forecasts.
Report was prepared by a student. Don't hesitate to contact me!

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Manchester United Independent Business Review

  1. 1. MANCHESTER UNITED FOOTBALL CLUB PLC INDEPENDENT BUSINESS REVIEW August 24th 2015 © Copyright by Karol Stępień All rights reserved (#)
  2. 2. MANCHESTER UNITED FOOTBALL CLUB PLC INDEPENDENT BUSINESS REVIEW INTRODUCTION MARKET ANALYSIS Market Overview Premier League Competition THE CLUB History Business Review Financial Analysis FORECASTS Forecasts and Scenarios Valuation 3 5 6 9 16 23 24 30 41 52 53 59
  3. 3. Introduction The following report was made by a student for University case study purposes. The aim was show a reader that football industry is getting more professional every year and that football clubs are being managed like ordinary companies. Although it is mostly about one certain club, the report shows key factors of managing every professional football club, crucial aspects of managing a company like this. One of chapters refers also to general market condition of football industry. The reason why Manchester United has been chosen as a topic is the fact that the Club is listed on NYSE and it easier to find necessary financial information, not all that was needed but at least something. Football is Author’s biggest passion. While studying he discovered that that might be possible to combine his passion with profession. He has written both BA and MA thesis about finance in football, published two academic articles as a co-author. Finally was a co- author of annually report that discusses financial condition of Polish football clubs. The report is published by Ernst & Young. Author tries to develop in the area of football finance, seeks for new things to learn about the exciting industry of sports. Author is open for every advice and suggestion. Every kind of comment is warmly welcomed. Sincerely, Karol Stepien Contact Information: Author Karol Stępień Address Dąbrowszczaków 2/4 03-474 Warszawa Telephone +48 660 40 49 86 Email Karol_Stepien@icloud.com © Copyright by Karol Stępień All rights reserved 3
  4. 4. MARKET ANALYSIS Market Overview Premier League Competition
  5. 5. 7,4% 3,2% 9,0% 3,2% 6,9% 14,0% 6,0% 9,1% 5,2% 6,5% 2008 2009 2010 2011 2012 Revenue Growth Wages Growth Business Overview Football is the most popular sport in the world. As a business, thanks to globalization and commercialization it became a huge business, one of the biggest among sport’s disciplines. Football industry has also bright future ahead. Football industry was criticized for overspending for many years. It was said that clubs expenditures on wages and transfers are unreasonably high. In fact clubs were generating losses, and they still are, and they probably will in the future. This is also a nature of this industry. If the club is profitable, fans are accusing owner that all he wants is to squeeze the profit out of the club and leave it. Football club may not be profitable, but it should be able to finance it own activity. Club’s management seemed to understand the problem of overspending and changes may be seen now. According to UEFA Benchmarking Report 2013/2014 Edition financial year 2012 was the first one where revenue growth rate was higher than wages growth rate – 6.9% in comparison to 6.3%. Moreover, net loss generated has decreased for the first time since 2008. It is a huge loss – over €1bn, unacceptably high, but it is still 36% less than in a previous year. It is expected that these figures will improve thanks to introducing Financial Fair Play. Forecasts for Sports industry are positive. According to A.T. Kearney’s Winning in the Business of Sports in 2017 Sports market value may reach almost $91bn, while in 2005 it was worth $46.5bn. Sports market value is increasing with higher CAGR than global GDP. In terms of football, it is developing even faster than sports in general. Football industry is very competitive, many clubs have huge desires while the winner is always one and others have to lose. That is way it is crucial to set long-term strategy and do not think about next season only. One great season in football is not enough anymore. Market Overview Source: UEFA Benchmarking Report 2013/2014 (data for 237 clubs) Revenue growth vs wages growth -636 -1 163 -1 634 -1 670 -1 066 2008 2009 2010 2011 2012 Source: UEFA Benchmarking Report 2013/2014 (data for 237 clubs) Net loss generated by European clubs (€m) Source: Winning in the Business of Sports, A.T. Kearney Sports market value ($bn) 46,5 58,4 76,1 90,9 2005 2009 2013 2017 2005- 2009 2009- 2013 2013- 2017 Sports market growth rate 6% 7% 5% Football market growth rate 8% 9% 5% 6
  6. 6. Value Of Player Market Overview o Health status – a player who has been fighting with serious injuries throughout his career, especially the same kind of injury may be a huge risk as a transfer. o Nationality – English club would have to pay a bigger price for an English player than for a similar overseas player. Additionally some nationalities are valued higher, like Argentinians (they are considered to be more talented). Through less obvious but still equally important: o Psychological characteristic (player who collect yellow and red cards or underperforming in important matches will have a lower price tag), o Marketing value of player – potential shirt’s sales boost or club’s crest usage in ads with a player etc. It is worth to remember that in many cases buying certain player is not finish of a whole process of assessing his value and whether he will suit well to the team, but in fact many times times transfers have nothing to do with sports/business calculation. Many times players are being bought only because manger or president really want him in the club. Moreover sometimes even fans can have an influence on club’s transfer policy Players, or player’s registrations are definitely one club’s most important asset alongside the stadium. In some cases this may be the highest valued asset club possess. However player’s registration value in accounting books is almost always undervalued. Player’s registrations are presented in company’s balance sheet as “Intangible assets”. The value of each player registration is calculated separately and it depicts two factors: value of contract and transfer fee (if player was bought from different club for a certain amount of money). Afterwards the value of single registration is subject of amortization. Amortization period is simply contract duration. Consequence of that method is that registration probably has nothing to do with real market value. Until signing a new contract, single registration’s value is lower every season while in reality many times player’s value increase over years. However it is impossible to assess the value of certain player in few years time. This method of calculation is correct according to IFRS standards. There is no alternative method that maybe helpful with evaluating player’s value, but there are portals like transfermarkt.de where player’s potential market value may be found.
  7. 7. Main Risk Factors Football club operates as an ordinary company which means that its activity has some risks. In football industry apart from risk factors common in every company many other factors exist. Risk factors connected with the characteristic of activity: o Dependence on one certain source of revenue may lead to problems with budget if source of revenue is lost. In Premier League many smaller clubs’ fate depend on Broadcasting revenue. If a club is going to relegated from Premier League it will also lose main source of revenue and may have problems repaying liabilities. o Premier League is the entity that manages the league. One its main responsibilities is to negotiate Broadcasting contracts. Clubs cannot sign their own contracts in terms of Broadcasting which means that they have limited influence on a revenue source that becomes more and more significant for club’s budget. Popular clubs like Manchester United or Arsenal could have earned more if they have the opportunity to negotiate terms of broadcasting deals on their own. o High transfer fees and very liberal wages policy may lead to high indebtedness and problems with liquidity. Both transfers fees and wages level are increasing over last seasons with a significant growth rate. Risk factors connected with on-pitch performance: o High level of competitors – no matter how good the team is, there are only 20 places in Premier League and every season three clubs will lose their place and will be relegated. o Dependence on First Team performance – even though club employs even hundreds of people, club’s well-being depends on performance of around 23 players of the First Team. They are responsible for generating most of revenue, and weak performance may very quick has its consequence in financial condition. o If the club does not meet all requirements of domestic or European governing bodies, like The FA or UEFA, may not be granted the license and that would mean the team cannot compete in Premier League or European cups. o Inappropriate behavior of fans or player may result in fines or points deduction. Market Overview 8
  8. 8. Premier League – the company Premier League was founded in 1992 and since that year it provides emotions and excitements to fans not only in the UK but also in almost every corner of Earth. Premier League is a company which main objective is govern the League. It is fully owned by 20 clubs that compete in Premier League every season. This means that every club has equal right to introduce their own idea and defend their own benefits. No matter whether this is Chelsea or Crystal Palace, everyone’s vote has the same value. Since the first season Premier League became the highest valued football league and is considered as one of the best football league in the world. Now Premier League games are broadcasted in around 212 countries by 80 different broadcasters. The TV audience reached 4.7bn. Premier League matches may be seen in over 643m homes from Los Angeles through London to Macau. The company’s goal is to set level of game at highest possible level, encourage best players to play for English clubs and develop level on lower divisions and investing in youth. Premier League is giving away approx. 11% of turnover every season. Premier League is operating in dynamic environment where many stakeholders have influence on how the business will look like: Premier League Club Stadium Name Capacity Average Attendance Utilization City Population Man Utd Old Trafford 75 731 75 335 99% 520 215 Arsenal Emirates Stadium 60 432 59 992 99% 8 630 000 Newcastle St James' Park 52 405 50 359 96% 289 835 Man City Etihad Stadium 55 000 45 365 97% 520 215 Liverpool Anfield 45 552 44 659 98% 466 415 Sunderland Stadium of Light 49 000 43 157 88% 174 286 Chelsea Stamford Bridge 41 798 41 546 99% 8 630 000 Everton Goodison Park 40 221 38 406 95% 466 415 Spurs White Hart lane 36 284 35 728 98% 8 630 000 West Ham Upton Park 35 016 34 846 100% 8 630 000 Aston Villa Villa Park 42 682 34 133 80% 1 092 330 Leicester City King Power Stadium 32 262 31 693 98% 337 653 Southampton St Mary's Stadium 32 689 30 741 94% 253 651 Stoke Britannia Stadium 27 743 27 081 98% 249 008 Norwich Carrow Road 27 244 26 169 96% 140 452 West Brom The Hawthorns 26 850 25 064 93% 75 405 Crystal Palace Selhurst Park 26 309 24 421 93% 8 630 000 Swansea Liberty Stadium 20 827 20 555 99% 239 000 Watford Vicarage Road 21 577 16 664 77% 90 301 Bournemouth Vitality Stadium 11 700 10 265 88% 183 491 Source: Own research (attendance for season 2014/2015 Premier League clubs – 2015/2016 preview Source: Based on The Guardian research Revenues in Premier League 2013/2014 433 347 325 304 256 181 130 121 117 115 106 104 99 98 94 91,2 89 87 84 83 41 -23 15 5 1 80 19 28 -4 10 29 -17 1 4 9 -33 23 13 9 -12 -40 -20 0 20 40 60 80 100 0 50 100 150 200 250 300 350 400 450 500 ManUtd ManCity Chelsea Arsenal Liverpool Spurs Newcastle Everton AstonVilla WestHam Southampton Sunderland Swansea Stoke Norwich Fulham CrystalPalace WestBrom HullCity CardiffCity Revenues Profit before Tax Domestic and international federations Commercial Partners Fans Domestic and international TV Broadcasters Clubs 9
  9. 9. Premier League – the league Premier League 2013/2014 season was special when it comes to financial aspects. 20 clubs that compete in the league generated profit for that financial year. This is the first time when clubs generated combined profit of £198m. Only five clubs showed their results in red. This is a major difference when compared to 2012/2013 season when combined loss amounted to £291m. That all could happen due to revenue boost in Premier League and introducing Financial Fair Play rules to the league. Since 2010/2011 season revenue has risen by 56% and now annual growth rate is expected to be higher then ever before thanks to new TV deal and many commercial partnerships negotiated individually by clubs. Premier League has left behind other European leagues like Bundesliga or La Liga. Premier League, in terms of revenue, was always first but now distance is becoming to be really big. Premier League Financial Fair Play Premier League Financial Fair Play was first introduced by UEFA in Champions League and Europa League in 2013/2014 season. Premier League governing bodies decided to implement FFP regulations into Premier League as well. Starting from 2013/2014 season Premier League clubs have to obey certain rules: Net loss: o Net loss from last three season cannot exceed £105m if owner decide to inject equity, o Net loss from last season cannot exceed £15m if owner decide not to inject equity. Wages: o No restrictions if wages are below £52m, o Above £52m wages can rise only £4m per season plus the amount of increased commercial deals revenue. If club does not complies with rules points can be deducted, plus more sanctions are to be introduced. Source: Based on Deloitte’s data Revenue in selected European leagues (€bn) 3,9 2,3 2,0 1,7 1,5 Premier League Bundesliga La Liga Serie A Ligue 1 Source: Based on Deloitte’s data Premier League clubs’ revenue and growth (€bn) 2,5 2,8 2,9 3,9 2010/2011 2011/2012 2012/2013 2013/2014 10
  10. 10. Equality And Records It seems that a key to Premier League success is not only popularity of football in the UK but also money distribution model between clubs. Fair model leads to equality and sustainable growth. Three factors have an impact on how much money will a single club earn during a season: Number of televised games, place in league and equal share. In Premier League share ratio (difference between best earner and worst earner) is the best, in terms of fairness, among other European leagues. Distribution model leads to the fact that best club gets only 1.52 of what the worst club gets. In other leagues the ratio shows higher differences. In La Liga Spanish giants Barcelona and Real Madrid get even 11x more than the smallest clubs. This is the consequence of individual contracting in Spain football. What is more, money earned from overseas Broadcasting is also shared in equal way. Premier League 94 89 97 93 98 90 85 81 79 78 76 75 74 73 71 69 68 68 67 64 46 47 37 28 4 0 3 Premier League European Cups Source: Based on data provided by Premier League, UEFA and The Guardian Broadcasting revenue in Premier League 2013/14 (£m) League Share ratio Distribution model Premier League 1.52 Equal share, Place, Televised games Serie A 5.25 Equal share, Place, Historical results, City Population, Supporters Index Element Ligue 1 3.2 Equal share, Place, Televised games, Historical results La Liga 11.7 Individual contracts Bundesliga 2.0 Points accumulation system from 3 seasons Source: Own research Broadcasting in selected European leagues 191 670 1 200 1 024 1 706 1 773 3 018 5 136 1992-97 1997-01 2001-04 2004-07 2007-10 2010-13 2013-16 2016-19 Source: Based on BBC data Premier League Broadcasting deals (£m) 2012-2015 2015-2018 Group Stage 8.6 12 Group Win 1 1.5 Group Draw 0.5 0.5 Round of 16 3.5 5.5 Quarter Final 3.9 6 Semi Final 4.9 7 Runner-up 6.5 10.5 Winner 10.5 15 Source: Based on UEFA data (€m) Champions League new distribution model Current distribution model provides smaller and less popular clubs with necessary money to keep up with big firms from Manchester or London. The chances of signing better players are higher and overall the differences on the pitch are smaller and League becomes more competitive. Moreover high level of competition (every single club) leads to higher attractiveness of Premier League and this reflects in another record-breaking deal for the years 2016-2019. £5.1bn from domestic TV operators means a crucial change and clubs will significantly boost their revenue pushing especially smaller clubs up to a higher level. Transfers like Cabaye (from PSG to Crystal Palace), Ayew brothers (from Ligue 1 to Villa and Swansea) or Payet to West Ham from Marseille are a consequence of new TV deals. Summing up, new broadcasting deals will boost clubs’ accounts. But it is distribution model that makes Premier League different from other leagues and a factor that makes Premier League most competitive league in the world. It is also worth to note that from 2015/2015 season revenue from Champions League will also rise. 11
  11. 11. Brand Attractiveness For season 2013/2014 accounts show that Commercial activity revenues amount to £915m. Among other European leagues Premier League clubs secure the highest contracts. £915m Premier League clubs have earned during 2013/2014 season. This stands for £46m on average. However only six clubs presented higher figures in this segment and could be called as big six because the difference between sixth Tottenham and seventh Aston Villa is around 80% and clubs like Manchester United or Manchester City are way further with generated revenue. Top six clubs earn 78% of total League’s revenue. It is also possible to state that that there is a relation between time spent in Premier League and level of Commercial revenue. Clubs like Cardiff, Hull City or Southampton are clubs that were competing in lower divisions and they may be considered as not that popular. Clubs like Chelsea, Arsenal or Liverpool are extremely popular not only in the UK but in the whole world. These clubs are targets for partners who are looking for a global brand as marketing tool. It should be noted that probably these figures for seasons 2014/2015 and 2015/2016 will rise significantly thanks to popularity of Premier League clubs. Recent contracts will boost revenue: Arsenal with Puma, Liverpool with New Balance, Chelsea with Yokohama Tyres and record- breaking deal between Manchester United and Adidas will be the most important change factors. This is also important that Premier League clubs are more popular than clubs from other leagues. In terms of shirt sponsorship Real Madrid, Bayern Munich or even Barcelona cannot meet Premier League standards, Manchester United earns almost twice of what Spanish giants earn. Moreover only Bayern Munich gets high revenue from kit partner. However it should be noted that Adidas is a shareholder of German champions. It is expected that Premier League clubs will remain first position in terms of Commercial revenue. All deals are long- term while in less popular leagues contracts are less lucrative and short-term (even for a half of season). However there are questions whether Premier League and football as a whole still be as popular as now. Premier League Source: Based on The Guardian research Commercial revenues in Premier League 2013/2014 (£m) 189 167 114 104 83 56 31 26 21 17 15 15 14 12 11 11 10 9 6 4 46 Revenue (£m) Average 44 40 30 25 25 25 20 20 Source: Based on The Independent research Highest shirt sponsorship deals as of 08.2015 (£m) 75 65 30 50 27 31 34 12 Source: Based on The Independent research Highest kit deals as of 08.2015 (£m) 12
  12. 12. Fan base Matchday revenue is lower than Broadcasting or Commercial, however it is still extremely important source of revenue. Clubs’ stadiums are full of fans but supporters complain about ticket prices. Likewise Commercial revenue, in terms of Matchday again there are six clubs that present revenue higher than league’s average. Of course main impacts on the level of revenue are number of matches and stadium capacity so clubs have quite limited options to increase significantly inflows from this segment. Premier League surely do not have a problem with attendance on matches. Only German Bundesliga has higher average attendance among European leagues, but it should be noted that German clubs benefit from stadiums that have been built for FIFA World Cup 2006. However Premier League is the best league in terms of stadium utilization. Most of clubs reach attendance of 99% of stadium capacity. Unfortunately supporters demonstrate their anger that comes from ticket prices. Historical data shows that even though in Italian Serie A average season ticket prices are higher than in Premier League there is a huge barrier when it comes to the cheapest tickets. In all major leagues average prices are more then two times lower when compared to Premier League. For most of fans this may be significant problem because they could simply be unable to afford season ticket for their clubs’ games. Clubs also show various strategies in terms of ticket prices. For example Manchester City cheapest ticket is the cheapest one in league but the most expensive one is third most expensive season ticket. Liverpool’s tickets’ prices range is really small, from £710 to £869. Moreover, for example Crystal Palace’s most expensive ticket cost £145 more than Chelsea’s. On this background, Manchester United ticket prices are on reasonable level. Due to limited possibilities to increase Matchday revenue is becoming less and less important source of revenue. It is still crucial for the business though. What would football be without stadium full of fans? Premier League Source: Based on The Guardian research Matchday revenues in Premier League 2013/2014 (£m) 468 233 207 165 865 801 549 1655 Premier League La Liga Bundesliga Serie A 108 100 71 51 47 35 26 19 19 17 16 13 12 12 11 9 9 8 7 7 30 Source: Based on The Guardian research Average season ticket prices in European leagues in season 2012/2013 (£) Source: Based on Sky Sports research Season ticket prices in Premier League 2015/2016 (£) 0 250 500 750 1000 1250 1500 1750 2000 2250 Arsenal AstonVilla Bournemouth Chelsea CrystalPalace Everton Leicester Liverpool ManCity ManUtd Newcastle Norwich Southampton Stoke Sunderland Swansea Spurs Watford WestBrom WestHam 13
  13. 13. Major Expenditure With wages/revenues ratio at a level of 59,6% it should be said that Premier League clubs are managed better every year, it is probably also a consequence of introducing Financial Fair Play rule into Premier League. Indebtedness and extraordinarily high wages were source of problems for many Premier league clubs, but it is also a common thing across other European leagues. Due too acquisitions and takeovers in the league many clubs ended up with large portion of debt, like Chelsea or Manchester United. Despite high level of loans and borrowings those clubs are still far from going bankrupt because loans are secured or come from the owner. English clubs, in terms of indebtedness are far from the state that can be seen in Spanish La Liga where many clubs are technically bankrupts. In Premier League clubs like Crystal Palace, Norwich or Swansea present no net debt or very low level of it. Still an average Premier League club has a net debt of £79m but the situation in this case isbetter every year. In the season 2013/2014 Premier League clubs have spend nearly £1.9bn on wages what reflects in £95m per club. Even though wages are rising, clubs know that soon revenue will increase significantly. Still six clubs presented Wages/revenue ratio above 60% with Fulham reaching 76% which may cause problems in the future. It is worth to note that all clubs that present wages level above £100m also generate wages/revenue ratio below 60% which means that employee expenses are managed in reasonable way. Once again it is easily seen how Arsenal, Man Utd, Man City and Chelsea are far away from the competition. Level of wages they spend on staff is even 2x higher than average. Majority of clubs spend from £45m to £65m annually. Premier League Source: Based on The Guardian research Wages in 2013/2014 Premier League (£m) 166 6953 192 466969 144 205215 785463617063 100 436564 55% 59% 64% 59% 52% 57% 76% 56% 59% 50% 60%57%59% 62% 67% 64% 55% 51% 75% 56% 0% 10% 20% 30% 40% 50% 60% 70% 80% 0 50 100 150 200 250 Wages Wages/Revenue Source: Based on The Guardian research Net debt in Premier League 2013/2014 (£m) 14
  14. 14. Ownership structure Nowadays football clubs operates like normal companies, most of them as private limited companies (plc). The process of commercializing football industry led many clubs to become a part of bigger holdings. Source: Based on theoffshoregame.net (08.08.2015) and own research Premier League Clubs’ Ownership Recent changes in clubs’ ownership structure shows that 9 Premier League clubs are owned by overseas holdings. Other clubs are owned by private investors, from the UK or overseas. Roman Abramovich is the most famous owner since buying Chelsea in 2003. Clubs like Arsenal or Liverpool are parts of holdings that posses other sports clubs around the world. Kroenke Sports & Entertainment (Arsenal major shareholder) has in its portfolio clubs from NBA or NHL. Research carried out by The Offshore Game leads to conclusion that 28 football clubs in England have overseas owners. The are two reasons why this kind of situation occurred: Premier League is a very popular product everywhere around the world and investors see the growth potential in clubs. Second reason is tax avoidance. Current state is often criticized by experts and fans. Fans don’t want to see their beloved clubs as ordinary companies that are taking care of accounts and profits. Experts point out that many overseas- owned clubs are not managed in a reasonable way. Owners finance clubs through loans, not through raising Equity. This leads to high levels of debt and when owner decides to leave, that clubs may be left on the verge of going bankrupt. Moreover new owners are accused of not understanding what is Premier League and want results here and now It is also said that German Bundesliga rule “50%+1” provides stabilization and sustainable growth. The rule says that no single entity can own major stake at club. “50%+1” shares have to belong to Club’s Members. Only if one entity is supporting the club for 20 years Bundesliga may allow to rest of shares to buy by the single company. WfL Wolfsburg and Bayer Leverkusen are owned by Volkswagen and Bayer, respectively. Similar situation is in Spanish La Liga where clubs belong to socios. Premier League Club Offshore Holding Jurisdiction Arsenal KSE UK Inc. USA Aston Villa Reform Acquisitions LLC USA Bournemouth AFCB Enterprises Limited N/A Chelsea Private investor UK Crystal Palace Private investors UK Everton Private investors UK Leicester City King Power International Thailand Liverpool UKSV I LLC USA Manchester City Abu Dhabi United Group Investment and Development Abu Dhabi UAE Manchester United Manchester United PLC Cayman Islands Newcastle United Private investor UK Norwich City Private investors UK Southampton Private investor UK Stoke City Private investors UK Sunderland Drumaville Limited Jersey Swansea Private investors UK Tottenham ENIC International Bahamas Watford Private investors UK West Brom Private investors UK West Ham United Private investors UK 9 Clubs have overseas owners 15
  15. 15. Premier League Map 2015/2016 Season Every season 20 clubs compete to become Champions of England. Current Title holder is Chelsea. Clubs holding places 18-20 are being relegated to lower division – Championship. At least 5 clubs can win Premier League this season which means some desires will not be fulfilled. Moreover, one of top clubs will not secure a place in Champions League what reflects in a significant loss of revenue. Three clubs will be relegated to Championship and will lose crucial source of revenue – Broadcasting and probably Commercial revenue will be slightly lower. Season 2015/2016 should be extremely interesting for fans which is good for the English football industry as whole. Premier League as a product will become even more desirable and high-valued. Many clubs completed expensive signings, current transfer window may be record-breaking in terms of transfer spending. In Premier League every club is seeking for glory, both on-the- field and off-the-field. Competition Premier League is considered as the best football league in a world. Thanks to high level of each team the competition is extremely fierce during 38 rounds of the season. Market Analysis # Club Games Wins Draws Losses Points 1 Chelsea 38 26 9 3 87 2 Manchester City 38 24 7 7 79 3 Arsenal 38 22 9 7 75 4 Manchester United 38 20 10 8 70 5 Tottenham 38 19 7 12 64 6 Liverpool 38 18 8 12 62 7 Southampton 38 18 6 14 60 8 Swansea City 38 16 8 14 56 9 Stoke City 38 15 9 14 54 10 Crystal Palace 38 13 9 16 48 11 Everton 38 12 11 15 47 12 West Ham United 38 12 11 15 47 13 West Bromwich Albion 38 11 11 16 44 14 Leicester City 38 11 8 19 41 15 Newcastle United 38 10 9 19 39 16 Sunderland 38 7 17 14 38 17 Aston Villa 38 10 8 20 38 18 Hull City 38 8 11 19 35 19 Burnley 38 7 12 19 33 20 Queens Park Rangers 38 8 6 24 30 Premier League 2014/2015 Season 380 Games 20 Clubs 4 Champions League Places 1 Winner 16
  16. 16. MANCHESTER CITYCHELSEA Manchester City lost title last season and now what to take it back. The squad is full of top class players like Sergio Aguero, Yaya Toure or David Silva. Raheem Sterling and Fabian Delph will only set the bar even higher. With financial help of Abu Dhabi United Group the club is stronger the ever before and is able to sign anyone they want. £347m of revenue place them second, just behind Manchester United, but the distance is still significant - £86m. As 2013/2014 champions the Citizens cashed £133m. The team is becoming more popular and number of televised games is expected to rise. £167m of Commercial revenue can always rise due to corporate bindings with ADUG. Important news is expanding Etihad Stadium’s capacity form 47400 to 55 000 seats. This ensures club will earn more than now – £47m Matchday revenue. This result was significantly lower than club like Man Utd or Arsenal. Manchester City potential seem to have no limits, no one knows how far the club may get. 45.4 Average attendance (‘000) £347m Revenue Main partner ARSENAL 41.5 Average attendance (‘000) £325m Revenue Main partner 60.0 Average attendance (‘000) £304 Revenue Main partner Experts are pointing out that this time Arsenal is a mature team that finally can finish first and become champions of England again. Only one major signing has been completed – Petr Cech came from Chelsea. With Alexis Sanchez, Mesut Ozil and Jack Wilshere healthy and in good form they are able to become Premier League champions for the first time since 2003/2004. After moving from Highbury to brand new Emirates Stadium Matchday revenue now reaches up to £100m. This is one of the best results in Premier League. New deals with Emirates and Puma will help to increase £83m from Commercial revenue in 2013/2014 season. Arsenal finishes in top 4 for many years and regularly compete in Champions League what is a stable source of Broadcasting revenue – £121m. Arsenal is always an example of well- managed club, but it should be noted that after finishing property-related activities results are not as good as they used to be however still remain black - £5m for 2013/2014. Chelsea will start 2015/2016 season as title holder and fans are expecting that the trophy will stay at Stamford Bridge for the next season. Club’s management decided not to strengthen team significantly. Radamel Falcao is on loan from Monaco and his form is under question mark. Asmir Begovic will probably be only a replacement for Thibaut Courtois. Still this is one of the strongest squad in the league. And charismatic manager. The Blues presents 3rd highest revenue. They reached semifinals in Champions League and that reflects in £140m from TV Broadcasting. Commercial revenue will grow significantly after replacing Samsung with Yokohama Tyres as Kit sponsor. The new deal is worth around £40m per season and is the second highest deal in the Premier League. Matchday revenue is as high as it can get with that stadium capacity. 99% utilization rate secures £71m revenue for Chelsea. And of course Roman Abramovich is a great financial asset for the club, that will provide a world class signing if necessary. Chelsea is a potential Premier League 2015/2016 champion. * Revenues are for 2013/2014 season ** Attendance is for 2014/2015 season 17
  17. 17. Southampton is that one example that shows money doesn’t play on the pitch. After entering Premier League in 2011/2012 season they don’t stop to surprise. They avoided relegation, they finish 7th last season, they spent majority of season in top 4 as well. And all of this after selling best players. Club earned hug amount of money after departures of Adam Lallana, Luke Shaw, Dejan Lovren, Nathaniel Clyne and others. £106m of revenue allows Saints to secure 11th place in Premier League with only £10m of Commercial revenue. Club has a lot to do in terms of expanding the brand awareness. Still big transfers allowed to generate £29m of pre- tax profit – 3rd result in the league. LIVERPOOL SWANSEA CITY TOTTENHAM HOTSPUR SOUTHAMPTON Is 2015/2016 season will be another great one for Swansea? The only club in Premier League that is located in Wales finished 8th last season. The club seems to be in a good shape, when it comes to on-the pitch performance as well as off-the-pitch results. Club is owned by the fans in 20%, the manager is Swansea’s legend. Transfers of players like Andre Ayew (still young, but with Champions League experience) shows that this season may be even better. From financial perspective Swansea will surely break the barrier of £100m of revenue. Club has a lot to do in terms of increasing both Matchday and commercial revenue, both categories are below £10m and that is one of the worst results in the league. The Swans managed to generate pre-tax profit though - £1m. Fans at Anfield are wondering how life “after- Gerrard” will look like, but the future may be very positive. Even though Liverpool lost Raheem Sterling the striking force is amazing: Benteke, Sturridge, Coutinho, Firmino. After changes in ownership structure club has more ambitious plans, stadium expansion is underway. With £256m of revenue they hold 5th place but after new deal with New Balance their Commercial revenue will rise significantly (it amounted to £101m for season 2013/2014, more than Arsenal for example). Only Matchday revenue is much lower than in other big clubs but after the stadium’s expansion it will no longer be a problem. This season can still be a disaster for a club like Liverpool – no Champions League qualification. Spurs, located in Northern London, shows ambitions to be a regular in Champions League. Unfortunately after Harry Redknapp and Gareth Bale’s departure club finds it hard to get a 4th place, they finished 5th 2014/2015 campaign. In terms of revenue they see the back of well- known clubs. Spurs already presented schemes of the new stadium that will help to increase Matchday revenue, yet club should find a way to get higher level of Commercial. Tottenham present low quality transfer policy, so far Roberto Soldado and Erik Lamela are huge disappointments. Yet still Spurs has a amazing asset in their team – Harry Kane. He is able to deliver 30 goals per season and in the future can be sold with bigger price tag than Raheem Sterling. 30.7 Average attendance (‘000) £106m Revenue Main partners 35.7 Average attendance (‘000) £181m Revenue Main partners 44.7 Average attendance (‘000) £256m Revenue Main partners 20.6 Average attendance (‘000) £99m Revenue Main partners 18
  18. 18. It seems that Everton is a typical 6-10 club. Always ready to make a surprise by winning with Man Utd or Chelsea but always fail at the end. However club was restructured by David Moyes over 9 seasons and now his successor – Roberto Martinez – is introducing his own management style. After signing big names last season (Lukaku, Barry etc.) Everton wasn’t active this year on transfer market. In terms of financials, Everton is 8th with £121m of revenue and managed to generate £28m of pre-tax profit. £19m of Matchday and £14m of Commercial revenue means that Blue part of Merseyside is an average Premier League club. Fans are looking forward to beat opponents from Liverpool again and are hoping that players like Stones, Barkeley or Coleman will stay in the club. CRYSTAL PALACE WEST HAM UNITED STOKE CITY EVERTON The Hammers finished 12th last season which was not a disappointment, but also not something special. Now both the club and fans are looking forward to the new season. Expectations are bigger because of Slaven Bilic’s arrival and Andy Carroll’s finally becoming fit again. The striker could make a deadly duo with Enner Valencia. Also a transfer of Dimitri Payet is promising. In terms of financials West Ham is also in the shadow of bigger names like Arsenal, Chelsea or Tottenham. Revenue is around £115, but 64% comes from Broadcasting. Matchday revenue is 8th biggest in Premier League, but in this field of activity The Hammers will probably improve after moving to Upton Park to the Olympic Stadium The Eagles are fourth from the bottom in terms of revenue – only £89m – they are doing pretty well on the field. Since Alan Pardew came in to the club team started to perform better and finished 10th. Now, after Yoan Cabaye reunion with Pardew expectations are even bigger. Crystal Palace operates in London, it is obvious they find it hard to compete with bigger opponents like Arsenal or Chelsea, Matchday revenue is low, Commercial is also only £6m. Transfers of players like Cabaye were possible thank to Broadcasting. Club has now chance to become world-known brand from marketing point of view because the competition in London is just too big. However it is worth to note that club is doing better then its accounting books say. Just like Swansea, Stoke will be looking for braking £100m revenue barrier this season. On the pitch they should find their place somewhere in the middle (they finished 9th last season), they may be looking for Europa League. And interesting fact is that Stoke was considered as not-so-pretty-playing team with rather low skills, but they have Ibrahim Afellay or Bojan, former Barcelona players that will have an influence on team’s performance (interesting fact is that after signing Shaquiri Stoke has more Champions League winners than Arsenal, Liverpool and Man City together) In terms of revenue only six clubs generated smaller inflows. Unfortunately fans from Brittania (said to be “the loudest” fans in England) generated no more than £7m which is a really low result. Commercial revenue puts them on 12th position when compared to others. 38.4 Average attendance (‘000) £121m Revenue Main partners 27.1 Average attendance (‘000) £98m Revenue Main partners 24.4 Average attendance (‘000) £89m Revenue Main partners 34.8 Average attendance (‘000) £115m Revenue Main partners 19
  19. 19. Fans would be delighted to see a team from the 90s, with Alan Shearer up front. Unfortunately these times are past, still St. James’ Park is full of fans. £26m of Matchday revenue is 7th in Premier League and attendance is 3rd in the league. Moreover from financial point of view Mike Ashley (the owner) is doing perfectly fine - £19m compared to only £130m gives ROS of 14.6%. Unfortunately transfer policy can be questioned, many players are underperforming. Not long ago Newcastle was fighting for Champions League qualification and last season they avoided relegation with a piece of luck. Now with new manager fans are hoping to get in the higher part of the table. LEICESTER CITY SUNDERLAND WEST BROMWICH ALBION NEWCASTLE UNITED Another club, apart from Newcastle, from Northern England. Almost been relegated last season with only three points more than 18th club. What is definitely a positive is 6th position in terms of attendance, thanks to capacity of Stadium of Light. On the other hand only £16m of Matchday revenue suggest that Club may find it hard to keep fans on stands by a different way than reducing ticket prices. Sunderland may benefit from its location. Only Newcastle is close which means that those clubs are good marketing targets. £17m is more than Everton or Southampton. What is an absolute “must” for Sunderland is securing a place in Premier League for 2016/2017 season. Everything above this will be a big surprise. They finished 14th last season which was a success because Foxes were looking only to avoid relegation. Moreover fans will remember a victory 5-3 against Man Utd. They operate in the centre of England where not many competitors are located. Thanks to this Leicester City can present a quite good average attendance – just 4000 below average. Not much is known about their financials. Surely they got much from Broadcasting what was crucial for a club that played in the Championship before. Leicester spent £7m for Shinji Okazaki from Mainz. New manager, former Chelsea coach Claudio Ranieri has a great challenge ahead. Premier League club’s accounts for 2013/2014 season shows that only Hull City and Cardiff City generated lower level of revenue, but they no longer compete in Premier League. Definitely, West Brom is one of the smallest club in Premier League. Only thanks to Broadcasting revenue club was able to compete with others. £11m in Commercial segment was one of the worst results in the league, while £9m from Matchday was definitely the worst figure. Unfortunately, with low level of revenue and relatively high wages wages/revenue ratio is also on a dangerous level – 75% - way too high. If the new striker – Rickie Lambert - finds his form from Southampton era and Saido Berahino has another good season, West Brom should remain in Premier League for 2016/2017 season. 50.4 Average attendance (‘000) £130m Revenue Main partners 25.1 Average attendance (‘000) £87m Revenue Main partners 31.7 Average attendance (‘000) N/A Revenue Main partners 43.2 Average attendance (‘000) £104m Revenue Main partners 20
  20. 20. Norwich is coming back to Premier League after one year spell in Championship. The Canaries are one of the smallest clubs in the league and they will be looking for a safe place above relegation zone. Also in terms of revenue club may be considered as a small, only five clubs present lower level of revenue. Club present small amount of Matchday revenue, but this is not a surprise – Carrow Road is one of the smallest stadiums in the league. Yet club has generated profit for 2013/2014 season and finance its activity by a stable sources – net debt is amounting to 0. Fans will be looking for a good season of Nathan Redmond, but will that be enough? BOURNEMOUTH WATFORD ASTON VILLA NORWICH CITY Watford spent last season in the Championship and now they are pointed out as potential candidate for relegation. Their last two seasons in Premier League ended just after 38 rounds and this season may be no different. One of the lowest average attendance in Premier League, weak brand awareness and city’s small population reflects probably in low Matchday and Commercial revenue so surely Broadcasting will boost club’s financials. Watford brought in some well-known names so they will fight to remain in Premier League, but will that be enough to achieve this goal. Bournemouth is an absolute debutant in Premier League and everyone is wondering how will they perform. Experts point out that they have chances to secure place for next season Premier League games. Not much is known about Bournemouth financials, but club seems to be in a good shape, mostly thanks to owner, Russian entrepreneur Maxim Demin. Now they also have secured huge income from Broadcasting. A disadvantage is a small stadium – the smallest one in Premier League. Moreover the utilization rate is one of the lowest in league as well (88%). Signings like Tyrone Mings show that Bournemouth is seriously thinking of staying in Premier League for next few seasons. Club from Birmingham is one of the famous clubs of Premier League. Unfortunately last season club was close to be relegated and finished 17th. Yet in terms of revenue the Villans holds 9th place. They collect £31m Commercial revenue, more than Newcastle or Southampton. They operated in big city and they benefit from this. With Tim Sherwood in charge Aston Villa started to play better but still far from fans’ expectations. Now the question is how they are going deal with rivals without striking force of Christian Benteke and engine of Fabian Delph. Experts point out Villa as a candidate for places 18-20. The are also rumors that club may change the owner. 26.2 Average attendance (‘000) £94m Revenue Main partners 34.1 Average attendance (‘000) £117m Revenue Main partners 10.3 Average attendance (‘000) N/A Revenue Main partners 16.7 Average attendance (‘000) N/A Revenue Main partners 21
  21. 21. Fan Base Potential Marketing Potential Sports Potential Budget Potential Arsenal 2 2 2 2 Chelsea 2 2 2 2 Liverpool 2 2 2 2 Manchester City 2 2 2 2 Man United 2 2 2 2 Tottenham 1 1 2 2 Aston Villa 1 1 1 1 Everton 1 1 1 1 Newcastle United 1 1 1 1 West Ham 1 1 1 1 Southampton 0 1 1 1 Sunderland 0 1 0 1 Swansea City 0 1 1 0 Crystal Palace 0 0 1 0 Stoke City 0 0 1 0 Bournemouth 0 0 0 0 Leicester City 0 0 0 0 Norwich City 0 0 0 0 Watford 0 0 0 0 West Bromwich Albion 0 0 0 0 Competition Market Analysis Key: High Medium Low 22
  22. 22. THE CLUB History Financial Analysis Business Review
  23. 23. Club’s history How it all began 6th of February Busby babes 26 years of glory What lies ahead
  24. 24. In 1878 one of the best football clubs in the world played its first match Workers form a football club at Newton Heath By Karol Stepien The club we know today as Manchester United was first formed in 1878 under the name of Newton Heath LYR. All the players that played for the club then all worked in one department – Carriage and Wagon at Newton Heath area. At first they were playing only against other departments of Lancashire and Yorkshire Railway and other railway companies. Even though the first football league was formed in 1888 as The Football League Newton Heath did not compete and waited until 1982 to make their debut in the league. What is quite common nowadays in football industry was also know to newly formed club – financial problems. Newton Heath nearly went bankrupt, but thanks to John Henry Davies club was saved. With new owners and new ground club also have changed its name. Few options were considered and among them was the one we know today – Manchester United Football Club. And the new era began… The Three Crowns was used as an unofficial headquarters and changing facilities for Newton Heath LYR FC in the late 1800s. Newton Heath in their 1902/1903 season I. Alexander Graham Bell demonstrates the telephone to Queen Victoria, II. The University of London becomes the first in the UK to admit women on equal terms with men, III. Cyprus Convention: The Ottoman Empire cedes Cyprus to the United Kingdom but retains nominal title, IV. Konrad Korzeniowski, the future novelist Joseph Conrad, sets foot on English soil for the first time, at Lowestoft from the SS Mavis. Back in 1878 newspapers were also writing about… With the change of the name, club also changed team’s colors from gold and green to red and white as we know it now. Manchester United have won its first out of 20 League titles in 1908. In 1910 the team have moved from Bank Street ground in Clayton to Old Trafford. New ground was funded by John Henry Davies, who decided that Champions of England need a new place to host their games. Since the debut in 1888 few things have changed
  25. 25. 6th of February History of Manchester United is full of bright and positive stories however club experienced also dramatic stories. United opened 1957/58 season with talk of a treble - The League, the FA Cup and the European Cup. But fate had decided it was not to be. On 6 February 1958 the British European Airways plane carrying team home from Belgrade crashed on takeoff in Munich and the consequences were tragic and devastating. Manchester United team were on their way back to England from European Cup match – quarter- final against Crvena Zvezda Belgrade. Match ended up with a 3-3 draw (5-4 on aggregate and United were on the way to semi-final). On the return journey the aircraft stopped at Munich to refuel. After the third attempt of takeoff procedure plane crashed due to sudden loss of speed. There were 6 crew members and 38 passengers on board: Manchester United players, club’s representatives as well as journalists and supporters. Mark Jones, David Pegg, Roger Byrne, Geoff Bent, Eddie Colman, Liam Whelan, and Tommy Taylor were killed instantly. Club secretary Walter Crickmar as well as coaches Tom Curry and Bert Whalley were also killed. Duncan Edwards, Matt Busby, and Johnny Berry were critically injured. Duncan Edwards died three weeks later in hospital. Johnny Berry and Jackie Blanchflower survived but never played again. Four other passengers and two of the crew were also killed, as were eight sportswriters travelling with the team, including former England goalkeeper Frank Swift. On the day of the crash 23 great people have lost their lives. It was the most tragic day English football had ever seen. Of course the whole season was lost because club members were devastated by accident. However club members did not give up and some of the survivors had a huge impact on Manchester United future. Especially the coach Matt Busby and a player Bobby Charlton. The 6th of February is still remembered and every year the club, the fans, the players pay tribute to those who lost their lives in the plane crash. One of many memorials at Old Trafford – Munich Clock unveiled on 25 February 1960 Club’s history 26
  26. 26. Busby babes Busby babes’ history is a story of both glory and tragedy, happiness and sadness. The term “Busby babes” was first introduce by Manchester Evening News journalists and referred to who won the league in 1955/1956 and 1956/1957. The Busby Babes were notable not only for being young and gifted, but for being developed by the club itself, rather than bought from other clubs. Most of Manchester United players those years were homegrown players and 21-22 years old on average. They made progress, came trough every stage in clubs hierarchy with help and guidance of one of the biggest person in club’s history – Sir Matt Busby. Sir Matt Busby managed United between 1945 and 1969 and was a main creator of development and success of young players. The team was really successful those days: won League title twice and were runners-up in FA Cup. Even players from the outside were not necessary and over a couple of years United carried out only few transfers. The team was supposed to win many more titles but then the Munich disaster had happened and dream was over. 10 players lost their life or were not able to continue career. Among them was Duncan Edwards. While waking around Manchester and Old Trafford is very common to hear from older fans that even Pele and Maradona could not match Edwards’ talent and he was the very best player they have ever seen. After the tragedy survivors, with Sir Matt Busby, started to rebuild the club. New team was built around Bobby Charlton, Harry Gregg and Bill Foulkes. With help from new players, like George Best or Denis Law, who came to the club Manchester United won FA Cup in 1963 and won the league in 1965 but the biggest success was yet to come… It was the evening, 29th May 1968, ten years after Munich. In European Cup Manchester United won the title after beating S.L. Benfica 4-1 with Bobby Charlton scoring twice. This was the biggest success of Sir Matt Busby and The Babes. Busby retired as manager at the end of the following season, having announced his intention to do so on 14 January 1969 but remained at the club as a director. The legend of “Busby Babes” is still alive at Old Trafford. George Best after scoring a goal in European Cup final against S.L. Benfica in 1968. Club’s history 27
  27. 27. When Ron Atkinson was leaving club in 1986 his place as Manchester United manager was taken by Alex Ferguson, then 43-year-old former Aberdeen manager with few trophies won like Scottish Premier Division or Scottish Cup. He was a promising manager but surely no one would have expected that he will remain United’s manager position for more than 26 years. Sir Alex Ferguson was appointed as Manchester United manager on 6th of November 1986 and he was on duty until 19th of May 2013 when Manchester United finished Premier League as champions for the last time. His career has led Sir Alex to being regarded as one of the most successful, admired and respected managers in the history of football and sports in general. Since joining the club, he lifted over 30 trophies as the boss at Old Trafford and that makes him the most successful manager in British football history. Broke many records and was the most influential person at Old Trafford. He managed Manchester United in 15001 games, winning 895 what gives 60% win ratio. However his career at Old Trafford started at rather low level. He waited for his first win until his 3rd game having lost debut 2-0 to Oxford United. First few season were weak and even fans started to demand a new manager. Fortunately the Board allowed Ferguson to do his job. After a return of Mark Hughes and signing of Eric Cantona, Manchester united have won its first League title after 26-year wait. Suddenly the future of Manchester United and Sir Alex Ferguson began to look bright. After this time, like everyone, Ferguson had ups and downs but his time at Old Trafford is a time of permanent success for the club. As first British club, Manchester United won the treble in 1998/1999 season, winning Premier League, Champions League and FA Cup. Sir Alex Ferguson and his style of managing led Manchester United to the position it has now. Over 26 years he brought large group of absolutely world class players, as well as introducing homegrown footballers who later became club’s legends but he always stated that “no one is bigger than club” 1 Source: http://www.stretfordend.co.uk/managers/ferguson.html 2 Source: http://www.premierleague.com/en-gb/clubs/managers/profile.overview.html/alex-ferguson 26 years of glory Premier League Champions League FA Cup Manager of the Year Highlights2 13x 2x 5x 5x Club’s history 28
  28. 28. After Sir Alex Ferguson decided to retire everyone were wondering what is going to be next for Manchester United, how life at Old Trafford is going to look like after “Ferguson’s era”. David Moyes was appointed as new manager but after disappointing results and performance club decided that new one should step in. Louis Van Gaal was confirmed to replace David Moyes as the new manager for Manchester United on 19 May 2014, after signing a 3-year contract with the club. It took effect after FIFA World Cup 2014 in Brazil were LVG managed to reach semi-final with Netherlands national team and then securing the third place in the tournament after winning with Brazil 3-0. United seemed to be in the trough when it comes to both morale and quality of performance and Van Gall was chosen as a manager who bring what is necessary and put United back in the first four in Premier League and secure place in Champions League. The first season 2014/2015 was really tough for the team but the club managed to finish at 4th and is on a good way to play in Champions League in upcoming season. However, since Sir Alex Ferguson’s retirement a lot have changed in the dressing room. Many players have left the club. Homegrown players like Darren Fletcher, Danny Welbeck and Tom Cleverley, players wore United shirt for many seasons like Nani, or Robin van Persie who was a key factor in United’s last winning campaign in 2012/2013. Especially the defending line seemed to be a ruin after departures of Rio Ferdinand, Nemanja Vidic and Patrice Evra. Since Sir Alex Ferguson’s retirement United have strengthen by completing many new signing. With players like Juan Mata, Marouane Fellaini, Luke Shaw, Ander Herrera, Marcos Rojo, Daley Blind and recent signings of Memphis Depay, Morgan Schneiderlin, Bastian Schweinsteiger and Matteo Darmian fans will see completely new United team. Last season showed that not everything works perfectly fine and expectations are extremely high, as always, at Old Trafford. It is impossible to forecast whether the club will sign any new players but for now it seems that club does everything it can encourage David de Gea to stay in Manchester. Spanish goalkeeper was a key player last season, who saved many points for the club, but rumors say he is already on his way to Real Madrid. Many critics also point out that club also lost its “soul” by completing huge transfers but everyone should realize that nowadays results are expected here and now and to produce new “Class of ‘92” it takes many seasons. With captain Wayne Rooney, many young players and new signings Manchester United should be able to keep up with Chelsea, Arsenal and Manchester City in race for Premier League title but surely this is no longer Ferguson’s United but new Manchester United by Louis van Gaal. What lies ahead Club’s history 29
  29. 29. Business Review General Information SWOT Analysis Matchday Broadcasting Commercial activities Employee Expense Management Key Operational Assets Other
  30. 30. OLD TRAFFORD The stadium called also “Theatre of Dreams” is fully- owned by the Company and was built in 1910, is one of the Club’s trademarks. It is one of the biggest asset in Company’s accounting books that generates Matchday. With average attendance 99% of total capacity it allows Club to collect even more than £100m annually. SUPPORTERS Supporters are Manchester United key asset. The Club is recognizable everywhere around the world and United shirt may be seen in every country. Fan base leads Club to become the highest valued brand on football market (according to brandfinance.com) Fans both in the UK and overseas are motor engine for each source of revenue. TROPHIES Manchester United trophy gallery contains numbers of many awards. Club has won 9 different trophies including Domestic and European and International Cups. POWER OF THE BRAND With an enormous fan base and brand recognition Manchester United takes huge profit. Commercial revenue became the most important source of revenue. After signing deals with AON, General Motors and new record-breaking with Adidas the Club will boost its revenue securing massive amount of money for the future. General Information MANCHESTER UNITED One the world’s most recognized and successful football club was established in 1878. Estimated number of followers amounts to 659m. 65.5m5.6m As of 27.07.2015 20x 11x 3x The Club won also: FIFA Club World Cup, International Cup, FA Community Shield, UEFA Super Cup and European Cup Winners’ Cup 42x Manchester United has won over 42 trophies BROADCASTING Revenue from TV Rights are rising over years and it is very important source of the revenue for the Club. Starting from season 2016/2017 new deal will take effect and Premier League clubs will divide between themselves even up to £8bn over three seasons. However the Premier League negotiate new contracts not Manchester United itself Business review 31
  31. 31. WEAKNESSES THREADS STRENGTHS OPPORTUNITIES o Entering emerging markets, especially in Asia can result in a major revenue boost in almost every area of business with major impact on Commercial revenue. o Summer tours secured around £11m revenue for year ended 30th June 2014. This may be the opportunity for the club in future. o Introducing Financial Fair Play may put financially health clubs in favor over indebted clubs when comes to signing new players. Many big clubs (potential competitors when trying to sign certain players) may be fined by UEFA with a transfer embargo what will help Manchester United to sign top class players. o New record-breaking sponsorship deals may encourage market to invest more funds in Manchester United, potential partners may see the a high potential growth in the Club. o Dependence on UEFA/The FA/Premier League rules may put the club in a worse position when comes to a minimum number of homegrown players or players with English passport. Due dissatisfaction with national team results such rules may come into effect in a near future. o Rising popularity of football attracts overseas investors who took over clubs. This has a consequence in stronger competition and higher number of clubs that are able to achieve trophies. o There is no longer a term “Big 4” in Premier League in regard to Liverpool, Arsenal, Man Utd and Chelsea. Teams like Man City or Tottenham are on the same level, moreover every season there is at least one team that also has chances to finish in top 4 – like Southampton or Everton. And there are only 4 places in Champions League. o It is possible that next sponsorship agreements will not be as profitable as current ones. o Club still carry a large portion of debt and it is possible, when negative circumstances occur, that club will find it hard to repay the liabilities. o Manchester United well-being depends on many factors that club does not have an influence on: Attracting key personnel or business partners. o The national/world economy condition affects business very much. In case of crisis attendance could lower, Broadcasting revenue may decrease as well and sponsorship agreements may not be as profitable. o In long-term state of business depends on performance of the first team. This is why it is crucial to hire the best possible players. o Every year without Champions League competition leaves huge gap in revenue that cannot be filled in other way. o Huge fan base located around the world – over 650m supporters around the world o Very high rate of brand awareness – number of followers and likes. o Ability to monetize the brand’s value – through number of partnerships with most recent with Adidas and GM. o As one of the world’s greatest football brands it is easier to attract top class players. o Old Trafford is the biggest stadium in the UK and has the utilization rate of 99% since 1998/1999. o One of the most successful football clubs around the world. o Large amount of revenue comes from stable sources and does not depend on on-the- pitch performance in short- term. Revenue from Premier League or sponsorship agreements will remain on high level even if the team fail to success. o Manchester United is one of the strongest football clubs in the world, from financial point of view. SWOT Analysis 32
  32. 32. Revenue - Matchday Amazing stadium is Club’s great asset that is generating huge revenue. However in the times of Broadcasting and Sponsorship deals Matchday become the smallest source of revenue. Source: Own analysis based Skysports data Average season ticket prices in 2015/2016 Premier League Because major share of Matchday revenue comes from ticket sales it obvious that overall amount of revenue are correlated with attendance at Old Trafford. The Club have no problems with utilizing stadium’s capacity. Since 1997/1998 average attendance amounts to 99% which is extremely good result even in Premier League where almost every club has an attendance above 90%. Club could surely sell more tickets for home games, however Old Trafford is already the biggest stadium in Premier League with capacity of 75 635 seats. At the same time club has a limited options to increase revenue in this category. Attendance cannot become any higher without bigger capacity of Old Trafford and setting higher ticket prices may be very risky. In Premier League has the most expensive tickets among European Leagues. Fans are showing their dissatisfaction during games, they even organize strikes, all because of rising prices. Yet Manchester United is not the club with highest prices in Premier League. Season tickets for Arsenal’s games cost more than two United’s tickets. On the other hand the cheapest Manchester City season ticket costs £299, £233 less than at Old Trafford. Club may look up for alternative source like organizing games during Olympic Games 2012. It also seems that executive suites or VIP lounges are becoming more and more popular. Still the most important factor in number of games played. The Club is is playing 19 home games every season in Premier League and in addition should maximize number of Champions League and Domestic Cups (however distributing model in Domestic Cups may be inefficient for bigger clubs). Matchday revenue will be lower that in previous season because Manchester United did not compete in Champions League but the average revenue per game remain on the same level – £4.5m and is at least 12.5% higher then in previous seasons. Especially Champions League games will boost this revenue category that is why it is essential for United to qualify every year to this competition. *Football League Cup excluded 21 3,9 4,1 4,0 4,5 4,5 3,4 3,6 3,8 4 4,2 4,4 4,6 85 90 95 100 105 110 115 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015 £MIL £MIL Matchday revenue Average revenue per Game Source: Own analysis Average Matchday revenue* 29 24 27 24 XX Number of home games Min – Adults’ cheapest season ticket Max – Adults’ most expensive season ticket 532 1035 299 710 500 419 445 950 2039 1750 869 924 489 650 Manchester United Arsenal Manchester City Liverpool Newcastle Swansea City Watford Business review 33
  33. 33. Broadcasting Manchester United are about to gain an increase in Broadcasting revenue due to new deal negotiated by Premier League. Clubs’ games are also televised in Champions League, Domestic Cups and Summer Tours and these are additional source of revenue. Source: Own analysis based on Premier League and UEFA data Broadcasting driving factors PREMIER LEAGUE This is the main source of broadcasting revenue. Due to rising attractiveness of football and Premier League as a league, every new contract is record breaking. Contracts are usually for a 3-year period of time. It should be noted that not only place at season’s finish have an impact on amount of revenue. Starting from season 2016/2017 new deal will take effect and clubs may earn up to £8.1bn (£5.1bn new deal with domestic TV operators plus unconfirmed overseas deal). On the day of the announcement Manchester United shares on NYSE had risen by 5%. That shows how important the change is. Starting from new deal Manchester United can earn even up to £150m. Premier League distribution system provides clubs with probably most equal rights. It is possible that if Manchester United had a chance to negotiate contract only for itself it could get even higher stakes but on the other hand current distribution model allows steady growth for whole league and high level of every single team in the league makes Premier League one of the best, if not the best one, football leagues in the world and that allows Manchester United to take profit because of this. CHAMPIONS LEAGUE Lack of appearances in season 2014/2015 showed how important it is, from financial point of view, to secure a place in UEFA competition. Starting from season 2015/2016 money to distribute between clubs will also rise significantly. Revenue are paid in EUR currency and that makes a risk for the club. Every season without Champions League means DOMESTIC CUPS Domestic Cups’ matches may be televised but the amount of contracts are not high, additionally when Manchester United will draw a club from lower division game may be considered as not attractive and will not be televised. This segment is not as important as Premier League and Champions League. OTHER MATCHES Individual contracts with partners are not available for public, but in comparison with with other Broadcasting segments, this one is not as important and may considered as a bonus. Source: Own analysis based on Premier League & UEFA data Broadcasting revenue breakdown 53 36 36 45 - 60 60 61 89 97 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015 Champions League (EURm) Premier League (GBPm) £1,733bn £3,018bn £5,136 bn 2010-2013 2013-2016 2016-2019 Premier League TV deals Champions League distribution system 2012-2015 2015-2018 Group Stage 8.6 12 Group Win 1 1.5 Group Draw 0.5 0.5 Round of 16 3.5 5.5 Quarter Final 3.9 6 Semi Final 4.9 7 Runner-up 6.5 10.5 Winner 10.5 15 Additionally clubs are given revenue from market pool, which separate for each national league. It is believed that for Premier League clubs the share may rise up to50%. Business review 34
  34. 34. £303m over 13 years min. value £750m over 10 years £23.4m per season + bonuses £75m per season + £4m bonus -30% lack of CL in 2 consecutive seasons Commercial activities Recently Commercial revenue became the most important source of revenue for the Club. With new record-breaking deals Manchester United are on the verge of boosting revenue to even higher level. Club's commercial revenue may be showed as three categories: Sponsorship, Retail & merchandising and Mobile & content. Starting from season 2014/2015 General Motors with Chevrolet brand became Club’s biggest Partner. The Club will earn GBP equivalent of $70m. Moreover this amount will increase every year by 2.1%. GM also paid £18.6m as pre-partnership support. Club was also the first in football’s history to have a Training kit partner. Previously right to this partnership had DHL and now this place on shirt belongs to AON. Moreover, AON has naming rights to training complex at Carrington. It is rumored that AON Training Complex is worth approx. £15m per season. Club also has many other partners present on both domestic and international markets. In terms of Retail major share comes from partnership with Nike which is expiring prior 2015/2016 season. New partnership with Adidas will provide Club with money injection. New contract allow Company to use £75m per season. Additionally a bonus of £4m if the team’s performance is satisfying. However, if Manchester United fails to qualify to Champions League for two or more consecutive seasons, the annual payment will be reduce by 30% (Club will earn £52.5m). So far it never happened but the competition in Premier League represent higher level every season and there is a risk of finishing on 5th or lower position in two consecutive seasons. Even though Mobile & content is a small group in comparison with Retail and Sponsorship this may be a significant segment in the future. The growth potential is huge in days of new technologies, video- on-demand and and other internet-related services. Club will invest significant amount of money in this segment – up to £8m but due to dynamic growth of the category this sum is subject to change for higher values. Club’s Executives secured Club for years, most of deals are long-term (all of major deals expire after 2020). On the other hand Club should be prepared that after 2020 it may not be possible to sign such contracts any more. Business review 8,0 14,1 19,6 43,6 vodafone AIG AON General Motors Source: Company’s financial reports Manchester United sponsorship deals Source: Company’s financial reports New partnerships vs previous £70m £134m Source: Own elaboration based on financial reports Nike partnership vs Adidas partnership Estimated values for retail, main sponsorship deal and mobile segments 35
  35. 35. 46,14% 50,48% 49,70% 49,59% 51,23% 43% 44% 45% 46% 47% 48% 49% 50% 51% 52% 2010/2011 2011/2012 2012/2013 2013/2014 3Q 2014/2015 Employee Expense Management Employee Expenses are a crucial area of cost management in every football club. Manchester United, despite hiring best players presents reasonable and safe level of Employee costs/Revenue ratio. Source: Own analysis based on The Guardian data Employee expenses/Revenue ratio for selected Premier League clubs Employee/revenue ratio shows that value have risen in season 2014/2015, but change is not significant and still the result 51.2% is very reasonable. According to UEFA research every club should keep this ratio below 60% and if club depicts value of 70%+ it is considered as not liable. After retirement of Sir Alex Ferguson the team is under reconstruction process. Many new players came into dressing room, some of them are recognized as stars. Departures of Radamel Falcao, Robin van Persie and Nani shows that Club is taking care of its payroll and is trying to keep ratio on reasonable level. It should be noted that Manchester United is a club with biggest employee expenses, however it also generates highest revenue stream in Premier League. It is expected that employee expenses will rise after recent and possible new signings, yet the ratio will remain below 60%. Source: Own analysis based on financial reports Employee expenses as percentage of revenue 50% 55% 55% 56% 59% Manchester United Arsenal Tottenham Liverpool Chelsea Source: Own research Highest Paid Players Wayne Rooney Angel Di Maria Bastian Schweinsteiger Juan Mata Morgan Schneiderlin Man Utd Arsenal Chelsea Liverpool Newcastle Utd Aston Villa Tottenham Everton Middlesbrough Leeds Utd West Ham Blackburn Charlton Bolton Fulham R² = 0,84876 0 0,5 1 1,5 2 2,5 3 3,5 4 0 2 4 6 8 10 12 14 16 18 Source: S. Szymanski, S. Kuper, Soccernomics, HarperSport 2012, p. 12 Performance and wage expenditure (1998-2007) Newcomers the best-earners in the Club. Four out of five players with highest wage were bought over last two seasons. With this information and market trends, Manchester United will probably spend more on wages in the future. It cannot be forecasted precisely but this is a significant risk factor for the business. Comparing to other key competitors in Premier League Manchester United present the best ratio’s value. Still other clubs shows values below 60% what gives them the opportunity to chase players they want to buy. Research carried out by S. Szymanski and S. Kuper shows that Manchester United pay wages of more the 3x higher than league average. It is also a proof that in long-term perspective wage level is correlated with league position 3.16x Manchester United wages above League average Business review 36
  36. 36. 75,11 75,39 75,53 75,21 75,34 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015 99,3% 99,7% 99,9% 99,4% 99,6% Utlization Theatreof Dreams Old Trafford, know also as the “Theatre of Dreams” is one the iconic stadium around the world. Ground generates Matchday revenue of approx. £100m. Source: Own analysis based on Worldfootball.net Clubs with the highest attendance in Premier League 2014/2015 (‘000) Old Trafford is one of the most famous and historic stadiums in the world. Football followers travel from all over the world to attend a match at Old Trafford. The stadium is located no more than 5km from the City Centre with good access to A56 that leads to M60. Prior to the season 2006/2007 Club expanded seating capacity at Old Trafford from approx. 68 000 to 75 635. This is also the biggest stadium in the UK. Because of this Manchester United has the highest attendance among other Premier League competitors. While visiting Old Trafford fans are able to shop ate Club’s megastore, learn about Manchester United history at Museum and eat dinner at restaurants/bars. The venue generates high depreciation costs and require renovations over years. Old Trafford book value amounts £231m (combined with AON Training Complex) as for 31.03.2015 and depreciation costs are around £3.4m per year. Moreover required capital expenditures amounted to approx. £4.1m, £4.0m and £15.3m for the years 2014, 2013 and 2012 respectively. Club estimates that min annual capital expenditures are to be more or less £3m. Even though the attendance amounts almost full capacity there are probably no plans for expanding, yet that would generate high costs, but still Old Trafford may be Club’s most important assets, it is part of Club’s heritage. Source: Own analysis based on Worldfootball.net Average attendance at Old Trafford (‘000) 75 335 59 992 50 359 45 365 44 659 Manchester United Arsenal Newcastle Manchester City Liverpool Source: Own research Old Trafford Highlights Old Trafford Year of construction 1910 Seats 76 635 Luxury Boxes 154 Executive club seats 8 000 Restaurants 15 Sports bars 4 Business review 37
  37. 37. Brand Every club’s major asset is brand, with its heritage, history, successes and players who wore club’s kit. Manchester United is working hard to increase increase its brand value and every year it is the one of the highest valued football brands around the world. According to BrandFinance, brand valuation company, Manchester United is the highest valued brand among football clubs. £727m is £165m more than second Bayern Munich. The results were published in “Football 50” 2015 edition. The valuation was conducted with the use of “relief from royalty” method. Method itself is similar to ordinary DCF valuation used for enterprise valuation. It applies royalty rate, the the rate that club would have to pay to have the rights to use third party trademark for own purposes. To find this royalty it is necessary to find previous transactions within selected industry and see in buyer’s financial report the value of brand/intangible asset/trademark. Various websites may also be used for these purposes (ktMine or RoyaltySource). For a example ktMine estimates a royalty rate in Entertainment industry, which contains Sports events, at 15%. Other possible option is to carry out own analysis by using factors that are important in selected industry and according to results apply a rate which should not be higher that 25% of EBITDA margin. Because of similarity to DCF method, brand valuation’s main factor is revenue. This is why Manchester United brand valuation is higher then in previous year. Club have secured higher revenue for next years through new Premier League TV deal, and partnership with Adidas and General Motors. In the list of 10 highest valued football’s brand there are six Premier League club’s what shows the strength of the League Source: Football 50 2015 Edition, BrandFinance Highest valued football brands (£m) 727 562 526 482 479 465 423 347 326 217 Business review 38
  38. 38. Players After Sir Alex Ferguson retirement the team is under reconstruction process led by Luis van Gaal. Many players left the Club and many came into squad. However it seems that Club is still searching for new players while experts criticize Company’s transfer policy. Only few players from season 2012/2013 still remains in the Club. From players who had huge impact on winning campaign in 2012/2013 only Wayne Rooney, David de Gea, Michael Carrick, Antonio Valencia and Ashley Young are still at the Club. Despite big signings critics stress that Manchester United want to “buy” Premier League title and that Club is “loosing its soul and heritage” by this transfer policy. Experts also point out that defensive area need major signings after departure of Evra, Vidic and Ferdinand. Also new players struggle to put their footprint on team’s performance and style. Angel di Maria, Radamel Falcao, Luke Shaw and Juan Mata were criticized and said to be underperforming. Fallaini had been called as overpriced signing. Not all the transfers were good decision but after departure of important players Club needed players who can just come into squad and play on certain level. New transfers provide manager with both experienced players and young players and to some extent gives him a freedom of rotating first eleven. On the other hand it seems like defensive line still needs to be strengthen. Also team is left with only Rooney, Hernandez and Wilson up front and Chicarito is said to be put on transfer list and might leave the Club before September. Van Gaal has various option in midfield with Carrick (probably most important player last season), Mata, Young, Fellaini, Depay, Schweinsteiger, Herrera and Schneiderlin. Critics stress that there is also no more room for homegrown players and that they will struggle to play in first team, and that surely is a difference in comparison with Club’s policy from previous years. It looks like only McNair, Wilson, Lingard, Blackett and Januzaj have real possibility to take more serious part in the team. More players may come during Transfer window and players like de Gea might be leaving the club soon as well. Undoubtedly Manchester United squad justify club’s desires to win Premier League this season but what about future? Will the squad be homogeneous and players willing to fight for each other? Source: Own research Manchester United 2012/2013 vs 2015/2016 Source: Manutd.com, as of 30.06.2015 Transfers prior 2015/2016 season Business review Vidic Ferdinand Rafael van Persie Evra Kagawa Rooney Carrick Valencia de Gea Young Bench: Lindegaard, Jones, Giggs, Scholes, Cleverley, Hernandez, Welbeck Rojo Smalling Valencia Shaw Schneiderlin Carrick Schweinsteiger Mata Depay de Gea Rooney Bench: Romero, Jones, Darmian, Herrera, Fellaini, Young, Hernandez Memphis Depay, Matteo Darmian, Bastian Schweinsteiger, Morgan Schneiderlin, Sergio Romero Nani, Robin van Persie, Angel di Maria, Rafael, Radamel Falcao (loan end) 39
  39. 39. Other There are also other important areas that Club is involved in. Club operates MU Foundation, visits other continent as part of Summer Tours. Manchester United is also listed on New York Stock Exchange. CORPORATE SOCIAL RESPONSIBILTY Manchester United is extremely popular Club everywhere around the world. Thanks to power of the brand Company can also operates CSR strategies. Trough players and Club’s staff Manchester United runs MU Foundation that organize variety of events and charity projects. Moreover Club has an agreement with UNICEF. Through MU Disabled Supporters Association Company helps fans to fight with weaknesses. SUMMER TOURS Summer tours between seasons are becoming more and more popular among football clubs. Manchester United has played 24 exhibition games over last four seasons, visiting Australia, China, Germany, Hong Kong, Japan, South Africa and other countries. Last two pre-season’s preparations took place in the United States where Manchester United is extremely popular. In 2014 at Michigan Stadium over 109 000 fans enjoyed Manchester United – Real Madrid game. Summer tours in an additional source of revenue for the Club. During 2014 Tour the Club earned £11m and this does not include any sponsorship-related revenue. It is believed that Summer Tours can become even more profitable. Moreover Club offers non-football related services like organizing conferences or even weddings. Business review Source: nyse.com Manchester United share price (USD) 17,81 16,20 0 5 10 15 20 Manchester United is listed on New York Stock Exchange since 10th of August 2012. Current price (as of 29.07.2015) is $17.81 what means that it is above average price of $16.20. The highest share price was $19.48 a year ago (30.07.2014). Current market cap is $2.92bn. 40
  40. 40. Financial Analysis Summary Revenue Analysis Costs of Activity Company’s Assets Liabilities & Equity Borrowings and Finance Costs Operating Results Financial Ratios
  41. 41. Summary Manchester United presents healthy financial condition in every aspect of its activity. Positive results may be seen in both Income statement and Balance Sheet. However lack of Champions League appearance is easily seen in financial results of the Club and shows how important it is to secure place in competition. Source: Own analysis based on financial reports Revenue and Expenses Growth REVENUE Revenue are growing almost every season, with CAGR of 9.3% however recent season will be negative in terms of Revenue. Estimated growth amounts to -11%. On the other hand Operating Expenses remain on similar level. Over last seasons it may be seen that Matchday revenue source becomes less important, while Commercial activities became main source of revenue for the Club. Due to new TV Rights contract and new partnership Manchester United will significantly boost revenue in next seasons. OPERATING EXPENSES Expenses show growth in every season. Data for 3Q 2014/2015 show that expenses have almost reached the level of revenue. Employee-related expenses remain the biggest segment in Total costs. Surprisingly, Club managed to lower wage and salaries despite completing transfers of many players. Significant increase has been noted on Amortization of players’ registration, also due to new players coming to the Club. DEBT & EQUITY Manchester United number one priority is Debt management. Senior secured notes and Secured term loan facility and others amounts to almost £400m (approx. 33% of Total assets’ value). Borrowings are to be repaid until 2019. Equity’s share is higher than in previous seasons. ASSETS 85% of Total assets’ value is a share of Non- current assets. Club’s main assets are stadium Old Trafford, Goodwill, Players’ registration and Aon Training Complex. Club’s assets have grown by 18% since 2010/2011 season. PROFITS Manchester United may be proud of being a football club that has been profitable on both operating and net income level for 5 consecutive seasons. Source: Own analysis based on financial reports Selected Financial Ratios Source: Own analysis based on financial reports Operating profit and profit for the year -3% 13% 19% -11% 5% 9% 20% 2% 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015 Revenue' growth Operating Expenses' growth 4.8% Return on Equity 0.63 Current Ratio 59% Debt Ratio 63 45 62 68 23 13 23 146 24 6 2010/2011 2011/2012 2012/2013 2013/2014 3Q 2014/2015 Operating profit Profit for the year Estimated growth for 2014/2015 Financial Analysis 42
  42. 42. Revenue Analysis Starting from season 2010/2011 club’s revenue increased by 31% reaching £433m in season 2013/2014. Figures for 3Q 2014/2015 shows possible decrease (estimated £386m) by £47.3m mostly due to lack of Champions League revenue. 103 118 152 189 151 117 104 102 136 67 111 99 109 108 71 2010/2011 2011/2012 2012/2013 2013/2014 3Q 2014/2015 Commercial Broadcasting Matchday Source: Own analysis based on financial reports Revenue breakdown (£m) HIGHLIGHTS The club generates revenue in 3 categories: Matchday, Broadcasting and Commercial activities. While two first segments are stable or growth is determined by outside factor, the main reason of 9.3% CAGR (Compounded Annual Growth Rate) is mostly thanks to Commercial segment that rose by 83% over 4 seasons. MATCHDAY Matchday revenue varies from £99m in 2011/2012 season to £111m in 2010/2011. Main reason of differences is number of games played by the throughout the season. However this segment becomes less important to club due to limited capacity at Old Trafford (99% of tickets are sold on average) and fans opposition against tickets’ price increases. Matchday revenue stands for around 25% of revenue in seasons 2013/2014 and 3Q 2014/2015 while before it was a minimum of 30% (33% in season 2010/2011. BROADCASTING Manchester United will generate huge amount of revenue thanks to TV rights distribution sold to both domestic and overseas TV providers. 34% growth in this segment took place in season 2013/2014 because of new 3-year contract. Starting from season 2016/2017 massive new deal will take effect and that means another boost of revenue. Typically Broadcasting revenue stands for approx. 30% of revenue but it is expected to have bigger impact in the future because of new deal contract. COMMERCIAL Commercial activities carried out by the club becomes the major source of revenue over last 4 seasons. While in 2010/2011 season this was third biggest source (£103m), now in season 2013/2014 it amounts to £189m and is expected to reach £200m for the season 2014/2015 (figures for 3Q shows £151m). 331 320 363 433 289 0% -3% 13% 19% -33% -40% -30% -20% -10% 0% 10% 20% 30% - 100 200 300 400 500 £MIL Revenue growth [%] Source: Own analysis based on financial reports Revenue analysis 31% 37% 42% 44% 52% 0% 10% 20% 30% 40% 50% 60% 2010/2011 2011/2012 2012/2013 2013/2014 3Q 2014/2015 Commercial Broadcasting Matchday Source: Own analysis based on financial reports Revenue structure Financial Analysis 43
  43. 43. Revenue Analysis Manchester United thanks to its brand’s recognition and fan base around the world benefits and it reflects commercial revenue. Thanks to partnership with many a range of companies commercial activities became the most important source of revenue. 2010/2011 2011/2012 2012/2013 2013/2014 3Q 2014/2015 Commercial revenue 103 369 117 611 152 441 189 315 151 029 Sponsorship 54 925 63 121 90 865 135 835 119 629 Retail, merchandising, apparel & products licensing 31 268 33 787 38 609 37 512 23 300 Mobile & Content 17 176 20 703 22 967 15 968 8 100 Source: Company’s financial reports Revenue structure [£ ‘000] Revenue generated by commercial activities amounted to £189m in 2013/2014 season and estimated 2014/2015 figures amount to £201m which stands for 6% growth year-over-year. The club divides its commercial revenue into 3 categories: Sponsorship, Retail & others and Mobile & content. The third biggest category is Mobile & content. It contains revenue from partnerships with telecom operators in many countries as well revenue generated directly by website followers. Revenue in this segment is the least important one for the company (8% in 2013/2014 season) however it stood for approx. 1/5 in 2011/2012 season (£20m). Retail revenue contains streams from partnership with Nike. It should be noted that Manchester United have a guaranteed share from Nike and share that is result- related. Because of lack Champions League appearances in 2014/2015 season revenue in this category will significantly decrease. The most important segment of commercial activities is Sponsorship. It stands for 79% of commercial revenue (72%, 60%, 54% in 2014, 2013 and 2012 respectively). Manchester United has wide range of both global and regional partners around the world thanks to power of brand and successful history. Likewise Broadcasting, Commercial revenue will increase significantly in future thanks to new partnerships with Adidas and General Motors. Sponsorship Retail, merchandising, apparel & products licensing Mobile & Content Source: Own analysis based on financial reports Commercial revenue structure in 2014/2015 season* * figures for 3Q 2014/2015 79% of commercial revenue generated by sponsorship deals 136 38 16 136 108 189 Sponsorship Retail, merchandising, apparel & products licensing Mobile & Content Broadcasting Matchday Source: Own analysis based on financial reports Commercial revenue vs total revenue – 2013/2014 (£m) Financial Analysis 44
  44. 44. Costs of Activity Operating expenses are growing by 8.6% year-over-year with £372m for 2013/2014 season and £285m for 3Q 2014/2015 season. The most significant category of costs are employee-related expenses. HIGHLIGHTS Overall expenses have risen by 37% over 4 full seasons (2011-2014). Y-o-y growth was higher every season however estimated growth for 2014/2015 season shows growth only by 2%. This is a significant change in comparison to 20% in previous season. Employee expenses for the 2013/2014 season amounted to £215m and this was the largest expense category for the club. PLAYERS’ REGISTRATIONS Players’ registrations are company’s assets what means it amortized every year. The value of amortization is related to number of players employed, contract duration and transfer fee for players who were brought to the club. Due to big transfers conducted in last two seasons amortization has increased significantly, becoming the second biggest segment for 3Q 2014/2015 season. OTHER OPERATING EXPENSES This is usually the second biggest group of expenses with values ranging from £64m to even £81m. This category contains mainly security costs relate to match organization, gate share costs for domestic cups and summer tours costs. OTHER COSTS The club also incurs costs in categories like: Exceptional items (loss of office, PL pension scheme, advisers), Depreciation of property and investment property, Lease costs and Auditor’s remuneration. These costs varies from £9m to £20m every season. 273 285 310 372 285 95 5% 9% 20% 2% 0% 5% 10% 15% 20% 25% - 50 100 150 200 250 300 350 400 2010/2011 2011/2012 2012/2013 2013/2014 3Q 2014/2015 £MIL Operating expenses Forecast for 4Q 2014/2015 growth Source: Own analysis based on financial reports Operating expenses 153 162 181 215 148 7 7 8 9 7 68 64 71 81 53 39 38 42 55 74 5 11 6 5 2 2010/2011 2011/2012 2012/2013 2013/2014 3Q 2014/2015 Other costs Exceptional items Amortization of players' registrations Other operating expenses Depreciation—property, plant and equipment Employee benefit expense Source: Own analysis based on financial reports Operating expenses structure 39 38 42 55 74 2010/2011 2011/2012 2012/2013 2013/2014 3Q 2014/2015 Source: Own analysis based on financial reports Amortization of players’ registrations (£m) Financial Analysis 45
  45. 45. 136 143 158 189 1 2 16 18 19 21 1 1 2 2 2010/2011 2011/2012 2012/2013 2013/2014 Wages and salaries Share-based payments Social security costs Other pension costs 56% Employee benefit expenses analysis Source: Own analysis based on financial reports 153 162 181 215 148 - 50 100 150 200 250 2010/2011 2011/2012 2012/2013 2013/2014 3Q 2014/2015 £MIL Based on seasons 2011-3Q 2015 Employee-related expenses stand for 56% of total expenses Costs of Activity As in every football club employee expenses are the biggest category of costs. Manchester United spent £214m on salaries and other staff-related expenses in 2013/2014 season. Analysis of 5 periods (2011-3Q 2015) shows that Employee expenses amount to 56% of total costs which should be seen as reasonable level, especially in comparison with other club around the Premier League and other European leagues. Salaries and other costs are rising by 12% every season and cumulative growth of 40% (until season 2013/2014). It should not be a surprise as club is hiring many players with a “star” status. However, what may be a huge surprise, level of employee’s costs are going to be lower in 2014/2015 season in comparison to 2013/2014 (estimated value – £197m) Club has hired Angel di Maria and Radamel Falcao among others and even though club managed to control its expenses in even more effective way. This year transfers will increase salaries level, but on the other hand after the departure of players with significant wages like Nani or Robin van Persie employee-related expenses should remain on similar level. Wages and salaries level are key factors to healthy financial condition of the club. Players’ salaries are rising every year and because of the importance of this costs segment this is also extremely significant risk factor that may lead to financial crisis not only at Manchester United but any other club. Majority of employee expenses are wages and salaries. That position also includes bonuses. Wages salaries rose by 40% over 4 seasons. Other significant position is Social security costs. Those figure correlated with wages and stand for approx. 12% of Wages and salaries. Other positions does not present significant values. Source: Own analysis based on financial reports Employee benefit expenses structure (£m) Financial Analysis 46
  46. 46. 1 017 947 1 118 1 216 1 195 -7% 18% 9% -2% -10% -5% 0% 5% 10% 15% 20% - 200 400 600 800 1 000 1 200 1 400 2010/20112011/20122012/20132013/2014 3Q 2014/2015 Total assets growth Club’s assets Fixed assets are club’s main assets group while Current assets remains only about 15% of total value (from 10% to 20%). The biggest position in club’s accounting books is Goodwill, which amounts to £421m. Source: Company’s financial reports Assets’ structure (£ ‘000) HIGHLIGHTS Total assets value have risen by 18% to reach £1195m as for 31.03.2015. The biggest impact on change in assets between 2012 and 2013 had Deferred tax asset that started to be a significant position in club’s books. NON-CURRENT ASSETS This group is dominant and that is mainly because of Property, plant and equipment (Old Trafford stadium is one one of the most important asset for the club). Value of this position does not change over significantly over seasons because of capital expenditures. Similar value is presented by Players’ registrations. It worth to notice that Players’ registration value has boosted by 213% since 2011/2012 what shows the scale of investment in first squad. However the biggest share in Non-current assets, and in total value as well, posses Goodwill - £421m. Goodwill contains all subsidiaries’ value, mainly Manchester United Limited which was bought in 2005. Goodwill is not a subject of amortization but is annually tested for impairment and if conditions require it even more often. CURRENT ASSETS As mentioned above Current assets amounts to only about 15% of total assets. The biggest share position is receivables, mainly trade but also others. Cash and equivalents shows a decrease over years, from £150m to just £11m as for 31.03.2015. Source: Own analysis based on financial reports Assets (£m) 2010/2011 2011/2012 2012/2013 2013/2014 3Q 2014/2015 Non-current assets 811 140 798 915 954 999 1 024 227 1 074 901 Property, plant and equipment 240 540 247 866 252 808 254 859 252 494 Investment property 6 938 14 197 14 080 13 671 13 587 Goodwill 421 453 421 453 421 453 421 453 421 453 Players' registrations 129 709 112 399 119 947 204 572 237 760 Derivative financial instruments - - - - 1 323 Trade and other receivables 10 000 3 000 1 583 41 1 000 Deferred tax asset 2 500 - 145 128 129 631 147 284 Current assets 206 048 148 233 163 312 191 484 120 398 Derivative financial instruments - 967 260 - 1 354 Trade and other receivables 55 403 74 163 68 619 125 119 107 716 Current tax receivable - 2 500 - - 124 Cash and cashequivalents 150 645 70 603 94 433 66 365 11 204 Total assets 1 017 188 947 148 1 118 311 1 215 711 1 195 299 Source: Own analysis Assets (£m) 85% Average share of current assets in total value Financial Analysis 47

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