3.2. Financial Performance of the Club

MU was once listed on the London Stock Exchange and initially planned to list in Honk Kong. The Club was delisted in 2005 after Malcolm Glazer bought the club for £780m²⁹. In July 2006, a £660 million debt refinancing package was announced which strained the Club’s financial situation. In January 2010 Manchester United had debts £716.5 million which it tried to refinance through a bond issue worth £504 million. This sum was repaid to the international bank lenders.

In spite of debt restructuring, fans are highly critical of the Glazer’s ownership of the club and took several actions during matches in order to show their criticism. They also had meeting with a group of well-off fans discussing plans to buy out the control package of the club. Analysts see that Glazer’s actions of debt restructuring only take cash out of the club and upstream it to the Red Football Joint Venture company. All in all, this makes the Club even more leveraged³⁰.

Apart from the financial crisis issues, this puts a restraint on the transfer budgets and intervenes into MU’s strategy to develop as a football club and a brand. To solve this issue in early 2011 MU has entered into a new credit of an additional £75m which should be used for working capital and, basically, for player transfers. These actions also did not see support from the fans.

Table 3.1. Financial results of Manchester United, millions of pounds (£).

	Year ended 30 June
	2009	2010	2011
Total turnover	278.5	286.4	331.4
- Matchday turnover	108.8	100.2	108.6
- Media Turnover	99.7	104.8	119.4
- Commercial Turnover	69.9	81.4	103.4
Total Operating Costs	(269.1)	(271.8)	(220.5)
EBITDA	91.6	101.2	110.9
Net debt	364.0	357.8	308.0
Cash	150.3	163.8	150.6
Net assets	455.5	777.2	810.6
Interest payments	(41.9)	(40.2)	(51.2)
Total profit (loss)	25.6	(83.6)	19.0

*Huge pre-tax profit in 2009 comes from the selling of Cristiano Ronaldo to FC Real Madrid.

It can be seen that financial results (Table 4.1) of the year 2011 ended on June 30^th look promising comparing to the previous periods^31,32. This partly due to the MU success on the field, contracts with new sponsors, and brand expansion worldwide. Nevertheless, the interest payments make the profits lower which means higher risk for the successive years which is the main concern of the investors when evaluating the shares offering.

The IPO has created hype among fans and the analysts long before it is clear what the exact amount of the shares offered is. Reports on the target figure of the raised funds vary from £500 million up to £1.5 billion net of debts. Earlier this year, Forbes ranked the club as the world's most valuable soccer team, valuing the club at $1.86 billion³³. No matter the real figures, this is the long lasted decision for both Glazers and fans which seem to be a compromise between having a company close held and raising funds from the outside.

The deal itself has the two tier structure which means that for every voting share there is a non-voting share. This tactic is mainly used to retain control in the owners’ hands. This obvious move also caused critics as it is not a very common move in Europe³⁴. Despite the promising results of the previous financial year it is still a long way to go until the Club will get the financial stability, and the lack of Glazers’ operations in their US operations does not help at all in this situation. Moreover, some analysts believe that latest financial report just covers the financial illnesses of the Club with the bright figures³⁵. Still, half of the operating income is spent to service the debt.

Who does the Club owe to? Red Football Limited has £250m of bonds secured on the club’s assets which calculated at current rates brings up to approximately £500m of debt due in February 2017. These bonds are owned by a variety of investors around the world. Also a £7m mortgage belongs to the Club secured on the container terminal behind the Stretford End. Until late 2010, there was also £249m of “payment in kind” (PIK) loans owed by Red Football Joint Venture Limited, the parent company of Red Football. These PIKs were secured on the shares of Red Football and were repaid in November 2010 without explanation on the sources of the finance. It is rumored that a new debt was issued to repay the KIPs³⁶.

Nevertheless, in spite of the financial turbulence, MU is quite ready for the financial fair play. According to UEFA, the the rules apply to the season 2013/14 when clubs must prove that losses in the two previous seasons don’t exceed €45m, which is currently not a tough target for MU. Unless something goes wrong with the debt.

Despite all the bright figures it is the fact that the debt charges would not exist if the club hadn’t been bought by the Glazers with debt. Since the acquisition, Glazer and the Club have incurred more than £450m in interest charges and debt-related payments. This figures do not include the sum actually borrowed which is currently around £500m as it is stated above. These payments include fees to bankers and lawyers, penalties related to refinancing, the PIKs interest, loans to the Glazers, and annual interest charges. And it is this makes fans so angry about the Glazers.