Sponsorship Deals Help Manchester United Reduce Debt & Increase Profit

November 14, 2012

Recent sponsorships deals have allowed Manchester United to reduce their debt and boost their profit.

United’s gross debt has been cut to £359.7m after the owners ‘retired’ a further £62.6m-worth of bonds during the first financial quarter.

It has been estimated that overall income will reach £350m to £360m over the entire financial year to June 2013, thanks mainly to commercial developments with sponsorship, including a seven-year £357m shirt deal with General Motors.

Sponsorship revenue increased 32.4% from £34.6m in 2011 to £43m in 2012 while retail, merchandising apparel & product licensing revenue increased 11.9%.

United executive vice-chairman Ed Woodward said: “Manchester United had a record first quarter driven by our commercial operation, which continues to experience extremely strong global revenue growth in new media & mobile, retail merchandising & sponsorship.”

United have added ten new sponsors in the first quarter – General Motors, Bwin, Toshiba Medical Systems, Yanmar (global); Kagome (regional); Santander, Shinsei Bank and MBNA (financial services); Bakcell (mobile); and Fuji TV (MUTV

The club’s broadcast revenues nose-dived however by 37.4%, largely attributed to their dismal showing on the Champions League stage last season when they failed to reach the knock-out stages.

“The increase in MU’s commercial revenues to £43m is impressive but not unexpected,” Steven Falk, Director of Star Sports Marketing told iSportconnect

The former Manchester United Marketing Director added: “Under the direction of ex-banker Ed Woodward (Executive Vice Chairman) and super-salesman Richard Arnold (Commercial Director) who report directly to Bryan Glazer the family member with day-to-day responsibility for running the commercial side of the club, a sales team now comprising over 70 sales executives and researchers has been aggressively targeting commercial global, regional and local deals around the world since 2008. 

“Interesting for a club based in Manchester, this sales operation is actually managed from offices on Piccadilly in London. Further regional sales offices being opened in the US and Asia. 

“Of more interest to fans than the unprecedented scale of the clubs sales activity is the decision by the owners to pay down around 20% of the club’s outstanding debt accumulated from loans taken out to purchase the club. While this is an encouraging sign for those who believe that the current debt burden affects the ability of the club to compete in the transfer market, it is likely that the majority of the £62.6m used to pay down the loans originated from the partial sale of shares floated on the New York Stock Exchange earlier this year.” 

“It remains to be seen if the club can continue to generate new revenues from commercial sponsorship to maintain this trend. Indeed, even assuming the club is able to significantly increase the level of revenue generated from renewal of its kit deal with Nike (currently around £30m pa), the key test for MU’s approach will be its ability to service, sustain and renew these deals. In today’s competitive market, even the most star-struck sponsor demands value and a measurable return from its sponsorship investment.”