Back in May, I recommended buying shares of Manchester United (MANU). The team had just watched Sir Alex Ferguson retire after 26 years with Manchester United. The appointment of new coach David Moyes had caused shares to fall and offered a buying opportunity. Since that article about Manchester United, shares are down nearly 2%. On Wednesday, the company reported record revenue and relatively conservative guidance that once again offers a good entry point for investors or sports lovers.
On Wednesday, Manchester United reported record revenue. Total revenue increased 13.4% to 363.2 million GBP. Here is a look at revenue by segment:
2013 Revenue (GBP)
2012 Revenue (GBP)
Manchester United had a stellar fiscal year in its first full year since its successful IPO. The company saw strong results from licensing and commercial segment, thanks to the strength of its brand and fan base around the world.
The positive results should continue to pour in for Manchester United, as it transitions further away from sports team revenue towards licensing and commercial revenue. In fiscal 2013, commercial revenue made up 42% of total revenue. In one article, I highlighted Manchester United as an investment in licensing and a growing worldwide fan base.
Other highlights from the fiscal year include:
· Re-financed long-term debt (177.8 million GBP and $22.1 million US), will provide annual savings on interest payments
· Saw increased profit share from a partnership with Nike, which should continue to grow with the strength of the team and increased fan base
· Acquired remaining 1/3rd stake of MUTV (Manchester United TV)
Manchester United also signed a partnership with Pepsi. The team will have Pepsi as the official soft drink of the team in the countries of Thailand, Malaysia, Singapore, Myanmar, Cambodia, Laos, and Brunei. The sponsorship is for two years and should have a strong impact on next year's fiscal sales. Manchester United will see $70 million from General Motors in 2014 when Chevrolet becomes the new shirt sponsor in one of the best sports sponsorships of recent history.
Here is a look at how Manchester United has performed in the English Premier League the last five years:
· 2008-2009: First Place
· 2009-2010: Second Place
· 2010-2011: First Place
· 2011-2012: Second Place
· 2012-2013: First Place
The finish in the domestic league is extremely important. The top teams make the Champions League, where valuable broadcast revenue is earned. The Premier League also splits their annual revenue proportionately based on the prior year's finish. Last year, Manchester United received 25% of the Premier League's revenue based on a second place finish. This fiscal year, that number jumps to 40% thanks to their finish atop the table.
Manchester United also began playing in the elusive Champions League competition this past week. The team opened with a win and is in a favorable group. The team is hoping to make it to at least the quarterfinals this year, after an early exit last season. Here is a look at how the team has fared in the Champions League over the last five years:
· 2008: Champions
· 2009: Runner-Up
· 2010: Quarterfinalist
· 2011: Runner-Up
· 2012: Round of 16
Last year's early exit was at the hands of Real Madrid, one of the top teams in the world. This year, the team is hoping to make it to the quarterfinals, and anything past that stage would hopefully boost revenue guidance for the full year. The team will also compete in several other European tournaments with a chance for more hardware.
In its full year earnings release, the company has set a goal of finishing in the top three of the English Premier League and reaching the quarterfinals of the Champions League. With those assumptions, Manchester United believes revenue will grow to a new record of 420 to 430 million GBP. EBITDA is expected to grow to 128 to 133 million GBP.
I think Manchester United has been beaten down due to a coaching transition. Investors are worrying too much about the team's manager and recent signings. This is a licensing stock play as Manchester United is one of the strongest sports teams in the world. I have recommended buying shares of Manchester United since its IPO at $14 a share. Investors and sports fans should buy this stock and hold it in a portfolio for quite some time. The company's conservative guidance and new sponsorships will have shares over $20 in the next two years.