A Trophy In 2012-2013 Will See Manchester United Shares Rally To New Highs

Sep.19.12 | About: Manchester United (MANU)

The world's most valuable sports franchise saw its first quarterly and Fiscal year earnings report as a new public company Tuesday. English soccer giant Manchester United (NYSE:MANU) reported fourth quarter earnings that sent shares down 3% during Tuesday's trading session. Manchester United reported a fourth quarter loss before the market's open Tuesday.

The company lost 14.9 million pounds, or $24.2 million. Last year, the team saw a smaller loss equivalent to $570,000. Revenue dropped 25% to $120.96 million for the fourth quarter. Earnings per share fell to a loss of $0.16. Analysts on Yahoo Finance were looking for revenue of $117.15 million. Analysts were hoping to see a small loss of $0.01 per share.

In Fiscal 2012, Manchester United posted revenue of 320.3 million pounds, equivalent to $520.04 million. The team suffered several revenue misses with early exits from the Champions League and other competitions. Fiscal 2012 also marked the first time since 2005 that Manchester United did not win a trophy.

Here is a look at revenue for the Fiscal year by segment (in $USD):

  • Commercial Revenue: $190.94 million, +13.7%
  • Broadcasting Revenue: $168.85 million, -11.30%
  • Matchday Revenue: $160.25 million, -10.9%

At the end of the Fiscal year, Manchester United had over $114.63 million in cash. Manchester United did lower some of its debt by paying over $110 million during the Fiscal year. The company used some of the IPO proceeds to lower long term debt to $782 million. While this number will seem extremely high for some investors, it is a step in the right direction to begin paying off and lowering debt to equity from a 2 to 1.8.

Manchester United recently began its playing season in the English Premier League. To date, the team has played four matches, securing three victories and one loss. Wednesday marks the beginning of Champions League play for Manchester United as they host Galatasary in the beginning of the Group Stage. The Champions League is extremely important for Manchester United this season as last year saw a disappointing early exit. The company is expecting to reach the quarter finals of this year's international competition and anything less could send shares to new lows.

Manchester United has forecasted its revenue for Fiscal 2013. The sports team sees itself posting revenue of 350-360 million pounds. This translates to $568-584 for Americans reading the article. Some of these revenue projections are based on Manchester United reaching the quarterfinals in the Champions League and the League Cup competitions.

New broadcasting deals are sure to help Manchester United's top line revenue in 2013. The United Kingdom rights for English Premier League games increased by 70% to $1.62 billion for the year. This amount will be split between the twenty teams in the EPL. Broadcasting for Champions League games will also see a huge increase in revenue for Manchester United.

Looking further past Fiscal 2013 brings years of a new partnership with General Motors (NYSE:GM). Beginning in the 2014-2015 season, Manchester United soccer kits will feature the Chevrolet logo front and center. General Motors is paying $559 million over seven years for the exclusive rights to the famous "Red Devils" jerseys. Current sponsor Aon (AON) is paying less than half of that. This of course sets up for commercial revenue to see a significant jump beginning in 2014.

People have been bashing the Manchester United IPO since the soccer team went public. Big negatives impacted the company are a large amount of debt, and the dual ownership stake giving Malcolm Glazer the majority of the voting rights for the team. Recently, shares saw a small rally after investor George Soros disclosed a position equaling a two percent ownership stake in the team.

Shares of Manchester United now trade at $12.58, representing the bottom end of its 52 week range of $12.00 to $15.27. Analysts are now predicting the company will post revenue of $575.57 million for Fiscal 2013, which falls mid range of Manchester United's guidance. Analysts see the company posting a profit of $0.19 per share. I have been bullish on this company since its IPO, and recommended buying shares. Sports teams are a huge investment opportunity in any country. The majority of sports teams are held by one person, but Manchester United's recent IPO allows individual investors the chance to own a piece of sports history.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.