Debt: Man Utd reduces debt ahead of IPO

Old Trafford

Old Trafford

Manchester United, Premiership winners last season, has managed to reduce monumental debt by £70m. This has been accomplished by a record full-year revenue ahead of the club’s expected introduction onto the financial markets in Singapore, to the tune of a $1bn initial public offering.

Record 16% increase

The holding company that owns the country’s best football club is Red Football Limited and they have realised a record 16% increase in the years turnover, rising to £331.4m in full-year results to 30 June. This rise has been instigated by new sponsorship money and also much higher match day and media revenues.

The net debt that the club had has fallen to £308m from £377m, but in contrast annual interest payments had risen by to £43.5m from a much smaller £3.5m.

The strategy behind the forthcoming IPO in Singapore is to ‘de-lever’ the club further, and this has been revealed by a person close to the company.

Profits before tax has been taken into consideration have increased from a loss in 2010 of £15m to a gain of £30m which was boosted by a £16.5m exchange rate gain on the Red Football Limited’s United States dollar debts.

This gain has helped in compensating for a weaker profit margin which has fallen by nearly 2 percentage points down to 33.5 per cent.

Before the summer transfer window opened the club had revealed a cash balance of 150.6m, but this has dropped after £50m was spent on new players which will help the club become more competitive and successful.

Two-tier share structure

The club is expected to move forward using a two-tier share structure. The purpose of this is to minimise the influence of outside shareholders over the US-based Glazer family who purchased Manchester United in 2005.

Chris Searle, corporate finance analyst at BDO has said: “This will only be palatable to investors as long as results, both financial and on the football field, keep going the right way.”

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