How is the Manchester United Red’s Five-Year Business Plan Impacted by Recently Becoming Publicly Traded?

Jarred D. RiccadonnaApril 27, 2015

Overview and Thesis

Thesis Question: How is the Manchester United Red’s Five-Year Business Plan Impacted by Recently Becoming Publicly Traded?

Passion for sports marketing More teams that are NOT publicly

traded Short-run and long-run effects of all

important business categories (financials, management, marketing, etc.)

Benefits of the Research

Better understand the complexities of becoming a publicly traded entity

Understand the guidelines necessary in becoming a publicly traded company, regardless of the business owned

Professional sports team owner considering becoming publicly traded

One considering acquiring ownership of a professional sports team via the stock market.

Background – History1878-1909

Club formed in 1878, playing against other individuals in railway industry

John Henry Davies saved organization from bankruptcy, which led to the name change of Manchester United Reds in 1902

Won first Football League title in the 1907-1908 season

Lost 12 league matches in a row, leading to a dissipation of fan support

James Gibson, a manufacturer of Army uniforms, invested equivalent of30,000 Euros (32441 U.S. Dollars) to help avoid bankruptcy

Background – History1930-1939

Became publicly traded onAugust 10, 2012

All-time great Sir Alex Ferguson retired Succeeding Ferguson, David Moyes had

a dismal 2013-2014 season coaching the Reds, resulting in his termination

Background – History2010 – Present Day

History – Championships

39 Total Trophies, second highest ever (Liverpool FC)

20 Premier League English titles (Best) Ranked top 3 or better 21 out of the

past 22 seasons (7th in Moyes’ season)

Becoming a PubliclyTraded Entity*

Two concepts:› Firm must sell its securities on public

markets; › All business and financial information must

be reported on a regular basis Initial Public Offering (IPO):

› Allow investors to acquire a specified size, which enforces reporting requirements;

› Voluntarily register with the SEC*New businesses: investors should look at historical data on financial trends/ratios to be enticed into entering the market

Financial Analysis – Stocks

Began IPO on August 10, 2012 at $14 a shareconsisting of an even split ofClass A and Class B sharestotaling 16,666,667 shares

Class A: One vote per share Class B: Ten votes per share $16.35 per share (February 5, 2015)

› 16.78% increase Minor growth trend, not as appealing for

the risk taker

Financial Analysis – Market (Micro)

Stock from August 31, 2012 – February 5, 2015

Hiring of David Moyes› Initial volatility of stock (uncertainty of

outcome)› 7th place finish: stock dropped back to $14

Stock rose 6.5% after Moyes was fired Assuming Laissez Faire, the impact of a

coaching change and team performance can effect stock price

Financial Analysis – Market (Micro)

As of the 2012-2013 season, the entire Premier League lost 291 million Euros ($314,934,750 USD)

Second highest on wage bill (181 million Euros)

First in team income: 363 million Euros Provides investors a level of confidence

being successful financially

Financial Analysis – Market (Macro)

Financial Analysis – Finances

June 30th annual fiscal year 13.38% increase revenue (2012-2013) 19.26% increase revenue (2013-2014)

Financial Analysis – Finances

Effect of the IPO, before and after:

Financial Analysis – Profits

2012 – 2013 (000) 2013 – 2014 (000) Tax Credit (000)

From 23,313 to 146,419

From 146,419 to 23,835

155,212

123,106 (122,584)

The heavy volatility shows the immediate impact becoming publicly

traded with respect to short-run profitability

Financial Analysis – Ratios

Financial Analysis Forecasts and

Predictions Profit and Margin trends almost

stagnant Investors be uninterested if looking for

a dividend No huge spike (positively or negatively)

in stock prices Will remain an

influential factorwithin thePremier League

Marketing – Revenue Generators and

Customers Top five customers:

› Premier League› Nike› UEFA (Union of European Football Associations)› Aon› General Motors (Chevrolet)

Accounted for 51.1% revenue in 2014, 45.5% in 2013, and 50.1% in 2012

New 10-year agreement with Adidas

Marketing – Sponsorships

Accounts for 189.3 million Euros Sponsorship deals are typically 2-5

year terms Stock potential maximized with

constant revenue drivers and expansion of renewed or new sponsors

Marketing – Other Influences

Retailing/Merch

Mobile and Content

Broadcasting

Matchday

303M Euros; Nike

16M Euros;58M Facebook;

3.4M Twitter followers

55-60% increase predictions

MUTV – 85 countries

108.1M Euros (2014) Ticketing (4.4% growth)

Porter’s Five Forces

Bargaining Power› Favors MAN U – High revenues› Global recognition› Consistent success and sponsorships

New Entrants› Favors MAN U – Revered team› Strong fan base vs. new team’s base› Capital to start: 100M USD› Threat is nearly nonexistent

Porter’s Five Forces

Buyer Power› Favors MAN U – Global Popularity› Success of the team› Renewing sponsors at higher amounts

Threat of Substitutes› Favors the market – Tastes/preferences

(Fans)› Successes of other organizations› Enforces urgency to be successful

Porter’s Five Forces

Rivalry› Overall, Favors MAN U – Powerhouse

enforcer› Role model for Premier League due to

financial successes and revenue leader› Strategic foundation for prices, commercial

and consumer sales› Allows for potential to grow stock

Porter’s Five Forces

SWOT AnalysisSafe investment/Slippery Slope?

Strengths:› Prestige and Global Community

62 total trophies 659M total followers 37M records in CRM database

› Sponsorships/Contracts Big five customers Renewing contracts

› Growth/Profitability Minor yet consistent growth rate Key contributor to cash flow and revenues

of the Premier League

Weaknesses:› Stalemating growth

No promise of long-term financial gain› No dividends

No payouts as stated in Prospectus Stock for bragging or decision making

purposes only

SWOT AnalysisSafe investment/Slippery Slope?

Opportunities:› Portfolio of Sponsors

Expanding the portfolio, increase revenue› Reaching Global Audiences

Expand broadcast rights – reach more of659 million fans

› Mobile and Content Lowest revenue driver

Employ a digital media strategy to target customer base

Convert 37M fans and 58M Facebook connections to increased sales

SWOT AnalysisSafe investment/Slippery Slope?

Threats:› Conflicts of Interest

Nike contract expiring; signing Adidas?› Current/Previous Standings

Currently in 4th; bad performance loses fan loyalty and bonus revenues paid out

SWOT AnalysisSafe investment/Slippery Slope?

Conclusion

Continual success after the IPO Stock, revenues and transactions

strongly dependent on success of team Continue to be the market driver,

exploit opportunities and overcome weakness

IPO influenced short- and long-run business decisions (players, fans, mkt)

Continuous small growth pattern

Personal Analysis

I would NOT purchase MAN U stock› Risk taker; not for bragging rights

Successfully hypothesized positive impact of IPO for short-run and potentially long-run

Five-year plan is successful insofar

Limitations of the Research

The bulk of the research was performed only on one team› Compare to other teams for more accurate

prediction; Lack of scholarly articles

› Challenge of finding credible sources and anticipated lack of scholarly articles; and

Timeliness of the research› Uncontrollable. Data from FY12 – FY14. As

time goes on, can refer back and check predictions

References LLP, PricewaterhouseCoopers (2012, July 23). Manchester United PLC. Retrieved February 6, 2015,

from http://www.sec.gov/Archives/edgar/data/1549107/000104746912008161/a2210672z424b4.htm#cm71301_dividend_policy

Manager Profile - Alex Ferguson. (2015). Retrieved February 6, 2015, from http://www.premierleague.com/en-gb/clubs/managers/profile.overview.html/alex-ferguson

Manchester United Ltd. Cl A. (2015). Retrieved February 6, 2015, from http://www.marketwatch.com/investing/stock/manu/financials

Manchester United PLC. (2015). Retrieved February 6, 2015, from http://www.google.com/finance?q=NYSE:MANU&fstype=ii

Nasdaq (2015, February 5). MANU Key Financial Ratios. Retrieved February 5, 2015, from http://www.nasdaq.com/symbol/manu/financials?query=ratios

Public Companies. (n.d.). U.S. Securities and Exchange Commission. Retrieved February 12, 2015, from http://investor.gov/introduction-markets/how-markets-work/public-companies#.VN1RYuajOm4

Sedghi, A., & Wills, T. (Eds.). (2014, May 1). Premier League finances: Turnover, wages, debt and performance. Retrieved February 12, 2015, from http://www.theguardian.com/news/datablog/2014/may/01/premier-league-club-accounts-debt-wages

United history: 1878 to 1909. (n.d.). Retrieved February 6, 2015, from http://www.manutd.com/en/History/History-By-Decade/History-By-Decade/2014/Oct/manchester-united-history-1878-to-1909.aspx

United history: 1930 to 1939. (n.d.). Retrieved February 6, 2015, from http://www.manutd.com/en/History/History-By-Decade/History-By-Decade/2014/Oct/manchester-united-history-1930-to-1939.aspx

United history: 2010 onwards. (n.d.). Retrieved February 6, 2015, from http://www.manutd.com/en/History/History-By-Decade/History-By-Decade/2014/Oct/manchester-united-history-2010-onwards.aspx

Woodward, E. (2014, October 27). Manchester United PLC, Form 20-F. Retrieved February 6, 2015, from http://ir.manutd.com/~/media/Files/M/Manutd-IR/Annual Reports/manchester-united-plc-20f-20141027.pdf

Questions?