2012/13 Financials

Commercial: £117.6M --> £152.4M
Broadcasting: 104.0--> 101.6M
Matchday: 98.7M --> 109.1M
Total: 320.3M --> 363.2

13.4% growth, which isn't bad at all. New TV contract hit after this. Coming down the road are (i) the full Chevy deal, (ii) the new Nike deal, and (iii) UEFA's next deal for Champions League. Revenue is going to grow considerably.

Looking at one component:

Nike: 33.8 --> 38.6

I toss this out, as I often to, to point out that people who think signing a Big Player would be paid for by that player's shirt sales. It just isn't reality. Our Nike deal is one of the best in the business. Or entire revenue from Nike, which is more than just for kits, is a robust £38.6. One player alone isn't going to increase that by £10M, let along £20M or £50M. Too many folks are taking cuts out of those kits before the money gets back to Nike and United. So when someone says buying Ronaldo could have been paid for by selling shirts, laugh at them. Same goes for Neymar shirts at Barca.

On the Expense side:

Operating expenses - excluding exceptional items: 274.4M --> 304.0M
Operating expenses — exceptional items: 10.7M --> 2.4M
Net finance costs: 49.5M --> 69.0M

The bump in finance costs were largely due to:

Amortisation of issue discount, debt finance and debt issue costs on secured term loan and senior secured notes: 2.3M --> 11.8M
Premium on repurchase of senior secured notes: 2.2M --> 22.0M

In turn, interest payable was down about 4.7M and currency exchange losses were down about 3.9M.

Our Loss on ordinary activities before tax was 8.8M, which sounds "bad" but really was simply related to those finance costs which actually are saving us money in the long term:

Borrowings: 436.9M --> 389.2M

This is why the "finance costs" went up: it was paying down the debt. Basically knocked £44M off the debt. In addition, we replaced a large chunk of the old debt with those new deals at lower rates, which will knock interest payments down.

Cash and cash equivalents: £70.6M --> £94.2M

People were worried that the cash was low at the end of the 3rd Qtr, but the was just cyclical.

Oh, and if you want to have accounting fun, dig this:

Tax credit

For the year ended 30 June 2013, we recorded a non-cash tax credit of £155.2 million, largely comprising the recognition of US deferred tax assets.

As a result of the reorganization transactions related to the IPO, we inherited the £96.1million carried forward US tax bases of Red Football Limited Partnership, which we expect to benefit from by way of future US tax deductions.

Furthermore, the reorganization transactions related to the IPO resulted in additional US tax bases or "step-up" that we currently expect to result in the availability of further US tax deductions. The resulting increase in tax bases is currently estimated to be approximately $350 million (£225 million) gross, although not all of this is expected to result in increased US tax deductions. The deductible element of the "step-up" was not finalized at the time of preparation of the financial statements for the year ended 30 June 2013 and consequently the £31.9 million recognized as a deferred tax asset with respect to the step-up reflects management's current best estimate. We expect to finalize this position by the end of fiscal 2014.

In addition, we expect to utilize any future UK taxes paid as foreign tax credits in the US, allowing us to "mirror" our existing UK net deferred tax liability as a deferred tax asset in the US. As our existing UK net deferred tax liability unwinds, we expect there to be UK taxable income that will result in a foreign tax credit in the US. The benefit of the expected foreign tax credit in the US has resulted in a deferred tax asset of £25.3 million.

The £153.3 million US deferred tax asset recognized in connection with the reorganization transactions related to the IPO, a portion of which has been utilized during the year ended 30 June 2013, reflects management's current expectation that there will be sufficient future taxable profits to utilize future US tax deductions.

In the prior year, we recorded a tax credit of £28.0 million primarily due to the recognition of previously unrecognized UK tax losses as a UK deferred tax asset and the continuing release of the UK deferred tax liabilities

So the "Profit for the year" is booked as £146.4M. You just have to love the tax credits given to rich people and rich clubs.

Anyway, our books look vastly better than at any point in the Glazer Era. The team continues to use a chunk of New Revenue to pay down the debt, and use refinancing to lower interest costs. We have four clear new major revenue streams that will be hitting the books in the coming years, along with all sorts of those smaller deals that the club is signing left and right. Revenue will conintue to grow, the debt will come down, finance cost will come down, and likely within the new three year EPL TV deal we'll see the books looking quite in order. Others like the Andersred blog have correctly pointed out that once the financing costs are down & out that we'll likely see the Glazers transition into paying dividends or other forms of moving money from the team to the owners. It probably will be similar to now:

Now: X% to debt financing + Y% to Club expenses (including buying players)
Future: A% to shareholders + B% to Club expenses (including buying players)

It's possible that X% = A%, and we'll see no change in the amount going to the club. But with revenue going up, the total going to the club will go up even if the % stays the same.

This FanPost represents the view of the member who posts it and does not necessarily reflect the views of <em>The Busby Babe</em> or <em>SB Nation. </em>

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