• Club will this week record operating profits of
£100m
• Profits may help success of shares on Singapore market
Manchester United
will this week report record operating profits of more than
£100m and are set to use Thursday's financial results as a
springboard for a bid to raise up to $1bn (£614m) by floating a
minority stake in Singapore.
An increase in revenues, understood to have topped £300m for the
first time from last year's figure of £286.4m, has been driven by
new overseas sponsorship deals that are likely to have pushed
commercial income above £100m for the first time.
That figure does not include
the £10m a year DHL training kit
sponsorship deal or other recently signed contracts. The
club is likely to point out that operating profits have more than
doubled from £43m since the Glazers took over in 2005. In contrast
to last year's record losses of £83.3m, driven by one-off costs
related to a £526m bond issue, the club is expected to record a net
profit for the year ending June 2011. But campaigners against the
Glazer regime will point to the impact of £45m in annual interest
repayments on the club's bottom line.
They calculate that £434m has flowed out of the club in
interest, fees and debt repayment since 2005. The chief executive,
David Gill, has repeatedly insisted the club can shoulder the
interest burden and still compete for the best players. For the
ambitious flotation scheme to succeed when it goes ahead in
mid-October, Manchester United will have to overcome doubts about
the way it is structured. It is understood that the club will
pursue a dual share structure, whereby investors will have to
purchase one "non-voting" share for every voting share, allowing
the Glazers to raise funds while staying in control of the
club.
Sources argue it is modelled on the US sports model, where clubs
in the NFL and the NBA must have a single designated owner, and
will allow for strategic long-term planning and swift decision
making. "This structure works best for the club, Manchester United
as a company and shareholders and the evidence is the club's
results in the last five years," a source said. "It is what works
well in football given the rapid nature of decisions required and
specialist knowledge of the football transfer market."
But corporate governance experts said it was out of step with
best practice and increasingly frowned upon by investors.
A spokesman for the Association of British Insurers said:
"Investors in the UK market in particular, and to a lesser extent
across Europe, do not favour dual share structures. There is a
common idea of one share, one vote, so that your economic interests
are the same as your voting interests."
Corporate governance consultancy PIRC said it "approves of the
'one share, one vote' structure for companies share capital, and
generally disapproves of dual class stock structures which have
varying voting and dividend payments rights".
A spokesman added: "In our view, shareowners who have the same
financial commitment to the company should have the same rights.
Where a company is creating a new class of shares, or seeking an
increase in the number of shares of the class of stock that has
superior voting rights, we will usually oppose the capital
restructuring."
At the height of the hacking scandal, there was much criticism
from shareholders of News Corporation's dual share structure.
Anne Simpson, the corporate governance chief at the California
Public Employees' Retirement System (CalPERS), said last month that
not having one vote for each share was "a corruption of the
corporate governance system".