Johannesburg - As with De Beers, Manchester United gets as much press coverage today as when it was a publicly listed business, such is the pulling power of the brand, be it diamonds or football.
Nonetheless, there are certain benefits to being unlisted, according to the soccer club's CEO, David Gill, currently in SA as the team participates in a pre-season tournament.
For instance, managing the brouhaha over the future of star player, Christiano Ronaldo, would have been "difficult to manage" if listed, said Gill.
Given the sheer volume of coverage over the apparent wantaway of Ronaldo to Real Madrid, a rival Spanish football team, Gill and his board would have spent hours managing the flow of information to worried shareholders as required of listed firms.
But perhaps the greater benefit of having turned a private business is that important decisions get made more quickly. Said Gill: "Previously there were committees and lots of debate. Now I can pick up the phone to Joel [Glazer] and get a yes or a no."
Glazer is one of three sons in a family headed by Malcolm Glazer, that bought Manchester United in 2005 for about £790m. The Glazers then, somewhat controversially, transferred the cost of the transaction to Manchester United. The debt was recently restructured, but critics say it has put 130-year old club in a potentially parlous state.
Gill was part of the team that successfully repelled the Glazers when they first sought ownership of Manchester United. But he now thinks delisting was an inevitability.
The money angle
It had, for instance, become increasingly obvious the listing of Manchester United was unnecessary. Liquidity was low owing to the presence of several large shaeholders and the City had "fallen out of love with football stocks," he said.
And apart from quicker decision-making, there's also the money angle.
Gill attributes the four-year £56.5m sponsorship deal with AIG, the North American insurance company, to Glazer. Apart from being the UK's largest sponsorship, it's also one of the reasons Manchester United are in SA. "The tour gives us opportunity to further AIG's goals in this market," says Gill.
SA and Africa in general offers a club like Manchester United other riches.
According to research, there are more supporters in SA than in Britain. Regionally, there's significant potential to build on the 56 million strong support base in Africa which is, incidentally, three million more souls than in Europe.
And while Asia has a 190 million strong support base, Africa has certain countries with a track-record of producing what Gill described, in dramatic understatement, as "good players".
Fertile debate
Not that Manchester United would appear to need much bulking in its playing staff. The team scooped England's and Europe's top club trophies last season, which ended in May, and thinks it can continue the success.
The cost of success, however, is proving a fertile debate. About 50% of total turnover, £295m last financial year, was paid in player salaries. Gill acknowledges that escalating wages "are a challenge" for football, but he believes his business can manage them.
Firstly, players want to play for teams that win trophies, so Manchester United has cache it can use to leverage players in negotiations; secondly, players' wages are the only significant cost, he said.
"We're lucky," said Gill. "We just have to get the balance right on player wages because the rest of the business is high margin." Nearly 30%, in fact, because EBITDA (earnings before interest and tax) was £80m last year.
Television revenues also help set the pace on wages. From 2001 to 2004, TV rights to broadcast the English Premier League had flattened. Last season, however, represented the first year in a new £625m TV rights deal which handed Manchester United £50m for topping the league. On this basis, player wages can improve.
Yet concerns exist. While the club's most important single cost has potential to escalate, its single most important revenue stream - matchday receipts - looks cramped. There's a limit to growing the stadium, known as Old Trafford, beyond its current 76 000 capacity while consumers get sniffy when ticket prices increase.
"I don't think this revenue line is ex-growth," Gill responded. Consumers are "resiliant" nothwithstanding the High Street downturn in the UK and there's the prospect of taking Old Trafford to 80 000 seats, though it's not yet planned, he said. Fitting seats behind suites and boxes is also being contemplated, however.
For a chartered accountant, Gill is charming but he doesn't like being asked about plans to buy new players. The question is ultimately about capital expenditure, however: "We need to spend less this year," he said.
- Fin24.com