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Tuesday, January 24, 2006

Manchester United 2005 Accounts

Annual Report 2005

Manchester United remains the most profitable football club in the world and the largest in terms of global brand revenues.
Change of Ownership
The period was notable for the announcement on 23 May 2005 of the offer by Red Football Limited, owned by the Glazer family, for the issued share capital of the company which it did not already hold. This offer led to Red Football acquiring 100% of Manchester United PLC on 27 September 2005 and its change of name to Manchester United Limited on 11 October 2005. The Board of Directors now consists of Joel Glazer, Avram Glazer, Bryan Glazer, Nick Humby, Andy Anson and myself, with the Board of Manchester United Football Club remaining unchanged.

Club Developments

Key Signings
The eleven months will also be remembered for a number of exciting developments around the Club, beginning with the acquisition of Wayne Rooney from Everton in August 2004 for an initial fee of £23 million plus costs (rising to a maximum of £27 million plus costs) and ending with the acquisition of Edwin van der Sar from Fulham in June 2005 for £1 million plus costs.

Stadium Expansion
Once again, the team played each of its FAPL games in front of sell-out 68,000 crowds. During last season, the Club secured the planning permission and awarded the construction contracts to build the new quadrant seating and executive facilities which will increase the capacity at Old Trafford to over 75,000 from the start of the 2006/07 season. The Club hopes that some of the additional seats will be available for use before the end of this season. Sales of the new executive seats are going exceptionally well, with more than three quarters of the new facilities already pre sold. In conjunction with the increase in capacity, we will be offering additional season tickets for which we anticipate very strong demand.

Team Performance
On the field the Club’s disappointment at not winning any silverware reflects the high standards that this Club expects to achieve. We went out over 2 legs in the European Champions League to the eventual finalists AC Milan, were defeated over 2 legs in the Carling Cup semi-final by the eventual winners, Chelsea, and lost narrowly on penalties to Arsenal in the FA Cup Final. A third place finish in the FAPL meant a qualifying tie against Debrecen of Hungary to enable us to qualify for the group stages of the Champions League for a UK record tenth consecutive time.

Financial Year End Change and Results
Subsequent to delisting from the London Stock Exchange, the Company has changed its financial year end to 30 June; reflecting the year-end date of players’ contracts and creating a more even split across the first and second halves. Although these accounts reflect an eleven month period, the Group Operating Profit before depreciation and amortisation of intangible assets and exceptional items, was £46.0 million; maintaining the Company’s position as the most profitable football club in the world, and in the eleven months generating £43.3 million in net cash inflow from operating activities. The exceptional item included £6.6 million in respect of professional fees and associated costs in relation to the takeover.

The drop in profits and cash generation from the previous year reflects mainly the impact of the media deals, with a reduction in the domestic FAPL revenue of £6.5 million following the new three year deal and a reduction of £7.6 million in Champions League media revenue mainly from finishing third in the FAPL in 2003/4 compared to first in 2002/3.

Player Trading and Agents
In the period, the Club incurred costs of £2.2 million (£5.5m in the previous year) in relation to agents, of which £1.5m was for the acquisition of Wayne Rooney, as announced in August 2004. This information will undoubtedly add to the debate into the transparency of the role of agents and the level of their fees. While the Club feels that disclosure is the right course of action, we do not believe it is helpful that Manchester United remains the only FAPL club to publish such figures. We will keep this issue under review, but the failure of others to publish comparable statistics will once again leave Manchester United to be criticised over this matter on behalf of the whole game – an untenable position in the long term.

The Future
Manchester United continues to be the world’s biggest football club based on its global brand revenues and profits. The value of the Manchester United name with its huge and loyal fan base remains strong. The Company estimates that the total revenue generated by the Club from its sale of branded products and services, and those by its apparel and merchandising partner, Nike, and its media partners in the full twelve-month period to July 2005, exceeded £200 million. The Club is in detailed discussions with a number of top companies to be only our third shirt sponsor in over 20 years and is confident of securing the most lucrative deal in its history.

We believe that Old Trafford, the biggest Club stadium in the UK, will continue to develop as a year round venue, and new developments like the new £43 million quadrant facilities will enhance our ability to achieve that.

Everyone at the Club is determined to ensure that we continue to challenge successfully for every trophy over the coming years. Our excellent squad has been strengthened in the January transfer window with significant investment in both Nemanja Vidic and Patrice Evra. Further sums will be available, as necessary, to improve the squad in the summer.

The new ownership structure has established itself quickly, and the Club once again returned to being a private company - as it has been for all but 14 of its 128 year history. The year ahead has many challenges, but the Board believes that the Club is equipped to compete and to continue to grow its global revenues.

David A Gill, Chief Executive, Manchester United Limited
Monday 23 January 2006


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