Umbro shares tumble as Chelsea back out

13 April 2012

SHARES in UK football gear firm Umbro tumbled on news that it had agreed to end a sponsorship deal with English Premier League leaders Chelsea five years early, hitting 2005 profit expectations by up to £2m.

The shares fell 7p to 102½p. In 2004 the sales of Chelsea kit of £8.2m represented 6.1% of Umbro's UK turnover.

The contract, to supply playing and training gear as well as to sell and distribute replica products, had been due to run until 2011. Umbro did not say why the deal was being terminated.

However, Umbro, which listed on the London stock market last May, said that Chelsea, to make up for terminating the contract, would pay it £24.5m in June 2006, which could enhance earnings in the medium term.

'We believe this represents a good deal for shareholders. It provides us with a material cash injection in the summer of 2006, which will fuel a higher level of global investment in the brand over the medium term,' chief executive Peter McGuigan said in a statement.

The 81-year-old firm also supplies the England soccer team and sells its products in more than 90 countries. International wholesale equivalent sales growth was ahead of a year-earlier, when the company benefited from the European 2004 Championship.

'There has been a good level of orders for 2005, in particular for the England home kit, which is likely to be in line with 2004. This is very encouraging given that 2005 is a non-tournament year,' the company said.

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