*All financial statements and conclusions are time-sensitive, subjected to the first quarter ended 31st March 2020 Manchester United PLC Annual Report 2020*
Key Points:
• The COVID-19 pandemic and related lockdown measures resulted in the suspension of all Premier League, FA Cup and UEFA Europa League matches since 13 March.
• In compliance with relevant guidelines, Premier League clubs have resumed training on 19 May in preparation for a potential restart of the 2019/20 season in June; Europa League to potentially restart in August
• The Club and its Foundation have committed significant resources to COVID-19 responses including support for local hospitals, food banks, schools and other community-based initiatives
Ed Woodward, Executive Vice Chairman: “Our focus remains on the health and well-being of our colleagues, fans and partners around the world and we are extremely proud of how those connected to the club have responded during this crisis. Since the start of the pandemic, Manchester United and our Foundation have provided assistance to hospitals, charities and schools in our communities, as well as support for frontline workers and vulnerable fans. These actions reflect our core values as a club and the resilience through adversity that we have demonstrated many times throughout our long history and will do so again to weather these current challenges. In that spirit, we look forward to the team safely returning to the pitch and building on the exciting momentum that Ole and the players had previously achieved while taking all necessary steps to protect public health. Our thoughts remain with all those affected during this unprecedented time.”
COVID-19 Impact
Manchester United has taken a range of measures to support its communities in response to the COVID-19 pandemic, including donations to food banks and outreach to elderly and disabled supporters. In addition, the Manchester United Foundation has committed over £1M to community initiatives, including the supply of 60,000 meals for health workers in local hospitals and support for schools and vulnerable children across Greater Manchester. The Club has also used its media platforms to deliver public health messages and to support frontline workers around the world. Operationally, the impact of the pandemic and measures to prevent further spread continues to disrupt its businesses in several ways, most significantly in Broadcasting and Matchday operations. Old Trafford and its flagship Megastore operations have been closed to visitors since 20 March 2020 and Museum, Stadium Tour and Red Café operations have been closed since 17 March 2020. The government imposed restrictions have also resulted in the postponement of the Premier League, UEFA competitions and FA Cup competition since 13 March 2020. Postponement of the Premier League and changes to match scheduling has resulted in a reduction in the total broadcasting revenue expected for the season and has impacted broadcasting revenue during the quarter for matches played to date. In addition, during the quarter, Broadcasting and Matchday revenues were impacted due to the postponement of three matches: one away Premier League match, one home Round of 16 Europa League match and one away FA cup quarter-final match.
Manchester United’s Financial Fair Play ( FFP ) status stands at negative 132.82M pounds. The UEFA Financial Fair Play Regulations were established to prevent professional football clubs spending more than they earn in the pursuit of success and in doing so getting into financial problems that might threaten their long-term survival. FFP is calculated by subtracting the amount of money received for the departures of players from the club ( club assets ) from the amount of money paid for the arrival of players into the club ( new club assets ).
2019/2020 Arrivals and Departures affecting FFP
Arrivals:
1. Harry Maguire: £87.00M
2.Aaron Wan Bissaka: £55.00M
3.Bruno Fernandes: £55.00M
4.Daniel James: £17.00M
5. Odion Ighalo: (on loan)
Sum total: €214.00m
Departures:
1. Romelu Lukaku: £74.00M
2. Chris Smalling: £3.OOM (loan fee)
3.Matteo Darmian: £2.48M
4.Ashley Young: £1.70M
Sum total: €81.18M
Total FPP Value = €81.18M-€214.00m
=€-132.82m
Manchester United F.C. owned by Manchester United PLC showed a £1,356,413 thousand worth of assets matched by the same worth of liabilities on Manchester United PLC.
For PLC companies it is not a massive achievement to have properly matched, consolidated balance sheets. However, Manchester United is a club with high investment stature have maintained it despite COVID-19 whilst coming from a footballing season of increased investment exceeding €200.00M and debt in excess of €400.00M making huge and wide efforts during COVID-19 a well, while other clubs such as FC Barcelona and Arsenal were not capable of having consolidated balance sheets and had to take severe measures to do so.
This just further goes to show the exemplary management of Manchester United PLC and Manchester United F.C. as an institution.
Total Losses incurred for the quarter amount to £22,853 after income tax.
The following have been the contributing factors:
Operating Losses: £3,307
Net Finance Losses: £25,247
Additional Losses include losses from the drop in the value of publicly sold shares :
Loss per share: £13.89
Total loss: £164,544
Analysis of Financial Statements:
1.Working Capital and Liquidity
As of 31 March 2020, the Company had £90.3m of cash balances together with access to an additional £150m available under the Company’s revolving credit facility. This provides financial flexibility to support the Club through the disruption caused by COVID-19.
2.Net debt
Net Debt as of 31 March 2020 was £429.1 million, an increase of £127.4 million over the prior-year quarter, a decrease of £370.9 million over the previous year.
Net debt is calculated as non-current and current borrowings minus cash and cash equivalents.
3.Commercial Revenue
Commercial revenue for the quarter was £68.6 million, an increase of £2.0 million, or 3.0%, over the prior-year quarter
Within the Commercial revenue sector, we monetize our global brand via three revenue streams: sponsorship; retail, merchandising, apparel & product licensing; and mobile & content.
We are well-positioned to continue to secure sponsorships with leading brands. We have historically implemented a proactive approach to identifying, securing and supporting sponsors. During the fiscal year 2019, we announced eight new regional and global sponsorship partnerships, the replacement of one global partnership, a conversion of one regional sponsorship to a global partnership as well as extensions to five global partnerships and three regional partnerships.
Currently, we have a 10-year agreement with Adidas with respect to our global technical sponsorship and dual branded licensing rights, which began on 1 August 2015. In the future, we plan to invest to expand our portfolio of product licensees to enhance the range of product offerings available to our followers. Additionally, we may also seek to refine how we segment the different elements of this business. We may also increase our focus on developing these rights more proactively, alone or with other partners.
The rapid shift of media consumption towards the internet, mobile and social media platforms present us with multiple growth opportunities and new revenue streams. Our digital media platforms, applications and social media channels are expected to become one of the primary methods by which we engage and transact with our followers around the world. We continue to evolve our media team’s capability to address these opportunities. Since 2013, we have wholly-owned MUTV ensuring that we have both a greater degree of control over the production, distribution and quality of our proprietary content and better insight into how to evolve our digital media strategy as we continue to develop and roll-out carefully targeted new products and services.
3.A.Sponsorship: We monetize the value of our global brand and community of followers through marketing and sponsorship relationships with leading international and regional companies around the globe. To better leverage the strength of our brand, we have developed a global, regional and product segmentation sponsorship strategy.
• Sponsorship revenue was £44.7 million, an increase of £3.1 million, or 7.5%, over the prior-year quarter, primarily due to new sponsorship deals
3.B.Retail, Merchandising, Apparel & Product Licensing: We market and sell sports apparel, training and leisurewear and other clothing featuring the Manchester United brand on a global basis. In addition, we also sell other licensed products, from coffee mugs to bedspreads, featuring the Manchester United brand and trademarks. These products are distributed through Manchester United branded retail centres and e-commerce platforms, as well as our partners’ wholesale distribution channels.
• Retail, Merchandising, Apparel & Product Licensing revenue was £23.9 million, a decrease of £1.1 million, or 4.4%, over the prior-year quarter, in part due to the closure of the Old Trafford Megastore mid-March.
3.C.Broadcasting
We benefit from the distribution of live football content directly from the revenue we receive and indirectly through increased global exposure for our commercial partners. Broadcasting revenue is derived from the global television rights relating to the Premier League, UEFA club competitions and other competitions. In addition, our wholly-owned global television channel, MUTV, delivers Manchester United programming to over 56 countries and territories around the world. In addition to our broadcasting channel, we also launched a D2C subscription mobile application in season 2016/17 which, as of 30 June 2019, was available in over 167 territories. In addition, for our 2018 pre-season tour we also launched on four ‘Connected TV’ platforms to enable our fans to watch and subscribe to our content on more platforms, namely Amazon Fire, Apple TV, Roku and Xbox. Broadcasting revenue including, in some cases, the prize money received by us in respect of various competitions, will vary from year to year as a result of variability in the amount of available prize money and the performance of our first team in such competitions.
Broadcasting revenue for the quarter was £26.0 million, a decrease of £27.8 million, or 51.7%, over the prior-year quarter, primarily due to an estimated £15.0m Premier League rebate due to broadcasters, following delay and broadcast schedule changes to the 2019/20 football season, non-participation in the UEFA Champions League, and the impact of playing two fewer Premier League away games.
3.D.Matchday Revenue
We believe Old Trafford is one of the world’s iconic sports venues. It currently seats 74,140 and is the largest football club stadium in the UK. We have averaged over 99% of attendance capacity for our Premier League matches in each of the last 21 years. Matchday revenue will vary from year to year as a result of the number of home games played and the performance of our first team in various competitions.
Matchday revenue for the quarter was £29.1 million, a decrease of £2.6 million, or 8.2%, over the prior-year quarter, including the impact of postponement of the Round of 16 Europa League home match and closure of non-match day operations in mid-March.
Manchester United lose out on £5M every time they play behind closed doors at Old Trafford.
4.Employee benefit expenses
Employee benefit expenses for the quarter were £69.5 million, a decrease of £15.3 million, or 18.0%, over the prior-year quarter, due to the impact of net player disposals, loan deals and reductions in player salaries as a result of nonparticipation in the UEFA Champions League.
5.Net finance costs
Net finance costs for the quarter were £25.3 million, compared to £3.1 million in the prior-year quarter.
6.Income tax
The income tax credit for the quarter was £5.8 million, compared to a charge of £3.4 million in the prior-year quarter
Conclusion
United’s finances are strong when compared to other clubs after the COVID-19 pandemic but still remain imbalanced with their ambitions in the transfer buying the likes of Jadon Sancho, Jack Grealish and so on…
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