Manchester United plc — Form 20-F summary
Reporting period: The filing is the audited annual report for the fiscal year ended 30 June 2020, not a 2019 fourth-quarter filing. Financial statements are prepared under IFRS and presented in pounds sterling.
Business context and reporting period
Manchester United operates men’s and women’s professional football teams and monetizes its brand through Commercial, Broadcasting and Matchday activities. The year was materially disrupted by COVID-19: competitions were suspended from 13 March 2020, matches resumed behind closed doors, and multiple matches and related revenue were deferred into fiscal 2021.
Key financial metrics
| Metric | FY ended 30 June 2020 | FY ended 30 June 2019 |
|---|---|---|
| Revenue | £509.0m | £627.1m |
| Commercial revenue | £279.0m | £275.1m |
| Broadcasting revenue | £140.2m | £241.2m |
| Matchday revenue | £89.8m | £110.8m |
| Operating profit | £5.2m | £50.0m |
| Loss/profit before tax | (£20.8m) | £27.5m |
| Net loss/profit | (£23.2m) | £18.9m |
| Adjusted EBITDA | £132.1m | £185.8m |
| Net cash from/(used in) operating activities | (£3.8m) | £244.8m |
| Cash and cash equivalents at year-end | £51.5m | £307.6m |
| Total borrowings | £525.6m | £511.2m |
| Net debt | £474.1m | £203.6m |
| Total assets / liabilities / equity | £1,383.5m / £1,032.2m / £351.2m | £1,496.5m / £1,081.3m / £415.2m |
Margins: Calculated from reported figures, operating margin was approximately 1.0% versus 8.0% in FY2019; net margin was approximately (4.6%) versus 3.0%; Adjusted EBITDA margin was approximately 26.0% versus 29.6%. Adjusted EBITDA is a non-IFRS measure and is not directly comparable across companies.
Gross debt comprised $425m of 3.79% senior secured notes, due 2027, and $225m of secured term loans, due 2029. The term loan bears floating-rate interest; £181.8m was reported as variable-rate debt. The company had an undrawn £150m revolving facility at 30 June 2020. Debt facilities were secured against substantially all assets of specified subsidiaries.
Material changes versus prior comparable period
- Revenue declined £118.1m, or 18.8%. Broadcasting fell 41.9%, chiefly because the team did not play in the 2019/20 Champions League, matches were deferred, and broadcaster rebates were recorded. Matchday revenue fell 19.0% due to fewer matches played in front of fans and deferred fixtures.
- Commercial revenue increased 1.4%: sponsorship rose 5.6%, while retail, merchandising and licensing fell 5.7%, including the temporary closure of the Old Trafford Megastore.
- Operating expenses decreased 13.4%, including lower employee costs associated with player disposals, loan deals and Champions League non-participation, and lower other costs during pandemic-related closures. These reductions did not offset the revenue decline.
- Operating profit decreased to £5.2m; net results swung from profit to loss. Adjusted EBITDA declined £53.7m, or approximately 28.9%.
- Operating cash flow swung from a £244.8m inflow to a £3.8m outflow. Investing cash outflow rose to £212.8m, including £191.6m net expenditure on player registrations. Cash fell by £256.1m year over year; net debt increased by £270.5m.
Outlook, risks and unusual items
- COVID-19 and outlook: Management said future impacts on revenue and cash flow depended on public-health restrictions, consumer behavior, and the ability to stage matches with fans. It assessed scenarios including a full season behind closed doors, delayed receipts and counterparty credit risk. The filing provides no numerical revenue or earnings guidance. Management concluded the group could meet obligations for at least 12 months after the report date, while emphasizing substantial uncertainty.
- Liquidity actions: Management monitored costs and uncommitted capital expenditure. The company suspended its share repurchase program after purchasing £21.3m of shares and retained the £150m revolving facility available at year-end. A new revolving facility of up to £50m was entered into on 14 October 2020. FY2020 dividends paid were $0.18 per share; future dividends remain discretionary and subject to restrictions.
- Broadcasting and competition distributions: The company estimated its share of Premier League broadcaster rebates at approximately £14m, with the cash impact intended to be deducted from distributions in 2021/22 and 2022/23. UEFA said COVID-related shortfalls would reduce distributions over five seasons; Manchester United estimated its share of the 2019/20 reduction at approximately €0.9m. The club qualified for the 2020/21 Champions League after finishing third in the 2019/20 Premier League.
- Other notable items: FY2020 included £18.4m profit on disposal of intangible assets, primarily related to Romelu Lukaku. FY2019 included £19.6m exceptional compensation for the former manager and coaching staff; FY2020 had no exceptional items. Investment property impairment was £3.8m, with external valuers citing material valuation uncertainty related to COVID-19.
- Contingencies and legal/tax matters: Up to £79.0m of contingent transfer fees could become payable if specified conditions are met; £4.0m of contingent transfer receipts was considered probable. The company was in active discussions with UK tax authorities over player and representative arrangements; potential liabilities were not quantified because disclosure was not practicable. Routine legal proceedings were described as not material.
- Operating and financing risks: Results depend on team performance, European competition qualification, player availability, sponsor renewals, broadcasting rights, match attendance and counterparties’ ability to pay. Other disclosed exposures include foreign exchange, variable interest rates and debt covenants. The company reported compliance with debt covenants at year-end.
- Subsequent commercial change: In August 2020, the Chevrolet shirt sponsorship agreement was extended by six months to 31 December 2021, without material change to rights or total consideration. Settlement in sterling meant the related cash-flow hedge no longer qualified for hedge accounting, requiring accumulated foreign-exchange losses to be reclassified to profit or loss.
Most important facts for investors to verify
- Confirm the period: this filing reports FY2020 ended 30 June 2020, not 2019 Q4.
- Track restoration of matchday receipts and cash generation, including the timing of supporter access to Old Trafford and deferred broadcasting distributions.
- Monitor debt, net debt, cash, the availability and terms of revolving facilities, and covenant headroom as pandemic effects continue.
- Assess the commercial and financial consequences of Champions League participation, broadcaster rebates and future UEFA distribution reductions.
- Review player transfer spending, contingent transfer obligations and the future amortization burden; £119.7m of existing registrations was expected to amortize in FY2021.
- Follow the UK tax-authority discussions and any quantified exposure, and assess whether dividend policy remains supported by cash flow and debt restrictions.
- Consider the filing’s control disclosures: PwC gave an unqualified opinion on the IFRS financial statements and internal control over financial reporting as of 30 June 2020.