Manchester United plc — Form 20-F Summary
Period note: This is the annual report for the fiscal year ended 30 June 2022, not a 2021 Q4 filing. The company reports under IFRS in pounds sterling.
Business context and reporting period
Manchester United operates men’s and women’s professional football teams and generates revenue through Commercial, Broadcasting and Matchday activities. The report was filed on 23 September 2022. Old Trafford operated at full capacity throughout FY2022; in FY2021, 33 of 34 home matches were played behind closed doors.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | £583.2m | £494.1m |
| Commercial revenue | £257.8m | £232.2m |
| Broadcasting revenue | £214.8m | £254.8m |
| Matchday revenue | £110.5m | £7.1m |
| Operating loss | £87.4m | £36.9m |
| Loss before tax | £149.6m | £24.0m |
| Net loss | £115.5m | £92.2m |
| Adjusted EBITDA | £81.1m | £95.1m |
| Operating cash flow | £96.4m | £113.1m |
| Cash and cash equivalents at year-end | £121.2m | £110.7m |
| Total borrowings | £636.1m | £530.2m |
| Net debt | £514.9m | £419.6m |
| Total equity | £127.5m | £272.5m |
Cash generated from operations was £121.7m, down from £137.8m. Investing activities used £93.4m, including £85.1m net capital expenditure on player registrations. Financing activities provided £5.0m, including £40.0m of revolving-facility borrowing and £33.6m of dividends paid. The group reported £200m of undrawn revolving facilities at year-end. Its directors said working capital was sufficient for present requirements and adopted the going-concern basis.
Changes versus the prior comparable year
- Revenue increased 18.0%, mainly reflecting the return of supporters and visitors: Matchday revenue rose by £103.4m, and Commercial revenue increased 11.0%.
- Broadcasting revenue fell 15.7%, primarily because 22 fewer matches were played than in FY2021, which included completion of COVID-delayed 2019/20 competitions.
- Operating expenses rose 28.6% to £692.5m. Employee benefit expenses increased 19.1% to £384.1m, principally due to increased investment in the first-team squad; amortization increased 21.8% to £151.5m.
- Net finance costs were £62.2m versus net finance income of £12.9m, chiefly reflecting £58.7m of foreign-exchange losses on unhedged US-dollar borrowings, compared with a £48.0m gain in FY2021.
- Net loss widened despite higher revenue. FY2022 included a £34.1m tax credit, mainly from deferred tax assets recognized on current-year losses; FY2021 included a £68.2m tax expense, including a non-cash write-down of US deferred tax assets.
Outlook, commentary, risks and unusual items
- No numerical revenue, profit or cash-flow guidance for the next fiscal year is clearly provided. Management noted uncertainty over the future effects of COVID-19, economic conditions and fan attendance.
- After the 2021/22 season, the men’s first team was set to play in the 2022/23 Europa League rather than the Champions League, creating potential pressure on broadcasting, matchday and commercial income. The report cites £75.0m of combined European-competition Broadcasting and Matchday revenue in FY2022.
- The next Premier League broadcast-rights cycle (2022/23–2024/25) was expected to deliver 16% overall growth, driven by a 28% uplift in international rights; domestic rights were consistent with the prior cycle. UEFA was recouping COVID-related competition revenue shortfalls through distributions over five seasons to 2023/24.
- FY2022 exceptional costs were £24.7m: £23.8m for compensation to former managers and staff and £0.9m for additional Football League pension-scheme contributions. Player-registration disposal profits were £21.9m.
- At year-end, total borrowings included $425m of 3.79% senior secured notes due 2027, a $225m secured term loan due 2029, and £100m drawn on revolving facilities. Debt facilities are secured, contain financial and restricted-payment covenants, and were reported compliant at year-end.
- Risks include dependence on first-team performance and European qualification, player and staff costs, sponsor and media-rights concentration, counterparty credit, foreign exchange and interest rates, indebtedness, regulation, cyber security, and possible renewed pandemic restrictions. The company reported active UK tax-authority discussions concerning player and representative arrangements; the timing and amount of any resulting liability were unclear. Potential contingent transfer payments were up to £112.4m.
- Subsequent to year-end, player and coaching-staff registrations were acquired or extended for £218.1m consideration, payable over five years. The report also describes the 2022/23 Europa League participation and new commercial and digital partnerships.
- The auditor issued an unqualified opinion on the IFRS financial statements and internal controls. Commercial revenue recognition and the fair value of player registrations were identified as critical audit matters.
Important facts for investors to verify
- Reconcile the filing period: this is FY2022, not 2021 Q4.
- Assess the sustainability of losses, declining Adjusted EBITDA, rising net debt and the substantial increase in operating costs.
- Verify the impact of Europa League participation and subsequent transfer activity on revenue, cash needs, amortization and debt headroom.
- Review covenant definitions, restrictions on dividends, and the availability and cost of undrawn revolving facilities.
- Monitor outcomes of UK tax-authority discussions and whether contingent transfer obligations become payable.
- Consider the concentration of revenue: the Premier League represented 25.1% and adidas 13.1% of FY2022 revenue.