Manchester United: Turnover And Expenses Down; Debt Up; Glazer Dividend $30 Million

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Manchester United released its unaudited financial statements for 2019/20 on Wednesday. The two eye-catching numbers are Turnover down by $154 million and Net Debt up by $352 million from a year ago.

However, the devil is in the details and a more detailed analysis shows that Manchester United also reduced operating costs by $105 million over the last twelve months. The net impact turned a 2018/19 Profit Before Tax of $36 million into a 2019/20 loss of $27million.

Not surprisingly, the impact of Covid-19 on Manchester United’s financial results has been significant. However, it is worth noting that the club’s guidance on Turnover for 2019/20 was for a revenue range $730 million to $750 million, down $48 million to $68 million from the number posted in 2018/19. While Covid-19 was unexpected, participation in the Europe League rather than the Champions League was not.

Here is a detailed look at Manchester United’s financial results for 2019/20. (Exchange 1.30 $ to Pound)

Match-day receipts down $27 million with 85% occurring in the period from April to June.

Broadcasting down $132 million; In its Q3 results, Manchester United estimated that missing out on the Champions League cost $100 million. It is also worth remembering that several games were pushed into 2020/21 and any revenue accruing will show up in 2021 Q1.

Sponsorship up $5 million although before Covid-19 struck it was heading even higher. Q3 results showed an increase of $15 million. An adjunct to this category is that Manchester United extended the shirt agreement with GM to December 2021 – an extra six months.

The contribution from Gain on player sales (not included in Turnover) dropped by $11 million from $34 million to $23million.

Operating expenses down $105 million. $42 million of the reduction was realized in Q4. Q1-3 saw costs reduced by $63 million.

Employee benefit expenses was the largest contributor to the reduction in operating expenses – $63 million out of $105 million.

Exceptional expenses booked in 2018/19 was a non-recurring expense. It cost Manchester United in the region of $26 million to fire Jose Mourinho and his entourage.

Amortization was largely unchanged at $165 million 19/20 versus $169 million the year previous.

Net financing costs increased slightly from $29million to $33 million.

DIVIDEND
Things change but the dividend payment to the Glazer family stayed the same at $30 million.

There was a swing of $63 million from profit to loss in the twelve months. A $36 million profit before tax in 2018/19 became a $27 million loss in 2019/20. Estimating the impact of Covid-19 is an art rather than a science. However, even without the chaos caused by the pandemic it seems likely that Manchester United’s profit would have been lower than 2018/19.

The net debt grew by 132% – $266 million to $618million – over $100 million of payments from sponsorship were deferred; advance ticket sales for 2020/21 worth $65 million; investment in new players up $73 million from the previous year.

THE FUTURE
To paraphrase Manchester United’s press release, given ongoing uncertainty due to the Covid-19 pandemic there will be no revenue or EBITDA guidance forthcoming for 2021.

FINANCIAL FAIR PLAY
How will this impact Manchester United and Uefa Financial Fair Play? The simple answer is not at all. Manchester United’s results will be one of the strongest despite the loss once the full financial picture across Europe becomes clearer.

When asked in March of this year about Covid-19 and the impact on Financial Fair Play regulations, Uefa responded -“……concerning the monitoring activity in relation to Financial Fair Play, it must be noted that the principle of force majeure is already foreseen in the CL & FFP regulations. According to this principle, any extraordinary event or circumstances beyond the control of the club that are considered as a case of force majeure, is taken into account as part of the clubs’ assessment on a case by case basis.”


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