Exhibit 99.1
Manchester United plc
Interim report (unaudited) for the three and nine months
ended 31 March 2023
Contents
| Management’s discussion and analysis of financial condition and results of operations | 2 |
| Interim consolidated statement of profit or loss for the three and nine months ended 31 March 2023 and 2022 | 13 |
| Interim consolidated statement of comprehensive loss for the three and nine months ended 31 March 2023 and 2022 | 14 |
| Interim consolidated balance sheet as of 31 March 2023, 30 June 2022 and 31 March 2022 | 15 |
| Interim consolidated statement of changes in equity for the nine months ended 31 March 2023, the three months ended 30 June 2022 and the nine months ended 31 March 2022 | 17 |
| Interim consolidated statement of cash flows for the three and nine months ended 31 March 2023 and 2022 | 18 |
| Notes to the interim consolidated financial statements | 19 |
Manchester United plc
Management’s discussion and analysis of financial condition and results of operations
GENERAL INFORMATION AND FORWARD-LOOKING STATEMENTS
The following Management’s discussion and analysis of financial condition and results of operations should be read in conjunction with the interim consolidated financial statements and notes thereto included as part of this report. This report contains forward-looking statements. You should not place undue reliance on such statements because they are subject to numerous risks and uncertainties relating to Manchester United plc’s (“the Company”) operations and business environment, all of which are difficult to predict and many are beyond the Company’s control. Forward-looking statements include information concerning the Company’s possible or assumed future results of operations, including descriptions of its business strategy. These statements often include words such as “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “seek,” “believe,” “estimate,” “predict,” “potential,” “continue,” “contemplate,” “possible” or similar expressions. The forward-looking statements contained in this interim report are based on our current expectations and estimates of future events and trends, which affect or may affect our businesses and operations. You should understand that these statements are not guarantees of performance or results. They involve known and unknown risks, uncertainties and assumptions. Although the Company believes that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect its actual financial results or results of operations and could cause actual results to differ materially from those in these forward-looking statements. These factors are more fully discussed in the “Risk Factors” section and elsewhere in the Company’s Annual Report on Form 20-F for the year ended 30 June 2022, as filed with the Securities and Exchange Commission on 23 September 2022 (File No. 001-35627).
GENERAL
Manchester United is one of the most popular and successful sports teams in the world, playing one of the most popular spectator sports on Earth. Through our 145-year heritage we have won 67 trophies, including a record 20 English league titles, enabling us to develop what we believe is one of the world’s leading sports brands and a global community of 1.1 billion fans and followers. Our large, passionate community provides Manchester United with a worldwide platform to generate significant revenue from multiple sources, including sponsorship, merchandising, product licensing, broadcasting and matchday. We attract leading global companies such as adidas, Kohler, TeamViewer and Tezos that want access and exposure to our community of followers and association with our brand.
RESULTS OF OPERATIONS
Three months ended 31 March 2023 as compared to the three months ended 31 March 2022
| | | Three months ended
31 March
(in £ millions) | | | % Change | |
| | | 2023 | | | 2022 | | | 2023 over
2022 | |
| Revenue | | | 170.0 | | | | 152.8 | | | | 11.3 | % |
| Commercial revenue | | | 69.4 | | | | 65.6 | | | | 5.8 | % |
| Broadcasting revenue | | | 50.7 | | | | 51.5 | | | | (1.6 | )% |
| Matchday revenue | | | 49.9 | | | | 35.7 | | | | 39.8 | % |
| Total operating expenses | | | (176.7 | ) | | | (175.3 | ) | | | 0.8 | % |
| Employee benefit expenses | | | (85.0 | ) | | | (101.8 | ) | | | (16.5 | )% |
| Other operating expenses | | | (45.3 | ) | | | (30.6 | ) | | | 48.0 | % |
| Depreciation | | | (3.5 | ) | | | (3.5 | ) | | | - | |
| Amortization | | | (42.9 | ) | | | (39.4 | ) | | | 8.9 | % |
| Profit on disposal of intangible assets | | | 2.0 | | | | 0.7 | | | | 185.7 | % |
| Net finance costs | | | (1.0 | ) | | | (14.1 | ) | | | (92.9 | )% |
| Income tax credit | | | 0.1 | | | | 8.2 | | | | (98.8 | )% |
| Loss after tax | | | (5.6 | ) | | | (27.7 | ) | | | (79.8 | )% |
Revenue
Total revenue for the three months ended 31 March 2023 was £170.0 million, an increase of £17.2 million, or 11.3%, over the three months ended 31 March 2022, as a result of an increase in revenue in our commercial and Matchday sectors, partially offset by a decrease in revenue in our broadcasting sector, as described below.
Commercial revenue
Commercial revenue for the three months ended 31 March 2023 was £69.4 million, an increase of £3.8 million, or 5.8%, over the three months ended 31 March 2022.
| ● | Sponsorship revenue for the three months ended 31 March 2023 was £41.0 million, an increase of £1.8 million, or 4.6%, over the three months ended 31 March 2022, due to new sponsorship agreements. |
| ● | Retail, Merchandising, Apparel & Product Licensing revenue for the three months ended 31 March 2023 was £28.4 million, an increase of £2.0 million, or 7.6%, over the three months ended 31 March 2022, primarily due to an increased number of matches played at Old Trafford in the quarter. |
Broadcasting revenue
Broadcasting revenue for the three months ended 31 March 2023 was £50.7 million, a decrease of £0.8 million, or 1.6%, over the three months ended 31 March 2022, primarily due to the men’s first team participating in the UEFA Europa League compared to the UEFA Champions League in the prior year, partially offset by progression in domestic cup competitions.
Matchday revenue
Matchday revenue for the three months ended 31 March 2023 was £49.9 million, an increase of £14.2 million, or 39.8%, over the three months ended 31 March 2022, due to playing five additional home matches in the current year quarter, compared to the prior year quarter.
Total operating expenses
Total operating expenses (defined as employee benefit expenses, other operating expenses, depreciation and amortization and exceptional items) for the three months ended 31 March 2023 were £176.7 million, an increase of £1.4 million, or 0.8%, over the three months ended 31 March 2022.
Employee benefit expenses
Employee benefit expenses for the three months ended 31 March 2023 were £85.0 million, a decrease of £16.8 million, or 16.5%, over the three months ended 31 March 2022 due to squad turnover and the men’s first team not participating in Champions League in the current year.
Other operating expenses
Other operating expenses for the three months ended 31 March 2023 were £45.3 million, an increase of £14.7 million, or 48.0%, over the 3 months ended 31 March 2022 primarily due to increased matchday costs associated with progression in domestic cup competitions.
Depreciation
Depreciation for the three months ended 31 March 2023 was £3.5 million, consistent with the three months ended 31 March 2022.
Amortization
Amortization, primarily of registrations, for the three months ended 31 March 2023 was £42.9 million, an increase of £3.5 million, or 8.9%, over the three months ended 31 March 2022, due to investment in the first team playing squad. The unamortized balance of registrations as of 31 March 2023 was £416.7 million.
Profit on disposal of intangible assets
Profit on disposal of intangible assets for the three months ended 31 March 2023 was £2.0 million, compared to £0.7 million for the three months ended 31 March 2022.
Net finance costs
Net finance costs for the three months ended 31 March 2023 were £0.1 million, compared to net finance costs of £14.1 million for the three months ended 31 March 2022. The movement was driven by a favorable swing in foreign exchange rates in the current quarter, largely offsetting interest costs payable on borrowings. This compares to an unfavorable swing in foreign exchange rates in the prior year quarter.
Income tax
The income tax credit for the three months ended 31 March 2023 was £0.1 million, compared to a credit of £8.2 million for the three months ended 31 March 2022. The current year estimated weighted average annual tax rate of 18.22% is driven by UK deferred tax movements, recognized at the current UK corporation tax rate of 25%, effective from April 2023. The impact of deferred tax being recognised at 25% is negated by costs not deductible in the UK associated with the strategic review.
Nine months ended 31 March 2023 as compared to the nine months ended 31 March 2022
| | | Nine months ended
31 March
(in £ millions) | | | % Change | |
| | | 2023 | | | 2022 | | | 2023 over
2022 | |
| Revenue | | | 481.1 | | | | 464.7 | | | | 3.5 | % |
| Commercial revenue | | | 235.5 | | | | 194.4 | | | | 21.1 | % |
| Broadcasting revenue | | | 144.5 | | | | 181.2 | | | | (20.3 | )% |
| Matchday revenue | | | 101.1 | | | | 89.1 | | | | 13.5 | % |
| Total operating expenses | | | (508.0 | ) | | | (509.2 | ) | | | (0.2 | )% |
| Employee benefit expenses | | | (244.6 | ) | | | (288.0 | ) | | | (15.1 | )% |
| Other operating expenses | | | (124.8 | ) | | | (87.1 | ) | | | 43.3 | % |
| Depreciation | | | (10.6 | ) | | | (10.8 | ) | | | (1.9 | )% |
| Amortization | | | (128.0 | ) | | | (113.3 | ) | | | 13.0 | % |
| Exceptional items | | | - | | | | (10.0 | ) | | | - | |
| Profit on disposal of intangible assets | | | 16.0 | | | | 17.9 | | | | (10.6 | )% |
| Net finance costs | | | (19.9 | ) | | | (31.2 | ) | | | (36.2 | )% |
| Income tax credit | | | 5.0 | | | | 13.1 | | | | (61.8 | )% |
| Loss after tax | | | (25.8 | ) | | | (44.7 | ) | | | (42.3 | )% |
Revenue
Total revenue for the nine months ended 31 March 2023 was £481.1 million, an increase of £16.4 million, or 3.5%, over the nine months ended 31 March 2022, as a result of an increase in revenue in our commercial and Matchday sectors, partially offset be a decrease in revenue in our broadcasting sector, as described below.
Commercial revenue
Commercial revenue for the nine months ended 31 March 2023 was £235.5 million, an increase of £41.1 million, or 21.1%, over the nine months ended 31 March 2022.
| ● | Sponsorship revenue for the nine months ended 31 March 2023 was £149.2 million, an increase of £38.5 million, or 34.8%, over the nine months ended 31 March 2022 primarily due to the men’s first team undertaking an overseas pre-season tour for the first time in three years, as a result of the lifting of COVID-19 restrictions, as well as a one-off sponsorship credit. |
| ● | Retail, Merchandising, Apparel & Product Licensing revenue for the nine months ended 31 March 2023 was £86.3 million, an increase of £2.6 million, or 3.1%, over the nine months ended 31 March 2022. |
Broadcasting revenue
Broadcasting revenue for the nine months ended 31 March 2023 was £144.5 million, a decrease of £36.7 million, or 20.3%, over the nine months ended 31 March 2022 , primarily due to the men’s first team participating in the UEFA Europa League in current year compared to the UEFA Champions League in the prior year.
Matchday revenue
Matchday revenue for the nine months ended 31 March 2023 was £101.1 million, an increase of £12.0 million, or 13.5%, over the nine months ended 31 March 2022, due to playing four more home games in the current year.
Total operating expenses
Total operating expenses (defined as employee benefit expenses, other operating expenses, depreciation, and amortization and exceptional items) for the nine months ended 31 March 2023 were £508.0 million, a decrease of £1.2 million, or 0.2%, over the nine months ended 31 March 2022.
Employee benefit expenses
Employee benefit expenses for the nine months ended 31 March 2023 were £244.6 million, a decrease of £43.4 million, or 15.1%, over the nine months ended 31 March 2022, as a result of squad turnover and the men’s first team not participating in the UEFA Champions League.
Other operating expenses
Other operating expenses for the nine months ended 31 March 2023 were £124.8 million, an increase of £37.7 million, or 43.3%, over the nine months ended 31 March 2022. This includes the impact of rising energy and maintenance costs, costs associated with the men’s first team pre-season tour and increased matchday costs associated with progression in domestic cup competitions.
Depreciation
Depreciation for the nine months ended 31 March 2023 was £10.6 million, a decrease of £0.2 million, or 1.9%, over the nine months ended 31 March 2022.
Amortization
Amortization, primarily of players’ registrations, for the nine months ended 31 March 2023 was £128.0 million, an increase of £14.7 million, or 13.0%, over the nine months ended 31 March 2022, due to increased investment in the first team playing squad. The unamortized balance of registrations as of 31 March 2023 was £416.7 million.
Exceptional items
Exceptional items for the nine months ended 31 March 2023 were £nil compared to a cost of £10.0 million for the nine months ended 31 March 2022.
Profit on disposal of intangible assets
Profit on disposal of intangible assets for the nine months ended 31 March 2023 was £16.0 million, compared to a profit of £17.9 million for the nine months ended 31 March 2022.
Net finance costs
Net finance costs for the nine months ended 31 March 2023 were £19.9 million, compared to net finance costs of £31.2 million for the nine months ended 31 March 2022, primarily due to a favorable swing in foreign exchange rates in the current year compared to an unfavorable swing in the prior year.
Income tax
The income tax credit for the nine months ended 31 March 2023 was £5.0 million, compared to a credit of £13.1 for the nine months ended 31 March 2022. The current year estimated weighted average annual tax rate of 18.22% is driven by UK deferred tax movements, recognized at the current UK corporation tax rate of 25%, effective from April 2023. The impact of deferred tax being recognised at 25% is negated by costs not deductible in the UK associated with the strategic review.
LIQUIDITY AND CAPITAL RESOURCES
Our primary cash requirements stem from the payment of transfer fees for the acquisition of players’ registrations, capital expenditures for the improvement of facilities at Old Trafford and the Carrington training ground (“Carrington”), payment of interest on our borrowings, employee benefit expenses, other operating expenses and dividends on our Class A ordinary shares and Class B ordinary shares. Historically, we have met these cash requirements through a combination of operating cash flow and proceeds from the transfer fees from the sale of players’ registrations. Our existing borrowings primarily consist of our secured term loan facility, our senior secured notes and outstanding drawdowns under our revolving facilities. We manage our cash flow interest rate risk where appropriate using interest rate swaps. Such interest rate swaps have the economic effect of converting a portion of variable rate borrowings from floating to fixed rates. We have US dollar borrowings that we use to hedge our US dollar commercial revenue exposure. We continue to evaluate our financing options and may, from time to time, take advantage of opportunities to repurchase or refinance all or a portion of our existing indebtedness to the extent such opportunities arise. As of 31 March 2023, we had cash resources of £73.7 million and all funds are held as cash and cash equivalents and therefore available on demand. As of 31 March 2023, we also had access to an undrawn revolving facility of £100 million. However, we cannot assure you that our cash generated from operations, cash and cash equivalents or cash available under our revolving facilities will be sufficient to meet our long-term future needs. We cannot assure you that we could obtain additional financing on favorable terms or at all, including as a result of changes or volatility in the credit or capital markets, which affect our ability to borrow money or raise capital.
Our business ordinarily generates a significant amount of cash from our Matchday revenues and commercial contractual arrangements at or near the beginning of our fiscal year, with a steady flow of other cash received throughout the fiscal year. In addition, we ordinarily generate a significant amount of our cash through advance receipts, including season tickets (which include general admission season tickets and seasonal hospitality tickets), most of which are received prior to the end of June for the following season. Our Broadcasting revenue from the Premier League and UEFA are paid periodically throughout the season, with primary payments made in late summer, December, January and the end of the football season. Our sponsorship and other commercial revenue tends to be paid either quarterly or annually in advance. However, while we typically have a high cash balance at the beginning of each fiscal year, this is largely attributable to deferred revenue, the majority of which falls under current liabilities in the consolidated balance sheet, and this deferred revenue is unwound through the statement of profit or loss over the course of the fiscal year. Over the course of a year, we use our cash on hand to pay employee benefit expenses, other operating expenses, interest payments and other liabilities as they become due. This typically results in negative working capital movement at certain times during the year. In the event it ever became necessary to access additional operating cash, we also have access to cash through our revolving facilities. As of 31 March 2023, we had £200 million of outstanding loans under our revolving facilities and access to undrawn revolving facilities of £100 million.
We also maintain a mixture of long-term debt and capacity under our revolving facilities in order to ensure that we have sufficient funds available for short-term working capital requirements and for investment in the playing squad and other capital projects.
Our cost base is more evenly spread throughout the fiscal year than our cash inflows. Employee benefit expenses and fixed costs constitute the majority of our cash outflows and are generally paid throughout the 12 months of the fiscal year.
In addition, transfer windows for acquiring and disposing of registrations occur in January and the summer. During these periods, we may require additional cash to meet our acquisition needs for new players and we may generate additional cash through the sale of existing registrations. Depending on the terms of the agreement, transfer fees may be paid or received by us in multiple installments, resulting in deferred cash paid or received. Although we have not historically drawn on our revolving facilities during the summer transfer window, if we seek to acquire players with values substantially in excess of the values of players we seek to sell, we may be required to utilize cash available from our revolving facilities to meet our cash needs.
Acquisition and disposal of registrations also affects our trade receivables and payables, which affects our overall working capital. Our trade receivables include transfer fees receivable from other football clubs, whereas our trade payables include transfer fees and other associated costs payable to other football clubs in relation to the acquisition of registrations.
Cash Flow
The following table summarizes our cash flows for the nine months ended 31 March 2023 and 2022:
| | | Nine months ended
31 March
(in £ millions) | |
| | | 2023 | | | 2022 | |
| Cash flow from operating activities | | | | | | | | |
| Cash generated from operations | | | 12.2 | | | | 77.8 | |
| Net interest paid | | | (25.1 | ) | | | (18.2 | ) |
| Tax paid | | | (0.6 | ) | | | (4.3 | ) |
| Net cash (outflow)/inflow from operating activities | | | (13.5 | ) | | | 55.3 | |
| Cash flow from investing activities | | | | | | | | |
| Payments for property, plant and equipment | | | (9.8 | ) | | | (6.2 | ) |
| Payments for intangible assets | | | (144.7 | ) | | | (101.3 | ) |
| Proceeds from sale of intangible assets | | | 19.8 | | | | 20.2 | |
| Net cash outflow from investing activities | | | (134.7 | ) | | | (87.3 | ) |
| Cash flow from financing activities | | | | | | | | |
| Proceeds from borrowings | | | 100.0 | | | | 40.0 | |
| Principal elements of lease payments | | | (1.6 | ) | | | (1.3 | ) |
| Dividends paid | | | - | | | | (21.6 | ) |
| Net cash inflow from financing activities | | | 98.4 | | | | 17.1 | |
| Net decrease in cash and cash equivalents (1) | | | (49.8 | ) | | | (14.9 | ) |
(1) Excludes the effects of exchange rate movements on cash and cash equivalents.
Net cash outflow from operating activities
Cash generated from operations represents our operating results and net movements in our working capital. Our working capital is generally impacted by the timing of cash received from the sale of tickets and hospitality and other Matchday revenues, broadcasting revenues from the Premier League and UEFA and sponsorship and other commercial revenues. Cash generated from operations for the nine months ended 31 March 2023 was £12.2 million, a decrease of £65.6 million from cash generated from operations of £77.8 million for the nine months ended 31 March 2022.
Additional changes in net cash (outflow)/inflow from operating activities generally reflect our finance costs. We currently pay fixed rates of interest on our senior secured notes and variable rates of interest on our secured term loan facility. We use interest rate swaps to manage the cash flow interest rate risk. Such swaps have the economic effect of converting a portion of interest from variable rates to a fixed rate. Drawdowns from our revolving facilities are also subject to variable rates of interest. Net cash outflow from operating activities for the nine months ended 31 March 2023 was £13.5 million, compared to a net cash inflow of £55.3 million for the nine months ended 31 March 2022.
Net cash outflow from investing activities
Capital expenditure for the acquisition of intangible assets as well as for improvements to property, principally at Old Trafford and Carrington, are funded through cash flow generated from operations, proceeds from the sale of intangible assets and, if necessary, from our revolving facilities. Capital expenditure on the acquisition, disposal and trading of intangible assets tends to vary significantly from year to year depending on the requirements of our men’s first team, overall availability of players, our assessment of their relative value and competitive demand for players from other clubs. By contrast, capital expenditure on the purchase of property, plant and equipment tends to remain relatively stable as we continue to make improvements at Old Trafford and Carrington.
Net cash outflow from investing activities for the nine months ended 31 March 2023 was £134.7 million, an increase of £47.4 million from £87.3 million for the nine months ended 31 March 2022.
For the nine months ended 31 March 2023, net capital expenditure on property, plant and equipment was £9.8 million, an increase of £3.6 million from £6.2 million for the nine months ended 31 March 2022.
For the nine months ended 31 March 2023, net capital expenditure on intangible assets was £124.9 million, an increase of £43.8 million from £81.1 million for the nine months ended 31 March 2022.
Net cash inflow from financing activities
Net cash inflow from financing activities for the nine months ended 31 March 2023 was £98.4 million, compared to net cash inflow of £17.1 million for the nine months ended 31 March 2022. This is due to a £100.0 million drawdown on the revolving facilities in the current year compared to a £40.0 million drawdown on the revolving facilities in the prior year, combined with dividends paid of £nil in the current year, compared to $0.18 per share in the prior year.
Indebtedness
Our primary sources of indebtedness consist of our senior secured notes, our secured term loan facility and our revolving facilities. As part of the security for our senior secured notes, our secured term loan facility and our revolving facilities, substantially all of our assets are subject to liens and mortgages.
Description of principal indebtedness
Senior secured notes
Our wholly owned subsidiary, Manchester United Football Club Limited, issued $425 million in aggregate principal amount of 3.79% senior secured notes. As of 31 March 2023, the sterling equivalent of £341.4 million (net of unamortized issue costs of £2.2 million) was outstanding. The outstanding principal amount was $425.0 million. The senior secured notes mature on 25 June 2027.
The senior secured notes are guaranteed by Red Football Limited, Red Football Junior Limited, Manchester United Limited and MU Finance Limited and secured against substantially all of the assets of those entities and Manchester United Football Club Limited. These entities are wholly owned subsidiaries of Manchester United plc.
The note purchase agreement governing the senior secured notes contains a financial maintenance covenant requiring us to maintain consolidated profit for the period before depreciation, amortization of, and profit/(loss) on disposal of, intangible assets, exceptional items, net finance costs, and tax (“EBITDA”) of not less than £65 million for each 12 month testing period (reduced to £25 million during the period 31 March 2021 to 31 March 2023 inclusive). We are able to claim certain dispensations from complying with the consolidated EBITDA floor up to twice (in non-consecutive financial years) during the life of the senior secured notes if we fail to qualify for the first-round group stages (or its equivalent from time to time) of the UEFA Champions League. The impact of IFRS 16 is excluded for the purpose of covenant compliance testing. The covenant is tested on a quarterly basis and we were in compliance as at 31 March 2023.
The note purchase agreement governing the senior secured notes contains events of default typical for securities of this type, as well as customary covenants and restrictions on the activities of Red Football Limited and each of Red Football Limited’s subsidiaries, including, but not limited to, the incurrence of additional indebtedness; dividends or distributions in respect of capital stock or certain other restricted payments or investments; entering into agreements that restrict distributions from restricted subsidiaries; the sale or disposal of assets, including capital stock of restricted subsidiaries; transactions with affiliates; the incurrence of liens; and mergers, consolidations or the sale of substantially all of Red Football Limited’s assets. The covenants in the note purchase agreement governing the senior secured notes are subject to certain thresholds and exceptions described in the note purchase agreement governing the senior secured notes.
The senior secured notes may be redeemed in part, in an amount not less than 5% of the aggregate principal amount of the senior secured notes then outstanding, or in full, at any time at 100% of the principal amount plus a “make-whole” premium of an amount equal to the discounted value (based on the US Treasury rate) of the remaining interest payments due on the senior secured notes up to 25 June 2027.
Secured term loan facility
Our wholly-owned subsidiary, Manchester United Football Club Limited, has a secured term loan facility with Bank of America Merrill Lynch International Designated Activity Company as lender. As of 31 March 2023, the sterling equivalent of £180.1.0 million (net of unamortized issue costs of £1.8 million) was outstanding. The outstanding principal amount was $225.0 million. The remaining balance of the secured term loan facility is repayable on 6 August 2029, although the Group has the option to repay the secured term loan facility at any time before then.
Loans under the secured term loan facility bear interest at a rate per annum equal to the Secured Overnight Financing Rate (SOFR) plus the applicable margin. The applicable margin, if no event of default has occurred and is continuing, means the following:
| Total net leverage ratio (as defined in the secured term loan facility agreement) | | | Margin %
(per annum) |
| Greater than 3.5 | | | 1.75 |
| Greater than 2.0 but less than or equal to 3.5 | | | 1.50 |
| Less than or equal to 2.0 | | | 1.25 |
While any event of default is continuing, the applicable margin shall be the highest level set forth above.
Our secured term loan facility is guaranteed by Red Football Limited, Red Football Junior Limited, Manchester United Limited, MU Finance Limited and Manchester United Football Club Limited and secured against substantially all of the assets of those entities. These entities are wholly owned subsidiaries of Manchester United plc.
The secured term loan facility contains a financial maintenance covenant requiring us to maintain consolidated profit for the period before depreciation, amortization of, and profit/(loss) on disposal of, intangible assets, exceptional items, net finance costs, and tax (“EBITDA”) of not less than £65 million for each 12 month testing period (reduced to £25 million during the period 31 March 2021 to 31 March 2023 inclusive). We are able to claim certain dispensations from complying with the consolidated EBITDA floor up to twice (in non-consecutive financial years) during the life of the secured term loan facility if we fail to qualify for the first round group stages (or its equivalent from time to time) of the UEFA Champions League. The impact of IFRS 16 is excluded for the purpose of covenant compliance testing. The covenant is tested on a quarterly basis and we were in compliance as at 31 March 2023.
The secured term loan facility contains events of default typical in facilities of this type, as well as typical covenants including restrictions on incurring additional indebtedness, paying dividends or making other distributions or repurchasing or redeeming our stock, selling assets, including capital stock of restricted subsidiaries, entering into agreements restricting our subsidiaries’ ability to pay dividends, consolidating, merging, selling or otherwise disposing of all or substantially all of our assets, entering into sale and leaseback transactions, entering into transactions with our affiliates and incurring liens. Certain events of default and covenants in the secured term loan facility are subject to certain thresholds and exceptions described in the agreement governing the secured term loan facility.
Revolving facilities
Our revolving facilities agreement originally dated 22 May 2015 (as amended on 7 October 2015, amended and restated on 4 April 2019, 4 March 2021 and 10 December 2021) (the “initial revolving facility”) allows Manchester United Football Club Limited (or any direct or indirect subsidiary of Red Football Limited that becomes a borrower thereunder) to borrow up to £150 million from a syndicate of lenders with Bank of America Europe Designated Activity Company as agent and security trustee. As of 31 March 2023, we had £100 million in outstanding loans and £50 million in borrowing capacity under our revolving facilities agreement.
The revolving facilities agreement contains a financial maintenance covenant consistent with the note purchase agreement and secured term loan- facility. The initial revolving facility is scheduled to expire on 4 April 2025. Any amount still outstanding at that time will be due in full immediately on the applicable expiry date.
Our revolving facility agreement originally dated 14 October 2020 (as amended and restated on 4 March 2021, 13 December 2021 and 26 April 2022) (the “new revolving facility”) allows Manchester United Football Club Limited (or any direct or indirect subsidiary of Red Football Limited that becomes a borrower thereunder) to borrow up to £75 million from Santander UK plc as original lender and with Santander UK plc as agent and with Bank of America Europe Designated Activity Company as security trustee. The general covenants under the new revolving facility are consistent with the initial revolving facility. As of 31 March 2023, we had £50 million in outstanding loans and £25 million in borrowing capacity under our revolving facility agreement. The new revolving facility has a maturity date of 25 June 2027.
On 26 April 2022 we entered into a new bilateral revolving facility agreement (the “bilateral revolving facility”) which allows Manchester United Football Club Limited (or any direct or indirect subsidiary of Red Football Limited that becomes a borrower thereunder) to borrow up to £75 million from Bank of America, N.A., London Branch as original lender and with Bank of America Europe Designated Activity Company as agent and security trustee. The general covenants under the bilateral revolving facility agreement are consistent with the initial revolving facilities agreement. As of 31 March 2023, we had £50 million in outstanding loans and £25 million in borrowing capacity under our revolving facility agreement.
Our revolving facilities are guaranteed by Red Football Limited, Red Football Junior Limited, Manchester United Limited, MU Finance Limited and Manchester United Football Club Limited and secured against substantially all of the assets of those entities. These entities are wholly owned subsidiaries of Manchester United plc.
RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.
We do not currently have any research and development policies in place.
OFF BALANCE SHEET ARRANGEMENTS
Transfer fees payable
Under the terms of certain contracts with other football clubs in respect of player transfers, additional amounts would be payable by us if certain specific performance conditions are met. We estimate the fair value of any contingent consideration at the date of acquisition based on the probability of conditions being met and monitor this on an ongoing basis. The maximum additional amount that could be payable as of 31 March 2023 is £145.4 million (30 June 2022: £112.4 million; 30 March 2022: £122.2 million). As of 31 March 2023, £5.3 million of these contingent fees are capitalized (30 June 2022: £6.2 million; 31 March 2022: £7.2 million).
Transfer fees receivable
Similarly, under the terms of contracts with other football clubs for player transfers, additional amounts would be payable to us if certain specific performance conditions are met. In accordance with the recognition criteria for contingent assets, such amounts are only disclosed by the Company when probable and recognized when virtually certain. As of 31 March 2023, we believe receipt of £nil to be probable (30 June 2022: £nil; 30 March 2022: £nil).
Other commitments
In the ordinary course of business, we enter into capital commitments. These transactions are recognized in the consolidated financial statements in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”), and are more fully disclosed therein.
As of 31 March 2023, we had not entered into any other off-balance sheet transactions.
Manchester United plc
Interim consolidated statement of profit or loss - unaudited
| | | | Three months ended
31 March | | Nine months ended
31 March | |
| | Note | | 2023
£’000 | | 2022
£’000 | | 2023
£’000 | | 2022
£’000 | |
| Revenue from contracts with customers | | 6 | | | 170,048 | | | 152,848 | | | 481,070 | | | 464,749 | |
| Operating expenses | | 7 | | | (176,675 | ) | | (175,370 | ) | | (507,959 | ) | | (509,190 | ) |
| Profit on disposal of intangible assets | | 9 | | | 1,949 | | | 721 | | | 15,969 | | | 17,879 | |
| Operating loss | | | | | (4,678 | ) | | (21,801 | ) | | (10,920 | ) | | (26,562 | ) |
| Finance costs | | | | | (14,657 | ) | | (17,676 | ) | | (30,777 | ) | | (40,267 | ) |
| Finance income(1) | | | | | 13,656 | | | 3,568 | | | 10,903 | | | 9,033 | |
| Net finance costs | | 10 | | | (1,001 | ) | | (14,108 | ) | | (19,874 | ) | | (31,234 | ) |
| Loss before income tax | | | | | (5,679 | ) | | (35,909 | ) | | (30,794 | ) | | (57,796 | ) |
| Income tax credit | | 11 | | | 132 | | | 8,182 | | | 5,037 | | | 13,128 | |
| Loss for the period | | | | | (5,547 | ) | | (27,727 | ) | | (25,757 | ) | | (44,668 | ) |
| Loss per share during the period: | | | | | | | | | | | | | | | |
| Basic loss per share (pence) | | 12 | | | (3.40 | ) | | (17.01 | ) | | (15.80 | ) | | (27.40 | ) |
| Diluted loss per share (pence)(2) | | 12 | | | (3.40 | ) | | (17.01 | ) | | (15.80 | ) | | (27.40 | ) |
(1) Each element of finance costs and finance income is split based on its position in both the 3 months ended 31 March 2023 and the 9 months ended 31 March 2023. In the current year, exchange rate fluctuations have resulted in income for the 3 months ended 31 March 2023 that is greater than the total net position across the 9 months ended 31 March 2023.
(1) For the three and nine months ended 31 March 2023 and the three and nine months ended 31 March 2022, potential ordinary shares are anti-dilutive, as their inclusion in the diluted loss per share calculation would reduce the loss per share, and hence have been excluded.
See accompanying notes to the interim consolidated financial statements.
Manchester United plc
Interim consolidated statement of comprehensive loss - unaudited
| | | Three months ended
31 March | | | Nine months ended
31 March | |
| | | 2023
£’000 | | | 2022
£’000 | | | 2023
£’000 | | | 2022
£’000 | |
| Loss for the period | | | (5,547 | ) | | | (27,727 | ) | | | (25,757 | ) | | | (44,668 | ) |
| Other comprehensive loss: | | | | | | | | | | | | | | | | |
| Items that may be subsequently reclassified to profit or loss | | | | | | | | | | | | | | | | |
| Movement on hedges | | | (323 | ) | | | 3,787 | | | | 1,395 | | | | 4,953 | |
| Income tax credit/(expense) relating to movements on hedges | | | 67 | | | | (947 | ) | | | (352 | ) | | | (1,238 | ) |
| Other comprehensive (loss)/income for the period, net of income tax | | | (256 | ) | | | 2,840 | | | | 1,043 | | | | 3,715 | |
| Total comprehensive loss for the period | | | (5,803 | ) | | | (24,887 | ) | | | (24,714 | ) | | | (40,953 | ) |
See accompanying notes to the interim consolidated financial statements.
Manchester United plc
Interim consolidated balance sheet - unaudited
| | | | | As of | |
| | Note | | | 31 March
2023
£’000
| | | 30 June
2022
£’000 | | | 31 March
2022
£’000 | |
| ASSETS | | | | | | | | | | | | | | |
| Non-current assets | | | | | | | | | | | | | | |
| Property, plant and equipment | 14 | | | | 242,730 | | | | 242,661 | | | | 243,752 | |
| Right-of-use assets | 15 | | | | 2,952 | | | | 4,072 | | | | 4,510 | |
| Investment property | 16 | | | | 20,063 | | | | 20,273 | | | | 20,343 | |
| Intangible assets | 17 | | | | 843,307 | | | | 743,278 | | | | 776,525 | |
| Trade receivables | 20 | | | | 21,485 | | | | 29,757 | | | | 35,423 | |
| Derivative financial instruments | 21 | | | | 15,102 | | | | 16,462 | | | | 6,977 | |
| | | | | | 1,145,639 | | | | 1,056,503 | | | | 1,087,530 | |
| Current assets | | | | | | | | | | | | | | |
| Inventories | 19 | | | | 2,645 | | | | 2,200 | | | | 2,692 | |
| Prepayments | | | | | 16,595 | | | | 15,534 | | | | 19,388 | |
| Contract assets – accrued revenue | 6.2 | | | | 62,873 | | | | 36,239 | | | | 45,524 | |
| Trade receivables | 20 | | | | 60,321 | | | | 49,210 | | | | 56,763 | |
| Other receivables | | | | | 2,031 | | | | 1,569 | | | | 1,032 | |
| Income tax receivable | | | | | 4,410 | | | | 4,590 | | | | 834 | |
| Derivative financial instruments | 21 | | | | 5,894 | | | | 6,597 | | | | 2,362 | |
| Cash and cash equivalents | 22 | | | | 73,733 | | | | 121,223 | | | | 95,791 | |
| | | | | | 228,502 | | | | 237,162 | | | | 224,386 | |
| Total assets | | | | | 1,374,141 | | | | 1,293,665 | | | | 1,311,916 | |
See accompanying notes to the interim consolidated financial statements.
Manchester United plc
Interim consolidated balance sheet (continued) - unaudited
| | | | | As of | |
| | Note | | | 31 March 2023 £’000 | | | 30 June
2022
£’000 | | | 31 March
2022
£’000 | |
| EQUITY AND LIABILITIES | | | | | | | | | | | | | | |
| Equity | | | | | | | | | | | | | | |
| Share capital | 23 | | | | 53 | | | | 53 | | | | 53 | |
| Share premium | | | | | 68,822 | | | | 68,822 | | | | 68,822 | |
| Treasury shares | 24 | | | | (21,305 | ) | | | (21,305 | ) | | | (21,305 | ) |
| Merger reserve | | | | | 249,030 | | | | 249,030 | | | | 249,030 | |
| Hedging reserve | | | | | 1,993 | | | | 950 | | | | 804 | |
| Accumulated losses | | | | | (194,085 | ) | | | (170,042 | ) | | | (85,917 | ) |
| Total equity | | | | | 104,508 | | | | 127,508 | | | | 211,487 | |
| Non-current liabilities | | | | | | | | | | | | | | |
| Deferred tax liabilities | 18 | | | | 1,939 | | | | 7,402 | | | | 22,882 | |
| Contract liabilities – deferred revenue | 6.2 | | | | 3,842 | | | | 16,697 | | | | 19,057 | |
| Trade and other payables | 25 | | | | 155,903 | | | | 102,347 | | | | 97,043 | |
| Borrowings | 26 | | | | 521,482 | | | | 530,365 | | | | 489,240 | |
| Lease liabilities | 15 | | | | 2,367 | | | | 2,869 | | | | 2,909 | |
| Derivative financial instruments | 21 | | | | 1,303 | | | | 49 | | | | 456 | |
| Provisions | 27 | | | | 91 | | | | 11,586 | | | | 4,805 | |
| | | | | | 686,927 | | | | 671,315 | | | | 636,392 | |
| Current liabilities | | | | | | | | | | | | | | |
| Contract liabilities – deferred revenue | 6.2 | | | | 130,081 | | | | 165,847 | | | | 140,047 | |
| Trade and other payables | 25 | | | | 235,508 | | | | 220,587 | | | | 216,190 | |
| Income tax liabilities | | | | | - | | | | - | | | | 2,189 | |
| Borrowings | 26 | | | | 203,665 | | | | 105,757 | | | | 102,295 | |
| Lease liabilities | 15 | | | | 792 | | | | 1,561 | | | | 1,636 | |
| Derivative financial instruments | 21 | | | | 48 | | | | 32 | | | | 673 | |
| Provisions | 27 | | | | 12,612 | | | | 1,058 | | | | 1,007 | |
| | | | | | 582,706 | | | | 494,842 | | | | 464,037 | |
| Total equity and liabilities | | | | | 1,374,141 | | | | 1,293,665 | | | | 1,311,916 | |
See accompanying notes to the interim consolidated financial statements.
Manchester United plc
Interim consolidated statement of changes in equity - unaudited
| | | Share
capital
£’000 | | | Share
premium
£’000 | | | Treasury
shares
£’000 | | | Merger
reserve
£’000 | | | Hedging
reserve
£’000 | | | Accumulated
losses
£’000 | | | Total
equity
£’000 | |
| Balance at 30 June 2021 | | | 53 | | | | 68,822 | | | | (21,305 | ) | | | 249,030 | | | | (10,436 | ) | | | (13,652 | ) | | | 272,512 | |
| Loss for the period | | | - | | | | - | | | | - | | | | - | | | | - | | | | (44,668 | ) | | | (44,668 | ) |
| Cash flow hedges | | | - | | | | - | | | | - | | | | - | | | | 4,953 | | | | - | | | | 4,953 | |
| Tax expense relating to movement on hedges | | | - | | | | - | | | | - | | | | - | | | | (1,238 | ) | | | - | | | | (1,238 | ) |
| Total comprehensive income/(loss) for the period | | | - | | | | - | | | | - | | | | - | | | | 3,715 | | | | (44,668 | ) | | | (40,953 | ) |
| Equity-settled share-based payments | | | - | | | | - | | | | - | | | | - | | | | - | | | | 1,489 | | | | 1,489 | |
| Reclassified | | | - | | | | - | | | | - | | | | - | | | | 7,525 | | | | (7,525 | ) | | | - | |
| Dividends paid | | | - | | | | - | | | | - | | | | - | | | | - | | | | (21,561 | ) | | | (21,561 | ) |
| Balance at 31 March 2022 | | | 53 | | | | 68,822 | | | | (21,305 | ) | | | 249,030 | | | | 804 | | | | (85,917 | ) | | | 211,487 | |
| Loss for the period | | | - | | | | - | | | | - | | | | - | | | | - | | | | (70,842 | ) | | | (70,842 | ) |
| Cash flow hedges | | | - | | | | - | | | | - | | | | - | | | | 195 | | | | - | | | | 195 | |
| Tax expense relating to movement on hedges | | | - | | | | - | | | | - | | | | - | | | | (49 | ) | | | - | | | | (49 | ) |
| Total comprehensive income/(loss) for the period | | | - | | | | - | | | | - | | | | - | | | | 146 | | | | (70,842 | ) | | | (70,696 | ) |
| Equity-settled share-based payments | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1,291 | ) | | | (1,291 | ) |
| Dividends paid | | | - | | | | - | | | | - | | | | - | | | | - | | | | (11,992 | ) | | | (11,992 | ) |
| Balance at 30 June 2022 | | | 53 | | | | 68,822 | | | | (21,305 | ) | | | 249,030 | | | | 950 | | | | (170,042 | ) | | | 127,508 | |
| Loss for the period | | | - | | | | - | | | | - | | | | - | | | | - | | | | (25,757 | ) | | | (25,757 | ) |
| Cash flow hedges | | | - | | | | - | | | | - | | | | - | | | | 1,395 | | | | - | | | | 1,395 | |
| Tax expense relating to movement on hedges | | | - | | | | - | | | | - | | | | - | | | | (352 | ) | | | - | | | | (352 | ) |
| Total comprehensive income/(loss) for the period | | | - | | | | - | | | | - | | | | - | | | | 1,043 | | | | (25,757 | ) | | | (24,714 | ) |
| Equity-settled share-based payments | | | - | | | | - | | | | - | | | | - | | | | - | | | | 1,714 | | | | 1,714 | |
| Balance at 31 March 2023 | | | 53 | | | | 68,822 | | | | (21,305 | ) | | | 249,030 | | | | 1,993 | | | | (194,085 | ) | | | 104,508 | |
See accompanying notes to the interim consolidated financial statements.
Manchester United plc
Interim consolidated statement of cash flows - unaudited
| | | | | | Three months ended 31 March | | | Nine months ended 31 March | |
| | | Note | | | 2023 £’000 | | | 2022
£’000 | | | 2023 £’000 | | | 2022
£’000 | |
| Cash flow from operating activities | | | | | | | | | | | | | | | | | | | |
| Cash generated from operations | | 28 | | | | 65,208 | | | | 31,708 | | | | 12,194 | | | | 77,828 | |
| Interest paid | | | | | | (11,054 | ) | | | (8,284 | ) | | | (25,277 | ) | | | (18,237 | ) |
| Interest received | | | | | | 130 | | | | 2 | | | | 207 | | | | 5 | |
| Tax paid | | | | | | (220 | ) | | | (246 | ) | | | (612 | ) | | | (4,347 | ) |
| Net cash inflow/(outflow) from operating activities | | | | | | 54,064 | | | | 23,180 | | | | (13,488 | ) | | | 55,249 | |
| Cash flow from investing activities | | | | | | | | | | | | | | | | | | | |
| Payments for property, plant and equipment | | | | | | (2,717 | ) | | | (721 | ) | | | (9,816 | ) | | | (6,223 | ) |
| Payments for intangible assets(1) | | | | | | (14,824 | ) | | | (10,419 | ) | | | (144,716 | ) | | | (101,334 | ) |
| Proceeds from sale of intangible assets(1) | | | | | | 6,098 | | | | 7,226 | | | | 19,831 | | | | 20,241 | |
| Net cash outflow from investing activities | | | | | | (11,443 | ) | | | (3,914 | ) | | | (134,701 | ) | | | (87,316 | ) |
| Cash flow from financing activities | | | | | | | | | | | | | | | | | | | |
| Proceeds from borrowings | | | | | | - | | | | - | | | | 100,000 | | | | 40,000 | |
| Principal elements of lease payments | | | | | | (153 | ) | | | (436 | ) | | | (1,602 | ) | | | (1,284 | ) |
| Dividends paid | | | | | | - | | | | (10,892 | ) | | | - | | | | (21,561 | ) |
| Net cash (outflow)/inflow from financing activities | | | | | | (153 | ) | | | (11,328 | ) | | | 98,398 | | | | 17,155 | |
| Effects of exchange rate movements on cash and cash equivalents | | | | | | 220 | | | | 419 | | | | 2,301 | | | | 45 | |
| Net increase/(decrease) in cash and cash equivalents | | | | | | 42,688 | | | | 8,357 | | | | (47,490 | ) | | | (14,867 | ) |
| Cash and cash equivalents at beginning of period | | | | | | 31,045 | | | | 87,434 | | | | 121,223 | | | | 110,658 | |
| Cash and cash equivalents at end of period | | 22 | | | | 73,733 | | | | 95,791 | | | | 73,733 | | | | 95,791 | |
(1) Payments and proceeds for intangible assets primarily relate to player and key football management staff registrations. When acquiring or selling players’ and key football management staff registrations it is normal industry practice for payment terms to spread over more than one year. Details of registrations additions and disposals are provided in Note 17. Trade payables in relation to the acquisition of registrations at reporting date are provided in Note 25. Trade receivables in relation to the disposal of registrations at the reporting date are provided in Note 20.
See accompanying notes to the interim consolidated financial statements.
Manchester United plc
Notes to the interim consolidated financial statements (continued) - unaudited
1 General information
Manchester United plc (the “Company”) and its subsidiaries (together the “Group”) is a men’s and women’s professional football club together with related and ancillary activities. The Company incorporated under the Companies Law (as amended) of the Cayman Islands. The Company’s shares are listed on the New York Stock Exchange under the symbol “MANU”.
These financial statements are presented in pounds sterling and all values are rounded to the nearest thousand (£’000) except when otherwise indicated.
These interim consolidated financial statements were approved for issue by the board of directors on 28 June 2023.
2 Basis of preparation
The interim consolidated financial statements of Manchester United plc have been prepared on a going concern basis and in accordance with International Accounting Standard 34 “Interim Financial Reporting”. The interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended 30 June 2022, as filed with the Securities and Exchange Commission on 23 September 2022, contained within the Company’s Annual Report on Form 20-F, which were prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The report of the auditors on those financial statements was unqualified and did not contain an emphasis of matter paragraph. The results of operations for the interim periods should not be considered indicative of results to be expected for the full fiscal year.
Going concern
The Group has cash resources as of 31 March 2023 of £73.7 million, with all funds held as cash and cash equivalents and therefore available on demand. As of 31 March 2023, the Group also has access to undrawn revolving facilities of £100 million.
The Group’s debt facilities include the $425 million senior secured notes and the $225 million secured term loan facility, the majority of which attract fixed interest rates. As of 31 March 2023, the Group also has £200 million of outstanding loans under our revolving facilities. The Group’s secured notes and term loan mature in 2027 and 2029 respectively. Of the Group’s total available revolving facilities of £300 million, £150 million expires in 2025 and £150m expires in 2027. As of 31 March 2023, the Group was in compliance with all debt covenants.
As a result of a detailed assessment, including prudent assumptions around the men’s first team’s performance, and with reference to the Group’s balance sheet, existing committed facilities, but also acknowledging the inherent uncertainty of the current economic outlook, Management has concluded that the Group is able to meet its obligations when they fall due for a period of at least 12 months after the date of this report. For this reason, the Group continues to adopt the going concern basis for preparing the unaudited interim consolidated financial statements.
Manchester United plc
Notes to the interim consolidated financial statements (continued) - unaudited
3 Accounting policies
The accounting policies adopted are consistent with those of the consolidated financial statements for the year ended 30 June 2022, except as described below.
Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.
New and amended standards and interpretations adopted by the Group
No new or amended IFRS standards or interpretations, effective for the first time for the financial year beginning on 1 July 2022, have had a material impact on the interim consolidated financial statements of the Group.
New and amended standards and interpretations issued but not yet adopted
There are no IFRS or IFRS IC interpretations that are not yet effective that would be expected to have a material impact on the Group in the future reporting periods or on foreseeable future transactions.
4 Critical estimates and judgments
The preparation of interim financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the interim consolidated financial statements are considered to be:
| · | Estimate of minimum guarantee revenue recognition – see Note 5 |
| · | Estimate of fair value of registrations – see Note 17 |
| · | Recognition of deferred tax assets – see Note 18 |
| · | Recognition of tax related provisions – see Note 27 |
Management does not consider there to be any significant judgements in the preparation of the financial statements.
In preparing these interim consolidated financial statements, the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 30 June 2022.
Manchester United plc
Notes to the interim consolidated financial statements (continued) - unaudited
5 Seasonality of revenue
We experience seasonality in our revenue and cash flow, limiting the overall comparability of interim financial periods. In any given interim period, our total revenue can vary based on the number of games played in that period, which affects the amount of Matchday and Broadcasting revenue recognized. This is particularly evident in the 2022/23 season, in which the Premier League Season paused for six weeks in November 2022 for the FIFA World Cup to take place. Similarly, certain of our costs are derived from hosting games at Old Trafford, and these costs will also vary based on the number of games played in the period. We historically recognize the most revenue in our second and third fiscal quarters due to the scheduling of matches. However, a strong performance by our first team in European competitions and domestic cups could result in significant additional Matchday and Broadcasting revenue, and consequently we may also recognize the most revenue in our fourth fiscal quarter in those years.
i) Commercial
Commercial revenue (whether settled in cash or value in kind) comprises revenue receivable from the exploitation of the Manchester United brand through sponsorship and other commercial agreements, including minimum guaranteed revenue, revenue receivable from retailing Manchester United branded merchandise in the UK and licensing the manufacture, distribution and sale of such goods globally, and fees for the Manchester United men’s first team undertaking tours. Revenue is recognized over the term of the sponsorship agreement in line with the performance obligations included within the contract and based on the sponsorship rights enjoyed by the individual sponsor. In instances where the sponsorship rights remain the same over the duration of the contract, revenue is recognized as performance obligations are satisfied evenly over time (i.e. on a straight-line basis). Retail revenue is recognized when control of the products has transferred, being at the point of sale to the customer. License revenue in respect of right to access licences is recognized in line with the performance obligations included within the contract, in instances where these remain the same over the duration of the contract, revenue is recognized evenly on a time elapsed (i.e. straight-line) basis. Sales-based royalty revenue is recognized only when the subsequent sale is made.
Significant estimates
A number of sponsorship contracts contain significant estimates in relation to the allocation and recognition of revenue in line with performance obligations. Minimum guaranteed revenue is recognized over the term of the sponsorship agreement in line with the performance obligations included within the contract and based on the sponsorship benefits enjoyed by the individual sponsor. In instances where the sponsorship rights remain the same over the duration of the contract, revenue is recognized as performance obligations are satisfied evenly over time (i.e. on a straight-line basis).
The Group has a 10-year agreement with adidas which began on 1 August 2015. The minimum guarantee payable by adidas over the term of the agreement is £750 million, subject to certain adjustments. Payments due in a particular year may increase if the club’s men’s first team wins the Premier League, FA Cup or Champions League, or decrease if the club’s men’s first team fails to participate in the Champions League for two or more consecutive seasons with the maximum possible increase being £4 million per year and the maximum possible reduction being 30% of the applicable payment for the year in which the second or other consecutive season of non-participation falls. Participation in the UEFA Champions League is typically secured via a top 4 finish in the Premier League or winning the UEFA Europa League. Revenue is currently being recognized based on management’s estimate as at 31 March 2023 that the full minimum guarantee amount is the most likely amount that will be received, as management does not expect two consecutive seasons of non-participation in the Champions League.
Manchester United plc
Notes to the interim consolidated financial statements (continued) - unaudited
5 Seasonality of revenue (continued)
ii) Broadcasting
Broadcasting revenue represents revenue receivable from all UK and overseas broadcasting contracts, including contracts negotiated centrally by the Premier League and UEFA. Distributions from the Premier League comprise a fixed element (which is recognized evenly as each performance obligation is satisfied i.e. as each Premier League match is played), facility fees for live coverage and highlights of domestic home and away matches (which are recognized when the respective performance obligation is satisfied i.e. the respective match is played), and merit awards (which, being variable consideration, are recognized when each performance obligation is satisfied i.e. as each Premier League match is played, based on management’s estimate of where the men’s first team will finish at the end of the football season i.e. the most likely outcome and to the extent that it is deemed highly probably that no revenue recognized will be reversed). Distributions from UEFA relating to participation in European competitions comprise market pool payments (which are recognized over the matches played in the competition, a portion of which reflects Manchester United’s performance relative to the other Premier League clubs in the competition), fixed amounts for participation in individual matches (which are recognized when the matches are played) and an individual club coefficient share (which is recognized over the group stage matches).
iii) Matchday
Matchday revenue is recognized based on matches played throughout the year with revenue from each match (including season ticket allocated amounts) only being recognized when the performance obligation is satisfied i.e. the match has been played. Revenue from related activities such as Conference and Events or the Museum is recognized as the event or service is provided or the facility is used. Matchday revenue includes revenue receivable from all domestic and European match day activities from Manchester United games at Old Trafford, together with the Group’s share of gate receipts from domestic cup matches not played at Old Trafford, and fees for arranging other events at the Old Trafford stadium. As the Group acts as the principal in the sale of match tickets, the share of gate receipts payable to the other participating club and competition organizer for domestic cup matches played at Old Trafford is treated as an operating expense.
Manchester United plc
Notes to the interim consolidated financial statements (continued) - unaudited
6 Revenue from contracts with customers
6.1 Disaggregation of revenue from contracts with customers
The principal activity of the Group is the operation of men’s and women’s professional football clubs. All of the activities of the Group support the operation of the football clubs and the success of the men’s first team in particular is critical to the on-going development of the Group. Consequently, the chief operating decision maker (being the Board and executive officers of Manchester United plc) regards the Group as operating in one material segment, being the operation of professional football clubs.
All revenue derives from the Group’s principal activity in the United Kingdom. Revenue can be analysed into its three main components as follows:
| | | Three months ended
31 March | | | Nine months ended
31 March | |
| | | 2023
£’000 | | | 2022
£’000 | | | 2023
£’000 | | | 2022
£’000 | |
| Sponsorship | | | 40,966 | | | | 39,181 | | | | 149,200 | | | | 110,665 | |
| Retail, merchandising, apparel & product licensing | | | 28,425 | | | | 26,403 | | | | 86,268 | | | | 83,692 | |
| Commercial | | | 69,391 | | | | 65,584 | | | | 235,468 | | | | 194,357 | |
| Domestic competitions | | | 44,383 | | | | 41,017 | | | | 116,409 | | | | 110,279 | |
| European competitions | | | 5,064 | | | | 8,908 | | | | 23,646 | | | | 65,721 | |
| Other | | | 1,306 | | | | 1,615 | | | | 4,490 | | | | 5,295 | |
| Broadcasting | | | 50,753 | | | | 51,540 | | | | 144,545 | | | | 181,295 | |
| Matchday | | | 49,904 | | | | 35,724 | | | | 101,057 | | | | 89,097 | |
| | | | 170,048 | | | | 152,848 | | | | 481,070 | | | | 464,749 | |
6.2 Assets and liabilities related to contracts with customers
Details of movements on assets related to contracts with customers are as follows:
| | | Current
contract
assets –
accrued
revenue
£’000 | |
| At 1 July 2021 | | | 40,544 | |
| Recognized in revenue during the period | | | 44,233 | |
| Cash received/amounts invoiced during the period | | | (39,252 | ) |
| At 31 March 2022 | | | 45,525 | |
| Recognized in revenue during the period | | | (9,285 | ) |
| Cash received/amounts invoiced during the period | | | (1 | ) |
| At 30 June 2022 | | | 36,239 | |
| Recognized in revenue during the period | | | 73,334 | |
| Cash received/amounts invoiced during the period | | | (46,700 | ) |
| At 31 March 2023 | | | 62,873 | |
Manchester United plc
Notes to the interim consolidated financial statements (continued) - unaudited
6 Revenue from contracts with customers (continued)
6.2 Assets and liabilities related to contracts with customers (continued)
A contract asset (accrued revenue) is recognized if Commercial, Broadcasting or Matchday revenue performance obligations are satisfied prior to unconditional consideration being due under the contract.
Details of movements on liabilities related to contracts with customers are as follows:
| | | Current
contract
liabilities –
deferred
revenue
£’000 | | | Non-current
contract
liabilities –
deferred
revenue
£’000 | | | Total contract
liabilities –
deferred
revenue
£’000 | |
| At 1 July 2021 | | | (117,984 | ) | | | (22,942 | ) | | | (140,926 | ) |
| Recognized in revenue during the period | | | 97,078 | | | | - | | | | 97,078 | |
| Cash received/amounts invoiced during the period | | | (115,256 | ) | | | - | | | | (115,256 | ) |
| Reclassified to current during the period | | | (3,885 | ) | | | 3,885 | | | | - | |
| At 31 March 2022 | | | (140,047 | ) | | | (19,057 | ) | | | (159,104 | ) |
| Recognized in revenue during the period | | | 10,923 | | | | - | | | | 10,923 | |
| Cash received/amounts invoiced during the period | | | (34,363 | ) | | | - | | | | (34,363 | ) |
| Reclassified to current during the period | | | (2,360 | ) | | | 2,360 | | | | - | |
| At 30 June 2022 | | | (165,847 | ) | | | (16,697 | ) | | | (182,544 | ) |
| Recognized in revenue during the period | | | 156,407 | | | | - | | | | 156,407 | |
| Cash received/amounts invoiced during the period | | | (107,786 | ) | | | - | | | | (107,786 | ) |
| Reclassified to current during the period | | | (12,855 | ) | | | 12,855 | | | | - | |
| At 31 March 2023 | | | (130,081 | ) | | | (3,842 | ) | | | (133,923 | ) |
Commercial, broadcasting and matchday consideration which is received in advance of the performance obligation being satisfied is treated as a contract liability (deferred revenue). The deferred revenue is then recognized as revenue when the performance obligation is satisfied. The Group receives substantial amounts of deferred revenue prior to the previous financial year end which is then recognized as revenue throughout the current and, where applicable, future financial years.
Manchester United plc
Notes to the interim consolidated financial statements (continued) - unaudited
7 Operating expenses
| | | Three months ended
31 March | | | Nine months ended
31 March | |
| | | 2023
£’000 | | | 2022
£’000 | | | 2023
£’000 | | | 2022
£’000 | |
| Employee benefit expenses | | | (85,026 | ) | | | (101,774 | ) | | | (244,592 | ) | | | (288,024 | ) |
| Depreciation - property, plant and equipment (Note 14) | | | (2,971 | ) | | | (3,006 | ) | | | (8,898 | ) | | | (9,265 | ) |
| Depreciation – right-of-use assets (Note 15) | | | (426 | ) | | | (445 | ) | | | (1,446 | ) | | | (1,316 | ) |
| Depreciation - investment property (Note 16) | | | (70 | ) | | | (70 | ) | | | (210 | ) | | | (210 | ) |
| Amortization (Note 17) | | | (42,922 | ) | | | (39,444 | ) | | | (128,032 | ) | | | (113,231 | ) |
| Sponsorship, other commercial and broadcasting costs | | | (6,060 | ) | | | (3,237 | ) | | | (21,125 | ) | | | (13,231 | ) |
| External Matchday costs | | | (15,371 | ) | | | (8,033 | ) | | | (29,030 | ) | | | (20,471 | ) |
| Property costs | | | (4,907 | ) | | | (4,276 | ) | | | (14,425 | ) | | | (9,522 | ) |
| Other operating expenses | | | (18,922 | ) | | | (15,085 | ) | | | (60,201 | ) | | | (43,928 | ) |
| Exceptional items (Note 8) | | | - | | | | - | | | | - | | | | (9,992 | ) |
| | | | (176,675 | ) | | | (175,370 | ) | | | (507,959 | ) | | | (509,190 | ) |
8 Exceptional items
| | | Three months ended
31 March | | | Nine months ended
31 March | |
| | | 2023
£’000 | | | 2022
£’000 | | | 2023
£’000 | | | 2022
£’000 | |
| Compensation paid for loss of office | | | - | | | | - | | | | - | | | | (9,127 | ) |
| Football League pension scheme deficit (Note 29) | | | - | | | | - | | | | - | | | | (865 | ) |
| | | | - | | | | - | | | | - | | | | (9,992 | ) |
Compensation paid for loss of office relates to amounts payable to a former men’s first team manager and certain members of the coaching staff.
The Football League pension scheme deficit reflects the present value of the additional contributions the Group is expected to pay to remedy the revised deficit of the scheme pursuant to the latest triennial actuarial valuation.
9 Profit on disposal of intangible assets
| | | Three months ended
31 March | | | Nine months ended
31 March | |
| | | 2023
£’000 | | | 2022
£’000 | | | 2023
£’000 | | | 2022
£’000 | |
| Profit on disposal of registrations | | | 1,949 | | | | 47 | | | | 15,969 | | | | 16,705 | |
| Player loan income | | | - | | | | 674 | | | | - | | | | 1,174 | |
| | | | 1,949 | | | | 721 | | | | 15,969 | | | | 17,879 | |
Manchester United plc
Notes to the interim consolidated financial statements (continued) - unaudited
10 Net finance costs
| | | Three months ended
31 March | | | Nine months ended
31 March | |
| | | 2023
£’000 | | | 2022
£’000 | | | 2023
£’000 | | | 2022
£’000 | |
| Interest payable on bank loans and overdrafts | | | (427 | ) | | | (372 | ) | | | (1,633 | ) | | | (1,316 | ) |
| Interest payable on secured term loan facility, senior secured notes and revolving facilities | | | (8,257 | ) | | | (4,994 | ) | | | (22,019 | ) | | | (14,254 | ) |
| Interest payable on lease liabilities (Note 15) | | | (18 | ) | | | (22 | ) | | | (82 | ) | | | (72 | ) |
| Amortization of issue costs on secured term loan facility and senior secured notes | | | (188 | ) | | | (174 | ) | | | (553 | ) | | | (528 | ) |
| Foreign exchange losses on retranslation of unhedged US dollar borrowings (1) | | | - | | | | (11,102 | ) | | | - | | | | (21,662 | ) |
| Unwinding of discount on deferred payments relating to registrations | | | (2,317 | ) | | | (584 | ) | | | (5,794 | ) | | | (1,797 | ) |
| Interest on provisions | | | (60 | ) | | | - | | | | (198 | ) | | | - | |
| Hedge ineffectiveness on cash flow hedges | | | - | | | | (428 | ) | | | - | | | | (638 | ) |
| Fair value movement on derivative financial instruments: | | | | | | | | | | | | | | | | |
| Embedded foreign exchange derivatives | | | (3,390 | ) | | | - | | | | (498 | ) | | | - | |
| Total finance costs | | | (14,657 | ) | | | (17,676 | ) | | | (30,777 | ) | | | (40,267 | ) |
| Interest receivable on short-term bank deposits | | | 129 | | | | 2 | | | | 320 | | | | 5 | |
| Foreign exchange gains on retranslation of unhedged US dollar borrowings (2) | | | 12,997 | | | | - | | | | 10,294 | | | | - | |
| Hedge ineffectiveness on cash flow hedges | | | 530 | | | | - | | | | 289 | | | | - | |
| Reclassified from hedging reserve (3) | | | - | | | | - | | | | - | | | | 326 | |
| Fair value movement on derivative financial instruments: | | | | | | | | | | | | | | | | |
| Embedded foreign exchange derivatives | | | - | | | | 3,566 | | | | - | | | | 8,702 | |
| Total finance income | | | 13,656 | | | | 3,568 | | | | 10,903 | | | | 9,033 | |
| Net finance costs | | | (1,001 | ) | | | (14,108 | ) | | | (19,874 | ) | | | (31,234 | ) |
(1) Unrealized foreign exchange losses on unhedged USD borrowings due to an unfavourable swing in foreign exchange rates.
(2) Unrealized foreign exchange gains on unhedged USD borrowings due to a favourable swing in foreign exchange rates.
(3) Foreign exchange losses immediately reclassified from the hedging reserve for hedged future revenues no longer meeting the hedge accounting criteria due to a change in denomination of the contract currency.
Manchester United plc
Notes to the interim consolidated financial statements (continued) - unaudited
11 Income tax credit
| | | Three months ended
31 March | | | Nine months ended
31 March | |
| | | 2023
£’000 | | | 2022
£’000 | | | 2023
£’000 | | | 2022
£’000 | |
| Current tax | | | | | | | | | | | | | | | | |
| Current tax on loss for the period | | | (70 | ) | | | (58 | ) | | | (206 | ) | | | (173 | ) |
| Foreign tax | | | (205 | ) | | | (247 | ) | | | (572 | ) | | | (601 | ) |
| Total current tax expense | | | (275 | ) | | | (305 | ) | | | (778 | ) | | | (774 | ) |
| Deferred tax | | | | | | | | | | | | | | | | |
| Origination and reversal of temporary differences | | | 407 | | | | 8,487 | | | | 5,815 | | | | 13,902 | |
| Total deferred tax credit | | | 407 | | | | 8,487 | | | | 5,815 | | | | 13,902 | |
| Total income tax credit | | | 132 | | | | 8,182 | | | | 5,037 | | | | 13,128 | |
Tax is recognized based on management’s estimate of the weighted average annual tax rate expected for the full financial year. Based on current forecasts, the estimated weighted average annual tax rate used for the year to 30 June 2023 is 18.22% (30 June 2022: (23.75%)).
The current year estimated weighted average annual tax rate of 18.22% is driven by UK deferred tax movements, recognized at the current UK Corporation tax rate of 25%, effective from April 2023. The impact of deferred tax being recognised at 25% is negated by costs not deductible in the UK associated with the strategic review.
The prior year estimated weighted average annual tax rate of 23.43% was also largely driven by the UK deferred tax movements.
In addition to the amounts recognized in the statement of profit or loss, the following amounts relating to tax have been recognized in other comprehensive income:
| | | Three months ended
31 March | | | Nine months ended
31 March | |
| | | 2023
£’000 | | | 2022
£’000 | | | 2023
£’000 | | | 2022
£’000 | |
| Deferred tax (Note 18) | | | 67 | | | | (947 | ) | | | (352 | ) | | | (1,238 | ) |
| Total income tax credit/(expense) recognized in other comprehensive income | | | 67 | | | | (947 | ) | | | (352 | ) | | | (1,238 | ) |
Manchester United plc
Notes to the interim consolidated financial statements (continued) - unaudited
12 Loss per share
| | | Three months ended
31 March | | | Nine months ended
31 March | |
| | | 2023 | | | 2022 | | | 2023 | | | 2022 | |
| Loss for the period (£’000) | | | (5,547 | ) | | | (27,727 | ) | | | (25,757 | ) | | | (44,668 | ) |
| Basic loss per share (pence) | | | (3.40 | ) | | | (17.01 | ) | | | (15.80 | ) | | | (27.40 | ) |
| Diluted loss per share (pence) (1) | | | (3.40 | ) | | | (17.01 | ) | | | (15.80 | ) | | | (27.40 | ) |
(i) Basic loss per share
Basic loss per share is calculated by dividing the loss for the period by the weighted average number of ordinary shares in issue during the period.
(ii) Diluted loss per share
Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares in issue during the year to assume conversion of all dilutive potential ordinary shares. The Company has one category of dilutive potential ordinary shares: share awards pursuant to the 2012 Equity Incentive Plan (the “Equity Plan”). Share awards pursuant to the Equity Plan are assumed to have been converted into ordinary shares at the beginning of the financial year, or, if later, the date of issue of the potential ordinary shares.
(iii) Weighted average number of shares used as the denominator
| | | Three months ended
31 March | | | Nine months ended
31 March | |
| | | 2023
Number
‘000 | | | 2022
Number
‘000 | | | 2023
Number
‘000 | | | 2022
Number
‘000 | |
| Class A ordinary shares | | | 52,013 | | | | 54,478 | | | | 52,013 | | | | 51,112 | |
| Class B ordinary shares | | | 112,732 | | | | 110,208 | | | | 112,732 | | | | 113,571 | |
| Treasury shares | | | (1,683 | ) | | | (1,683 | ) | | | (1,683 | ) | | | (1,683 | ) |
| Weighted average number of ordinary shares used as the denominator in calculating basic loss per share | | | 163,062 | | | | 163,003 | | | | 163,062 | | | | 163,000 | |
| Adjustment for calculation of diluted loss per share assumed conversion into Class A ordinary shares(1) | | | - | | | | - | | | | - | | | | - | |
| Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted loss per share(1) | | | 163,062 | | | | 163,003 | | | | 163,062 | | | | 163,000 | |
(1) For the three and nine months ended 31 March 2023 and the three and nine months ended 31 March 2022, potential ordinary shares are anti-dilutive, as their inclusion in the diluted loss per share calculation would reduce the loss per share, and hence have been excluded.
Manchester United plc
Notes to the interim consolidated financial statements (continued) - unaudited
13 Dividends
Dividends paid in the nine months ended 31 March 2023 amounted to £nil. Dividends paid in the nine months ended 31 March 2022 amounted to $29,339,000 ($0.18 per share), the pounds sterling equivalent of which was £21,561,000.
14 Property, plant and equipment
| | | Freehold
property
£’000 | | | Plant and
machinery
£’000 | | | Fixtures and
fittings
£’000 | | | Total
£’000 | |
| At 1 July 2022 | | | | | | | | | | | | | | | | |
| Cost | | | 281,377 | | | | 39,562 | | | | 75,394 | | | | 396,333 | |
| Accumulated depreciation | | | (63,261 | ) | | | (34,293 | ) | | | (56,118 | ) | | | (153,672 | ) |
| Net book amount | | | 218,116 | | | | 5,269 | | | | 19,276 | | | | 242,661 | |
| Nine months ended 31 March 2023 | | | | | | | | | | | | | | | | |
| Opening net book amount | | | 218,116 | | | | 5,269 | | | | 19,276 | | | | 242,661 | |
| Additions | | | 2,611 | | | | 1,734 | | | | 4,622 | | | | 8,967 | |
| Depreciation charge | | | (2,559 | ) | | | (1,952 | ) | | | (4,387 | ) | | | (8,898 | ) |
| Closing net book amount | | | 218,168 | | | | 5,051 | | | | 19,511 | | | | 242,730 | |
| At 31 March 2023 | | | | | | | | | | | | | | | | |
| Cost | | | 283,988 | | | | 41,296 | | | | 80,016 | | | | 405,300 | |
| Accumulated depreciation | | | (65,820 | ) | | | (36,245 | ) | | | (60,505 | ) | | | (162,570 | ) |
| Net book amount | | | 218,168 | | | | 5,051 | | | | 19,511 | | | | 242,730 | |
| | | | | | | | | | | | | | | | | |
| At 1 July 2021 | | | | | | | | | | | | | | | | |
| Cost | | | 278,987 | | | | 38,309 | | | | 73,528 | | | | 390,824 | |
| Accumulated depreciation | | | (59,867 | ) | | | (32,964 | ) | | | (50,934 | ) | | | (143,765 | ) |
| Net book amount | | | 219,120 | | | | 5,345 | | | | 22,594 | | | | 247,059 | |
| Nine months ended 31 March 2022 | | | | | | | | | | | | | | | | |
| Opening net book amount | | | 219,120 | | | | 5,345 | | | | 22,594 | | | | 247,059 | |
| Additions | | | 2,230 | | | | 1,612 | | | | 2,116 | | | | 5,958 | |
| Transfers | | | - | | | | 232 | | | | (232 | ) | | | - | |
| Depreciation charge | | | (2,544 | ) | | | (2,255 | ) | | | (4,466 | ) | | | (9,265 | ) |
| Closing net book amount | | | 218,806 | | | | 4,934 | | | | 20,012 | | | | 243,752 | |
| At 31 March 2022 | | | | | | | | | | | | | | | | |
| Cost | | | 281,217 | | | | 40,182 | | | | 75,383 | | | | 396,782 | |
| Accumulated depreciation | | | (62,411 | ) | | | (35,248 | ) | | | (55,371 | ) | | | (153,030 | ) |
| Net book amount | | | 218,806 | | | | 4,934 | | | | 20,012 | | | | 243,752 | |
Manchester United plc
Notes to the interim consolidated financial statements (continued) - unaudited
(i) Amounts recognized in the consolidated balance sheet
The balance sheet shows the following amounts relating to leases:
Right-of-use assets:
| | | 31 March 2023
£’000 | | | 30 June
2022
£’000 | | | 31 March
2022
£’000 | |
| Property | | | 2,579 | | | | 3,655 | | | | 4,123 | |
| Plant and machinery | | | 373 | | | | 417 | | | | 387 | |
| Total | | | 2,952 | | | | 4,072 | | | | 4,510 | |
Additions to right-of-use assets for the nine months ended 31 March 2023 amounted £331,000 (year ended 30 June 2022: £1,428,000; nine months ended 31 March 2022: £1,443,000).
Lease liabilities:
| | | 31 March 2023
£’000 | | | 30 June
2022
£’000 | | | 31 March
2022
£’000 | |
| Current | | | 792 | | | | 1,561 | | | | 1,636 | |
| Non-current | | | 2,367 | | | | 2,869 | | | | 2,909 | |
| Total lease liabilities | | | 3,159 | | | | 4,430 | | | | 4,545 | |
The following table provides an analysis of the movements in lease liabilities:
| | | £’000 | |
| At 1 July 2021 | | | 4,340 | |
| Cash flows | | | (1,309 | ) |
| Additions | | | 1,443 | |
| Accretion expense | | | 71 | |
| At 31 March 2022 | | | 4,545 | |
| Cash flows | | | (141 | ) |
| Accretion expense | | | 26 | |
| At 30 June 2022 | | | 4,430 | |
| Cash flows | | | (1,703 | ) |
| Additions | | | 330 | |
| Accretion expense | | | 102 | |
| At 31 March 2023 | | | 3,159 | |
Manchester United plc
Notes to the interim consolidated financial statements (continued) - unaudited
15 Leases (continued)
(ii) Amounts recognized in the consolidated statement of profit or loss:
| | | Three months ended
31 March | | | Nine months ended
31 March | |
| | | 2023 £’000 | | | 2022
£’000 | | | 2023 £’000 | | | 2022
£’000 | |
| Depreciation charge of right -of-use assets | | | | | | | | | | | | |
| Property | | | (346 | ) | | | (393 | ) | | | (1,076 | ) | | | (1,165 | ) |
| Plant and machinery | | | (80 | ) | | | (52 | ) | | | (370 | ) | | | (151 | ) |
| | | | (426 | ) | | | (445 | ) | | | (1,446 | ) | | | (1,316 | ) |
| Interest expense (included in finance costs) | | | (18 | ) | | | (22 | ) | | | (82 | ) | | | (72 | ) |
| Expense relating to short-term leases (included in operating expenses) | | | (93 | ) | | | (182 | ) | | | (287 | ) | | | (368 | ) |
| Expense relating to low value leases (included in operating expenses) | | | - | | | | (11 | ) | | | - | | | | (32 | ) |
Manchester United plc
Notes to the interim consolidated financial statements (continued) - unaudited
16 Investment property
| | | Total
£’000 | |
| At 1 July 2022 | | | | |
| Cost | | | 32,193 | |
| Accumulated depreciation and impairment | | | (11,920 | ) |
| Net book amount | | | 20,273 | |
| Nine months ended 31 March 2023 | | | | |
| Opening net book amount | | | 20,273 | |
| Depreciation charge | | | (210 | ) |
| Closing net book amount | | | 20,063 | |
| At 31 March 2023 | | | | |
| Cost | | | 32,193 | |
| Accumulated depreciation and impairment | | | (12,130 | ) |
| Net book amount | | | 20,063 | |
| | | | | |
| At 1 July 2021 | | | | |
| Cost | | | 32,193 | |
| Accumulated depreciation and impairment | | | (11,640 | ) |
| Net book amount | | | 20,553 | |
| Nine months ended 31 March 2022 | | | | |
| Opening net book amount | | | 20,553 | |
| Depreciation charge | | | (210 | ) |
| Closing net book amount | | | 20,343 | |
| At 31 March 2022 | | | | |
| Cost | | | 32,193 | |
| Accumulated depreciation and impairment | | | (11,850 | ) |
| Net book amount | | | 20,343 | |
Investment properties were externally valued as of 30 June 2022 in accordance with the Royal Institution of Chartered Surveyors (“RICS”) Valuation - Global Standards 2017 on the basis of Fair Value (as defined in the Standards). The fair value of investment properties as of 30 June 2022 was £38,250,000. Management has considered the carrying amount of investment property as of 31 March 2023 and concluded that, as there are no indicators of impairment, an impairment test is not required.
The fair value of investment properties is determined using inputs that are not based on observable market data, consequently the asset is categorized as Level 3.
Manchester United plc
Notes to the interim consolidated financial statements (continued) - unaudited
17 Intangible assets
| | | Goodwill
£’000 | | | Registrations
£’000 | | | Other
intangible
assets
£’000 | | | Total
£’000 | |
| At 1 July 2022 | | | | | | | | | | | | | | | | |
| Cost | | | 421,453 | | | | 779,197 | | | | 18,817 | | | | 1,219,467 | |
| Accumulated amortization | | | - | | | | (462,986 | ) | | | (13,203 | ) | | | (476,189 | ) |
| Net book amount | | | 421,453 | | | | 316,211 | | | | 5,614 | | | | 743,278 | |
| Nine months ended 31 March 2023 | | | | | | | | | | | | | | | | |
| Opening net book amount | | | 421,453 | | | | 316,211 | | | | 5,614 | | | | 743,278 | |
| Additions | | | - | | | | 235,130 | | | | 1,742 | | | | 236,872 | |
| Disposals | | | - | | | | (8,811 | ) | | | - | | | | (8,811 | ) |
| Amortization charge | | | - | | | | (125,823 | ) | | | (2,209 | ) | | | (128,032 | ) |
| Closing net book amount | | | 421,453 | | | | 416,707 | | | | 5,147 | | | | 843,307 | |
| At 31 March 2023 | | | | | | | | | | | | | | | | |
| Cost | | | 421,453 | | | | 982,275 | | | | 20,559 | | | | 1,424,287 | |
| Accumulated amortization | | | - | | | | (565,568 | ) | | | (15,412 | ) | | | (580,980 | ) |
| Net book amount | | | 421,453 | | | | 416,707 | | | | 5,147 | | | | 843,307 | |
| | | | | | | | | | | | | | | | | |
| At 1 July 2021 | | | | | | | | | | | | | | | | |
| Cost | | | 421,453 | | | | 861,210 | | | | 16,644 | | | | 1,299,307 | |
| Accumulated amortization | | | - | | | | (533,223 | ) | | | (11,617 | ) | | | (544,840 | ) |
| Net book amount | | | 421,453 | | | | 327,987 | | | | 5,027 | | | | 754,467 | |
| Nine months ended 31 March 2022 | | | | | | | | | | | | | | | | |
| Opening net book amount | | | 421,453 | | | | 327,987 | | | | 5,027 | | | | 754,467 | |
| Additions | | | - | | | | 147,381 | | | | 2,299 | | | | 149,680 | |
| Disposals | | | - | | | | (14,391 | ) | | | - | | | | (14,391 | ) |
| Amortization charge | | | - | | | | (111,329 | ) | | | (1,902 | ) | | | (113,231 | ) |
| Closing net book amount | | | 421,453 | | | | 349,648 | | | | 5,424 | | | | 776,525 | |
| At 31 March 2022 | | | | | | | | | | | | | | | | |
| Cost | | | 421,453 | | | | 982,384 | | | | 18,045 | | | | 1,421,882 | |
| Accumulated amortization | | | - | | | | (632,736 | ) | | | (12,621 | ) | | | (645,357 | ) |
| Net book amount | | | 421,453 | | | | 349,648 | | | | 5,424 | | | | 776,525 | |
Manchester United plc
Notes to the interim consolidated financial statements (continued) - unaudited
17 Intangible assets (continued)
Impairment tests for goodwill
Goodwill is not subject to amortization and is tested annually for impairment (normally at the end of the third fiscal quarter) or more frequently if events or changes in circumstances indicate a potential impairment.
An impairment test has been performed on the carrying value of goodwill based on value-in-use calculations. The value-in-use calculations have used pre-tax cash flow projections based on the financial budgets approved by management covering a five year period. The budgets are based on past experience in respect of revenues, variable and fixed costs, registrations and other capital expenditure and working capital assumptions. For each accounting period, cash flows beyond the five year period are extrapolated using a terminal growth rate of 2.0% (2022: 2.0%), which does not exceed the long term average growth rate for the UK economy in which the cash generating unit operates.
The other key assumptions used in the value in use calculations for each period are the pre-tax discount rate, which has been determined at 11.8% (2022: 8.4%) for each period and certain assumptions around progression in and qualification for domestic and European cup competitions, notably the Champions League.
Management determined budgeted revenue growth based on historic performance and its expectations of market development. The discount rates are pre-tax and reflect the specific risks relating to the business.
The following sensitivity analysis was performed:
| ● | increase the discount rate by 1% (post-tax); |
| ● | more prudent assumptions around qualification for European competitions; and |
| ● | increase future capital expenditure. |
In each of these scenarios the estimated recoverable amount substantially exceeds the carrying value for the cash generating unit and accordingly no impairment was identified.
Having assessed the future anticipated cash flows, management believes that any reasonably possible changes in key assumptions would not result in an impairment of goodwill.
Significant estimates – fair value of registrations
The costs associated with the acquisition of players’ and key football management staff registrations include an estimate of the fair value of any contingent consideration. The estimate of the fair value of the contingent consideration payable requires management to assess the likelihood of specific performance conditions being met which would trigger the payment of the contingent consideration. This assessment is carried out on an individual basis. The maximum additional amount that could be payable as of 31 March 2023 is disclosed in Note 31.1. The estimate over the probability of contingent consideration payable could impact the net book value of registrations and amortization recognized in the statement of profit or loss.
Other intangible assets
Other intangible assets include internally generated assets whose cost and accumulated amortization as of 31 March 2023 was £2,103,000 and £2,103,000 respectively (31 March 2022: £2,103,000 and £2,069,000 respectively).
Manchester United plc
Notes to the interim consolidated financial statements (continued) - unaudited
18 Deferred tax
Deferred tax assets and liabilities are offset where the Group has a legally enforceable right to do so. The following is the analysis of the deferred tax balances (after allowable offset) for financial reporting purposes:
| | | 31 March 2023
£’000 | | | 30 June
2022
£’000 | | | 31 March
2022
£’000 | |
| Net deferred tax liability | | | (1,939 | ) | | | (7,402 | ) | | | (22,882 | ) |
The movements in the net deferred tax liability are as follows:
| | | 31 March 2022 £’000 | | | 30 June
2022
£’000 | | | 31 March
2022
£’000 | |
| At the beginning of the period | | | (7,402 | ) | | | (35,546 | ) | | | (35,546 | ) |
| Credited/(expensed) to the statement of profit or loss (Note 11) | | | 5,815 | | | | 29,431 | | | | 13,902 | |
| (Expensed)/credited to other comprehensive income (Note 11) | | | (352 | ) | | | (1,287 | ) | | | (1,238 | ) |
| At the end of the period | | | (1,939 | ) | | | (7,402 | ) | | | (22,882 | ) |
Group profits are subject to both UK and US corporate tax. The current US federal corporate income tax rate is 21% compared to the UK corporation tax rate of 25%. As the UK corporation tax rate is higher than the US federal corporate income tax rate, it is forecast that all future US cash tax will be sheltered by foreign tax credits derived from UK tax paid. A potential US deferred tax asset at the period end has therefore not been recognised as it is not forecast to give rise to a future economic benefit. Future increases in the US federal corporate income tax rate could result in the recognition of the US deferred tax asset.
Significant estimates – recognition of deferred tax assets
Deferred tax assets are recognized only to the extent that it is probable that the associated deductions will be available for use against future profits and that there will be sufficient future taxable profit available against which the temporary differences can be utilized, provided the asset can be reliably quantified. In estimating future taxable profit, management use “base case” approved forecasts which incorporate a number of assumptions, including a prudent level of future uncontracted revenue in the forecast period. In arriving at a judgment in relation to the recognition of deferred tax assets, management considers the regulations applicable to tax, advice on their interpretation and potential future business planning. Future taxable income may be higher or lower than estimates made when determining whether it is appropriate to record a tax asset and the amount to be recorded. Furthermore, changes in the legislative framework or applicable tax case law may result in management reassessing the recognition of deferred tax assets in future periods.
Manchester United plc
Notes to the interim consolidated financial statements (continued) - unaudited
19 Inventories
| | | 31 March 2023
£’000 | | | 30 June
2022
£’000 | | | 31 March
2022
£’000 | |
| Finished goods | | | 2,645 | | | | 2,200 | | | | 2,692 | |
The cost of inventories recognized as an expense and included in operating expenses for the nine months ended 31 March 2023 amounted to £10,069,000 (year ended 30 June 2022: £11,345,000; nine months ended 31 March 2022: £9,156,000).
20 Trade receivables
| | | 31 March 2023
£’000 | | | 30 June
2022
£’000 | | | 31 March
2022
£’000 | |
| Trade receivables | | | 96,540 | | | | 91,207 | | | | 100,679 | |
| Less: provision for impairment of trade receivables | | | (14,734 | ) | | | (12,240 | ) | | | (8,493 | ) |
| Net trade receivables | | | 81,806 | | | | 78,967 | | | | 92,186 | |
| Less: non-current portion | | | | | | | | | | | | |
| Trade receivables | | | 21,485 | | | | 29,757 | | | | 35,423 | |
| Current trade receivables | | | 60,321 | | | | 49,210 | | | | 56,763 | |
Net trade receivables include transfer fees receivable from other football clubs of £49,907,000 (30 June 2022: £50,418,000; 31 March 2022: £56,124,000) of which £21,484,000 (30 June 2022: £29,757,000; 31 March 2022: £35,423,000) is receivable after more than one year. Net trade receivables also include £26,495,000 (30 June 2022: £19,903,000; 31 March 2022: £32,194,000) of deferred revenue that is contractually payable to the Group, but recorded in advance of the earnings process, with corresponding amounts recorded as contract liabilities - deferred revenue.
Gross contractual trade receivables pre discounting as at 31 March 2023 were £83,034,000 (30 June 2022: £80,150,000; 31 March 2022: £93,616,000).
Manchester United plc
Notes to the interim consolidated financial statements (continued) - unaudited
21 Derivative financial instruments
| | | 31 March 2023 | | | 30 June 2022 | | | 31 March 2022 | |
| | | Assets | | | Liabilities | | | Assets | | | Liabilities | | | Assets | | | Liabilities | |
| | | £’000 | | | £’000 | | | £’000 | | | £’000 | | | £’000 | | | £’000 | |
| Used for hedging: | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest rate swaps | | | 3,809 | | | | - | | | | 2,458 | | | | - | | | | 890 | | | | - | |
| Forward foreign exchange contracts | | | - | | | | - | | | | - | | | | - | | | | - | | | | (32 | ) |
| At fair value through profit or loss: | | | | | | | | | | | | | | | | | | | | | | | | |
| Embedded foreign exchange derivatives | | | 16,093 | | | | - | | | | 20,286 | | | | - | | | | 8,449 | | | | (135 | ) |
| Forward foreign exchange contracts | | | 1,094 | | | | (1,351 | ) | | | 315 | | | | (81 | ) | | | - | | | | (962 | ) |
| | | | 20,996 | | | | (1,351 | ) | | | 23,059 | | | | (81 | ) | | | 9,339 | | | | (1,129 | ) |
| Less non-current portion: | | | | | | | | | | | | | | | | | | | | | | | | |
| Used for hedging: | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest rate swaps | | | 3,809 | | | | - | | | | 2,458 | | | | - | | | | 890 | | | | - | |
| At fair value through profit or loss: | | | | | | | | | | | | | | | | | | | | | | | | |
| Embedded foreign exchange derivatives | | | 10,737 | | | | - | | | | 13,786 | | | | - | | | | 6,087 | | | | (42 | ) |
| Forward foreign exchange contracts | | | 556 | | | | (1,303 | ) | | | 218 | | | | (49 | ) | | | - | | | | (414 | ) |
| Non-current derivative financial instruments | | | 15,102 | | | | (1,303 | ) | | | 16,462 | | | | (49 | ) | | | 6,977 | | | | (456 | ) |
| Current derivative financial instruments | | | 5,894 | | | | (48 | ) | | | 6,597 | | | | (32 | ) | | | 2,362 | | | | (673 | ) |
Fair value hierarchy
Derivative financial instruments are carried at fair value. The different levels used in measuring fair value have been defined in accounting standards as follows:
| ● | Level 1 – the fair value of financial instruments traded in active markets is based on quoted market prices at the end of the reporting period. |
| ● | Level 2 - the fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximize the use of observable market data and as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2. |
| ● | Level 3 – if one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3. |
All of the financial instruments detailed above are included in Level 2.
Manchester United plc
Notes to the interim consolidated financial statements (continued) - unaudited
22 Cash and cash equivalents
| | | 31 March 2023
£’000 | | | 30 June
2022
£’000 | | | 31 March
2022
£’000 | |
| Cash at bank and in hand | | | 73,733 | | | | 121,223 | | | | 95,791 | |
Cash and cash equivalents for the purposes of the interim consolidated statement of cash flows are as above.
| | | Number of
shares
(thousands) | | | Ordinary
shares £’000 | |
| At 1 July 2021 | | | 164,677 | | | | 53 | |
| Employee share-based compensation awards – issue of shares | | | 9 | | | | - | |
| At 31 March 2022 | | | 164,686 | | | | 53 | |
| Employee share-based compensation awards – issue of shares | | | 59 | | | | - | |
| At 30 June 2022 | | | 164,745 | | | | 53 | |
| Employee share-based compensation awards – issue of shares | | | - | | | | - | |
| At 31 March 2023 | | | 164,745 | | | | 53 | |
The Company has two classes of ordinary shares outstanding: Class A ordinary shares and Class B ordinary shares, each with a par value of $0.0005. The rights of the holders of Class A ordinary shares and Class B ordinary shares are identical, except with respect to voting and conversion. Each Class A ordinary share is entitled to one vote per share and is not convertible into any other shares. Each Class B ordinary share is entitled to 10 votes per share and is convertible into one Class A ordinary share at any time. In addition, Class B ordinary shares will automatically convert into Class A ordinary shares upon certain transfers and other events, including upon the date when holders of all Class B ordinary shares cease to hold Class B ordinary shares representing, in the aggregate, at least 10% of the total number of Class A and Class B ordinary shares outstanding. For special resolutions (which are required for certain important matters including mergers and changes to the Company’s governing documents), which require the vote of two-thirds of the votes cast, at any time that Class B ordinary shares remain outstanding, the voting power permitted to be exercised by the holders of the Class B ordinary shares will be weighted such that the Class B ordinary shares shall represent, in the aggregate, 67% of the voting power of all shareholders.
As of 31 March 2023, the Company’s issued share capital comprised 54,537,360 Class A ordinary shares and 110,207,613 Class B ordinary shares.
1,682,896 Class A ordinary shares are currently held in treasury. Distributable reserves have been reduced by £21,305,000, being the consideration paid for these shares. See Note 24.
Manchester United plc
Notes to the interim consolidated financial statements (continued) - unaudited
| | | Number of
shares
(thousands) | | | £’000 | |
| At 1 July 2021 | | | (1,683 | ) | | | (21,305 | ) |
| Acquisition of shares | | | - | | | | - | |
| At 31 March 2022 | | | (1,683 | ) | | | (21,305 | ) |
| Acquisition of shares | | | - | | | | - | |
| At 30 June 2022 | | | (1,683 | ) | | | (21,305 | ) |
| Acquisition of shares | | | - | | | | - | |
| At 31 March 2023 | | | (1,683 | ) | | | (21,305 | ) |
25 Trade and other payables
| | | 31 March 2023
£’000 | | | 30 June
2022
£’000 | | | 31 March
2022
£’000 | |
| Trade payables | | | 290,350 | | | | 192,863 | | | | 195,865 | |
| Other payables | | | 15,099 | | | | 18,982 | | | | 19,212 | |
| Accrued expenses | | | 70,816 | | | | 89,016 | | | | 81,541 | |
| Social security and other taxes | | | 15,146 | | | | 22,073 | | | | 16,615 | |
| | | | 391,411 | | | | 322,934 | | | | 313,233 | |
| Less: non-current portion | | | | | | | | | | | | |
| Trade payables | | | 155,269 | | | | 101,301 | | | | 95,848 | |
| Other payables | | | 634 | | | | 1,046 | | | | 1,195 | |
| Non-current trade and other payables | | | 155,903 | | | | 102,347 | | | | 97,043 | |
| Current trade and other payables | | | 235,508 | | | | 220,587 | | | | 216,190 | |
Trade payables include transfer fees and other associated costs in relation to the acquisition of player registrations of £279,862,000 (30 June 2022: £181,545,000; 31 March 2022: £183,632,000) of which £155,269,000 (30 June 2022: £101,301,000; 31 March 2022: £95,848,000) is due after more than one year. Of the amount due after more than one year, £77,374,000 (30 June 2022: £54,732,000; 31 March 2022: £51,233,000) is expected to be paid between 1 and 2 years, and the balance of £77,895,000 (30 June 2022: £46,569,000; 31 March 2022: £44,615,000) is expected to be paid between 2 and 5 years.
Gross contractual trade payables pre discounting as at 31 March 2023 were £307,076,000 (30 June 2022: £196,396,000; 31 March 2022: £200,213,000). The fair value of other payables is not materially different to their carrying amount.
Manchester United plc
Notes to the interim consolidated financial statements (continued) - unaudited
26 Borrowings
| | | 31 March 2023
£’000 | | | 30 June
2022
£’000 | | | 31 March
2022
£’000 | |
| Senior secured notes | | | 341,361 | | | | 347,173 | | | | 320,284 | |
| Secured term loan facility | | | 180,121 | | | | 183,192 | | | | 168,956 | |
| Revolving credit facilities | | | 200,000 | | | | 100,000 | | | | 100,000 | |
| Accrued interest on senior secured notes and revolving credit facilities | | | 3,665 | | | | 5,757 | | | | 2,295 | |
| | | | 725,147 | | | | 636,122 | | | | 591,535 | |
| Less: non-current portion | | | | | | | | | | | | |
| Senior secured notes | | | 341,361 | | | | 347,173 | | | | 320,284 | |
| Secured term loan facility | | | 180,121 | | | | 183,192 | | | | 168,956 | |
| Non-current borrowings | | | 521,482 | | | | 530,365 | | | | 489,240 | |
| Current borrowings | | | 203,665 | | | | 105,757 | | | | 102,295 | |
The senior secured notes of £341,361,000 (30 June 2022: £347,173,000; 31 March 2022: £320,284,000) is stated net of unamortized issue costs amounting to £2,239,000 (30 June 2022: £2.591,000; 31 March 2022: £2,712,000). The outstanding principal amount of the senior secured notes is $425,000,000 (30 June 2022: $425,000,000; 31 March 2022: $425,000,000). The senior secured notes have a fixed coupon rate of 3.79% per annum and interest is paid semi-annually. The senior secured notes mature on 25 June 2027.
The senior secured notes were issued by our wholly-owned subsidiary, Manchester United Football Club Limited, and are guaranteed by Red Football Limited, Red Football Junior Limited, Manchester United Limited and MU Finance Limited and are secured against substantially all of the assets of those entities and Manchester United Football Club Limited. These entities are wholly-owned subsidiaries of Manchester United plc.
The secured term loan facility of £180,121,000 (30 June 2022: £183,192,000; 31 March 2022: £168,956,000) is stated net of unamortized issue costs amounting to £1,785,000 (30 June 2022: £1,979,000; 31 March 2022: £2,043,000). The outstanding principal amount of the secured term loan facility is $225,000,000 (30 June 2022: $225,000,000; 31 March 2022: $225,000,000). The secured term loan facility attracts interest of the Secured Overnight Financing Rate (SOFR) plus an applicable margin of between 1.25% and 1.75% per annum and interest is paid monthly. The remaining balance of the secured term loan facility is repayable on 6 August 2029, although the Group has the option to repay the secured term loan facility at any time before then.
The secured term loan facility was provided to our wholly-owned subsidiary, Manchester United Football Club Limited, and is guaranteed by Red Football Limited, Red Football Junior Limited, Manchester United Limited, MU Finance Limited and Manchester United Football Club Limited and is secured against substantially all of the assets of each of those entities. These entities are wholly owned subsidiaries of Manchester United plc.
Manchester United plc
Notes to the interim consolidated financial statements (continued) - unaudited
26 Borrowings (continued)
The Group also has £200,000,000 (30 June 2022: £100,000,000; 31 March 2022: £100,000,000) in outstanding loans and £100,000,000 (30 June 2022: £200,000,000; 31 March 2022: £100,000,000) in borrowing capacity under our revolving facilities. £150,000,000 of the facilities terminate on 4 April 2025 and the remainder terminates on 25 June 2027.
The Group has complied with all covenants under its revolving facilities, the secured term loan facility and the note purchase agreement governing the senior secured notes during the 2023 and 2022 reporting periods.
27 Provisions
| | | Other(1) | | | Tax(2) | | | Total | |
| | | £’000 | | | £’000 | | | £’000 | |
| At 1 July 2021 | | | 722 | | | | 4,080 | | | | 4,802 | |
| Charged to profit or loss: | | | | | | | | | | | | |
| Additional provisions recognized | | | 285 | | | | 725 | | | | 1,010 | |
| At 31 March 2022 | | | 1,007 | | | | 4,805 | | | | 5,812 | |
| Charged to profit or loss: | | | | | | | | | | | | |
| Reassessment of provisions | | | 136 | | | | 1,259 | | | | 1,395 | |
| Additional provisions recognized | | | - | | | | 5,437 | | | | 5,437 | |
| At 30 June 2022 | | | 1,143 | | | | 11,501 | | | | 12,644 | |
| Charged/(credited) to profit or loss: | | | | | | | | | | | | |
| Reassessment of provisions | | | (331 | ) | | | 96 | | | | (235 | ) |
| Additional provisions recognised | | | - | | | | 294 | | | | 294 | |
| At 31 March 2023 | | | 812 | | | | 11,891 | | | | 12,703 | |
| Less: non-current portion | | | | | | | | | | | | |
| Provisions | | | (91 | ) | | | - | | | | (91 | ) |
| Current provisions | | | 721 | | | | 11,891 | | | | 12,612 | |
(1) Other provision
Other provision includes, amongst other items, make good provisions as the Group is required to restore the leased premises of its office spaces to their original condition at the end of the respective lease terms. A provision has been recognized based upon the estimated expenditure required to remove any leasehold improvements. The remaining term on such leased properties is between 8 months and 14 months.
(2) Tax provision
Provision in respect of player related tax matters. The timing of cash outflows is by its nature uncertain but it is management’s best estimate that these will be made within the next 12 months.
Manchester United plc
Notes to the interim consolidated financial statements (continued) - unaudited
28 Cash generated from operations generated from operations
| | | Three months ended 31 March | | | Nine months ended 31 March | |
| | | 2023 £’000 | | | 2022
£’000 | | | 2023 £’000 | | | 2022
£’000 | |
| Loss before income tax | | | (5,679 | ) | | | (35,909 | ) | | | (30,794 | ) | | | (57,796 | ) |
| Adjustments for: | | | | | | | | | | | | | | | | |
| Depreciation | | | 3,467 | | | | 3,521 | | | | 10,554 | | | | 10,791 | |
| Amortization | | | 42,922 | | | | 39,444 | | | | 128,032 | | | | 113,231 | |
| Profit on disposal of intangible assets | | | (1,949 | ) | | | (721 | ) | | | (15,969 | ) | | | (17,879 | ) |
| Net finance costs | | | 1,001 | | | | 14,108 | | | | 19,874 | | | | 31,234 | |
| Non-cash employee benefit expense - equity-settled share-based payments | | | 559 | | | | 521 | | | | 1,714 | | | | 1,489 | |
| Foreign exchange losses/(gains) on operating activities | | | 980 | | | | (4 | ) | | | 4,947 | | | | (306 | ) |
| Reclassified from hedging reserve | | | 284 | | | | (221 | ) | | | (246 | ) | | | (191 | ) |
| Changes in working capital: | | | | | | | | | | | | | | | | |
| Inventories | | | 627 | | | | 184 | | | | (445 | ) | | | (612 | ) |
| Prepayments | | | 9,304 | | | | 8,909 | | | | (1,624 | ) | | | (4,842 | ) |
| Contract assets – accrued revenue | | | (9,368 | ) | | | 16,707 | | | | (26,634 | ) | | | (12,577 | ) |
| Trade receivables | | | 51,766 | | | | (3,099 | ) | | | 3,679 | | | | (8,640 | ) |
| Other receivables | | | 395 | | | | 78 | | | | (462 | ) | | | (572 | ) |
| Contract liabilities – deferred revenue | | | (33,905 | ) | | | (21,437 | ) | | | (48,621 | ) | | | 18,178 | |
| Trade and other payables | | | 5,104 | | | | 9,174 | | | | (31,870 | ) | | | 5,310 | |
| Provisions | | | (300 | ) | | | 453 | | | | 59 | | | | 1,010 | |
| Cash generated from operations | | | 65,208 | | | | 31,708 | | | | 12,194 | | | | 77,828 | |
Manchester United plc
Notes to the interim consolidated financial statements (continued) - unaudited
The Group participates in the Football League Pension and Life Assurance Scheme (‘the Scheme’). The Scheme is a funded multi-employer defined benefit scheme where members may have periods of service attributable to several participating employers. The Group is unable to identify its share of the assets and liabilities of the Scheme and therefore accounts for its contributions as if they were paid to a defined contribution scheme. The Group has received confirmation that the assets and liabilities of the Scheme cannot be split between the participating employers. The Group is advised only of the additional contributions it is required to pay to make good the deficit. These contributions could increase in the future if one or more of the participating employers exits the Scheme.
The last triennial actuarial valuation of the Scheme was carried out at 31 August 2020 where the total deficit on the ongoing valuation basis was £27.5 million. The accrual of benefits ceased within the Scheme on 31 August 1999, therefore there are no contributions relating to current accrual. The Group pays monthly contributions based on a notional split of the total expenses and deficit contributions of the Scheme.
The Group currently pays total contributions of £555,000 per annum and this amount will increase by 5% per annum from September 2023. Based on the existing actuarial valuation assumptions, this will be sufficient to pay off the deficit by 30 April 2025.
As of 31 March 2023, the present value of the Group’s outstanding contributions (i.e. its future liability) is £1,195,000. This amounts to £561,000 (30 June 2022: £556,000; 31 March 2022: £539,000) due within one year and £634,000 (30 June 2022: £1,046,000; 31 March 2022: £1,195,000) due after more than one year and is included within other payables.
Contributions are also made to defined contribution pension arrangements and are charged to the statement of profit or loss in the period in which they become payable.
Manchester United plc
Notes to the interim consolidated financial statements (continued) - unaudited
30 Financial risk management
30.1 Financial risk factors
The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, and cash flow and fair value interest rate risk), credit risk, and liquidity risk.
The interim consolidated financial statements do not include all financial risk management information and disclosures required in the annual financial statements, they should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended 30 June 2022, as filed with the Securities and Exchange Commission on 23 September 2022, contained within the Company’s Annual Report on Form 20-F.
There have been no changes in risk management since the previous financial year end or in any risk management policies.
30.2 Hedging activities
The Group uses derivative financial instruments to hedge certain exposures and has designated certain derivatives as hedges of cash flows (cash flow hedge).
The Group hedges the foreign exchange risk on contracted future US dollar revenues whenever possible using the Group’s US dollar net borrowings as the hedging instrument. The foreign exchange gains or losses arising on re-translation of the Group’s US dollar net borrowings used in the hedge are initially recognized in other comprehensive income, rather than being recognized in the statement of profit or loss immediately. Amounts previously recognized in other comprehensive income and accumulated in the hedging reserve are subsequently reclassified into the statement of profit or loss in the same accounting period, and within the same statement of profit or loss line (i.e. commercial revenue), as the underlying future US dollar revenues, which given the varying lengths of the commercial revenue contracts will be between April 2023 to May 2027. The foreign exchange gains or losses arising on re-translation of the Group’s unhedged US dollar borrowings are recognized in the statement of profit or loss immediately (within net finance costs). The table below details the net borrowings being hedged at the balance sheet date:
| | | 31 March 2023
$’000 | | | 30 June
2022
$’000 | | | 31 March
2022
$’000 | |
| USD borrowings | | | 650,000 | | | | 650,000 | | | | 650,000 | |
| Hedged USD cash | | | (25,311 | ) | | | (37,000 | ) | | | (18,226 | ) |
| Net USD debt | | | 624,689 | | | | 613,000 | | | | 631,774 | |
| Hedged future USD revenues (1) | | | (48,780 | ) | | | (22,800 | ) | | | (28,649 | ) |
| Unhedged USD borrowings | | | 575,909 | | | | 590,200 | | | | 603,125 | |
| Closing USD exchange rate ($: £) | | | 1.2369 | | | | 1.2151 | | | | 1.3158 | |
(1) A further portion of the profit and loss exposure (within net finance income/costs) on unhedged USD borrowings is naturally offset by the fair value of foreign exchange based embedded derivatives in host Commercial revenue contracts.
Manchester United plc
Notes to the interim consolidated financial statements (continued) - unaudited
30 Financial risk management (continued)
30.2 Hedging activities (continued)
The Group hedges its cash flow interest rate risk where considered appropriate using interest rate swaps. Such interest rate swaps have the economic effect of converting a portion of variable rate borrowings from floating rates to fixed rates. The effective portion of changes in the fair value of the interest rate swap is initially recognized in other comprehensive income, rather than being recognized in the statement of profit or loss immediately. Amounts previously recognized in other comprehensive income and accumulated in the hedging reserve are subsequently reclassified into the statement of profit or loss in the same accounting period, and within the same statement of profit or loss line (i.e. net finance costs), as the underlying interest payments, which given the term of the swap will be between April 2023 to June 2024. The following table details the interest rate swaps at the reporting date that are used to hedge borrowings:
| | | 31 March 2023 | | | 30 June
2022 | | | 31 March
2022 | |
| Principal value of loan outstanding ($‘000) | | | 150,000 | | | | 150,000 | | | | 150,000 | |
| Rate received | | | 1 month $ LIBOR | | | | 1 month $ LIBOR | | | | 1 month $ LIBOR | |
| Rate paid | | | Fixed 2.032% | | | | Fixed 2.032% | | | | Fixed 2.032% | |
| Expiry date | | | 30 June 2024 | | | | 30 June 2024 | | | | 30 June 2024 | |
As of 31 March 2023 the fair value of the above interest rate swaps was an asset of £3,809,000 (30 June 2022: asset of £2,458,000; 31 March 2022: asset of £890,000).
The Group also seeks to hedge the majority of the foreign exchange risk on revenue arising as a result of participation in UEFA club competitions, either by using contracted future foreign exchange expenses (including player transfer fee commitments) or by placing forward foreign exchange contracts, at the point at which it becomes reasonably certain that it will receive the revenue. The Group also seeks to hedge the foreign exchange risk on other contracted future foreign exchange expenses using available foreign exchange cash balances and forward foreign exchange contracts.
Manchester United plc
Notes to the interim consolidated financial statements (continued) - unaudited
31 Contingent liabilities and contingent assets
| 31.1 | Contingent liabilities |
The Group had contingent liabilities at 31 March 2023 in respect of:
Under the terms of certain contracts with other football clubs and agents in respect of player transfers, additional amounts, in excess of the amounts included in the cost of registrations, would be payable by the Group if certain substantive performance conditions are met. These excess amounts are only recognized within the cost of registrations when the Group considers that it is probable that the condition related to the payment will be achieved. The maximum additional amounts that could be payable is £145,386,000 (30 June 2022: £112,372,000; 31 March 2022: £122,218,000). No material adjustment was required to the amounts included in the cost of registrations during the period (2022: no material adjustments) and consequently there was no material impact on the amortization of registration charges in the statement of profit or loss (2022: no material impact). As of 31 March 2023, the potential amount payable by type of condition and category of player was:
| Type of condition | | First team squad
£’000 | | | Other
£’000 | | | Total £’000 | |
| MUFC appearances/team success/new contract | | | 82,141 | | | | 19,153 | | | | 101,294 | |
| International appearances | | | 10,352 | | | | 1,078 | | | | 11,430 | |
| Awards | | | 32,662 | | | | - | | | | 32,662 | |
| | | | 125,155 | | | | 20,231 | | | | 145,386 | |
We are currently in active discussions with UK tax authorities over a number of tax areas in relation to arrangements with players and players' representatives. It is possible that in the future, as a result of discussions between the Group and UK tax authorities, as well as discussions UK tax authorities are holding with other stakeholders within the football industry, interpretations of applicable rules will be challenged, which could result in liabilities in relation to these matters. The information usually required by IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’, is not disclosed on the grounds that it is not practicable to be disclosed.
Under the terms of certain contracts with other football clubs in respect of player transfers, additional amounts would be payable to the Group if certain specific performance conditions are met. In accordance with the recognition criteria for contingent assets, such amounts are only disclosed by the Group when probable and recognized when virtually certain. As of 31 March 2023, the amount of such receipt considered to be probable was £nil (30 June 2022: £nil; 31 March 2022: £nil).
Manchester United plc
Notes to the interim consolidated financial statements (continued) - unaudited
32 Commitments
32.1 Capital commitments
As at 31 March 2023, the Group had contracted capital expenditure relating to property, plant and equipment amounting to £9,012,000 (30 June 2022: £1,185,000; 31 March 2022: £806,000) and to other intangible assets amounting to £84,000 (30 June 2022: £1,476,000; 31 March 2022: £1,230,000). These amounts are not recognized as liabilities.
33 Events occurring after the reporting period
On 2 May 2023, the Group signed a lease agreement for a new London office, commencing on 1 May 2023. The lease is for a period of 10 years and costs of £8,831,000 have been capitalized under IFRS 16. This will be recognized in the annual financial statements.
| 33.2 | Secured term loan amendment |
On 1 June 2023, the Group signed the Sixth Amendment and Restatement Agreement relating to our Secured Term Loan. This amendment replaced the previous reference interest rate payable on the loan (USD LIBOR) with the Secured Overnight Financing Rate (SOFR). The impact of this on the Group is not expected to be material.
34 Related party transactions
As of 31 March 2023, trusts and other entities controlled by six lineal descendants of Mr. Malcolm Glazer collectively own 4.37% of our issued and outstanding Class A ordinary shares and all of our issued and outstanding Class B ordinary shares, representing 95.62% of the voting power of our outstanding capital stock.
Manchester United plc
Notes to the interim consolidated financial statements (continued) - unaudited
35 Subsidiaries
The following companies are all subsidiary undertakings of the Company as of 31 March 2023:
| Subsidiaries | | Principal activity | | % of ownership
interest | |
| Red Football Finance Limited* | | Dormant company | | | 100 | |
| Red Football Holdings Limited* | | Holding company | | | 100 | |
| Red Football Shareholder Limited | | Holding company | | | 100 | |
| Red Football Joint Venture Limited | | Holding company | | | 100 | |
| Red Football Limited | | Holding company | | | 100 | |
| Red Football Junior Limited | | Holding company | | | 100 | |
| Manchester United Limited | | Holding company | | | 100 | |
| Alderley Urban Investments Limited | | Property investment | | | 100 | |
| Manchester United Football Club Limited | | Professional football club | | | 100 | |
| Manchester United Women’s Football Club Limited | | Professional football club | | | 100 | |
| Manchester United Interactive Limited | | Dormant company | | | 100 | |
| MU 099 Limited | | Dormant company | | | 100 | |
| MU Commercial Holdings Limited | | Non-trading company | | | 100 | |
| MU Commercial Holdings Junior Limited | | Non-trading company | | | 100 | |
| MU Finance Limited | | Non-trading company | | | 100 | |
| MU RAML Limited | | Retail and licensing company | | | 100 | |
| MUTV Limited | | Media company | | | 100 | |
| RAML USA LLC | | Dormant company | | | 100 | |
* Direct investment of Manchester United plc, others are held by subsidiary undertakings.
All of the above are incorporated and operate in England and Wales, with the exception of Red Football Finance Limited which is incorporated and operates in the Cayman Islands and RAML USA LLC which is incorporated in the United States.
