UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of January, 2024
Commission File Number: 001-35627
MANCHESTER UNITED PLC
(Translation of registrant’s name into English)
Old Trafford
Manchester M16 0RA
United Kingdom
(Address of principal executive offices)
Indicate
by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F x Form 40-F ¨
Indicate
by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1). ¨
Indicate
by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7). ¨
THIS
REPORT ON FORM 6-K IS HEREBY INCORPORATED BY REFERENCE INTO THE FOLLOWING REGISTRATION STATEMENTS OF THE REGISTRANT:
THE REGISTRATION STATEMENT ON FORM F-3 (NO. 333-259817) ORIGINALLY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (“SEC”) ON SEPTEMBER 27, 2021, AS AMENDED, AND THE
REGISTRATION STATEMENT ON FORM S-8 (NO. 333- 183277) ORIGINALLY FILED WITH THE SEC ON AUGUST 13, 2012, AS AMENDED.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: January 17, 2024
| |
MANCHESTER UNITED PLC |
| |
|
| |
By: |
/s/ Cliff Baty |
| |
Name: Cliff Baty |
| |
Title: Chief Financial Officer |
EXHIBIT INDEX
Exhibit 99.1
Manchester United plc
Interim report (unaudited) for the three
months ended 30 September 2023
Contents
| Management’s discussion and analysis of financial condition and results of operations |
2 |
| |
|
| Interim consolidated statement of loss for the three months ended 30 September 2023 and 2022 |
10 |
| |
|
| Interim consolidated statement of comprehensive loss for the three months ended 30 September 2023 and 2022 |
11 |
| |
|
| Interim consolidated balance sheet as of 30 September 2023, 30 June 2023 and 30 September 2022 |
12 |
| |
|
| Interim consolidated statement of changes in equity for the three months ended 30 September 2023, the nine month period ended 30 June 2023 and the three month period ended 30 September 2022 |
14 |
| |
|
| Interim consolidated statement of cash flows for the three months ended 30 September 2023 and 2022 |
15 |
| |
|
| Notes to the interim consolidated financial statements |
16 |
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 2023, as filed with the Securities and Exchange
Commission on 27 October 2023 (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 146-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, TeamViewer and Kohler that want access and exposure to our community
of followers and association with our brand.
RESULTS OF OPERATIONS
Three months ended 30 September 2023 as
compared to the three months ended 30 September 2022
| |
|
Three months ended
30 September
(in £ millions) |
|
|
|
|
| |
|
2023 |
|
|
2022 |
|
|
% Change
2023 over
2022 |
|
| Revenue |
|
|
157.1 |
|
|
|
143.7 |
|
|
|
9.3 |
% |
| Commercial revenue |
|
|
90.4 |
|
|
|
87.4 |
|
|
|
3.4 |
% |
| Broadcasting revenue |
|
|
39.3 |
|
|
|
35.0 |
|
|
|
12.3 |
% |
| Matchday revenue |
|
|
27.4 |
|
|
|
21.3 |
|
|
|
28.6 |
% |
| Total operating expenses |
|
|
(184.7 |
) |
|
|
(163.7 |
) |
|
|
(12.8) |
% |
| Employee benefit expenses |
|
|
(90.3 |
) |
|
|
(82.3 |
) |
|
|
(9.7) |
% |
| Other operating expenses |
|
|
(43.5 |
) |
|
|
(37.8 |
) |
|
|
(15.1) |
% |
| Depreciation |
|
|
(4.1 |
) |
|
|
(3.5 |
) |
|
|
(17.1) |
% |
| Amortization |
|
|
(46.8 |
) |
|
|
(40.1 |
) |
|
|
(16.7) |
% |
| Profit on disposal of intangible assets |
|
|
29.5 |
|
|
|
16.6 |
|
|
|
77.7 |
% |
| Net finance costs |
|
|
(34.7 |
) |
|
|
(31.0 |
) |
|
|
(11.9) |
% |
| Income tax credit |
|
|
7.0 |
|
|
|
7.9 |
|
|
|
(11.4) |
% |
| Loss after tax |
|
|
(25.8 |
) |
|
|
(26.5 |
) |
|
|
2.6 |
% |
Revenue
Total revenue for the three months ended 30 September 2023
was £157.1 million, an increase of £13.4 million, or 9.3%, over the three months ended 30 September 2023, as
a result of an increase in all of our revenue sectors, as described below.
Commercial revenue
Commercial revenue for the three months ended
30 September 2023 was £90.4 million, an increase of £3.0 million, or 3.4%, over the three months ended 30 September 2022.
| • | Sponsorship revenue for the three months ended 30 September 2023 was £56.2 million,
a decrease of £1.6 million, or 2.8%, over the three months ended 30 September 2022; and |
| • | Retail, Merchandising, Apparel & Product Licensing revenue for the three months ended
30 September 2023 was £34.2 million, an increase of £4.6 million, or 15.5%, over the three months ended 30 September 2022,
primarily due to successful kit launches and strong Megastore performance. |
Broadcasting revenue
Broadcasting revenue for the three months ended
30 September 2023 was £39.3 million, an increase of £4.3 million, or 12.3%, over the three months ended 30 September 2022,
primarily due to our men’s first team participating in the UEFA Champions League compared to the UEFA Europa League in the prior
year quarter, as well as increased income from the Premier League.
Matchday revenue
Matchday revenue for the three months ended 30
September 2023 was £27.4 million, an increase of £6.1 million, or 28.6%, over the prior year quarter, primarily due to
playing one more home game 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) for the three months ended 30 September 2023 were £184.7 million,
an increase of £21.0 million, or 12.8%, over the three months ended 30 September 2022.
Employee benefit expenses
Employee benefit expenses for the three months
ended 30 September 2023 were £90.3 million, an increase of £8.0 million, or 9.7%, over the three months ended
30 September 2022 primarily due to the men’s first team participating in the UEFA Champions League in the current year, in
addition to investment in the first team playing squad.
Other operating expenses
Other operating expenses for the three months
ended 30 September 2023 were £43.5 million, an increase of £5.7 million, or 15.1%, over the three months ended
30 September 2022. This is primarily due to increased commercial costs and increased matchday costs, due to hosting one additional
home game in the current year quarter.
Depreciation
Depreciation for the three months ended 30 September 2023
was £4.1 million, an increase of £0.6 million, or 17.1%, over the three months ended 30 September 2022.
Amortization
Amortization, primarily of players’ registrations,
for the three months ended 30 September 2023 was £46.8 million, an increase of £6.7 million, or 16.7%, over
the three months ended 30 September 2022, due to investment in the first team playing squad. The unamortized balance of registrations
at 30 September 2023 was £539.9 million.
Profit on disposal of intangible assets
Profit on disposal of intangible assets for the
three months ended 30 September 2023 was £29.5 million, an increase of £12.9 million, or 77.7%, over the three months
ended 30 September 2022, primarily due to the disposals of Elanga, Fred and Henderson.
Net finance costs
Net finance costs for the three months ended 30
September 2023 were £34.7 million, an increase of £3.7 million, or 11.9%, over the three months ended 30 September 2022,
primarily due to an unfavourable swing in foreign exchange rates resulting in unrealized foreign exchange losses on unhedged USD borrowings.
Income tax
The income tax credit for the three months ended
30 September 2023 was £7.0 million, compared with an income tax credit of £7.9 million in the three months ended 30 September 2022.
LIQUIDITY AND CAPITAL RESOURCES
Our primary cash requirements stem from the payment
of transfer fees for the acquisition of players’ registrations, capital expenditure 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 30 September, we had cash resources of £80.8 million, with all funds held as cash and cash equivalents and therefore
available on demand. As of 30 September 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 30 September 2023, we had £200 million of outstanding loans under our revolving facilities
and access to undrawn revolving facilities of £100 million. Subsequent to the quarter end, a further drawdown of £60 million
was made, taking our total drawdown to £260 million and our undrawn facilities to £40 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 three months ended 30 September 2023 and 2022:
| | |
Three months ended
30 September
(in £ millions) | |
| | |
2023 | | |
2022 | |
| Cash flow from operating activities | |
| | | |
| | |
| Cash generated from operations | |
| 25.9 | | |
| 3.6 | |
| Net interest paid | |
| (10.2 | ) | |
| (9.6 | ) |
| Tax refunded/(paid) | |
| 5.8 | | |
| (0.0 | ) |
| Net cash inflow/(outflow) from operating activities | |
| 21.5 | | |
| (6.0 | ) |
| Cash flow from investing activities | |
| | | |
| | |
| Payments for property, plant and equipment | |
| (9.1 | ) | |
| (4.4 | ) |
| Payments for intangible assets | |
| (132.2 | ) | |
| (100.0 | ) |
| Proceeds from sale of intangible assets | |
| 25.7 | | |
| 11.7 | |
| Net cash outflow from investing activities | |
| (115.6 | ) | |
| (92.7 | ) |
| Cash flow from financing activities | |
| | | |
| | |
| Proceeds from borrowings | |
| 100.0 | | |
| - | |
| Principal elements of lease payments | |
| (0.2 | ) | |
| (0.9 | ) |
| Net cash inflow/(outflow) from financing activities | |
| 99.8 | | |
| (0.9 | ) |
| Net increase/(decrease)
in cash and cash equivalents(1) | |
| 5.7 | | |
| (99.6 | ) |
(1) Excludes the effect of exchange
rate changes on cash and cash equivalents.
Net cash inflow/(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 revenue from the Premier League and UEFA and sponsorship
and other commercial revenue. Cash generated from operations for the three months ended 30 September 2023 was £25.9 million,
compared to £3.6 million for the three months ended 30 September 2022.
Additional changes in net cash inflow/(outflow)
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 inflow from operating activities for the three months ended 30 September 2023
was £21.5 million, compared to net cash outflow of £6.0 million for the three months ended 30 September 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 three months ended 30 September 2023 was £115.6 million, an increase of £22.9 million from £92.7 million for
the three months ended 30 September 2022.
For the three months ended 30 September 2023,
net capital expenditure on property, plant and equipment was £9.1 million, an increase of £4.7 million from net expenditure
of £4.4 million for the three months ended 30 September 2022.
For the three months ended 30 September 2023,
net capital expenditure on intangible assets was £106.5 million, an increase of £18.2 million from net expenditure
of £88.3 million for the three months ended 30 September 2022.
Net cash outflow from financing activities
Net cash inflow from financing activities for
the three months ended 30 September 2023 was £99.8 million, compared to net cash outflow of £0.9 million for the three
months ended 30 September 2022, due to a £100.0 million drawdown on our revolving facilities.
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 30 September 2023 the
sterling equivalent of £346.1 million (net of unamortized issue costs of £2.0 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 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. 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 although these dispensations
have never been claimed. 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 of 30 September 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 30 September 2023 the sterling equivalent of £182.7 million (net of unamortized issue costs of £1.7
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 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. 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 although these dispensations have never been claimed.
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 of 30 September 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”) agreement 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 30 September 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 agreement
are consistent with the initial revolving facilities agreement. As of 30 September 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 30 September 2023, we had £50 million in outstanding loans and £25 million in borrowing capacity under our
revolving facility agreement.
The bilateral revolving facility has a maturity
date of 25 June 2027.
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 30 September 2023 is £150.1 million
(30 June 2023: £133.1 million; 30 September 2022: £149.0 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 30 September 2023, we believe receipt of £nil to be probable (30 June 2023: £nil;
30 September 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 30 September 2023, we had not entered
into any other off-balance sheet transactions.
Manchester United plc
Interim consolidated statement of loss - unaudited
| | |
| | |
Three months ended
30 September | |
| | |
Note | | |
2023
£’000 | | |
2022
£’000 | |
| Revenue from contracts with customers | |
| 6 | | |
| 157,096 | | |
| 143,654 | |
| Operating expenses | |
| 7 | | |
| (184,762 | ) | |
| (163,644 | ) |
| Profit on disposal of intangible assets | |
| 8 | | |
| 29,481 | | |
| 16,608 | |
| Operating profit/(loss) | |
| | | |
| 1,815 | | |
| (3,382 | ) |
| Finance costs | |
| | | |
| (34,968 | ) | |
| (49,730 | ) |
| Finance income | |
| | | |
| 349 | | |
| 18,742 | |
| Net finance costs | |
| 9 | | |
| (34,619 | ) | |
| (30,988 | ) |
| Loss before income tax | |
| | | |
| (32,804 | ) | |
| (34,370 | ) |
| Income tax credit | |
| 10 | | |
| 7,047 | | |
| 7,854 | |
| Loss for the period | |
| | | |
| (25,757 | ) | |
| (26,516 | ) |
| | |
| | | |
| | | |
| | |
| Loss per share during the period: | |
| | | |
| | | |
| | |
| Basic and diluted loss per share (pence)(1) | |
| 11 | | |
| (15.79 | ) | |
| (16.26 | ) |
(1) For the three months ended 30 September 2023
and the three months ended 30 September 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
30 September |
|
| |
|
2023
£’000 |
|
|
2022
£’000 |
|
| Loss for the period |
|
|
(25,757 |
) |
|
|
(26,516 |
) |
| Other comprehensive (loss)/income: |
|
|
|
|
|
|
|
|
| Items that may be reclassified to profit or loss |
|
|
|
|
|
|
|
|
| Movement on hedges |
|
|
(9,266 |
) |
|
|
(388 |
) |
| Income tax credit relating to movements on hedges |
|
|
2,317 |
|
|
|
97 |
|
| Other comprehensive loss for the period, net of income tax |
|
|
(6,949 |
) |
|
|
(291 |
) |
| Total comprehensive loss for the period |
|
|
(32,706 |
) |
|
|
(26,807 |
) |
See accompanying notes to the interim consolidated financial statements.
Manchester United plc
Interim consolidated balance sheet - unaudited
| | |
| | |
As of | |
| | |
Note | | |
30 September
2023
£’000 | | |
30 June
2023
£’000 | | |
30 September
2022
£’000 | |
| ASSETS | |
| | | |
| | | |
| | | |
| | |
| Non-current assets | |
| | | |
| | | |
| | | |
| | |
| Property, plant and equipment | |
| 12 | | |
| 256,961 | | |
| 253,282 | | |
| 244,642 | |
| Right-of-use assets | |
| 13 | | |
| 8,417 | | |
| 8,760 | | |
| 3,677 | |
| Investment properties | |
| 14 | | |
| 19,923 | | |
| 19,993 | | |
| 20,203 | |
| Intangible assets | |
| 15 | | |
| 966,766 | | |
| 812,382 | | |
| 920,941 | |
| Deferred tax asset | |
| 16 | | |
| 6,244 | | |
| - | | |
| 644 | |
| Trade receivables | |
| 18 | | |
| 45,014 | | |
| 22,303 | | |
| 19,325 | |
| Derivative financial instruments | |
| 19 | | |
| 190 | | |
| 7,492 | | |
| 36,683 | |
| | |
| | | |
| 1,303,515 | | |
| 1,124,212 | | |
| 1,246,115 | |
| Current assets | |
| | | |
| | | |
| | | |
| | |
| Inventories | |
| 17 | | |
| 5,046 | | |
| 3,165 | | |
| 3,752 | |
| Prepayments | |
| | | |
| 36,418 | | |
| 16,487 | | |
| 30,912 | |
| Contract assets – accrued revenue | |
| 6.2 | | |
| 47,343 | | |
| 43,332 | | |
| 46,139 | |
| Trade receivables | |
| 18 | | |
| 28,920 | | |
| 31,167 | | |
| 51,224 | |
| Other receivables | |
| | | |
| 11,677 | | |
| 9,928 | | |
| 1,929 | |
| Income tax receivable | |
| | | |
| - | | |
| 5,317 | | |
| 4,547 | |
| Derivative financial instruments | |
| 19 | | |
| 6,646 | | |
| 8,317 | | |
| 12,137 | |
| Cash and cash equivalents | |
| 20 | | |
| 80,829 | | |
| 76,019 | | |
| 24,277 | |
| | |
| | | |
| 216,879 | | |
| 193,732 | | |
| 174,917 | |
| Total assets | |
| | | |
| 1,520,394 | | |
| 1,317,944 | | |
| 1,421,032 | |
See accompanying notes to the interim consolidated financial statements.
Manchester United plc
Interim consolidated balance sheet
– unaudited (continued)
| | |
| | |
As of | |
| | |
Note | | |
30
September 2023 £’000 | | |
30 June
2023
£’000 | | |
30 September
2022
£’000 | |
| EQUITY AND LIABILITIES | |
| | | |
| | | |
| | | |
| | |
| Equity | |
| | | |
| | | |
| | | |
| | |
| Share capital | |
| 21 | | |
| 53 | | |
| 53 | | |
| 53 | |
| Share premium | |
| | | |
| 68,822 | | |
| 68,822 | | |
| 68,822 | |
| Treasury shares | |
| 22 | | |
| (21,305 | ) | |
| (21,305 | ) | |
| (21,305 | ) |
| Merger reserve | |
| | | |
| 249,030 | | |
| 249,030 | | |
| 249,030 | |
| Hedging reserve | |
| | | |
| (2,947 | ) | |
| 4,002 | | |
| 659 | |
| Retained deficit | |
| | | |
| (221,669 | ) | |
| (196,652 | ) | |
| (196,029 | ) |
| Total equity | |
| | | |
| 71,984 | | |
| 103,950 | | |
| 101,230 | |
| Non-current liabilities | |
| | | |
| | | |
| | | |
| | |
| Deferred tax liabilities | |
| 16 | | |
| - | | |
| 3,304 | | |
| - | |
| Contract liabilities – deferred revenue | |
| 6.2 | | |
| 7,816 | | |
| 6,659 | | |
| 20,382 | |
| Trade and other payables | |
| 23 | | |
| 203,853 | | |
| 161,141 | | |
| 172,977 | |
| Borrowings | |
| 24 | | |
| 528,787 | | |
| 507,335 | | |
| 577,367 | |
| Lease liabilities | |
| 13 | | |
| 7,766 | | |
| 7,844 | | |
| 2,588 | |
| Derivative financial instruments | |
| 19 | | |
| 850 | | |
| 748 | | |
| - | |
| Provisions | |
| 25 | | |
| 95 | | |
| 93 | | |
| 11,706 | |
| | |
| | | |
| 749,167 | | |
| 687,124 | | |
| 785,020 | |
| Current liabilities | |
| | | |
| | | |
| | | |
| | |
| Contract liabilities - deferred revenue | |
| 6.2 | | |
| 214,666 | | |
| 169,624 | | |
| 171,344 | |
| Trade and other payables | |
| 23 | | |
| 267,728 | | |
| 236,472 | | |
| 258,443 | |
| Income tax liabilities | |
| | | |
| 684 | | |
| - | | |
| - | |
| Borrowings | |
| 24 | | |
| 204,380 | | |
| 105,961 | | |
| 102,892 | |
| Lease liabilities | |
| 13 | | |
| 971 | | |
| 1,036 | | |
| 1,000 | |
| Derivative financial instruments | |
| 19 | | |
| 499 | | |
| 931 | | |
| - | |
| Provisions | |
| 25 | | |
| 10,315 | | |
| 12,846 | | |
| 1,103 | |
| | |
| | | |
| 699,243 | | |
| 526,870 | | |
| 534,782 | |
| Total equity and liabilities | |
| | | |
| 1,520,394 | | |
| 1,317,944 | | |
| 1,421,032 | |
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 | |
Retained earnings £’000 | |
Total equity £’000 | |
| Balance at 30 June 2022 | |
53 | |
| 68,822 | |
| (21,305 | ) |
| 249,030 | |
| 950 | |
| (170,042 | ) |
| 127,508 | |
| Loss for the period | |
- | |
| - | |
| - | |
| - | |
| - | |
| (26,516 | ) |
| (26,516 | ) |
| Cash flow hedges | |
- | |
| - | |
| - | |
| - | |
| (388 | ) |
| - | |
| (388 | ) |
| Tax credit relating to movement on hedges | |
- | |
| - | |
| - | |
| - | |
| 97 | |
| - | |
| 97 | |
| Total comprehensive loss for the period | |
- | |
| - | |
| - | |
| - | |
| (291 | ) |
| (26,516 | ) |
| (26,807 | ) |
| Equity-settled share-based payments | |
- | |
| - | |
| - | |
| - | |
| - | |
| 529 | |
| 529 | |
| Balance at 30 September 2022 | |
53 | |
| 68,822 | |
| (21,305 | ) |
| 249,030 | |
| 659 | |
| (196,029 | ) |
| 101,230 | |
| Loss for the period | |
- | |
| - | |
| - | |
| - | |
| - | |
| (2,162 | ) |
| (2,162 | ) |
| Cash flow hedges | |
- | |
| - | |
| - | |
| - | |
| 4,458 | |
| - | |
| 4,458 | |
| Tax expense relating to movement on hedges | |
- | |
| - | |
| - | |
| - | |
| (1,115 | ) |
| - | |
| (1,115 | ) |
| Total comprehensive loss for the period | |
- | |
| - | |
| - | |
| - | |
| 3,343 | |
| (2,162 | ) |
| 1,181 | |
| Equity-settled share-based payments | |
- | |
| - | |
| - | |
| - | |
| - | |
| 1,224 | |
| 1,224 | |
| Deferred tax credit relating to share-based payments | |
- | |
| - | |
| - | |
| - | |
| - | |
| 315 | |
| 315 | |
| Balance at 30 June 2023 | |
53 | |
| 68,822 | |
| (21,305 | ) |
| 249,030 | |
| 4,002 | |
| (196,652 | ) |
| 103,950 | |
| Loss for the period | |
- | |
| - | |
| - | |
| - | |
| - | |
| (25,757 | ) |
| (25,757 | ) |
| Cash flow hedges | |
- | |
| - | |
| - | |
| - | |
| (9,265 | ) |
| - | |
| (9,265 | ) |
| Tax credit relating to movement on hedges | |
- | |
| - | |
| - | |
| - | |
| 2,316 | |
| - | |
| 2,316 | |
| Total comprehensive loss for the period | |
- | |
| - | |
| - | |
| - | |
| (6,949 | ) |
| (25,757 | ) |
| (32,706 | ) |
| Equity-settled share-based payments | |
- | |
| - | |
| - | |
| - | |
| - | |
| 740 | |
| 740 | |
| Balance at 30 September 2023 | |
53 | |
| 68,822 | |
| (21,305 | ) |
| 249,030 | |
| (2,947 | ) |
| (221,669 | ) |
| 71,984 | |
See accompanying notes to the interim
consolidated financial statements.
Manchester United plc
Interim consolidated statement of
cash flows - unaudited
| | |
| | |
Three months ended 30 September | |
| | |
Note | | |
2023 £’000 | | |
2022 £’000 | |
| Cash flow from operating activities | |
| | | |
| | | |
| | |
| Cash generated from operations | |
| 26 | | |
| 25,871 | | |
| 3,619 | |
| Interest paid | |
| | | |
| (10,574 | ) | |
| (9,628 | ) |
| Interest received | |
| | | |
| 349 | | |
| 18 | |
| Tax refunded/(paid) | |
| | | |
| 5,817 | | |
| (52 | ) |
| Net cash inflow/(outflow) from operating activities | |
| | | |
| 21,463 | | |
| (6,043 | ) |
| Cash flow from investing activities | |
| | | |
| | | |
| | |
| Payments for property, plant and equipment | |
| | | |
| (9,029 | ) | |
| (4,393 | ) |
| Payments for intangible assets(1) | |
| | | |
| (132,213 | ) | |
| (100,024 | ) |
| Proceeds from sale of intangible assets(1) | |
| | | |
| 25,669 | | |
| 11,662 | |
| Net cash outflow from investing activities | |
| | | |
| (115,573 | ) | |
| (92,755 | ) |
| Cash flow from financing activities | |
| | | |
| | | |
| | |
| Proceeds from borrowings | |
| | | |
| 100,000 | | |
| - | |
| Principal elements of lease payments | |
| | | |
| (200 | ) | |
| (878 | ) |
| Net cash inflow/(outflow) from financing activities | |
| | | |
| 99,800 | | |
| (878 | ) |
| Effect of exchange rate changes on cash and cash equivalents | |
| | | |
| (880 | ) | |
| 2,730 | |
| Net increase/(decrease) in cash and cash equivalents | |
| | | |
| 4,810 | | |
| (96,946 | ) |
| Cash and cash equivalents at beginning of period | |
| | | |
| 76,019 | | |
| 121,223 | |
| Cash and cash equivalents at end of period | |
| 20 | | |
| 80,829 | | |
| 24,277 | |
(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 payments terms to spread over more
than one year and consideration may also include non-cash items. Details of registrations additions and disposals are provided in Note
15. Trade payables in relation to the acquisition of registrations at the reporting date are provided in Note 23. Trade receivables in
relation to the disposal of registrations at the reporting date are provided in Note 18.
See accompanying notes to the interim
consolidated financial statements.
Manchester United plc
Notes to the interim consolidated
financial statements – unaudited (continued)
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 17 January 2024.
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 2023, as filed with the Securities and
Exchange Commission on 27 October 2023, 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 30 September 2023 of £80.8 million, with all funds held as cash and cash equivalents and therefore available
on demand. As of 30 September 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 30 September 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 30 September 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 – unaudited (continued)
3 Accounting
policies
The accounting
policies adopted are consistent with those of the consolidated financial statements for the year ended 30 June 2023, 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
The following amendment
to standards has been adopted by the Group for the first time for the year ended 30 June 2024:
| · | Deferred
Tax Related to Assets and Liabilities Arising from a Single Transaction (Amendments to IAS
1) |
The adoption of
this amendment has not had a material effect on the Group’s financial statements.
New and amended
standards and interpretations issued but not yet adopted
The following amendment
to IFRS that has been issued by the IASB will become effective in a subsequent accounting period:
| · | Classification
of Liabilities as Current or Non-current (Amendments to IAS 1) |
This change is
not expected to have a material effect on the Group’s financial statements.
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 value of registrations – see Note 15 |
| · | Recognition
of deferred tax assets – see Note 16 |
| · | Recognition
of tax related provisions – see Note 25 |
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 2023.
Manchester United plc
Notes to the interim consolidated
financial statements – unaudited (continued)
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.
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.
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).
On 21 July 2023,
the Group signed a 10-year extension to its agreement with adidas which began on 1 August 2015 and now terminates on 30 June 2035.
The minimum guarantee payable over the term of this extended agreement is £750 million per the original term and an additional
£900 million due under the extension, resulting in a total of £1,650 million, subject to certain adjustments. Payments due
in a particular year may increase if the club’s men’s or women’s first teams win the Premier League or Women’s
Super League respectively, FA Cup or continental competitions with the maximum possible increase being £4.4 million per annum.
Payments may decrease if the men’s first team fails to participate in the UEFA Champions League. Under the original term, if the
men’s first team did not participate in the UEFA Champions League for two or more consecutive seasons, a deduction of 30% was made
in the second or other consecutive year of non-participation. As a result of the men’s first team qualifying for the 2023/24 Champions
League, no deductions are due under the original term and there is no critical accounting estimate in relation to the original term.
Under the extended term, this clause has been amended to state that a £10 million deduction will be applied for each year of non-participation
in the UEFA Champions League, commencing from the 2025/26 season and a critical accounting estimate exists in estimating the value of
any such deductions over the life of the contract. The total revenue of this contract including the estimated deduction in respect of
the Champions League clause is recognized evenly over the life of contract and the impact of changing the estimated deduction by one
year on revenue recognized in any one financial year is £0.8 million.
Manchester
United plc
Notes to the interim consolidated
financial statements – unaudited (continued)
5 Seasonality
of revenue (continued)
In line with IFRS
15, management re-assess this estimate at the end of each reporting period and will make adjustments to revenue recognition as appropriate.
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).
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 – unaudited (continued)
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 30 September | |
| | |
2023 £’000 | | |
2022
£’000 | |
| Sponsorship | |
| 56,166 | | |
| 57,811 | |
| Retail, merchandising, apparel & product licensing | |
| 34,215 | | |
| 29,577 | |
| Commercial | |
| 90,381 | | |
| 87,388 | |
| Domestic competitions | |
| 29,944 | | |
| 27,627 | |
| European competitions | |
| 7,515 | | |
| 5,687 | |
| Other | |
| 1,888 | | |
| 1,689 | |
| Broadcasting | |
| 39,347 | | |
| 35,003 | |
| Matchday | |
| 27,368 | | |
| 21,263 | |
| | |
| 157,096 | | |
| 143,654 | |
All non-current assets, other than US
deferred tax assets, are held within the United Kingdom.
| 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 2022 | |
| 36,239 | |
| Recognized in revenue during the period | |
| 52,576 | |
| Cash received/amounts invoiced during the period | |
| (42,676 | ) |
| At 30 September 2022 | |
| 46,139 | |
| Recognized in revenue during the period | |
| 158,114 | |
| Cash received/amounts invoiced during the period | |
| (160,921 | ) |
| At 30 June 2023 | |
| 43,332 | |
| Recognized in revenue during the period | |
| 56,700 | |
| Cash received/amounts invoiced during the period | |
| (52,689 | ) |
| At 30 September 2023 | |
| 47,343 | |
Manchester United plc
Notes to the interim consolidated
financial statements – unaudited (continued)
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 2022 | |
| (165,847 | ) | |
| (16,697 | ) | |
| (182,544 | ) |
| Recognized in revenue during the period | |
| 101,985 | | |
| | | |
| 101,985 | |
| Cash received/amounts invoiced during the period | |
| (111,167 | ) | |
| - | | |
| (111,167 | ) |
| Reclassified to current during the period | |
| 3,685 | | |
| (3,685 | ) | |
| - | |
| At 30 September 2022 | |
| (171,344 | ) | |
| (20,382 | ) | |
| (191,726 | ) |
| Recognized in revenue during the period | |
| 120,167 | | |
| - | | |
| 120,167 | |
| Cash received/amounts invoiced during the period | |
| (104,724 | ) | |
| - | | |
| (104,724 | ) |
| Reclassified to current during the period | |
| (13,723 | ) | |
| 13,723 | | |
| - | |
| At 30 June 2023 | |
| (169,624 | ) | |
| (6,659 | ) | |
| (176,283 | ) |
| Recognized in revenue during the period | |
| 109,092 | | |
| | | |
| 108,818 | |
| Cash received/amounts invoiced during the period | |
| (155,291 | ) | |
| - | | |
| (155,017 | ) |
| Reclassified to current during the period | |
| 1,157 | | |
| (1,157 | ) | |
| - | |
| At 30 September 2023 | |
| (214,666 | ) | |
| (7,816 | ) | |
| (222,482 | ) |
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 – unaudited (continued)
| | |
Three months ended 30 September | |
| | |
2023 £’000 | | |
2022
£’000 | |
| Employee benefit expenses | |
| (90,292 | ) | |
| (82,256 | ) |
| Depreciation - property, plant and equipment (Note 12) | |
| (3,721 | ) | |
| (2,974 | ) |
| Depreciation – right-of-use assets (Note 13) | |
| (311 | ) | |
| (434 | ) |
| Depreciation - investment property (Note 14) | |
| (70 | ) | |
| (70 | ) |
| Amortization – intangible assets (Note 15) | |
| (46,845 | ) | |
| (40,139 | ) |
| Other operating expenses | |
| (43,523 | ) | |
| (37,771 | ) |
| | |
| (184,762 | ) | |
| (163,644 | ) |
| 8 | Profit
on disposal of intangible assets |
| | |
Three months ended 30 September | |
| | |
2023
£’000 | | |
2022
£’000 | |
| Profit on disposal of registrations | |
| 29,481 | | |
| 16,608 | |
| | |
| 29,481 | | |
| 16,608 | |
Manchester
United plc
Notes to the interim consolidated
financial statements – unaudited (continued)
9 Net
finance costs
| | |
Three months ended 30 September | |
| | |
2023
£’000 | | |
2022
£’000 | |
| Interest payable on bank loans and overdrafts | |
| (248 | ) | |
| (813 | ) |
| Interest payable on secured term loan facility, senior secured notes and revolving facilities | |
| (8,391 | ) | |
| (6,210 | ) |
| Interest payable on lease liabilities (Note 13) | |
| (276 | ) | |
| (23 | ) |
| Amortization of issue costs on secured term loan facility and senior secured notes | |
| (183 | ) | |
| (177 | ) |
| Foreign exchange losses on retranslation of unhedged US dollar borrowings (1) | |
| (13,753 | ) | |
| (40,440 | ) |
| Unwinding of discount relating to registrations | |
| (3,480 | ) | |
| (1,172 | ) |
| Interest on provisions | |
| (87 | ) | |
| (60 | ) |
| Hedge ineffectiveness on cash flow hedges | |
| (387 | ) | |
| (835 | ) |
| Fair value movement on derivative financial instruments: | |
| | | |
| | |
| Embedded foreign exchange derivatives | |
| (8,163 | ) | |
| - | |
| Total finance costs | |
| (34,968 | ) | |
| (49,730 | ) |
| Interest receivable on short-term bank deposits | |
| 349 | | |
| 130 | |
| Fair value movement on derivative financial instruments: | |
| | | |
| | |
| Embedded foreign exchange derivatives | |
| - | | |
| 18,612 | |
| Total finance income | |
| 349 | | |
| 18,742 | |
| Net finance costs | |
| (34,619 | ) | |
| (30,988 | ) |
(1) Unrealized foreign
exchange losses on unhedged USD borrowings due to an unfavorable swing in foreign exchange rates.
Manchester
United plc
Notes
to the interim consolidated financial statements – unaudited (continued)
10 Income
tax expense
| | |
Three
months ended 30 September | |
| | |
2023
£’000 | | |
2022
£’000 | |
| Current
tax | |
| | | |
| | |
| Current
tax on loss for the period | |
| (69 | ) | |
| (69 | ) |
| Foreign
tax | |
| (115 | ) | |
| (26 | ) |
| Total
current tax expense | |
| (184 | ) | |
| (95 | ) |
| Deferred
tax | |
| | | |
| | |
| Origination
and reversal of temporary differences | |
| 7,231 | | |
| 7,949 | |
| Total
deferred tax credit | |
| 7,231 | | |
| 7,949 | |
| Total
income tax credit | |
| 7,047 | | |
| 7,854 | |
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 2024 is 21.84% (30 June 2023:
22.93%).
The
current year estimated weighted average annual tax rate of 21.84% is driven by UK deferred tax movements, recognized at the UK Corporation
tax rate of 25%.
In
addition to the amount recognized in the income statement, the following amounts relating to tax have been recognized directly in other
comprehensive income:
| | |
Three
months ended 30 September | |
| | |
2023
£’000 | | |
2022
£’000 | |
| Deferred
tax (Note 16) | |
| 2,317 | | |
| 97 | |
| Total
income tax credit recognized in other comprehensive income | |
| 2,317 | | |
| 97 | |
Manchester
United plc
Notes
to the interim consolidated financial statements – unaudited (continued)
11 Loss
per share
| | |
Three
months ended 30 September | |
| | |
2023 | | |
2022 | |
| Loss
for the period (£’000) | |
| (25,757 | ) | |
| (26,516 | ) |
| Basic
and diluted loss per share (pence) (1) | |
| (15.79 | ) | |
| (16.26 | ) |
(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 period 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 the issue of the potential ordinary shares.
(iii) Weighted
average number of shares used as the denominator
| | |
Three
months ended 30 September | |
| | |
2023 Number ‘000 | | |
2022
Number
‘000 | |
| Class A
ordinary shares | |
| 52,110 | | |
| 52,013 | |
| Class B
ordinary shares | |
| 112,732 | | |
| 112,732 | |
| Treasury
shares | |
| (1,683 | ) | |
| (1,683 | ) |
| Weighted
average number of ordinary shares used as the denominator in calculating basic and diluted loss per share (1) | |
| 163,159 | | |
| 163,062 | |
(1) For
the three months ended 30 September 2023 and the three months ended 30 September 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 – unaudited (continued)
12 Property,
plant and equipment
| |
|
Freehold
property
£’000 |
|
|
Plant
and
machinery
£’000 |
|
|
Fixtures
and fittings
£’000 |
|
|
Total
£’000 |
|
| At
1 July 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost |
|
|
287,413 |
|
|
|
46,706 |
|
|
|
75,873 |
|
|
|
409,992 |
|
| Accumulated
depreciation |
|
|
(66,677 |
) |
|
|
(35,094 |
) |
|
|
(54,939 |
) |
|
|
(156,710 |
) |
| Net
book amount |
|
|
220,736 |
|
|
|
11,612 |
|
|
|
20,934 |
|
|
|
253,282 |
|
| Three
months ended 30 September 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Opening
net book amount |
|
|
220,736 |
|
|
|
11,612 |
|
|
|
20,934 |
|
|
|
253,282 |
|
Additions
|
|
|
2,510 |
|
|
|
1,156 |
|
|
|
3,734 |
|
|
|
7,400 |
|
| Depreciation
charge |
|
|
(869 |
) |
|
|
(1,203 |
) |
|
|
(1,649 |
) |
|
|
(3,721 |
) |
| Closing
net book amount |
|
|
222,377 |
|
|
|
11,565 |
|
|
|
23,019 |
|
|
|
256,961 |
|
| At
30 September 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost |
|
|
289,923 |
|
|
|
47,862 |
|
|
|
79,607 |
|
|
|
417,392 |
|
| Accumulated
depreciation |
|
|
(67,546 |
) |
|
|
(36,297 |
) |
|
|
(56,588 |
) |
|
|
(160,431 |
) |
| Net
book amount |
|
|
222,377 |
|
|
|
11,565 |
|
|
|
23,019 |
|
|
|
256,961 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| At
1 July 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost |
|
|
281,377 |
|
|
|
39,561 |
|
|
|
75,393 |
|
|
|
396,331 |
|
| Accumulated
depreciation |
|
|
(63,261 |
) |
|
|
(34,293 |
) |
|
|
(56,115 |
) |
|
|
(153,669 |
) |
| Net
book amount |
|
|
218,116 |
|
|
|
5,268 |
|
|
|
19,278 |
|
|
|
242,662 |
|
| Three
months ended 30 September 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Opening
net book amount |
|
|
218,116 |
|
|
|
5,268 |
|
|
|
19,278 |
|
|
|
242,662 |
|
Additions
|
|
|
1,555 |
|
|
|
630 |
|
|
|
2,769 |
|
|
|
4,954 |
|
| Depreciation
charge |
|
|
(850 |
) |
|
|
(677 |
) |
|
|
(1,447 |
) |
|
|
(2,974 |
) |
| Closing
net book amount |
|
|
218,821 |
|
|
|
5,221 |
|
|
|
20,600 |
|
|
|
244,642 |
|
| At
30 September 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost |
|
|
282,932 |
|
|
|
40,191 |
|
|
|
78,162 |
|
|
|
401,285 |
|
| Accumulated
depreciation |
|
|
(64,111 |
) |
|
|
(34,970 |
) |
|
|
(57,562 |
) |
|
|
(156,643 |
) |
| Net
book amount |
|
|
218,821 |
|
|
|
5,221 |
|
|
|
20,600 |
|
|
|
244,642 |
|
Manchester
United plc
Notes
to the interim consolidated financial statements – unaudited (continued)
13 Leases
(i) Amounts
recognized in the consolidated balance sheet
The
balance sheet shows the following amounts relating to leases:
Right-of-use
assets:
| | |
30
September 2023
£’000 | | |
30
June
2023
£’000 | | |
30
September
2022
£’000 | |
| Property | |
| 7,898 | | |
| 8,114 | | |
| 3,286 | |
| Plant
and machinery | |
| 519 | | |
| 646 | | |
| 391 | |
| Total | |
| 8,417 | | |
| 8,760 | | |
| 3,677 | |
Additions
to right-of-use assets for the three months ended 30 September 2023 amounted to £nil (2022: £39,000) and for the year
ended 30 June 2023 amounted to £6,384,000.
Lease
liabilities:
| |
|
30
September 2023
£’000 |
|
|
30
June
2023
£’000 |
|
|
30
September
2022
£’000 |
|
| Current |
|
|
971 |
|
|
|
1,036 |
|
|
|
1,000 |
|
| Non-current |
|
|
7,766 |
|
|
|
7,844 |
|
|
|
2,588 |
|
| Total
lease liabilities |
|
|
8,737 |
|
|
|
8,880 |
|
|
|
3,588 |
|
The
following table provides an analysis of the movements in lease liabilities:
| | |
£’000 | |
| At 1 July 2022 | |
| 4,430 | |
| Cash flows | |
| (903 | ) |
| Additions | |
| 38 | |
| Accretion
expense | |
| 23 | |
| At 30 September 2022 | |
| 3,588 | |
| Cash flows | |
| (1,239 | ) |
| Additions | |
| 6,346 | |
| Accretion
expense | |
| 185 | |
| At 30 June 2023 | |
| 8,880 | |
| Cash flows | |
| (455 | ) |
| Additions | |
| 36 | |
| Accretion
expense | |
| 276 | |
| At
30 September 2023 | |
| 8,737 | |
Manchester
United plc
Notes
to the interim consolidated financial statements – unaudited (continued)
13 Leases
(continued)
(ii) Amounts
recognized in the consolidated statement of profit or loss
| | |
Three
months ended 30 September | |
| | |
2023
£’000 | | |
2022
£’000 | |
| Depreciation
charge of right-of-use assets | |
| | | |
| | |
| Property | |
| (216 | ) | |
| (369 | ) |
| Plant
and machinery | |
| (95 | ) | |
| (65 | ) |
| | |
| (311 | ) | |
| (434 | ) |
| Interest
expense (included in finance cost) | |
| (276 | ) | |
| (23 | ) |
| Expenses
relating to short-term leases (included in operating expenses) | |
| (72 | ) | |
| (95 | ) |
| Expenses
relating to low value leases (included in operating expenses) | |
| - | | |
| (11 | ) |
Manchester
United plc
Notes
to the interim consolidated financial statements – unaudited (continued)
14 Investment
property
| |
|
Total
£’000 |
|
| At
1 July 2023 |
|
|
|
|
| Cost |
|
|
32,193 |
|
| Accumulated
depreciation and impairment |
|
|
(12,200 |
) |
| Net
book amount |
|
|
19,993 |
|
| Three
months ended 30 September 2023 |
|
|
|
|
| Opening
net book amount |
|
|
19,993 |
|
| Depreciation
charge |
|
|
(70 |
) |
| Closing
net book amount |
|
|
19,923 |
|
| At
30 September 2023 |
|
|
|
|
| Cost |
|
|
32,193 |
|
| Accumulated
depreciation and impairment |
|
|
(12,270 |
) |
| Net
book amount |
|
|
19,923 |
|
| |
|
|
|
|
| At
1 July 2022 |
|
|
|
|
| Cost |
|
|
32,193 |
|
| Accumulated
depreciation and impairment |
|
|
(11,920 |
) |
| Net
book amount |
|
|
20,273 |
|
| Three
months ended 30 September 2022 |
|
|
|
|
| Opening
net book amount |
|
|
20,273 |
|
| Depreciation
charge |
|
|
(70 |
) |
| Closing
net book amount |
|
|
20,203 |
|
| At
30 September 2022 |
|
|
|
|
| Cost |
|
|
32,193 |
|
| Accumulated
depreciation and impairment |
|
|
(11,990 |
) |
| Net
book amount |
|
|
20,203 |
|
Investment
properties were externally valued as of 30 June 2023 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 2023 was £32,970,000. Management has considered the carrying amount of investment property as of 30 September 2023
and concluded that, as there are no indicators of impairment, an impairment test is not required.
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 – unaudited (continued)
15 Intangible
assets
| | |
Goodwill
£’000 | | |
Registrations
£’000 | | |
Other
intangible
assets
£’000 | | |
Total
£’000 | |
| At 1 July 2023 | |
| | | |
| | | |
| | | |
| | |
| Cost | |
| 421,453 | | |
| 924,829 | | |
| 22,164 | | |
| 1,368,446 | |
| Accumulated
amortization | |
| - | | |
| (539,944 | ) | |
| (16,120 | ) | |
| (556,064 | ) |
| Net
book amount | |
| 421,453 | | |
| 384,885 | | |
| 6,044 | | |
| 812,382 | |
| Three months
ended 30 September 2023 | |
| | | |
| | | |
| | | |
| | |
| Opening net
book amount | |
| 421,453 | | |
| 384,885 | | |
| 6,044 | | |
| 812,382 | |
| Additions | |
| - | | |
| 211,073 | | |
| 107 | | |
| 211,180 | |
| Disposals | |
| - | | |
| (9,951 | ) | |
| - | | |
| (9,951 | ) |
| Amortization
charge | |
| - | | |
| (46,156 | ) | |
| (689 | ) | |
| (46,845 | ) |
| Closing
book amount | |
| 421,453 | | |
| 539,851 | | |
| 5,462 | | |
| 966,766 | |
| At 30 September 2023 | |
| | | |
| | | |
| | | |
| | |
| Cost | |
| 421,453 | | |
| 1,022,538 | | |
| 22,271 | | |
| 1,466,262 | |
| Accumulated
amortization | |
| - | | |
| (482,687 | ) | |
| (16,809 | ) | |
| (499,496 | ) |
| Net
book amount | |
| 421,453 | | |
| 539,851 | | |
| 5,462 | | |
| 966,766 | |
| | |
| | | |
| | | |
| | | |
| | |
| At 1 July 2022 | |
| | | |
| | | |
| | | |
| | |
| Cost | |
| 421,453 | | |
| 779,196 | | |
| 18,817 | | |
| 1,219,466 | |
| Accumulated
amortization | |
| - | | |
| (462,985 | ) | |
| (13,203 | ) | |
| (476,188 | ) |
| Net
book amount | |
| 421,453 | | |
| 316,211 | | |
| 5,614 | | |
| 743,278 | |
| Three months
ended 30 September 2022 | |
| | | |
| | | |
| | | |
| | |
| Opening net
book amount | |
| 421,453 | | |
| 316,211 | | |
| 5,614 | | |
| 743,278 | |
| Additions | |
| - | | |
| 218,654 | | |
| 376 | | |
| 219,030 | |
| Disposals | |
| - | | |
| (1,228 | ) | |
| - | | |
| (1,228 | ) |
| Amortization
charge | |
| - | | |
| (39,505 | ) | |
| (634 | ) | |
| (40,139 | ) |
| Closing
book amount | |
| 421,453 | | |
| 494,132 | | |
| 5,356 | | |
| 920,941 | |
| At 30 September 2022 | |
| | | |
| | | |
| | | |
| | |
| Cost | |
| 421,453 | | |
| 989,667 | | |
| 19,193 | | |
| 1,430,313 | |
| Accumulated
amortization | |
| - | | |
| (495,535 | ) | |
| (13,837 | ) | |
| (509,372 | ) |
| Net
book amount | |
| 421,453 | | |
| 494,132 | | |
| 5,356 | | |
| 920,941 | |
Manchester
United plc
Notes
to the interim consolidated financial statements – unaudited (continued)
15 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. Management has considered the carrying amount of goodwill as of
30 September 2023 and concluded that, as there are no indicators of impairment, a detailed impairment test is not required. 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 – value of registrations
The
costs associated with the acquisition of players’ and key football management staff registrations include an estimate of any contingent
consideration that is probable at the balance sheet date. The estimate of the probable 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 30 September 2023
is disclosed in Note 29.1. 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.
Manchester
United plc
Notes
to the interim consolidated financial statements – unaudited (continued)
16 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:
| |
|
30
September 2023
£’000 |
|
|
30
June
2023
£’000 |
|
|
30
September
2022
£’000 |
|
| Net
deferred tax asset/(liability) |
|
|
6,244 |
|
|
|
(3,304 |
) |
|
|
644 |
|
The
movements in the net deferred tax asset/(liability) are as follows:
| |
|
30
September
2023
£’000 |
|
|
30
June
2023
£’000 |
|
|
30
September
2022
£’000 |
|
| At
the beginning of the period |
|
|
(3,304 |
) |
|
|
(7,402 |
) |
|
|
(7,402 |
) |
| Credited
to income statement (Note 10) |
|
|
7,231 |
|
|
|
4,801 |
|
|
|
7,949 |
|
| Credited/(expensed)
to other comprehensive income (Note 10) |
|
|
2,317 |
|
|
|
(1,018 |
) |
|
|
97 |
|
| Credit
relating to share-based payments |
|
|
|
|
|
|
315 |
|
|
|
|
|
| At
the end of the period |
|
|
6,244 |
|
|
|
(3,304 |
) |
|
|
644 |
|
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.
The
deferred tax asset at 30 September 2023 relates to carried forward UK tax losses.
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 and advice
on their interpretation. 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 – unaudited (continued)
17 Inventories
| |
|
30
September 2023
£’000 |
|
|
30
June
2023
£’000 |
|
|
30
September
2022
£’000 |
|
| Finished
goods |
|
|
5,046 |
|
|
|
3,165 |
|
|
|
3,752 |
|
The
cost of inventories recognized as an expense and included in operating expenses for the three months ended 30 September 2023 amounted
to £4,734,000 (year ended 30 June 2023: £12,307,000; three months ended 30 September 2022: £4,073,000).
18 Trade
receivables
| |
|
30
September 2023
£’000 |
|
|
30
June
2023
£’000 |
|
|
30
September
2022
£’000 |
|
| Trade
receivables |
|
|
92,111 |
|
|
|
69,729 |
|
|
|
83,359 |
|
| Less:
provision for impairment of trade receivables |
|
|
(18,177 |
) |
|
|
(16,259 |
) |
|
|
(12,810 |
) |
| Net
trade receivables |
|
|
73,934 |
|
|
|
53,470 |
|
|
|
70,549 |
|
| Less: non-current
portion |
|
|
|
|
|
|
|
|
|
|
|
|
| Trade
receivables |
|
|
45,014 |
|
|
|
22,303 |
|
|
|
19,325 |
|
| Current
trade receivables |
|
|
28,920 |
|
|
|
31,167 |
|
|
|
51,224 |
|
Net
trade receivables include transfer fees receivable from other football clubs of £60,619,000 (30 June 2023: £42,309,000;
30 September 2022: £57,264,000) of which £45,014,000 (30 June 2023: £22,303,000; 30 September 2022:
£24,823,000) is receivable after more than one year. Net trade receivables also include £28,112,000 (30 June 2023: £13,207,000;
30 September 2022: £5,274,000) 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 of 30 September 2023 was £76,878,000 (30 June 2023: £54,393,000;
30 September 2022: £72,486,000).
Manchester
United plc
Notes
to the interim consolidated financial statements – unaudited (continued)
19 Derivative
financial instruments
| | |
30
September 2023 | | |
30
June 2023 | | |
30
September 2022 | |
| | |
Assets | | |
Liabilities | | |
Assets | | |
Liabilities | | |
Assets | | |
Liabilities | |
| | |
£’000 | | |
£’000 | | |
£’000 | | |
£’000 | | |
£’000 | | |
£’000 | |
| Used
for hedging: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Interest
rate swaps | |
| 3,497 | | |
| - | | |
| 4,173 | | |
| - | | |
| 5,173 | | |
| - | |
| Forward
foreign exchange contracts | |
| 248 | | |
| (1,349 | ) | |
| 378 | | |
| (1,615 | ) | |
| - | | |
| - | |
| At
fair value through profit or loss: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Embedded
foreign exchange derivatives | |
| 3,091 | | |
| - | | |
| 11,258 | | |
| (64 | ) | |
| 38,280 | | |
| - | |
| Forward
foreign exchange contracts | |
| - | | |
| - | | |
| - | | |
| - | | |
| 5,367 | | |
| - | |
| | |
| 6,836 | | |
| (1,349 | ) | |
| 15,809 | | |
| (1,679 | ) | |
| 48,820 | | |
| - | |
| Less
non-current portion: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Used
for hedging: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Interest
rate swaps | |
| - | | |
| - | | |
| - | | |
| - | | |
| 5,173 | | |
| - | |
| Forward
foreign exchange contracts | |
| 121 | | |
| (850 | ) | |
| 378 | | |
| (748 | ) | |
| - | | |
| | |
| At
fair value through profit or loss: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Embedded
foreign exchange derivatives | |
| 69 | | |
| - | | |
| 7,114 | | |
| - | | |
| 27,681 | | |
| - | |
| Forward
foreign exchange contracts | |
| - | | |
| - | | |
| - | | |
| - | | |
| 3,829 | | |
| - | |
| Non-current
derivative financial instruments | |
| 190 | | |
| (850 | ) | |
| 7,492 | | |
| (748 | ) | |
| 36,683 | | |
| - | |
| Current
derivative financial instruments | |
| 6,646 | | |
| (499 | ) | |
| 8,317 | | |
| (931 | ) | |
| 12,137 | | |
| - | |
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.
20 Cash
and cash equivalents
| |
|
30
September 2023
£’000 |
|
|
30
June
2023
£’000 |
|
|
30
September
2022
£’000 |
|
| Cash
at bank and in hand |
|
|
80,829 |
|
|
|
76,019 |
|
|
|
24,277 |
|
Cash
and cash equivalents for the purposes of the interim consolidated statement of cash flows are as above.
Manchester United plc
Notes to the interim consolidated
financial statements – unaudited (continued)
| | |
Number of shares
(thousands) | | |
Ordinary shares £’000 | |
| At 1 July 2022 | |
| 164,745 | | |
| 53 | |
| Employee share-based compensation awards – issue of shares | |
| - | | |
| - | |
| At 30 September 2022 | |
| 164,745 | | |
| 53 | |
| Employee share-based compensation awards – issue of shares | |
| 97 | | |
| - | |
| At 30 June 2023 | |
| 164,842 | | |
| 53 | |
| Employee share-based compensation awards – issue of shares | |
| - | | |
| - | |
| At 30 September 2023 | |
| 164,842 | | |
| 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
per share. 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 30 September 2023,
the Company’s issued share capital comprised 54,634,231 Class A ordinary shares and 110,207,613 Class B ordinary shares.
1,682,896 Class A ordinary shares
are currently held in treasury as of 30 September 2023. Distributable reserves have been reduced by £21,305,000, being the
consideration paid for these shares. See Note 22.
| | |
Number of
shares (thousands) | | |
£’000 | |
| At 1 July 2022, 30 September 2022, 30 June 2023 and 30 September 2023 | |
| (1,683 | ) | |
| (21,305 | ) |
Manchester United plc
Notes to the interim consolidated
financial statements – unaudited (continued)
| 23 | Trade and other payables |
| | |
30
September 2023
£’000 | | |
30 June
2023
£’000 | | |
30 September
2022
£’000 | |
| Trade payables | |
| 387,751 | | |
| 302,708 | | |
| 323,966 | |
| Other payables | |
| 12,059 | | |
| 12,039 | | |
| 17,517 | |
| Accrued expenses | |
| 42,595 | | |
| 62,271 | | |
| 59,813 | |
| Social security and other taxes | |
| 29,176 | | |
| 20,595 | | |
| 30,124 | |
| | |
| 471,581 | | |
| 397,613 | | |
| 431,420 | |
| | |
| | | |
| | | |
| | |
| Less: non-current portion | |
| | | |
| | | |
| | |
| Trade payables | |
| 203,546 | | |
| 160,649 | | |
| 172,057 | |
| Other payables | |
| 307 | | |
| 492 | | |
| 920 | |
| Non-current trade and other payables | |
| 203,853 | | |
| 161,141 | | |
| 172,977 | |
| Current trade and other payables | |
| 267,728 | | |
| 236,472 | | |
| 258,443 | |
Trade payables
include transfer fees and other associated costs in relation to the acquisition of players’ registrations of £364,122,000
(30 June 2023: £276,626,000; 30 September 2022: £306,771,000) of which £203,546,000 (30 June 2023: £160,649,000;
30 September 2022: £172,057,000) is due after more than one year. Of the amount due after more than one year, £108,814,000
(30 June 2023: £80,256,000; 30 September 2022: £78,589,000) is expected to be paid between 1 and 2 years, £94,732,000
(30 June 2023: £80,393,000; 30 September 2022: £92,503,000) is expected to be paid between 2 and 5 years, and the
balance of £nil (30 June 2023: £nil; 30 September 2022: £965,000) is expected to be paid after 5 years.
Gross contractual
trade payables pre discounting as of 30 September 2023 were £422,145,000 (30 June 2023: £317,809,000; 30 September 2022:
£346,326,000). The fair value of other payables is not materially different to their carrying amount.
Manchester United plc
Notes to the interim consolidated
financial statements – unaudited (continued)
| | |
30
September 2023
£’000 | | |
30 June
2023
£’000 | | |
30 September
2022
£’000 | |
| Senior secured notes | |
| 346,136 | | |
| 332,112 | | |
| 377,903 | |
| Secured term loan facility | |
| 182,651 | | |
| 175,223 | | |
| 199,464 | |
| Revolving facilities | |
| 200,000 | | |
| 100,000 | | |
| 100,000 | |
| Accrued interest on senior secured notes and revolving facilities | |
| 4,380 | | |
| 5,961 | | |
| 2,892 | |
| | |
| 733,167 | | |
| 613,296 | | |
| 680,259 | |
| Less: non-current portion | |
| | | |
| | | |
| | |
| Senior secured notes | |
| 346,136 | | |
| 332,112 | | |
| 377,903 | |
| Secured term loan facility | |
| 182,651 | | |
| 175,223 | | |
| 199,464 | |
| Non-current borrowings | |
| 528,787 | | |
| 507,335 | | |
| 577,367 | |
| Current borrowings | |
| 204,380 | | |
| 105,961 | | |
| 102,892 | |
The senior secured
notes of £346,136,000 (30 June 2023: £332,112,000; 30 September 2022: £377,903,000) is stated net of unamortized
issue costs amounting to £1,995,000 (30 June 2023: £2,113,000; 30 September 2022: £2,478,000). The outstanding
principal amount of the senior secured notes is $425,000,000 (30 June 2023: $425,000,000; 30 September 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 £182,651,000 (30 June 2023: £175,223,000; 30 September 2022: £199,464,000) is stated net
of unamortized issue costs amounting to £1,654,000 (30 June 2023: £1,720,000; 30 September 2022: £1,915,000).
The outstanding principal amount of the secured term loan facility is $225,000,000 (30 June 2023: $225,000,000; 30 September 2022:
$225,000,000). The secured term loan facility attracts interest of the 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 26 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 – unaudited (continued)
The Group also
has £200,000,000 (30 June 2032: £100,000,000; 30 September 2022: £100,000,000) in outstanding loans and £100,000,000
(30 June 2023: £200,000,000; 30 September 2022: £200,000,000) 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 facility, the secured term loan facility and the note purchase agreement governing the senior
secured notes during the 2023 and 2022 reporting period.
| |
|
Other(1) |
|
|
Tax(2) |
|
|
Total |
|
| |
|
£’000 |
|
|
£’000 |
|
|
£’000 |
|
| At 1 July 2022 |
|
|
1,143 |
|
|
|
11,501 |
|
|
|
12,644 |
|
| Charged to profit or loss: |
|
|
|
|
|
|
|
|
|
|
|
|
| Reassessment of provisions |
|
|
47 |
|
|
|
118 |
|
|
|
165 |
|
| At 30 September 2022 |
|
|
1,190 |
|
|
|
11,619 |
|
|
|
12,809 |
|
| Charged to profit or loss: |
|
|
|
|
|
|
|
|
|
|
|
|
| Reassessment of provisions |
|
|
(314 |
) |
|
|
146 |
|
|
|
(168 |
) |
| Additional provisions recognized |
|
|
- |
|
|
|
298 |
|
|
|
298 |
|
| At 30 June 2023 |
|
|
876 |
|
|
|
12,063 |
|
|
|
12,939 |
|
| Charged to profit or loss: |
|
|
|
|
|
|
|
|
|
|
|
|
| Reassessment of provisions |
|
|
34 |
|
|
|
(2,563 |
) |
|
|
(2,529 |
) |
| At 30 September 2023 |
|
|
910 |
|
|
|
9,500 |
|
|
|
10,410 |
|
| Less: non-current portion |
|
|
|
|
|
|
|
|
|
|
|
|
| Provisions |
|
|
(95 |
) |
|
|
- |
|
|
|
(95 |
) |
| Current provisions |
|
|
815 |
|
|
|
9,500 |
|
|
|
10,315 |
|
(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 6 months and 10 years.
(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 – unaudited (continued)
| 26 | Cash
generated from operations |
| | |
Three months ended 30 September | |
| | |
2023 £’000 | | |
2022
£’000 | |
| Loss before income tax | |
| (32,804 | ) | |
| (34,370 | ) |
| Adjustments for: | |
| | | |
| | |
| Depreciation | |
| 4,102 | | |
| 3,478 | |
| Amortization | |
| 46,845 | | |
| 40,139 | |
| Profit on disposal of intangible assets | |
| (29,481 | ) | |
| (16,608 | ) |
| Net finance costs | |
| 34,619 | | |
| 30,988 | |
| Non-cash employee benefit expense - equity-settled share-based payments | |
| 740 | | |
| 529 | |
| Foreign exchange gains on operating activities | |
| (142 | ) | |
| (1,173 | ) |
| Reclassified from hedging reserve | |
| (252 | ) | |
| (163 | ) |
| Changes in working capital: | |
| | | |
| | |
| Inventories | |
| (1,881 | ) | |
| (1,552 | ) |
| Prepayments | |
| (20,119 | ) | |
| (15,566 | ) |
| Contract assets – accrued revenue | |
| (4,011 | ) | |
| (9,900 | ) |
| Trade receivables | |
| (5,245 | ) | |
| 15,983 | |
| Other receivables | |
| (1,749 | ) | |
| (360 | ) |
| Contract liabilities – deferred revenue | |
| 46,199 | | |
| 9,182 | |
| Trade and other payables | |
| (8,237 | ) | |
| (17,153 | ) |
| Provisions | |
| (2,713 | ) | |
| 165 | |
| Cash generated from operations | |
| 25,871 | | |
| 3,619 | |
Manchester United plc
Notes to the interim consolidated
financial statements – unaudited (continued)
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 actuarial valuation assumptions, this will be sufficient to pay off the deficit by 30 April 2025.
As of 30 September 2023,
the present value of the Group’s outstanding contributions (i.e. its future liability) is £920,000. This amounts to
£573,000 (30 June 2023: £567,000; 30 September 2022: £514,000) due within one year and £347,000 (30
June 2023: £491,000; 30 September 2022: £920,000) 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 – unaudited (continued)
| 28 | Financial risk management |
| 28.1 | 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,
and should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended 30 June 2023,
as filed with the Securities and Exchange Commission on 27 October 2023, 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.
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 income statement 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
October 2023 to June 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 reporting date:
| | |
30
September 2023
$’000 | | |
30 June
2023
$’000 | | |
30 September
2022
$’000 | |
| USD borrowings | |
| 650,000 | | |
| 650,000 | | |
| 650,000 | |
| Hedged USD cash | |
| (6,300 | ) | |
| (57,500 | ) | |
| (10,343 | ) |
| Net USD debt | |
| 643,700 | | |
| 592,500 | | |
| 639,657 | |
| Hedged future USD revenues | |
| (258,200 | ) | |
| (52,000 | ) | |
| (53,330 | ) |
| Unhedged USD borrowings(1) | |
| 385,500 | | |
| 540,500 | | |
| 586,327 | |
| Closing exchange rate | |
| 1.2208 | | |
| 1.2716 | | |
| 1.1173 | |
(1) A
further portion of the profit and loss exposure (within net finance income/costs) on unhedged USD borrowings is naturally offset by the
fair value of foreign exchange based embedded derivatives in host Commercial revenue contracts.
Manchester United plc
Notes to the interim consolidated
financial statements – unaudited (continued)
| 28 | Financial risk management (continued) |
| 28.2 | Hedging activities (continued) |
The Group hedges
its cash flow interest rate risk where considered appropriate using interest rate swaps. Such interest rate swaps have the economic effect
of converting a portion of variable rate borrowings from floating rates to fixed rates. The effective portion of changes in the fair
value of the interest rate swap is initially recognized in other comprehensive income, rather than being recognized in the statement
of profit or loss immediately. Amounts previously recognized in other comprehensive income and accumulated in the hedging reserve are
subsequently reclassified into the statement of profit or loss in the same accounting period, and within the same statement of profit
or loss line (i.e. net finance costs), as the underlying interest payments, which given the term of the swap will be between October 2023
to June 2024. The following table details the interest rate swaps at the reporting date that are used to hedge borrowings:
| | |
30
September 2023 | | |
30 June
2023 | | |
30 September
2022 | |
| Principal value of loan outstanding ($‘000) | |
| 150,000 | | |
| 150,000 | | |
| 150,000 | |
| Rate received | |
| 1 month $ SOFR | | |
| 1 month $ SOFR | | |
| 1 month $ LIBOR | |
| Rate paid | |
| Fixed 1.9215% | | |
| Fixed 1.9215% | | |
| Fixed 2.032% | |
| Expiry date | |
| 30 June 2024 | | |
| 30 June 2024 | | |
| 30 June 2024 | |
As of 30 September 2023,
the fair value of the above interest rate swaps was an asset of £3,497,000 (30 June 2023: asset of £4,173,000; 30 September 2022:
asset of £5,173,000).
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.
Summary of hedging
reserve
The Group’s
hedging reserve comprises of two separate hedging reserves, the cash flow hedge reserve and the cost of hedging reserve. Details of balances
in each reserve (net of tax) are shown below.
| | |
At 30 September 2023 £’000 | | |
At 30 June 2023 £’000 | | |
At 30 September 2022 £’000 | |
| Cash flow hedge reserve | |
| (2,528 | ) | |
| 2,815 | | |
| 659 | |
| Cost of hedging reserve | |
| (419 | ) | |
| 1,187 | | |
| - | |
| Total hedging reserve | |
| (2,947 | ) | |
| 4,002 | | |
| 659 | |
Manchester United plc
Notes to the interim consolidated
financial statements – unaudited (continued)
| 29 | Contingent
liabilities and contingent assets |
| 29.1 | Contingent
liabilities |
The Group had contingent liabilities
at 30 September 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 £150,053,000 (30 June 2023: £133,142,000;
30 September 2022: £149,031,000). 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 30 September 2023, the potential amount payable by type of
condition and category of player was:
| | |
First team squad
£’000 | | |
Other
£’000 | | |
Total
£’000 | |
| Type of condition: | |
| | | |
| | | |
| | |
| MUFC appearances/team success/new contract | |
| 78,761 | | |
| 25,938 | | |
| 104,699 | |
| International appearances | |
| 10,234 | | |
| 2,014 | | |
| 12,248 | |
| Awards | |
| 32,008 | | |
| - | | |
| 32,008 | |
| Other | |
| 925 | | |
| 173 | | |
| 1,098 | |
| | |
| 121,928 | | |
| 28,125 | | |
| 150,053 | |
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 30 September 2023, the amount of such receipt considered
to be probable was £nil (30 June 2023: £nil; 30 September 2022: £nil).
Manchester United plc
Notes to the interim consolidated
financial statements – unaudited (continued)
At 30 September 2023,
the Group had contracted capital expenditure relating to property, plant and equipment amounting to £2,019,000 (30 June 2023:
£5,152,000; 30 September 2022: £1,167,000) and to other intangible assets amounting to £nil (30 June 2023:
£nil; 30 September 2022: £13,000). These amounts are not recognized as liabilities.
| 31 | Events after the reporting
period |
On 10 October 2023,
a drawdown on the Group’s revolving facilities was made. This comprised of a £35.0 million drawdown under our initial revolving
facility with Bank of America, a £12.5 million drawdown under our bilateral facility with Bank of America and a £12.5 million
drawdown under our revolving facility with Santander. This took the total drawdown as of 10 October 2023 to £260.0 million
from available facilities of £300.0 million.
| 31.2 | Management
transition |
On 15 November 2023,
the Group announced that Richard Arnold was stepping down from his role as Chief Executive Officer after 16 years with the club. The
Group’s Chief Legal Officer, Patrick Stewart, will take over as CEO on an interim basis with a search process carried out for a
new permanent CEO.
| 31.3 | Premier
League broadcasting rights - 2025/26 to 2028/29 |
On 4 December 2023,
the Premier League announced that it had concluded agreements for the UK broadcasting rights of Premier League matches and highlights
for the four seasons from 2025/26 to 2028/29. The total value to the league of the agreed packages is £6.7 billion across the four-year
period.
| 31.4 | Entry
into transaction agreement with Sir Jim Ratcliffe |
On 24 December 2023,
the Group announced that it had entered into an agreement under which Chairman of INEOS, Sir Jim Ratcliffe, will acquire 25% of all Class B
shares and up to 25% of all Class A shares and provide an additional $300 million of investment into the Club. The transaction is
subject to customary regulatory approvals that have not been completed at the date of this report.
Subsequent to 30
September 2023, the playing registrations of certain footballers have been disposed of. Total net proceeds were £1,594,000 and
the associated net book value was £nil. Additionally, solidarity contributions, training compensation, sell-on fees and contingent
consideration totalling £380,000 became receivable in respect of previous playing registration disposals.
Also subsequent
to 30 September 2023, the playing registrations of certain players were acquired or extended for a total consideration, including
associated costs, of £2,755,000. Also subsequent to 30 September 2023, sell-on fees and contingent consideration totalling
£3,000,000 became payable in respect of previous playing registration acquisitions.
| 32 | Related party transactions |
As of 30 September 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 – unaudited (continued)
The following companies
are the subsidiary undertakings of the Company as of 30 September 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.
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