Q4 2020 Manchester United PLC Earnings Call
From somebody is definitely going up more influences. These games go by.
I did.
So I think that's a little bit getting pressed high again talk perhaps moving through the gears now and a lovely bowl between the lines to Fernandez.
Now Marshall I'll say in March.
Yes.
Caution tick.
Eric from Moscow.
Yes, the United So exciting at the moment I turned it around and they lead to want yes, that's exactly where I was just say moments. The goal that we wont talk around the hostage to open his body out to get on the ball, but lets take nothing away from Anthony Marci Ali.
Big scoring purported scoring so brilliant goals as well and this is where exactly that's what he's an infant unless downside pace and power well complete this can get close to him and he just smashes that ball Naples pallets Mccarthy.
At this JV to one lead in the last five or six minutes, that's all and that's a special moment for Anthony Martialled, because its Fiftyth Premier League goal and I really memorable one for the Frenchman Foster.
Foster event picks.
Popper terminate.
Into stoppage time at the end of the first half.
Four minutes being added on.
Rashford.
And I referenced.
I thought Oh, you know I could strike first there is a breakthrough what a coal car finish and in first half stoppage time, United lead itself first park.
Exactly what I was talking about the little intricate part is to find the space and that is exactly what happened there was really no fernandez.
You know just when you you saw him through Marcellus drilling.
Good day, ladies and gentlemen, and thank you for standing by.
Welcome to the Manchester, United <unk> fourth quarter, and full year earnings conference call.
At this time, all participants are in listen only mode.
Following the presentation, we will conduct a question and answer session.
If you for questions. Please press star one if any.
If anyone has difficulty hearing the call. Please press star zero for operators system at any time, we would.
We would also like to remind everyone. This conference call is being recorded.
Before we begin we would like to inform everyone that this conference call will include estimates and forward looking statements, which are subject to various risks and uncertainties that could cause actual results to differ materially from these statements.
Any such statements are forward looking statements should be considered in conjunction with the cautionary note in our earnings release regarding forward looking statements and risk factor discussions in our filings with the SEC.
Manchester United Plc assumes no obligation to update any of the estimates or forward looking statements I will now turn the conference over to the executive Vice Chairman of Manchester, United Mr., Ed Woodward. Please go ahead Sir.
Thank you and thank you to everybody for joining us today, when looking back today and what's being one of the most extraordinary and challenging seasons in recent history and I'm proud of the way the club continues to respond.
There's still big challenges not infection Syn <unk> is ahead of CK 119 pandemic continues to disrupt.
I have like across the globe.
This disruption is clear to say in the financial results that were announcing today.
We expect the impact to remain visible for quite some time to come.
[laughter]. However, the post he has also demonstrates the underlying strength and resilience of the club especial role.
Especial roll the sports plays and I saw it is and the meaningful impacts the club can make and I mean its history. This period about testing.
On the sales, we will never be satisfied it mentioned Tonight, and that's a winning choices.
[laughter] place finish in the Premier League as strong cut runs last year showed is that while there is more hard work ahead, and the politics and always smooth we are making progress.
We have a clear strategy and Ali told a successful commit to attain a cool if hadn't gotten kind of blended with high quality recruits the place far flung attacking football.
To that end, we are pleased that I recent additions to the office teams quotes Ah Ah Tony Vaughn debate and Alex tell us to play as we've been tracking as part of our recruitment process for a long period of time and Edison Kabbani, a top strike that he wants a proven new option to afford line.
We also welcome I couldn't Dave, let's see I'm IDR light, who will join in January two exciting young prospects, who we've also been scouting extensively.
Added to the arrival to Breanna funded already this year. These are credits underscore our continued commitment to strengthen the squad to take on that investment and new players in some of the 2019 type a 200 million euros more than any other major European club over that timeframe.
We also continue to invest strongly enough riding academy graduates make up a third of our current focus teams cook apply.
The pipeline of new talent looks exciting however, with only getting first giving first team debbie's eight academy graduates off season, the highest number about possibly base for breaking through 68 years ago.
This facing east remains an integral part of our I'd say the club.
Even with the addition of some more experience place. This month I scored remains one of the youngest independently with an average age of 25. This means the team has potential for significant improvement of our young players.
Gotcha.
We're also trying to fix talks about the progress being made by women's team under Casey's tiny filling the arrival of several new place this summer.
Greeting type in haste and Christian press to a type two time, well a couple of minutes with the U.S. national team.
While our commitment to investment remains it must be balanced with recognition that be extraordinarily challenging environment facing us I know football clubs at this time, let me.
Let me share a few initial observations on this summer transfer window that finished recently.
Grace transfer spend across the big five European leagues was down about 40%. This summer driven by both a lower volume of transactions and lower average fees.
The contraction was also I felt at the top end of the market with no transactions over 100 million euros for the first time in five years and an almost 30% reduction in the average fee for the top 50 truck says.
There was a material increase in the share of free transfers and loans, which were up to 20% and 30% respectively.
At a club level many of our pace were cautious with round Madrid, Barcelona, buying meaning you ventas and PSG, having combined net spend of 9 million euros.
Of course, there were one or two outlines the other way my speech healthy and making up for not being able to be active during their trucks about it from some of 2019.
So we need to look across multiple windows to gain a clear perspective, and as I mentioned earlier I aggregate net investment over the last three transfer Windows compares very favorably with our peers.
The bottom line is we are investing.
We will continue to invest tobacco manager.
More recently you might read about the discussions taking place within English football about plans to address the needs of the collateral predicament created by the pandemic the clubs in the lower league we'd be in.
We've been playing an active role in those discussions because we strongly believe in supporting the English football pyramid, both in the short term to regret to address the issues created by type at 19 and in the long term to improve financial sustainability at all levels of the game.
There will always be intense debate around any changes to the structure of football Justice says that was before the formation of the Premier League 28 years ago.
Now at this critical juncture for the game, we must ensure that the huge success of the Premier League is reinforced why don't sharing of the wider football pyramid continues to thrive in a rapidly changing media environment.
Cheating this will request strategic vision and leadership.
We are pleased with the Premier League is committed to work together on a plan for the future structures on financing I think dish football.
Oh, it must deliver on that promise and we are committed to playing a leading role in pushing that process towards a successful outcome.
Another crucial issue can hold a football.
Opening a stadium suspect types as soon as the government allows while the.
Well the situation in greater Manchester in the UK as a whole continues to evolve.
Our plans for the return of funds are well advanced and we are confident of hours and the whole leagues ability to welcome the back end of safe by a secure environment.
Crowds are being permitted to return to varying degrees and I've, a 200 year paying 20 European countries, albeit with significant capacity restrictions to allow for social distancing and we urge the UK government to follow these positive examples soon it is safe to do so.
While we recognize that public health must always be a priority what is needed is consistency of approach.
People are left to sit on an airplane for hours or in the cinema or even watch football in the cinema and.
And while they are not allowed to inside the stadium environment, which is professionally managed and controlled into.
If endo concerts are allowed why should outdoor essentially distance football fans be treated differently.
Fans of the bedrock of this game has some of the inconsistency is out there a frustrating for them and indeed for the clubs.
Despite severe near term pressures created by the pandemic, we do remain optimistic about the medium to long term demand for life simple around the world is strong and sustainable commercial model means we are very well placed to harness that Christ, while continuing to pursue will always be our number one priority delivering success entertainment and.
Prices on the pitch on that.
Ill now hand over to our great management direct to rich Donald who will update you on our key business activities. Thank you.
Thank you Ed and thank you to everyone for joining us today.
Brazilian since attrite closely associated with Manchester, United and since we last spoke in May that trade has being needed.
Im demonstrated once again.
Flip will walk you through the impact of carry benign team has had in our revenue streams and the continued impact we expect into fiscal 2021.
Well I'd like to share a few insights into how we face this challenge.
First throughout the fourth quarter, we continued to use our global platform to raise awareness and provide assistance to those in need in our.
In our surrounding communities across.
Across the UK and internationally.
We stepped up our efforts far amounts do not good foundation by supporting local food banks.
Regarding meals for the NHS.
I can catch the nation's department schools.
Teaming up with supporters clubs and launching a fund raising contribution fund raising campaign.
Contributions to date for that are already over a million pounds in Florida.
And as we highlighted in May we're appreciative of the generosity of our players and our colleagues who have donated their time and energy is on.
It is our intent that these efforts will inspire more sustainable long term support for our community.
We're also incredibly proud to be individual effort of Marcus Rashford, who served as an exemplary read both on and off the pitch.
This year by using his platform to bring incredible awareness through a CLO cores that vary due to his hall child hunger.
Baucus was successful 90, championing this very important goals and bringing considerable awareness of the plight of many UK school children, who are suffering during this pandemic.
But he also become painful and successfully achieved change the affected children across the whole country.
We also wanted to take a moment this morning to discuss the diversity and inclusion initiatives or club.
Well. This is a topic that is rightly moving to the forefront of conversations in boardrooms across every industry. We're proud that we've been leading and executing in this area within our organization over many years.
Whilst we acknowledge that there is clearly no room for complacency.
All right all equal initiative, which commenced in 2016 is the most visible example, and it's probably the guiding principle and remains a vital annual campaign for the club.
We have committed to striving for real change within the industry.
On and off the pitch both through our own campaigns and through the support of other organizations.
Turning to our business.
We have needed and being able to continue to strengthen our digital media capabilities during the pandemic.
This man, we achieved higher engagement levels relative to last year across all platforms during the fourth quarter.
To highlight a few stocks despite the pandemic our total rate from April through the end of the season in July improve.
Improved by high single digits against the prior season.
On our owned and operated platforms June and July represented record month for engagement on our mobile App while.
Boston was also a record year on our social channels.
We achieved over 1.1 billion social interaction higher than any season, previously and 24% higher than last year.
This engagement in turn contribute directly to stronger E commerce conversant levels.
Well I'll start Megastore re opened on June 15 foot traffic has remained depressed.
Relative to last year.
Obviously, given the absence of finds the old Trafford hugging matches and to a lesser extent the continued closure and closure of our museum into our operations.
However, our E commerce business with fanatics.
Formed ahead of expectation and we plan to accelerate our E commerce initiatives.
Throughout fiscal 2020, well.
Turning now to our sponsorship business.
Fiscal year, 2023 was a solid year and despite the pandemic it.
It was one of the busiest in the clubs history for our sponsorship to.
For the year, we signed eight new sponsorship deals with partners, including Lego Mondelez and visit Malta.
Manchester, United commercial strength drives not least from its strong unaffected commercial partnerships.
Pandemic proved an opportunity to demonstrate resilience in delivering to our partners in particular.
Great thing to delivering digital campaigns in the absence of guidance.
As a result of this we've also renewed partnerships.
Whilst we remain in the mid to this pandemic, we're mindful of the current tenuous macro backdrop affecting our partners we.
We've been working very closely with them to support their activity through these challenging times.
To that end due to the disruption caused by the pandemic.
We entered into a variation agreement with general Motors to extend our current shirt sponsorship agreement for six months.
So we can't provide any certainty at this time regarding the price precise timing of the return of our support to old Trafford do you.
Due to the very fluid nature of recent Corona virus developments in the UK, we do remain optimistic.
In the meantime, we continue to prepare to welcome back all supported with hygiene.
On social distancing protocols as health and safety, obviously remains a top priority.
Further we have used the downtime to.
To explore an implement upgrades that we believe will serve to enhance all supported in stadium experience such as contact with century with my ball ticketing.
I also want to take environment to highlight the clubs commitment transported in China.
Since our first brand remarks on the mainland in 1975.
And just you know I did it established a significant finding following base in the region.
Earlier in the fiscal year, we announced a strategic partnership with Alibaba, which is.
Which includes the UK platform.
We're now producing more localized Chinese content than ever before.
We are also the first and only club to reach 10 million Weibo followers.
We are also the most engaged club on both the way by round, we chat platforms.
We remain committed to providing a passionate supporters in the country with highly engaged.
Subcontinent.
As you are aware in August the Premier League terminated a deal with its China broadcast partner Seasonings PPTV.
The league entered into a one year contract with 10 cents.
While the league searches for new long term partner.
This means that the clubhouse these games and content on showing shown on both at the two largest digital platforms as well.
As well as the expectation of linear broadcasting.
Together with the exciting progress on the HOS experienced sentences. This puts us in a strong position for future engagement with Dolphins in China.
Finally, as that highlighted the near term economic environment remains challenging.
There remains much to be optimistic about regarding our long term prospects.
We'll be relentlessly pursuing the growth opportunities that remain for all Brian.
The strong commercial engine of this club driven by our commitment to delivering the engagement or find Craven demand.
It will ultimately fuels, our ability to continuously and sustainably reinvest in the team.
With that I'll now turn the call over to our CFO I flip back to review our results and discuss our financial outlook in more detail clip.
Thank you Richard.
Firstly I will talk through our fiscal year results, which have been impacted by Coca 19, pandemic and then I'll provide some details for the upcoming fiscal year.
But we will not be providing EBITDA guidance today.
As a reminder year on year comparisons relative to fiscal 2019 have been impacted by non participation in the champions League as well as a number of games played in the.
There was a headline figures total revenue for the period were 509 million down 118.1 million versus last year due to the impact of COVID-19, particularly on broadcasting and Matchday revenues.
Adjusted EBITDA was 132.1 million down 53.7 million right yet.
Overall, we estimate the impact of COVID-19 on total left what went through revenues was 70 million okay.
Of which 40 million will last in my state closures Premier League rebates and impact and I'll make us do and other operations.
The remaining 30 million relates to broadcasting revenues from the 1920 seasons matches, which were played in July and August those revenues will be recognized in the current year.
We estimate that the adjusted EBITDA outcome breath, why 20 had cobot 90, not a good would've been an additional 60 million delivering a total adjusted EBITDA slightly over 190 million comfortably ahead of our previous guidance range.
Turning to the key items in their results total commercial revenues with 279 million with sponsorship revenues of 182.7 million, 5.6% higher than the prior year.
This reflects the underlying growth we saw throughout fiscal Twentytwenty.
Merchandizing and licensing revenues were 5.8 million below prior year 96.3 million, reflecting the closure of them make a statement from mid March through mid June.
Well testing revenues decreased by 101 million to 140.2 million shares.
This reflects both the lower Europa League revenues and that's like 20 compared to Champions League in the prior year as.
As well as the impact of 10 matches in the 1920 season, including six Premier League matches. The replay after the period end.
Revenues also further impacted by rebates to broadcast is which we estimate total 14 million for the full 1920 season was around 11 million recognized.
20.
Lastly revenues for the year decreased by 21 million to 89 point 89.8 million impacted by suspension of matches in March.
This meant revenue associated with four home Premier League games, and the Europa League round to 16 match was lost.
Moving down the income statement operating expenses, excluding depreciation amortization and exceptional items decreased by 14.6% versus the prior year.
This includes wages, which were down 14.5%, primarily due to the contraction contractual reduction related to non participation in the champions League.
Other operating expenses for the fiscal year decreased by 16.1 million, reflecting the suspension of matches together with reduced activity and cost saving actions taken in response to govern 19.
How much are they some cost were 126.7 million for the fiscal year, a decrease of 2.5 million versus the prior year.
Net finance costs for the year with 26 million, an increase of 3.5 million due to foreign exchange movements on the unhedged portion of our U.S. dollar debt.
As mentioned in previous quarters.
Cash interest costs and U.S. dollars remained broadly consistent year on year.
Turning now to our balance sheet at the end of June cash balances were 51.5 million down 256.1 million against the prior year. This.
This decrease is comprised of three main items.
Lastly, as we mentioned throughout the year player Capex is elevated in Fytwenty by 56 million due to planned investments made during the year and the associated accelerated payment profiles.
Secondly, the impact of COVID-19, and the uncertainty around the tent defense to the stadium.
I meant that the bulk of season ticket monies, which is typically received by the 30 that you have not been received this year. We estimate this impact to be able to 50 million.
Finally, some sponsorship moneys normally do prior to 30 to June relating to the 2021 season have been agreed to be deferred for some commercial commercial partners that have been impacted by coke at 90.
This reduced our cash flows by amounts in excess of 80 million over a large portion of this has now been received with the remainder June installments during fiscal year 21.
Net debt at the period end was 474.1 million, an increase of 270.5 million compared to the prior year due to lower cash balances described together with the impact of unfavorable foreign exchange movements on a us dollar denominated debt.
In terms of cash liquidity, we now have 200 million of Undrawn committed facilities have increased our available lines by another 50 million. This.
This provides additional flexibility in the current environment.
Now turning to outlook for the fiscal year 21 in line with many other companies, we're not providing any revenue or EBITDA guidance.
The main impact on revenue and EBITDA forever 21 will be the loss of match stay on ancillary revenues should the entire season to be behind closed doors together with the loss of a pre season somewhat to.
I've mentioned this will be partially offset by 30 million of deferred broadcasting revenues relating to season 1920 fixtures and are attuned to the champions League.
Finally, we expect our committed player Capex net cash outflows for this year.
The book to be approximately 120 million with amortization of 127 million.
Well, we have to go back to the operator to take your questions I wanted to make you all aware that we will not be hosting our first quarter conference call. When our results were released in mid November just a few short weeks from now.
Due to the unusual timing this year relates to the pandemic would only be issuing a press release with our first quarter financial results. However, we will return to normal conference call cadence for our second quarter report in February.
With that I'll now we are ready to take your questions operator.
Thank you we will now begin the question and answer session to ask.
You ask a question you May press Star then one on your Touchtone phone. If you are you.
If you are using a speaker phone we ask you. Please [laughter] handset before pressing the keys to withdraw your question. Please press Star then too.
Ladies first question comes from Randy Konik with Jefferies. Please go ahead.
[noise]. Good morning can you hear me.
Yes, we can already.
Alright, great. Thanks, guys, good morning, and congrats on a nice win yesterday.
The smart the the Champions League on I guess, the first question is.
Now, let's talk a little bit about some of that changing or.
Or adaptations in need for Merck and the smartphone sponsorship segment, let's let's talk about I guess for example, shabby.
Yes.
Some of the the sponsored supply I think six months yeah.
No not with any other partners and then the other thing I picked up on it in your remarks, you talked about.
In sum.
Activations to more did you tell me, what's kind of your partners.
Good return on there are you know things and partnership investment et cetera, So give us some perspective on what kinda since we've done more there on the digital side kind of how you know the partners on them. So we create value for their sponsorship is this sort of thing.
Thanks, Randy I think you know in some part the second part of your question on the first I mean, the overwhelming majority of.
Individual a sponsor cases, what weve done is a work with partners to.
Failed a commercial strategy that leverage what is available to us I'm, obviously as you indicated you know.
Yeah, we the work that we've done in establishing leadership in all failed in terms of all digital engagement techniques, we find meaning that we were able to offer.
Well for them, you something thats pretty cutting edge in the market and very very effective and you know I think that is testament to the.
ER work of the team in this area that we were able to do that and also to support that we had from players and others in terms of deriving that content.
Got it and then any anything changes will explorations of deals in terms of the extension of the Chevy going on probably more of a one off but anything there that we should be thinking about with other partners.
Partners.
Large NOL you know the.
Oh partners or no more immune to the magnetic macro effects than any other businesses in the world. So.
You've seen in these results the work that we've done supporting them, particularly on the cash flow basis.
That having been said or you know equally.
With a hugely fortunate that we have some of the best companies in the world as partners by and large the majority it varies it rebounded very strongly have traded relatively well through the period and.
I think that the renewals we've seen even during this pandemic and literally during this pandemic in the last three months have been strong.
I think that that's a you know an indication of the high caliber companies, we have as partners and the work that we've been able to do with those partners to drive results in even the most difficult circumstances.
Great very helpful. Thanks, guys.
And ladies and gentlemen, as a reminder, if you'd like to ask a question. Please press Star then one.
Today's next question comes from Conor Murphy with Deutsche Bank. Please go ahead.
Hey, everyone. Just a few for me we have burst has begun to you know a little more when you. When you are anticipating fans might be able to come back and any sense of capacity I know bird flu situation, but just trying to get a sense of how discussions are going and how that might evolve throughout the season.
And and then I have a couple of others.
Yes, so yeah as you're aware, we're subject to government or.
Regulation the regulatory environment in this regard the initial expectation had been that there would be a return to partially filled stadiums starting on the first about sorry, but following on from test events that were successfully conducted in August and September.
That advice was changed not because of the effect of what was happening as a result of the partially filled stadia and in fact as significant track record across Europe for that being executed successfully but because of what was happening in other sectors I'm, particularly around the return to school and University in the <unk>.
Background infection right.
And the government guidance had been at that point in time, but absent what they refer to as the moon shot was not to affect that not to expect full stadia I'm prior to March next year.
Well, what I refer to Moon shot batches the ability for us to have either variously vaccine programs. All show a quick response testing a mass scale. So the most often referred to as pregnancy type test where people can achieve certified and.
Faction free attendance at this point in time, it's unclear as to the probability and timing of those to moonshot items. So we remain subject to the more general situation in terms of the resetting of funds.
The guidance in respect of the fill rate was a function of distancing.
Both in the access points to the stadium and in the stadium itself I'm not trended out to approximately 30% under the prior regulations.
Although again going back to what I said earlier the evidence was that the sort of professionally run stadia that had very well developed protocols. In this area meant that there was no evidence at this point that that was a an infection risk.
That's very helpful and could we dig a little more into this job.
Deeper backed by a European Premier League and you know what the impetus is it sounds like you know supporting.
That's your teens, but just sort of flesh that out a bit and you know what the advantages of a larger week would be.
Are you referring to what was in the press yesterday are you referring to walk.
Okay, I mean I saw the report from that.
And candidly don't know where that story came from but there isn't really anything for us to say we are engaged on a.
On a very regular basis, three my role with any CIA.
And also on the FCC side with the wafer with those two entities easy I knew wafer talking about potential changes to the champions League for 24 onwards, he might have read.
I think two or three days ago in the press there was a story about whether the champions League make IDE study six teams that they are the conversations that we are actively involved in so I can't I can't comment on on your question.
Fair enough and then the last one was can you talk a little bit about the Premier League contract Yeah in China, and you know what the expectations are in terms of the new deal and it sounds like you guys have a you know it's very popular over there so I guess, you're saying before a longer term.
Contract higher pricing.
Yeah. If you had the colella you'd have had Richard talk I'm talking.
Talk about what happened there I'm, sorry, I assume you're up to up to speed with regard to that.
Absolutely the plan I'm on the back of getting a fantastic partner in ER, which is 10 cents in China.
All right you know you can be as a stop gap period of one year.
It's pretty incredible actually that they've managed to lock that in so quickly. The plan now is to go back to market in due course in a much more measured way and try that do a a four year deal to get us back lockstep with the the cadence of the cycle for that that will happen in the coming months.
Great. Thank you.
And ladies and gentlemen. This concludes today's question and answer session and today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
[noise] [noise] [laughter] through what Oh, Tom finish.
Stoppage time, Yeah 90.