Comment By Manchester United’s Woodward Suggests Premier Rights Loss Of $450M

Manchester United has released its third quarter fiscal report for the period to March 31, 2020.

The team posted a an operating loss of £3.3 million ($4M), and a loss before income tax of £28.5 million ($34.7M) after accounting for net finance costs of £25.3 million ($30.8M). The United release attributed the increase in net finance costs to unrealized exchange losses on non-hedged USD borrowings.

Some of the comparative numbers for the previous twelve months were:

• Operating Profit £44.1 million ($53.8M)
• Profit before income tax £25.7 million ($31.3M)
• Net finance costs £18.4 million ($22.4M)

While Commercial revenue grew both quarterly and year to date, Broadcasting revenue took a big hit. Quarterly Broadcasting dropped by £27.8M ($33.9M), and year to date the category dropped by £76.7 million ($93.6M).

Manchester United’s press release explained the reduction by pointing at a COVID-19 related initial rebate of £15 million ($18.3M) payable to broadcasters, as well as the team’s non-participation in the Champions League, together with two fewer Premier League away games prior to the enforced stoppage.

The executive vice-chairman Ed Woodward added that the club expects the overall reduction in Premier League broadcast revenue to total £20 million ($24.4M) for a full 38-game season, should it be completed.

Using United’s estimates as a baseline, it means that Premier League teams could be rebating broadcasters to the tune of close to £400 million ($488 million).

But you need to adjust for the fact that Manchester United is historically one the big earners from Premier League rights. Not all teams will be facing the same hit but even so, it is not unreasonable to project the cumulative rebate at somewhere between £320 million ($390M) and £370 million ($450M).

Manchester United’s matchday takings were down £2.6 million ($3.2M) for the quarter and pretty much the same for the year to date. However, there seems little hope that Manchester United, or any other Premier League team for that matter, is going to play another match this season in front of paying customers. This means a black hole by season’s end for all 20 Premier League teams.

In 2018/19, Manchester United banked £111 million ($135.4M) in matchday revenues. To March 31, 2020 the category had generated £84.3 million ($102.8M) leaving a potential year-to-year difference of £26.7 million ($32.6 million).

However, there was a minor silver lining. As revenue dropped, so did operating expenses. Missing out on the Champions League, the impact of player disposals, loans deals all helped reduce employee benefit expenses by £15.3 million ($18.7M) in the three month reporting period over the corresponding period last year.

Nonetheless, Manchester United’s net debt increased for the third straight quarter and for the fourth time in the last five. Net debt now sits at £429.1 million($523M), up from £203.6 million ($248.4M) at June 30, 2019 – an increase of 110%.

Twelve months ago the net debt was £301.7 million ($368 million); September 2019 £384.5 million ($469M); December 2019 £391.3 million ($477.4M).

United’s cash balance was down by £103.6 million ($126.4M) from twelve months ago and down £216 million ($264M) from June 30, 2019. Gross borrowings increased to £519 million ($633M).

Manchester United’s share price floated between a low of $15.38 and a high of $16.42 before finishing at $15.92 at the close on Wednesday. After hours, the stock was trading at $16.50. Overall, a United share is down by over 13% from twelve months ago, and over 20% from the beginning of 2020.

On Wednesday, United also withdrew its previous forecast of revenue of between £560-£580m for the 2019/20 year. The reason given was “ongoing uncertainty due to COVID-19 and the evolving related economic and financial consequences’.