20-F 1 tm2023793-1_20f.htm 20-F tm2023793-1_20f - none - 33.5286312s
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended 30 June 2020
OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-35627
MANCHESTER UNITED plc
(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrant’s name into English)
Cayman Islands
(Jurisdiction of incorporation or organization)
Sir Matt Busby Way, Old Trafford,
Manchester, England, M16 0RA
(Address of principal executive offices)
Edward Woodward
Executive Vice Chairman
Sir Matt Busby Way, Old Trafford,
Manchester, England, M16 0RA Telephone No. 011 44 (0) 161 868 8000
E-mail: ir@manutd.co.uk
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Class A ordinary shares, par value $0.0005 per share
MANU
New York Stock Exchange
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
38,939,193 Class A ordinary shares
124,000,000 Class B ordinary shares
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes ☐ No ☒
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.  Yes ☐ No ☒
Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒
Accelerated filer ☐
Non-accelerated filer ☐
Emerging growth company ☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ☐
International Financial Reporting Standards as issued
by the International Accounting Standards Board ☒
Other ☐
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐ No ☒

 
TABLE OF CONTENTS
Page
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PART I
1
1
1
30
57
57
76
86
88
89
90
95
97
PART II
98
98
98
99
99
99
100
100
101
101
101
PART III
102
102
102
F-1
 
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GENERAL INFORMATION
In this annual report on Form 20-F (“Annual Report”), references to “Manchester United,” “the Company,” “our Company,” “our business,” “we,” “us” and “our” are, as the context requires, to Manchester United plc together with its consolidated subsidiaries as a consolidated entity.
Throughout this Form 20-F, we refer to the following football leagues and cups:

the English Premier League (the “Premier League”);

the Emirates FA Cup (the “FA Cup”);

the English Football League Cup (the “EFL Cup”);

the Union of European Football Associations Champions League (the “Champions League”); and

the Union of European Football Associations Europa League (the “Europa League”).
The term “Matchday” refers to all domestic and European football match day activities from Manchester United men’s games at Old Trafford, the Manchester United football stadium, along with receipts for domestic cup (such as the EFL Cup and the FA Cup) games not played at Old Trafford plus receipts from Manchester United women’s home games. Fees for arranging other events at the stadium are also included as Matchday revenue.
PRESENTATION OF FINANCIAL AND OTHER DATA
We report under International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (the “IASB”), and IFRS Interpretations Committee interpretations. None of the financial statements were prepared in accordance with generally accepted accounting principles in the United States.
All references in this Annual Report to (i) “pounds sterling,” “pence,” “p” or “£” are to the currency of the United Kingdom, (ii) “US dollar,” “USD” or “$” are to the currency of the United States, and (iii) “Euro” or “€” are to the currency introduced at the start of the third stage of European economic and monetary union pursuant to the treaty establishing the European Community, as amended.
FORWARD-LOOKING STATEMENTS
This Annual Report contains estimates and forward-looking statements. Our estimates and forward-looking statements are mainly based on our current expectations and estimates of future events and trends, which affect or may affect our businesses and operations. Although we believe that these estimates and forward-looking statements are based upon reasonable assumptions, they are subject to numerous risks and uncertainties, including the effects of the novel coronavirus COVID-19 (“COVID-19”) pandemic, and are made in light of information currently available to us. Many important factors, in addition to the factors described in this Annual Report, may adversely affect our results as indicated in forward-looking statements. You should read this Annual Report completely and with the understanding that our actual future results may be materially different and worse from what we expect.
All statements other than statements of historical fact are forward-looking statements. The words “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “seek,” “believe,” “estimate,” “predict,” “potential,” “continue,” “contemplate,” “possible” and similar words are intended to identify estimates and forward-looking statements.
Our estimates and forward-looking statements may be influenced by various factors, including without limitation:

risks related to the impact of the COVID-19 pandemic, including the severity and duration of the outbreak, actions taken by government authorities to contain the outbreak or treat its impact, the impact on our fans, sponsors and suppliers, other impacts to the business, and the Company’s ability to sufficiently manage and mitigate the strategic and operational impact of such events;

the effect of adverse economic conditions on our operations;
 
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maintaining, enhancing and protecting our brand and reputation in order to expand our follower and sponsorship base;

our ability to attract and retain key personnel, including players;

our dependence on the performance and popularity of our men’s first team;

our ability to renew or replace key commercial agreements on similar or better terms or attract new sponsors;

the negotiation and pricing of key media contracts, which are outside of our control;

our reliance on European competitions as a source of future income;

the impact of the United Kingdom’s decision to exit from the European Union (the “EU”) on the movement of players or other regulations;

our dependence on relationships with certain third parties;

our relationship with merchandising, licensing, sponsor and other commercial partners;

our exposure to credit related losses in connection with key media, commercial and transfer contracts;

our dependence on Matchday revenue;

our exposure to competition, both in football and the various commercial markets in which we do business;

our ability to protect ourselves from cyber-attacks on our IT systems;

actions taken by other Premier League clubs that are contrary to our interests;

our relationship with the various leagues to which we belong and the application of their respective rules and regulations;

our ability to execute a digital media strategy that generates the revenue we anticipate;

the impact resulting from serious injuries or losses of the playing staff;

our ability to maintain, train and build an effective international sales and marketing infrastructure, and manage the risks associated with such an expansion;

uncertainty with regard to exchange rates, our tax rate and our cash flow;

brand impairments resulting from failures to adequately protect our intellectual property and curbing sales of counterfeit merchandise;

our ability to adequately protect against media piracy and identity theft of our followers’ account information;

our exposure to the effects of seasonality in our business;

maintaining our match attendance at Old Trafford;

any natural disasters, terrorist incidents or other events beyond our control that adversely affect our operations;

the effect of our indebtedness on our financial health and competitive position;

estimates and estimate methodologies used in preparing our consolidated financial statements; and

the future trading prices of our Class A ordinary shares and the impact of securities analysts’ reports on these prices.
Other sections of this Annual Report include additional factors that could adversely impact our business and financial performance, principally “Item 3. Key Information—D. Risk Factors.” Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual
 
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results to differ materially from those contained in any forward-looking statements. Therefore, you are cautioned not to place undue reliance on these forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements contained in this Annual Report, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.
MARKET AND INDUSTRY DATA
This Annual Report contains industry, market, and competitive position data that are based on the industry publications and studies conducted by third parties listed below as well as our own internal estimates and research. These industry publications and third-party studies generally state that the information that they contain has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe that each of these publications and third-party studies is reliable, we have not independently verified the market and industry data obtained from these third-party sources. While we believe our internal research is reliable and the definition of our market and industry are appropriate, neither such research nor these definitions have been verified by any independent source.
References to our “1.1 billion fans and followers” are based on a survey conducted by Kantar (a division of WPP plc) in 2019 and paid for by us. As in the survey conducted by Kantar, we define the term “fans” as those individuals who answered survey questions, unprompted, with the answer that Manchester United was their favorite football team in the world and the term “followers” as those individuals who answered survey questions, unprompted, with the answer that Manchester United is a football team that they proactively follow in addition to their favorite football team. For example, we and Kantar included in the definition of “follower” a respondent who watched live Manchester United matches, followed highlights coverage or read or talked about Manchester United regularly.
This internet-based survey was conducted during the first six months of 2019 and included over 54,000 respondents across 39 countries. It repeated a similar 2011 survey, also conducted by Kantar, to ensure comparability of approach, methodology and results. The survey included questions on:

demographics, age, gender and socio-economic background;

viewership of Manchester United matches, social media following and engagement;

relationship, awareness and attitudes to commercial partners; and

interest in Manchester United products, including merchandise.
The survey indicated that Manchester United has 1.1 billion combined fans and followers worldwide, comprised of 467 million fans and 635 million followers (compared to 277 million and 382 million, respectively, in 2011), including:

a total of 731.7 million fans and followers in the Asia Pacific region (compared to 324.7 million in 2011);

a total of 296.1 million fans and followers in Europe, the Middle East and Africa (compared to 262.9 million in 2011); and

a total of 74 million fans and followers in the Americas (compared to 71.7 million in 2011).
We expect there to be differences in the level of engagement with our brand between followers and fans, as defined in the survey. We have not identified any practical way to measure these differences in consumer behavior and any references to our fans and followers should be viewed in that light.
To calculate the number of fans and followers from the approximately 54,000 responses, Kantar applied assumptions based on third-party data sets covering certain factors including population size, country specific characteristics such as wealth and GDP per capita, and affinity for sports and media penetration. They then extrapolated the results to the rest of the world, representing an extrapolated adult population of 5 billion people. However, while Kantar believes the extrapolation methodology was robust and consistent
 
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with consumer research practices, as with all surveys, there are inherent limitations in extrapolating survey results to a larger population than those actually surveyed. As a result of these limitations, our number of followers and fans may be significantly less or significantly more than the extrapolated survey results. Kantar’s extrapolated results also accounted for non-internet users. To do so, Kantar had to make assumptions about the preferences and behaviors of non-internet users in those countries surveyed. For surveyed markets with especially low internet penetration, these assumptions reduced the number of our followers in those countries and there is no guarantee that the assumptions applied are accurate. Survey results also account only for claimed consumer behavior rather than actual consumer behavior and as a result, survey results may not reflect real consumer behavior with respect to football or the consumption of our content and products. The Kantar survey indicates that the information that it contains has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe that the survey results are reliable, we have not independently verified the data contained in the survey.
In addition to the survey conducted by Kantar, this Annual Report references the following industry publications and third-party studies:

television viewership data compiled by futures sports + entertainment—Mediabrands International Limited for the 2019/20 season up to 30 June 2020 (the “Futures Data”); and

a paper published by AT Kearney, Inc. in 2014 entitled “Winning in the Business of Sports” (“AT Kearney”).
 
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PART I
ITEM 1.   IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2.   OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3.   KEY INFORMATION
A.
SELECTED FINANCIAL DATA
We prepare our consolidated financial statements in accordance with IFRS as issued by the IASB. The selected consolidated financial data (including statement of profit or loss data, other data and balance sheet data) presented as of and for the years ended 30 June 2020, 2019, 2018, 2017 and 2016 has been derived from our audited consolidated financial statements and the notes thereto (our audited consolidated financial statements as of and for the years ended 30 June 2017 and 2016 are not included in this Annual Report). Our historical results for any prior period are not necessarily indicative of results expected in any future period.
The selected historical financial information presented in the tables below should be read in conjunction with, and is qualified in its entirety by reference to, our audited consolidated financial statements and accompanying notes. The audited consolidated financial statements and the accompanying notes as of 30 June 2020 and 2019 and for the years ended 30 June 2020, 2019 and 2018 have been included elsewhere in this Annual Report.
Unless otherwise specified, all financial information included in this Annual Report has been stated in pounds sterling.
 
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Year ended 30 June
2020
2019
2018
2017
2016
(£’000, unless otherwise indicated)
Statement of profit or loss data:
Revenue from contracts with customers(1)
509,041 627,122 589,758 581,254 515,694
Analyzed as:
Commercial revenue
279,044 275,093 275,835 275,521 268,667
Broadcasting revenue
140,203 241,210 204,137 194,098 140,440
Matchday revenue
89,794 110,819 109,786 111,635 106,587
Operating expenses–before exceptional items
(522,204) (583,337) (562,089) (516,068) (421,574)
Analyzed as:
Employee benefit expenses
(284,029) (332,356) (295,935) (263,464) (232,242)
Other operating expenses
(92,876) (108,977) (117,019) (117,942) (91,244)
Depreciation and impairment
(18,543) (12,850) (10,755) (10,228) (10,079)
Amortization
(126,756) (129,154) (138,380) (124,434) (88,009)
Operating expenses–exceptional items
(19,599) (1,917) 4,753 (15,135)
Total operating expenses
(522,204) (602,936) (564,006) (511,315) (436,709)
Operating (loss)/profit before profit/(loss) on disposal of intangible assets
(13,163) 24,186 25,752 69,939 78,985
Profit/(loss) on disposal of intangible assets
18,384 25,799 18,119 10,926 (9,786)
Operating profit
5,221 49,985 43,871 80,865 69,199
Finance costs
(27,391) (25,470) (24,233) (25,013) (20,459)
Finance income
1,352 2,961 6,195 736 442
Net finance costs
(26,039) (22,509) (18,038) (24,277) (20,017)
(Loss)/profit before income tax
(20,818) 27,476 25,833 56,588 49,182
Income tax expense(2)
(2,415) (8,595) (63,462) (17,379) (12,584)
(Loss)/profit for the year(1)/(2)
(23,233) 18,881 (37,629) 39,209 36,598
Weighted average number of ordinary shares (thousands)
164,253 164,526 164,195 164,025 163,890
Diluted weighted average number of ordinary shares (thousands)(3)
164,253 164,666 164,195 164,448 164,319
Basic (loss)/earnings per share (pence)(1)/(2)
(14.14) 11.48 (22.92) 23.90 22.33
Diluted (loss)/earnings per share
(pence)(1)/(2)/(3)
(14.14) 11.47 (22.92) 23.84 22.27
(1)
Revenue for the year ended 30 June 2020 has been significantly impacted by the COVID-19 pandemic and governmental measures to manage the spread of the disease. Government imposed restrictions resulted in the suspension of all Premier League, FA Cup and UEFA Europa League matches from 13 March 2020. The Premier League and FA Cup resumed in June 2020 and the UEFA Europa League resumed in August 2020. All remaining matches were played behind closed doors. The postponement has resulted in the deferral of a number of matches, originally expected to be played in the financial year ended 30 June 2020, as well as the remaining matches being played behind closed doors, the impact of which was to reduce Broadcasting and Matchday revenues for the year ended 30 June 2020. Broadcasting revenue has been further impacted by rebates due to broadcasters following disruption of the 2019/20 competitions. Further, Old Trafford and its flagship Megastore operations as well as Museum, Stadium Tour and Red Café operations were closed in mid-March 2020. The Old Trafford Megastore re-opened during June 2020 with a variety of safety measures in place in line with Government guidance.
 
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The stadium and Museum and Stadium Tour operations remain closed. Accordingly, this resulted in a loss for the year ended 30 June 2020 and basic and diluted loss per share.
(2)
The US federal corporate income tax rate reduced from 35% to 21% following the substantive enactment of US tax reform on 22 December 2017. This necessitated a re-measurement of the existing US deferred tax position in the period to 31 December 2017. As a result, the tax expense for the year ended 30 June 2018 included a non-cash tax accounting write off of £49.0 million. Accordingly, this resulted in a loss for the year ended 30 June 2018 and basic and diluted loss per share.
(3)
For the years ended 30 June 2020 and 2018, 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. For the years ended 30 June 2019, 2017 and 2016, potential ordinary shares have been treated as dilutive, as their inclusion in the diluted earnings per share calculation decreases earnings per share.
Year ended 30 June
2020
2019
2018
2017
2016
(£’000, unless otherwise indicated)
Other data:
Commercial revenue
279,044 275,093 275,835 275,521 268,667
Analyzed as:
Sponsorship revenue
182,709 173,010 172,982 171,530 171,329
Retail, merchandising, apparel & products licensing
revenue
96,335 102,083 102,853 103,991 97,338
Adjusted EBITDA(4)
132,136 185,789 176,804 199,848 192,208
Dividends declared per share ($)
0.18 0.18 0.18 0.18 0.18
Dividends declared per share (£ equivalent)
0.14 0.14 0.13 0.14 0.12
As of 30 June
2020
2019
2018
2017
2016
(£’000)
Balance sheet data:
Cash and cash equivalents
51,539 307,637 242,022 290,267 229,194
Total assets
1,383,466 1,496,525 1,545,744 1,533,652 1,451,385
Total liabilities
1,032,234 1,081,323 1,118,640 1,053,565 991,006
Total equity
351,232 415,202 427,104 480,087 460,379
Season
2020
2019
2018
2017
2016
Home games played(5):
Premier League
16 19 19 19 19
European Games
4 5 4 7 6
Domestic Cups
4 2 3 5 4
Away games played(5):
Premier League
16 19 19 19 19
European Games
5 5 5 8 6
Domestic Cups
6 3 6 5 5
Total games played(5):
Premier League
32 38 38 38 38
European Games
9 10 9 15 12
Domestic Cups
10 5 9 10 9
(4)
We define Adjusted EBITDA as (loss)/profit for the year before depreciation and impairment,
 
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amortization, (profit)/loss on disposal of intangible assets, exceptional items, net finance costs, and tax. Adjusted EBITDA is a non-IFRS measure and not a uniformly or legally defined financial measure. Adjusted EBITDA is not a substitute for IFRS measures in assessing our overall financial performance. Because Adjusted EBITDA is not a measurement determined in accordance with IFRS, and is susceptible to varying calculations, Adjusted EBITDA may not be comparable to other similarly titled measures presented by other companies. Adjusted EBITDA is included in this Annual Report because it is a measure of our operating performance and we believe that Adjusted EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties in their evaluation of the operating performance of companies in industries similar to ours. We also believe Adjusted EBITDA is useful to our management and investors as a measure of comparative operating performance from year to year and among companies as it is reflective of changes in pricing decisions, cost controls and other factors that affect operating performance, and it removes the effect of our asset base (primarily depreciation, impairment and amortization), material volatile items (primarily (profit)/loss on disposal of intangible assets and exceptional items), capital structure (primarily finance costs), and items outside the control of our management (primarily taxes). Our management also uses Adjusted EBITDA for planning purposes, including the preparation of our annual operating budget and financial projections. Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for an analysis of our results as reported under IFRS as issued by the IASB.
The following is a reconciliation of (loss)/profit for the years presented to Adjusted EBITDA:
Year ended 30 June
2020
2019
2018
2017
2016
(£’000)
(Loss)/profit for the year
(23,233) 18,881 (37,629) 39,209 36,598
Adjustments:
Tax expense
2,415 8,595 63,462 17,379 12,584
Net finance costs
26,039 22,509 18,038 24,277 20,017
(Profit)/loss on disposal of intangible assets
(18,384) (25,799) (18,119) (10,926) 9,786
Exceptional items(a)
19,599 1,917 (4,753) 15,135
Amortization
126,756 129,154 138,380 124,434 88,009
Depreciation and impairment
18,543 12,850 10,755 10,228 10,079
Adjusted EBITDA
132,136 185,789 176,804 199,848 192,208
(a)
See notes 2.7 and 6 to our audited consolidated financial statements included elsewhere in this Annual Report for more information.
(5)
As a direct consequence of COVID-19, and the resulting government imposed restrictions, all Premier League, FA Cup and UEFA Europa League matches were suspended from 13 March 2020. The Premier League and FA Cup resumed in June 2020 and completed in July 2020 and August 2020 respectively. The UEFA Europa League resumed and completed in August 2020. The temporary postponement of all competitions has resulted in four home and six away matches relating to 2019/20 competitions being played at the start of the 2020/21 financial year. This includes three home and three away Premier League matches, the FA Cup semi-final, one Europa League home match and the Europa League single-leg quarter-final and semi-final. From June 2020, all matches have been played behind closed doors.
B.
CAPITALIZATION AND INDEBTEDNESS
Not applicable.
C.
REASONS FOR THE OFFER AND USE OF PROCEEDS
Not applicable.
 
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D.
RISK FACTORS
Investment in our Class A ordinary shares involves a high degree of risk. We expect to be exposed to some or all of the risks described below in our future operations. Any of the risk factors described below, as well as additional risks of which we are not currently aware, could affect our business operations and have a material adverse effect on our business, results of operations, financial condition, cash flow and prospects and cause the value of our shares to decline. Moreover, if and to the extent that any of the risks described below materialize, they may occur in combination with other risks which would compound the adverse effect of such risks on our business, results of operations, financial condition, cash flow and prospects.
Risks Related to Our Business
The COVID-19 pandemic has had, and is expected to continue to have, a material impact on our business, results of operations, financial position and cash flows.
We are closely monitoring the impact of the outbreak of COVID-19 on all aspects of our business, including how it will impact our broadcasting and Matchday operations, our sponsorship and credit agreements, and our employees, fans, sponsors, customers and suppliers. COVID-19 has had a significant adverse impact on our reported results for the year ended 30 June 2020. The impact is primarily due to a reduction in Broadcasting and Matchday revenues following the postponement of the Premier League season and UEFA and FA Cup competitions beginning in mid-March 2020 and rebates due to broadcasters following disruption of the 2019/20 competitions. The Premier League and FA Cup resumed in June 2020 and the UEFA Europa League resumed in August 2020 with all matches played behind closed doors. Further, regulatory and organizational mandates set forth by governing bodies resulted in the closure of Old Trafford football stadium and its flagship Megastore, and Museum and Stadium Tour operations in mid-March 2020. The Old Trafford Megastore re-opened during June 2020 with a variety of safety measures in place in line with Government guidance. The stadium and Museum and Stadium Tour operations remain closed. The timing for re-opening and any modified participant levels is currently uncertain. The extent to which our operations may continue to be impacted by the COVID-19 pandemic will depend largely on future developments including the re-opening of the stadium and resumption of matches played in front of a crowd, which are highly uncertain and cannot be accurately predicted. New information which may emerge concerning the severity of the COVID-19 outbreak and actions by government authorities to contain the outbreak or treat its impact may further impact our operations. As such, we are unable to predict with certainty the ultimate further impact that COVID-19 may have on our business, future results of operations, financial position or cash flows. We are also unable to predict with certainty the impact that COVID-19 may continue to have on our fans, sponsors, customers, and suppliers; however, any material effect on these parties could negatively impact us. In addition, if there is a future resurgence of COVID-19 following its initial containment, the negative impacts on our business may be exacerbated. If we are unable to sufficiently manage and mitigate the strategic and operational impact of COVID-19, in the short- and medium-term, the future results of our business may be materially negatively impacted. Though we continue to monitor the COVID-19 pandemic closely, this situation is changing rapidly and additional impacts may arise that we are not aware of currently. Moreover, to the extent that the COVID-19 pandemic harms our business and operations, many of the other risks described in this “Risk Factors” section should be interpreted as heightened risks.
If we are unable to maintain and enhance our brand and reputation, particularly in new markets, or if events occur that damage our brand and reputation, our ability to expand our follower base, sponsors, and commercial partners or to sell significant quantities of our products may be impaired.
The success of our business depends on the value and strength of our brand and reputation. Our brand and reputation are also integral to the implementation of our strategies for expanding our follower base, sponsors and commercial partners. To be successful in the future we believe we must preserve, grow and leverage the value of our brand across all of our revenue streams. For instance, we have in the past experienced, and we expect that in the future we will continue to receive, a high degree of media coverage. Unfavorable publicity regarding our men’s first team’s performance in league and cup competitions or their behavior off the field, our ability to attract and retain certain players and coaching staff or actions by or changes in our ownership, could negatively affect our brand and reputation. Failure to respond effectively to negative
 
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publicity could also further erode our brand and reputation. In addition, events in the football industry, even if unrelated to us, may negatively affect our brand or reputation. As a result, the size, engagement and loyalty of our follower base and the demand for our products may decline. Damage to our brand or reputation or loss of our followers’ commitment for any of these reasons could impair our ability to expand our follower base, sponsors and commercial partners or our ability to sell significant quantities of our products, which would result in decreased revenue across our revenue streams and have a material adverse effect on our business, results of operations, financial condition and cash flow, as well as require additional resources to rebuild our brand and reputation.
In addition, maintaining and enhancing our brand and reputation may require us to make substantial investments. We cannot assure you that such investments will be successful. Failure to successfully maintain and enhance the Manchester United brand or our reputation or excessive or unsuccessful expenses in connection with this effort could have a material adverse effect on our business, results of operations, financial condition and cash flow.
Our business is dependent upon our ability to attract and retain key personnel, including players.
We are highly dependent on members of our management, coaching staff and our players. Competition for talented players and staff is, and will continue to be, intense. Our ability to attract and retain the highest quality players for our men’s first team and youth academy, as well as coaching staff, is critical to our men’s first team’s success in league and cup competitions, increasing popularity and, consequently, critical to our business, results of operations, financial condition and cash flow. Our success and many achievements over the last twenty years does not necessarily mean that we will continue to be successful in the future, whether as a result of changes in player personnel, coaching staff or otherwise. A downturn in the performance of our men’s first team could adversely affect our ability to attract and retain coaches and players. Further, on 31 January 2020, the United Kingdom formally left the EU at 11:00 p.m. GMT after which it entered the transition period specified in the withdrawal agreement, which is scheduled to end on 31 December 2020. The withdrawal of the United Kingdom from the EU means that following the transition period, we will no longer be able to rely on European regulations relating to the movement of players between the United Kingdom and the European Economic Area (“EEA”) unless alternative arrangements are agreed. In addition, our popularity in certain countries or regions may depend, at least in part, on fielding certain players from those countries or regions. While we enter into employment contracts with each of our key personnel with the aim of securing their services for the term of the contract, the retention of their services for the full term of the contract cannot be guaranteed due to possible contract disputes or approaches by other clubs. Our failure to attract and retain key personnel could have a negative impact on our ability to effectively manage and grow our business.
We are dependent upon the performance and popularity of our men’s first team.
Our revenue streams are driven by the performance and popularity of our men’s first team. Significant sources of our revenue are the result of historically strong performances in English domestic and European competitions, specifically the Premier League, the FA Cup, the EFL Cup, the Champions League and the Europa League. Our revenue varies significantly depending on our men’s first team’s participation and performance in these competitions. Our men’s first team’s performance can affect all four of our revenue streams:

sponsorship revenue through sponsorship relationships;

retail, merchandising, apparel & product licensing revenue through product sales;

Broadcasting revenue through the frequency of appearances, performance based share of league broadcasting revenue, Champions League/Europe League distributions and MUTV distribution through linear and digital platforms; and

Matchday revenue through ticket sales.
Our men’s first team currently plays in the Premier League, the top football league in England. Our performance in the Premier League directly affects, and a weak performance in the Premier League could adversely affect, our business, results of operations, financial condition and cash flow. For example, our
 
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revenue from the sale of products, media rights, tickets and hospitality would fall considerably if our men’s first team were relegated from, or otherwise ceased to play in, the Premier League, the Champions League or the Europa League.
We cannot ensure that our men’s first team will be successful in the Premier League or in the other leagues and tournaments in which it plays. Relegation from the Premier League or a general decline in the success of our men’s first team, particularly in consecutive seasons, would negatively affect our ability to attract or retain talented players and coaching staff, as well as supporters, sponsors and other commercial partners, which would have a material adverse effect on our business, results of operations, financial condition and cash flow.
It may not be possible to renew or replace key commercial agreements on similar or better terms, or attract new sponsors.
Our Commercial revenue for each of the years ended 30 June 2020, 2019 and 2018 represented 54.8%, 43.8%, and 46.8% of our total revenue, respectively. The substantial majority of our Commercial revenue is generated from commercial agreements with our sponsors, and these agreements have finite terms. When these contracts expire, we may not be able to renew or replace them with contracts on similar or better terms or at all. Our most important commercial contracts include contracts with global, regional and supplier sponsors representing industries including financial services, airline, spirits, automotive, entertainment centers, hotels, betting and kitchen and bathroom fixtures and generators, which typically have contract terms of two to five years.
If we fail to renew or replace these key commercial agreements on similar or better terms, we could experience a material reduction in our Commercial revenue. Such a reduction could have a material adverse effect on our overall revenue and our ability to continue to compete with the top football clubs in England and Europe.
As part of our business plan, we intend to continue to grow our commercial portfolio by developing and expanding our product categorized approach, which will include partnering with additional sponsors. We may not be able to successfully execute our business plan in promoting our brand to attract new sponsors. We cannot assure you that we will be successful in implementing our business plan or that our Commercial revenue will continue to grow at the same rate as it has in the past or at all. Any of these events could negatively affect our ability to achieve our development and commercialization goals, which could have a material adverse effect on our business, results of operations, financial condition and cash flow.
The underlying probability of being unable to renew or replace key contracts on similar or more favorable terms, or to partner with additional sponsors, has increased as the impact of COVID-19 is felt across the global economy. As a result, there may be a shift in focus for the majority of companies in the short- to medium-term, as these companies reduce perceived “excess” spend on marketing in favor of protecting the operational and financial stability of the entity. See “—The COVID-19 pandemic has had, and is expected to continue to have, a material impact on our business, results of operations, financial position and cash flows.”
Negotiation and pricing of key media contracts are outside of our control and those contracts may change in the future.
For each of the years ended 30 June 2020, 2019 and 2018, 80.3%, 60.6% and 74.2% of our Broadcasting revenue, respectively, was generated from the media rights for Premier League matches, and 12.0%, 34.5% and 18.8% of our Broadcasting revenue, respectively, was generated from the media rights for UEFA matches. Contracts for these media rights and certain other revenue for those competitions (both domestically and internationally) are negotiated collectively by the Premier League and the Union of European Football Associations (“UEFA”) respectively. We are not a party to the contracts negotiated by the Premier League and UEFA. Further, we do not participate in and therefore do not have any direct influence on the outcome of contract negotiations. As a result, we may be subject to media rights contracts with media distributors with whom we may not otherwise contract or media rights contracts that are not as favorable to us as we might otherwise be able to negotiate individually with media distributors. Furthermore, the limited number of media
 
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distributors bidding for Premier League and UEFA club competition media rights may result in reduced prices paid for those rights and, as a result, a decline in revenue received from media contracts.
In addition, although an agreement has been reached for the sale of Premier League domestic broadcasting rights through the end of the 2021/22 football season and for the sale of UEFA club competition broadcasting rights through the end of the 2020/21 football season, future agreements may not maintain our current level of Broadcasting revenue. Furthermore, existing broadcasting agreements have been and may continue to be, and future broadcasting agreements may also be, adversely impacted as a result of the ongoing COVID-19 pandemic. See “—The COVID-19 pandemic has had, and is expected to continue to have, a material impact on our business, results of operations, financial position and cash flows.”
Future intervention by the European Commission (“EC”), the Court of Justice of the European Union (“CJEU”), UK authorities, or other competent authorities and courts having jurisdiction may also have a negative effect on our revenue from media rights in the EEA. Enforcement of competition laws and changes to copyright regimes may require changes to sales models that could negatively affect the amount which copyright holders, such as the Premier League, are able to derive from the exploitation of rights within the EU. As a result, our Broadcasting revenue from the sale of those rights could decrease.
It is likely that there will be future regulatory intervention by the EC relating to the grant of exclusive licenses of content on a territorial basis within the EEA insofar as they prohibit or limit the cross-border provision by satellite or internet transmission of retail pay-TV services in response to unsolicited demand (so-called “passive sales”). In the cases of the Premier League & others vs. QC Leisure & Others / Karen Murphy vs. Media Protection Services, the CJEU ruled that EU free movement rules prevented enforcement of national laws to prevent importation and sale of decoding devices marketed in other Member States. It is an open question whether this finding is confined to broadcasting by satellite. The CJEU held further that EU competition rules prohibit any agreement designed to guarantee absolute territorial exclusivity by restricting passive sales within the EU (i.e. by obliging broadcasters not to meet unsolicited demand for decoding devices enabling access to the right holder’s protected subject-matter with a view to their use outside the territory covered by the license agreement).
Subsequently, in January 2014 the EC launched a competition investigation into exclusive licensing arrangements between US Studios and various platforms in Europe (the major platform in each of the five largest Member States). In July 2015, the EC issued a Statement of Objections in Case COMP/40023—Cross-border access to pay-TV setting out its preliminary view that certain provisions in the license agreements between the studios and Sky UK would eliminate cross-border competition and constitute a violation of EU competition rules. According to the EC, these provisions require Sky UK to block or limit access to films through geo-blocking its online services or through its satellite pay-TV services to consumers outside of the United Kingdom and Ireland (and thus prevent Sky UK from responding to passive sales requests). The EC was carrying out parallel investigations into cross-border access to pay-TV services in France, Italy, Germany and Spain. Studios and platforms argue that EU law does not preclude enforcement of their copyright and that the restrictions are necessary to ensure adequate financing of content creation because content value varies considerably across Member States.
On 22 April 2016, the EC announced that Paramount, while not agreeing with the concerns expressed in the Statement of Objections, had offered to settle the case by offering a series of commitments, including an undertaking not to enter into pay-TV agreements that prohibit their licensees from responding to passive sales requests. The commitments cover both linear pay-TV services and (when covered by the broadcaster’s licenses) subscription video-on-demand services. The EC accepted these commitments on 27 July 2016. On 8 December 2016, the French TV broadcaster Groupe Canal + brought an action seeking annulment of the EC’s decision to accept the commitments. On 12 December 2018, the EU General Court dismissed the appeal and upheld the EC decision as lawful in identifying competition concerns and finding the commitments suitable to resolve them. Shortly before and on the same and following day of the General Court’s judgment, Disney, NBC Universal, Sony Pictures, Warner Bros. and Sky also offered commitments, which the EC accepted on 7 March 2019 and closed the investigation. The commitments foresee that the restrictive clauses will not be applied nor re-introduced in the film licensing contracts, without prejudice to the studios’ rights under copyright law or the Portability Regulation. On 15 February 2019, Canal + appealed the General Court’s judgment before the CJEU and on 19 June 2019, it also appealed before the General Court the EC decision accepting the commitments by Sky and four Hollywood studios; both cases are
 
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pending. While these investigations have targeted film content, any future decision is very likely to be applicable to any pay-TV content, including sport.
In addition to this regulatory action, the EU as part of its Digital Single Market (“DSM”) strategy adopted on 8 June 2017 the Portability Regulation, which is designed to enable consumers to access their content services while travelling across Europe. The Portability Regulation became applicable on 20 March 2018. The EU has also adopted a regulation on unjustified geo-blocking, which became applicable on 3 December 2018. Copyright protected content is excluded but the EC must review and report on the exclusion. This report is expected within calendar year 2020. This may lead to proposals for inclusion of content protected by copyright and neighbouring rights.
As part of the DSM initiative, the EC has also sought to modernize EU copyright rules to allow for wider access to online content across the EU, including by extending rights clearance mechanisms in the Satellite and Cable Directive. The EC published its proposal for a Regulation on Online Transmissions on 14 September 2016, which in particular contains the proposal that the country of origin principle be extended to online broadcast services. In practice, this would mean that licenses for simulcast and catch-up rights, for example, for the United Kingdom would be construed as covering the entire EEA (as long as the United Kingdom remains subject to EU law). The European Parliament and the Council have both agreed to turn the draft Regulation on Online Transmissions into a Directive and to include substantial amendments limiting the country of origin principle. As a result, the country of origin principle will apply to radio broadcasts, but not to television broadcasts of sports events. In parallel, the revised Copyright Directive has inter alia strengthened the position of rights owners by making online platforms responsible for taking certain actions against user-uploaded content which violates copyright. Both Directives were adopted in April 2019 and Member States have 24 months from their publication to transpose them into national law.
In addition, also as part of the DSM initiative, the European Parliament and the Council adopted on 6 November 2018, a revision of the Audiovisual Media Services Directive and Member States have 21 months from its entering into force to transpose it into national law. This Directive applies to traditional TV broadcasters, with the revision inter alia extending the scope for some provisions to also cover video-sharing platforms. The revision has not affected Article 14 on the possibility of national measures ensuring the non-exclusive broadcast of events of major importance for society.
Finally, as part the DSM initiative, on 2 June 2020, the EC launched a public consultation on the Digital Services Act, a broad regulatory package for digital services. The consultation will run until 8 September 2020 and covers two work strands of the package: first, updating the rules concerning e-commerce, and second, exploring the introduction of rules to address market imbalances associated with online platforms acting as gatekeepers. In parallel, also on 2 June 2020, the EC published an inception impact assessment and launched another consultation, also running until 8 September 2020, on the possible introduction of a new competition tool addressing structural competition problems in a timely and effective manner. At this early stage, the exact scope and nature of these regulatory initiatives is being developed in consultation with various stakeholders. Therefore, the future potential impact and relevance to our business cannot be determined.
European competitions cannot be relied upon as a source of income.
Qualification for the Champions League is largely dependent upon our men’s first team’s performance in the Premier League and, in some circumstances, the Champions League or Europa League in the previous season. Qualification for the Champions League cannot, therefore, be guaranteed. Failure to qualify for the Champions League would result in a material reduction in revenue for each season in which our men’s first team did not participate. To help mitigate this impact the majority of playing contracts for our men’s first team include step-ups in remuneration which are contingent on participation in the group stage of the Champions League. As a result of our men’s first team performance during the 2018/19 season, our men’s first team did not participate in the 2019/20 Champions League but did participate in the 2019/20 Europa League. Inclusive of Broadcasting revenue, prize money and Matchday revenue, our combined Broadcasting and Matchday revenue from participation in European competitions was £20.9 million, £93.1 million and £45.9 million for each of the years ended 30 June 2020, 2019 and 2018, respectively. Revenue for the year ended 30 June 2020 has been significantly impacted by the COVID-19 pandemic and the resulting deferral of the knock-out stages of the Europa League competition to August 2020, with remaining matches played
 
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behind closed doors. The postponement has resulted in one home match and two away matches relating to the 2019/20 Europa League competition being played at the start of the 2020/21 financial year. This includes the scheduled Round of 16 Europa League home match and the single-leg quarter-final and semi-final away matches. As a result of our men’s first team performance during the 2019/20 season, our men’s first team will participate in the 2020/21 Champions League.
In addition, our participation in the Champions League or Europa League may be influenced by other factors beyond our control. For example, the number of places in each European competition available to the clubs of each national football association in Europe can vary from year to year based on a ranking system. If the performance of English clubs in Europe declines, the number of places in each European competition available to English clubs may decline and it may be more difficult for our men’s first team to qualify for European competition in future seasons. Further, the rules governing qualification for European competitions (whether at the European or national level) may change and make it more difficult for our men’s first team to qualify for European competition in future seasons.
We are a founder member and our Executive Vice Chairman has a seat on the executive board of the European Club Association (“ECA”), an independent organization set up to work with football governing bodies to protect and promote the interests of football clubs at the European level.
UEFA implemented changes to the format of the Champions League and Europa League, which took effect from 2018/19. The key changes related to the access list for both competitions and the methodology for financial distributions. With respect to the Champions League, the top four clubs from the four top-ranked national associations (of which England is currently one) qualify automatically for the group stage of the Champions League. With respect to the financial distribution methodology, in addition to the previous three-pillar system (starting fee, performance fees and market pool), UEFA introduced a fourth pillar being the individual club coefficient. The individual club coefficient is determined by reference to past performance in UEFA club competitions over a ten-year period with additional points for historical winners of UEFA club competitions.
In addition, UEFA Club Competitions SA (“UCC SA”) was established by UEFA to advise and make recommendations to UEFA on strategic business matters and opportunities concerning club competitions. Half of the administration board is appointed by UEFA and the other half by the ECA. Our Executive Vice Chairman is Deputy Chairman of UCC SA.
In December 2018, UEFA approved the introduction of a third UEFA club competition to run alongside both the Champions League and Europa League. The competition is expected to commence in 2021/22. The competition is not expected to have an impact on the Champions League but it will reduce the number of teams competing in the Europa League from 48 teams to 32. This will now result in three competitions being held with 32 teams competing in each, compared to the current structure of 32 teams in the Champions League and 48 teams in the Europa League. The winner of the new competition will be entitled to enter the following season’s UEFA Europa League group stage. England’s overall access quota is expected to remain unchanged, but the quota will now apply across the three UEFA competitions.
Moreover, because of the prestige associated with participating in the European competitions, particularly the Champions League, failure to qualify for any European competition, particularly for consecutive seasons, could negatively affect our ability to attract and retain talented players and coaching staff, as well as supporters, sponsors and other commercial partners. Failure to participate in the Champions League for two or more consecutive seasons would also reduce annual payments under the agreement with adidas by 30% of the applicable payment for the year in which the second or other consecutive season of non-participation falls. Any one or more of these events could have a material adverse effect on our business, results of operation, financial condition and cash flow.
Our business depends in part on relationships with certain third parties.
We consider the development of our commercial assets to be central to our ongoing business plan and a driver of future growth. For example, our current contract with adidas that began with the 2015/16 season provides them with certain global technical sponsorship and dual-branded licensing rights. While we expect to be able to continue to execute our business plan in the future with the support of adidas, we
 
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remain subject to these contractual provisions and our business plan could be negatively impacted by non-compliance or poor execution of our strategy by adidas. Further, any interruption in our ability to obtain the services of adidas or other third parties or deterioration in their performance could negatively impact this portion of our operations. Furthermore, if our arrangement with adidas is terminated or modified against our interest, we may not be able to find alternative solutions for this portion of our business on a timely basis or on terms favorable to us or at all.
In the future, we may enter into additional arrangements permitting third parties to use our brand and trademarks. Although we take steps to carefully select our partners, such arrangements may not be successful. Our partners may fail to fulfill their obligations under their agreements or have interests that differ from or conflict with our own. For example, we are dependent on our sponsors and commercial partners to effectively implement quality controls over products using our brand and/or trademarks. The inability of such sponsors and commercial partners to meet our quality standards, including as a result of the COVID-19 pandemic, could negatively affect consumer confidence in the quality and value of our brand, which could result in lower product sales. Any one or more of these events could have a material adverse effect on our business, results of operation, financial condition and cash flow.
We are exposed to credit related losses in the event of non-performance by counterparties to Premier League and UEFA media contracts as well as our key commercial and transfer contracts.
We derive the substantial majority of our Broadcasting revenue from media contracts negotiated by the Premier League and UEFA with media distributors, and although the Premier League obtains guarantees to support certain of its media contracts, typically in the form of letters of credit issued by commercial banks, it remains our single largest credit exposure. We derive our Commercial and sponsorship revenue from certain corporate sponsors, including global, regional and supplier sponsors (which includes new businesses operating in emerging markets) in respect of which we may manage our credit risk by seeking advance payments, installments and/or bank guarantees where appropriate. The substantial majority of this revenue is derived from a limited number of sources.
We are also exposed to other football clubs globally for the payment of transfer fees on players. Depending on the transaction, some of these fees are paid to us in installments. We try to manage our credit risk with respect to those clubs by requiring payments in advance or, in the case of payments on installment, requiring bank guarantees on such payments in certain circumstances. However, we cannot ensure these efforts will eliminate our credit exposure to other clubs. A change in credit quality at one of the media broadcasters for the Premier League or UEFA, one of our sponsors or a club to whom we have sold a player can increase the risk that such counterparty is unable or unwilling to pay amounts owed to us. The failure of a major television broadcaster for the Premier League or UEFA club competitions to pay outstanding amounts owed to its respective league or the failure of one of our key sponsors or a club to pay outstanding amounts owed to us could have a material adverse effect on our business, results of operations, financial condition and cash flow.
The residual counterparty credit risk from our commercial partnerships or the failure of any significant customer or another club, and non-fulfillment of contractual obligations, has increased as a result of certain global and regional partners requesting payment deferrals while dealing with the fallout of COVID-19. This has the potential to significantly impact club operations if a major commercial partner were to defer or default on payments. See “—The COVID-19 pandemic has had, and is expected to continue to have, a material impact on our business, results of operations, financial position and cash flows.”
Matchday revenue from our supporters is a significant portion of overall revenue.
A significant amount of our revenue derives from ticket sales and other Matchday revenue for our men’s first team matches at Old Trafford and our share of gate receipts from domestic cup matches. In particular, the revenue generated from ticket sales and other Matchday revenue at Old Trafford will be highly dependent on the continued attendance at matches of our individual and corporate supporters as well as the number of home matches we play each season. During each of the 2019/20, 2018/19 and 2017/18 seasons, we played 24, 26 and 26 home matches, respectively, and our Matchday revenue was £89.8 million, £110.8 million and £109.8 million for the years ended 30 June 2020, 2019 and 2018, respectively. Match attendance is influenced by a number of factors, some of which are partly or wholly outside of our control.
 
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These factors include the success of our men’s first team, broadcasting coverage and general economic conditions in the United Kingdom, which affect personal disposable income and corporate marketing and hospitality budgets. A reduction in Matchday attendance, including as an ongoing result of the COVID-19 pandemic and related regulations to contain it, could continue to have a material adverse effect on our Matchday revenue and our overall business, results of operations, financial condition and cash flow. See “—The COVID-19 pandemic has had, and is expected to continue to have, a material impact on our business, results of operations, financial position and cash flows.”
The markets in which we operate are highly competitive, both within Europe and internationally, and increased competition could cause our profitability to decline.
We face competition from other football clubs in England and Europe. In the Premier League, investment from wealthy team owners has led to teams with deep financial backing that are able to acquire top players and coaching staff, which could result in improved performance from those teams in domestic and European competitions. As the Premier League continues to grow in popularity, the interest of wealthy potential owners may increase, leading to additional clubs substantially improving their financial position. Competition from European clubs also remains strong. Despite the adoption of the UEFA financial fair play initiative, a set of financial monitoring rules on clubs participating in the Champions League and Europa League, and the Premier League Profitability and Sustainability Rules, a similar set of rules monitoring Premier League clubs, European and Premier League football clubs are spending substantial sums on transfer fees and player salaries. Competition from inside and outside the Premier League has led to higher salaries for our players as well as increased competition on the field. The increase in competition could result in our men’s first team finishing lower in the Premier League than we have in the past and jeopardizing our qualification for or results in European competitions. Competition within England could also cause our men’s first team to fail to advance in the FA Cup and EFL Cup.
In addition, from a commercial perspective, we actively compete across many different industries and within many different markets. We believe our primary sources of competition, both in Europe and internationally, include, but are not limited to:

other businesses seeking corporate sponsorships and commercial partners such as sports teams, other entertainment events and television and digital media outlets;

providers of sports apparel and equipment seeking retail, merchandising, apparel & product licensing opportunities;

digital content providers seeking consumer attention and leisure time, advertiser income and consumer e-commerce activity;

other types of television programming seeking access to broadcasters and advertiser income; and

alternative forms of corporate hospitality and live entertainment for the sale of Matchday tickets such as other live sports events, concerts, festivals, theater and similar events.
All of the above forms of competition could have a material adverse effect on any of our four revenue streams and our overall business, results of operations, financial condition and cash flow.
A cyber-attack on or disruption to our IT systems or other systems utilized in our operations could compromise our operations, adversely impact our reputation and subject us to liability.
As a high-profile brand we are susceptible to the risk of a cyber-attack on our IT systems or other third-party systems utilized in our operations. In recent years, the computer systems of an increasing number of companies and other organizations have been the subject of attacks by cyber criminals, activists and other parties (internal and external). Though we seek to protect ourselves by putting processes in place that are designed to prevent such attacks and regularly monitor alerts and updates from leading cyber security vendors and trusted authorities, our IT systems and other third-party systems utilized in our operations may still be vulnerable to external or internal security breaches, acts of vandalism, computer viruses and other forms of cyber-attack. Any such attack could disable the information technology systems we use or depend on to operate our business and give rise to the loss of significant amounts of personal data or other sensitive information, potentially subjecting us to criminal or civil sanctions or other liability.
 
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See “—We are subject to governmental regulation and other legal obligations related to privacy, data protection, data security and safeguarding. Our actual or perceived failure to comply with such obligations could harm our business.” Similarly, any disruption to or failures in our IT systems or other third-party systems utilized in our operations could have an adverse impact on our ability to operate our business and lead to reputational damage. Any of these events could have a material adverse effect on our business, results of operations, financial condition and cash flow. Furthermore, as attempted attacks continue to evolve in scope and sophistication, we may incur significant costs in modifying or enhancing our IT security systems and processes in an attempt to defend against such attacks. There can be no assurance, however, that any security systems or processes we currently have in place or that we may implement in the future will be successful in preventing or mitigating the harm from such attacks.
We are subject to special rules and regulations regarding insolvency and bankruptcy.
We are subject to, among other things, special insolvency or bankruptcy-related rules of the Premier League and the Football Association (the “FA”). Those rules empower the Premier League board to direct certain payments otherwise due to us to the FA and its members, associate members and affiliates, certain other English football leagues and certain other entities if it is reasonably satisfied that we have failed to pay certain creditors including other football clubs, the Premier League and the Football League.
If we experience financial difficulty, we could also face sanctions under the Premier League rules, including suspension from the Premier League, European competitions, the FA Cup and certain other competitions, the deduction of league points from us in the Premier League or Football League and loss of control of player registrations. For example, the Premier League could prevent us from playing, thereby cutting off our income from ticket sales and putting many of our other sources of revenue at risk. Any of these events could have a material adverse effect on our business, results of operation, financial condition, or cash flow, as well as our ability to meet our financial obligations.
Premier League voting rules may allow other clubs to take action contrary to our interests.
The Premier League is governed by its 20 club shareholders with most rule changes requiring the support of a minimum of 14 of the clubs. This allows a minority of clubs to block changes they view as unfavorable to their interests. In addition, it allows a concerted majority of the clubs to pass rules that may be disadvantageous to the remaining six clubs. As one of the larger clubs in the Premier League in terms of revenue and follower base, we can exert some influence on the rulemaking process, however, our interests may not always align with the majority of clubs and it may be difficult for us to effect changes that are advantageous to us. At the same time, it is possible that other clubs may take action that we view as contrary to our interests. If the Premier League clubs pass rules that limit our ability to operate our business as we have planned or otherwise affect the payments made to us, we may be unable to achieve our goals and strategies or increase our revenue.
Our digital media strategy is unproven and may not generate the revenue we anticipate.
We maintain contact with, and provide entertainment to, our global follower base through a number of digital and other media channels, including the internet, mobile services and applications, and social media. While we have attracted a significant number of followers to our digital media assets, including our website and mobile application, the associated future revenue and income potential is uncertain. You should consider our business and prospects in light of the challenges, risks and difficulties we may encounter in this new and rapidly evolving market, including:

our ability to retain our current global follower base, build our follower base and increase engagement with our followers through our digital media assets, particularly those on third-party digital media platforms;

our ability to enhance the content offered through our digital media assets and increase our subscriber base;

our ability to effectively generate revenue from interaction with our followers through our digital media assets;
 
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our ability to attract new sponsors and advertisers, retain existing sponsors and advertisers and demonstrate that our digital media assets will deliver value to them;

our ability to develop our digital media assets in a cost effective manner and operate our digital media services profitably and securely;

our ability to identify and capitalize on new digital media business opportunities; and

our ability to compete with other sports and other media for users’ time.
In addition, as we expand our digital and other media channels, including the internet, mobile services and applications, and social media, revenue from our other business sectors may decrease, including our Broadcasting revenue. Moreover, the increase in subscriber base in some of these digital and other media channels may limit the growth of the subscriber base and popularity of other channels. Further, governmental or other regulatory actions against social media platforms could result in a loss of some or all of our social media followers on such platform. Failure to successfully address these risks and difficulties could affect our overall business, financial condition, results of operations, cash flow, liquidity and prospects.
Serious injuries to or losses of playing staff may affect our performance, and therefore our results of operations and financial condition.
Injuries to members of the playing staff, particularly if career-threatening or career-ending, could have a detrimental effect on our business. Such injuries could have a negative effect upon our men’s first team’s performance and may also result in a loss of the income that would otherwise have resulted from a transfer of that player’s registration. In addition, depending on the circumstances, we may write down the carrying value of a player on our balance sheet and record an impairment charge in our operating expenses to reflect any losses resulting from career-threatening or career-ending injuries to that player. Our strategy is to maintain a squad of men’s first team players sufficient to mitigate the risk of player injuries. However, this strategy may not be sufficient to mitigate all financial losses in the event of an injury, and as a result such injury may affect the performance of our men’s first team, and therefore our business, results of operations financial condition and cash flow.
Inability to renew our insurance policies could expose us to significant losses.
We insure against the accidental death (including death by natural causes) or permanent disablement (resulting in an inability to continue their playing career with Manchester United and/or any other club in one of the top five European leagues) of certain members of our men’s first team, although typically not at such player’s full market value. Such insurance also excludes incidents which occur while playing matches or training. We also have catastrophe coverage in the event of an incident (such as travel or terrorist related incidents) that results in the death or permanent disablement of multiple members of our men’s first team playing squad. We also carry non-player related insurance typical for our business (including liability, property damage, business interruption and terrorism insurance). When any of our insurance policies expire, it may not be possible to renew them on the same terms, or at all. In such circumstances, some of our businesses and/or assets may be uninsured. If any of these uninsured businesses or assets were to suffer damage, we could suffer a financial loss. Our most valuable tangible asset is Old Trafford. An inability to renew insurance policies covering our players, Old Trafford, the Aon Training Complex or other valuable assets could expose us to significant losses.
In addition to the above, for the period ending 31 December 2022, the Fédération Internationale de Football Association (“FIFA”) has confirmed that it will provide insurance coverage for loss of wages (temporary disablement), subject to a maximum period of 365 days and a cap of €7.5 million per claim, paid by the club to our players who are injured while playing for their senior national team in a match played under the FIFA international match calendar. Neither FIFA nor national football associations are obliged to provide death or permanent disablement insurance coverage for players while on international duty. These terms are subject to review when the policy is due for renewal.
Our international expansion and operations in foreign markets expose us to risks associated with international sales and operations.
We intend to continue to expand internationally and operate in select foreign markets. Managing a global organization is difficult, time consuming and expensive. Our inexperience in operating the club’s
 
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businesses globally increases the risk that any future international expansion efforts that we may undertake will not be successful. In addition, conducting international operations subjects us to risks such as the lack of familiarity with and unexpected changes in foreign regulatory requirements; difficulties in managing and staffing international operations; fluctuations in foreign exchange rates; potentially adverse tax consequences, including foreign value added tax systems, and restrictions on repatriation of earnings; the burdens of complying with a wide variety of foreign laws and legal standards; increased financial accounting and reporting burdens and complexities; the lack of strong intellectual property regimes and political, social and economic instability abroad. Operating in international markets also requires significant management attention and financial resources. The investment and additional resources required to establish operations and manage growth in other countries may not produce desired levels of revenue or profitability.
In many foreign countries, particularly in certain developing economies, it is not uncommon to encounter business practices that are prohibited by certain regulations, such as the UK Bribery Act 2010, the US Foreign Corrupt Practices Act and similar laws. Although we and our subsidiaries have undertaken compliance efforts with respect to these laws, our employees, contractors and agents, as well as those companies to which we outsource certain of our business operations, may take actions in violation of such policies and procedures. Any such violation, even if prohibited by our or our subsidiaries’ policies and procedures or the law, could have a material adverse effect on our reputation, results of operations, financial condition and the price of our Class A ordinary shares.
Fluctuations in exchange rates may adversely affect our results of operations.
Our functional and reporting currency is pounds sterling and substantially all of our costs are denominated in pounds sterling. However, Broadcasting revenue from our participation in UEFA club competitions, as well as certain other revenue, is generated in Euros. We also occasionally enter into transfer agreements, commercial partner agreements and other contracts which are payable in Euros. In addition, we have US dollar foreign exchange exposure relating to our secured term loan facility and senior secured notes as well as Commercial revenue from certain sponsors. We hedge the foreign exchange risk on our future US dollar revenues using a portion of our US dollar denominated secured term loan facility and senior secured notes as the hedging instrument. While we incurred foreign exchange losses in our statement of profit or loss on our unhedged US dollar denominated secured term loan facility and senior secured notes of £4.4 million and £2.7 million for the years ended 30 June 2020 and 30 June 2019 respectively, we recorded a gain of £5.0 million for the year ended 30 June 2018. For the years ended 30 June 2020, 2019 and 2018 approximately 3.3%, 13.3% and 6.5% of our total revenue was generated in Euros, respectively, and approximately 22.9%, 19.2% and 20.7% of our total revenue was generated in US dollars, respectively. We may also enter into foreign exchange contracts to hedge a portion of this transactional exposure. We offset the value of our non-sterling revenue and the value of the corresponding hedge before including such amounts in our overall revenue. Our results of operations have in the past and will in the future fluctuate due to movements in exchange rates and the impact of the COVID-19 pandemic may result in further volatility.
Failure to adequately protect our intellectual property and curb the sale of counterfeit merchandise could injure our brand.
Like other popular brands, we are susceptible to instances of brand infringement (such as counterfeiting and other unauthorized uses of our intellectual property rights). We seek to protect our brand assets by ensuring that we own and control certain intellectual property rights in and to those assets and, where appropriate, by enforcing those intellectual property rights. For example, we own the copyright in our logo, and our logo and trade name are registered as trademarks (or are the subject of applications for registration) in a number of jurisdictions in Europe, Asia Pacific, Africa, North America and South America. However, it is not possible to detect all instances of brand infringement. Additionally, where instances of brand infringement are detected, we cannot guarantee that such instances will be prevented as there may be legal or factual circumstances which give rise to uncertainty as to the validity, scope and enforceability of our intellectual property rights in the brand assets. Furthermore, the laws of certain countries in which we license our brand and conduct operations, particularly those in Asia may not offer the same level of protection to intellectual property rights holders as those in the United Kingdom, the rest of Europe and the United States, or the time required to enforce our intellectual property rights under these legal regimes may be lengthy and delay recovery. For example, the unauthorized use of intellectual property is common and widespread
 
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in Asia and enforcement of intellectual property rights by local regulatory agencies is inconsistent. If we were to fail or be unable to secure, protect, maintain and/or enforce the intellectual property rights which vest in our brand assets, then we could lose our exclusive right to exploit such brand assets. Infringement of our trademark, copyright and other intellectual property rights could have an adverse effect on our business. We also license our intellectual property rights to third parties. In an effort to protect our brand, we enter into licensing agreements with these third parties which govern the use of our intellectual property and which require our licensees to abide by quality control standards with respect to such use. Although we make efforts to police our licensees’ use of our intellectual property, we cannot assure you that these efforts will be sufficient to ensure their compliance. The failure of our licensees to comply with the terms of their licenses could have a material adverse effect on our business, results of operations, financial condition and cash flow.
We are subject to governmental regulation and other legal obligations related to privacy, data protection, data security and safeguarding. Our actual or perceived failure to comply with such obligations could harm our business.
We are subject to diverse laws and regulations relating to data privacy and security, including, in the EEA, Regulation 2016/679, known as the General Data Protection Regulation (the “GDPR”). New global privacy rules are being enacted and existing ones are being updated and strengthened. We are likely to be required to expend significant capital and other resources to ensure ongoing compliance with these laws and regulations. Claims that we have violated individuals’ privacy rights or breached our data protection obligations, even if we are not found liable, could be expensive and time-consuming to defend and could result in adverse publicity that could harm our business.
We collect and process personal data from our followers, customers, members, suppliers, business contacts and employees as part of the operation of our business (including online merchandising), and therefore we must comply with data protection and privacy laws in the United Kingdom and, in certain situations, other jurisdictions where our followers reside. The United Kingdom’s Data Protection Act 2018, implements the GDPR and imposes more stringent operational requirements for controllers of personal data, including, for example, higher standards for obtaining consent from individuals to process their personal data (including, in certain circumstances for marketing and other follower engagement), more robust disclosures to individuals and a strengthened individual data rights regime, shortened timelines for data breach notifications, limitations on retention of information, additional obligations when we contract third-party processors in connection with the processing of personal data, and certain restrictions when transferring personal data outside of the EEA (which has been the focus of a recent decision by the Court of Justice of the EU). In addition, we are exposed to the risk that the personal data we control could be wrongfully accessed and/or used, whether by employees, followers or other third parties, or otherwise lost or disclosed or processed in breach of data protection regulations. If we or any of the third-party service providers on which we rely fail to process such personal data in a lawful or secure manner or if any theft or loss of personal data were to occur, we could face liability under data protection laws, and we may be subject to litigation, regulatory investigations, enforcement notices requiring us to change the way we use personal data and/or fines of up to 20 million Euros or up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher. In addition to statutory enforcement and other administrative penalties, a personal data breach can lead to compensation claims by affected individuals, negative publicity and a potential loss of business.
In addition, following the departure of the United Kingdom from the EU on 31 January 2020, this could also lead to further legislative and regulatory changes. It remains unclear how the UK data protection laws or regulations will develop in the medium to longer term and how data transfer to the United Kingdom from the EU will be regulated, especially if the United Kingdom leaves the EU without a deal following the transition period. However, the United Kingdom has transposed the GDPR into domestic law with the Data Protection Act 2018 and other statutory instruments (which allow for fines of up to £17.5 million or 4% of the total worldwide annual turnover of the preceding financial year) which will remain in force.
In recent years, US and European lawmakers and regulators have expressed concern over electronic marketing and the use of third-party cookies, web beacons and similar technology for online behavioral advertising. In the United Kingdom, marketing is defined broadly to include any promotional material and the rules specifically on e-marketing are currently set out in the ePrivacy Directive (which is implemented in the United Kingdom by the Privacy and Electronic Communications Regulations; this will remain in force
 
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following the United Kingdom’s departure from the European Union). Regulation of cookies and web beacons may lead to broader restrictions on our online activities, including efforts to understand followers’ internet usage and promote ourselves to them.
We are also subject to legislation associated with child protection, adult protection, safeguarding and the rights of children. We aim to operate in compliance with the guiding principles of the United Nations Convention on the Rights of the Child (“UNCRC”) which sets out the civil, political, economic, social and cultural rights of every child, regardless of their race, religion or abilities.
Both in the United Kingdom and internationally there have been increases in disclosures of institutional sexual abuse, most notably by the Football Association (England), US Gymnastics (USA) and Oxfam (Haiti/ United Kingdom), where the outcome has been significant fines, reductions in funding and sponsorship, and substantial media reputational damage along with a lack of trust in those organizations. We are required to demonstrate to government and regulatory bodies our processes and systems to demonstrate what proactive steps we take to ensure the safety and wellbeing of children and adults at risk in our duty of care, as well as managing any civil liability or other claims by individuals against historical abuse disclosures.
We collect, process and retain personal data associated with safeguarding cases and criminal records in order to take steps to safeguard children and adults at risk, and create a safer culture for them to thrive and for staff/volunteers to work within, in accordance with legal and regulatory requirements. Safeguarding legislation is in flux with the key focus that the welfare of the child and/or adult at risk is paramount. Failure to maintain compliance with these changes could harm our business.
Piracy and illegal live streaming may adversely impact our Broadcasting revenue.
For each of the years ended 30 June 2020, 2019 and 2018, Broadcasting revenue constituted 27.6%, 38.4% and 34.6%, respectively, of our total revenue. Our Broadcasting revenue is principally generated by the broadcasting of our matches on pay and free-to-air television channels as well as content delivered over the internet and through our own television channel, MUTV. In recent years, piracy and illegal live streaming of subscription content over the internet has caused, and is continuing to cause, lost revenue to media distributors showing our matches. For example, the Premier League previously initiated litigation against Google and YouTube for facilitating piracy and illegal streaming of subscription content. While this litigation matter has been settled there can be no guarantee that this or similar actions will prevent or limit future piracy or illegal streaming of subscription content. If these trends increase or continue unabated, they could pose a risk to subscription television services. The result could be a reduction in the value of our share of football broadcasting rights and of our online and MUTV services, which could have a material adverse effect on our business, results of operations, financial condition and cash flow.
Changes in consumer viewing habits and the emergence of new content distribution platforms could adversely affect our business.
The manner in which consumers view televised sporting events is changing rapidly with the emergence of alternative distribution platforms. Digital cable, internet and wireless content providers are continuing to improve technologies, content offerings, user interface, and business models that allow consumers to access video-on-demand or internet-based tools with interactive capabilities including start, stop and rewind. Such developments may impact the profitability or effectiveness of our existing media contracts and strategy, including our television channel, MUTV. If we are unsuccessful in adapting our licensing practices and/or media platforms as consumer viewing habits change, our viewership levels (whether on traditional or new platforms), our Broadcasting revenue and/or the value of our advertising and sponsorship contracts may decrease, which could have a material adverse effect our business, results of operations and financial condition.
In addition, even if we are able to successfully adapt, we will be subject to risks associated with these alternative distribution platforms. Delivery of video programming over the internet is done through a series of carriers, and any point of failure in this distribution chain may disrupt or degrade the quality of our services. Service disruption or degradation for any reason, including as a result of a cyber-attack, natural disaster or other failure in our or a third-party’s IT systems, could diminish the overall attractiveness of our
 
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services to subscribers, causing us to lose subscribers and/or credit subscribers affected by such disruption, which could have a material adverse effect on our business, results of operations and financial condition.
Our operating results may fluctuate due to seasonality.
Our operating results are subject to seasonal variation, limiting the overall comparability and predictability of interim financial periods. The seasonality of our operating results is primarily attributable to the number of games played in each financial period and therefore Matchday and Broadcasting revenue recognized. Similarly, certain of our costs derive from hosting games at Old Trafford, and these costs will also vary based on the number of games played in the period. We have historically generated higher revenue in the second and third quarters of our fiscal year. Our business might be affected by our men’s first team reaching the later stages of European and domestic competitions, which would generally generate significant additional Broadcasting and Matchday revenue during the fourth quarter of our fiscal years. Our cash flow may also vary among interim periods due to the timing of significant payments from major commercial and player transfer agreements. The seasonality we have experienced in our business, as described above, has been, and may continue to be, further exaggerated by the COVID-19 pandemic. As a result, our interim results and any quarterly financial information that we publish should not be viewed as an indicator of our performance for the fiscal year.
We are subject to tax in multiple jurisdictions, and changes in tax laws (or in the interpretations thereof) in the United States or in other jurisdictions could have an adverse effect on us.
Although we are incorporated as a Cayman Islands exempted company, we report as a US domestic corporation for US federal income tax purposes and we are subject to US federal corporate income tax (currently at a statutory rate of 21%) on our worldwide income.
In addition, we are subject to income and other taxes in various other jurisdictions. The amount of tax we pay is subject to our interpretation and application of tax laws in jurisdictions in which we operate. Changes in current or future laws or regulations, or the imposition of new or changed tax laws or regulations or new related interpretations by taxing authorities in the US or foreign jurisdictions, could adversely affect our business, results of operations, financial condition and cash flow.
We establish tax provisions, where appropriate, on the basis of amounts expected to be paid to (and recovered from) tax authorities and, as a result, changes in tax laws (or in the interpretations thereof) could have an adverse effect on us.
Tax is calculated on the basis of the tax laws enacted or substantively enacted at the reporting date in the countries where we operate and generate taxable income. We establish provisions where appropriate on the basis of amounts expected to be paid to (or recovered from) the tax authorities. From time to time we are involved in discussions with tax authorities in relation to ongoing tax matters and, where appropriate, provisions are made based on our assessment of each case. 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 these discussions, as well as discussions that 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 future income tax expense or credit may be higher or lower than estimates made when we determined whether it was appropriate to record a provision and the amount to be recorded. Furthermore, changes in the legislative framework or applicable tax case law (or in the interpretation thereof) could adversely affect our business, results of operations, financial condition and cash flow.
Business interruptions due to natural disasters, terrorist incidents and other events, such as the ongoing COVID-19 pandemic or any other pandemic, epidemic or outbreak of an infectious disease, could adversely affect us and Old Trafford.
Our operations can be subject to natural disasters, terrorist incidents and other events beyond our control, such as earthquakes, fires, power failures, telecommunication losses, acts of war and pandemics, epidemics or any other outbreak of an infectious disease, including fluctuations in the severity and duration of the COVID-19 pandemic and any resulting restrictions on business activity and operations, which may
 
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vary significantly by country and/or region. Such events, whether natural or manmade, could cause severe destruction or interruption to our operations, and as a result, our business could suffer serious harm. Our men’s first team regularly tours the world for promotional matches, visiting various countries with a history of terrorism and civil unrest, and as a result, we and our players could be potential targets of terrorism when visiting such countries. In addition, any prolonged business interruption at Old Trafford could cause a decline in Matchday revenue. See “—The COVID-19 pandemic has had, and is expected to continue to have, a material impact on our business, results of operations, financial position and cash flows.” Our business interruption insurance only covers some, but not all, of these potential events, and even for those events that are covered, it may not be sufficient to compensate us fully for losses or damages that may occur as a result of such events, including, for example, loss of market share and diminution of our brand, reputation and client loyalty. Any one or more of these events could have a material adverse effect on our business, results of operation, financial condition and cash flow.
If we fail to properly manage our anticipated growth, our business could suffer.
The planned growth of our commercial operations may place a significant strain on our management and on our operational and financial resources and systems. To manage growth effectively, we will need to maintain a system of management controls and attract and retain qualified personnel, as well as, develop, train and manage management-level and other employees. Failure to manage our growth effectively could cause us to over-invest or under-invest in infrastructure, and result in losses or weaknesses in our infrastructure, which could have a material adverse effect on our business, results of operations, financial condition and cash flow. Any failure by us to manage our growth effectively could have a negative effect on our ability to achieve our development and commercialization goals and strategies.
Risks Related to Our Industry
An economic downturn or other adverse economic conditions may harm our business.
Economic downturns and other adverse conditions in the United Kingdom and markets globally, including the current economic downturn and adverse conditions caused by the ongoing COVID-19 pandemic, have negatively affected, and any further downturns or other adverse conditions that occur in the future may also negatively affect, our operations. Our Matchday and Broadcasting revenue in part depend on personal disposable income and corporate marketing and hospitality budgets. Further, our Commercial revenue is contingent upon the expenditures of businesses across a wide range of industries. Any economic downturn or other deterioration in economic conditions, such as inflation, slower growth, unemployment levels, credit availability, fuel prices, interest rates, tax rates, trade relations and regulations, or other factors, whether resulting from geopolitical issues and uncertainty, the impact of pandemics, epidemics or other outbreaks of infectious disease, or any number of other conditions or events outside of our control, are likely to have a negative impact on consumer and corporate discretionary spending and otherwise lead companies in affected industries to cut costs in response to these changed circumstances. As a result, any economic downturn or other weakening in economic conditions could cause a reduction in our Commercial revenue, as well as our Broadcasting and Matchday revenue, each of which could have a material adverse effect on our business, results of operations, financial condition and cash flow.
The departure of the United Kingdom from the European Union may adversely affect our operations and financial results.
Following a national referendum and enactment of legislation by the government of the United Kingdom, the United Kingdom formally withdrew from the EU on 31 January 2020 and entered into a transition period during which it will continue its ongoing and complex negotiations with the EU relating to the future trading relationship between the parties. The transitional period is expected to end on 31 December 2020. Significant political and economic uncertainty remains about whether the terms of the relationship will differ materially from the terms before withdrawal, as well as about the possibility that a so-called “no deal” separation will occur if negotiations are not completed by the end of the transition period.
These developments, or the perception that any of them could occur, have had and may continue to have a material adverse effect on global economic conditions and the stability of global financial markets,
 
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and could significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets. Asset valuations, currency exchange rates and credit ratings have been and may continue to be subject to increased market volatility. Lack of clarity about future UK laws and regulations as the United Kingdom determines which EU laws to replace or replicate could decrease foreign direct investment in the United Kingdom, increase costs, depress economic activity and restrict our access to capital. If the United Kingdom and the EU are unable to negotiate acceptable withdrawal terms or if other EU member states pursue withdrawal, barrier-free access between the United Kingdom and other EU member states or among the EEA overall could be diminished or eliminated. Any of these factors could have a material adverse effect on our business, results of operations, financial condition, cash flow and the price of our Class A ordinary shares.
Furthermore, although it is unknown what the terms of the United Kingdom’s future relationship with the EU, if any, will be, or which EU laws the United Kingdom will replace or replicate, it is possible that there will be greater restrictions on imports and exports between the United Kingdom and EU member states, greater restrictions on the movement of players between the United Kingdom and EU member states, and other increased regulatory complexities. In particular, FIFA rules currently prohibit the international transfer of players under the age of 18 subject to certain limited exceptions, including an exception that permits the transfer of players between the ages of 16 and 18 within the territory of the EU or the EEA (subject to the satisfaction of certain conditions). With effect from 1 January 2021, we will no longer be able to rely on this exception and so, unless any alternative arrangements are agreed between the United Kingdom and the EU, any of the changes described above may have a material adverse effect on our business, results of operations, financial condition and cash flow and our ability to continue to compete with the top football clubs in Europe.
An increase in the relative size of salaries or transfer costs could adversely affect our business.
Our success depends on our ability to attract and retain the highest quality players and coaching staff. As a result, we are obliged to pay salaries generally comparable to our main competitors in England and Europe. Any increase in salaries may adversely affect our business, results of operations, financial condition and cash flow.
Other factors that affect player salaries, such as changes in personal tax rates, changes to the treatment of income or other changes to taxation in the United Kingdom and the relative strength of pounds sterling, may make it more difficult to attract top players and coaching staff from Europe or elsewhere or require us to pay higher salaries to compensate for higher taxes or less favorable exchange rates. In addition, if our revenue falls and salaries remain stable (for example, as a result of fixed player or coaching staff salaries over a long period) or increase, our results of operations would be materially adversely affected.
An increase in transfer fees would require us to pay more than expected for the acquisition of players’ registrations in the future. In addition, certain players’ transfer values may diminish after we acquire them, and we may sell those players for transfer fees below their net book value, resulting in a loss on disposal of players’ registrations. Net transfer costs could also increase if levies imposed by FIFA, the Premier League or any other organization in respect of the transfer of players’ registrations were to increase.
We remain committed to attracting and retaining the highest quality players and key football management staff for our men’s first team. Our average annual net registrations capital expenditure over the last 5 years has been £133.8 million and we continue to expect it to vary significantly from period to period. We may explore new player acquisitions in connection with future transfer periods that may materially increase the amount of our net capital expenditure on intangible assets. As part of any material increase in net capital expenditure on intangible assets, we may also experience a material increase in our expenditure for player salaries. The actual amount of cash we use on player acquisitions will also depend, in part, on the amount of any cash we receive as a result of the sale of any players. Any increase in net capital expenditure on intangible assets compared to historic levels will also result in an increase in amortization expenses in future periods.
UEFA, Premier League and FIFA regulations could negatively affect our business.
As the primary governing body of European football, UEFA continually evaluates the dynamics in the football industry and considers changes to the regulatory framework governing European football clubs. As
 
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an example, clubs participating in the Champions League and Europa League competitions are subject to the UEFA Club Licensing and Financial Fair Play regulations (“FFP regulations”). Breaches in the rules may result in, among other things, withholding of prize money, bans on registering new players for UEFA club competitions and ultimately disqualification from UEFA club competitions. Amongst other things, these rules are intended to discourage clubs from continually operating at a loss and to ensure that clubs settle their football, staff and tax creditors on time. Breaches of FFP regulations, for example, where relevant costs (which includes all wage costs and the amortization of player capital expenditures, but excludes depreciation of tangible fixed assets, youth development, women’s team and community expenditure) exceed revenues on a cumulative basis over a three-year period, or serious delays in settling creditors, have resulted in clubs being punished by way of significant fines and even exclusion from UEFA club competitions.
The Premier League also operates under regulations that aim to promote sustainability through profitability. The Premier League Profitability and Sustainability Rules contain a break-even test, similar to that in UEFA’s FFP regulations. Our most recent submission was based on the fiscal years ended 30 June 2019 and 2018 and provided a positive result. Wide-ranging sanctions, including significant fines, player transfer restrictions and Premier League points deduction, may be imposed by the Premier League for a breach of these regulations.
There is a risk that application of the FFP regulations and Premier League Profitability and Sustainability Rules could have a material adverse effect on the performance of our men’s first team and our business, results of operations, financial condition and cash flow.
The club is also bound by FIFA and Premier League regulations in respect of the status and transfer of players’ registrations across all age groups internationally and domestically. Sanctions for significant non-compliance or breaches could include restrictions on incoming player transfers and monetary fines, which could have a material adverse effect on the performance of our men’s first team and our business, results of operations, financial condition and cash flow.
We could be negatively affected by current and other future Premier League, FA, UEFA or FIFA regulations.
Future changes to the Premier League, FA, UEFA, FIFA or other regulations may adversely affect our results of operations. These regulations could cover various aspects of our business, such as the format of competitions, the eligibility of players, the operation of the transfer market and the distribution of Broadcasting revenue. FIFA is currently going through a process of reforming the regulations which govern the transfer of player registrations, including: (a) how clubs involved in the training of a professional player are compensated for their contribution to the development of that player when that player’s registration is transferred from one club to another; (b) the transfer of players on a temporary basis (so-called player loans); and (c) the activities and remuneration of intermediaries (so-called football agents) with respect to player transfers. It is possible that this regulatory reform will impact our ability to acquire players and/or increase our costs with respect to the recruitment and retention of players. In addition, changes are being considered to address the financial sustainability of clubs such as more robust ownership rules and tests in relation to board directors and significant shareholders. In particular, changes to football regulations designed to promote competition could have a significant impact on our business. Such changes could include changes to the distribution of broadcasting income, changes to the relegation structure of English football and restrictions on player spending. In addition, rules designed to promote the development of local players, such as the Home Grown Player Rule, which requires each Premier League club to include at least eight “home grown” (i.e. players that have been registered for at least three seasons at an English or Welsh club between the ages of 16 and 21) players in their squads, could limit our ability to select players. Any of these changes could make it more difficult for us to acquire top quality players and, therefore, adversely affect the performance of our men’s first team.
Changes in the format of the league and cup competitions in which our men’s first team plays, or might in the future play, could have a negative impact on our results of operations. In addition, in the event that new competitions are introduced to replace existing competitions (for example, a European league), our results of operations may be negatively affected.
 
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There could be a decline in our popularity or the popularity of football.
There can be no assurance that football will retain its popularity as a sport around the world and its status in the United Kingdom as the so-called “national game,” together with the associated levels of media coverage. In addition, we could suffer a decline in popularity. Any decline in popularity could result in lower ticket sales, Broadcasting revenue, sponsorship revenue, a reduction in the value of our players or our brand, or a decline in the value of our securities, including our Class A ordinary shares. Any one of these events or a combination of such events could have a material adverse effect on our business, results of operations, financial condition and cash flow.
Risk Related to Our Indebtedness
Our indebtedness could adversely affect our financial health and competitive position.
As of 30 June 2020, we had total indebtedness of £525.6 million. Our indebtedness increases the risk that we may be unable to generate cash sufficient to pay amounts due in respect of our indebtedness. It could also have effects on our business. For example, it could:

limit our ability to pay dividends;

increase our vulnerability to general adverse economic and industry conditions;

require us to dedicate a material portion of our cash flow from operations to make payments on our indebtedness, thereby reducing the availability of our cash flow to fund the hiring and retention of players and coaching staff, working capital, capital expenditures and other general corporate purposes;

limit our flexibility in planning for, or reacting to, changes in our business and the football industry;

affect our ability to compete for players and coaching staff; and

limit our ability to borrow additional funds.
In addition, our revolving facilities, our secured term loan facility and the note purchase agreement governing the senior secured notes contain, and any agreements evidencing or governing other future indebtedness may contain, certain restrictive covenants that will limit our ability to engage in certain activities that are in our long-term best interests. See “—Our indebtedness may restrict our ability to pursue our business strategies.” We have not previously breached and are not in breach of any of the covenants under any of these facilities; however our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all of our indebtedness.
To service our indebtedness, we require cash, and our ability to generate cash is subject to many factors beyond our control.
Our ability to make payments on and to refinance our indebtedness and to fund planned capital expenditures will depend on our ability to generate cash in the future. This, to a certain extent, is subject to the performance and popularity of our men’s first team as well as general economic, financial, competitive, regulatory and other factors that are beyond our control, including the COVID-19 pandemic and any other pandemic, epidemic or outbreak of an infectious disease.
We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. We may need to refinance all or a portion of our indebtedness on or before maturity. We cannot assure you that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all. Failure to refinance our indebtedness on terms we believe to be acceptable could have a material adverse effect on our business, financial condition, results of operations and cash flow.
Our indebtedness may restrict our ability to pursue our business strategies.
Our revolving facilities, our secured term loan facility and the note purchase agreement governing the senior secured notes limit our ability, among other things, to:

incur additional indebtedness;
 
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pay dividends or make other distributions or repurchase or redeem our shares;

make investments;

sell assets, including capital stock of restricted subsidiaries;

enter into agreements restricting our subsidiaries’ ability to pay dividends;

consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;

enter into sale and leaseback transactions;

enter into transactions with our affiliates; and

incur liens.
Our ability to comply with these covenants and restrictions may be affected by events beyond our control. If we breach any of these covenants or restrictions, we could be in default under our revolving facilities, our secured term loan facility and the note purchase agreement governing the senior secured notes. This would permit the lending banks under our revolving facilities and our secured term loan facility to take certain actions, including declaring all amounts that we have borrowed under our revolving facilities, secured term loan facility and other indebtedness to be due and payable, together with accrued and unpaid interest. This would also result in an event of default under the note purchase agreement governing the senior secured notes. Furthermore, lending banks could refuse to extend further credit under the revolving facilities. If the debt under our revolving facilities, our secured term loan facility, the note purchase agreement governing the senior secured notes or any other material financing arrangement that we enter into were to be accelerated, our assets, in particular liquid assets, may be insufficient to repay our indebtedness. The occurrence of any of these events could have a material adverse effect on our business, financial condition and results of operations.
Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly, as well as risks related to the phasing out of LIBOR.
We are subject to interest rate risk in connection with borrowings under our revolving facilities and our secured term loan facility, which bear interest at variable rates. Interest rate changes could impact the amount of our interest payments, and accordingly, our future earnings and cash flow, assuming other factors are held constant. We have entered into an interest rate swap related to a portion of our secured term loan facility that involves the exchange of floating for fixed rate interest payments in order to reduce interest rate volatility. As of 30 June 2020, we had £181.8 million of variable rate indebtedness outstanding under our secured term loan facility. We cannot assure you that any hedging activities entered into by us will be effective in fully mitigating our interest rate risk from our variable rate indebtedness.
In addition, the London Inter-bank Offered Rate (“LIBOR”) and certain other interest “benchmarks” may be subject to regulatory guidance and/or reform that could cause interest rates under our current and future debt agreements to perform differently than in the past or cause other unanticipated consequences. The United Kingdom’s Financial Conduct Authority, which regulates LIBOR, has announced that it intends to stop encouraging or requiring banks to submit LIBOR rates after 2021, and it is unclear if LIBOR will cease to exist or if new methods of calculating LIBOR will evolve. While the agreements governing our revolving facilities and our secured term loan facility provide for an alternate method of calculating our interest rates in the event that a LIBOR rate is unavailable, if LIBOR ceases to exist or if the methods of calculating LIBOR change from their current form, there may be adverse impacts on the financial markets generally and interest rates on borrowings under our revolving facilities and our secured term loan facility may be materially adversely affected.
Risks Related to Ownership of Our Class A Ordinary Shares
Because of their increased voting rights, the holders of our Class B shares will be able to exert control over us and our significant corporate decisions.
Trusts and other entities controlled by six lineal descendants of Mr. Malcolm Glazer collectively own 7.75% of our issued and outstanding Class A ordinary shares and all of our issued and outstanding Class B
 
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ordinary shares, representing 97.19% of the voting power of our outstanding capital stock. See “Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders.” Each Class A ordinary share is entitled to one vote per share and is not convertible into any other class of 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, our 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 at least 10% of the total number of Class A and Class B ordinary shares outstanding. For special resolutions, 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 a result, the holders of our Class B shares will be able to exert a significant degree of influence or actual control over our management and affairs and control all matters submitted to our shareholders for approval, including the election and removal of directors and any merger, consolidation, or sale of all or substantially all of our assets. The interests of the holders of our Class B shares might not coincide with the interests of the other shareholders. This concentration of voting power in our Class B shares may harm the value of our Class A ordinary shares, among other things:

delaying, deferring or preventing a change in control of our Company;

impeding a merger, consolidation, takeover or other business combination involving our Company; or

causing us to enter into transactions or agreements that are not in the best interests of all shareholders.
As a foreign private issuer within the meaning of the New York Stock Exchange’s corporate governance rules, we are permitted to, and we do, rely on exemptions from certain of the New York Stock Exchange corporate governance standards and shareholder approval requirements. Our reliance on such exemptions may afford less protection to holders of our Class A ordinary shares.
The New York Stock Exchange’s corporate governance rules require listed companies to have, among other things, a majority of independent board members and independent director oversight of executive compensation, nomination of directors and corporate governance matters. Additionally, the New York Stock Exchange’s rules require that a listed company obtain, in specified circumstances, (1) shareholder approval to adopt and materially revise equity compensation plans, as well as (2) shareholder approval prior to an issuance (a) of more than 1% of its common stock (including derivative securities thereof) in either number or voting power to related parties, (b) of more than 20% of its outstanding common stock (including derivative securities thereof) in either number or voting power or (c) that would result in a change of control. As a foreign private issuer, we are permitted to, and we do, follow home country practice in lieu of the foregoing requirements. As long as we rely on the foreign private issuer exemptions under the rules of the New York Stock Exchange, a majority of the directors on our board of directors are not required to be independent directors, our remuneration committee is not required to be comprised entirely of independent directors, we are not required to have a nominating and corporate governance committee, and shareholder approval is neither required for equity compensation plans and material revisions to those plans nor the issuance of more than 1% of our outstanding ordinary shares (including derivative securities thereof) in either number or voting power, the issuance of 20% or more of our outstanding ordinary shares (including derivative securities thereof) in either number or voting power or an issuance that would result in a change of control. Therefore, our board of directors’ approach to governance and securities issuances may be different from that of a board of directors consisting of a majority of independent directors, and, as a result, the management oversight of our Company may be more limited than if we were subject to all of the New York Stock Exchange corporate governance standards and shareholder approval requirements.
Accordingly, our shareholders do not have the same protection afforded to shareholders of companies that are subject to all of the New York Stock Exchange corporate governance standards and shareholder approval requirements, and the ability of our independent directors to influence our business policies and affairs may be reduced.
 
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The obligations associated with being a public company require significant resources and management attention.
As a public company in the United States, we incur legal, accounting and other expenses that we did not previously incur as a private company. We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), the listing requirements of the New York Stock Exchange and other applicable securities rules and regulations. Compliance with these rules and regulations increases our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increases demand on our systems and resources. The Exchange Act requires that we file annual and current reports with respect to our business, financial condition and results of operations. The Sarbanes-Oxley Act requires, among other things, that we establish and maintain effective internal control over financial reporting and requires our independent registered public accounting firm to attest to the effectiveness of such internal control. Even if our management concludes that our internal controls over financial reporting are effective, our independent registered public accounting firm may decline to attest to our management’s assessment or may issue a report that is qualified if it is not satisfied with our internal controls or the level at which such controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. Failure to comply with Section 404 could subject us to regulatory scrutiny and sanctions, impair our ability to generate revenue, cause investors to lose confidence in the accuracy and completeness of our financial reports and negatively affect our share price.
Furthermore, the demands of being a public company may divert management’s attention from implementing our growth strategy, which could prevent us from improving our business, financial condition and results of operations. We have made, and will continue to make, changes to our internal controls and procedures for financial reporting and accounting systems to continue to meet our reporting obligations as a public company. However, the measures we have taken, and will continue to take, may not be sufficient to satisfy our obligations as a public company. In addition, these rules and regulations increase our legal and financial compliance costs and make some activities more time-consuming and costly. For example, these rules and regulations make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to incur substantial costs to maintain the same or similar coverage. These additional obligations could have a material adverse effect on our business, financial condition, results of operations and cash flow.
In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to continue to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and our business, financial condition, results of operations and cash flow could be adversely affected.
We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.
We are a “foreign private issuer,” as such term is defined in Rule 405 under the Securities Act, and therefore, we are not required to comply with all the periodic disclosure and current reporting requirements of the Exchange Act and related rules and regulations. Under Rule 405, the determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter and, accordingly, the next determination will be made with respect to us on 31 December 2020.
In the future, we would lose our foreign private issuer status if a majority of our shareholders, directors or management are US citizens or residents and we fail to meet additional requirements necessary to avoid
 
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loss of foreign private issuer status. Although we have elected to comply with certain US regulatory provisions, our loss of foreign private issuer status would make such provisions mandatory. The regulatory and compliance costs to us under US securities laws as a US domestic issuer may be significantly higher. If we are not a foreign private issuer, we will be required to file periodic reports and registration statements on US domestic issuer forms with the US Securities and Exchange Commission (the “SEC”), which are more detailed and extensive than the forms available to a foreign private issuer. For example, the annual report on Form 10-K requires domestic issuers to disclose executive compensation information on an individual basis with specific disclosure regarding the domestic compensation philosophy, objectives, annual total compensation (base salary, bonus, equity compensation) and potential payments in connection with change in control, retirement, death or disability, while the annual report on Form 20-F permits foreign private issuers to disclose compensation information on an aggregate basis. We will also have to mandatorily comply with US federal proxy requirements, and our officers, directors and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. We may also be required to modify certain of our policies to comply with good governance practices associated with US domestic issuers. Such conversion and modifications will involve additional costs. In addition, we may lose our ability to rely upon exemptions from certain corporate governance requirements on US stock exchanges that are available to foreign private issuers.
Anti-takeover provisions in our organizational documents and Cayman Islands law may discourage or prevent a change of control, even if an acquisition would be beneficial to our shareholders, which could depress the price of our Class A ordinary shares and prevent attempts by our shareholders to replace or remove our current management.
Our amended and restated memorandum and articles of association contain provisions that may discourage unsolicited takeover proposals that shareholders may consider to be in their best interests. In particular, our amended and restated memorandum and articles of association permit our board of directors to issue preference shares from time to time, with such rights and preferences as they consider appropriate. Our board of directors could also authorize the issuance of preference shares with terms and conditions and under circumstances that could have an effect of discouraging a takeover or other transaction. We are also subject to certain provisions under Cayman Islands law which could delay or prevent a change of control. In particular, any merger, consolidation or amalgamation of the Company would require the active consent of our board of directors. Our board of directors may be appointed or removed by the holders of the majority of the voting power of our ordinary shares (which is controlled by the holders of our Class B ordinary shares). Together these provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our Class A ordinary shares.
The price of our Class A ordinary shares might fluctuate significantly, and you could lose all or part of your investment.
Volatility in the market price of our Class A ordinary shares may prevent investors from being able to sell their Class A ordinary shares at or above the price they paid for such shares. The trading price of our Class A ordinary shares may be volatile and subject to wide price fluctuations in response to various factors, including:

performance of our men’s first team;

the overall performance of the equity markets;

industry related regulatory developments;

issuance of new or changed securities analysts’ reports or recommendations;

additions or departures of key personnel;

investor perceptions of us and the football industry, changes in accounting standards, policies, guidance, interpretations or principles;

sale of our Class A ordinary shares by us, our principal shareholders or members of our management;
 
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general economic conditions, including the economic impact of the COVID-19 pandemic and any other pandemic, epidemic or outbreak of an infectious disease;

changes in interest rates; and

availability of capital.
These and other factors might cause the market price of our Class A ordinary shares to fluctuate substantially, which might limit or prevent investors from readily selling their Class A ordinary shares and may otherwise negatively affect the liquidity of our Class A ordinary shares. In addition, in recent years, the stock market has experienced significant price and volume fluctuations. This volatility has had a significant impact on the market price of securities issued by many companies across many industries. The changes frequently appear to occur without regard to the operating performance of the affected companies. Accordingly, the price of our Class A ordinary shares could fluctuate based upon factors that have little or nothing to do with our Company, and these fluctuations could materially reduce our share price. Securities class action litigation has often been instituted against companies following periods of volatility in the overall market and in the market price of a company’s securities. This litigation, if instituted against us, could result in substantial costs, divert our management’s attention and resources, and harm our business, operating results and financial condition.
Future sales of our Class A ordinary shares, or the perception in the public markets that these sales may occur, may depress our stock price.
Sales of substantial amounts of our Class A ordinary shares, or the perception that these sales could occur, could adversely affect the price of our Class A ordinary shares and could impair our ability to raise capital through the sale of additional shares. As of 6 October 2020 we had 38,939,193 Class A ordinary shares outstanding. The Class A ordinary shares are freely tradable without restriction under the Securities Act, except for any of our Class A ordinary shares that may be held or acquired by our directors, executive officers and other affiliates, as that term is defined in the Securities Act, which will be restricted securities under the Securities Act. Restricted securities may not be sold in the public market unless the sale is registered under the Securities Act or an exemption from registration is available.
All of our Class A ordinary shares outstanding as of the date of this Annual Report may be sold in the public market by existing shareholders, subject to applicable Rule 144 volume limitations and other limitations imposed under federal securities laws.
In the future, we may also issue our securities if we need to raise capital in connection with a capital raise or acquisition. The amount of our Class A ordinary shares issued in connection with a capital raise or acquisition could constitute a material portion of our then-outstanding Class A ordinary shares.
Our ability to pay regular dividends is subject to restrictions in our revolving facilities, our secured term loan facility, the note purchase agreement governing the senior secured notes, results of operations, distributable reserves and solvency requirements; our Class A ordinary shares have no guaranteed dividends and holders of our Class A ordinary shares have no recourse if dividends are not declared.
In fiscal year 2020, we paid two semi-annual cash dividends on our Class A ordinary shares and Class B ordinary shares of $0.09 per share. Dividends paid in the year ended 30 June 2020 amounted to $29.6 million ($0.18 per share), the pounds sterling equivalent of which was £23.2 million (£0.14 per share). The declaration and payment of any future dividends will be at the sole discretion of our board of directors or a committee thereof and will depend upon our results of operations, financial condition, distributable reserves, contractual restrictions, restrictions imposed by applicable law, capital requirements and other factors our board of directors (or such committee thereof) deems relevant. Furthermore, neither our Class A ordinary shares nor our Class B ordinary shares have any guaranteed dividends and holders of our Class A ordinary shares and holders of our Class B ordinary shares have no recourse if dividends are not declared. Our ability to pay dividends on the Class A ordinary shares and Class B ordinary shares is limited by our revolving facilities, our secured term loan facility and the note purchase agreement governing the senior secured notes, which contain restricted payment covenants. The restricted payment covenants allow dividends in certain circumstances, including to the extent dividends do not exceed 50% of the cumulative
 
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consolidated net income of Red Football Limited and its restricted subsidiaries, provided there is no event of default and Red Football Limited is able to meet the principal and interest payments on its debt under a fixed charge coverage test. Our ability to pay dividends may be further restricted by the terms of any of our future debt or preferred securities. Additionally, because we are a holding company, our ability to pay dividends on our Class A ordinary shares and Class B ordinary shares is limited by restrictions on the ability of our subsidiaries to pay dividends or make distributions to us, including restrictions under the terms of the agreements governing our indebtedness. As a consequence of these limitations and restrictions, we may not be able to make, or may have to reduce or eliminate, the payment of dividends on our Class A ordinary shares. Accordingly, you may have to sell some or all of your Class A ordinary shares after price appreciation in order to generate cash flow from your investment. You may not receive a gain on your investment when you sell your Class A ordinary shares and you may lose the entire amount of the investment. Additionally, any change in the level of our dividends or the suspension of the payment thereof could adversely affect the market price of our Class A ordinary shares. See “Item 8. Financial Information—A. Consolidated Financial Statements and Other Financial Information—Dividend Policy.”
The rules of the Premier League and our amended and restated memorandum and articles of association impose certain limitations on shareholders’ ability to invest in more than one football club.
The rules of the Premier League prohibit any person who holds an interest of 10% or more of the total voting rights exercisable in a Premier League or English Football League (“EFL”) football club from holding an interest in voting rights exercisable in any other Premier League football club or EFL football club. As a result, our amended and restated memorandum and articles of association prohibit the acquisition of (i) 10% or more of our Class A ordinary shares if they hold any interest in voting rights exercisable in another Premier League football club and (ii) any Class A ordinary shares if they hold an interest of 10% or more of the total voting rights exercisable in another Premier League football club. In addition, under our amended and restated memorandum and articles of association, if any shareholder is determined by us, at our absolute discretion, to be holding any Class A ordinary shares in violation of this rule or the rules of certain other relevant governing bodies, we have the right to repurchase shares from such person or direct that shareholder to transfer those shares to another person.
Exchange rate fluctuations may adversely affect the foreign exchange value of the Class A ordinary shares and any dividends.
Our Class A ordinary shares are quoted in US dollars on the New York Stock Exchange. Our financial statements are prepared in pounds sterling. Fluctuations in the exchange rate between the pounds sterling and the US dollar will affect, among other matters, the US dollar value of the Class A ordinary shares and of any dividends.
The rights afforded to shareholders are governed by the laws of the Cayman Islands.
Our corporate affairs and the rights afforded to shareholders are governed by our amended and restated memorandum and articles of association and by the Companies Law (as amended) of the Cayman Islands (the “Companies Law”) and common law of the Cayman Islands, and these rights differ in certain respects from the rights of shareholders in typical US corporations. In particular, the laws of the Cayman Islands relating to the protection of the interests of minority shareholders differ in some respects from those established under statutes or judicial precedent in existence in the United States. The laws of the Cayman Island provide only limited circumstances under which shareholders of companies may bring derivative actions and (except in limited circumstances) do not afford appraisal rights to dissenting shareholders in the form typically available to shareholders of a US corporation other than in limited circumstances in relation to certain mergers. A summary of Cayman Islands law on the protection of minority shareholders is set out in “Item 10. Additional Information—B. Memorandum and Articles of Association and Other Share Information.”
We report as a US domestic corporation for US federal corporate income tax purposes.
As discussed more fully under “Item 10. Additional Information—E. Taxation,” due to the circumstances of our formation and the application of Section 7874 of the Code, we report as a US
 
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domestic corporation for all purposes of the Code. As a result, we are subject to US federal income tax on our worldwide income. In addition, if we pay dividends to a Non-US Holder, as defined in the discussion “Item 10. Additional Information—E. Taxation,” we will be required to withhold US federal income tax at the rate of 30%, or such lower rate as may be provided in an applicable income tax treaty. Each investor should consult its own tax adviser regarding the US federal income tax position of the Company and the tax consequences of holding the Class A ordinary shares.
Withholding under the Foreign Account Tax Compliance Act may apply to our dividends
Under legislation incorporating provisions referred to as the Foreign Account Tax Compliance Act (“FATCA”), a 30% withholding tax will generally apply to certain types of payments, including US source dividends made to “foreign financial institutions” (as defined under those rules) and certain other non-US entities, unless such foreign financial institutions or other entities comply with requirements under FATCA. Because we report as a US domestic corporation for all purposes of the Code, including for purposes of FATCA, our dividends paid to a foreign financial institution or other non-US entity may be subject to potential withholding under FATCA. Under the applicable US Treasury Regulations and administrative guidance, withholding under FATCA generally applies to payments of dividends on our Class A ordinary shares. While withholding under FATCA would have also applied to payments of gross proceeds from the sale or other disposition of stock on or after 1 January 2019, proposed Treasury Regulations eliminate FATCA withholding on payments of gross proceeds entirely. Taxpayers generally may rely on these proposed Treasury Regulations until final Treasury Regulations are issued.
If securities or industry analysts do not publish research or reports or publish unfavorable research about our business, our stock price and trading volume could decline.
The trading market for our Class A ordinary shares depends in part on the research and reports that securities or industry analysts publish about us, our business or our industry. If one or more of the analysts who covers us downgrades our stock, our share price will likely decline. If one or more of these analysts ceases to cover us or fails to publish regular reports on us, interest in the purchase of our Class A ordinary shares could decrease, which could cause our stock price or trading volume to decline.
It may be difficult to enforce a US judgment against us, our directors and officers and certain experts named in this Annual Report outside the United States, or to assert US securities law claims outside of the United States.
The majority of our directors and executive officers are not residents of the United States, and the majority of our assets and the assets of these persons are located outside the United States. As a result, it may be difficult or impossible for investors to effect service of process upon us within the United States or other jurisdictions, including judgments predicated upon the civil liability provisions of the federal securities laws of the United States. Additionally, it may be difficult to assert US securities law claims in actions originally instituted outside of the United States. Foreign courts may refuse to hear a US securities law claim because foreign courts may not be the most appropriate forums in which to bring such a claim. Even if a foreign court agrees to hear a claim, it may determine that the law of the jurisdiction in which the foreign court resides, and not US law, is applicable to the claim. Further, if US law is found to be applicable, the content of applicable US law must be proved as a fact, which can be a time-consuming and costly process, and certain matters of procedure would still be governed by the law of the jurisdiction in which the foreign court resides.
In particular, investors should be aware that there is uncertainty as to whether the courts of the Cayman Islands would recognize and enforce judgments of United States courts obtained against us or our directors or management as well as against the selling shareholder predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States or entertain original actions brought in the Cayman Islands courts against us or our directors or officers as well as against the selling shareholder predicated upon the securities laws of the United States or any state in the United States. As a result of the difficulty associated with enforcing a judgment against us, you may not be able to collect any damages awarded by either a US or foreign court.
 
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ITEM 4.   INFORMATION ON THE COMPANY
Our Company—Manchester United
Manchester United Ltd., an exempted company with limited liability incorporated under the Companies Law (as amended) of the Cayman Islands, was incorporated on 30 April 2012. On 8 August 2012, Manchester United Ltd. changed its legal name to Manchester United plc. The principal executive office address is Sir Matt Busby Way, Old Trafford, Manchester M16 0RA, United Kingdom.
The SEC maintains an Internet website that contains reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The address of that site is www.sec.gov. We also make available on our website, free of charge, our annual reports on Form 20-F and the text of our reports on Form 6-K, including any amendments to these reports, as well as certain other SEC filings, as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. Our website address is https://ir.manutd.com/. The information contained on or through our website, or any other website referred to herein, is not incorporated by reference in this Annual Report.
We are one of the most popular and successful sports teams in the world, playing one of the most popular spectator sports on Earth. Through our 142-year heritage we have won 66 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 us 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, Aon, General Motors (Chevrolet) and Kohler that want access and exposure to our community of followers and association with our brand.
Our global community of followers engages with us in a variety of ways:

Premier League games at our home stadium, Old Trafford, played in front of a crowd, have been virtually sold out since the 1997/98 season. In the 2019/20 season, prior to the postponement due to COVID-19 and associated government restrictions, our 23 home games were attended by a cumulative audience of over 1.6 million. Our remaining games were played behind closed doors.

We undertake exhibition games and promotional tours on a global basis, enabling our worldwide followers to see our team play. These games are in addition to our competitive matches and take place during the summer months or during gaps in the football season. Over the last 6 years, we have played 24 exhibition games in Australia, China, Ireland, Norway, Singapore, Sweden and the United States. Due to COVID-19 and competition delays resulting in the deferral of a number of 2019/20 Premier League, FA Cup and Europa League matches to July and August 2020, no promotional tour was undertaken in the summer of 2020.

Our customer relationship management (“CRM”) database, a proprietary data repository that includes contact and transactional details of followers and customers around the globe, enables us to analyze and better understand prospects and customers to drive revenues. As of 30 June 2020, we estimate that the CRM database holds in excess of 43.2 million records.

As of 30 June 2020, we also had more than 164.0 million total social connections. Last year we reported a year-end figure as of 30 June 2019 of 152.7 million total social connections (a 7.4% increase). Total social connections include the following:

We have a very popular brand page on Facebook with approximately 73.2 million connections as of 30 June 2020. In comparison, each of the New York Yankees and Dallas Cowboys had approximately 8.5 million Facebook connections as of 30 June 2020. Furthermore, we have more Facebook connections than the official pages of the NBA, NFL, NHL and MLB combined and we are the most followed Facebook page registered in the United Kingdom according to www.socialbakers.com.

As of 30 June 2020, our Twitter accounts had more than 25.3 million followers, an increase of 13.0% from 30 June 2019.
 
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We have over 35.9 million followers on Instagram as of 30 June 2020, an increase of 21.3% from 30 June 2019. We continue to be the most-followed Premier League club on Instagram.

As of 30 June 2020, our YouTube channel had over 2.9 million subscribers. Since June 2020, according to YouTube we became the fastest sports club to reach 3.0 million subscribers on YouTube.

We also have a significant presence on Chinese social media. During the 2019/20 season we became the first sports club to generate 10 million followers on Sina Weibo. In July 2019, we launched a Chinese language mobile application.

In May 2018, we launched our new website (www.manutd.com) and in August 2018, we launched our first free global mobile application, which reached number one in the App Store’s sports category download charts in 98 markets around the world and was top ten within the sports category in 157 markets. The free global mobile application has monthly active users in over 230 markets globally.

We have expanded the reach of our in house television network, MUTV, by launching a direct to consumer (“D2C”) proposition on iOS, Android, AppleTV, Roku, Amazon Fire and Xbox. Our linear television network continues to be the most subscribed football channel in the United Kingdom.

During the 2019/20 season, according to Futures Data, our games played up to and including 30 June 2020 generated a cumulative audience reach of over 2.64 billion viewers; thus on a per game basis our 51 games attracted an average cumulative audience reach of over 51.7 million viewers. The remaining 10 games related to 2019/20 season and competitions were played during July and August in fiscal year 2021 due to delays resulting from the impact of COVID-19.

We have one of the strongest online global brands providing us with significant opportunities to further engage with our followers and develop our media assets and revenue streams.
Our Business Model and Revenue Drivers
We operate and manage our business as a single reporting segment—the operation of professional sports teams. However, we review our revenue through three principal sectors—Commercial, Broadcasting and Matchday.

Commercial: Within the Commercial revenue sector, we monetize our global brand via two revenue streams: sponsorship and retail, merchandising, apparel & product licensing.

Sponsorship: We monetize the value of our global brand and community of followers through marketing and sponsorship relationships with leading international and regional companies around the globe. To better leverage the strength of our brand, we have developed a segmentation sponsorship strategy. Our sponsorship revenue was £182.7 million, £173.0 million and £173.0 million, for each of the years ended 30 June 2020, 2019 and 2018, respectively.

Retail, Merchandising, Apparel & Product Licensing: We market and sell sports apparel, training and leisure wear and other clothing featuring the Manchester United brand on a global basis. In addition, we also sell other licensed products, from coffee mugs to bed spreads, featuring the Manchester United brand and trademarks. These products are distributed through Manchester United branded retail centers and e-commerce platforms, as well as our partners’ wholesale distribution channels. Our retail, merchandising, apparel & product licensing revenue was £96.3 million, £102.1 million and £102.8 million for each of the years ended 30 June 2020, 2019 and 2018, respectively. Revenue for the year ended 30 June 2020 was impacted by COVID-19 and the closure of the Old Trafford Megastore from mid-March 2020 to mid-June 2020.
Our Commercial revenue was £279.0 million, £275.1 million and £275.8 million for each of the years ended 30 June 2020, 2019 and 2018, respectively.
Our other two revenue sectors, Broadcasting and Matchday, provide predictable cash flow and global media exposure that enables us to continue to invest in the success of the teams and expand our brand.

Broadcasting:   We benefit from the distribution of live football content directly from the revenue we receive and indirectly through increased global exposure for our commercial partners. Broadcasting
 
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revenue is derived from the global television rights relating to the Premier League, UEFA club competitions and other competitions. In addition, our wholly-owned global television channel, MUTV, delivers Manchester United programming to territories around the world. In addition to our broadcasting channel, we have also launched a MUTV D2C subscription mobile application which is available on iOS, Android, Amazon Fire, Apple TV, Roku and Xbox. Broadcasting revenue including, in some cases, prize money received by us in respect of various competitions, will vary from year to year as a result of variability in the amount of available prize money and the performance of our men’s first team in such competitions. Our Broadcasting revenue was £140.2 million, £241.2 million and £204.2 million for each of the years ended 30 June 2020, 2019 and 2018, respectively. Revenue for the year ended 30 June 2020 was primarily impacted by non-participation in the UEFA Champions League and by COVID-19 and the temporary postponement of all 2019/20 competitions (resulting in the deferral of ten matches to the start of the 2020/21 financial year) as well as rebates due to broadcasters following competition delay and broadcast schedule changes.

Matchday:   We believe Old Trafford is one of the world’s iconic sports venues. It currently seats 74,140 and is the largest football club stadium in the United Kingdom. We have averaged over 99% of attendance capacity for our Premier League matches played in front of a crowd in each of the last 22 years. Matchday revenue will vary from year to year as a result of the number of home games played and the performance of our men’s first team in various competitions. Our Matchday revenue was £89.8 million, £110.8 million and £109.8 million for each of the years ended 30 June 2020, 2019 and 2018, respectively. COVID-19 has had a significant impact on Matchday revenue for the year ended 30 June 2020. All competitions were suspended in mid-March 2020 and following the resumption of play in June 2020, all matches were played behind closed doors. This includes one home match played during June 2020 and four home matches relating to 2019/20 competitions which were deferred to the start of the 2020/21 financial year.
Total revenue for the years ended 30 June 2020, 2019 and 2018 was £509.0 million, £627.1 million and £589.8 million, respectively.
Our Competitive Strengths
We believe our key competitive strengths are:

One of the most successful sports teams in the world: Founded in 1878, Manchester United is one of the most successful sports teams in the world—playing one of the world’s most popular spectator sports. We have won 66 trophies in nine different leagues, competitions and cups since 1908. Our ongoing success is supported by our highly developed football infrastructure and global scouting network.

A globally recognized brand with a large, worldwide following: Our 142-year history, our success and the global popularity of our sport have enabled us to become, we believe, one of the world’s most recognizable brands. We enjoy the support of our worldwide community of 1.1 billion fans and followers. The composition of our follower base is far reaching and diverse, transcending cultures, geographies, languages and socio-demographic groups, and we believe the strength of our brand goes beyond the world of sports.

Ability to successfully monetize our brand: The popularity and quality of our globally recognized brand make us an attractive marketing partner for companies around the world. Our community of followers is strong in emerging markets, especially in certain regions of Asia, which enables us to deliver media exposure and growth to our partners in these markets.

Well established marketing infrastructure driving Commercial revenue growth: We have a large global team dedicated to the development and monetization of our brand and to the sourcing of new revenue opportunities. The team has considerable experience and expertise in sponsorship sales, customer relationship management, marketing execution, advertising support and brand development. In addition, we have developed an increasing range of case studies, covering multiple sponsorship categories and geographies, which in combination with our many years’ experience enables us to demonstrate and deliver an effective set of marketing capabilities to our partners on a global and
 
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regional basis. Our team is dedicated to the development and monetization of our brand and to the sourcing of new revenue opportunities.

Sought-after content capitalizing on the proliferation of digital and social media: We produce content that is followed year-round by our global community of fans and followers. Our content distribution channels are international and diverse, and we actively adopt new media channels to enhance the accessibility and reach of our content. We believe our ability to generate proprietary and exclusive content, which we distribute on our own global platforms as well as via popular third-party social media platforms such as Facebook, Instagram, Twitter, YouTube, Sina Weibo and others, constitute an ongoing growth opportunity. Following the successful D2C launch of MUTV on iOS, Android, and MUTV.com last season, and building on the global success of its linear distribution, in July 2018 we launched MUTV applications on ‘connected TV’ platforms—namely, AppleTV, Roku, Amazon Fire and Xbox. This gives our fans the ability to watch MUTV without a cable subscription. Existing subscribers to the MUTV mobile application and web platforms can access these new platforms for free via a universal login feature which allows the same credentials to be used across several devices. This continued expansion provides MUTV access to a new demographic of the club’s fan base. Recent figures show that connected TV usage is highest amongst millennials (18-34 year-olds), representing a growing trend of younger audiences accessing programming on over the top (“OTT”) platforms in place of traditional linear television.

Seasoned management team and committed ownership: Our senior management has considerable experience and expertise in the football, commercial, media and finance industries.
Our Strategy
We aim to increase our revenue and profitability by expanding our high growth businesses that leverage our brand, global community and marketing infrastructure. The key elements of our strategy are:

Continue to invest in our team, facilities and other brand enhancing initiatives: Dating back to our first league championship in 1908 through present day, where we have earned a record number of English League titles, we have enjoyed a rich tradition of football excellence. We believe our many years of on field success coupled with an iconic stadium and high level of fan engagement has driven our leading global brand. We are well positioned to continue reinvesting our free cash flow in brand enhancing initiatives. Our brand begins with strong on-field performance, and we remain committed to attracting and retaining the highest quality players for our first teams and coaching staff. To maintain our high standard of performance we will continue to invest in our team. We will also continue to invest in our facilities, including the Old Trafford Stadium, to maintain the quality of service, enhance the fan experience and drive their high level of engagement and loyalty. We have undertaken several initiatives at Old Trafford to enhance our Matchday fan experience, revenue and profitability including restructuring the composition of our stadium, with a particular emphasis on developing premium seating and hospitality facilities. Our commitment to the fan experience has resulted in strong fan loyalty with over 99% average attendance for all of our Premier League games played in front of a crowd since the 1997/98 season. Prior to the postponement due to COVID-19, and associated government restrictions during the 2019/20 season, our 23 home games were attended by a cumulative audience of over 1.6 million (with our remaining games played behind closed doors). Furthermore, we continue to invest in several other areas including our digital media assets and emerging markets to grow our global fan base and increase our ability to engage with our fans in multiple ways. We remain committed to investing in our team, our facilities and other initiatives to continue our many years of success and enhance our brand globally. We expect these initiatives will continue to be key drivers of our sales, profit and leading brand recognition going forward.

Expansion and renewal of sponsors: We are well-positioned to continue to secure sponsorships with leading brands and further develop our relationships with existing sponsors. We have historically implemented a proactive approach to identifying, securing and supporting sponsors, including expanding our sponsorship team to bolster our analytical capabilities and effectiveness. We continue to place great emphasis on working with our existing sponsors and maintaining a strong renewals base. During fiscal year 2020, we announced two new global partnerships, the replacement of two global partnerships, as well as extensions to four global partnerships.
 
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Further develop our retail, merchandising, apparel & product licensing business: Currently, we have a 10-year agreement with adidas with respect to our global technical sponsorship and dual-branded licensing rights, which began on 1 August 2015. The agreement with adidas does not include the rights with respect to mono-branded licensing rights or the right to create and operate Manchester United branded soccer schools, physical retail channels and e-commerce retail channels. In the future, we plan to invest to expand our portfolio of product licensees to enhance the range of product offerings available to our followers. Additionally, we may also seek to refine how we segment the different elements of this business. We may also increase our focus on developing these rights more proactively, alone or with other partners.
Our e-commerce platform, ‘United Direct’ is currently operated under license by Fanatics in close partnership with Manchester United. We believe that the reach and engagement of our Media platform, when combined with our segmented product range, provides the platform for growth in this business. Our e-commerce business saw growth during the second half of fiscal 2020, and we believe that there is scope to build on this success.

Exploit digital media opportunities: The rapid shift of media consumption towards internet, mobile and social media platforms presents us with multiple growth opportunities and new revenue streams. Our digital media platforms, applications and social media channels, are expected to become one of the primary methods by which we engage and transact with our fans around the world. We continue to evolve our media team’s capability to address these opportunities. Moreover, since 2013, we have wholly owned MUTV ensuring that we have both a greater degree of control over the production, distribution and quality of our proprietary content and better insight into how to evolve our digital media strategy as we continue to develop and roll out carefully targeted new products and services.
We maintain a D2C subscription mobile application on iOS, Android, MUTV.com, AppleTV, Roku, Amazon Fire and Xbox. MUTV enables our fans to watch our live men’s first team tour matches live, our academy team matches live, as well as exclusively produced original productions and interviews with players and our team manager. These applications have enabled us to directly access new overseas territories and develop our fan base further domestically.
The launch of MUTV D2C gave access to new demographics of the club’s fan base. Recent figures show that connected TV usage is highest amongst millennials (18-34 year-olds), representing a growing trend of younger audiences accessing programming on OTT platforms and services in place of traditional linear television.
We publish content on a daily basis onto the club’s website and mobile application. Our website provides commercial benefits for our business with greater e-commerce opportunities and more digital inventory for our commercial partners to benefit from.
In addition, the proliferation of mobile devices has resulted in a need for our content to be consumed ‘on the go’ and in real time. The official mobile application builds upon the aforementioned benefits of the new website and increases the distribution of our content. We constantly iterate and improve the functionality of the club website and club mobile application, using fan insight and data to drive improvements which ultimately enhance our engagement with our fan base. Since launch, we have reached number one in the App Store’s sports category download charts in 98 markets around the world, top ten within the sports category in 157 markets and currently have active users in over 230 markets globally.
In addition to developing our own digital properties, we intend to leverage third-party media platforms and other social media as a means of further engaging with our fans and creating a source of traffic for our digital media assets. Our digital media offerings are in the early stages of development and present opportunities for future growth.

Enhance the reach and distribution of our broadcasting rights:   We are well-positioned to benefit from any increased value and related growth in club distributions associated with the Premier League, the Champions League and other competitions. Season 2019/20 was the first year of a new Premier League broadcasting rights three-year cycle. Of seven live UK packages, five were sold to Sky Sports,
 
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one to BT Sport and the final one to Amazon Prime Video, a new entrant in the domestic Premier League rights market. The overall value generated from the sale of the seven packages was not publicly disclosed, but was a slight reduction on the previous rights deal. The previous deal, which saw an increase of over 70% for the 2016/17 to 2018/19 cycle compared to the 2013/14 to 2015/16 cycle, represented the largest UK TV rights deal ever signed. The international broadcasting rights for the current three-year cycle (2019/20 to 2021/22) represent a 30% uplift on the previous cycle. The Premier League also implemented a change to the distribution method for international broadcasting rights in 2019/20. International broadcast monies were previously split equally among Premier League clubs. From 2019/20, clubs share equally an inflation-adjusted amount on the previous three-year cycle, with any growth in international rights distributed based on league finishing position at the end of the season. In the current cycle, the ratio between the maximum and minimum broadcasting revenue that a club can receive from the Premier League in a season is capped at 1.8:1.
The current UEFA club competition’s three-year media rights agreement which commenced in the 2018/19 season is worth €3.2 billion per season, marking an increase of 33% on the previous contract. We believe these contracts underline the continuing demand for, and popularity of, live sports content and football in particular. Unlike other television programming, the unpredictable outcomes of live sports ensures that individuals consume sports programming in real time and in full, resulting in higher audiences and increased interest from television broadcasters and advertisers.
Furthermore, MUTV, our global broadcasting platform, delivers Manchester United programming to territories around the world. We plan to continue to expand the distribution of MUTV supported by improving the quality of its content and its production capabilities.
COVID-19 resulted in the postponement of the 2019/20 Premier League, FA Cup and UEFA Europa League competitions with matches suspended from 13 March 2020. This resulted in the deferral of nine remaining Premier League matches, one scheduled Round of 16 Europa League match and the final matches of the FA Cup. The 2019/20 Premier League season resumed on 17 June 2020 (with three of the deferred matches played during June 2020 and the remaining six matches deferred to the start of the 2020/21 financial year). The delay to 2019/20 season completion, and broadcast schedule changes to the season as a whole, had implications for the agreements between the Premier League and both UK and international broadcasters, resulting in an estimated rebate due to broadcasters on the annual fees for the 2019/20 Season of £285 million. The mechanism for allocating the impact of the rebate on individual clubs was approved by the 20 Premier League clubs and resulted in a reduction of approximately £14 million to amounts we typically would have earned. It is the intention of the league that the cash impact of this rebate will be deducted from distributions to clubs in seasons 2021/22 and 2022/23. UEFA has announced in its circular letter 75/2020 that gross revenues from the 2019/20 club competitions were adversely impacted by COVID-19 by a total amount of approximately €566 million, representing 16% of total revenues. As a result, UEFA has confirmed that this shortfall will be recouped against distributions to clubs who participate in their competitions over the five seasons from 2019/20 through to 2023/24. The reduction for each individual club will be calculated in proportion to each individual club’s related revenue and will therefore be dependent upon competition participation and progress. UEFA have stated that the 2019/20 reduction will be approximately 3.6% of revenues. Based upon our performance in the 2019/20 UEFA Europa League competition, we have estimated that our share of the 2019/20 reduction will be approximately €0.9 million compared to the amounts we believe we would have otherwise earned.

Diversify revenue and improve margins:   We aim to increase the revenue and operating margins of our business as we further expand our high growth commercial businesses, including sponsorship, retail, merchandising and licensing.
Our Market Opportunity
We believe that we are one of the world’s most recognizable global brands with a community of 1.1 billion fans and followers. Manchester United is at the forefront of live football, which is a key component of the global sports market.
 
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Other markets driving our business include the global advertising market, the global pay television market and the global apparel market.
While our business represents only a small portion of our addressable markets and may not grow at a corresponding rate, we believe our global reach and access to emerging markets position us for continued growth.
Our Men’s Team’s History
Founded in 1878 as Newton Heath L&YR Football Club, our club has operated for over 142 years. The team first entered the English First Division, then the highest league in English football, for the start of the 1892/93 season. Our club name changed to Manchester United Football Club in 1902, and we won the first of our 20 English League titles in 1908. In 1910, we moved to Old Trafford, our current stadium.
In the late 1940s, we returned to on-field success, winning the FA Cup in 1948 and finishing within the top four league positions during each of the first five seasons immediately following the Second World War. During the 1950s, we continued our on-field success under the leadership of manager Sir Matt Busby, who built a popular and famous team based on youth players known as the “Busby Babes.”
In February 1958, an airplane crash resulted in the death of eight of our men’s first team players. Global support and tributes followed this disaster as Busby galvanized the team around such popular players as George Best, Bobby Charlton and Denis Law. Rebuilding of the club culminated with a victory in the 1968 European Cup final, becoming the first English club to win this title.
This storied history preceded the highly successful modern era of Manchester United which began in earnest in 1986 when the club appointed Sir Alex Ferguson as manager, and in 1990 we won the FA Cup and began a long period of sustained success winning the Premier League title a record 13 times. In total, we have won a record 20 English League titles, 12 FA Cups, 5 EFL Cups, 3 European/Champions League Cups, 1 European Europa League Cup, and 1 FIFA Club World Cup, making us one of the most successful clubs in England.
At the end of the 2012/13 season, Sir Alex Ferguson retired as team manager. Sir Alex remains a key member of the club as he is a director of Manchester United Football Club.
Our current team manager, Ole Gunnar Solskjaer, was appointed on 28 March 2019 on a three-year contract. Solskjaer scored 126 goals in 366 appearances for our men’s first team between 1996 and 2007 and also managed the club’s reserve team until the end of 2010.
Since the inception of the Premier League in 1992, our club has enjoyed consistent success and growth with popular players such as Bryan Robson, Ryan Giggs, Eric Cantona, David Beckham, Paul Scholes, Cristiano Ronaldo and Wayne Rooney. The popularity of these players, our distinguished tradition and history, and the on-field success of our men’s first team have allowed us to expand the club into a global brand with an international follower base.
Our Old Trafford stadium, commonly known as “The Theatre of Dreams,” was originally opened on 19 February 1910 with a capacity of approximately 80,000. During the Second World War, Old Trafford was used by the military as a depot, and on 11 March 1941 was heavily damaged by a German bombing raid. The stadium was rebuilt following the war and re-opened on 24 August 1949. The addition of floodlighting, permitting evening matches, was completed in 1957 and a project to cover the stands with roofs was completed in 1959. After a series of additions during the 1960s, 1970s and early 1980s, capacity at Old Trafford reached 56,385 in 1985. The conversion of the stadium to an all-seater reduced capacity to approximately 44,000 by 1992, the lowest in its history. Thereafter, we began to expand capacity throughout the stadium, bringing capacity to approximately 58,000 by 1996, approximately 68,000 by 2000, and over 74,000 in 2006. Current capacity at Old Trafford is 74,140.
 
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The following chart shows the historical success of our men’s first team by trophies won:
TROPHIES WON
Premier League/Football League
Division One
FA Charity/Community Shield
1908 1965 1997 2007 1908 1967 1996 2011
1911 1967 1999 2008 1911 1977 1997 2013
1952 1993 2000 2009 1952 1983 2003 2016
1956 1994 2001 2011 1956 1990 2007
1957 1996 2003 2013 1957 1993 2008
1965 1994 2010
FA Cup
EFL/Football League Cup
1909 1977 1990 1999 1992 2010
1948 1983 1994 2004 2006 2017
1963 1985 1996 2016 2009
European Cup/Champions League
Europa League
1968 1999 2008 2017
FIFA Club World Cup
UEFA Super Cup
2008
1991
European Cup Winners’ Cup
Intercontinental Cup
1991
1999
Industry Overview
Football is one of the most popular spectator sports on Earth and global follower interest has enabled the sport to commercialize its activities through sponsorship, retail, merchandising, apparel & product licensing, broadcasting, and Matchday. As a consequence, football constitutes a significant portion of the overall global sports industry, according to AT Kearney.
Football’s growth and increasing popularity is primarily a product of consumer demand for and interest in live sports, whether viewed in person at the venue or through television and digital media. The sport’s revenue growth has been driven by the appetite among consumers, advertisers and media distributors for access to and association with these live sports events, in particular those featuring globally recognized teams.
The major football leagues and clubs in England, Germany, Spain, Italy and France have established themselves as the leading global entities due to their history as well as their highly developed television and advertising markets, according to AT Kearney. The combination of historical success and media development in the core European markets has helped to drive revenue, which in turn enables those leagues to attract the best players in the world, further strengthening their appeal to followers.
As television and digital media such as broadband internet and mobile extend their reach globally, the availability of and access to live games and other content of the leading European leagues has increased and live games are now viewed worldwide. In addition, advances in new technology continue to both improve the television and digital media user experience and the effectiveness of sponsorships and advertising on these platforms. These trends further strengthen the commercial benefit of associating with football for media distributors and advertisers and increase the global opportunities for the sport.
League Structure
Manchester United is a member of the English Premier League, the top league in the United Kingdom, which has been, for a long time, and continues to be, one of the elite leagues in the world.
 
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The Premier League is a private company wholly-owned by its 20 member clubs, with responsibility for the competition, its Rule Book, the centralized broadcasting rights and other commercial rights. The Premier League works proactively with the member clubs and other football authorities domestically and internationally including the Football Association, UEFA and FIFA. Each member club is an independent shareholder of the Premier League and works within the rules of football defined by the various governing bodies.
Governing Bodies
Manchester United operates under three different levels of governing bodies, ranging from worldwide to continental to national jurisdiction.
FIFA is the international governing body of football around the world. Headquartered in Zurich, Switzerland, FIFA is responsible for the regulation, promotion and development of football worldwide. All football played at any level must abide by the Laws of the Game, as set forth by FIFA. FIFA’s rules and regulations are decided by the International Football Association Board (“IFAB”) and reviewed on an annual basis. FIFA also sets the international fixture calendar which, along with European and domestic cup dates, takes precedence over the domestic football league.
UEFA is a competition organizer and is responsible for the organization and regulation of cross-border football in Europe. UEFA is primarily known for its European club competitions, the Champions League and the Europa League. Currently the Premier League gets four teams into the Champions League and another three into the Europa League. The representative structures for UEFA are primarily national association-based with the FA representing English football on numerous committees.
The FA is the national governing body for football in England and is responsible for sanctioning competition Rule Books, including the Premier League’s, and regulating on-field matters. The FA also organizes the FA Cup competition, in which the 20 Premier League member clubs participate. The FA is a special shareholder of the Premier League that has the ability to exercise a vote on certain specific issues, but has no role in the day-to-day running of the league. Each year the Premier League submits its rules to the FA for approval and sanction. For the Premier League, the FA ensures that throughout the season the Laws of the Game are applied on the field by officials, clubs and players including on- and off-field discipline. The FA is also involved in refereeing, youth development and the United Kingdom’s largest sports charity, the Football Foundation.
Our Football Operations
Our football operations are primarily comprised of the following activities: our men’s first team, our youth academy, our global scouting networks, our women’s team and other operations such as our sport science, medical and fitness operations at the Aon Training Complex.
Men’s first team
Our men’s first team plays professional football in the Premier League, domestic cup competitions in England including the FA Cup and EFL Cup and, subject to qualifying, international cup competitions, including the Champions League.
Our men’s first team is led by our manager, supported by an assistant manager and a club secretary, who in turn are supported by a team of over 160 individuals, including coaches and scouts for our men’s first team and youth academy, medical and physiotherapy staff, sports science and performance and match analysis staff.
We have 69 players under contract of whom 39 have made an appearance for our men’s first team. The remaining players may play for the youth academy teams but are being developed such that they may make it to a starting position on our men’s first team or the first team of other clubs. This structure has been put in place with the aim of developing some of the world’s best football players and maximizing our men’s first team’s chances of winning games, leagues and tournaments.
 
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Domestic transfers of players between football clubs are governed by the Premier League Rules and the FA Rules, which allow a professional player to enter into a contract with and be registered to play for any club, and to receive a signing-on fee in connection with such contract. Players are permitted to move to another club during the term of their contract if both clubs agree on such transfer. In such circumstances a compensation fee may be payable by the transferee club. FIFA Regulations on the Status and Transfer of Players (the “FIFA Regulations”) govern international transfers of players between clubs and may require the transferee club to distribute 5% of any compensation fee to the clubs that trained the relevant player. In addition, a 4% levy on any such compensation fee would also be payable to the Premier League. The transferor club in an international transfer may also be entitled to receive payment of “training compensation” under the FIFA Regulations when certain conditions are met. If an out-of-contract player (i.e. a player whose contract with a club has expired or has been terminated) wishes to play for another club, the player’s former club will only be entitled to a compensation fee in a domestic transfer, or a payment of training compensation under the FIFA Regulations in an international transfer, if certain conditions are satisfied, including conditions regarding the player’s age and requiring the former club to offer the player a new contract on terms which are no less favorable than his current contract. Subject to limited exceptions, transfers of professional players may only take place during one of the “transfer windows,” which for the Premier League is the month of January and ordinarily, the period beginning on the day following the last Premier League match of the season and ending on the Thursday immediately prior to the first Premier League match of the following season. Due to the impact of COVID-19 on the 2019/20 Premier League season end-date, the 2020 summer transfer window began on 27 July 2020 and ran through until 5 October 2020. A domestic-only transfer window during which Premier League clubs can trade with EFL clubs will also run from 5 October 2020 to 16 October 2020.
Our players enter into contracts with us that follow a prescribed model based on FA and Premier League rules. Players on our men’s first team typically also enter into an image rights agreement with us, which grants us enhanced rights and protections with respect to use of their image. Our men’s first team players generally enter into contracts of between two and five years’ duration.
 
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As of 6 October 2020, our men’s first team(1) was comprised of the following players:
Player
Position
Nationality
Age
Apps(2)
Caps(3)
David de Gea
Goalkeeper Spanish 29 407 43
Lee Grant
Goalkeeper English 37 2 0
Dean Henderson
Goalkeeper English 23 2 0
Joel Castro Pereira(4)
Goalkeeper Portuguese 24 3 0
Sergio Romero
Goalkeeper Argentinian 33 60 96
Eric Bailly
Defender Ivorian 26 88 34
Diogo Dalot(4)
Defender Portuguese 21 35 0
Timothy Fosu-Mensah
Defender Dutch 22 27 3
Phil Jones
Defender English 28 224 27
Victor Lindelof
Defender Swedish 26 117 34
Harry Maguire
Defender English 27 57 26
Marcos Rojo
Defender Argentinian 30 122 61
Luke Shaw
Defender English 25 142 8
Alex Telles
Defender Brazilian 27 0 1
Axel Tuanzebe
Defender English 22 18 0
Aaron Wan-Bissaka
Defender English 22 47 0
Brandon Williams
Defender English 20 36 0
Bruno Fernandes
Midfielder Portuguese 26 24 21
Frederico Rodrigues de Paula Santos (Fred)
Midfielder Brazilian 27 73 11
James Garner(4)
Midfielder English 19 7 0
Daniel James
Midfielder Welsh 22 47 12
Jesse Lingard
Midfielder English 27 208 24
Scott McTominay
Midfielder English 23 86 14
Juan Mata
Midfielder Spanish 32 255 41
Nemanja Matic
Midfielder Serbian 32 91 48
Facundo Pellestri
Midfielder Uruguayan 18 0 0
Andreas Pereira(4)
Midfielder Brazilian 24 75 1
Paul Pogba
Midfielder French 27 166 69
Donny van de Beek
Midfielder Dutch 23 5 12
Edinson Cavani
Forward Uruguayan 33 0 116
Tahith Chong(4)
Forward Dutch 20 16 0
Mason Greenwood
Forward English 18 55 1
Odion Ighalo(5)
Forward Nigerian 31 21 35
Anthony Martial
Forward French 24 223 20
Marcus Rashford
Forward English 22 217 38
(1)
The table includes all men’s first team players as of 6 October 2020.
(2)
Apps means appearances for our men’s first team through 6 October 2020.
(3)
Caps means appearances for senior national football team through 6 October 2020.
(4)
Currently out on loan to other clubs.
(5)
Currently in on loan from other clubs.
 
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Youth academy
Our youth academy is a rich source of new talent for our men’s first team as well as a means of developing players that may be sold to generate transfer income. The aim of our youth academy is to create a flow of talent from the youth teams up to our men’s first team, thereby saving us the expense of purchasing those players in the transfer market. Our youth academy has allowed us to have a home grown player in every game for the last eighty years. Players in our youth academy may be loaned to other clubs in order to develop and gain first team experience with those other clubs and enhance their transfer value. Players from our youth academy who do not make it into our men’s first team frequently achieve a place at another professional football club, thereby generating income from player loans and transfer fees. As a result, our youth academy has developed more players in the top two tiers of English football than any other.
Our youth academy program consists of 10 junior teams ranging from under 9s to under 23s. Each team consists of 15 to 30 players, each of whom takes part in an age specific elite player development and games program during the season.
Scouting network
Together with our youth academy, our scouting system is another source of our football talent. Through our scouting system, we recruit players for both our men’s first team and youth academy. Our scouting system consists of a professional network of staff who scout in general and for specific positions and age groups.
Our scouting system was traditionally oriented towards the United Kingdom, but our focus has increasingly shifted toward a more international approach in order to identify and attract football players from the broadest talent pool possible.
Women’s team
Manchester United Women’s Football Club was founded in May 2018 and was promoted to the English Women’s Super League (the top tier in England) after winning the English Women’s Championship in their first season. Led by manager Casey Stoney, our aim is to develop a team capable of competing at the highest level in the women’s game which has a core consisting of players who have graduated from our long-established and highly successful Manchester United Girls’ Regional Talent Club and offer academy players a clear route to top level football within the club.
Training facilities
We have invested significant resources into developing a performance center which contains advanced sports and science equipment. We have highly experienced training staff working at the performance center, where we provide physiotherapy, bio-mechanical analysis and nutritional guidance to our players as part of our drive to ensure that each player is able to achieve peak physical condition. We believe the quality of our performance center differentiates our club from many of our competitors.
We spent approximately £1.9 million in the year ended 30 June 2020 in connection with further updating our training facility, the Aon Training Complex.
Revenue Sectors
Commercial
Within the Commercial revenue sector, we monetize our brand via two revenue streams: sponsorship; and retail, merchandising, apparel & product licensing. The primary source of revenue in this sector comes from sponsorship, which allows highly diverse and global companies to partner with Manchester United, regionally or internationally, in order to realize sponsorship benefits and associate themselves with our brand.
 
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Sponsorship
Our sponsorship agreements are negotiated directly by our commercial team. Our sponsors are granted various rights, which can include:

rights in respect of our brand, logo and other intellectual property;

rights in respect of our player and manager imagery;

exposure on our television platform, MUTV;

exposure on our website and mobile application;

exposure on our club branded social media channels;

exposure on digital perimeter advertising boards at Old Trafford;

exposure on interview backdrops; and

the right to administer promotions targeted at customers whose details are stored on our CRM database.
Any use of our intellectual property rights by sponsors is under license. However, we retain the ownership rights to our intellectual property.
Sponsorship development and strategy
We pursue our sponsorship deals through a developed infrastructure for commercial activities. We have a dedicated sales team that focuses on developing commercial opportunities and sourcing new sponsors. We target potential sponsors that we believe will benefit from association with our brand and have the necessary financial resources to support an integrated marketing relationship. By cultivating strong relationships with our sponsors, we generate significant revenue and leverage our sponsors co-branded marketing strategies to further grow our brand. We are successful in executing a geographic and product categorized approach to selling our sponsorship rights.
We offer category exclusivity on a global basis to companies within particular industries, such as airline, beverage, logistics and hotels. We also offer sponsorship exclusivity within a particular geography for certain industries, such as dietary and nutrition supplements.
In seeking any individual partnership, we aim to establish an indicative value for that sponsorship based on the prospective sponsor’s industry and marketing objectives. We will only pursue a sponsorship if we believe it reflects the value that we deliver. Our current strategy is to focus more closely on larger, established global brands rather than regional partnerships.
We believe that certain key sectors play an active role in sports sponsorship. We have sponsors in a number of these sectors and we believe that there is significant potential to expand this platform by selectively targeting companies within the remaining sectors and by growing revenue in existing sectors through additional sponsorship arrangements. High growth markets such as Asia, which we expect to be a key focus for many of our prospective sponsors, are an important element of our sponsorship efforts.
 
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Our sponsors
The following graph shows our annual sponsorship revenue for each of the last five fiscal years:
Sponsorship Revenue
[MISSING IMAGE: tm2023793d1-bc_sponsorbw.jpg]
Note: Sponsorship revenue does not include revenue generated from our agreements with Nike (which was in effect through the end of July 2015) and adidas.
The table below highlights some of our global and regional sponsors as of 1 July 2020:
Sponsor
Type of sponsorship
Product category
Aeroflot
Global sponsor Commercial airline
Aon
Global sponsor (training kit)
Business/professional advisory services
Apollo Tyres
Global sponsor Tyres
Canon Medical Systems
Global sponsor Medical scanners
Chivas
Global sponsor Spirits
Concha y Toro
Global sponsor Wine
DHL
Global sponsor Logistics
General Motors (Chevrolet)
Global sponsor (shirt) Automobiles
Gulf Oil International
Global sponsor Lubricant oil and fuel retail
Harves Entertainment
Global sponsor Entertainment centers
HCL
Global sponsor Digital platform development
Kohler
Global sponsor (sleeve)
Kitchen and bathroom fixtures and generators
Konami
Global sponsor Football computer games
Malta Tourism
Global sponsor Destination Partner
Marriott
Global sponsor Hotels
Maui Jim
Global sponsor Eyewear
Mlily
Global sponsor Mattresses and pillows
Mondelez
Global sponsor
Confectionary, sweet biscuits, cakes and savory crackers
Spectrum (Remington)
Global sponsor Electronic grooming
TAG Heuer
Global sponsor Watches
Tianyu (Yabo)
Global sponsor Gambling
True Religion
Global sponsor Denim clothing
Science in Sport (SiS)
Regional sponsor Sports nutrition
 
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Global, regional and supplier sponsors
In addition to revenue from our shirt sponsor, training kit partner and training facilities partner, we generated a further £96.8 million in the year ended 30 June 2020 from other global, regional and other sponsors. The length of these sponsorship deals is generally between two and five years. The majority of these sponsorship deals have minimum revenue guarantees and some have additional revenue sharing arrangements.
Global sponsors are granted certain marketing and promotional rights with respect to our brand and intellectual property as well as exposure on our media, such as digital perimeter boards at Old Trafford, MUTV and our website. These rights are granted on a global basis and are exclusive by category. Regional sponsors are granted certain marketing and promotional rights and media exposure, however, these rights are granted for a limited number of territories. Regional sponsors are able to use the rights in their designated territory on an exclusive basis, however they are not granted global category exclusivity.
Financial services affinity sponsorship
There is a significant growth opportunity to further develop Manchester United branded financial services products. These financial services products include credit cards and debit cards. We believe there are key commercial opportunities with credit and debit cards, which are particularly attractive as credit and debit cards also serve as a means of follower expression and loyalty. Depending on the product category, we may pursue affinity agreements on a territory specific or regional basis. Examples of our financial services affinity sponsors include Banco Invex (Mexico), Co-operative Bank (Myanmar), Emirates NBD Bank (UAE), Equity Bank (Kenya), Eurobank (Serbia), ICICI (India), Maybank Group (Malaysia), National Bank of Egypt (Egypt), and Santander (Norway).
Exhibition games and promotional tours
We conduct exhibition games and promotional tours on a global basis. Our promotional tours enable us to engage with our followers, support the marketing objectives of our sponsors and extend the reach of our brand in strategic markets. The tour matches are broadcast and/or streamed live to subscribers of MUTV. These promotional tours are in addition to our competitive matches and take place during the summer months or during gaps in the football season. Over the last 6 years, we played 24 exhibition games in Australia, China, Ireland, Norway, Singapore, Sweden and the United States. Due to the COVID-19 pandemic and postponement of the 2019/20 Premier League season and UEFA and FA Cup competitions, we have not conducted a promotional tour during the summer of 2020.
We normally receive a guaranteed fee for such tours. We also generate revenue from tour sponsorship opportunities sold to existing and new partners. During the 2019/20 season, our promotional exhibition games and promotional tours generated £12.9 million of revenue (excluding any related sponsorship revenue). We believe promotional tours represent a growth opportunity as we continue to play exhibition games around the world.
Commercial income from the Premier League
In addition to revenue from contracts that we negotiate ourselves, we receive revenue from commercial arrangements negotiated collectively by the Premier League on behalf of its member teams. Income from these commercial contracts negotiated by the Premier League is shared equally between the clubs that are to be in the Premier League for the season to which the income relates. Our pro rata income received from the other commercial contracts negotiated by the Premier League is not material to the Company’s results of operations.
Retail, Merchandising, Apparel & Product Licensing
Unlike American teams in the NFL, MLB and NHL, Manchester United retains full control of the use and monetization of its intellectual property rights worldwide in the areas of retail, merchandising, apparel & product licensing.
 
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Our retail, merchandising, apparel & product licensing business includes the sale of sports apparel, training and leisure wear and other clothing featuring Manchester United brands as well as other licensed products from high fashion and luxury watches to children’s toys and household items such as mugs and bedspreads. These products are distributed on a global basis through Manchester United branded retail stores and e-commerce platform, as well as through our partners’ wholesale distribution channels.
We have a 10-year agreement with adidas with respect to our global technical sponsorship and dual-branded licensing rights, which began on 1 August 2015. The minimum guarantee payable by adidas over the term of the agreement is equal to £750 million, subject to certain adjustments. Payments due in a particular year may increase if our men’s first team wins the Premier League, FA Cup or Champions League, or decrease if our men’s first team fails to participate in the Champions League for two or more consecutive seasons, with the maximum possible increase being £4 million per year and the maximum possible reduction being 30% of the applicable payment for the year in which the second or other consecutive season of non-participation falls. If the men’s first team fails to participate in the Champions League for two or more consecutive seasons, then the reduction is applied as from the year in which the second consecutive season of non-participation falls. In the event of a reduction in any year due to the failure to participate in the Champions League for two or more consecutive seasons, the payments revert back to the original terms upon the men’s first team participating again in the Champions League. Any increase or decrease in a particular year would have the effect of increasing or decreasing the minimum guarantee amount of £750 million payable over the 10-year term of the agreement.
The minimum guarantee from adidas does not include the rights with respect to mono-branded licensing rights or the right to create and operate Manchester United branded soccer schools, physical retail channels and e-commerce retail channels, which rights may generate additional revenue for the club. We may also benefit from additional royalty payments upon exceeding a threshold of sales.
The agreement with adidas is subject to reciprocal termination provisions in respect of material breach and insolvency. Adidas may reduce the applicable payments for a year by 50% if the men’s first team is not participating in the English Premier League during that year. In addition, adidas may terminate the agreement by giving one full-season’s notice if the men’s first team is relegated from the English Premier League or if it is otherwise determined that the men’s first team shall not be participating in the Premier League or the top English league.
The Manchester United match jerseys and training wear collections are completely redesigned for each season by adidas. The annual launch of the new jerseys is always a much-anticipated day for our global community of followers. The result is a robust adidas collection apparel business.
In addition to our adidas collection, we have a number of premium brands utilizing Manchester United intellectual property for the creation of dual-branded merchandise, where we receive a royalty payment and a sponsorship fee from the partner.
Retail
We operate our flagship retail store at the Old Trafford stadium, which trades year round, and not just on Matchdays. In addition to the Old Trafford store, we have a Manchester United branded retail location in Macau (which is operated under franchise by a third-party licensee).
We have agreed a long term strategic partnership with Harves Entertainment for the creation of a series of Manchester United Experience Centers in China. Each venue will feature interactive and immersive experiences, using state-of the-art technology to bring Manchester United to life in this market. The first of these centers is scheduled to open in (the prestigious Tiananmen district in) Beijing at the start of the 2021 calendar year, with further venues in Shanghai and Shenyang scheduled to open later in the same year.
Merchandising & product licensing
We grant product licenses across a wide range of Manchester United products which are highly sought after by our followers around the world. Under our product licensing agreements, we receive royalties from the sales of specific Manchester United branded products. Under some product licensing agreements, we
 
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receive a minimum guaranteed payment from the licensee. The majority of licensees are granted on a non-exclusive rights basis for specific product categories, within a specific country or geographic region.
E-commerce
We currently have arrangements in place whereby Fanatics has been granted separate licenses to use our brand and/or trademarks to operate the official online store, branded as “United Direct”, in the United States and the rest of the world. The online store sells a range of Manchester United branded merchandise including official replica kit and other clothing from adidas. In addition, the online store offers a broad range of other apparel, equipment such as balls, luggage and other accessories, homewares such as bedroom, kitchen and bathroom accessories, and collectibles, souvenirs and other gifts. We currently receive a percentage of net sales from the online store as a royalty payment.
We believe there is a significant opportunity for us to expand our e-commerce capabilities through improved leverage of our digital media platform, and focusing on delivering a tailored digital shopping experience at a regional level. Specifically, we intend to improve our ability to offer targeted merchandise to our followers, complemented by more efficient fulfillment mechanics, including product delivery, availability and payment methods.
Broadcasting
Central Media
We benefit from the distribution and broadcasting of live football content directly from the revenue we receive and indirectly through increased global exposure for our commercial partners. Broadcasting revenue is derived from the centrally negotiated domestic and international television and radio rights to the Premier League, the Champions League and other competitions. In addition, our wholly-owned global television channel, MUTV, delivers Manchester United programming to territories around the world.
The Premier League and UEFA negotiate their own media rights contracts independently of the participating clubs. In respect of the Premier League, media agreements are typically three years in duration and are centrally negotiated and entered into with media distributors by the Premier League on behalf of the member clubs. Under the agreements, Broadcasting revenue for each season is typically shared between the clubs that are to be in the Premier League for that season and a part-share for the clubs that were relegated from the Premier League in the previous four seasons. After certain deductions approved by the Premier League (for example, donations to “grass roots” football development and other causes), the income from the sale of the domestic broadcasting rights is allocated to the current and relegated clubs according to a formula based on, among other things, finishing position in the league and the number of live television appearances. Under the previous Premier League broadcasting cycle, revenue from the sale of the rights to televise Premier League matches internationally by overseas broadcasters and radio was shared equally between the current clubs and a part-share for the clubs that were relegated from the Premier League in the previous four seasons. Under the current Premier League broadcasting cycle which commenced in the 2019/20 season, international broadcasting rights are fixed at the previous cycle’s equal share adjusted for inflation. Any increase in rights values above this are then allocated to the twenty Premier League clubs based upon finishing position in the league.
COVID-19 resulted in the postponement of the 2019/20 Premier League, UEFA competitions and FA Cup competition with matches suspended from 13 March 2020. This resulted in the deferral of nine remaining Premier League matches, one scheduled Round of 16 Europa League match and the final matches of the FA Cup. The 2019/20 Premier League season resumed on 17 June 2020 (with three of the deferred matches played during June 2020 and the remaining six matches deferred to the start of the 2020/21 financial year). The delay to 2019/20 season completion, and broadcast schedule changes to the season as a whole, had implications for the agreements between the Premier League and both UK and international broadcasters, resulting in an estimated rebate due to broadcasters on the annual fees for the 2019/20 Season of £285 million. The mechanism for allocating the impact of the rebate on individual clubs was approved by the 20 Premier League clubs and resulted in a reduction of approximately £14 million to amounts we typically would have earned. It is the intention of the league that the cash impact of this rebate will be deducted from distributions to clubs in seasons 2021/22 and 2022/23.
 
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In the Champions League and Europa League, media agreements are also typically three years in duration and are collectively negotiated and entered into by UEFA on behalf of the participating clubs. Each club receives a fixed amount for qualifying for the group stage plus bonuses based on performance. Further fixed amounts are received for participation in the knock-out rounds; round of 32 (Europa League only), round of 16, quarter-final, and semi-final. The runner-up and winner of the competition also earn additional amounts. For the current three-year agreement (which commenced in the 2018/19 season) amounts are distributed as follows:
Champions
League (“UCL”)
Europa
League (“UEL”)
€’million
€’million
Bonus for group stage participation (UCL–32 teams; UEL–48 teams)
15.25 2.92
Bonus for each group stage win (maximum 6)
2.70 0.57
Bonus for each group stage draw(1)
0.90 0.19
Bonus for group runners-up
N/A 0.50
Bonus for group winners
N/A 1.00
Bonus for round of 32 participation
N/A 0.50
Bonus for round of 16 participation
9.50 1.10
Bonus for quarter-final participation
10.50 1.50
Bonus for semi-final participation
12.00 2.40
Runner-up bonus (inclusive of ticketing revenue share)
15.00 4.50
Winner bonus (inclusive of ticketing revenue share)
19.00 8.50
Maximum total of the above
82.45 21.34
(1)
In the event of a draw, the non-distributed balance will be aggregated and split among the clubs that won matches at the group stage in proportion to the number of matches won.
In August of each season, the previous season’s Champions League winner and Europa League winner will play in the UEFA Super Cup where each team can expect to receive a further €3.5 million participation fee, with the winner receiving an additional €1.0 million.
Total fixed distribution amounts are €1.073 billion for Champions League and €308 million for Europa League. In addition to the fixed amounts, UEFA allocates monies to a market pool which is also distributed to clubs who reach the group-stage and beyond. Further, with effect from the three-year cycle 2018/19 to 2020/21, UEFA introduced the coefficient ranking. The total market pool for the Champions League is €292 million per annum and the total coefficient ranking allocation is €585 million per annum (giving a combined total of €877 million per annum) and the total market pool for the Europa League is €168 million per annum and the total coefficient ranking allocation is €84 million per annum (giving a combined total of €252 million per annum).
The individual club coefficient is determined by reference to past performance in UEFA club competitions over a ten-year period with additional points for historical winners of UEFA club competitions. On the basis of these parameters, a ranking has been established. The total Champions League amount of €585.05 million is divided into ‘coefficient shares’, with each share worth €1.108 million. The lowest-ranked team will receive one share (€1.108 million). One share will be added to every rank and so the highest-ranked team will receive 32 shares (€35.46 million). The total Europa League amount of €84 million is divided into ‘coefficient shares’, with each share worth €71,430. The lowest-ranked team will receive one share (€71,430). One share will be added to every rank and so the highest-ranked team will receive 48 shares (€3.42 million).
The market pool for each country is calculated based on the proportional value of its broadcasting agreements with UEFA relative to the total value of broadcasting agreements from all countries represented at the group stage. The total English market pool for the 2019/20 Europa League competition was approximately €33 million. This amount can vary from season to season subject to the composition of the
 
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clubs taking part in the group stage. 50% of each country market pool is distributed to its group-stage representatives based on each club’s domestic performance in the previous season. For the Champions League this is based on league finishing position. For the Europa League this is based on league finishing position and potentially both domestic cup competitions (the winners of the FA Cup, if participating in the Europa League, earn the highest share). Any club which qualifies for the Champions League group-stage by virtue of winning the Europa League in the previous season (such as ourselves in 2016/17) does not receive a distribution of the 50% market pool based on domestic performance in the previous season.
The remaining 50% of the market pool is distributed as follows:

for the Champions League, based on the number of games played in the current competition relative to teams from the same country.

for the Europa League, split across each round of the competition (40% to the group stage, 20% to the round of 32, 16% to the round of 16, 12% to the quarter-finals, 8% to the semi-finals and 4% to the final) which is distributed to teams who participate in the relevant round based on the proportional value of the country broadcasting rights relative to the value of all broadcasting agreements for countries represented at each stage.
Broadcasting revenue including, in some cases, prize money received by us in respect of various competitions, will vary from year to year as a result of variability in the amount of available prize money and the performance of our men’s first team in such competitions.
UEFA has announced in its circular letter 75/2020 that gross revenues from the 2019/20 club competitions were adversely impacted by COVID-19 by a total amount of approximately €566 million, representing 16% of total revenues. UEFA has confirmed that this shortfall will be recouped against distributions to clubs who participate in their competitions over the five seasons from 2019/20 through to 2023/24. As a result, going forward through to season 2023/24, we expect approximately a 3.5% annual reduction to the above distributions. The reduction for each individual club will be calculated in proportion to each individual club’s related revenue and will therefore be dependent upon competition participation and progress.
Digital media
Our website, www.manutd.com, is published in 7 languages and is available globally. We use our website, which incorporates e-commerce services and venue microsites (United Events, Exec Club, Foundation, Matchday VIP), to communicate with our followers, promote the Manchester United brand and provide a platform for our sponsors to reach a global audience. Our website is designed with a mobile first approach, with content including exclusive articles, exclusive videos, real-time match updates, live blogging capabilities, social integration and sharing capabilities, improved search and discoverability, content recommendations, fan polls, voting trivia and statistics.
The proliferation of digital television, broadband internet, smartphones, mobile applications and social media globally provides our business with many opportunities to extend the reach of our content. Specifically, we intend to use our digital media platforms to generate value through extended sponsor positioning, driving e-commerce, and direct-to-consumer opportunities, including selling premium services such as video and exclusive content subscriptions. We will also continue to leverage our digital media platform to generate customer data and information as well as follower profiles of commercial value to us, our sponsors and our media partners. We believe that in the future, digital media will be one of the primary means through which we engage and interact with our follower base.
Content and localization
Our digital media properties are an increasingly important means through which we engage with our fan base, domestically and internationally. To take advantage of that opportunity, we are constantly developing our premium, localized and exclusive content to enhance the proposition for our followers, members and paid subscribers around the world.
Our followers generally prefer to consume our content in their language and context. We believe we can effectively deliver tailored services to our followers globally through various language offerings, geographic
 
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targeting and personalized content. Our mobile application is available in Simplified Chinese. We also currently have international language websites in English, Spanish, French, Arabic, Simplified Chinese, Korean and Japanese. On our social channels we have international language feeds in English, Spanish, Arabic, Simplified Chinese, Korean, Japanese, Malay and Thai. This enables us to engage with our followers in their native language and to produce content that is specific to each region.
Mobile services and applications
There has been a significant increase in the prevalence of broadband and video-enabled mobile devices in recent years. Mobile devices running the iOS or Android operating system enable consumers to browse the internet, watch video, share content, access dedicated applications and conduct e-commerce. As a consequence we are seeing the majority of our followers now accessing our website and digital content via their mobile devices.
At the start of the 2018/19 season we launched our first free global mobile application. This application has been developed in conjunction with our new website which will provide benefits to our fans, through a clean and easy navigation interface. We believe our mobile application also provides significant benefits to our business through better e-commerce functionality and more digital inventory for our commercial partners to benefit from. We believe our focus on our owned and operated products will lead to an improved customer experience via the mining of owned data, which will lead to more personalization and a more engaged fan base, as users spend more time on our platforms and return regularly.
In the 2016/17 season we launched the MUTV channel on a direct-to-consumer basis. This enabled fans to purchase MUTV on a subscription basis for the first time without an existing satellite or cable subscription.
We launched a free content section allowing all fans access to our exclusive programming, with subscribers then having access to our full range of programming, including both on demand and linear experiences around full match commentary for all Premier League, Champions League and domestic cup matches, as well as live tour matches and coverage. Subscribers can also view pre- and post-match analysis for all matches by club legends, exclusive interviews with the team manager and men’s first team players, award winning documentaries, celebrity features, and live broadcasts of academy team matches and more recently women’s team matches.
We intend to continue developing the functionality of our mobile applications to facilitate greater engagement and to satisfy global demand.
Video on demand
The proliferation of broadband internet and mobile access also allows us to offer video on demand to our followers around the world. Through our new website, official club mobile application and the MUTV D2C applications, we provide live video and video on demand to our followers in a variety of formats and commercial models. Some video on demand content is free to all users, some content is only accessible upon registration and some content, as in the case of live pre-season tour matches, is available on a subscription basis.
Depending on the market, going forward we may offer video on demand services via our media partners as part of a comprehensive suite of content rights, as well as on a direct-to-consumer basis.
Social media
With a global fan base, we believe there is a significant opportunity to leverage the capabilities of social media platforms to augment our relationships with our followers around the world. By establishing an official presence on these platforms, we believe we will be able to deepen the connections with our follower base and improve our ability to market and sell products and services to our followers.
As of 30 June 2020 we had over 164.0 million social connections including approximately 73.2 million connections on our Facebook page, over 35.9 million followers on Instagram and over 25.3 million followers
 
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to our Twitter accounts. For the 2019/20 season we generated over 1.1 billion interactions on Facebook, Instagram and Twitter.
We use our social footprint as a means to communicate news and other club updates, engage with our followers, identify active followers, solicit feedback from our users, tailor future digital media offerings and enhance the overall follower experience.
We intend to continue to expand our reach through new and different social media and mobile chat platforms by launching additional Manchester United branded presences on global platforms as well as regional and language-specific platforms.
We believe this continuous expansion will enable us to broaden the reach of our brand and the content we produce, enhance our engagement with followers in many of our key international and emerging markets as well as opening up a new demographic of fans.
While there is no guarantee that our social connections will continue to grow at comparable rates in the future, we believe the combination of platforms on which we have an official presence will provide an increasing source of traffic to our club branded digital media services and e-commerce properties, enhance our ability to convert users into customers through video and exclusive content subscriptions and e-commerce, and continue to provide extensive positioning opportunities for our partners.
Customer relationship management
One of our ongoing strategic objectives is to further develop our understanding of and deepen the relationships with our fans and followers. We operate a CRM database in order to better understand the size, location, demographics and characteristics of our fan and follower base on an aggregated basis. We believe our CRM database enables us to more effectively deliver targeted communications to our fan base which ultimately leads to upsell opportunities through our product and service offerings such as digital subscription services, merchandise and tickets. A deep understanding of our follower base is also valuable to sponsors and media partners who seek to access specific customer categories with targeted and relevant advertising.
MUTV
MUTV is our wholly-owned global television channel and is broadcast in numerous countries. MUTV broadcasts a wide variety of content which is compelling to our global community of followers, including live first team football from our pre-season tours, academy and women’s team live football, club news, game highlights, and exclusive “behind the scenes” coverage of our club.
Depending on the market, we may offer MUTV as a single product to television distributors for distribution to our fans on a linear television basis or directly to our fans on a D2C basis which allows them to subscribe directly to the club via our OTT offering. MUTV is currently available in 195 markets globally.
For example, in our domestic territory, the United Kingdom, MUTV is offered to consumers through the Sky and Virgin Media distribution platforms and on a D2C basis via a subscription on MUTV mobile applications on iOS and GooglePlay App stores and ‘Connected TV’ applications on platforms such as Roku, Amazon Fire, AppleTV and Xbox. In addition, MUTV is available on MUTV.com.
Outside the United Kingdom, we offer MUTV through distribution partners as part of a suite of media rights, which can be purchased on a bundled or selective basis, and can include certain promotional rights, and via the OTT offerings (both on mobile application and Connected TVs).
MUTV features a range of content, the primary categories of which are:

highlights from games and other time-delayed game footage (including full matches), both of which are subject to certain holdback periods under the agreements between media distributors, the participating clubs and the Premier League and UEFA;

live coverage of promotional tours and exhibition games;
 
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lifestyle programming and other “behind the scenes” content profiling the club, our history, our manager and our players;

live coverage of women’s team games;

live coverage of academy and youth games;

live ‘Managers Press Conference’ before relevant men’s first team fixtures; and

various other award winning shows and documentaries.
Matchday
Our stadium, which we fully own, is called Old Trafford and is known as “The Theatre of Dreams.” We believe Old Trafford is one of the most famous and historic stadiums in the world. Football followers travel from all over the world to attend a match at Old Trafford, which is the largest football club stadium in the United Kingdom, with a capacity of 74,140. In the 2019/20 season, prior to the postponement due to COVID-19, the club’s 23 home games were attended by a cumulative audience of over 1.6 million. The remaining games were played behind closed doors. The stadium has approximately 8,000 executive club seats, including 133 luxury boxes, 24 restaurants and 4 sports bars.
We have one of the highest capacity utilizations among English clubs, with an average attendance for our home Premier League matches played in front of a crowd of over 99% for each season since the 1997/98 season. The substantial majority of our tickets are sold to both general admission and executive season ticket holders, the majority of whom pay for all their tickets in advance of the first game of the season. As a result of COVID-19, seasonal facility sales are currently on hold due to the uncertainties around fans returning to the stadium.
Other Matchday revenue includes Matchday catering (including the sale of hospitality packages, food and drink), event parking, program sales as well as membership and travel, Manchester United Museum revenue and a share of the ticket revenue from away matches in domestic cup competitions. Matchday revenue also includes revenue from other events hosted at Old Trafford, including other sporting events (including the annual Rugby Super League Grand Final), music concerts and entertainment events. As a result of COVID-19, Old Trafford, along with its Museum, Stadium Tour and Red Café operations have been closed since mid-March 2020. The timing for re-opening and any modified participant levels is currently uncertain.
We operate a membership program for our supporters. Individuals who become official members have the opportunity to apply for tickets to all home matches. Adult official members pay £35 per season to join the program while persons over the age of 65 and under the age of 18 receive a discount. At the end of the 2019/20 season we had over 241,000 members. This represents a decrease of 5.1% compared to the previous season, and was impacted by the temporary closure of the membership program in March 2020 following the suspension of the season due to COVID-19.
The Manchester United Museum is located within Old Trafford. It chronicles Manchester United’s 142-year history and houses the club’s most precious artifacts and trophies. In 2019/20, approximately 211,000 people visited the Manchester United Museum, making it the most visited football club museum in the United Kingdom. The museum has been closed since mid-March 2020 due to the COVID-19 pandemic.
We have frozen general admission season ticket prices for a ninth consecutive season ahead of the 2020/21 season to support fans in attending our games. We aim to maximize ticket revenue by enhancing the mix of experiences available at each game and by providing a range of options from general admission tickets to multi-seat facilities and hospitality suites. In particular, we have recently increased overall Matchday revenue by restructuring the composition of our stadium, with an emphasis on developing hospitality facilities which sell at a higher price and improve our margins. As part of this effort, we have invested in new and refurbished multi-seat hospitality suites as well as improvements to our single-seat facilities. We expect our enhancements to our hospitality facilities to continue to be a key driver of our profit from Matchday sales going forward. As a result of the COVID-19 pandemic, seasonal facility sales are currently on hold due to the uncertainties around fans returning to the stadium.
 
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UEFA Club Licensing and Financial Fair Play Regulations
UEFA oversees the FFP regulations, which are intended to ensure the financial self-sufficiency and sustainability of football clubs by discouraging them from continually operating at a loss, introduce more discipline and rationality on club finances, ensure that clubs settle their liabilities on a timely basis and encouraging long term investment in youth development and sporting infrastructure.
The FFP regulations contain a “break-even” rule aimed at encouraging football clubs to operate on the basis of their own revenue. Therefore, owner investments of equity will be allowed only within the acceptable deviation thresholds, as described below. In addition, the FFP regulations provide that football clubs who are granted a UEFA license by their national association, based largely on physical infrastructure and personnel criteria set out by UEFA, and who then qualify for a UEFA club competition based on sporting grounds, will then be required to comply with a “monitoring” process. The monitoring process involves the submission of certain financial information (a break-even test and payables analysis) to the Club Financial Control Body (“CFCB”). The CFCB is part of UEFA’s Organs for the Administration of Justice and comprises a team of independent financial and legal experts. The CFCB will review financial submissions and decide what sanctions, if any, to apply to non-compliant clubs. Any appeal must be made directly to the Court of Arbitration for Sport. Potential sanctions for non-compliance with the FFP regulations include a reprimand/warning, withholding of prize money, fines, prohibition on registering new players for UEFA club competitions and ultimately exclusion from UEFA club competitions.
The monitoring process includes so called ‘breach indicators’ which if in existence trigger additional reporting requirements to UEFA such as accelerated reporting of audited financial information and projections for the competition season and future seasons. Breach indicators include an auditor going concern qualification, a worsening balance sheet net liabilities position, a break-even deficit in any individual year and sustainable debt and player transfer balance indicators. The sustainable debt indicator is triggered if debt at the reporting date is greater than €30 million and greater than seven times the average of relevant earnings (as defined by UEFA). The player transfer balance indicator is triggered if a club incurs a deficit on net player transfers in excess of €100 million in any transfer window within the license season.
Ahead of registration for UEFA club competitions for the 2020/21 season we submitted our payables analysis and break-even assessment under the FFP regulations. The break-even test result, initially assessed on the cumulative sum of the financial information for the two years ended 30 June 2019 (but which would ordinarily have been extended to the cumulative sum of the financial information for the three years ended 30 June 2020 should there have been any breach indicators) was positive (i.e. a surplus). The payables analysis is typically carried out at 30 June prior to the competition season and is required in respect of payments to other clubs for transfer fees, payments to staff including players and football staff and payments to tax authorities. UEFA has already imposed sanctions on clubs who have breached the Licensing and FFP regulations, ranging from monetary fines, restrictions on wages and first team squad size and limitation on transfer expenditures, to exclusion from UEFA club competitions.
With respect to the break-even assessment, a club must demonstrate that its relevant “football” income is equal to or exceeds its “football” expenses. The permitted level of deficit is limited over the three-year assessment period to just €5 million, although a larger deficit of up to €30 million is permitted provided it is reduced to the €5 million acceptable deviation by equity contributions from equity participants and/or related parties. Any club which exceeds the €30 million limit will automatically be in breach of the break-even rule, unless it has sufficient surpluses in the two years prior to the assessment period, irrespective of any equity contributions.
Due to the reduced revenues and financial implications caused by COVID-19, UEFA have revised the rules for Financial Fair Play submissions relating to participation in UEFA competitions going forward. The standard submission is a break-even result over a two-year period, extended to a three-year period in the result of a breach indicator (being the two preceding financial years and the current financial year) with an allowable loss of €5 million before equity injection. For a licensee to compete in UEFA competitions in 2020/21, the break-even result has been amended to a two-year period, being the two years ended 30 June 2019. For a licensee to compete in UEFA competitions in 2021/22, the break-even result has been revised to a three-year period reflecting the aggregate of the two years ended 30 June 2019, plus the average of the years ended 30 June 2020 and 30 June 2021. Moreover, the allowable loss has been extended to be
 
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the measurable impact of COVID-19 on the club, calculated by the reduction in revenues (excluding UEFA revenues) from the year ended 30 June 2019 to the average of the years ended and ending 30 June 2020 and 30 June 2021, respectively. We do not anticipate any issues in complying with these requirements.
European clubs reported operating profits for the sixth consecutive year in 2017/18 at just under €0.7 billion, albeit lower than the record €1.4 billion in 2016/17. European clubs have now generated more than €4.3 billion in operating profits over the last five fiscal years compared with operating losses of €0.7 billion during the period from fiscal year 2009 to fiscal year 2013. This would suggest that the UEFA Licensing and Financial Fair Play Regulations are achieving their objectives.
In 2015, UEFA announced some changes to the FFP regulations aimed primarily at clubs undergoing a business restructuring. Instead of breaching the FFP regulations and being subject to sanctions, the amended regulations enable clubs to voluntarily approach the CFCB with a business plan which demonstrates how they are going to remedy their short-term breach of FFP regulations and achieve break-even compliance over a four-year time period. If the business plan is approved by the CFCB the club would not be subject to sanctions for the restructuring year which results in a breach of the FFP regulations.
We support and operate within the financial fair play regulations, and do not believe it will adversely impact our ability to continue to attract some of the best players in the coming years.
Premier League Profitability and Sustainability Rules
The Premier League Profitability and Sustainability Rules were introduced during the 2015/16 season, implementing a break-even rule similar to the break-even test of the UEFA Club Licensing and Financial Fair Play Regulations and aimed at encouraging Premier League clubs to operate within their means. Potential sanctions for non-compliance with the profitability and sustainability regulations include significant fines, player transfer restrictions and Premier League points deduction.
Our most recent break-even assessment under the Premier League Profitability and Sustainability Rules was submitted in August 2020, based on our fiscal year 2018 and fiscal year 2019 audited financial statements. The break-even test is based on a club’s audited pre-tax earnings. If the break-even test results are positive, no further action is required until the next break-even test. If the initial test is negative, a club is re-tested, using the UEFA definition of “adjusted earnings before tax,” which allows credit for depreciation of tangible fixed assets and expenditure on youth development and community programs. If these second test results are negative by £15 million or less, no further action is required. If a club’s losses exceed £15 million but are not more than £105 million, the club’s ownership must provide secure funding to avoid sanctions. If these results are negative by more than £105 million, regardless of ownership funding, Premier League sanctions will apply. Our break-even test result submitted in August 2020 was positive.
Consistent with UEFA, due to the reduced revenues and financial implications caused by COVID-19, the Premier League Profitability and Sustainability Rules have been revised. Our August 2020 submission was based on our fiscal year 2018 and fiscal year 2019 audited financial statements. For the submission in 2021, the allowable loss amount will be increased to an amount equivalent to the measurable impact of COVID-19 on the club. For the submission in 2022, the three-year period will be fiscal year 2018 and fiscal year 2019 plus the average of fiscal year 2020 and fiscal year 2021, adjusted for the measurable impact of COVID-19.
As with the UEFA Club Licensing and Financial Fair Play Regulations, we support and operate within the Premier League Profitability and Sustainability Rules, and do not believe it will adversely impact our ability to continue to attract some of the best players in the coming years.
Social Responsibility
Manchester United Foundation
We are committed to a wide-ranging corporate social responsibility program through Manchester United Foundation (the “Foundation”). The associated charity of Manchester United, the Foundation uses football to engage and inspire young people to build a better life for themselves and unite the communities in which they live. Dedicated staff deliver football coaching, educational programs and personal development,
 
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providing young people with opportunities to change their lives for the better. The Foundation has partnerships with 27 high schools across Greater Manchester, in which full-time coaches are based to work with the pupils, feeder primary schools and within the local community to build lasting relationships. Other initiatives, such as Street Reds evening football sessions, girls’ development provision, and the disability and inclusion program, provide free football, alternative activities, qualifications and work experience opportunities to young people across Greater Manchester. The Foundation fulfills all charitable activity for Manchester United, including promotion of the Sir Bobby Charlton Foundation (finding innovative solutions to create a landmine-free world), and managing the club’s long-term partnership with global children’s organization Unicef. The United for Unicef partnership is the longest running of its kind and since the start of the partnership in 1999 has had a positive impact on the lives of millions of children across the globe. The Foundation also supports external charities by providing signed items for their own fundraising purposes.
Due to the COVID-19 pandemic, the Foundation’s regular delivery and operations in schools and the local community was disrupted, however we continued to serve those with whom we work on a regular basis through online resources, monetary and food donations, and presence in schools, and staff also supported the distribution of food and care packages to the community, food banks and other charitable organizations.
Equality, Diversity and Inclusion
We are committed to equality, diversity and inclusion, with the club’s activity in these areas falling with its #allredallequal campaign. There are a large number of activities that have contributed to the work being done in these areas, including the club working towards achieving the Premier League Equality Standard Advanced Level in June 2019, establishing a strategic partnership with LGBT inclusion charity Stonewall, becoming the first club to sign the UK Government’s Social Mobility Pledge (outlining our commitment to accessing and progressing talent from all backgrounds), and a number of internal engagement activities being delivered by the club’s Employee Inclusion Networks.
The club’s award-winning RED initiative, demonstrates our stance against all forms of discrimination taking place on and off the pitch, with a particular focus on social media. This campaign, in addition to messaging around International Women’s Day and Mental Health, forms part of the club’s activities within #allredallequal as we strive to promote equality, diversity and inclusion throughout. We continue to support football-wide campaigns and initiatives within the lens of #allredallequal.
Internationally, the club’s diversity and inclusion strategy outlines the club’s plans to further develop equality, diversity and inclusion across all areas of the business and ensure that Old Trafford remains as a welcoming and inclusive environment to all.
Sustainability
We recognize the need to move towards a more sustainable economy. We have taken steps to reduce the amount of waste we produce and divert all operational waste away from landfills. We also aim to minimize the use of non-renewable materials, improve our recycling rates and use more recycled materials. We have achieved the Carbon Trust Standard, which recognizes organizations that take a best practice approach to measuring and managing their environmental impacts, and through our Reds Go Green initiative we will continue to build on our carbon and renewable energy strategy to improve our performance further. We have also achieved the Gold Standard in Green Tourism Business Certification, which recognizes the commitment of tourism businesses that are actively working to become more sustainable.
Intellectual Property
We consider intellectual property to be important to the operation of our business and critical to driving growth in our Commercial revenue, particularly with respect to sponsorship revenue. Certain of our commercial partners have rights to use our intellectual property. In order to protect our brand we generally have contractual rights to approve uses of our intellectual property by our commercial partners.
We consider our brand to be a key business asset and therefore have a portfolio of Manchester United related registered trademarks and trademark applications. The historic emphasis has been on seeking and
 
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maintaining trademark registrations for the words “Manchester United” and the club crest but that emphasis was then extended to cover the devil device and the words “MUTV” and “Man Utd”. We also actively procure copyright protection and copyright ownership of materials such as literary works, logos, photographic images and audio visual footage.
Enforcement of our trademark rights is important in maintaining the value of the Manchester United brand. There are numerous instances of third parties infringing our trademarks, for example, through the manufacture and sale of counterfeit products. While it would be cost-prohibitive to take action in all instances, our aim is to consistently reduce the number of Manchester United related trademark infringements by carrying out coordinated, cost-effective enforcement action on a global basis following investigation of suspected trademark infringements. Enforcement action takes a variety of forms. In the United Kingdom, we work with enforcement authorities such as trading standards and customs authorities to seize counterfeit goods and to stop the activities of unauthorized sellers. Overseas enforcement action is taken by approved lawyers and investigators. Those lawyers and investigators are instructed to work with, where feasible, representatives of other football clubs and brands that are experiencing similar issues within the relevant country in order that our enforcement action costs can be minimized as far as possible. We also work with the Premier League in respect of infringements that affect multiple Premier League clubs, in particular in Asia. We also take direct legal action against infringers, for example, by issuing cease and desist letters or seeking compensation when we consider that it is appropriate to do so.
In relation to materials for which copyright protection is available (such as literary works, logos, photographic images and audio visual footage), our current practice is generally to secure copyright ownership where possible and appropriate. For example, where we are working with third parties and copyright protected materials are being created, we generally try to secure an assignment of the relevant copyright as part of the commercial contract. However, it is not always possible to secure copyright ownership. For example, in the case of audio visual footage relating to football competitions, copyright will generally vest in the competition organizer and any exploitation by Manchester United Football Club of such footage will be the subject of a license from the competition organizer.
As part of our ongoing investment into intellectual property, we have implemented a program to detect intellectual property infringement in a digital environment and which facilitates taking action against infringers.
Competition
From a business perspective, we compete across a wide variety of industries and within many different markets. We believe our primary sources of competition include, but are not limited to:

Football clubs: We compete against other football clubs in the Premier League for match attendance and Matchday revenue. We compete against football clubs around Europe and the rest of the world to attract the best players and coaches in the global transfer and football staff markets.

Television media: We receive media income primarily from the Premier League and UEFA media contracts, each of which is collectively negotiated. Further details of such arrangements are set out in the section headed “—Revenue Sectors—Broadcasting.” On a collective level, and in respect of those media rights we retain, we compete against other types of television programming for broadcaster attention and advertiser income both domestically and in other markets around the world.

Digital media: We compete against other digital content providers for consumer attention and leisure time, advertiser income and consumer e-commerce activity.

Merchandise and apparel: We compete against other providers of sports apparel and equipment.

Sponsorship: As a result of the international recognition and quality of our brand, we compete against many different outlets for corporate sponsorship and advertising income, including other sports and other sports teams, other entertainment and events, television and other traditional and digital media outlets.

Live entertainment: We compete against alternative forms of live entertainment for the sale of Matchday tickets, including other live sports, concerts, festivals, theatre and similar events.
 
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As a result, we do not believe there is any single market for which we have a well-defined group of competitors.
Real Property
We own or lease property dedicated to our football and other operations. The most significant of our real properties is Old Trafford. The following table sets out our key owned and leased properties. In connection with our revolving facilities, our secured term loan facility and the senior secured notes, several of our owned properties, including Old Trafford are encumbered with land charges as security for all obligations under those agreements, although the Manchester International Freight Terminal and the Aon Training Complex are not encumbered.
Key properties and locations
Primary function
Owned/leased
Area
(approx. m2)
Old Trafford Football Stadium, Manchester
Football stadium Owned (freehold)
205,000
Aon Training Complex, Carrington, Trafford
Football training facility
Owned (freehold)
440,000
Littleton Road Training Ground, Salford
Football training facility
Owned (freehold)
84,000
The Cliff, Lower Broughton Road, Salford
Football training facility
Owned (freehold)
28,000
Manchester International Freight Terminal, Westinghouse Road Trafford Park, Manchester
Investment properties Leased (through March 2071)
107,000
Land and buildings at Wharfside, Trafford Park, Manchester
Investment properties Owned (freehold)
27,100
Land and buildings on the southwest side of Trafford Wharf Road, Manchester
Offices and Car Parking
Owned (freehold)
23,000
Land and buildings at Canalside, Trafford Park, Manchester
Investment properties Owned (freehold)
10,800
Land and buildings at Castlemore Retail Park, Trafford Park, Manchester
Investment properties Owned (freehold)
3,969
Office space, Chester Road, Manchester
Offices
Leased (through November 2020)
1,176
Office space, central London
Offices Leased (through March 2021)
1,100
Office space, Maryland, United States
Offices Leased (through May 2024)
653
The above properties are owned or leased by Manchester United Football Club Limited or Manchester United Limited, apart from Castlemore Retail Park and Manchester International Freight Terminal which are owned or leased by Alderley Urban Investments Limited.
Legal Proceedings
We are involved in various routine legal proceedings incident to the ordinary course of our business. We believe that the outcome of all pending legal proceedings, in the aggregate, will not have a material adverse effect on our business, financial condition or operating results. Further, we believe that the probability of any material losses arising from these legal proceedings is remote.
Subsidiaries
Our directly or indirectly wholly-owned principal subsidiaries are: Red Football Finance Limited, Red Football Holdings Limited, Red Football Shareholder Limited, Red Football Joint Venture Limited, Red
 
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Football Limited, Red Football Junior Limited, Manchester United Limited, Alderley Urban Investments Limited, Manchester United Football Club Limited, Manchester United Women’s Football Club Limited, Manchester United Interactive Limited, MU Commercial Holdings Limited, MU Commercial Holdings Junior Limited, MU Finance Limited, MU RAML Limited, MUTV Limited and RAML USA LLC. All of the above are incorporated and operate in England and Wales, with the exception of Red Football Finance Limited which is incorporated in the Cayman Islands and RAML USA LLC which is incorporated in the state of Delaware in the United States.
Customers
See “Item 3.D. Risk Factors—Risks Related to Our Business—. We are exposed to credit related losses in the event of non-performance by counterparties to Premier League and UEFA media contracts as well as our key commercial and transfer contracts.” Our top customer was the Premier League, who represented 23.2%, 24.1% and 26.4% of our total revenue in each of the years ended 30 June 2020, 2019 and 2018, respectively. Our second largest customer was adidas, who represented 15.3%, 12.6% and 13.4% of our total revenue in each of the years ended 30 June 2020, 2019 and 2018.
ITEM 4A.   UNRESOLVED STAFF COMMENTS
None.
ITEM 5.   OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion should be read in conjunction with our consolidated financial statements and notes included elsewhere in this Annual Report.
Overview
We are one of the most popular and successful sports teams in the world, playing one of the most popular spectator sports on Earth. Through our 142-year heritage we have won 66 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, Aon, General Motors (Chevrolet) and Kohler that want access and exposure to our community of followers and association with our brand.
As a direct consequence of COVID-19, and the Government imposed restrictions, the Premier League, UEFA competitions and the FA Cup competition were suspended from 13 March 2020. This resulted in the deferral of nine remaining Premier League matches, one scheduled Round of 16 Europa League match and the final matches of the FA Cup. The resumption of domestic competitions (Premier League and FA Cup) resulted in one Premier League home match, two Premier League away matches and an FA Cup quarter final away match being played during the month of June 2020. All remaining domestic matches were played in July 2020 with the UEFA Europa League resuming and completing in August 2020. All matches from June 2020 were played behind closed doors.
The postponement has resulted in ten matches relating to 2019/20 competitions being played at the start of the financial year ending 30 June 2021 as well as the remaining matches being played behind closed doors, the impact of which was to reduce Matchday and Broadcasting revenues for the year ended 30 June 2020.
Broadcasting revenue has been further impacted by rebates due to broadcasters following disruption of the 2019/20 competitions.
Further, Old Trafford and its flagship Megastore operations as well as Museum, Stadium Tour and Red Café operations were closed in mid-March 2020. The Old Trafford Megastore re-opened during June 2020 with a variety of safety measures in place in line with Government guidance. The stadium and Museum and Stadium Tour operations remain closed. The timing for re-opening and any modified participant levels is currently uncertain.
 
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The ongoing crisis has had a significant impact on full year revenues, operating profit and cash flows for the year ended 30 June 2020. We expect that the wider impact of COVID-19 on future revenue streams and cash flows will vary, but will generally depend on the extent and success of UK and international governmental measures to manage the spread of the disease; the length of time that such measures remain in place, their impact on future consumer behavior and our ability to play football matches.
How We Generate Revenue
We operate and manage our business as a single reporting segment—the operation of professional sports teams. We review our revenue through three principal sectors—Commercial, Broadcasting and Matchday—and within the Commercial revenue sector, we have two revenue streams which monetize our global brand: sponsorship revenue; and retail, merchandising, apparel & product licensing revenue.
Revenue Drivers
Commercial
Commercial revenue is derived from sponsors and commercial partners. We generate our Commercial revenue with low fixed costs and small incremental costs for each additional sponsor, making our commercial operations a relatively high margin and scalable part of our business and a driver of growth for our overall profitability. Total Commercial revenue for the year ended 30 June 2020 was £279.0 million.
Sponsorship
We monetize the value of our global brand and community of followers through sponsorship relationships with leading international and regional companies around the globe. To better capitalize on the strength of our brand, we have developed a segmentation sponsorship strategy. See “Item 4. Information on the Company—Revenue Sectors—Commercial—Sponsorship—Our Sponsors” for some of our global and regional sponsors as at 1 July 2020.
A partnership with Manchester United provides corporations with the ability to associate themselves with the highly popular Manchester United brand and a global marketing platform to quickly and effectively amplify their brand and message to their potential customers.
Our current shirt sponsor is General Motors (Chevrolet), and our current training facilities and training kit partner is Aon.
Total sponsorship revenue for the year ended 30 June 2020 was £182.7 million.
Retail, Merchandising, Apparel & Product Licensing
Our retail, merchandising, apparel & product licensing business includes the sale of sports apparel, training and leisure wear and other clothing featuring the Manchester United brand as well as other licensed products from coffee mugs to bedspreads. These products are distributed on a global basis through Manchester United branded retail stores and e-commerce platform, as well as through our partners’ wholesale distribution channels.
We have a 10-year agreement with adidas with respect to our global technical sponsorship and dual-branded licensing rights, which began on 1 August 2015. See “Item 4. Information on the Company—Revenue Sectors—Commercial—Retail, Merchandising, Apparel & Product Licensing” for additional information regarding our agreement with adidas.
Total retail, merchandising, apparel & product licensing revenue for the year ended 30 June 2020 was £96.3 million. Revenue for the year ended 30 June 2020 was impacted by COVID-19 and the closure of the Old Trafford Megastore from mid-March 2020 to mid-June 2020.
Broadcasting
We benefit from the distribution of live football content directly from the revenue we receive and indirectly through increased global exposure for our commercial partners. Broadcasting revenue is derived
 
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from our share of the global broadcasting rights relating to the Premier League, Champions League and other competitions. The growing popularity of the Premier League and Champions League in international markets and the associated increases in media rights values have been major drivers of the increase in our overall Broadcasting revenue in recent years.
Season 2019/20 was the first year of a new Premier League broadcasting rights three-year cycle. Of seven live UK packages, five were sold to Sky Sports, one to BT Sport and the final one to Amazon Prime Video, a new entrant in the domestic Premier League rights market. The overall value generated from the sale of the seven packages was not publicly disclosed, but was a slight reduction on the previous rights deal. The previous deal, which saw an increase of over 70% for the 2016/17 to 2018/19 cycle compared to the 2013/14 to 2015/16 cycle, represented the largest UK TV rights deal ever signed. The international broadcasting rights for the current three-year cycle are a 30% uplift on the previous cycle. The Premier League also implemented a change to the distribution method for international broadcasting rights in 2019/20. International broadcast monies were previously split equally among Premier League clubs. From 2019/20, clubs share equally an inflation-adjusted amount on the previous three-year cycle, with any growth in international rights distributed based on league finishing position at the end of the season. In the current cycle, the ratio between the maximum and minimum broadcasting revenue that a club can receive from the Premier League in a season is capped at 1.8:1.
Our share of the revenue under the Premier League broadcasting rights contract amounted to £112.5 million, £146.3 million and £151.6 million for the 2019/20, 2018/19 and 2017/18 seasons, respectively, and our share of the revenue from broadcasting rights for UEFA club competitions amounted to £16.8 million, £83.1 million and £38.3 million for the 2019/20, 2018/19 and 2017/18 seasons, respectively.
Our participation in the Premier League and Champions League or Europa League (and consequently, our receipt of the revenue generated by these broadcasting contracts) is predicated on the success of our men’s first team, and if our men’s first team fails to qualify for these UEFA club competitions or is relegated from the Premier League in any given season, our Broadcasting revenue for that and subsequent fiscal years will be adversely impacted, partially offset by lower operating expenses. Revenue for the year ended 30 June 2020 was primarily impacted by non-participation in the UEFA Champions League and by COVID-19 and the subsequent deferral of a number of matches to the start of the 2020/21 financial year, as well as rebates due to broadcasters following competition delay and broadcast schedule changes.
In addition, MUTV delivers Manchester United programming and other content to territories around the world. MUTV generated total revenue of £7.9 million, £10.1 million and £10.7 million for each of the years ended 30 June 2020, 2019 and 2018, respectively. Total Broadcasting revenue for the year ended 30 June 2020 was £140.2 million.
Matchday
Matchday revenue is a function of the number of games played in front of a crowd at Old Trafford, the size and seating composition of Old Trafford, attendance at our matches and the prices of tickets and hospitality sales. A significant driver of Matchday revenue is the number of home games we play at Old Trafford in front of a crowd, which is ordinarily based on 19 Premier League matches and any additional matches resulting from the success of our men’s first team in the FA Cup, EFL Cup and UEFA club competitions. Our participation in the Premier League and UEFA club competitions (and consequently, our receipt of the revenue generated by these matches) is predicated on the success of our men’s first team, and if our men’s first team fails to qualify for UEFA club competitions or is relegated from the Premier League in any given season, our Matchday revenue for that and subsequent fiscal years will be adversely impacted, partially offset by lower resulting expenses. Average attendance for our home Premier League matches played in front of a crowd has been over 99% for each season since the 1997/98 season, with strong attendance for UEFA club competitions, FA Cup and EFL Cup matches. Total Matchday revenue for the year ended 30 June 2020 was £89.8 million. As a result of COVID-19, our five remaining home matches, originally scheduled for the 2019/20 financial year, have been played behind closed doors (four of such matches were deferred to the start of the 2020/21 financial year).
 
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Other Factors That Affect Our Financial Performance
Employee benefit expenses
Player and staff compensation comprise the majority of our operating costs. Of our total operating costs, player costs, which consist of salaries, bonuses, benefits and national insurance contributions are the primary component. Compensation to non-player staff, which includes our manager and coaching staff, also accounts for a significant portion. Competition from top clubs in the Premier League and Europe has resulted in increases in player and manager salaries, forcing clubs to spend an increasing amount on player and staff compensation, and we expect this trend to continue. In addition, as our commercial operations grow, we expect our headcount and related expenses to increase as well.
Other operating expenses
Our other operating expenses include certain variable costs such as Matchday catering, policing, security stewarding and cleaning at Old Trafford, visitor gateshare for domestic cups, and costs related to the delivery on media and commercial sponsorship contracts. Other operating expenses also include certain fixed costs, such as property costs, maintenance, human resources, training and developments costs, and professional fees. As a result of COVID-19 and the associated reduced business activity, other operating expenses for the year ended 30 June 2020 have decreased compared to the prior year. This includes five home matches relating to 2019/20 competitions played behind closed doors (of which four matches were deferred to the start of the 2020/21 financial year) plus the impact of reduced travel and reduced costs related to the closure of the Old Trafford Megastore from mid-March 2020 to mid-June 2020.
Amortization, depreciation and impairment
We amortize the capitalized costs associated with the acquisition of players’ and key football management staff registrations. These costs are amortized over the period of the employment contract agreed with a player/key football management staff. If a player or key football management staff extends his contract prior to the end of the pre-existing period of employment, the remaining unamortized portion of the acquisition cost is amortized over the period of the new contract. Changes in amortization of the costs of players’ and key football management staff registrations from year to year and period to period reflect additional fees paid for the acquisition of players and key football management staff, the impact of contract extensions and the disposal of registrations. As such, increased players’ and key football management staff registration costs in any period could cause higher amortization in that period and in future periods and have a negative impact on our results of operations. Moreover, to the extent that the player and key football management staff registration costs vary from period to period, this may drive variability in our results of operations. We also amortize the capitalized costs associated with the acquisition of other intangible assets over their estimated useful lives, which is typically between 3 and 10 years.
Depreciation primarily reflects a straight-line depreciation on investments made in property, plant and equipment. Depreciation over the periods under review results primarily from the depreciation of Old Trafford, including incremental improvements made to Old Trafford each season.
Impairment charges arise when an asset’s carrying amount exceeds its recoverable amount. Assets are tested for impairment whenever events or changes in circumstance indicate that the carrying amount may not be recoverable.
Exceptional items
Exceptional operating costs are those costs that in management’s judgment need to be separately disclosed by virtue of their size, nature or incidence in order to provide a proper understanding of our results of operations and financial condition.
Profit/(loss) on disposal of intangible assets
We recognize profits or losses on the disposal of intangible assets (primarily players’ registrations) in our statement of profit or loss. Acquisitions and disposals of players are discretionary and we make transfer
 
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decisions based upon the requirements of our first teams and the overall availability of players. These requirements and the availability of players, and resulting profits or losses on disposals, may vary from period to period, contributing to variability in our results of operations between periods.
Finance costs
A key component of our expenses during each of the past three fiscal years has been interest costs. We expect interest expense to continue to be a significant component of our expenses. See “Item 5.B. Liquidity and Capital Resources—Indebtedness.”
Taxes
During each of the three years ended 30 June 2020, 2019 and 2018, our principal operating subsidiaries were tax residents in the United Kingdom. During the same years, we were subject to a weighted UK statutory tax rate of 19.0% each year.
Although we are organized as a Cayman Islands exempted company, we report as a US domestic corporation for US federal income tax purposes. As a result, our worldwide income is also subject to US taxes at the US statutory rate (currently 21%). The US federal corporate income tax rate reduced from 35% to 21% following the substantive enactment of US tax reform on 22 December 2017 (the “TCJA”). We expect to utilize a credit in the United States for the UK taxes paid and therefore we do not expect to be double taxed on our income. We expect our future cash tax rate to align more closely with the US statutory rate of 21%.
We may also be subject to US state and local income (franchise) taxes based generally upon where we are doing business. These tax rates vary by jurisdiction and the tax base. Generally, state and local taxes are deductible for US federal income tax purposes. Furthermore, because most of our subsidiaries are disregarded from their owner for US federal income tax purposes, we are not able to control the timing of much of our US federal income tax exposure. In calculating our liability for US federal income tax, however, certain of our deductible expenses are higher than the amount of those same expenses under UK corporation tax rules, owing to differences in the relevant rules of the two jurisdictions and the related difference in the opening book versus tax basis of our assets and liabilities. Finally, our UK tax liability can be credited against our US federal income tax liabilities, subject to US rules and limitations. Nevertheless, over time we expect to pay slightly higher amounts of tax than had we remained solely liable to tax in the United Kingdom.
Seasonality
We experience seasonality in our revenue and cash flow, limiting the overall comparability and predictability 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 derive 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 men’s first team in UEFA club competitions and domestic cups could result in significant additional Broadcasting and Matchday revenue, and consequently we may also recognize the most revenue in our fourth fiscal quarter in those years. Our cash flow may also vary among interim periods due to the timing of significant payments from major commercial agreements. As such, though we report interim results of operations for our first, second and third fiscal quarters, in managing our business, setting goals and assessing performance we focus primarily on our full-year results of operations rather than our interim results of operations. Additionally, the seasonality we have experienced in our business has been further impacted by the COVID-19 pandemic.
A.
OPERATING RESULTS
The following table shows selected audited consolidated statement of profit or loss data for the years ended 30 June 2020 and 2019. For a discussion of our results of operations for the year ended 30 June 2018,
 
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including a year-to-year comparison between the years ended 30 June 2019 and 2018, refer to Part I, Item 5, “Operating and Financial Review and Prospects” in our Annual Report Form 20-F for the year ended 30 June 2019.
Year ended 30 June
2020
2019
(£’000)
Statement of profit or loss data
Revenue
509,041 627,122
Analyzed as:
Commercial revenue
279,044 275,093
Broadcasting revenue
140,203 241,210