the preliminary results for the twelve months to 31 July
2003.
Strong Performance
Over the past twelve months Manchester United has continued
to deliver a strong performance both as a team and as a
business. The successes have been achieved against a
background of weak macro economic conditions and uncertain
financial markets which have been amplified in the football
industry as a whole by its high levels of debt and over-
dependence on media revenues.
Manchester United has differentiated itself through its
results both on and off the pitch.
Team Success
The team emphatically answered its critics by remaining
unbeaten in the Premiership from the start of 2003 to win
the club's 8th Premiership title in 11 years. The team
reached the UEFA Champions League Quarter Finals for the
seventh successive season - the best record of any team in
Europe - before losing to Real Madrid in arguably the best
tie in the competition. We also reached our first
Worthington Cup Final in nine years. Our loyal fans have
once again showed tremendous support for the team with sell
out crowds at virtually every one of our 33 first team
matches at Old Trafford. We appreciate the contribution that
this support makes to our team's and business success.
Strengthening the Squad
During the off-season we have been exceptionally active in
making progress on one of our core strategic goals, to
maintain the playing success of the team. The sales of David
Beckham and Juan Sebastian Veron, the release of David May
and Laurent Blanc at the end of their contracts and the
acquisitions of Tim Howard, Eric Djemba Djemba, David
Bellion, Kleberson and Cristiano Ronaldo, were all important
steps. They have strengthened the playing squad and equipped
the manager, Sir Alex Ferguson, with the players he needs to
keep the club challenging for major trophies. These
transfers have decreased the average age of the squad to 25
and have also reduced average player wages. I would like to
express my appreciation of the contribution made by the
players who have left, in particular David Beckham who has
been with the club since he was 16 and played a key part in
our successes over the last decade.
Excellent Financial Results
Our financial results have benefited from the additional
games at Old Trafford (33 compared to 27 last season) as a
result of cup successes, the start of the new Nike
partnership, and strong contributions from the UEFA
Champions League Final at Old Trafford and our pre-season
tour to the USA.
Group turnover of £173m was 18% up on the previous year.
£8.5m (2002 £1.3m) was produced by our domestic cup runs,
£27.6m (2002 £29.9m) from our participation in the UEFA
Champions League, £4.7m from the USA tour and hosting the
UEFA Champions League final. In addition, the first year of
our new Nike contract is worth an additional £3.5m above the
level guaranteed for the 2nd year onwards of £20.7m. Aside
from these factors the underlying revenues excluding cup
success were £128.7m, which was 12% up on a like for like
basis on the previous year, as a result of the new Nike and
Platinum sponsor contracts and higher UK TV revenues.
The ratio of wages costs to turnover was 46% for the year,
well within our target of 50% of turnover as a result of
continued financial discipline and the strong cup
performances. Absolute wages went up by £8.7m, a rise of
12%, reflecting the new contractual commitments made in the
prior year and higher bonuses from our success.
Group Operating Profit before Exceptionals, Player Trading
and Amortisation was £50.0m, 45% above the previous year,
benefiting from strong additional contributions from the new
Nike partnership of £14.8m (compared to the previous
arrangements), a total of £3.0m from the UEFA Champions
League final and USA tour and the domestic cup games of
£3.6m (2002 £1.1m). The UEFA Champions League games
contributed 45% (2002 73%) of these profits.
Player Trading Profits
The Player Trading Profits were £12.9m (2002 £17.4m). The
major element of this was £15.9m for David Beckham. This is
calculated based on the unconditional proceeds of 25m Euro,
less costs of the transaction and the discount paid to our
bank to receive this sum on 2nd September 2003 as opposed to
over the four years originally agreed with Real Madrid. This
profit, together with additional receipts from Blackburn for
the sale of Andrew Cole and Dwight Yorke, was offset by the
provision for the loss on the sale of Veron to Chelsea of
£4.5m.
Increased Profit after Tax
The Profit after tax was £29.8m (2002 £25.0m) with the
underlying tax rate of 32.4 per cent being reduced by 8.8
percentage points as a result of the release of £3.4m
provisions mainly in respect of a property transaction which
took place in 1996.
Strong cash generation
The excellent financial results and continued discipline
over costs and cash management have strengthened our balance
sheet further. At the year-end we had cash and deposits of
£28.6m. We spent £4.2m on capital projects, net of
disposals, and £7.9m in net player acquisition during the
year with additional commitments to spend up to £23.9m on
the five players we have bought in this summer. The balance
sheet includes debtors of £23.4m principally from the sales
of Beckham (received on 2nd September) and Stam (due during
the 2004/5 financial year), which together with a net £12m
from the sale of Veron means we have total unconditional
receipts of £35.4m over the next two years. Our cash
generation will enable us to continue to strengthen the
squad as necessary without the use of debt.
We completed the sale of the Golden Tulip hotel investment
and recorded a profit on disposal of £0.4m in the second
half year. Further conditional payments could be received
depending on the release of monies retained for potential
warranty claims.