Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Manchester United Earnings Conference Call. At this time, all participants are in listen-only mode. Following the presentation, we will conduct a question-and-answer session [Operator Instructions].

I will now turn the call over to Corinna Freedman, Head of Investor Relations for Manchester United..

Thank you, operator. Good morning, everyone, and welcome to Manchester United's third quarter 2020 earnings call. A corresponding press release containing our financial results was issued earlier this morning and can be accessed on our IR Web site.

Today's call is being recorded and webcast, and a replay will also be available on our site for 30 days thereafter.

Before we begin, and as a matter of formality, we would like to remind everyone that this conference call will include estimates and forward-looking statements, which are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements.

Any such estimates or forward-looking statements should be considered along with the cautionary note included with our earnings release, as well as additional risk factor discussions in our filings with the SEC.

With us on the call today, Ed Woodward, our Executive Vice Chairman; Richard Arnold, our Group Managing Director; Cliff Baty, our Chief Financial Officer; and Hemen Tseayo, our Head of Corporate Finance. I will now turn the conference call over to our Executive Vice Chairman, Ed Woodward, for his opening remarks.

Ed?.

Thank you, Corinna, and thank you to everyone for joining us today. These are unprecedented times, and I would like to take a moment at the very top of this call to say that I hope you and your families are staying healthy and safe.

On behalf of everyone at Manchester United, I would also like to send the club's profound sympathies to all of those suffering directly from the COVID-19 virus, for those who may have lost family members due to this virus, and for those essential and front-line workers who everyday bravely risk infection doing their normal jobs.

You are all in our thoughts and we're very grateful to your sacrifice and to your service. We will win as some tireless work have been carried out in hospitals and other care settings within our local communities and by charities dealing with the economic fallout from the crisis. We take seriously our responsibility to support these efforts.

And I'm proud of the way everyone at Manchester United has responded. From our staff, we packaged out 30,000 items of food and drink from club stores for local charities, and the staff volunteering to cook 60,000 meals for National Health Service staff in Greater Manchester hospitals.

These are just two among many examples of how our people are rallying to help backing the club and the Manchester United Foundation, which continues to expand its charitable response in the U.K. and overseas.

We believe these initiatives are not only the right thing to do, but they are also essential to upholding the club's values with which our fans around the world identify. So we will continue to work with our Foundation to support vulnerable communities, as the social and economic impacts of the pandemic unfolds.

Clearly, it has caused significant disruption to our operations, including the postponement of all matches since mid-March and the temporary closure of our retail, catering and visitor facilities at Old Trafford.

While it is too soon to know with any certainty if or when those measures can be fully relaxed, we are optimistic that it will soon be possible to resume playing football. Our men's first team has begun a phased return training this week, with rigorous medical protocols in place to manage risks.

Subject to government and Premier League shareholder approval, including input from medical staff and players, we anticipate domestic games could restart again in June. Furthermore, all indications from UEFA are that the culmination of the Europa League could be during August.

We remain in constant dialogue with the Premier League, the FA and UEFA about the next steps toward returning to play, while continuing to plan to help our players, staff and the wider public.

We are encouraged by the return of German Bundesliga, which is the first major European Leagues to restart last weekend with the successful completion of nine matches, all played behind closed doors.

While no one in the football industry enjoys seeing football without fans in the stadium, the TV audiences attracted to the German matches demonstrates the strong pent-up demand for live football after two-month absence.

Players have also returned to training in Spain, Italy, Portugal and several other European countries, all with the aim of completing the 2019-2020 season. So there is clear momentum behind efforts to get football going again across Europe's major leagues.

All in all, as we sit here today, as many as 32 European countries are expected to restart their domestic leagues by the end of June. As in Germany and elsewhere, it is now inevitable that our matches will initially be played behind closed doors when the season resumes. This is a disappointing for us as it is for our fans.

So we hope it will allow the men's first team to complete all of its competitions in the current 2019-2020 season by the end of August and to start next season in time, to target completion of next season still in May 2021.

While there are still many uncertainties to resolve, we're looking forward as early in the team returning to pitch soon to defend the strong momentum that they achieved with their 11-game unbeaten run in the Premier League, Europa League and FA Cup immediately before the season was suspended in mid-March.

Our third quarter results published today reflect the partial impact that the pandemic has had on the club. While clearly, the greater impact will be in the current quarter and likely beyond. Cliff will walk you through some of the assumptions that drive our scenario planning.

There are still profound challenges ahead for football as a whole, and it is safe to say, will not be a business as usual for some time. Our club is built on solid foundation. We remain one of the most popular teams in the most followed global sport and have created a strong financial base with diverse revenue streams.

However, the repercussions of the pandemic are now being felt widely across the football community, not just by clubs but also by players, supporters, broadcasters, sponsors and many other stakeholders. We have a shared interest in protecting our sport during this period.

So it's crucial that we work together in the spirit of solidarity to maximize our chances of coming back strongly as the pandemic recedes. We must recognize that this crisis will not disappear overnight and that the world which emerges will be different from how it was before.

That will create challenges for football, like many other industries, but it will also brings an opportunity for innovation and creativity, as we explore options for resuming football in ways that still protect public health.

While nobody is claiming the football is the most important thing at this time, as sport can play a role in helping restore morale and bringing people back together as the factors recover.

Indeed, the absence of live football and the unifying experiences it creates to billions of people around the world has reminded us all of how much the sport means to us.

With that in mind, we remain firmly optimistic about the long-term prospects for the club and for exciting young team, once we have worked our way through what is undoubtedly one of the most extraordinary and testing periods in the 142-year history of Manchester United.

This club is built on resilience in the face of adversity, and those qualities have been proven once again now. With that, I will hand over to our Group Managing Director, Richard Arnold, who will update you on the key business activities. Thank you..

Thank you, Ed. Given the unusual nature of this quarter and these times, I'll keep our usual business commentary rather brief. Whilst it may not be an exact proxy for today's crisis, over the course of our 142-year history, this club has endured two world wars, the global depression, the credit crunch and the previous pandemic.

Resilience is a core part of the club's DNA, both on and off the pitch. Having worked at United through the credit crunch in 2007 and 2008, I know that the club will come out of this crisis more determined than ever to achieve both on and off the pitch.

Operationally, it goes without saying that COVID-19 and the related containment measures will have had a significant impact on our business. Internally, over 700 of our global employees have transitioned to a remote work environment.

I'd like to take this moment to thank our colleagues who've worked throughout this crisis, both to carry the club forward as well as delivering the support to our communities in NHS, as Ed referred to. The duty to entertain is also a key part of our heritage spanning that same period. Without games, this responsibility fell to our digital media team.

Through the crisis, we were particularly proud to be able to harness this strong global fan engagement in March with meaningful cause to action via several social campaigns aimed at raising awareness of important public health messages, offering support to front-line workers and providing activities for fans staying at home to save lives.

The circumstances of isolation meant we have to drive innovation in content capture generation and publishing that we hope will drive benefits for years to come. With the innovative content that we produced over this unusual period, we were able to stay in touch with our fans.

According to industry metrics, as of January 2020, the total time spent in the Manchester United Club app represented over 40% of total time spent on the Top 14 Football Club apps globally.

Whilst this engagement does have commercial benefits in terms of e-commerce and partner engagement, I think this time has proven to be galvanizing in terms of the connection of the fans to the team and the club just as they brought other communities together across the world.

At this point, it is also worth recognizing the support that we have received from our partners throughout this time. As well as their efforts to ease the crisis. Without their support, we would not have been in a position to act as determinedly to support those most in need in the community.

No question, the economic ramifications from this global pandemic will continue to resonate for years to come, but we remain optimistic about the long-term outlook for the sponsorship business and our ability to remain a leader within the market.

We've taken advantage of this temporary pause in normal routine to creatively attack our operational approach with disruptive innovations across all of our business lines, in particular the content capture and production referred to earlier, as well as further enhancing the embedded digital offering to commercial partners, deepening our e-commerce integration as well as expanding our CRM and in-house data capabilities.

Whilst there is still significant uncertainty regarding the duration of this pandemic and, ultimately, how COVID-19 may impact the economy longer term, what we do know is our fans have a deep emotional connection with the club, whether in Manchester, the U.K., or the rest of the world.

They want to be part of the club and continue to show their loyal support whether in the stadium, via broadcast matches, or digital or mobile interactions. I know I speak for everyone at Manchester United when I say that we all look forward to the day that we can welcome them back to Old Trafford, and football can return to normal.

I will now turn the call over to our CFO, Cliff Baty, to review our financial results and our outlook in more detail.

Cliff?.

Thank you, Richard. Given the current environment, I'll briefly summarize the headline figures for the third quarter, provide some commentary on the financial impact of COVID-19. I’ll invite you to refer to our press release filed earlier this morning for more details.

Total revenues for the third quarter were £123.7 million, down £28.4 million versus prior year. This was due to the COVID-19 disruption impact on our broadcast and matchday revenues. We experienced growth in our commercial revenues driven by sponsorship.

As a result of the impact on broadcasting and matchday revenues, adjusted EBITDA of £27.9 million was down £13.3 million versus the prior year. The revenue reduction partially offset by lower player wages as a result of non-participation in the Champions League.

Net finance costs for the third quarter were £25.3 million compared to £3.1 million in the prior year. This movement was solely due to foreign exchange movements on our U.S. dollar debt and reverses the foreign currency gain seen in the first half. Our cash interest costs remained consistent year-on-year.

COVID-19 had a significant operational impact on the final two weeks of the quarter with three scheduled matches at the end of March canceled, including the home leg of the Europa League Round of 16 versus LASK. Old Trafford, including our resilient Megastore, has been closed since mid-March.

Given the delay of course of the playing schedule, we anticipate that the revenues from the Premier League with the completion of the 2019-2020 season will be reduced, but discussions remain ongoing with broadcasters regarding the rebate. At Manchester United, we've estimated this reduction to be around £20 million for the full season of 38 games.

At the third quarter, we've provided for a £15 million reduction to our broadcasting revenues to reflect this impact for the 29 games played to-date.

In total, for the third quarter, we estimate that COVID-19 had a negative impact of roughly £23 million on our revenues, reflecting the broadcast reduction previously mentioned together with the match postponements and other closures.

In response to the financial impact of COVID-19, we have taken actions to closely control costs and review our planned capital expenditures. Turning now to the balance sheet and specifically to our liquidity, at the end of March, we had a cash balance of £90.3 million.

As previously advised, this is down year-on-year due to higher player capital expenditures. In addition to this cash on hand, we also have access to £150 million revolving credit facility to provide additional working capital support due to the impact of the COVID-19 crisis.

Our loan notes and term loan have both long-dated with settlements not due until 2027 and 2029. Now, turning to our outlook. In our press release this morning, we announced the withdrawal of our previous full-year revenue and adjusted EBITDA guidance ranges. Prior to the impact of COVID-19, we were well on track to meet our full-year target.

We have outlined the COVID-19 impact on our third quarter, and the impact on the fourth quarter will also be significant. Whilst we will not be providing any explicit forward guidance today, given the level of uncertainty remains, we do want to provide you with some assumptions for the fourth quarter.

For our commercial business, sponsorship revenues for 2019-2020 have contracted and their recognition in quarter four will be as normal. Retail revenues will be impacted due to the closure of our Megastore. Broadcast revenues will be dependent on the timing of matches played in the fourth quarter and finalization of the rebate.

Matchday revenues will be significantly impacted by the closure of Old Trafford to fans. Looking further ahead, given the revised timing for domestic and UEFA competitions, we will not be participating in our typical summer tour activities this year.

And, finally, we continue to expect committed player CapEx for the full year to remain at approximately £190 million with amortization costs of £130 million. We look forward to providing you with more information on our outlook for the 2020-2021 season on our fourth quarter earnings conference call later in the year.

And, with that, I'll hand back to the operator. And we're now ready to take your questions.

Operator?.

We will now begin the question-and-answer session [Operator Instructions]. First question comes from Randy Konik of Jefferies. Please go ahead..

Cliff, can you just repeat the impact on the revenues for the third quarter? I think you said £23 million.

Could you just, kind of, just go back over that one more time? And then any broader or greater context that you can give us to kind of help frame out what a potential rebate scenario would might look like with the broadcast partners?.

Yes, so it’s £23 million, we've estimated the impact based on at least to-date. So as I said £15 million of that is our estimates for the impact of the rebate over the 29 games played to-date. So we have to take all of that £15 million in the third quarter but obviously, that actually represents the 29 games.

So as I said, the full-year impact of that we expect to be £20 million, I'll come back to the rebate. Otherwise, of the £23 million, we also missed an away game at Tottenham. So we missed around £4 million of revenue from the Premier League for that.

And then the rest, as I said, we missed our home game, so we have some UEFA League -- Europa League, sorry, revenues against LASK, as well as just the shutting of the Megastore, our Tour and Museum, etc., so that all adds up to broadly £23 million.

In terms of the rebate, I think it's important to say that, it's the best estimates at this stage based on discussions between the Premier League and broadcasters. And that is what we required to reporting the accounts so that's really not final. We anticipated that is just, obviously, our current best view at the moment..

And then, I guess, Richard, can you give us some perspective on how you're kind of managing your commercial, your partners in this time? Should we just expect -- the contract stay in place as is, you just think of creative ways to kind of showcase those brand partners or any things we should be kind of aware of impacting the commercial segment's differently with COVID from before COVID that you were thinking?.

I think three points to make. So, firstly, we've got fantastic partners in terms of their behavior and the quality of the businesses. So, yes, the support we've had from them has been phenomenal and we're very appreciative of that.

Secondly, the work that we do digitally has meant that our ability to work with the sponsors to engage fans and continue to drive exposure and engagement for those partners has been very, very strong. And we've seen throughout the period ongoing engagement levels on a digital basis are very, very high.

And finally, yes, the majority of sponsor rights and benefit drives from that global exposure that comes from screening games rather than the in-stadium activities beyond the football, if that makes sense. So behind closed doors, while we really, really want fans to be there when -- as soon as it's safe to do so.

From the commercial point of view, it continues to generate exposure. So in the near term, those are the three main aspects to focus on. Longer term, I think that while it's likely and we've seen that there have been cuts in marketing spend globally in all times of flux.

The club has been very solid, and actually, the quality work we do means that we are a safe bet and that translated into the results we saw in 2007 and following after that. So I think those are the main points, but, obviously, it's been a very busy time..

[Operator Instructions] The next question comes from Bryan Kraft of Deutsche Bank. Please go ahead..

I wanted to ask you a question, and I think a lot of us are trying to wrap our heads around just how leagues and teams are getting back on the field.

And I want to see if you could walk us through some of the primary operational procedures that you're employing to key players and other MANU personnel, say, during training and that you'll see once the season resumes.

And if you could also maybe talk about some of the greatest challenges in this area, whether it's the availability of resources, such as test kits or other issues? Thank you..

I'll take a stab on answering that question. This is all being done centrally as you would imagine. It's not a Manchester United set of ideas or rules. This is done centrally through the Premier League together with a lot of advice through the government and other groups.

But in terms of broadly speaking where we are today, I can't comment on what it might take to get back to contact training or back to playing games, because those steps haven't happened yet.

The protocol that we approved in the last Premier League meeting, which allowed our players to go back to training yesterday is very detailed and includes pre-testing and regular testing, it includes lot of restrictions around where players can be, a lot of related cleaning protocols as you can imagine and, obviously, firm restrictions about other members and staff around those areas.

It also includes social distancing. So players in small groups training on grass, but not interacting with each other in any close contact quite way. So, at this stage, we're only really at the first step.

So our level of confidence about what they're doing from a protection perspective is pretty high, and we won't get to the next step or the next stages until they are approved and that would be, well, certainly not be before next week. And then, I think, your final or the second part of the question, it was resource-related.

I mean, you hit the nail on the head, I think the biggest resource question is around testing.

And I think as a country, we're at a point now where there are a lot of test kits available, and obviously, we wanted to make sure as an industry that we weren't redirecting test kits that were needed elsewhere from other people, and I think everybody feels confident about that..

Have you guys, let me ask this question, what do you think the frequency of testing is that you need to get to in order to go back to play in full contact training? And is that one of the obstacles still to getting back on the field in June?.

I'm not qualified to answer that question in terms of what the right frequency of testing is. I'm sure our Club doctor would have an answer, but he's not in this call unfortunately. And I don't think that that would be an issue.

There are relatively large number of test kits that are available for our players and staffs to ensure that the protocols are met, and I don't think this will be one of the issues that, if something stop us going back, I don't expect it to be this..

This concludes our question-and-answer session. I would like to turn the conference back over to Ed Woodward for any closing remarks..

Thank you. And so, I just want to say thank you to everybody for joining us today, and I'd like to reinforce what I said earlier that Manchester United is a resilient club and a resilient company.

We're well positioned both operationally and financially to navigate this global crisis, and we very much look forward to returning to play and building upon the strong on-pitch momentum we experienced through to mid-March when we stopped.

So on behalf of myself and everybody at Manchester United, we thank you for your continued support, and hope that you all stay safe. Thank you..

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..