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The financial statements and notes of Manchester United PLC for the year ended 31 July 2002. It includes consolidated profit and loss account, statement of total recognised gains and losses, consolidated balance sheet, company balance sheet, consolidated cash flow statement, and notes to the financial statements.
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Contents 36 Consolidated profit and loss account 36 Statement of total recognised gains and losses 37 Consolidated balance sheet 38 Company balance sheet 39 Consolidated cash flow statement 40 Note to consolidated cash flow statement 41 Notes to the financial statements
Financial statements
Financial statements
Note 2002 2001 Operations excluding player Player amortisation amortisation and trading and trading Total Total £’000 £’000 £’000 £’ Restated
Turnover: Group and share of joint venture 148,070 –148,070 130,
Less: Share of joint venture (2,008) –(2,008) (1,068)
Group turnover 3 146,062 –146,062 129,
Cost of sales (15,685) –(15,685) (22,120)
Gross profit 130,377 –130,377 107,
Administrative expenses before exceptional costs 4 (96,448) (17,647) (114,095) (85,942)
Administrative expenses – exceptional costs 5 (864) –(864) (2,073)
Total administrative expenses (97,312) (17,647) (114,959) (88,015)
Group operating profit/(loss) 33,065 (17,647) 15,418 19,
Share of operating (loss)/profit in:
Total operating profit: Group and share of joint venture and associates 32,561 (17,647) 14,914 18,
Profit on disposal of players –17,406 17,406 2,
Profit/(loss) before interest and taxation 32,561 (241) 32,320 21,
Net interest receivable 6 27 727
Profit on ordinary activities before taxation 32,347 21,
Taxation 8 (7,308) (7,399)
Profit for the year 25,039 14,
Dividends 10 (8,053) (5,195)
Retained profit for the year 24 16,986 9,
Basic and diluted earnings per share (pence) 11 9.6 5.
Basic and diluted adjusted earnings per share (pence) 11 10.0 8.
The results for both the current and prior period derive from continuing activities.
For the year ended 31 July 2002
2002 2001 £’000 £’ Restated
Profit for the year/total recognised gains and losses in the year 25,039 14,
Prior year adjustment (note 2) (4,235)
Total recognised gains and losses since last annual report 20,
The accompanying notes on pages 41 to 55 are an integral part of these financial statements.
For the year ended 31 July 2002
Financial statements
At 31 July 2002
Note 2002 2001 £’000 £’ Restated
Fixed assets
Tangible assets 13 25,238 25,
Investments 14 29,139 27,
54,377 53,
Current assets
Stocks 15 196 2,
Debtors 16 62,182 51,
Cash at bank and in hand 831 1,
63,209 55,
Creditors – amounts falling due within one year 17 17,131 16,
Net current assets 46,078 39,
Total assets less current liabilities 100,455 92,
Accruals and deferred income
Other deferred income 22 7,381 6,
Net assets 93,074 85,
Capital and reserves
Share capital 23 25,977 25,
Profit and loss account 24 67,097 59,
Shareholders’ funds 93,074 85,
The financial statements on pages 36 to 55 were approved by the Board of directors on 30 September 2002 and signed on its behalf by:
David Gill Director Nick Humby Director
The accompanying notes on pages 41 to 55 are an integral part of these financial statements.
Financial statements
For the year ended 31 July 2002
Note 2002 2001 £’000 £’000 £’000 £’
Net cash inflow from operating activities 42,807 50,
Returns on investments and servicing of finance
Interest received 521 692 Interest paid (445) (146)
Net cash inflow from returns on investments and servicing of finance 76 546
Taxation paid (9,433) (7,377)
Capital expenditure and financial investment
Proceeds from sale of players’ registrations 13,006 4, Purchase of players’ registrations (25,089) (47,504) Proceeds from sale of tangible fixed assets 1,165 1, Purchase of tangible fixed assets (15,088) (9,232)
Net cash outflow from capital expenditure and financial investment (26,006) (51,112)
Acquisitions and disposals
Investment in associated company – (126)
Net cash outflow from acquisitions and disposals – (126)
Equity dividends paid (5,274) (5,013)
Cash inflow/(outflow) before management of liquid resources and financing 2,170 (12,200)
Management of liquid resources
Sale of marketable securities – 5, Purchase of marketable securities – (5,006)
Net cash inflow from management of liquid resources – –
Financing
Repayment of borrowings – (1,856) Grants received – 400
Net cash outflow from financing – (1,456)
Increase/(decrease) in cash in the year 26 2,170 (13,656)
Financial statements
1 Accounting policies A summary of the Group’s principal accounting policies is set out below. These policies have been consistently applied, except for the adoption of Financial Reporting Standard 19 ‘Deferred Tax’ (‘FRS 19’), as described below.
Basis of accounting The financial statements have been prepared under the historical cost convention. They have been drawn up to comply with applicable accounting standards including FRS 19. The 2001 figures have been restated to reflect the adoption of FRS 19, additional information is given in note 2.
Basis of consolidation The financial statements combine the results of Manchester United PLC and its subsidiary undertakings using acquisition accounting. Undertakings other than subsidiary undertakings in which the Group has an investment of at least 20 per cent of the shares and over which it exerts significant influence, are treated as associates. Entities in which the Group holds an interest on a long-term basis, and which are jointly controlled by the Group and other parties, are treated as joint ventures. The result for the joint venture and associates are based upon management accounts for the period ended 31 July 2002.
Joint venture The Group profit and loss account includes the Group’s share of turnover, operating loss and interest of the joint venture. The investment in the joint venture is shown in the Group balance sheet using the gross equity method. The gross equity method records the Group’s share of the gross assets and gross liabilities in its joint venture.
Associates The Group profit and loss account includes the Group’s share of the operating result and interest of the associates. The investments in the associates are shown in the Group balance sheet using the equity method. The equity method records the Group’s share of the underlying net assets of the associates.
Turnover Turnover represents income receivable from the Group’s principal activities excluding transfer fees and value added tax.
Deferred income Income from match day activities, media and commercial contracts, which has been received prior to the year end in respect of future football seasons is treated as deferred income.
Depreciation Depreciation is provided on tangible fixed assets at annual rates appropriate to the estimated useful lives of the assets, as follows:
Reducing Straight balance line
Freehold land Nil Nil
Freehold buildings 1.33% 75 years
Assets in the course of construction Nil Nil
Computer equipment and software 33% 3 years
Plant and machinery 20% – 25% 4 – 5 years
General fixtures and fittings 15% 7 years
Tangible fixed assets acquired prior to 31 July 1999 are depreciated on a reducing balance basis at the rates stated above. Tangible fixed assets acquired after 1 August 1999 are depreciated on a straight line basis at the rates stated above.
Stocks Stocks comprising raw materials, consumables and goods held for resale are valued at the lower of cost and net realisable value.
Intangible fixed assets The costs associated with the acquisition of players’ registrations are capitalised as intangible fixed assets. These costs are fully amortised, in equal annual instalments, over the football seasons covered by the player’s initial contract.
Financial statements
1 Accounting policies continued Signing-on fees Staff costs include signing-on fees payable to players representing part of their remuneration which are charged to the profit and loss account evenly over the football seasons covered by the player’s contract.
Grants Grants receivable from the Football Trust and the former Football Grounds Improvement Trust in respect of capital expenditure are treated as deferred income and released to the profit and loss account so as to match the depreciation charged on the fixed assets purchased with the grant. Deferred grant income in the balance sheet represents total grants received less amounts credited to the profit and loss account.
Deferred taxation Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future have occurred at the balance sheet date. Timing differences are differences between the Group’s taxable profits and the results as stated in the financial statements.
Deferred tax is measured at the tax rates that are expected to apply in the periods in which the timing differences are expected to reverse, based on tax rates and laws that have been enacted or substantially enacted by the balance sheet date. Deferred tax is measured on a non-discounted basis.
Foreign currencies Transactions denominated in foreign currencies are translated at the exchange rate at the date of the transaction. Foreign currency assets and liabilities held at the year end are translated at year end exchange rates, or the exchange rate of a related forward exchange contract where appropriate. The resulting exchange gain or loss is dealt with through the profit and loss account.
Financial instruments The Group uses derivative financial instruments to manage its exposure to fluctuations in foreign currency exchange rates. Derivative instruments utilised by the Group include forward currency contracts. Such contracts are accounted for as hedges, with the instrument’s impact on profit deferred until the underlying transaction is recognised in the profit and loss account.
Leases Rentals payable under operating leases are charged to the profit and loss account on a straight line basis over the lease term.
Pension costs Contributions to money purchase pension schemes are charged to the profit and loss account as they fall due.
2 Prior year adjustment Following the issue of Financial Reporting Standard 19 ‘Deferred Tax’, the Group has changed its accounting policy for deferred taxation. Under the new policy deferred tax is provided for in full. Previously deferred tax was provided only to the extent that it was probable that a liability would crystallise.
The effect of this change in accounting policy on the profit and loss reserves of the Group is shown below:
£’
Profit and loss reserves as previously reported at 31 July 2001 98,
Prior year adjustment (4,235)
Profit and loss reserves as restated at 31 July 2001 93,
The effect on the retained profit for the year ended 31 July 2001 is shown below:
£’
Retained profit for the year as previously reported 9,
Additional provision for deferred tax on adoption of FRS 19 (558)
Retained profit for the year as restated 9,
In the year ended 31 July 2002 the effect of the change in policy has been to decrease the retained profit by £596,000.
Financial statements
5 Administrative expenses – exceptional costs
2002 2001 £’000 £’
Restructuring of merchandising operations 864 1,
Share of deficit on Football League Pension Scheme – 252
864 2,
The charge of £864,000 (2001 £1,821,000) relating to restructuring of the merchandising operations comprises accelerated depreciation charges on fixed assets of £762,000 (2001 £1,025,000) and redundancy costs of £102,000 (2001 £796,000).
6 Net interest receivable
2002 2001 £’000 £’
Interest receivable 492 737
Interest payable on bank loans and overdrafts (465) (10)
27 727
7 Staff costs The average number of employees during the year, including directors, was as follows:
2002 2001 Number Number
Players 66 72
Ground staff 67 60
Ticket office and membership 32 23
Catering 123 136
Merchandising 48 90
Administration and other 159 155
Average number of employees 495 536
The Group also employs approximately 1,374 temporary staff on match days (2001 1,346).
Particulars of employee costs, including directors, are as shown below:
2002 2001 £’000 £’
Wages and salaries 62,568 44,
Social security costs 6,836 4,
Other pension costs 595 551
69,999 50,
Details of directors’ remuneration and share options are given in the remuneration report on pages 29 to 32. This information forms part of these financial statements.
Financial statements
8 Taxation
2002 2001 £’000 £’ Restated
Corporation tax at 30 per cent (2001 30 per cent) on the profit for the year 11,950 8,
Adjustment in respect of previous years (3,500) –
Total current tax 8,450 8,
Deferred taxation: origination and reversal of timing differences (note 20) (1,614) (1,126)
Adjustment in respect of previous years 472 –
Total deferred tax (1,142) (1,126)
Tax on profit on ordinary activities 7,308 7,
The tax rate for the year is lower than the standard rate of corporation tax in the UK (30 per cent) mainly due to an adjustment in respect of previous years of £3,028,000 which arose following an agreement concluded during the year regarding capital allowances previously under claimed. A reconciliation of current tax is shown below:
2002 2001 £’000 £’
Profit on ordinary activities before tax 32,347 21,
Profit on ordinary activities multiplied by the standard rate of corporation tax in the UK of 30 per cent (2001 30 per cent) 9,704 6,
Effect of: Adjustment to tax in respect of previous years (3,500) –
Expenses not deductible for tax purposes 574 755
Capital allowances 1,672 1,
8,450 8,
9 Profit for the year The Company has taken advantage of Section 230 of the Companies Act 1985 and has not presented its own profit and loss account. The Company’s profit for the year was £15,287,000 (2001 £14,442,000 – restated (note 1)).
10 Dividends
2002 2001 £’000 £’
Interim paid of 0.64 pence per share (2001 0.61 pence per share) 1,663 1,
Proposed final of 1.46 pence per share (2001 1.39 pence per share) 3,792 3,
Proposed special of 1.00 pence per share (2001 nil) 2,598 –
8,053 5,
If approved, the final and special dividends will be paid on 22 November 2002 to shareholders on the register at 11 October 2002.
Financial statements
13 Tangible fixed assets
Freehold Plant and Fixtures and property machinery fittings Total Group £’000 £’000 £’000 £’
Cost (1)
At 1 August 2001 106,739 26,138 16,362 149,
Additions 8,035 5,249 1,035 14,
Disposals (886) (1,240) (1,311) (3,437)
At 31 July 2002 113,888 30,147 16,086 160,
Depreciation
At 1 August 2001 3,940 13,131 9,458 26,
Charge for the year (2)^ 1,548 4,107 2,030 7,
Disposals (170) (953) (1,299) (2,422)
At 31 July 2002 5,318 16,285 10,189 31,
Net book value
At 31 July 2002 108,570 13,862 5,897 128,
At 31 July 2001 102,799 13,007 6,904 122,
Freehold Plant and Fixtures and property machinery fittings Total Company £’000 £’000 £’000 £’
Cost (1)
At 1 August 2001 24,069 4,918 2,385 31,
Additions 1,852 833 27 2,
Disposals (754) (596) – (1,350)
At 31 July 2002 25,167 5,155 2,412 32,
Depreciation
At 1 August 2001 1,676 2,751 1,344 5,
Charge for the year (2)^373 1,079 749 2,
Disposals (37) (439) – (476)
At 31 July 2002 2,012 3,391 2,093 7,
Net book value
At 31 July 2002 23,155 1,764 319 25,
At 31 July 2001 22,393 2,167 1,041 25,
(1) At 31 July 2002 the following items have not been subject to depreciation:
Freehold Plant and Fixtures and property machinery fittings Total £’000 £’000 £’000 £’ Group Land 9,767 – – 9, Assets in the course of construction 6,751 2,315 839 9, 16,518 2,315 839 19, Company Land 9,767 – – 9,
(2) The depreciation charge for the year on freehold property (Group and Company) includes accelerated depreciation of £762,000 (see note 5).
Financial statements
14 Fixed asset investments
Loan to Loan to Subsidiary Associated Joint joint Group undertakings undertakings venture venture undertaking Total Group £’000 £’000 £’000 £’000 £’000 £’
Cost At 1 August 2001 – 792 – 1,000 – 1,
Share of loss – (3) (501) (1)^ – – (504)
Transfer to provision for liabilities and charges – – 501 – – 501
At 31 July 2002 –789 – 1,
Net book value
At 31 July 2002 –789 – 1,
At 31 July 2001 – 792 – 1,000 – 1,
Loan to Loan to Subsidiary Associated Joint joint Group undertakings undertakings venture venture undertaking Total Company £’000 £’000 £’000 £’000 £’000 £’
Cost
At 1 August 2001 1,009 733 – 1,000 24,683 27,
Additions 10 – – – 1,704 1,
At 31 July 2002 1,019 733 – 1,000 26,387 29,
Net book value
At 31 July 2002 1,019 733 – 1,000 26,387 29,
At 31 July 2001 1,009 733 – 1,000 24,683 27,
(1) In accordance with FRS 9, ‘Joint Ventures and Associates’ the Group’s share of losses from its investment in the joint venture of £501,000 has been calculated by reference to the proportion of ordinary shares it owns. The Group’s cash investment, including its loan to the joint venture company, is limited to £1,000,000, of which £1,000, had been paid at 31 July 2002.
Financial statements
17 Creditors – amounts falling due within one year
Group Company 2002 2001 2002 2001 £’000 £’000 £’000 £’ Restated
Bank overdraft – 1,237 – –
Trade creditors 21,579 13,702 1,707 2,
Corporation tax 9,813 10,796 4,062 6,
Social security and other taxes 4,711 9,265 1,892 1,
Other creditors – pensions 362 461 – –
Accruals 10,604 5,863 3,080 2,
Dividends proposed 6,390 3,611 6,390 3,
53,459 44,935 17,131 16,
The bank overdraft at 31 July 2001 was a floating rate financial liability, denominated in Sterling, repayable on demand and on which interest was charged at rates based on LIBOR.
Trade creditors include transfer fees payable to other football clubs of £13,631,000 (2001 £3,033,000 – previously disclosed in accruals).
18 Creditors – amounts falling due after one year
Group Company 2002 2001 2002 2001 £’000 £’000 £’000 £’
Other creditors – pensions 688 1,050 – –
Financial statements
19 Financial instruments The Group’s financial instruments comprise borrowings and cash, and various items such as trade debtors and trade creditors that arise directly from the Group’s operations. The main purpose of the financial instruments is to finance the Group’s operations.
It is, and has been throughout the period under review, the Group’s policy that no trading in financial instruments shall be undertaken. The main risks arising from the Group’s financial instruments are interest rate, liquidity and foreign currency risks.
Short-term debtors and creditors have been excluded from all the following disclosures, other than the currency disclosures.
Financial liabilities At 31 July 2002 the Group had no financial liabilities, excluding short-term trading items. At 31 July 2001 the Group had a bank overdraft, repayable on demand, of £1,237,000 which was denominated in sterling and incurred interest at floating rates based on LIBOR. The Group has contingent liabilities, as disclosed in note 29b and guarantees on behalf of an associate, as disclosed in note 29c. Both of these liabilities are denominated in sterling and no interest is paid thereon.
The Group had undrawn committed borrowing facilities available at 31 July 2002 of £29.5 million (2001 £28.3 million). These facilities are due for renewal in November 2002.
Included within accruals is an amount of £471,000 denominated in US Dollars on which no interest is paid.
Financial assets At 31 July 2002, as disclosed in note 16, the Group had trade debtors of £1,500,000 (2001 nil) receivable between one and two years from the balance sheet date, denominated in sterling and accruing interest at floating rates based on LIBOR.
The currency profile of the Group’s financial assets at 31 July 2002 and 31 July 2001 are set out below:
2002 2001 Financial assets on which no Floating rate interest accrues Total Total Group £’000 £’000 £’000 £’
Currency
US Dollar 302 –302 –
Euro –242 242 –
Other 38 –38 –
340 242 582 –
The floating rate financial assets at 31 July 2002 comprised cash at bank and in hand and accrued interest based on LIBOR.
Currency exposures The Group had no monetary net assets or liabilities denominated in currencies other than Sterling except as disclosed above.
Hedges The Group’s policy is to enter into forward foreign currency contracts on future sales and purchases where there is a high degree of likelihood of an exposure occurring. Gains and losses on these contracts are not recognised until the exposure being hedged is itself recognised.
At 31 July 2002 the Group had no forward exchange contracts outstanding (2001 £7.6 million denominated in Swiss Francs due to mature within one year).
Fair values The fair value of all financial instruments at 31 July 2002 and 31 July 2001 was not materially different from their book value.
Financial statements
23 Share capital
Company 2002 2001 £’000 £’
Authorised:
350,000,000 ordinary shares of 10 pence each 35,000 35,
Allotted, called up and fully paid:
259,768,040 ordinary shares of 10 pence each 25,977 25,
Share option schemes:
Savings-related Executive Plan Scheme Total Number Number Number
At 1 August 2001 3,033,049 606,523 3,639,
Granted 2,058,716 568,845 2,627,
Lapsed – (343,074) (343,074)
At 31 July 2002 5,091,765 832,294 5,924,
Savings-related Executive Plan Scheme
Options granted during the year:
Exercise price range £1.30 – £1.43 £0. Average exercise price £1.35 £0. Latest exercise date 19.04.2012 01.06.
Options outstanding at 31 July 2002:
Exercise price range £1.30 – £2.36 £0.97 – £1. Average exercise price £1.64 £1. Latest exercise date 19.04.2012 01.06.
Options granted to directors are disclosed in the remuneration report on pages 29 to 32.
Financial statements
24 Reserves
Other Profit and loss reserve account Group £’000 £’
At 1 August 2001 500 98,
Prior year adjustment – (4,235)
As restated 500 93,
Retained profit for the year – 16,
At 31 July 2002 500 110,
Profit and loss account Company £’
At 1 August 2001 59,
Prior year adjustment 453
As restated 59,
Retained profit for the year 7,
At 31 July 2002 67,
Under the terms of certain lotteries, past donations of £545,440 (2001 £93,970) received by one of the Company’s subsidiaries, and included within the profit and loss account balance, are not available for distribution (and bank balances are restricted accordingly) until such monies have been expended within the terms of those lotteries on capital programmes relating to the development of spectator facilities at the Old Trafford football stadium. All past donations, having been so applied, are distributable. It is intended that the balance will be applied to such programmes and will thereby become distributable.
25 Reconciliation of movements in equity shareholders’ funds
Group Company 2002 2001 2002 2001 £’000 £’000 £’000 £’ Restated Restated
Profit for the year 25,039 14,379 15,287 14,
Dividends (8,053) (5,195) (8,053) (5,195)
Net addition to equity shareholders’ funds 16,986 9,184 7,234 9,
Opening equity shareholders’ funds (as restated) 120,457 111,273 85,840 76,
Closing equity shareholders’ funds 137,443 120,457 93,074 85,
26 Reconciliation of net cash inflow/(outflow) to movement in net funds/(debt)
Group 2002 2001 £’000 £’
Increase/(decrease) in cash in the year 2,170 (13,656)
Cash outflow from repayment of debt – 1,
Movement in net funds/(debt) 2,170 (11,800)
Opening net (debt)/funds (1,237) 10,
Closing net funds/(debt) 933 (1,237)
