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Manchester United Returns to Profit Despite Stadium Ban on Fans. The Stock Is Rising.

Manchester United star Marcus Rashford has had an impact on and off the pitch, campaigning to end child food poverty in the U.K.


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Manchester United
returned to profit in the second quarter despite supporters remaining shut out of live matches, pushing the stock close to 2% higher on Friday.

It is almost a year since English Premier League fans have been able to attend soccer games, causing the country’s biggest clubs to miss out on millions of pounds in revenue.

However, Manchester United posted a £63.9 million profit for the three months to Dec. 31, as total revenue rose 2.6% to $172.8 million compared with the year-earlier period. The continued absence of fans was reflected in the club’s matchday revenue, which fell 96% from £33 million to just £1.5 million.

The club’s commercial revenue declined 11% but a major boost to broadcasting revenue—climbing 68% to £108.7 million—drove the revenue growth.

Read:The Nasdaq-100 Entered a Correction. Why It Could Keep Falling.

The rise came from the club’s inclusion in this year’s Champions League —Europe’s premier club competition—after missing out on qualification last season.

The most decorated soccer club in England, with 20 Premier League titles, Manchester United has been publicly traded on the New York Stock Exchange since 2012.

After close to a year of empty stadiums around the U.K., spectators may return as early as May after Prime Minister Boris Johnson set out his road map out of lockdown last month. Under the current plan, the largest stadiums in the U.K. will be allowed 10,000 fans from May.17—in time for the final game of the season. However, the return to normality will have a much greater impact once the new season starts in August, when full capacity could be allowed.

“The rapid rollout of vaccines in the U.K. and beyond gives us the confidence that we are now on a path towards normality,” said Manchester United’s executive vice chairman Ed Woodward.

Despite the increased confidence, the company, owned by the American Glazer family, didn’t provide revenue or earnings guidance for the fiscal year 2021, citing ongoing uncertainty due to the Covid-19 pandemic.

The company also revealed it took a £60 million drawdown on its £200 million revolving credit facilities during the quarter. Net debt as of Dec. 31 was £455 million, 16.4% higher than at the end of 2019, which it said was down to the loss of matchday cash receipts and deferred sponsorship payments this season.

Looking ahead. The return of supporters will undoubtedly be a positive for the club’s earnings going forward but that may already be largely priced in—the stock is currently trading at $18.83, 12.5% up year-to-date, while the
S&P 500
is 0.3% higher over that period.

Of course, a resurgence of the virus and measures to restrict fans in the future is a risk. However, Jefferies analyst Randal Konik set a new target price of $22 on the stock—a 16.8% upside—rating it a buy.

On the pitch, Manchester United currently sits second in the Premier League, on track to qualify for next year’s Champions League, which will be another boost for revenue this time next year.

Over the longer term, discussions to expand the Champions League could make it easier for the club to qualify and take away some of the uncertainty surrounding the bumper television revenue on offer. The TV money and the global appetite for the game is only getting bigger, and Manchester United is one of the biggest clubs in the world and the stock still sits some way below its August 2018 peak.

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