Ed Woodward - Executive Vice Chairman Cliff Baty - CFO Hemen Tseayo - Head of Corporate Finance Samanta Stewart - IR

John Janedis - Jefferies Omar Sheikh - Credit Suisse

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] We'd like to remind everyone that this conference call is being recorded. Before we begin, we'd like to inform everyone that this conference call will include estimates and forward-looking statements which are subject to various risks and uncertainties that could cause actual results to differ materially from these statements. Any such estimates or forward-looking statements should be considered in conjunction with the cautionary note in our earnings release regarding forward-looking statements and risk factor discussions in our filings with the SEC. Manchester United PLC assumes no obligation to update any of these estimates or forward-looking statements. I'll now turn the conference over to Ed Woodward, Executive Vice Chairman of Manchester United. Please go ahead, sir.

Thank you, operator; and thank you, everyone for joining us today. With me on the call are Cliff Baty, our CFO; Hemen Tseayo, our Head of Corporate Finance; and Samanta Stewart, Head of Investor Relations. It wasn’t long ago we reported our year-end 2016 earnings, so we will be keeping our comments fairly brief today. As you can see from the numbers released this morning, we're on track to achieve our annual guidance, which includes record revenues for 2017. This is impressive, given our first quarter numbers were negatively impacted by non-participation in the Champions League and the timing of matches for other competitions. Cliff will go through the numbers in detail shortly. On the pitch, it is still early in the season, we’ve 27 more Premier League games to play and have advanced the quarter-finals of the EFL Cup. Of pitch, the business continues to perform very well. It provides further evidence of the resiliency of the business model which allows us to overcome the performance volatility the professional sport naturally have, while simultaneously growing our revenues and investing. During the quarter we signed global deals with EA Sports and Tag Heuer and Apollo Tires, which has been a regional partner for the last three years renewed their partnership and become a global partner. This is the first conversion of a regional to a global partnership. We also renewed our deal with Hong Kong Jockey Club and entered into a financial services deal with Virgin Money. Since the quarter ended, we also announced renewal of our partnership with Concha y Toro, a wine partner and a global partnership with Mlily as the Club's first ever mattress and pillow partner. A retail business, which we brought in-house in August last year had a particularly strong first quarter. Here are a few interesting facts. Our Megastore achieved record Matchday sales ever around the game against City [ph] on Saturday, the 10th of September, Columbia outerwear products were also selling extremely well, achieving our yearly forecast in eight weeks. We’ve also seen huge demand for player printing due to the new signings and the Megastore shows with player names increased over 20% versus last year -- last year's quarter. I will now hand over to Cliff to look at the numbers in more detail.

Thank you, Ed. Hello, everyone. I’m going to talk -- I’m going to review our results for the first three months of fiscal 2017, which includes our China Tour and the summer transfer window. As usual, unless I mention otherwise, all figures are in U.K pound sterling. Year-on-year comparisons throughout fiscal 2017 will be materially impacted by three themes. One, the impact of non-competition to the Champions League competition on Matchday and broadcasting figures. Secondly, the new domestic and International Premier League deals, and thirdly, the cadence of matches on a quarterly basis. The emerging [ph] theme for Q1 is a number of home games. As we’ve played three fewer games compared to the prior year quarter. One in the Premier League, one UEFA Competition and one domestic cup match. The fluctuation in the number of games impacted of the total revenue for the quarter, which was down 2.8% to ₤120.2 million. If we had played the same number of Premier League home games as last year, due to the very contractual broadcasting in season to get revenue is recognized in the accounts, revenue would actually been 4% higher. Adjusted EBITDA for the period was ₤31.2 million, 25% below last year's first quarter due to lower revenues largely attributable to the number of home games played, higher wage costs, and increased operating expenses due to the timing of foreign exchange movements, As of previous announcements, we've included both adjusted net income and adjusted diluted earnings per share, as we believe that in assessing the true comparative financial performance of the business, it is usual to strip out the distorting impact of items that are unrelated to the underlying business, and then to apply a normalized tax rate of 35% both the current prior periods and we provide a reconciliation of this in the earnings release. Adjusted profit for the quarter then was ₤0.7 million compared to ₤2.7 million as the EBITDA decline and increased amortization following investment in playing staff in the quarter was offset by the swing in profit and loss on player disposals from a loss of ₤7.4 million in the prior year to a profit of ₤8.2 million in the first quarter of fiscal '17. Turning to the key items of note in the financial statements. Commercial revenues were up ₤3.1 million. The increase in merchandising, apparel and product licensing revenues from the extra month of our partnership with adidas which started on 1 August 2015 was partially offset by this impact of a shorter summer term. As I had mentioned, we saw good performance of our Megastore in the first quarter, but we believe this shouldn’t be annualized as the first quarter tends to be stronger due to the start of the season and the new player signings. Broadcasting revenues increased ₤1.5 million, primarily due to the commencement of the new Premier League domestic and international broadcasting rights agreements. As mentioned, this revenue line was impacted by the reduced number of Premier League matches, as well as two UEFA competition games. Matchday revenues were down ₤8 million also due to playing three fewer home games across all competitions. During the quarter, total operating expenses excluding depreciation and amortization were up 8.5% with total wages up 5.8% due primarily to additions to the football staff. Operating expenses increased due -- primarily due to timing of foreign exchange movements on our player CapEx payables. These movements are now substantially reversed. Net finance costs for the quarter were up ₤1.6 million, due to adverse foreign exchange movements on un-hedged portion of our U.S dollar debt. Given the recent currency fluctuations in this decline in sterling against the dollar, it is likely the net finance costs for the year will now be in the ₤23 million to ₤25 million range. This movement is primarily due to unrealized foreign exchange losses which we excluded in our calculation of adjusted profit for the period. The quantum of our cash interest costs in U.S dollars remains unaffected. Looking at the balance sheet, cash balances of ₤164.3 million, were up ₤20.8 million over prior year. And the increase in our net debt of ₤51.5 million to ₤337.7 million was entirely driven by the impact of foreign exchange movements on our U.S denominated debt. Our long-term debt remain unchanged in U.S dollar terms. Based on our first quarter results, we reiterate our previously stated guidance for fiscal 2017. Revenue between ₤530 million and ₤540 million, and adjusted EBITDA of ₤170 million to ₤180 million. As previously announced, we will be replacing the quarterly cash dividend with a semi-annual cash dividend. The $0.09 share semi-annual dividend will be paid on the 5th of January 2017 to shareholders of record on the 30th of November 2016. The stock will begin to trade ex-dividend on 20th of November 2016. With that, I will hand back to the operator, and we’re ready to your questions. Thank you.

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from John Janedis of Jefferies. Please go ahead.

Thank you. Ed, a local question for -- you currently sit in third place in your Europa Group League standings, and I wanted to know in the event that you fail to qualify for the knockout rounds, can you help us think about what the impact would be the broadcast and Matchday and what’s embedded in the full-year guidance?

Cliff?

Yes. John, hi. Its Cliff here. Yes, John the impact of that would be in the sort of single-digit million range. The bulk of it being in broadcasting with some of that being in Matchday. But as we get most of the income for the Europa League upfront through broadcasting, so it's in the, let's say, single-digit million. In question of whether that within our range? Well, you know our range is at a span of 10 from 170 to 180 EBITDA. So, we could accomplish that within that range as we say.

Okay. And then, I guess, separately you guys obviously know there has been pressure on live sports, particularly NFL on the U.S. So can you comment on how EPL viewership is trending the season, I guess, both domestically and in key international markets?

Yes, sure. I think you saw the news overnight, I think the NFL ratings were back to "normal last weekend". I think some of the comments that were made around the Olympics and perhaps even bigger in part [ph] the election, I think were probably accurate. But from a Premiere League perspective, the Olympics did have an initial negative impact on anecdotally the -- there was a big six-game playing another big 16 early on in August, same day as a gold rush in the Olympics in the UK and it had a 20% impact on audience. So you can see how these things can carry through based on other events. But we've -- we are hearing the trend is good, not bad, so yes there have been some early impacts based on different channels picking up different times in terms of the number of subscribers they have, different match ups and then finally different timeslots that actually gives us an unclear picture at this point. But I literally have just come back from the Premiere League meeting and actually it looks like a trend back to similar levels in previous years. So it's not something we're concerned about.

Okay. Thank you very much.

[Operator Instructions] Our next question comes from Omar Sheikh of Credit Suisse. Please go ahead.

Thank you. Good morning, everyone. I just had three questions. One for Ed and a couple for Cliff. Ed, can I ask, first of all, about sponsorship revenues. I want to be clear just give us your sense of whether or not sponsorship revenues will -- are going to grow this year? I know U.S sort of down slightly in the first quarter. And then just more broadly whether are we seeing the sponsorship revenue growth maturing? You had a very strong growth in the last two years and I’m wondering whether we can sort of get back to the 20% to 25% growth rate that we’ve seen in the past? That’s the first question. And then just a couple for Cliff. Maybe on staff cost, first of all, was there any partial sort of quarter impact for the new players and the managers in the quarter, because the cost growth on employee expenses was relatively modest. I’m wondering whether that might be picking up later in the year? And then finally, just want to clarify, Cliff, what you said about Matchday revenues in your prepared comments. Did you say that underlying Matchday revenues would be -- were up 4%, if you sort of equalize the number of matches? And I wonder whether that’s sort of the indication and we should -- should extrapolate that into the full-year essentially as we look at the season as a whole? Thank you.

Okay. So thanks, Omar. Let me deal with the first question. First is sponsorship question and its under [ph] the current year, looking as a -- a question around growth from last year is really clouded a little bit in terms of the tour and that complicated the picture. But we do see ourselves with a good pipeline, deals continuing to get done. There may be a bit of timing issue in terms of when the first money is coming, they’re returning to a good level of growth going forward. I would say 20% to 25% growth that we had in the past is probably a challenge given the size of the base. So we probably need to be looking at more measured growth rate that certainly returning to growth and starting to pull from the market is strong as ever. Cliff?

Thanks. Omar, just taking your questions, in terms of staff costs, you’re right. You sort of answered it there, we don’t have the full impact of the investment we made in the playing squad coming through in the first quarter. Overall, I think we mentioned that staff costs will be ahead this year against last year, probably sort of in the mid-teens percentage. So you'll see the relevant differential sort of increase as we get through the answers the question on staff costs. Coming back to Matchday revenues, yes, actually I was slightly different, the point I was trying to make in the pre-prepared comments there. It was actually saying we are at a -- if you just look in isolation at one quarter, the timing of matches is quite confusing in terms of what it shows, because of the way we recognize income and that is about broadcasting. It's just about broadcasting income and contracted season tickets and executive club income. If you think about it, we get paid all that money and not all of that up front, let's say season ticket money, executive club money up front for the whole season and broadcasting incomes too early to the year. But we then recognize that to the P&L on the basis of games played. And since we played less games in this period, we just do not recognize that money into the P&L. So, hopefully that wasn’t too confusing. In terms of actually other question, which is Matchday. No, Matchday really you can base it on last year's -- last year sort of assumptions and then adjust for sort of not being in the Champions League and during the Europa League this year. So we expect Matchday to be down on last year in total for the year.

Great. That’s very clear, Cliff. Thanks for that. Just -- if I could just follow-up on the tour for this year, have you guys decided where you’re planning to go and should we expect it to be a greater number of games than you did in China? Any thoughts there would be helpful?

We haven't announced yet where we’re going, so I can't communiqué that, but I would assume more games than China, yes.

Okay, great. Thank you very much.

Thank you.

Our next question is a follow-up from John Janedis of Jefferies. Please go ahead.

Yes, maybe sticking with the sponsorship, can you talk about the impact from the adidas sponsorship, if you don't qualify for the Champions League next year?

Yes. Hi, John, its Cliff here. I think this is how we mentioned before. Yes, we’ve a clause in the adidas contract that’s how if we are missing from the Champions League for two years in a row there is a 30% reduction of the following years receipt. So what that really means in terms as we're -- we'd get if we did miss out again that would kick in and we receive 30% of the future annual payment reduced. So an example of that being if we received say ₤70 million, 30% of that would be ₤21 million that we'd not receive, but that is spread over the remaining terms of the contract. So in the actual accounting terms and recognition terms, if we do miss out this year, we were to sort of get ₤2 million hit over the 10-year contract. But of course this is year two of the contract, so we'd have a catch up this year. So, broadly we have a ₤4 million reduction in revenues in this current year and then we'd have a ₤2 million reduction in revenues every year going onwards. That makes sense?

Yes. Thanks, Cliff.

This concludes our question-and-answer session. I'd like to turn the call back over to the management for any closing remarks.

I just say thank you everybody and we look forward to speaking to in February. Thank you.

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