MANCHESTER UNITED

MATERIALS FOR
DISCUSSION
Table of Contents
Executive Summary

Consumer Industry Overview
Company Considerations
Share price performance
Recent Corporate Actions
Operating Performance
Valuation
Trade Idea
EXECUTIVE SUMMARY
This presentation evaluates the consumer services industry in which Manchester United (Man U) operates
In this analysis, I have identied the fundamental drivers of the industry and company evaluate the intrinsic price
of Man Us shares using a fully integrated nancial statements forecast model and discounted cash ow
valuation

I have observed the following key drivers with respect to the companys operating performance:
MANU Is revalidated its brand through successful long term annuity deal with Chevrolet despite not
qualifying for the Champions League in FY15
Expect the commercial segment to generate over 50% of sales over the next ve years

Man U has continued to improve its nancial position through operational and nancial improvements
Traditional revenue streams will be overtaken by commercial segment which includes sponsorships and
marketing
Gearing ratios expected to decline annually from FY14-18E
Over the last 12months, the companys share price has remained stable relative to its consumer brands
competitors including Tumi, Hermes and Michael Kors
On a DCF basis, the company is intrinsically valued at $21,6 per share. Manchester United shares are currently
trading on the New York Stock Exchange at a discount: $18,7 per share implying potential value upside of 16,1%
CONSUMER INDUSTRY
OVERVIEW
Company Description
Manchester United is one of the most popular and successful sports
teams in the world playing the most popular sport: football. The team
was founded in 1878 and has a track record of success on the eld
which has led it to become a powerful brand with a global community
of 659 million followers.

This signicant global community provides Manchester United with a
worldwide platform to generate signicant revenue from multiple
sources including:
Sponsorship
Merchandising,
Product licensing,
New media & mobile, broadcasting
Matchday
Man U - Competitive Landscape
High Growth Consumer Brands

Hermes
Under Armour
Lululemon
Michael Kors
Tumi
Sponsorship Strengths
Brand Ownership
Control of
intellectual
property and
brand
Direct
relationships with
partners
Innovation of
Rights
Broad
sponsorship
assets
New rights and
platforms
Geographic
segmentation to
protect
exclusivity
Data and Insights
Driven Culture
Analytical
framework
Independent data
sources and
verication
Fan data and
segmentation, TV
audience data,
web analytics
Professional
Approach
Rigorous
prospecting and
research
Premium sales
packs and
presentations
Professional
marketing
support
SWOT Analysis
Brand value Chevrolet deal in FY 14
Strong player base
650 m loyal fan base
Strengths
Did not qualify for the Champions League
New manager
Poor playing performance
No Nike Deal renewal
Weaknesses
Champions league qualication next season
Van Gaal
Secured new contract with Wayne Rooney
Opportunities
Brand value distraction
Social media strategy underperformance
Threats
COMPANY
CONSIDERATIONS
Key Company Considerations
MANU Is revalidated its brand through successful
long term annuity deal with Chevrolet
Expect the commercial segment to generate over
50% of sales over the next ve years
Deleveraging: Man U continues to improve its
capital structure
Social Media Strategy requires signicant
investment
Player wage growth ination
Nike deal not renewed
Share Price Performance vs
Competitors (Last 12 Months)
Financial Forecasts
EBIT & Margin (14-18)
Prot & Margin (14-18) Sales & Growth (14-18)
431.1
418.7
533.4
617.3
640
18.7%
-2.9%
27.4%
15.7%
3.7%
-5%
0%
5%
10%
15%
20%
25%
30%
200
300
400
500
600
700
2014E 2015E 2016E 2017E 2018E
Sales Growth (%)
43.1
24.2
56.6
82.3
90.9
10%
6%
11%
13%
14%
0%
5%
10%
15%
0
20
40
60
80
100
2014E 2015E 2016E 2017E 2018E
Profit Margin (%)
73.3
44.0
93.3
132.7
145.3
17.0%
10.5%
17.5%
21.5%
22.7%
5%
10%
15%
20%
25%
0
50
100
150
200
2014E 2015E 2016E 2017E 2018E
EBIT Margin (%)
Sales is expected to rise y-o-y between
FY14-18E from $432m to $640m owing
to its strength in Man Us commercial
segment
Protability margins are expected to
improve from 17,0% to 22,7% in EBIT and
expand to 14% in Net Income over the
period due to efciency improvements
Key Financial Metrics - Gearing
Man Us gearing will continue to
reduce substanti al l y over the
forecast period from 1,97x to 0,65x
in net debt / EBITDA
Improving nancial position will
strengthen its debt capacity and
enhance credi t r i sk f or any
expansionary initiatives in the near
term
Net Debt / EBITDA
Debt / Equity
Net Debt / (Cash) - $M
319.2
258.2
248.4
209.3
133.5
2014E 2015E 2016E 2017E 2018E
1.97x
2.22x
1.60x
1.09x
0.65x
2014E 2015E 2016E 2017E 2018E
77%
73%
66%
58%
51%
2014E 2015E 2016E 2017E 2018E
Headline Operational Metrics
Follower Base by Region
Commercial Sales Development ($m) Revenue Breakdown by Division
103
118
133
183
221
269
0
30
100
130
200
230
300
2011 2012 2013 2014 2013L 2016L
31 30
23
22 21
18 18
37
42
43
32
31
30 49
32
28
32
26 28
32 33
0
20
40
60
80
100
2012 2013 2014 2013L 2016L 2017L 2018L
MaLchday Commerclal 8roadcasung
630 m loyal fan base (30 Asla-aclc)
Company ls growlng LoLal sales aL 13.7 ln
l?17 and 3.7 ln l?18
Commerclal dlvlslon ls Lhe fasLesL growlng
segmenL - wlll generaLe over 30 of LoLal
sales ln l?13
49
11
14
26
Asla-aclc Amerlcas Lurope MLA
Sponsorship Deal History
Announced Date Term Comments Value
BSkyB and British Telecom
Announced in July 2012
2 years from 2014 70% higher than
previous deal of 1.77B
3.0B
GM Chevrolet Announced
7/30/12, for start of the
2014/15 season
7 year term Shirt Future Sponsor 45m/year
AON Announced 5/24/09,
for start of
the 2010/11 season
4 year term Shirt Current Sponsor 20m/year
Nike 13-year contract was
signed in 2001
Renew the
contract
Previous Kit Sponsor 25M/year
TRADE IDEA
Valuation Considerations
To evaluate the fundamental value of Manchester Uniteds shares, I have built a 5-year discounted cash
ow forecast for FY14-18E, incorporating my key assumptions about the future potential of the
company

Key assumptions used include:
WACC: 9,6%
Long-term growth rate: 3,5%
Net Debt Position as at 30 June 2013: $389m
No. outstanding shares: 39m
On a DCF basis, the company is intrinsically valued at $21,6. Manchester United shares are currently
trading on the New York Stock Exchange at a discount: $18,7 per share (upside of 16,1%)
This implies FY15E EV/EBITDA multiple of 10,6x
Applying diferent assumptions for terminal growth and WACC
our valuation ranges from $19,1-24,5


WACC (%)
21,6 8,6% 9,1% 9,6% 10,1% 10,6%
Terminal
Growth
(%)
2,0% 20,6 18,4 16,4 14,7 13,2
2,5% 22,7 20,1 17,9 16,0 14,3
3,0% 25,1 22,1 19,6 17,5 15,6
3,5% 28,0 24,5 21,6 19,1 17,0
4,0% 31,5 27,3 23,9 21,1 18,6
4,5% 35,9 30,8 26,7 23,3 20,5
5,0% 41,5 35,1 30,1 26,1 22,8
Discounted Cash Flow Analysis
Financial Year (Dec. Year end) 2013 2014 2015 2016 2017 2018 Terminal Period
Total Turnover 363 431 419 533 617 640
growth (%) 18,7% -2,9% 27,4% 15,7% 3,7%

EBIT 62 73 44 93 133 145
margin (%) 17,1% 17,0% 10,5% 17,5% 21,5% 22,7%

Depreciation & Amortisation 119,0 88,5 72,6 61,8 58,9 59,9

Tax (21,7) (25,7) (15,4) (32,7) (46,5) (50,8)
Capital Expenditure 13,0 43,1 41,9 53,3 61,7 64,0
Capex/Sales (%) -3,6% -10,0% -10,0% -10,0% -10,0% -10,0%

Working Capital 0,0 (26,4) 0,5 (4,5) (3,3) (0,9)
Working Capital / Sales (%) 0,0% 6,1% -0,1% 0,8% 0,5% 0,1%

Free Cash Flow 146,3 66,7 59,8 64,7 80,1 89,4 89,4

Discount Factor 0,91 0,83 0,76 0,69 0,63 0,63

Terminal Value 1 517

Present Value 60,82 49,78 49,15 55,54 56,54 959
Enterprise Value (m) 1 231
Net Debt as at (Dec 2013) 389
Market Capitalisation (m) 842
No. Shares (m) 39
Share Price ($) 21,6



APPENDIX
Operating Assumptions
Sales Actual Actual Actual Forecast Forecast Forecast Forecast Forecast
2011 2012 2013 2014 2015 2016 2017 2018
Matchday 98,8 109,2 108,3 91,6 109,6 113,2 115,0
Commercial 117,5 152,5 185,8 216,8 273,7 309,1 315,0
Broadcasting 104 101,5 137,0 110,3 150,1 195,0 210,0
Total 320,3 363,2 431,1 418,7 533,4 617,3 640,0
13,4% 18,7% -2,9% 27,4% 15,7% 3,7%
Divisional Revenue Split
Matchday 31% 30% 25% 22% 21% 18% 18%
Commercial 37% 42% 43% 52% 51% 50% 49%
Broadcasting 32% 28% 32% 26% 28% 32% 33%
Divisional Revenue Growth
Matchday 10,5% -0,8% -15,4% 19,7% 3,3% 1,6%
Commercial 29,8% 21,8% 16,7% 26,2% 12,9% 1,9%
Broadcasting -2,4% 35,0% -19,5% 36,1% 29,9% 7,7%
Financial Assumptions
Manchester United Hist. Hist. Hist. Proj. Proj. Proj. Proj. Proj.
Financial Assumptions 30.06.2011 30.06.2012 30.06.2013 30.06.2014 30.06.2015 30.06.2016 30.06.2017 30.06.2018
Income statement
Sales growth 13,4% 10,0%
COGS as % of sales 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%
Annual depr. as % of previous PPE 48,0% 35,0% 35,0% 35,0% 35,0% 35,0%
SG&A as % of sales 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%
Amortization of other intangibles amount 0,0 0,0 0,0 0,0 0,0 0,0 0,0
Non-recurring items amount 0,0 0,0 0,0 0,0 0,0 0,0 0,0
Effective tax rate 35,0% 35,0% 35,0% 35,0% 35,0%
Shareholder info
Diluted weighted average shares outstanding 155,4 163,8 163,8 163,8 163,8 163,8 163,8
Dividend per share growth rate (100,0%) 0,0% 0,0% 0,0% 0,0% 0,0%
Balance sheet: current assets
Accounts receivable as % of sales 23,2% 18,9% 18,9% 18,9% 18,9% 18,9% 18,9%
Inventories % of COGS 0,0% 0,0% 0,0% 0,0% 0,0%
Other current assets % of sales 0,3% 0,1% 0,0% 0,0% 0,0% 0,0% 0,0%
Balance sheet: non-current assets
Capital expenditures % of sales 0,0% 3,6% 10,0% 10,0% 10,0% 10,0% 10,0%
Other assets % of sales 5,4% 44,3% 44,3% 44,3% 44,3% 44,3% 44,3%
Balance sheet: liabilities
Accounts payable and accruals % of COGS 21,6% 15,0% 15,0% 15,0% 15,0% 15,0%
Other long-term liabilities % of sales 19,1% 15,5% 0,0% 0,0% 0,0% 0,0% 0,0%
Balance sheet: equity
end Common stock amount 249,7 318,1 318,1 318,1 318,1 318,1 318,1
Share repurchases $ amount (show as positive) 0,0 0,0 0,0 0,0 0,0
Debt (/$ amount)
Loans due for repayment 0,0 0,0 0,0 0,0 0,0
Other long-term debt repayment 0,0 0,0 0,0 0,0 0,0
Interest Rate (%)
Short term debt 3,00% 3,00% 3,00% 3,00% 3,00%
Loans due for repayment 2,00% 2,00% 2,00% 2,00% 2,00%
Other long-term debt repayment 0,00% 0,00% 0,00% 0,00% 0,00%
Cash 1,00% 1,00% 1,00% 1,00% 1,00%
Income Statement
Manchester United Hist. Hist. Hist Proj. Proj. Proj. Proj. Proj.
Income Statement 30.06.2011 30.06.2012 30.06.2013 30.06.2014 30.06.2015 30.06.2016 30.06.2017 30.06.2018
Net Sales 0,0 320,3 363,2 431,1 418,7 533,4 617,3 640,0
COGS 0,0 0,0 0,0 0,0 0,0
SG&A (357,8) (374,7) (440,1) (484,6) (494,7)
EBIT 63,3 44,9 62,0 73,3 44,0 93,3 132,7 145,3
Depreciation 87,0 105,0 119,0 88,5 72,6 61,8 58,9 59,9
Amortization 0,0 0,0 0,0 0,0 0,0
EBITDA 161,8 116,6 155,2 191,6 205,2
Non-recurring items 0,0 0,0 0,0 0,0 0,0
Interest Income 0,8 0,9 1,2 1,5 2,1
Interest Expense 7,7 7,5 7,5 7,5 7,5
Profit before taxes 66,3 37,3 87,0 126,7 139,8
Taxes 3,3 23,2 13,1 30,5 44,3 48,9
Profit after tax 0,0 0,0 43,1 24,2 56,6 82,3 90,9
Net income 0,0 0,0 43,1 24,2 56,6 82,3 90,9
Shareholder information
Diluted weighted average shares
outstanding 155,4 163,8 163,8 163,8 163,8 163,8 163,8
Diluted earnings per share $0,00 $0,00 $0,26 $0,15 $0,35 $0,50 $0,55
Dividends per share $0,06 $0,00 $0,00 $0,00 $0,00 $0,00 $0,00
Dividends 10,0 0,0 0,0 0,0 0,0 0,0 0,0
Balance Sheet
Manchester United Hist. Hist. Hist. Proj. Proj. Proj. Proj. Proj.
Balance Sheet 30.06.2011 30.06.2012 30.06.2013 30.06.2014 30.06.2015 30.06.2016 30.06.2017 30.06.2018
Assets
Current assets
Cash and cash equivalents 70,6 94,4 58,3 119,3 129,1 168,2 244,0
Trade and other receivables 74,2 68,6 81,4 79,1 100,8 116,6 120,9
Current Tax receivables 2,5 0,0 0,0 0,0 0,0 0,0 0,0
Other current assets 1,0 0,3 0,0 0,0 0,0 0,0 0,0
Total current assets 148,2 163,3 139,8 198,4 229,9 284,8 364,9
Non-current assets
Net PP&E 247,9 252,8 207,4 176,7 168,2 171,1 175,2
Goodwill 421,5 421,5 421,5 421,5 421,5 421,5 421,5
Other intangibles 112,4 119,9 119,9 119,9 119,9 119,9 119,9
Other assets 17,2 160,8 190,9 185,4 236,1 273,3 283,3
Total assets 947,1 1 118,3 1 079,4 1 101,8 1 175,6 1 270,5 1 364,8
Liabilities
Current liabilities
Short term debt 15,6 11,8 0,0 0,0 0,0 0,0 0,0
Accounts payable and accruals 83,6 78,5 64,7 62,8 80,0 92,6 96,0
Accrued income taxes 128,5 146,3 146,3 146,3 146,3 146,3 146,3
Total current liabilities 227,8 236,5 211,0 209,1 226,3 238,9 242,3
Non-current liabilities
Total long-term debt 421,2 377,5 377,5 377,5 377,5 377,5 377,5
Other long-term liabilities 61,1 56,4 0,0 0,0 0,0 0,0 0,0
Total liabilities 710,1 670,4 588,4 586,6 603,8 616,4 619,8
Equity
Common stock 249,7 318,1 318,1 318,1 318,1 318,1 318,1
Retained earnings (12,7) 129,8 172,9 197,2 253,8 336,1 426,9
Treasury stock 0,0 0,0 0,0 0,0 0,0 0,0 0,0
Total equity 237,0 448,0 491,0 515,3 571,9 654,2 745,0
Total Liab.& Equity 947,2 1 118,3 1 079,5 1 101,9 1 175,6 1 270,6 1 364,8
Balance? OK OK OK OK OK OK OK
Cash Flow Statement
Manchester United Hist. Hist. Hist. Proj. Proj. Proj. Proj. Proj.
Cash Flow Statement 30.06.2011 30.06.2012 30.06.2013 30.06.2014 30.06.2015 30.06.2016 30.06.2017 30.06.2018
Net Income 43,1 24,2 56,6 82,3 90,9
Depreciation 87,0 105,0 119,0 88,5 72,6 61,8 58,9 59,9
Amortisation 0,0 0,0 0,0 0,0 0,0
Change in OWC (26,4) 0,5 (4,5) (3,3) (0,9)
Change in other assets (30,1) 5,5 (50,8) (37,1) (10,0)
Change in other liabilities (56,4) 0,0 0,0 0,0 0,0
Cash from Operating Activities 18,8 102,8 63,2 100,8 139,8
Capex 43,1 41,9 53,3 61,7 64,0
Cash from Investing Activities -43,1 -41,9 -53,3 -61,7 -64,0
Change in Common Stock 0,0 0,0 0,0 0,0 0,0
Change in Treasury Stock 0,0 0,0 0,0 0,0 0,0
Dividends 0,0 0,0 0,0 0,0 0,0
Long Term Debt Repayment 0,0 0,0 0,0 0,0 0,0
Cash from Financing Activities (0,0) 0,0 0,0 0,0 0,0
Net Cash Flow (24,4) 61,0 9,8 39,1 75,8
Beginning Cash 82,7 58,3 119,3 129,1 168,2
Ending Cash 82,7 58,3 119,3 129,1 168,2 244,0



HTTPS://BLUEBOOK.IO