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Manchester United plc 2015 First Quarter Results

Released : 11/18/2014

  • TOTAL REVENUES OF £88.7 MILLION
  • EBITDA OF £20.3 MILLION
  • PROFIT OF £8.9 MILLION

MANCHESTER, England--(BUSINESS WIRE)-- Manchester United (NYSE:MANU; the “Company” and the “Group”) – one of the most popular and successful sports teams in the world - today announced financial results for the 2015 fiscal first quarter ended 30 September 2014.

 
Highlights
  • During the first quarter we signed the largest kit manufacturer sponsorship deal in sports with adidas - £750m over 10 years with retail, e-commerce and licensing reverting to Manchester United from 01 August 2015.
  • Five additional sponsorship deals announced in the quarter – Nissin and Abengoa (global), Association of Football Federations of Azerbaijan - AFFA (regional), Maybank and Gloops (renewals of regional).
  • Signed a number of leading players including Blind, Di Maria, Rojo, and Falcao on loan after signing Herrera and Shaw earlier in the window.
  • Played five tour matches across the US to a cumulative stadium audience of more than 360,000
    • Record US attendance of 109,318 at ‘The Big House’ in Michigan.
 
Commentary

Ed Woodward, Executive Vice Chairman, commented, “While we recognize that the 2014/15 fiscal year financial results will reflect our absence from the Champions League, we signed the largest kit sponsorship deal in the history of sport in the first quarter and, with that concluded, we are excited to focus our efforts on the meaningful growth opportunities in sponsorship, digital media and retail and merchandising.”

 

Outlook

For fiscal 2015, Manchester United continues to expect:

  • Revenue to be £385m to £395m.
  • Adjusted EBITDA to be £90m to £95m.
 
Key Financials (unaudited)
         

£ million (except adjusted diluted earnings per share)

 

Three months ended
30 September

   
    2014   2013   Change
Commercial revenue   56.8   59.9   (5.2)%
Broadcasting revenue   16.8   19.3   (13.0)%
Matchday revenue   15.1   19.3   (21.8)%
Total revenue   88.7   98.5   (9.9)%
Adjusted EBITDA*   20.3   22.2   (8.6)%
 
Profit/(loss) for the period (i.e. net income)   8.9   (0.3)   N/A
Adjusted profit for the period (i.e. adjusted net income)*   4.2   2.2   90.9%
Adjusted diluted earnings per share (pence)*   2.59   1.37   89.1%
 
Gross debt   362.2   361.0   0.3%
Cash and cash equivalents   90.3   83.6   8.0%

* Adjusted EBITDA, adjusted profit for the period and adjusted diluted earnings per share are non-IFRS measures. See “Non-IFRS Measures: Definitions and Use” below and the accompanying Supplemental Notes for the definitions and reconciliations for these non-IFRS measures and the reasons we believe these measures provide useful information to investors regarding the Group’s financial condition and results of operations.

 
Revenue Analysis

Commercial

Commercial revenue for the quarter was £56.8 million, a decrease of £3.1 million, or 5.2%, over the prior year quarter.

  • Sponsorship revenue for the quarter was £46.3 million, an increase of £1.1 million, or 2.4%, over the prior year quarter primarily due to an increase in shirt and other sponsorships, partially offset by reduced tour revenue.
  • Retail, Merchandising, Apparel & Product Licensing revenue for the quarter was £7.8 million, a decrease of £2.9 million, or 27.1%, over the prior year quarter, primarily due to reduced Nike guaranteed revenue due to non-participation in the UEFA Champions League in the current season.
  • Mobile & Content revenue for the quarter was £2.7 million, a decrease of £1.3 million over the prior year quarter, due to the expiration of a few of our mobile partnerships.

Broadcasting

Broadcasting revenue for the quarter was £16.8 million, a decrease of £2.5 million, or 13.0%, over the prior year quarter, primarily due to non-participation in the UEFA Champions League in the current season.

Matchday

Matchday revenue for the quarter was £15.1 million, a decrease of £4.2 million, or 21.8%, over the prior year quarter, primarily as a result of non-participation in the UEFA Champions League and one fewer domestic cup home game.

 
Other Financial Information

Operating expenses

Total operating expenses for the quarter were £92.8 million, an increase of £2.6 million, or 2.9%, over the prior year quarter.

Employee benefit expenses

Employee benefit expenses for the quarter were £49.4 million, a decrease of £3.5 million, or 6.6%, over the prior year quarter due primarily to lower player wages.

Other operating expenses

Other operating expenses for the quarter were £19.0 million, a decrease of £4.4 million, or 18.8%, over the prior year quarter due to a reduction in domestic cup gate-share costs, as a result of playing one less home cup game, and favourable movements in foreign exchange.

Depreciation & amortization

Depreciation for the quarter was £2.3 million, an increase of £0.3 million, or 15.0%, over the prior year quarter. Amortization for the quarter was £21.2 million, an increase of £9.3 million, or 78.2%, over the prior year quarter. The unamortized balance of players’ registrations at 30 September 2014 was £291.7 million.

Profit on disposal of players’ registrations

Profit on disposal of players’ registrations for the quarter was £18.3 million compared to £1.0 million in the prior year quarter.

Net finance costs

Net finance costs for the quarter were £6.1 million, a decrease of £3.7 million, or 37.8%, over the prior year quarter. The decrease was primarily due to a £3.0 million foreign exchange loss on retranslation of US dollar bank accounts in the prior year quarter.

We started hedging the foreign exchange risk on a portion of contracted future US dollar revenues using our US dollar borrowings, net of a portion of our US dollar cash as the hedging instrument from the prior year second quarter. As a result, foreign exchange gains or losses arising on re-translation of our US dollar borrowings and a portion of our US dollar cash balances are now initially recognized in other comprehensive income, rather than being recognized in the income statement immediately.

Tax

The tax credit for the quarter was £0.8 million, compared to a credit of £0.2 million in the prior year quarter.

Cash flows

Net cash generated from operating activities for the quarter was £72.9 million, an increase of £49.7 million over the prior year quarter, primarily due to favourable movements in working capital.

Capital expenditure on property, plant and equipment for the quarter was £1.9 million, a decrease of £2.2 million over the prior year quarter.

Net player capital expenditure for the quarter was £55.9 million, an increase of £29.1 million over the prior year quarter.

Net cash generated from financing activities for the quarter was £4.6 million, compared to net cash used of £0.1 million in the prior year quarter.

 
Conference Call Information

The Company’s conference call to review first quarter fiscal 2015 results will be broadcast live over the internet today, 18 November 2014 at 8:00 a.m. Eastern Time and will be available on Manchester United’s investor relations website at http://ir.manutd.com. Thereafter, a replay of the webcast will be available for thirty days.

 
About Manchester United

Manchester United is one of the most popular and successful sports team in the world, playing one of the most popular spectator sports on Earth.

Through our 136-year heritage we have won 62 trophies, enabling us to develop the world’s leading sports brand and a global community of 659 million followers. Our large, passionate community provides Manchester United with a worldwide platform to generate significant revenue from multiple sources, including sponsorship, merchandising, product licensing, mobile & content, broadcasting and matchday.

 
Cautionary Statement

This press release contains forward-looking statements. You should not place undue reliance on such statements because they are subject to numerous risks and uncertainties relating to the Company’s operations and business environment, all of which are difficult to predict and many are beyond the Company’s control. Forward-looking statements include information concerning the Company’s possible or assumed future results of operations, including descriptions of its business strategy. These statements often include words such as “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “seek,” “believe,” “estimate,” “predict,” “potential,” “continue,” “contemplate,” “possible” or similar expressions. The forward-looking statements contained in this press release are based on our current expectations and estimates of future events and trends, which affect or may affect our businesses and operations. You should understand that these statements are not guarantees of performance or results. They involve known and unknown risks, uncertainties and assumptions. Although the Company believes that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect its actual financial results or results of operations and could cause actual results to differ materially from those in these forward-looking statements. These factors are more fully discussed in the “Risk Factors” section and elsewhere in the Company’s Registration Statement on Form F-1, as amended (File No. 333-182535) and the Company’s Annual Report on Form 20-F (File No. 001-35627).

 
Non-IFRS Measures: Definitions and Use

1. Adjusted EBITDA

Adjusted EBITDA is defined as profit for the period before depreciation, amortization, profit on disposal of players’ registrations, exceptional items, net finance costs, and tax.

We believe adjusted EBITDA is useful as a measure of comparative operating performance from period to period and among companies as it is reflective of changes in pricing decisions, cost controls and other factors that affect operating performance, and it removes the effect of our asset base (primarily depreciation and amortization), capital structure (primarily finance costs), and items outside the control of our management (primarily taxes). Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for an analysis of our results as reported under IFRS as issued by the IASB. A reconciliation of profit for the period to adjusted EBITDA is presented in supplemental note 2.

2. Adjusted profit for the period (i.e. adjusted net income)

Adjusted profit for the period is calculated, where appropriate, by adjusting for charges/credits related to exceptional items, foreign exchange gains/losses on US dollar denominated bank accounts, fair value movements on derivative financial instruments, and hedge ineffectiveness on cash flow hedges, adding/subtracting the actual tax expense/credit for the period, and subtracting the adjusted tax expense for the period (based on an normalized tax rate of 35%; 2013: 35%). The normalized tax rate of 35% is management’s estimate of the tax rate likely to be applicable to the Group in the long-term.

We believe that in assessing the comparative performance of the business, in order to get a clearer view of the underlying financial performance of the business, it is useful to strip out the distorting effects of charges/credits related to ‘one-off’ transactions and then to apply a ‘normalized’ tax rate (for both the current and prior periods) of the US federal income tax rate of 35%. A reconciliation of profit for the period to adjusted profit for the period is presented in supplemental note 3.

3. Adjusted basic and diluted earnings per share

Adjusted basic and diluted earnings per share is calculated by dividing the adjusted profit for the period by the weighted average number of ordinary shares in issue during the period. Adjusted diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue during the period to assume conversion of all dilutive potential ordinary shares. We have one category of dilutive potential ordinary shares: share awards pursuant to the 2012 Equity Incentive Plan (the “Equity Plan”). Share awards pursuant to the Equity Plan are assumed to have been converted into ordinary shares at the beginning of the financial year. Adjusted basic and diluted earnings per share are presented in supplemental note 3.

 
Key Performance Indicators
   
Three months ended
30 September
2014   2013
Commercial % of total revenue 64.0% 60.8%
Broadcasting % of total revenue 19.0% 19.6%
Matchday % of total revenue 17.0% 19.6%
Home Matches Played
FAPL 3 3
UEFA competitions - 1
Domestic Cups - 1
Away Matches Played
UEFA competitions - -
Domestic Cups 1 -
 
Other
Employees at period end 837 810
Staff costs % of revenue 55.7% 53.7%
                   
Phasing of Premier League home gamesQuarter 1   Quarter 2   Quarter 3   Quarter 4   Total
2014/15 season* 3   7   5   4   19
2013/14 season 3   6   7   3   19
2012/13 season 3   7   5   4   19

*Subject to changes in broadcasting scheduling

CONSOLIDATED INCOME STATEMENT
(unaudited; in £ thousands, except per share and shares outstanding data)

 

Three months ended
30 September

  2014   2013
Revenue88,670   98,521
Operating expenses

(92,751)

 

(90,208)

Profit on disposal of players’ registrations   18,328     996
Operating profit   14,247     9,309
Finance costs

(6,238)

 

(9,838)

Finance income   101     59
Net finance costs  

(6,137)

 

 

(9,779)

Profit/(loss) before tax8,110

(470)

Tax credit   834     177
Profit/(loss) for the period   8,944    

(293)

 
Basic earnings/(loss) per share:
Basic earnings/(loss) per share (pence) 5.46

(0.18)

Weighted average number of ordinary shares outstanding (thousands) 163,788 163,819
Diluted earnings/(loss) per share:
Diluted earnings/(loss) per share (pence) 5.45

(0.18)

Weighted average number of ordinary shares outstanding (thousands)   164,127     163,819

CONSOLIDATED BALANCE SHEET
(unaudited; in £ thousands)

     
   

As of
30 September
2014

 

As of
30 June
2014

 

As of
30 September
2013

ASSETS
Non-current assets
Property, plant and equipment 254,338 254,859 256,244
Investment property 13,643 13,671 14,051
Goodwill 421,453 421,453 421,453
Players’ registrations and other intangible assets 292,496 204,572 144,680
Derivative financial instruments 1,155 - -
Trade and other receivables - 41 241
Deferred tax asset   133,038   129,631   139,434
    1,116,123   1,024,227   976,103
Current assets
Derivative financial instruments 74 - 882
Trade and other receivables 71,571 125,119 64,292
Cash and cash equivalents   90,266   66,365   83,602
    161,911   191,484   148,776
Total assets   1,278,034   1,215,711   1,124,879

CONSOLIDATED BALANCE SHEET (continued)
(unaudited; in £ thousands)

     
   

As of
30 September
2014

 

As of
30 June
2014

 

As of
30 September
2013

EQUITY AND LIABILITIES
Equity
Share capital 52 52 52
Share premium 68,822 68,822 68,822
Merger reserve 249,030 249,030 249,030
Hedging reserve 15,509 25,918 16,342
Retained earnings   164,102   154,828   129,949
    497,515   498,650   464,195
Non-current liabilities
Derivative financial instruments 1,498 1,602 1,649
Trade and other payables 47,137 42,464 18,014
Borrowings 359,445 326,803 353,476
Deferred revenue 15,291 15,631 18,023
Provisions - - 845
Deferred tax liabilities   26,022   28,837   14,913
    449,393   415,337   406,920
Current liabilities
Derivative financial instruments 650 875 571
Current tax liabilities 1,976 2,999 5,472
Trade and other payables 140,250 102,232 72,929
Borrowings 2,731 15,005 7,571
Deferred revenue 185,519 180,613 166,757
Provisions   -   -   464
    331,126   301,724   253,764
Total equity and liabilities   1,278,034   1,215,711   1,124,879

CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited; in £ thousands)

 

Three months ended
30 September

    2014   2013
Cash flows from operating activities  
Cash generated from operations (see supplemental note 4) 83,342 32,770
Interest paid (8,729) (9,146 )
Debt finance costs paid relating to borrowings (866) (19 )
Interest received 49 59
Income tax paid   (887)   (487 )
Net cash generated from operating activities   72,909     23,177  
Cash flows from investing activities
Purchases of property, plant and equipment (1,942) (4,093 )
Purchases of players’ registrations (71,302) (33,450 )
Proceeds from sale of players’ registrations   15,443     6,655  
Net cash used in investing activities   (57,801)   (30,888 )
Cash flows from financing activities
Proceeds from borrowings 4,704 -
Repayment of borrowings   (97)   (91 )
Net cash generated from/(used in) financing activities   4,607     (91 )
Net increase/(decrease) in cash and cash equivalents19,715 (7,802 )
Cash and cash equivalents at beginning of period 66,365 94,433
Foreign exchange gains/(losses) on cash and cash equivalents   4,186     (3,029 )
Cash and cash equivalents at end of period   90,266     83,602  
 

SUPPLEMENTAL NOTES

1General information

Manchester United plc (the “Company”) and its subsidiaries (together the “Group”) is a professional football club together with related and ancillary activities. The Company incorporated under the Companies Law (2011 Revision) of the Cayman Islands, as amended and restated from time to time.

2Reconciliation of profit/(loss) for the period to adjusted EBITDA

 

Three months ended
30 September

 

 

2014
£’000

 

2013
£’000

Profit/(loss) for the period8,944   (293 )
Adjustments:
Tax credit (834) (177 )
Net finance costs 6,137 9,779
Profit on disposal of players’ registrations (18,328) (996 )
Exceptional items 876 -
Amortization 21,177 11,904
Depreciation   2,336     1,983  
Adjusted EBITDA   20,308     22,200  

3Reconciliation of profit/(loss) for the period to adjusted profit for the period and adjusted basic and diluted earnings per share

 

Three months ended
30 September

 

 

2014
£’000

 

2013
£’000

Profit/(loss) for the period8,944   (293 )
Exceptional items 876 -
Foreign exchange (gains)/losses on US dollar denominated bank accounts (695) 3,029
Fair value movement on derivative financial instruments recognized in net finance costs (1,324) 884
Hedge ineffectiveness of cash flow hedges (435) -
Tax credit   (834)   (177 )
Adjusted profit before tax 6,532 3,443

Adjusted tax expense (using a normalised US statutory rate of 35%)

  (2,286)   (1,205 )
Adjusted profit for the period (i.e. adjusted net income)   4,246     2,238  
 
Adjusted basic earnings per share:
Adjusted basic earnings per share (pence) 2.59 1.37
Weighted average number of ordinary shares outstanding (thousands) 163,788 163,819
Adjusted diluted earnings per share:
Adjusted diluted earnings per share (pence) 2.59 1.37
Weighted average number of ordinary shares outstanding (thousands)   164,127     163,819  

4Cash generated from operations

 

Three months ended
30 September

   

2014
£’000

 

2013
£’000

Profit/(loss) for the period 8,944   (293 )
Tax credit   (834)   (177 )
Profit/(loss) on ordinary activities before tax 8,110 (470 )
Depreciation 2,336 1,983
Amortization 21,177 11,904
Profit on disposal of players’ registrations (18,328) (996 )
Net finance costs 6,137 9,779
Loss on disposal of property, plant and equipment 4 -
Equity-settled share-based payments 330 383
Foreign exchange gains on operating activities (639) -
Other fair value losses/(gains) on derivative financial instruments 634 (160 )
Reclassified from hedging reserve (1,195) (188 )
Decrease in trade and other receivables 64,508 10
Increase in trade and other payables and deferred revenue 268 10,685
Decrease in provisions   -     (160 )
Cash generated from operations   83,342     32,770  

Investor Relations:
Manchester United plc
Samanta Stewart, +44 207 054 5928
ir@manutd.co.uk
or
Media:
Manchester United plc
Philip Townsend, +44 161 868 8148
philip.townsend@manutd.co.uk
or
Sard Verbinnen & Co
Jim Barron / Michael Henson, + 1-212-687-8080

Source: Manchester United plc