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Manchester United plc 2015 Second Quarter Results

Released : 02/12/2015

TOTAL REVENUES OF £105.7 MILLION

EBITDA OF £42.4 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 second quarter and six months ended 31 December 2014.

Highlights

  • Commercial revenues of £46.4 million up 9.7% for the quarter.
  • Two sponsorship deals announced in the quarter – Chi as official soft drinks partner in Nigeria and IVC (Aland), the Club’s first wellness partner in China.
  • Domestic Premier League Live Broadcasting rights up 70% – BSkyB and BT will pay £5.14 billion for the 2017-19 EPL seasons compared to £3.0 billion for the 2014-16 seasons.

Commentary

Ed Woodward, Executive Vice Chairman commented, “The recently announced Premier League broadcasting rights package for 2017-19, representing an increase just over 70%, once again demonstrates that we are part of the top football league in the world.

Notwithstanding no European football this season, our Revenues and EBITDA remain strong and demonstrate the underlying strength of our business model, with commercial revenues up year over year. On the pitch, the team is well positioned to challenge for a top four finish in the Premier League and we look forward to the rest of the season.”

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

31 December

          Six months ended

31 December

         
      2014     2013     Change     2014     2013     Change    
Commercial revenue     46.4     42.3     9.7%     103.2     102.2     1.0%    
Broadcasting revenue     28.4     46.9     (39.4%)     45.2     66.2     (31.7%)    
Matchday revenue     30.9     33.7     (8.3%)     46.0     53.0     (13.2%)    
Total revenue     105.7     122.9     (14.0%)     194.4     221.4     (12.2%)    
Adjusted EBITDA*     42.4     51.0     (16.9%)     62.7     73.2     (14.3%)    
     
Profit for the period (i.e. net income)     0.0     19.0     -     8.9     18.7     (52.4%)    
Adjusted profit for the period (i.e. adjusted net income)*     4.4     19.8     (77.8%)     8.6     22.0     (60.9%)    
Adjusted diluted earnings per share (pence)*     2.66     12.08     (78.0%)     5.25     13.45     (61.0%)    
     
Gross debt**     380.5     356.6     6.7%     380.5     356.6     6.7%    
Cash and cash equivalents     37.1     72.1     (48.5%)     37.1     72.1     (48.5%)    
       

* 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.

** Gross Debt increased primarily because of movements in USD/GBP exchange rate from 1.6561 at 31 December 2013 to 1.5573 at 31 December 2014.

Revenue Analysis

Commercial

Commercial revenue for the second quarter was £46.4 million, an increase of £4.1 million, or 9.7%, over the prior year quarter.

  • Sponsorship revenue for the second quarter was £35.8 million, an increase of £6.8 million, or 23.4%, over the prior year quarter, primarily due to an increase in shirt and other sponsorships.
  • Retail, Merchandising, Apparel & Product Licensing revenue for the second quarter was £7.9 million, a decrease of £1.2 million, or 13.2% 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 second quarter was £2.7 million, a decrease of £1.5 million, or 35.7% over the prior year quarter, due to the expiration of a few of our mobile partnerships.

Broadcasting

Broadcasting revenue for the second quarter was £28.4 million, a decrease of £18.5 million, or 39.4%, over the prior year quarter, primarily due to non-participation in the UEFA Champions League in the current season.

Matchday

Matchday revenue for the second quarter was £30.9 million, a decrease of £2.8 million, or 8.3%, over the prior year quarter, primarily due to no home domestic cup nor UEFA Champions League matches in the current quarter.

Other Financial Information

Operating expenses

Total operating expenses for the second quarter were £93.1 million, an increase of £5.4 million, or 6.2%, over the prior year quarter.

Staff costs

Staff costs for the second quarter were £48.7 million, a decrease of £2.9 million, or 5.6%, over the prior year quarter.

Other operating expenses

Other operating expenses for the second quarter were £14.6 million, a decrease of £5.7 million, or 28.1%, over the prior year quarter, primarily due to non-participation in the UEFA Champions League and favourable movements in foreign exchange.

Depreciation & amortization

Depreciation for the second quarter was £2.6 million, an increase of £0.5 million, or 23.8%, over the prior year quarter. Amortization for the second quarter was £27.0 million, an increase of £13.6 million, or 101.5%, over the prior year quarter. The unamortized balance of players’ registrations at 31 December 2014 was £269.3 million.

Exceptional items

Exceptional items for the second quarter were £0.2 million, a decrease of £0.1 million over the prior year quarter.

Net finance costs

Net finance costs for the second quarter were £6.3 million, an increase of £0.6 million, or 10.5%, over the prior year quarter.

Tax

The tax expense for the second quarter was £7.8 million, compared to an expense of £11.3 million in the prior year quarter.

Cash flows

Net cash used in operating activities for the second quarter was £39.0 million, an increase of £35.3 million over the prior year quarter, primarily due to movements in working capital.

Capital expenditure on property, plant and equipment for the second quarter was £1.9 million, a decrease of £0.9 million over the prior year quarter.

Net player and other intangible assets capital expenditure for the second quarter was £14.2 million, an increase of £10.8 million over the prior year quarter.

Conference Call Information

The Company’s conference call to review second quarter fiscal 2015 results will be broadcast live over the internet today, 12 February 2015 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, new media & mobile, 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 are 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 endedSix months ended
        31 December         31 December    
          2014       2013         2014       2013    
Commercial % of total revenue         43.0%       34.4%         52.7%       46.2%    
Broadcasting % of total revenue         27.3%       38.2%         23.4%       29.9%    
Matchday % of total revenue         29.7%       27.4%         23.9%       23.9%    
Home Matches Played                                        
FAPL         7       6         10       9    
UEFA competitions         -       2         -       3    
Domestic Cups         -       1         -       2    
Away Matches Played                                        
UEFA competitions         -       3         -       3    
Domestic Cups         -       1         1       1    
     
Other                                        
Employees at period end         814       849         814       849    
Staff costs % of revenue         46.1%       42.0%         50.5%       47.2%    
           
Phasing of Premier League home games   Quarter 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
31 December

 

Six months ended
31 December

 

  2014     2013     2014     2013  
Revenue105,761   122,927 194,431   221,448
Operating expenses (93,137) (87,715 ) (185,888) (177,923 )
Profit on disposal of players’ registrations   1,432     846     19,760     1,842  
Operating profit   14,056     36,058     28,303     45,367  
Finance costs (6,241) (5,765 ) (12,477) (15,603 )
Finance income   -     48     99     107  
Net finance costs   (6,241)   (5,717 )   (12,378)   (15,496 )
Profit before tax7,815 30,341 15,925 29,871
Tax expense   (7,870)   (11,301 )   (7,036)   (11,124 )
(Loss)/profit for the period   (55)   19,040     8,889     18,747  
 
Basic (loss)/earnings per share:
Basic (loss)/earnings per share (pence) (0.03) 11.62 5.43 11.44

Weighted average number of ordinary shares outstanding
(thousands)

163,797 163,812 163,792 163,816
Diluted (loss)/earnings per share:
Diluted (loss)/earnings per share (pence) (0.03) 11.62 5.42 11.44

Weighted average number of ordinary shares outstanding
(thousands)

  164,146     163,812     164,146     163,816  
 

CONSOLIDATED BALANCE SHEET

(unaudited; in £ thousands)

           
      As of

31 December

2014

    As of

30 June

2014

    As of

31 December

2013

ASSETS
Non-current assets
Property, plant and equipment 254,398 254,859 256,511
Investment property 13,615 13,671 13,728
Goodwill 421,453 421,453 421,453
Players’ registrations and other intangible assets 270,061 204,572 132,123
Derivative financial instruments 857 - 1,013
Trade and other receivables - 41 141
Deferred tax asset     128,797     129,631     134,261
      1,089,181     1,024,227     959,230
Current assets
Derivative financial instruments 544 - 201
Trade and other receivables 83,716 125,119 68,787
Current tax receivable 81 - -
Cash and cash equivalents     37,115     66,365     72,144
      121,456     191,484     141,132
Total assets     1,210,637     1,215,711     1,100,362
 

CONSOLIDATED BALANCE SHEET (continued)

(unaudited; in £ thousands)

 

 

    As of

31 December

2014

    As of

30 June

2014

    As of

31 December

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 6,185 25,918 20,483
Retained earnings     164,424     154,828     149,139
      488,513     498,650     487,526
Non-current liabilities
Derivative financial instruments 1,612 1,602 1,864
Trade and other payables 47,181 42,464 14,829
Borrowings 374,034 326,803 341,121
Deferred revenue 14,260 15,631 12,828
Deferred tax liabilities     24,085     28,837     22,184
      461,172     415,337     392,826
Current liabilities
Derivative financial instruments 617 875 1,048
Current tax liabilities 2,399 2,999 5,813
Trade and other payables 123,058 102,232 67,221
Borrowings 6,447 15,005 15,438
Deferred revenue     128,431     180,613     130,490
      260,952     301,724     220,010
Total equity and liabilities     1,210,637     1,215,711     1,100,362
 

CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited; in £ thousands)

   

Three months ended
31 December

Six months ended
31 December

    2014     2013     2014     2013  
Cash flows from operating activities    
Cash (used in)/generated from operations (see supplemental note 4) (34,421) 1,893 48,921 34,663
Interest paid (4,500) (4,818 ) (13,229) (13,964 )
Debt finance costs relating to borrowings 42 (104 ) (824) (123 )
Interest received 40 48 89 107
Income tax paid   (123)   (759 )   (1,010)   (1,246 )
Net cash (used in)/generated from operating activities   (38,962)   (3,740 )   33,947     19,437  
Cash flows from investing activities
Purchases of property, plant and equipment (1,851) (2,785 ) (3,793) (6,878 )
Proceeds from sale of property, plant and equipment - 50 - 50
Purchases of players’ registrations and other intangible assets (15,564) (3,837 ) (86,866) (37,287 )
Proceeds from sale of players’ registrations   1,273     401     16,716     7,056  
Net cash used in investing activities   (16,142)   (6,171 )   (73,943)   (37,059 )
Cash flows from financing activities
Proceeds from borrowings - - 4,704 -
Repayment of borrowings   (102)   (96 )   (199)   (187 )
Net cash (used in)/generated from financing activities   (102)   (96 )   4,505     (187 )
Net decrease in cash and cash equivalents(55,206) (10,007 ) (35,491) (17,809 )
Cash and cash equivalents at beginning of period 90,266 83,602 66,365 94,433
Foreign exchange gains/(losses) on cash and cash equivalents   2,055     (1,451 )   6,241     (4,480 )
Cash and cash equivalents at end of period   37,115     72,144     37,115     72,144  
 

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 for the period to adjusted EBITDA

   

Three months ended
31 December

     

Six months ended
31 December

      2014

£’000

      2013

£’000

        2014

£’000

     

2013

£’000

 
(Loss)/profit for the period(55)     19,040 8,889     18,747
Adjustments:
Tax expense 7,870 11,301 7,036 11,124
Net finance costs 6,241 5,717 12,378 15,496
Profit on disposal of players’ registrations (1,432) (846 ) (19,760) (1,842 )
Exceptional items 185 293 1,061 293
Amortization 27,046 13,418 48,223 25,322
Depreciation     2,560       2,085         4,896       4,068  
Adjusted EBITDA     42,415       51,008         62,723       73,208  
 

3Reconciliation of profit for the period to adjusted profit for the period and adjusted basic and diluted earnings per share

 

Three months ended
31 December

 

Six months ended
31 December

 

  2014

£’000

    2013

£’000

    2014

£’000

    2013

£’000

 
(Loss)/profit for the period(55)   19,040 8,889   18,747
Exceptional items 185 - 1,061 -
Foreign exchange (gains)/losses on US dollar denominated bank accounts (303) (317 ) (998) 2,712
Fair value movement on derivative financial instruments (1,185) 666 (2,486) 1,550
Hedge ineffectiveness of cash flow hedges 201 (248 ) (234) (248 )
Tax expense   7,870     11,301     7,036     11,124  
Adjusted profit before tax 6,713 30,442 13,268 33,885

Adjusted tax expense (using a normalised tax rate of 35% (2013: 35%))

  (2,350)   (10,655 )   (4,644)   (11,860 )
Adjusted profit for the period (i.e. adjusted net income)   4,363     19,787     8,624     22,025  
 
Adjusted basic earnings per share:
Adjusted basic earnings per share (pence) 2.66 12.08 5.27 13.45
Weighted average number of ordinary shares outstanding (thousands) 163,797 163,812 163,792 163,816
Adjusted diluted earnings per share:
Adjusted diluted earnings per share (pence) 2.66 12.08 5.25 13.45
Weighted average number of ordinary shares outstanding (thousands)   164,146     163,812     164,146     163,816  
 

4Cash generated from operations

 

Three months ended
31 December

 

Six months ended
31 December

    2014

£’000

    2013

£’000

    2014

£’000

    2013

£’000

 
(Loss)/profit for the period (55)   19,040 8,889   18,747
Tax expense   7,870     11,301     7,036     11,124  
Profit before tax 7,815 30,341 15,925 29,871
Depreciation 2,560 2,085 4,896 4,068
Impairment - 293 - 293
Amortization 27,046 13,418 48,223 25,322
Profit on disposal of players’ registrations (1,432) (846 ) (19,760) (1,842 )
Net finance costs 6,241 5,717 12,378 15,496
Loss/(profit) on disposal of property, plant and equipment 1 (43 ) 5 (43 )
Equity-settled share-based payments 377 158 707 541
Foreign exchange (gains)/losses on operating activities (329) 372 (968) 372
Other fair value losses/(gains) on derivative financial instruments 577 34 1,211 (126 )
Reclassified from hedging reserve (1,196) (330 ) (2,391) (518 )
(Increase)/decrease in trade and other receivables (12,110) (3,951 ) 52,398 (3,941 )
Decrease in trade and other payables and deferred revenue (63,971) (44,040 ) (63,703) (33,355 )
Decrease in provisions   -     (1,315 )   -     (1,475 )
Cash (used in)/generated from operations   (34,421)   1,893     48,921     34,663  
 

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

Source: Manchester United plc