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Manchester United plc 2016 Second Quarter Results

Released : 02/11/2016

  • RECORD Q2 REVENUES OF £133.8 MILLION, UP 26.6%
  • RECORD Q2 ADJUSTED EBITDA OF £56.1 MILLION, UP 32.3%
  • EBITDA GUIDANCE RAISED TO £178 TO £188 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 2016 fiscal second quarter and six months ended 31 December 2015.

Highlights

  • Commercial revenues of £66.1 million up 42.5% for the quarter.
  • Broadcasting revenues of £37.3 million up 31.3% for the quarter
  • Two sponsorship deals announced in the quarter:
    • Renewal of partnership with Thomas Cook
    • Cable and Wireless Communications
  • Announced licensing deals with New Era and Heroes

Commentary

Ed Woodward, Executive Vice Chairman, commented, “Our strong commitment to investing in our squad, youth academy and the broader club are ultimately underpinned by our financial strength and the hard work and dedication of everyone at the Club. Our solid results off the pitch help contribute to what remains our number one priority - success on the pitch.”

Outlook

For fiscal 2016, Manchester United expects:

  • Revenue to be £500m to £510m.
  • Adjusted EBITDA to be £178m to £188m.

Key Financials (unaudited)

£ million (except adjusted diluted earnings per share)   Three months ended

31 December

      Six months ended

31 December

   
    2015   2014   Change   2015   2014   Change
Commercial revenue   66.1   46.4   42.5%   137.3   103.2   33.0%
Broadcasting revenue   37.3   28.4   31.3%   64.9   45.2   43.6%
Matchday revenue   30.4   30.9   (1.6%)   55.2   46.0   20.0%
Total revenue   133.8   105.7   26.6%   257.4   194.4   32.4%
Adjusted EBITDA*   56.1   42.4   32.3%   97.7   62.7   55.8%
 
Profit for the period (i.e. net income)   18.6   0.0   -   23.6   8.9   165.2%
Adjusted profit for the period (i.e. adjusted net income)*   17.7   4.4   302.3%   20.4   8.6   137.2%
Adjusted diluted earnings per share (pence)*   10.77   2.66   304.9%   12.41   5.25   136.4%
 
Net debt   322.1   343.4   (6.2%)   322.1   343.4   (6.2%)

* 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 second quarter was £66.1 million, an increase of £19.7 million, or 42.5%, over the prior year quarter.

  • Sponsorship revenue for the second quarter was £37.4 million, an increase of £1.6 million, or 4.5%, over the prior year quarter.
  • Retail, Merchandising, Apparel & Product Licensing revenue for the second quarter was £25.7 million, an increase of £17.8 million, or 225.3% over the prior year quarter, primarily due to the commencement of the new agreement with adidas from 1 August 2015, which included a step-up in minimum guaranteed revenues and the contribution from several businesses previously operated by Nike.
  • Mobile & Content revenue for the second quarter was £3.0 million, an increase of £0.3 million, or 11.1% over the prior year quarter.

Broadcasting

Broadcasting revenue for the second quarter was £37.3 million, an increase of £8.9 million, or 31.3%, over the prior year quarter, primarily due to participation in the UEFA Champions League, partially offset by two fewer FAPL home games and two fewer FAPL live broadcast games in the current quarter.

Matchday

Matchday revenue for the three months ended 31 December 2015 was £30.4 million, a decrease of £0.5 million, or 1.6%, over the three months ended 31 December 2014, primarily due to playing two fewer FAPL home games and hosting a friendly international game (in the second quarter last year), largely offset by two UEFA Champions League home games and one domestic cup home game in the current quarter.

Other Financial Information

Operating expenses

Total operating expenses for the second quarter were £101.8 million, an increase of £8.7 million, or 9.3%, over the prior year quarter.

Employee benefit expenses

Employee benefit expenses for the second quarter were £55.7 million, an increase of £7.0 million, or 14.4%, over the prior year quarter, primarily due to renewals of existing player contracts, coupled with an uplift from participation in the UEFA Champions League.

Other operating expenses

Other operating expenses for the second quarter were £22.0 million, an increase of £7.4 million, or 50.7%, over the prior year quarter, primarily due to retail, merchandising, apparel and licensing costs now being recognized in-house, plus an increase in matchday costs as a result of playing two UEFA Champions League games in the quarter compared to the prior year quarter.

Depreciation & amortization

Depreciation for the second quarter was £2.5 million, a decrease of £0.1 million, or 3.8%, over the prior year quarter. Amortization for the second quarter was £21.6 million, a decrease of £5.4 million, or 20.0%, over the prior year quarter. The unamortized balance of players’ registrations at 31 December 2015 was £240.4 million.

Net finance costs

Net finance costs for the second quarter were £4.7 million, a decrease of £1.6 million, or 25.4%, over the prior year quarter. The decrease was primarily due to a reduction in interest payable on the secured term loan facility and senior secured notes following the refinancing in June 2015.

Tax

The tax expense for the second quarter was £9.3 million, compared to an expense of £7.8 million in the prior year quarter.

Cash flows

Net cash used in operating activities for the second quarter was £9.2 million, a decrease of £29.8 million over the prior year quarter, primarily due to increased profit and movements in working capital.

Capital expenditure on property, plant and equipment for the second quarter was £0.2 million, a decrease of £1.7 million over the prior year quarter.

Net player and other intangible assets capital expenditure for the second quarter was £10.2 million, a decrease of £4.0 million over the prior year quarter.

Dividend

As previously approved, a $0.045 per share quarterly cash dividend on the Company's outstanding Class A and Class B ordinary shares will be payable on 10 March 2016, to shareholders of record on 25 February 2016. The stock will begin to trade ex-dividend on 23 February 2016.

Conference Call Information

The Company’s conference call to review second quarter fiscal 2016 results will be broadcast live over the internet today, 11 February 2016 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 138-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/(loss) 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 unhedged US dollar denominated borrowings, 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%; 2014: 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 ended   Six months ended
  31 December   31 December
    2015   2014   2015   2014
Commercial % of total revenue   49.4%   43.0%   53.3%   52.7%
Broadcasting % of total revenue   27.9%   27.3%   25.2%   23.4%
Matchday % of total revenue   22.7%   29.7%   21.5%   23.9%
Home Matches Played                
FAPL   5   7   9   10
UEFA competitions   2   -   4   -
Domestic Cups   1   -   2   -
Away Matches Played                
UEFA competitions   2   -   4   -
Domestic Cups   -   -   -   1
 
Other                
Employees at period end   788   814   788   814
Staff costs % of revenue   41.6%   46.1%   44.5%   50.5%
Phasing of Premier League home games   Quarter 1   Quarter 2   Quarter 3   Quarter 4   Total
2015/16 season*   4   5   6   4   19
2014/15 season 3 7 5 4 19
2013/14 season   3   6   7   3   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

 

  2015   2014   2015   2014
Revenue   133,764   105,761   257,326   194,431
Operating expenses (101,804) (93,137) (208,410) (185,888)
Profit/(loss) on disposal of players’ registrations   648   1,432   (6,788)   19,760
Operating profit   32,608   14,056   42,128   28,303
Finance costs (4,799) (6,241) (9,178) (12,477)
Finance income   67   -   105   99
Net finance costs   (4,732)   (6,241)   (9,073)   (12,378)
Profit before tax27,876 7,815 33,055 15,925
Tax expense   (9,269)   (7,870)   (9,488)   (7,036)
Profit/(loss) for the period   18,607   (55)   23,567   8,889
 
Basic earnings/(loss) per share:
Basic earnings/(loss) per share (pence) 11.35 (0.03) 14.38 5.43
Weighted average number of ordinary shares outstanding (thousands) 163,892 163,797 163,888 163,792
Diluted earnings/(loss) per share:
Diluted earnings/(loss) per share (pence) 11.33 (0.03) 14.35 5.42
Weighted average number of ordinary shares outstanding (thousands)   164,263   164,146   164,263   164,146

CONSOLIDATED BALANCE SHEET

(unaudited; in £ thousands)

    As of

31 December

2015

  As of

30 June

2015

  As of

31 December

2014

ASSETS      
Non-current assets
Property, plant and equipment 248,314 250,626 254,398
Investment property 13,503 13,559 13,615
Goodwill 421,453 421,453 421,453
Players’ registrations and other intangible assets 241,892 238,944 270,061
Derivative financial instruments 1,680 - 857
Trade and other receivables 10,375 3,836 -
Deferred tax asset   132,910   133,640   128,797
    1,070,127   1,062,058   1,089,181
Current assets
Inventories 1,504 - -
Derivative financial instruments 1,971 27 544
Trade and other receivables 81,807 83,627 83,716
Current tax receivable - 124 81
Cash and cash equivalents   121,611   155,752   37,115
    206,893   239,530   121,456
Total assets   1,277,020   1,301,588   1,210,637

CONSOLIDATED BALANCE SHEET (continued)

(unaudited; in £ thousands)

    As of

31 December

2015

  As of

30 June

2015

  As of

31 December

2014

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 (9,220) 4,729 6,185
Retained earnings   174,834   155,285   164,424
    483,518   477,918   488,513
Non-current liabilities
Derivative financial instruments 2,454 2,769 1,612
Trade and other payables 19,587 48,078 47,181
Borrowings 437,656 410,482 374,034
Deferred revenue 16,944 21,583 14,260
Deferred tax liabilities   14,070   17,311   24,085
    490,711   500,223   461,172
Current liabilities
Derivative financial instruments 2,207 2,966 617
Current tax liabilities 4,870 2,105 2,399
Trade and other payables 164,769 131,283 123,058
Borrowings 6,057 485 6,447
Deferred revenue   124,888   186,608   128,431
    302,791   323,447   260,952
Total equity and liabilities   1,277,020   1,301,588   1,210,637

CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited; in £ thousands)

 

Three months ended
31 December

  Six months ended

31 December

    2015   2014   2015   2014
Cash flows from operating activities    
Cash (used in)/generated from operations (see supplemental note 4) (7,007) (34,421) 31,108 48,921
Interest paid (1,576) (4,500) (3,118) (13,229)
Debt finance costs relating to borrowings - 42 - (824)
Interest received 50 40 117 89
Income tax paid   (660)   (123)   (1,602)   (1,010)
Net cash (used in)/generated from operating activities   (9,193)   (38,962)   26,505   33,947
Cash flows from investing activities
Purchases of property, plant and equipment (223) (1,851) (576) (3,793)
Proceeds from sale of property, plant and equipment (2) - 19 -
Purchases of players’ registrations and other intangible assets (9,360) (15,564) (95,892) (86,866)
Proceeds from sale of players’ registrations   (818)   1,273   35,773   16,716
Net cash used in investing activities   (10,403)   (16,142)   (60,676)   (73,943)
Cash flows from financing activities
Proceeds from borrowings - - - 4,704
Repayment of borrowings (94) (102) (183) (199)
Dividends paid   (4,813)   -   (4,813)   -
Net cash (used in)/generated from financing activities   (4,907)   (102)   (4,996)   4,505
Net decrease in cash and cash equivalents(24,503) (55,206) (39,167) (35,491)
Cash and cash equivalents at beginning of period 143,525 90,266 155,752 66,365
Foreign exchange gains on cash and cash equivalents   2,589   2,055   5,026   6,241
Cash and cash equivalents at end of period   121,611   37,115   121,611   37,115

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

    2015

£’000

  2014

£’000

  2015

£’000

  2014

£’000

Profit/(loss) for the period18,607   (55) 23,567   8,889
Adjustments:
Tax expense 9,269 7,870 9,488 7,036
Net finance costs 4,732 6,241 9,073 12,378
(Profit)/loss on disposal of players’ registrations (648) (1,432) 6,788 (19,760)
Exceptional items - 185 - 1,061
Amortization 21,639 27,046 43,786 48,223
Depreciation   2,473   2,560   4,967   4,896
Adjusted EBITDA   56,072   42,415   97,669   62,723

3Reconciliation of profit/(loss) 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

 

  2015

£’000

  2014

£’000

  2015

£’000

  2014

£’000

Profit/(loss) for the period18,607   (55) 23,567   8,889
Exceptional items - 185 - 1,061
Foreign exchange losses/(gains) on unhedged US dollar denominated borrowings 455 (303) 1,214 (998)
Fair value movement on derivative financial instruments (1,105) (1,185) (2,912) (2,486)
Hedge ineffectiveness of cash flow hedges - 201 - (234)
Tax expense   9,269   7,870   9,488   7,036
Adjusted profit before tax 27,226 6,713 31,357 13,268

Adjusted tax expense (using a normalised tax rate of 35% (2014: 35%))

  (9,529)   (2,350)   (10,975)   (4,644)
Adjusted profit for the period (i.e. adjusted net income)   17,697   4,363   20,382   8,624
 
Adjusted basic earnings per share:
Adjusted basic earnings per share (pence) 10.80 2.66 12.44 5.27
Weighted average number of ordinary shares outstanding (thousands) 163,892 163,797 163,888 163,792
Adjusted diluted earnings per share:
Adjusted diluted earnings per share (pence) 10.77 2.66 12.41 5.25
Weighted average number of ordinary shares outstanding (thousands)   164,263   164,146   164,263   164,146

4Cash generated from operations

  Three months ended

31 December

  Six months ended

31 December

    2015

£’000

  2014

£’000

  2015

£’000

  2014

£’000

Profit/(loss) for the period 18,607   (55) 23,567   8,889
Tax expense   9,269   7,870   9,488   7,036
Profit before tax 27,876 7,815 33,055 15,925
Depreciation 2,473 2,560 4,967 4,896
Amortization 21,639 27,046 43,786 48,223
(Profit)/loss on disposal of players’ registrations (648) (1,432) 6,788 (19,760)
Net finance costs 4,732 6,241 9,073 12,378
Loss on disposal of property, plant and equipment 1 1 10 5
Equity-settled share-based payments 420 377 795 707
Foreign exchange losses/(gains) on operating activities 123 (329) 2,189 (968)
Other fair value losses/(gains) on derivative financial instruments 201 577 (4,046) 1,211
Reclassified from hedging reserve 321 (1,196) 663 (2,391)
Increase in inventories (144) - (1,504) -
Decrease/(increase) in trade and other receivables 24,541 (12,110) 14,375 52,398
Decrease in trade and other payables and deferred revenue   (88,542)   (63,971)   (79,043)   (63,703)
Cash (used in)/generated from operations   (7,007)   (34,421)   31,108   48,921

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