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Manchester United plc 2016 Third Quarter Results

Released : 05/13/2016

  • RECORD Q3 REVENUES OF £123.4 MILLION, UP 29.9%
  • RECORD Q3 ADJUSTED EBITDA OF £44.9 MILLION, UP 76.8%

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 third quarter and nine months ended 31 March 2016.

Highlights

  • Commercial revenues of £65.8 million up 37.7% for the quarter.
  • Five sponsorship deals announced in the quarter:
    • New Global deals with Gulf Oil International and 20th Century Fox
    • Regional deal with YouC1000 (isotonic drinks partner in Indonesia)
    • MUTV deal with Sina Sports in China
    • Renewal of partnership with Yanmar
  • Announced licensing deal with Columbia as Manchester United’s first Official Outdoor Apparel Partner.
  • International Premier League Broadcasting rights up approximately 40% for the 2017-19 cycle.

Commentary

Ed Woodward, Executive Vice Chairman, commented, “The conclusion to this year’s season demonstrates once again why the Premier League is the most popular league in the most popular sport.

As we reflect on our season, we are delighted by the emergence of yet another crop of exciting young players that demonstrate once again our terrific track record of youth development. We are looking forward to the FA Cup final on May 21st and hopefully winning this special trophy for a record equaling twelve times.”

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 March

         

Nine months ended
31 March

       
      2016   2015     Change     2016   2015     Change  
Commercial revenue     65.8   47.8     37.7%     203.1   151.0     34.5%  
Broadcasting revenue     27.8   21.7     28.1%     92.7   66.9     38.6%  
Matchday revenue     29.8   25.5     16.9%     85.0   71.5     18.9%  
Total revenue     123.4   95.0     29.9%     380.8   289.4     31.6%  
Adjusted EBITDA*     44.9   25.4     76.8%     142.6   88.1     61.9%  
   
Profit/(loss) for the period (i.e. net income)     13.7   (2.9)     -     37.3   6.0     521.7%  
Adjusted profit/(loss) for the period (i.e. adjusted net income)*     11.7   (7.1)     -     32.1   1.5     2040.0%  
Adjusted diluted earnings/(loss) per share (pence)*     7.15   (4.34)     -     19.56   0.91     2049.5%  
   
Net debt     348.7   384.2     (9.2%)     348.7   384.2     (9.2%)  

* Adjusted EBITDA, adjusted profit/(loss) for the period and adjusted diluted earnings/(loss) 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 third quarter was £65.8 million, an increase of £18.0 million, or 37.7%, over the prior year quarter.

  • Sponsorship revenue for the third quarter was £38.8 million, an increase of £1.3 million, or 3.5%, over the prior year quarter.
  • Retail, Merchandising, Apparel & Product Licensing revenue for the third quarter was £24.4 million, an increase of £16.8 million, or 221.1% 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 third quarter was £2.6 million, a decrease of £0.1 million, or 3.7% over the prior year quarter.

Broadcasting

Broadcasting revenue for the third quarter was £27.8 million, an increase of £6.1 million, or 28.1%, over the prior year quarter, primarily due to participation in UEFA competitions and one additional FAPL live broadcast game in the current quarter.

Matchday

Matchday revenue for the third quarter was £29.8 million, an increase of £4.3 million, or 16.9%, over the prior year quarter, primarily due to playing two UEFA Europa League home games in the current quarter.

Other Financial Information

Operating expenses

Total operating expenses for the third quarter were £102.2 million, an increase of £3.2 million, or 3.2%, over the prior year quarter.

Employee benefit expenses

Employee benefit expenses for the third quarter were £56.2 million, an increase of £6.0 million, or 12.0%, over the prior year quarter, primarily due to renewals of existing player contracts, coupled with an uplift in annual player salaries due to participation in the UEFA Champions League.

Other operating expenses

Other operating expenses for the third quarter were £22.3 million, an increase of £2.9 million, or 14.9%, 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 competition home games in the current quarter.

Depreciation & amortization

Depreciation for the third quarter was £2.5 million, which was unchanged from the prior year quarter. Amortization for the third quarter was £21.2 million, a decrease of £4.5 million, or 17.5%, over the prior year quarter. The unamortized balance of players’ registrations at 31 March 2016 was £228.3 million.

Net finance costs

Net finance costs for the third quarter were £3.6 million, a decrease of £2.2 million, or 37.9%, 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 third quarter was £5.9 million, compared to a credit of £8.5 million in the prior year quarter.

Cash flows

Net cash generated from operating activities for the third quarter was £5.9 million, an increase of £20.9 million over the prior year quarter, primarily due to increased profit.

Capital expenditure on property, plant and equipment for the third quarter was £0.2 million, a decrease of £0.1 million over the prior year quarter.

Net player and other intangible assets capital expenditure for the third quarter was £16.1 million, an increase of £5.1 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 June 2016, to shareholders of record on 26 May 2016. The stock will begin to trade ex-dividend on 23 May 2016.

The Board of Directors recently approved replacing the previous quarterly cash dividend with a regular semi-annual cash dividend on the Company's outstanding Class A and Class B ordinary shares of $0.09 per share which will be paid in January and June 2017. The specific record, ex dividend, and payment dates with respect to each semi-annual cash dividend will be announced in future releases.

Conference Call Information

The Company’s conference call to review third quarter fiscal 2016 results will be broadcast live over the internet today, 13 May 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/(loss) 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/(loss) for the period (i.e. adjusted net income)

Adjusted profit/(loss) 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/adding the adjusted tax expense/credit for the period (based on an normalized tax rate of 35%; 2015: 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/(loss) per share

Adjusted basic and diluted earnings/(loss) per share are calculated by dividing the adjusted profit/(loss) for the period by the weighted average number of ordinary shares in issue during the period. Adjusted diluted earnings/(loss) 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/(loss) per share are presented in supplemental note 3.


 

Key Performance Indicators

        Three months ended       Nine months ended

      31 March       31 March    
        2016       2015       2016       2015    
Commercial % of total revenue       53.3%       50.3%       53.3%       52.2%    
Broadcasting % of total revenue       22.5%       22.8%       24.4%       23.1%    
Matchday % of total revenue       24.2%       26.9%       22.3%       24.7%    
Home Matches Played                                    
FAPL       5       5       14       15    
UEFA competitions       2       -       6       -    
Domestic Cups       2       2       4       2    
Away Matches Played                                    
UEFA competitions       2       -       6       -    
Domestic Cups       2       3       2       4    
     
Other                                    
Employees at period end       797       791       797       791    
Staff costs % of revenue       45.5%       52.8%       44.8%       51.2%    

     




     




     




                                         
Phasing of Premier League home games
    Quarter 1       Quarter 2       Quarter 3       Quarter 4       Total    
2015/16 season


4


5


5


5


19

2014/15 season
    3       7       5       4       19    






















 

CONSOLIDATED INCOME STATEMENT

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



 
   

Three months ended
31 March

 

Nine months ended
31 March


 

  2016     2015     2016     2015  
Revenue   123,444
  94,970
  380,770
  289,401

Operating expenses
(102,168 )
(98,976 )
(310,578 )
(284,864 )
Profit/(loss) on disposal of players’ registrations   1,950     (1,556 )   (4,838 )   18,204  
Operating profit/(loss)   23,226     (5,562 )   65,354     22,741  
Finance costs
(3,747 )
(5,904 )
(12,925 )
(18,381 )
Finance income   185     37     290     136  
Net finance costs   (3,562 )   (5,867 )   (12,635 )   (18,245 )
Profit/(loss) before tax
19,664

(11,429 )
52,719

4,496

Tax (expense)/credit   (5,903 )   8,555     (15,391 )   1,519  
Profit/(loss) for the period   13,761     (2,874 )   37,328     6,015  









 
Basic earnings/(loss) per share:








Basic earnings/(loss) per share (pence)
8.40

(1.75 )
22.78

3.67

Weighted average number of ordinary shares outstanding (thousands)
163,892

163,797

163,889

163,794

Diluted earnings/(loss) per share:








Diluted earnings/(loss) per share (pence)
8.38

(1.75 )
22.72

3.66

Weighted average number of ordinary shares outstanding (thousands)   164,288     164,140     164,288     164,140  









 

CONSOLIDATED BALANCE SHEET

(unaudited; in £ thousands)


   

   
   


      As of

31 March

2016

      As of

30 June

2015

    As of

31 March

2015

 
ASSETS











Non-current assets











Property, plant and equipment

247,200


250,626

252,494

Investment property

13,475


13,559

13,587

Goodwill

421,453


421,453

421,453

Players’ registrations and other intangible assets

230,230


238,944

237,760

Derivative financial instruments

2,692


-

1,323

Trade and other receivables

10,542


3,836

1,000

Deferred tax asset     133,640       133,640     147,284  
      1,059,232       1,062,058     1,074,901  
Current assets











Inventories

1,293


-

-

Derivative financial instruments

4,553


27

1,354

Trade and other receivables

95,238


83,627

107,716

Current tax receivable

-


124

124

Cash and cash equivalents     104,202       155,752     11,204  
      205,286       239,530     120,398  
Total assets     1,264,518       1,301,588     1,195,299  












 












 

CONSOLIDATED BALANCE SHEET (continued)

(unaudited; in £ thousands)













 
      As of

31 March

2016

      As of

30 June

2015

    As of

31 March

2015

 
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

(18,324 )

4,729

(6,566 )
Retained earnings     178,779       155,285     161,872  
      478,359       477,918     473,210  
Non-current liabilities











Derivative financial instruments

7,473


2,769

4,087

Trade and other payables

19,620


48,078

39,827

Borrowings

450,551


410,482

392,480

Deferred revenue

15,961


21,583

24,464

Deferred tax liabilities     12,740       17,311     26,569  
      506,345       500,223     487,427  
Current liabilities











Derivative financial instruments

2,407


2,966

2,340

Trade and other payables

163,014


131,283

118,135

Current tax liabilities

7,626


2,105

1,753

Borrowings

2,356


485

2,950

Deferred revenue     104,411       186,608     109,484  
      279,814       323,447     234,662  
Total equity and liabilities     1,264,518       1,301,588     1,195,299  












 

CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited; in £ thousands)


 
 


Three months ended
31 March


Nine months ended
31 March

    2016     2015     2016     2015  
Cash flows from operating activities

 


 
Cash generated from/(used in) operations (see supplemental note 4)
14,493

(3,189 )
45,601

45,732
Interest paid
(8,419 )
(10,907 )
(11,537 )
(24,136 )
Debt finance costs relating to borrowings
-

-

-

(824 )
Interest received
129

368

246

457
Income tax paid   (296 )   (1,271 )   (1,898 )   (2,281 )
Net cash generated from/(used in) operating activities   5,907     (14,999 )   32,412     18,948  
Cash flows from investing activities







Purchases of property, plant and equipment
(207 )
(293 )
(783 )
(4,086 )
Proceeds from sale of property, plant and equipment
-

-

19

-
Purchases of players’ registrations and other intangible assets
(17,048 )
(14,406 )
(112,940 )
(101,272 )
Proceeds from sale of players’ registrations   956     3,447     36,729     20,163  
Net cash used in investing activities   (16,299 )   (11,252 )   (76,975 )   (85,195 )
Cash flows from financing activities







Proceeds from borrowings
-

-

-

4,704
Repayment of borrowings
(94 )
(102 )
(277 )
(301 )
Dividends paid   (10,191 )   -     (15,004 )   -  
Net cash (used in)/generated from financing activities   (10,285 )   (102 )   (15,281 )   4,403  
Net decrease in cash and cash equivalents
(20,677 )
(26,353 )
(59,844 )
(61,844 )
Cash and cash equivalents at beginning of period
121,611

37,115

155,752

66,365
Effects of exchange rate changes on cash and cash equivalents   3,268     442     8,294     6,683  
Cash and cash equivalents at end of period   104,202     11,204     104,202     11,204  








 

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 March


   

Nine months ended
31 March



      2016

£’000

      2015

£’000

      2016

£’000

   

2015

£’000

 
Profit/(loss) for the period

13,761
    (2,874 )

37,328     6,015

Adjustments:















Tax expense/(credit)

5,903


(8,555 )

15,391

(1,519 )
Net finance costs

3,562


5,867


12,635

18,245

(Profit)/loss on disposal of players’ registrations

(1,950 )

1,556


4,838

(18,204 )
Exceptional items

-


1,275


-

2,336

Amortization

21,164


25,708


64,950

73,931

Depreciation     2,524       2,469       7,491     7,365  
Adjusted EBITDA     44,964       25,446       142,633     88,169  
















 

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 March


 

Nine months ended
31 March


 

  2016

£’000

    2015

£’000

    2016

£’000

    2015

£’000

 
Profit/(loss) for the period
13,761
  (2,874 )
37,328
  6,015
Exceptional items
-

1,275

-

2,336
Foreign exchange (gains)/losses on unhedged US dollar denominated borrowings
(242 )
468

972

(530 )
Fair value movement on derivative financial instruments
(1,351 )
(1,511 )
(4,263 )
(3,997 )
Hedge ineffectiveness of cash flow hedges
-

234

-

-
Tax expense/(credit)   5,903     (8,555 )   15,391     (1,519 )
Adjusted profit/(loss) before tax
18,071

(10,963 )
49,428

2,305

Adjusted tax (expense)/credit (using a normalised tax rate of 35% (2015: 35%))

  (6,325 )   3,837     (17,300 )   (807 )
Adjusted profit/(loss) for the period (i.e. adjusted net income)   11,746     (7,126 )   32,128     1,498  












 
Adjusted basic earnings/(loss) per share:











Adjusted basic earnings/(loss) per share (pence)
7.17

(4.35 )
19.60

0.91
Weighted average number of ordinary shares outstanding (thousands)
163,892

163,797

163,889

163,794
Adjusted diluted earnings/(loss) per share:











Adjusted diluted earnings/(loss) per share (pence)
7.15

(4.34 )
19.56

0.91
Weighted average number of ordinary shares outstanding (thousands)   164,288     164,140     164,288     164,140  












 

4Cash generated from operations


   

Three months ended
31 March

 


   

Nine months ended
31 March

 



      2016

£’000

      2015

£’000

      2016

£’000

      2015

£’000

 
Profit/(loss) for the period

13,761
    (2,874 )

37,328
    6,015

Tax expense/(credit)     5,903       (8,555 )     15,391       (1,519 )
Profit/(loss) before tax

19,664


(11,429 )

52,719


4,496

Depreciation

2,524


2,469


7,491


7,365

Amortization

21,164


25,708


64,950


73,931

(Profit)/loss on disposal of players’ registrations

(1,950 )

1,556


4,838


(18,204 )
Net finance costs

3,562


5,867


12,635


18,245

Loss on disposal of property, plant and equipment

-


-


10


5

Equity-settled share-based payments

375


322


1,170


1,029

Net exchange differences

(255 )

438


1,934


(530 )
Fair value adjustment to derivative financial instruments

(1,583 )

3,131


(5,629 )

4,342

Reclassified from hedging reserve

345


(1,383 )

1,008


(3,774 )
Decrease/(increase) in inventories

211


-


(1,293 )

-

(Increase)/decrease in trade and other receivables

(12,605 )

(22,468 )

1,774


29,930

Decrease in trade and other payables and deferred revenue     (16,959 )     (7,400 )     (96,006 )     (71,103 )
Cash generated from/(used in) operations     14,493       (3,189 )     45,601       45,732  

















 

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
Sard Verbinnen & Co
Jim Barron / Michael Henson
+ 1 212 687 8080
JBarron@SARDVERB.com

Source: Manchester United plc