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Manchester United PLC Reports Second Quarter Fiscal 2020 Results; Reiterates Fiscal Year 2020 Guidance

February 25, 2020 GMT

MANCHESTER, England--(BUSINESS WIRE)--Feb 25, 2020--

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 2020 fiscal second quarter ended 31 December 2019.

Management Commentary

Ed Woodward, Executive Vice Chairman, commented, “We are pushing for a strong finish in the Premier League, the Europa League and the FA Cup as we enter the final third of the season. We have continued to make progress on our squad rebuild, with many changes in terms of players that we have brought in and players that have come through our Academy; the foundation for delivering the long-term success that we are all working towards is in place as we implement our plan and our footballing vision with Ole.”

Outlook

For fiscal 2020, the Company continues to expect total revenues to be in a range of £560 to £580 million and total adjusted EBITDA to be in a range of £155 to £165 million.

Phasing of Premier League games

Quarter 1

Quarter 2

Quarter 3

Quarter 4

Total

2019/20 season*

7

13

11

7

38

2018/19 season

7

13

11

7

38

*Subject to changes in broadcasting scheduling


Key Financials (unaudited)

£ million (except earnings per share)

Three months ended

31 December

 

Six months ended

31 December

 

 

2019

2018

Change

2019

2018

Change

Commercial revenue

70.6

65.9

7.1%

151.0

141.8

6.5%

Broadcasting revenue

64.7

103.7

(37.6%)

97.6

146.5

(33.4%)

Matchday revenue

33.1

39.0

(15.1%)

55.2

55.3

(0.2%)

Total revenue

168.4

208.6

(19.3%)

303.8

343.6

(11.6%)

Adjusted EBITDA (1)

72.1

104.3

(30.9%)

106.9

133.7

(20.0%)

Operating profit

36.5

44.0

(17.0%)

47.5

57.9

(18.0%)

 

Profit for the period (i.e. net income) (2)

35.0

26.8

30.6%

36.1

33.4

8.1%

Basic earnings per share (pence)

21.27

16.27

30.7%

21.96

20.31

8.1%

Adjusted profit for the period (i.e. adjusted net income) (1)

25.8

46.3

(44.3%)

29.7

53.3

(44.3%)

Adjusted basic earnings per share (pence) (1)

15.67

28.13

(44.3%)

18.02

32.40

(44.4%)

 

Net debt (1)/(2)

391.3

317.7

23.2%

391.3

317.7

23.2%

(1) Adjusted EBITDA, adjusted profit for the period, adjusted basic earnings per share and net debt are non-IFRS measures. See “Non-IFRS Measures: Definitions and Use” on page 6 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.
(2) The gross USD debt principal remains unchanged.

Revenue Analysis

Commercial

Commercial revenue for the quarter was £70.6 million, an increase of £4.7 million, or 7.1%, over the prior year quarter.

  • Sponsorship revenue was £45.1 million, an increase of £4.8 million, or 11.9%, over the prior year quarter, primarily due to increased sponsorship deals.
  • Retail, Merchandising, Apparel & Product Licensing revenue was £25.5 million, a decrease of £0.1 million, or 0.4%, over the prior year quarter.

Broadcasting

Broadcasting revenue for the quarter was £64.7 million, a decrease of £39.0 million, or 37.6%, over the prior year quarter, primarily due to non-participation in the UEFA Champions League. Guaranteed UEFA broadcasting revenues are typically recognised evenly over the course of the competition’s group stages. Given 5 of the 6 group stage matches were played in the quarter, the majority of the full year revenue impact has occurred in Q2.

Matchday

Matchday revenue for the quarter was £33.1 million, a decrease of £5.9 million, or 15.1%, over the prior year quarter, primarily due to playing two fewer home games across the Premier League and UEFA competitions; partially offset by playing an additional domestic cup home game.

Other Financial Information

Operating expenses

Total operating expenses for the quarter were £131.2 million, a decrease of £29.1 million, or 18.2%, over the prior year quarter.

Employee benefit expenses

Employee benefit expenses for the quarter were £70.9 million, a decrease of £7.0 million, or 9.0%, over the prior year quarter, primarily due to reductions in player salaries as a result of non-participation in the UEFA Champions League.

Other operating expenses

Other operating expenses for the quarter were £25.4 million, a decrease of £1.0 million, or 3.8%, over the prior year quarter.

Depreciation and amortization

Depreciation for the quarter was £3.7 million, an increase of £0.7 million, or 23.3%, over the prior year quarter. Amortization for the quarter was £31.2 million, a decrease of £2.2 million, or 6.6%, over the prior year quarter. The unamortized balance of registrations at 31 December 2019 was £329.2 million.

Exceptional items

Exceptional items for the quarter were £nil. Exceptional items for the prior year quarter £19.6 million, relating to compensation to the former manager and certain members of the coaching staff for loss of office.

Loss on disposal of intangible assets

Loss on disposal of intangible assets for the quarter was £0.7 million, compared to £4.3 million for the prior year quarter.

Net finance income/(costs)

Net finance income for the quarter was £15.3 million, compared to net finance costs of £6.3 million in the prior year quarter, primarily due to unrealized foreign exchange gains on unhedged USD borrowings compared to losses in the prior year quarter.

Income tax

The income tax expense for the quarter was £16.8 million, compared to £10.9 million in the prior year quarter.

Cash flows

Overall cash and cash equivalents (including the effects of exchange rate movements) decreased by £39.4 million in the quarter, compared to a decrease of £57.1 million in the prior year quarter.

Net cash outflow from operating activities for the quarter was £15.2 million, a decrease of £27.2 million over the prior year quarter. This is primarily due to lower working capital movements as a result of non-participation in the UEFA Champions League.

Net capital expenditure on property, plant and equipment for the quarter was £9.9 million, an increase of £7.5 million over the prior year quarter.

Net capital expenditure on intangible assets for the quarter was £7.1 million, a decrease of £9.1 million over the prior year quarter.

Net debt

Net Debt as of 31 December 2019 was £391.3 million, an increase of £73.6 million over the year, primarily due to an overall decrease in cash and cash equivalents. The gross USD debt principal remains unchanged.

Dividend

A semi-annual cash dividend of $0.09 per share was paid on 6 January 2020. A further semi-annual cash dividend of $0.09 per share will be paid on 3 June 2020, to shareholders of record on 24 April 2020. The stock will begin to trade ex-dividend on 23 April 2020.

Conference Call Details

The Company’s conference call to review fiscal 2020 second quarter results will be broadcast live over the internet today, 25 February 2020 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 teams in the world, playing one of the most popular spectator sports on Earth. Through our 142-year football heritage we have won 66 trophies, enabling us to develop what we believe is one of the world’s leading sports and entertainment brands with a global community of 1.1 billion fans and followers. Our large, passionate and highly engaged fan base provides Manchester United with a worldwide platform to generate significant revenue from multiple sources, including sponsorship, merchandising, product licensing, broadcasting and matchday initiatives which in turn, directly fund our ability to continuously reinvest in the club.

Cautionary Statements

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 intangible assets, exceptional items, net finance costs/income, and tax.

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), material volatile items (primarily profit on disposal of intangible assets and exceptional items), 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, and fair value movements on embedded foreign exchange derivatives, 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 21%; 2018: 21%). The normalized tax rate of 21% is the current US federal corporate income tax rate.

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 the items referred to above and then to apply a ‘normalized’ tax rate (for both the current and prior periods) of the weighted average US federal corporate income tax rate of 21% (2018: 21%) applicable during the financial year. 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. There is 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.

4. Net debt

Net debt is calculated as non-current and current borrowings minus cash and cash equivalents.

Key Performance Indicators

 

Three months ended

Six months ended

31 December

31 December

 

2019

2018

2019

2018

Commercial % of total revenue

41.9%

31.6%

49.7%

41.3%

Broadcasting % of total revenue

38.4%

49.7%

32.1%

42.6%

Matchday % of total revenue

19.7%

18.7%

18.2%

16.1%

Home Matches Played

 

 

 

 

PL

6

7

10

10

UEFA competitions

2

3

3

3

Domestic Cups

1

-

2

1

Away Matches Played

 

 

 

 

PL

7

6

10

10

UEFA competitions

3

2

3

3

Domestic Cups

1

-

1

-

 

Other

 

 

 

 

Employees at period end

979

937

979

937

Employee benefit expenses % of revenue

42.1%

37.3%

46.5%

45.1%


CONSOLIDATED STATEMENT OF PROFIT OR LOSS
(unaudited; in £ thousands, except per share and shares outstanding data)

 

Three months ended

31 December

Six months ended

31 December

 

2019

2018

2019

2018

Revenue from contracts with customers

168,455

208,612

303,826

343,638

Operating expenses

(131,253)

(160,269)

(267,674)

(303,849)

(Loss)/profit on disposal of intangible assets

(715)

(4,349)

11,302

18,079

Operating profit

36,487

43,994

47,454

57,868

Finance costs

(5,386)

(7,131)

(11,912)

(12,946)

Finance income

20,644

785

18,732

1,474

Net finance income/(costs)

15,258

(6,346)

6,820

(11,472)

Profit before income tax

51,745

37,648

54,274

46,396

Income tax expense

(16,738)

(10,878)

(18,139)

(12,980)

Profit for the period

35,007

26,770

36,135

33,416

 

 

 

 

 

Basic earnings per share:

 

 

 

 

Basic earnings per share (pence)

21.27

16.27

21.96

20.31

Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share (thousands)

164,573

164,526

164,573

164,526

Diluted earnings per share:

 

 

 

 

Diluted earnings per share (pence)

21.25

16.26

21.94

20.29

Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share (thousands)

164,746

164,663

164,737

164,663


CONSOLIDATED BALANCE SHEET
(unaudited; in £ thousands)

 

As of

 

31 December

2019

30 June

2019

31 December

2018

ASSETS

 

 

 

Non-current assets

 

 

 

Property, plant and equipment

253,523

246,032

246,910

Right-of-use assets (1)

5,168

-

-

Investment properties

24,792

24,979

13,772

Intangible assets

758,476

768,857

739,472

Deferred tax asset

53,862

58,415

57,636

Trade receivables

40,586

9,889

10,387

Income tax receivable

-

-

547

Derivative financial instruments

-

30

2,559

 

1,136,407

1,108,202

1,071,283

Current assets

 

 

 

Inventories

2,535

2,130

2,610

Prepayments

13,211

13,030

10,320

Contract assets – accrued revenue

78,098

39,532

79,496

Trade receivables

26,313

23,851

32,819

Other receivables

614

1,188

1,597

Income tax receivable

618

643

598

Derivative financial instruments

-

312

625

Cash and cash equivalents

100,856

307,637

190,395

 

222,245

388,323

318,460

Total assets

1,358,652

1,496,525

1,389,743

(1) Relates to adoption of IFRS 16, “Leases” with effect from 1 July 2019. See supplemental note 5 for further details.


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

 

As of

 

31 December

2019

30 June

2019

31 December

2018

EQUITY AND LIABILITIES

 

 

 

Equity

 

 

 

Share capital

53

53

53

Share premium

68,822

68,822

68,822

Merger reserve

249,030

249,030

249,030

Hedging reserve

(26,247)

(35,544)

(35,693)

Retained earnings

169,341

132,841

170,544

 

460,999

415,202

452,756

Non-current liabilities

 

 

 

Deferred tax liabilities

37,766

31,865

33,302

Contract liabilities - deferred revenue

23,605

33,354

32,952

Trade and other payables

31,241

79,183

46,644

Borrowings

486,852

505,779

502,576

Lease liabilities (1)

3,626

-

-

Derivative financial instruments

2,323

2,298

-

 

585,413

652,479

615,474

Current liabilities

 

 

 

Contract liabilities - deferred revenue

143,577

190,146

129,662

Trade and other payables

152,093

230,386

180,588

Income tax liabilities

9,429

2,859

5,771

Borrowings

5,288

5,453

5,492

Lease liabilities (1)

1,622

-

-

Derivative financial instruments

231

-

-

 

312,240

428,844

321,513

Total equity and liabilities

1,358,652

1,496,525

1,389,743

(1) Relates to adoption of IFRS 16, “Leases” with effect from 1 July 2019. See supplemental note 5 for further details.


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

 

Three months ended 31 December

Six months ended 31 December

 

2019

2018

2019

2018

Cash flows from operating activities

 

 

 

 

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

(13,833)

(41,019)

(18,439)

82,337

Interest paid

(1,585)

(1,734)

(9,951)

(9,507)

Debt finance costs paid

-

-

(555)

-

Interest received

406

722

1,050

1,355

Tax paid

(208)

(376)

(1,697)

(1,810)

Net cash (outflow)/inflow from operating activities

(15,220)

(42,407)

(29,592)

72,375

Cash flows from investing activities

 

 

 

 

Payments for property, plant and equipment

(9,879)

(2,414)

(13,030)

(7,318)

Payments for intangible assets

(11,598)

(16,418)

(187,311)

(145,056)

Proceeds from sale of intangible assets

4,530

255

22,009

25,183

Net cash outflow from investing activities

(16,947)

(18,577)

(178,332)

(127,191)

Cash flows from financing activities

 

 

 

 

Repayment of borrowings

-

-

-

(3,750)

Principal elements of lease payments (1)

(382)

-

(761)

-

Net cash outflow from financing activities

(382)

-

(761)

(3,750)

Net decrease in cash and cash equivalents

(32,549)

(60,984)

(208,685)

(58,566)

Cash and cash equivalents at beginning of period

140,307

247,505

307,637

242,022

Effects of exchange rate changes on cash and cash equivalents

(6,902)

3,874

1,904

6,939

Cash and cash equivalents at end of period

100,856

190,395

100,856

190,395

(1) Relates to adoption of IFRS 16, “Leases” with effect from 1 July 2019. See supplemental note 5 for further details.


SUPPLEMENTAL NOTES

1 General information

Manchester United plc (the “Company”) and its subsidiaries (together the “Group”) is a men’s and women’s professional football club together with related and ancillary activities. The Company incorporated under the Companies Law (as amended) of the Cayman Islands.

2 Reconciliation of profit for the period to adjusted EBITDA

 

Three months ended

31 December

Six months ended

31 December

 

2019

£’000

2018

£’000

2019

£’000

2018

£’000

Profit for the period

35,007

26,770

36,135

33,416

Adjustments:

 

 

 

 

Income tax expense

16,738

10,878

18,139

12,980

Net finance (income)/costs

(15,258)

6,346

(6,820)

11,472

Loss/(profit) on disposal of intangible assets

715

4,349

(11,302)

(18,079)

Exceptional items

-

19,599

-

19,599

Amortization

31,257

33,440

63,444

68,571

Depreciation

3,626

2,970

7,268

5,779

Adjusted EBITDA

72,085

104,352

106,864

133,738


3 Reconciliation 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

 

 

2019

£’000

2018

£’000

2019

£’000

2018

£’000

Profit for the period

35,007

26,770

36,135

33,416

Exceptional items

-

19,599

-

19,599

Foreign exchange (gains)/losses on unhedged US dollar denominated borrowings

(19,522)

1,316

(17,074)

1,535

Fair value movement on embedded foreign exchange derivatives

425

25

346

(56)

Income tax expense

16,738

10,878

18,139

12,980

Adjusted profit before income tax

32,648

58,588

37,546

67,474

 

Adjusted income tax expense (using a normalized tax rate of 21% (2018: 21%))

(6,856)

(12,303)

(7,885)

(14,170)

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

25,792

46,285

29,661

53,304

 

 

 

 

 

Adjusted basic earnings per share:

 

 

 

 

Adjusted basic earnings per share (pence)

15.67

28.13

18.02

32.40

Weighted average number of ordinary shares used as the denominator in calculating adjusted basic earnings per share (thousands)

164,573

164,526

164,573

164,526

Adjusted diluted earnings per share:

 

 

 

 

Adjusted diluted earnings per share (pence)

15.66

28.11

18.01

32.37

Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating adjusted diluted earnings per share (thousands)

164,746

164,663

164,737

164,663


4 Cash (used in)/generated from operations

 

Three months ended

31 December

Six months ended

31 December

 

2019

£’000

2018

£’000

2019

£’000

2018

£’000

Profit for the period

35,007

26,770

36,135

33,416

Income tax expense

16,738

10,878

18,139

12,980

Profit before income tax

51,745

37,648

54,274

46,396

Adjustments for:

 

 

 

 

Depreciation

3,626

2,970

7,268

5,779

Amortization

31,257

33,440

63,444

68,571

Loss/(profit) on disposal of intangible assets

715

4,349

(11,302)

(18,079)

Net finance (income)/costs

(15,258)

6,346

(6,820)

11,472

Non-cash employee benefit expense – equity-settled share-based payments

227

161

365

371

Foreign exchange losses/(gains) on operating activities

87

(95)

(286)

182

Reclassified from hedging reserve

2,957

1,536

5,811

2,844

Changes in working capital:

 

 

 

 

Inventories

129

56

(405)

(1,194)

Prepayments

2,171

2,336

(181)

542

Contract assets – accrued revenue

(38,165)

(33,643)

(38,566)

(41,478)

Trade receivables

6,160

2,442

8,504

81,719

Other receivables

14,655

(1,438)

574

(1,490)

Contract liabilities – deferred revenue

(66,449)

(97,181)

(56,318)

(54,983)

Trade and other payables

(7,690)

54

(44,801)

(18,315)

Cash (used in)/generated from operations

(13,833)

(41,019)

(18,439)

82,337

5 Adoption of IFRS 16

The Group adopted IFRS 16, “Leases” with effect from 1 July 2019. The Group has elected to apply the ‘simplified approach’ on initial adoption of IFRS 16, consequently comparative information has not been restated.

The new treatment of leases has resulted in an increase in non-current assets and financial liabilities as well as increasing underlying EBITDA, offset by an increase in depreciation and an increase in finance charges.

The Group expects that adjusted EBITDA for the year ended 30 June 2020 will increase by approximately £1.7 million. Profit before tax is expected to decrease by approximately £0.1 million.

Lease payments were previously presented as operating cash flows. Lease payments are now split into payments for the principal portion of the lease liability which are presented as financing cash flows, and payments for the interest portion of the lease liability which are presented as operating cash flows. There is no impact on overall cash flow.

Note 3 and note 15 to the interim consolidated financial statements for the three and six months ended 31 December 2019 provide further detail on the adoption of IFRS 16 and the impact on the consolidated income statement, consolidated balance sheet, and consolidated statement of cash flows.

View source version on businesswire.com:https://www.businesswire.com/news/home/20200225005518/en/

CONTACT: Investor Relations:

Corinna Freedman

Head of Investor Relations

+44 161 868 8431

Corinna.Freedman@manutd.co.ukMedia Relations:

Charlie Brooks

Director of Communications

+44 161 868 8148

charlie.brooks@manutd.co.ukSard Verbinnen & Co

Jim Barron / Devin Broda

+ 1 212 687 8080

JBarron@SARDVERB.com

dbroda@SARDVERB.com

KEYWORD: UNITED KINGDOM EUROPE

INDUSTRY KEYWORD: PROFESSIONAL SERVICES SOCCER ENTERTAINMENT SPORTS OTHER ENTERTAINMENT FINANCE

SOURCE: Manchester United PLC

Copyright Business Wire 2020.

PUB: 02/25/2020 07:00 AM/DISC: 02/25/2020 07:01 AM

http://www.businesswire.com/news/home/20200225005518/en