Manchester United plc 2018 Second Quarter Results

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 2018 fiscal second quarter ended 31 December 2017.

Highlights

  • Extended manager Jose Mourinho’s contract
  • Revenue for the quarter £163.9m – up 4% from second quarter 2017
  • Announced Melitta as the Club’s first official coffee partner

Commentary

Ed Woodward, Executive Vice Chairman, commented, “Our solid business model has allowed us to invest in the future of the Club with the extension of Jose Mourinho’s contract as manager and the acquisition of Alexis Sanchez. We look forward to the remainder of the season with confidence.”

Outlook

For fiscal 2018, Manchester United continues to expect:

  • Revenue to be £575m to £585m.
  • Adjusted EBITDA to be £175m to £185m.

Key Financials (unaudited)

£ million (except (loss)/earnings per share) Three months ended

31 December

Six months ended

31 December

2017 2016 Change 2017 2016 Change
Commercial revenue 65.4 66.8 (2.1%) 145.9 141.1 3.4%
Broadcasting revenue 61.6 52.5 17.3% 99.7 81.6 22.2%
Matchday revenue 36.9 38.6 (4.4%) 59.3 55.4 7.0%
Total revenue 163.9 157.9 3.8% 304.9 278.1 9.6%
Adjusted EBITDA167.8 69.0 (1.7%) 104.4 100.2 4.2%
Operating profit 28.7 37.6 (23.7%) 43.9 43.8 0.2%
(Loss)/profit for the period (i.e. net (loss)/income) 2(29.0) 17.5 - (21.1) 18.7 -
Basic (loss)/earnings per share (pence) (17.71) 10.69 - (12.87) 11.40 -
Adjusted profit for the period (i.e. adjusted net income)115.1 17.4 (13.2%) 21.3 18.2 17.0%
Adjusted basic earnings per share (pence)19.23 10.63 (13.2%) 12.99 11.07 17.3%
Net debt1/3328.6 409.3 (19.7%) 328.6 409.3 (19.7%)

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” 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.

2 The US federal corporate income tax rate has reduced from 35% to 21% following the substantive enactment of US tax reform on 22 December 2017. This necessitated a re-measurement of the existing US deferred tax position in the period to 31 December 2017. As a result the loss for the three and six months ended 31 December 2017 includes a non-cash tax accounting write off of £48.8 million.

3 The gross USD debt principal remains unchanged.

Revenue Analysis

Commercial
Commercial revenue for the quarter was £65.4 million, a decrease of £1.4 million, or 2.1%, over the prior year quarter.

  • Sponsorship revenue for the quarter was £39.4 million, a decrease of £1.3 million, or 3.2%, over the prior year quarter;
  • Retail, Merchandising, Apparel & Product Licensing revenue for the quarter was £26.0 million, a decrease of £0.1 million, or 0.4% over the prior year quarter.

Broadcasting
Broadcasting revenue for the quarter was £61.6 million, an increase of £9.1 million, or 17.3%, over the prior year quarter, primarily due to participation in the UEFA Champions League and two additional PL games broadcast live.

Matchday
Matchday revenue for the quarter was £36.9 million, a decrease of £1.7 million, or 4.4%, over the prior year quarter, primarily due to playing two fewer domestic cup home games.

Other Financial Information

Operating expenses
Total operating expenses for the quarter were £136.2 million, an increase of £15.0 million, or 12.4%, over the prior year quarter.

Employee benefit expenses
Employee benefit expenses for the quarter were £69.6 million, an increase of £6.0 million, or 9.4%, over the prior year quarter, primarily due to player salary uplifts due to participation in the UEFA Champions League.

Other operating expenses
Other operating expenses for the quarter were £26.5 million, an increase of £1.2 million, or 4.7%, over the prior year quarter.

Depreciation & amortization
Depreciation for the quarter was £2.8 million, a decrease of £0.1 million, or 3.4%, over the prior year quarter. Amortization for the quarter was £37.3 million, an increase of £3.1 million, or 9.1%, over the prior year quarter. The unamortized balance of registrations at 31 December 2017 was £341.8 million.

Exceptional items
Exceptional items for the quarter were £nil. Exceptional credit for the prior year quarter was £4.8 million, relating to a reversal of a registrations impairment charge for a player considered to be re-established as a member of the first team playing squad.

Profit on disposal of intangible assets
Profit on disposal of intangible assets for the quarter was £1.0 million compared to a profit of £0.9 million in the prior year quarter.

Net finance costs
Net finance costs for the quarter were £4.3 million, a decrease of £7.7 million, or 64.2%, over the prior year quarter, primarily due to unrealized foreign exchange gains on unhedged USD borrowings.

Tax
The US federal corporate income tax rate has reduced from 35% to 21% following the substantive enactment of US tax reform on 22 December 2017. This necessitated a re-measurement of the existing US deferred tax position in the period to 31 December 2017. As a result the current quarter expense includes a non-cash tax accounting write off of £48.8 million. Accordingly, the tax expense for the quarter was £53.4 million, compared to £8.1 million in the prior year quarter.

Cash flows
Overall cash and cash equivalents (including the effects of exchange rate changes) decreased by £60.9 million in the quarter compared to a decrease of £41.6m in the prior year quarter.

Net cash used in operating activities for the quarter was £44.4 million, an increase of £1.9 million over the prior year quarter.

Net capital expenditure on property, plant and equipment and investment property for the quarter was £4.1 million, an increase of £2.0 million over the prior year quarter.

Net capital expenditure on intangible assets for the quarter was £11.8 million, an increase of £8.1 million over the prior year quarter.

Net Debt
Net Debt as of 31 December 2017 was £328.6 million, a decrease of £80.7 million over the year. The gross USD debt principal remains unchanged.

Dividend
A semi-annual cash dividend of $0.09 per share was paid on 5 January 2018. A further semi-annual cash dividend of $0.09 per share will be paid on 5 June 2018, to shareholders of record on 27 April 2018. The stock will begin to trade ex-dividend on 26 April 2018.

Conference Call Information

The Company’s conference call to review second quarter fiscal 2018 results will be broadcast live over the internet today, 8 February 2018 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 140-year heritage we have won 66 trophies, enabling us to develop what we believe is one of the world’s leading sports brands 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, 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 intangible assets, 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 (loss)/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 derivative financial instruments, adding/subtracting the actual tax expense/credit for the period, and subtracting the adjusted tax expense for the period (based on a normalized tax rate of 35%; 2016: 35%). The normalized tax rate of 35% was the US federal corporate income tax rate applicable during the period.

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 the items referred to above and then to apply a ‘normalized’ tax rate (for both the current and prior periods) of the US federal income tax rate of 35% applicable during the period. A reconciliation of (loss)/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.

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


Key Performance Indicators

Three months endedSix months ended
31 December31 December
2017 2016 2017 2016
Commercial % of total revenue 39.9% 42.3% 47.9% 50.7%
Broadcasting % of total revenue 37.6% 33.3% 32.7% 29.4%
Matchday % of total revenue 22.5% 24.4% 19.4% 19.9%
Home Matches Played
PL 7 7 11 10
UEFA competitions 2 2 3 3
Domestic Cups - 2 1 2
Away Matches Played
UEFA competitions 2 2 4 3
Domestic Cups 2 - 2 1
Other
Employees at period end 923 839 923 839
Employee benefit expenses % of revenue 42.5% 40.3% 45.8% 45.2%
Phasing of Premier League home gamesQuarter 1Quarter 2Quarter 3Quarter 4Total
2017/18 season* 4 7 5 3 19
2016/17 season 3 7 4 5 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

2017 2016 2017 2016
Revenue163,962 157,858 304,942 278,071
Operating expenses (136,252) (121,156) (279,288) (243,398)
Profit on disposal of intangible assets 1,013 915 18,292 9,120
Operating profit28,723 37,617 43,946 43,793
Finance costs (4,533) (12,116) (5,534) (18,214)
Finance income 170 131 388 311
Net finance costs (4,363) (11,985) (5,146) (17,903)
Profit before tax24,360 25,632 38,800 25,890
Tax expense 1(53,446) (8,099) (59,939) (7,196)
(Loss)/profit for the period 1(29,086) 17,533 (21,139) 18,694
Basic (loss)/earnings per share:
Basic (loss)/earnings per share (pence) 1(17.71) 10.69 (12.87) 11.40
Weighted average number of ordinary shares outstanding (thousands) 164,195 164,025 164,195 164,025
Diluted (loss)/earnings per share:

Diluted (loss)/earnings per share (pence) 1/2

(17.71) 10.66 (12.87) 11.36
Weighted average number of ordinary shares outstanding (thousands) 164,585 164,489 164,585 164,489

1 The US federal corporate income tax rate has reduced from 35% to 21% following the substantive enactment of US tax reform on 22 December 2017. This necessitated a re-measurement of the existing US deferred tax position in the period to 31 December 2017. As a result the current period tax expense includes a non-cash tax accounting write off of £48.8 million. Accordingly, this has resulted in a loss for the period and basic and diluted loss per share for the period.

2 For the three and six months ended 31 December 2017 potential ordinary shares are anti-dilutive, as their inclusion in the diluted loss per share calculation would reduce the loss per share, and hence have been excluded.

CONSOLIDATED BALANCE SHEET
(unaudited; in £ thousands)

As of 31 December

2017

As of 30 June

2017

As of 31 December

2016

ASSETS
Non-current assets
Property, plant and equipment 246,673 244,738 244,064
Investment property 13,901 13,966 14,049
Intangible assets 770,076 717,544 773,260
Derivative financial instruments 1,192 1,666 2,435
Trade and other receivables 10,560 15,399 4,280
Tax receivable 1,882 - -
Deferred tax asset 80,341 142,107 144,942
1,124,625 1,135,420 1,183,030
Current assets
Inventories 1,918 1,637 1,093
Derivative financial instruments 2,704 3,218 4,583
Trade and other receivables 105,753 103,732 124,395
Cash and cash equivalents 155,312 290,267 122,704
265,687 398,854 252,775
Total assets1,390,312 1,534,274 1,435,805


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

As of 31 December

2017

As of 30 June

2017

As of 31 December

2016

EQUITY AND LIABILITIES
Equity
Share capital 53 53 52
Share premium 68,822 68,822 68,822
Merger reserve 249,030 249,030 249,030
Hedging reserve (24,209) (31,724) (43,237)
Retained earnings 171,500 191,436 192,999
465,196 477,617 467,666
Non-current liabilities
Derivative financial instruments - 655 2,656
Trade and other payables 70,331 83,587 64,967
Borrowings 474,748 497,630 525,830
Deferred revenue 32,704 39,648 32,927
Deferred tax liabilities 31,834 20,828 13,274
609,617 642,348 639,654
Current liabilities
Derivative financial instruments - 1,253 2,925
Tax liabilities 3,704 9,772 5,453
Trade and other payables 182,965 190,315 166,710
Borrowings 9,160 5,724 6,158
Deferred revenue 119,670 207,245 147,239
315,499 414,309 328,485
Total equity and liabilities1,390,312 1,534,274 1,435,805

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

Three months ended
31 December

Six months ended
31 December

2017 2016 2017 2016
Cash flows from operating activities
Cash (used in)/generated from operations (see supplemental note 4) (38,440) (40,633) (11,489) 23,150
Interest paid (1,621) (1,743) (9,639) (9,647)
Interest received 170 131 388 311
Tax paid (4,530) (211) (5,768) (3,663)
Net cash (used in)/generated from operating activities(44,421) (42,456) (26,508) 10,151
Cash flows from investing activities
Payments for property, plant and equipment (4,243) (2,151) (8,587) (3,708)
Proceeds from sale of property, plant and equipment 75 - 75 -
Payments for investment property - (15) - (659)
Payments for intangible assets (12,000) (6,563) (129,121) (165,411)
Proceeds from sale of intangible assets 256 2,909 32,442 39,068
Net cash used in investing activities(15,912) (5,820) (105,191) (130,710)
Cash flows from financing activities
Repayment of borrowings (106) (100) (206) (194)
Net cash used in financing activities(106) (100) (206) (194)
Net decrease in cash and cash equivalents(60,439) (48,376) (131,905) (120,753)
Cash and cash equivalents at beginning of period 216,236 164,277 290,267 229,194
Effects of exchange rate changes on cash and cash equivalents (485) 6,803 (3,050) 14,263
Cash and cash equivalents at end of period155,312 122,704 155,312 122,704

SUPPLEMENTAL NOTES

1 General 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.

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

Three months ended
31 December

Six months ended
31 December

2017

£’000

2016

£’000

2017

£’000

2016

£’000

(Loss)/profit for the period(29,086) 17,533 (21,139) 18,694
Adjustments:
Tax expense 53,446 8,099 59,939 7,196
Net finance costs 4,363 11,985 5,146 17,903
Profit on disposal of intangible assets (1,013) (915) (18,292) (9,120)
Exceptional items - (4,753) - (4,753)
Amortization 37,335 34,216 73,389 65,021
Depreciation 2,755 2,851 5,329 5,263
Adjusted EBITDA67,800 69,016 104,372 100,204

3 Reconciliation of (loss)/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

2017

£’000

2016

£’000

2017

£’000

2016

£’000

(Loss)/profit for the period(29,086) 17,533 (21,139) 18,694
Exceptional items - (4,753) - (4,753)
Foreign exchange (gains)/losses on unhedged US dollar borrowings (1,328) 4,983 (6,824) 7,094
Fair value movement on derivative financial instruments 291 973 845 (301)
Tax expense 53,446 8,099 59,939 7,196
Adjusted profit before tax 23,323 26,835 32,821 27,930

Adjusted tax expense (using a normalized US statutory rate of 35% (2016: 35%))

(8,163) (9,392) (11,487) (9,776)
Adjusted profit for the period (i.e. adjusted net income)15,160 17,443 21,334 18,154
Adjusted basic earnings per share:
Adjusted basic earnings per share (pence) 9.23 10.63 12.99 11.07
Weighted average number of ordinary shares outstanding (thousands) 164,195 164,025 164,195 164,025
Adjusted diluted earnings per share:
Adjusted diluted earnings per share (pence) 9.21 10.60 12.96 11.04
Weighted average number of ordinary shares outstanding (thousands) 164,585 164,489 164,585 164,489

4 Cash (used in)/generated from operations

Three months ended

31 December

Six months ended

31 December

2017

£’000

2016

£’000

2017

£’000

2016

£’000

(Loss)/profit for the period (29,086) 17,533 (21,139) 18,694
Tax expense 53,446 8,099 59,939 7,196
Profit before tax 24,360 25,632 38,800 25,890
Depreciation 2,755 2,851 5,329 5,263
Amortization 37,335 34,216 73,389 65,021
Reversal of impairment - (4,753) - (4,753)

Profit on disposal of intangible assets

(1,013) (915) (18,292) (9,120)
Net finance costs 4,363 11,974 5,146 17,903
Profit on disposal of property, plant and equipment (75) - (75) -
Equity-settled share-based payments 618 481 1,203 938
Foreign exchange losses on operating activities 9 2,914 1,000 878
Reclassified from hedging reserve 3,707 480 7,708 1,246
Changes in working capital:
Inventories 156 329 (281) (167)
Trade and other receivables (24,836) (58,064) (8,163) (18,617)
Trade and other payables and deferred revenue (85,819) (55,778) (117,253) (61,332)
Cash (used in)/generated from operations(38,440) (40,633) (11,489) 23,150

Contacts:

Manchester United plc
Investor Relations:
Cliff Baty, +44 161 868 8650
Chief Financial Officer
ir@manutd.co.uk
or
Manchester United plc
Media:
Philip Townsend, +44 161 868 8148
philip.townsend@manutd.co.uk
or
Sard Verbinnen & Co
Jim Barron / Devin Broda
+ 1 212 687 8080
JBarron@SARDVERB.com
dbroda@SARDVERB.com

Data & News supplied by www.cloudquote.io
Stock quotes supplied by Barchart
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.