Manchester United plc 2017 Second Quarter Results

Manchester United plc 2017 Second Quarter Results

• Q2 REVENUES OF £157.9 MILLION
• Q2 ADJUSTED EBITDA OF £69.0 MILLION
• Q2 OPERATING PROFIT OF £37.6 MILLION

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 2017 fiscal second quarter and six months ended 31 December 2016.

Highlights

• Broadcasting revenues of £52.5 million up 40.8% for the quarter.
• Matchday revenues of £38.6 million up 27.0% for the quarter.
• Three sponsorship deals announced in the quarter:
  • Deezer (Global)
  • Mlily (Global)
  • Renewal of Global partnership with Concha Y Toro.
• Progressed to the English Football League Cup Final.

Commentary

Ed Woodward, Executive Vice Chairman, commented, “We are pleased to be competing for the first available trophy of the season when we travel to Wembley to face Southampton in the EFL Cup final this month. The robustness of our business model continues to be reflected in our strong quarterly financial results and we remain on track to deliver record revenues for the year. Finally, I’d like to congratulate Wayne Rooney on becoming Manchester United’s all-time record goal scorer – achieving the remarkable feat of scoring 250 goals over the last 13 seasons, surpassing Sir Bobby Charlton’s record which has stood for 44 years.”

Outlook

For fiscal 2017, Manchester United continues to expect:

• Revenue to be £530m to £540m.
• Adjusted EBITDA to be £170m to £180m.

Key Financials (unaudited)

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 gross USD debt principal remains unchanged. The increase in net debt is due to the strengthening US dollar, with the USD/GBP exchange rate moving from 1.4747 at 31 December 2015 to 1.2293 at 31 December 2016 resulting in an £88.0 million increase in gross debt. Offsetting this were movements of £0.8 million including secured bank loan repayments and an increase in cash and cash equivalents.

Revenue Analysis

Commercial

Commercial revenue for the quarter was £66.8 million, an increase of £0.7 million, or 1.1%, over the prior year quarter.

• Sponsorship revenue for the quarter was £38.7 million, an increase of £1.3 million, or 3.5%, over the prior year quarter;
• Retail, Merchandising, Apparel & Product Licensing revenue for the quarter was £26.1 million, an increase of £0.4 million, or 1.6% over the prior year quarter; and
• Mobile & Content revenue for the quarter was £2.0 million, a decrease of £1.0 million, or 33.3% over the prior year quarter.

Broadcasting

Broadcasting revenue for the quarter was £52.5 million, an increase of £15.2 million, or 40.8%, over the prior year quarter, primarily due to the new FAPL broadcasting rights agreement, two additional FAPL home games and one additional live broadcast, partially offset by non-participation in the UEFA Champions League.

Matchday

Matchday revenue for the quarter was £38.6 million, an increase of £8.2 million, or 27.0%, over the prior year quarter, primarily due to playing three more home games across all competitions.

Other Financial Information

Operating expenses

Total operating expenses for the quarter were £121.2 million, an increase of £19.4 million, or 19.1%, over the prior year quarter.

Employee benefit expenses

Employee benefit expenses for the quarter were £63.6 million, an increase of £7.9 million, or 14.2%, over the prior year quarter, primarily due to first team acquisitions.

Other operating expenses

Other operating expenses for the quarter were £25.3 million, an increase of £3.3 million, or 15.0%, over the prior year quarter, primarily due to playing three more home games across all competitions.

Depreciation & amortization

Depreciation for the quarter was £2.9 million, an increase of £0.4 million, or 16.0%, over the prior year quarter. Amortization for the quarter was £34.2 million, an increase of £12.6 million, or 58.3%, over the prior year quarter. The unamortized balance of registrations at 31 December 2016 was £346.4 million.

Exceptional items

Exceptional credit for the quarter was £4.8 million, relating to a reversal of a registrations’ impairment charge for a player now 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 £0.9 million compared to £0.6 million in the prior year quarter.

Net finance costs

Net finance costs for the quarter were £12.0 million, an increase of £7.3 million, or 155.3%, over the prior year quarter, primarily due to unrealised foreign exchange losses on retranslation of unhedged US dollar borrowings.

Tax

The tax expense for the quarter was £8.1 million, compared to £9.3 million in the prior year quarter.

Cash flows

Net cash used in operating activities for the quarter was £42.5 million, an increase of £33.3 million over the prior year quarter.

Net capital expenditure on property, plant and equipment for the quarter was £2.1 million, an increase of £1.9 million over the prior year quarter.

Net capital expenditure on intangible assets for the quarter was £3.7 million, a decrease of £6.5 million over the prior year quarter.

Overall cash and cash equivalents (including the effects of exchange rate changes) decreased by £41.6 million in the quarter.

Net Debt

Net Debt as of 31 December 2016 was £409.3 million, an increase of £87.2 million over the year. The gross USD debt principal remains unchanged.

The increase in net debt is due to the strengthening US dollar, with the USD/GBP exchange rate moving from 1.4747 at 31 December 2015 to 1.2293 at 31 December 2016 resulting in an £88.0 million increase in gross debt. Offsetting this were movements of £0.8 million including secured bank loan repayments and an increase in cash and cash equivalents.

Dividend

A semi-annual cash dividend of $0.09 per share was paid on 5 January 2017. A further semi-annual cash dividend of $0.09 per share will be paid on 8 June 2017, to shareholders of record on 28 April 2017. The shares will begin to trade ex-dividend on 26 April 2017.

Conference Call Information

The Company’s conference call to review second quarter fiscal 2017 results will be broadcast live over the internet today, 9 February 2017 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 64 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 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 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 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 for the foreseeable future.

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.

4. Net debt

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

*Subject to changes in broadcasting scheduling

CONSOLIDATED INCOME STATEMENT

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

CONSOLIDATED BALANCE SHEET

(unaudited; in £ thousands)

CONSOLIDATED BALANCE SHEET (continued)

(unaudited; in £ thousands)

CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited; in £ thousands)

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 profit for the period to Adjusted EBITDA

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

4 Cash generated from operations

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

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