MANU Manchester United Plc

• RECORD TOTAL REVENUE OF £581.2 MILLION
• RECORD ADJUSTED EBITDA OF £199.8 MILLION
• RECORD OPERATING PROFIT OF £80.8 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 fourth quarter and twelve months ended 30 June 2017.

Highlights

• Won the UEFA Europa League and qualified for 2017/18 UEFA Champions League
• Won two domestic trophies in the 2016/17 Season – EFL Cup and Community Shield
• 12 Sponsorship deals announced during the fiscal year:
  • 9 global sponsorship partnerships
  • 1 regional sponsorship partnership, and
  • 2 financial services and MUTV partnerships

Commentary

Ed Woodward, Executive Vice Chairman, commented, “We concluded a successful 2016/17 season with a total of three trophies and a return to Champions League football. The year saw us set record revenues of over £581m and achieve a record EBITDA of £199.8m. We are pleased with the investment in our squad and look forward to an exciting season.”

Outlook

For fiscal 2018, Manchester United expect:

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

Key Financials (unaudited)

£ million (except earnings per share)   Twelve months ended

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      Three months ended

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        2017   2016   Change   2017   2016   Change Commercial revenue   275.5   268.3   2.7%   67.9   65.2   4.1% Broadcasting revenue   194.1   140.4   38.2%   81.1   47.7   70.0% Matchday revenue   111.6   106.6   4.7%   26.9   21.6   24.5% Total revenue   581.2   515.3   12.8%   175.9   134.5   30.8% Adjusted EBITDA1   199.8   191.9   4.1%   69.6   49.3   41.2% Operating profit   80.8   68.9   17.3%   41.1   3.6   1,041.7%           Profit/(loss) for the period (i.e. net income)   39.2   36.4   7.7%   24.3   (0.9)   - Basic earnings/(loss) per share   23.88   22.19   7.6%   14.79   (0.58)   - Adjusted profit for the period (i.e. adjusted net income)1   34.8   40.8   (14.7%)   22.9   8.7   163.2% Adjusted basic earnings per share (pence)1   21.20   24.91   (14.9%)   13.98   5.31   163.3%           Net debt1/2   213.1   260.9   (18.3%)   213.1   260.9   (18.3%)

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.

Revenue Analysis

Commercial

Commercial revenue for the year was £275.5 million, an increase of £7.2 million, or 2.7%, over the prior year.

• Sponsorship revenue was £162.3 million, an increase of £2.2 million, or 1.4%, over the prior year.
• Retail, Merchandising, Apparel & Product Licensing revenue was £104.0 million, an increase of £6.7 million, or 6.9%, over the prior year, primarily due to a full year contribution from the adidas agreement, compared to only 11 months in the prior year, plus growth in Megastore revenue.
• Mobile & Content revenue was £9.2 million, a decrease of £1.7 million, or 15.6%, over the prior year.

For the quarter, commercial revenue was £67.9 million, an increase of £2.7 million, or 4.1%, over the prior year quarter.

• Sponsorship revenue was £39.6 million, an increase of £2.0 million, or 5.3%, over the prior year quarter.
• Retail, Merchandising, Apparel & Product Licensing revenue was £25.8 million, an increase of £0.9 million, or 3.6%, over the prior year quarter.
• Mobile & Content revenue was £2.5 million, a decrease of £0.2 million, or 7.4%, over the prior year quarter.

Broadcasting

Broadcasting revenue for the year was £194.1 million, an increase of £53.7 million, or 38.2%, over the prior year, primarily due to the new Premier League broadcasting rights agreement plus progression to, and success in winning, the UEFA Europa League final.

Broadcasting revenue for the quarter was £81.1 million, an increase of £33.4 million, or 70.0%, over the prior year quarter, primarily due to the new Premier League broadcasting rights agreement plus progression to, and success in winning, the UEFA Europa League final.

Matchday

Matchday revenue for the year was £111.6 million, an increase of £5.0 million, or 4.7%, over the prior year, primarily due to playing two more home games in the year.

Matchday revenue for the quarter was £26.9 million, an increase of £5.3 million, or 24.5%, over the prior year quarter, primarily due to playing two more home games in the quarter.

Other Financial Information

Operating expenses

Total operating expenses for the year were £511.3 million, an increase of £74.7 million, or 17.1%, over the prior year.

Employee benefit expenses

Employee benefit expenses for the year were £263.5 million, an increase of £31.3 million, or 13.5%, over the prior year, primarily due to an increase in first team salaries, following investment in the first team squad.

Other operating expenses

Other operating expenses for the year were £117.9 million, an increase of £26.7 million, or 29.3%, over the prior year, primarily due to the impact of playing more games in the year as a result of progression in domestic and European cup competitions.

Depreciation and amortization

Depreciation for the year was £10.3 million, an increase of £0.2 million, or 2.0%, over the prior year. Amortization for the year was £124.4 million, an increase of £36.4 million, or 41.4%, over the prior year quarter. The unamortized balance of players’ registrations at 30 June 2017 was £290.6 million.

Exceptional items

Exceptional credit for the year was £4.8 million, relating to a reversal of a player registration impairment charge for a player considered to be re-established as a member of the first team playing squad. Exceptional costs for the prior year were £15.1 million.

Profit/(loss) on disposal of intangible assets

Profit on disposal of intangible assets for the year was £10.9 million, compared to a loss of £9.8 million for the prior year. The profit on disposal of intangible assets for the year included the disposals of McNair (Sunderland), Schneiderlin (Everton) and Schweinsteiger (Chicago Fire).

Net finance costs

Net finance costs for the year were £24.3 million, an increase of £4.3 million, or 21.5%, over the prior year. The increase was primarily due to fair value movements on derivatives, partially offset by favourable, unrealised foreign exchange movements.

Tax

The tax expense for the year was £17.3 million, compared to £12.5 million in the prior year, primarily due to the increase in profit before tax and a reduction in foreign exchange gains on US dollar denominated deferred tax assets.

Cash flows

Net cash generated from operating activities for the year was £227.7 million, an increase of £41.6 million over the prior year.

Net capital expenditure on property, plant and equipment for the year was £8.3 million, an increase of £3.2 million over the prior year.

Net capital expenditure on intangible assets for the year was £142.0 million, an increase of £42.3 million over the prior year.

Overall cash and cash equivalents (including the effects of exchange rate movements) increased by £61.1 million in the year.

Net debt

Net Debt as of 30 June 2017 was £213.1 million, a decrease of £47.8 million over the year. The gross USD debt principal remains unchanged.

Conference Call Information

The Company’s conference call to review fiscal 2017 and fourth quarter results will be broadcast live over the internet today, 21 September 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 139-year heritage we have won 66 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, new media and mobile, 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).

Statement Regarding Unaudited Financial Information

The unaudited financial information set forth is preliminary and subject to adjustments. The audit of the financial statements and related notes to be included in our annual report on Form 20-F for the year ended 30 June 2017 is still in progress. Adjustments to the financial statements may be identified when audit work is completed, which could result in significant differences from this preliminary unaudited financial information.

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 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), ‘one-off’ 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/(loss) 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/adding the adjusted tax expense/credit for the period (based on an normalized tax rate of 35%; 2016: 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/(loss) 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/(loss) 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     Twelve months ended   Three months ended   30 June   30 June     2017   2016   2017   2016 Commercial % of total revenue   47.4%   52.1%   38.6%   48.5% Broadcasting % of total revenue   33.4%   27.2%   46.1%   35.5% Matchday % of total revenue   19.2%   20.7%   15.3%   16.0% Home Matches Played                 PL   19   19   5   5 UEFA competitions   7   6   2   - Domestic Cups   5   4   -   - Away Matches Played                 UEFA competitions   8   6   3   - Domestic Cups   5   5   -   3                   Other                 Employees at period end   895   810   895   810 Employee benefit expenses % of revenue   45.3%   45.1%   40.4%   45.7%     Phasing of Premier League home games   Quarter 1   Quarter 2   Quarter 3   Quarter 4   Total 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)

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  2017   2016   2017   2016 Revenue   581,204   515,345   175,936   134,575 Operating expenses (511,315) (436,709) (138,118) (126,131) Profit/(loss) on disposal of intangible assets   10,926   (9,786)   3,327   (4,948) Operating profit   80,815   68,850   41,145   3,496 Finance costs (25,013) (20,459) (3,408) (7,534) Finance income   736   442   312   152 Net finance costs   (24,277)   (20,017)   (3,096)   (7,382) Profit/(loss) before tax 56,538 48,833 38,049 (3,886) Tax (expense)/credit   (17,361)   (12,462)   (13,797)   2,929 Profit/(loss) for the period   39,177   36,371   24,252   (957)   Basic earnings/(loss) per share:                 Basic earnings/(loss) per share (pence)   23.88   22.19   14.79   (0.58) Weighted average number of ordinary shares outstanding (thousands)   164,025   163,890   164,025   163,892 Diluted earnings/(loss) per share:                 Diluted earnings/(loss) per share (pence)   23.82   22.13   14.74   (0.58)(1) Weighted average number of ordinary shares outstanding (thousands)   164,493   164,319   164,493   164,319 (1)  

For the three months ended 30 June 2016, potential ordinary shares are anti-dilutive, as their inclusion in thediluted loss per share calculation would reduce the loss per share, and hence have been excluded.

 

CONSOLIDATED BALANCE SHEET

(unaudited; in £ thousands)

 

    As of

30 June

2017

  As of

30 June

2016

ASSETS     Non-current assets Property, plant and equipment 244,738 245,714 Investment property 13,966 13,447 Intangible assets 717,544 665,634 Derivative financial instruments 1,666 3,760 Trade and other receivables 15,399 11,223 Deferred tax asset   142,107   145,460     1,135,420   1,085,238 Current assets Inventories 1,637 926 Derivative financial instruments 3,218 7,888 Trade and other receivables 103,732 128,657 Cash and cash equivalents   290,267   229,194     398,854   366,665 Total assets   1,534,274   1,451,903

 

 

EQUITY AND LIABILITIES         Equity Share capital 53 52 Share premium 68,822 68,822 Merger reserve 249,030 249,030 Hedging reserve (31,724) (32,989) Retained earnings   191,436   173,367     477,617   458,282 Non-current liabilities Derivative financial instruments 655 10,637 Trade and other payables 83,587 41,450 Borrowings 497,630 484,528 Deferred revenue 39,648 38,899 Deferred tax liabilities   20,828   14,364     642,348   589,878 Current liabilities Derivative financial instruments 1,253 2,800 Tax liabilities 9,772 6,867 Trade and other payables 190,315 199,668 Borrowings 5,724 5,564 Deferred revenue   207,245   188,844     414,309   403,743 Total equity and liabilities   1,534,274   1,451,903

CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited; in £ thousands)

 

Twelve months ended30 June

 

Three months ended30 June

    2017   2016   2017  

2016

Cash flows from operating activities     Cash generated from operations (see supplemental note 4) 251,759 200,864 180,539 155,263 Interest paid (19,523) (13,219) (1,760) (1,682) Interest received 736 487 312 241 Tax paid   (5,312)   (2,040)   (1,359)   (142) Net cash generated from operating activities   227,660   186,092   177,732   153,680 Cash flows from investing activities Payments for property, plant and equipment (8,373) (5,101) (2,021) (4,318) Proceeds from sale of property, plant and equipment - 19 - - (Payments)/refund for investment property (641) - 18 - Payments for intangible assets (193,825) (138,095) (23,543) (25,155) Proceeds from sale of intangible assets   51,871   38,357   1,266   1,628 Net cash used in investing activities   (150,968)  

(104,820)

  (24,280)   (27,845) Cash flows from financing activities Repayment of borrowings (395) (371) (100) (94) Dividends paid   (23,295)   (20,084)   (11,471)   (5,080) Net cash used in financing activities   (23,690)   (20,455)   (11,571)   (5,174) Net increase in cash and cash equivalents 53,002 60,817 141,881 120,661 Cash and cash equivalents at beginning of period 229,194 155,752 152,653 104,202 Exchange gains/(losses) on cash and cash equivalents   8,071   12,625   (4,267)   4,331 Cash and cash equivalents at end of period   290,267   229,194   290,267   229,194

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/(loss) for the period to adjusted EBITDA

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Profit/(loss) for the period 39,177   36,371 24,252   (957) Adjustments: Tax expense/(credit) 17,361 12,462 13,797 (2,929) Net finance costs 24,277 20,017 3,096 7,382 (Profit)/loss on disposal of intangible assets (10,926) 9,786 (3,327) 4,948 Exceptional items (4,753) 15,135 - 15,135 Amortization 124,434 88,009 29,275 23,059 Depreciation   10,228   10,079   2,507   2,588 Adjusted EBITDA   199,798   191,859   69,600   49,226

3 Reconciliation of profit/(loss) for the period to adjusted profit for the period and adjusted basic and diluted earnings per share

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Profit/(loss) for the period 39,177   36,371 24,252   (957) Exceptional items (4,753) 15,135 - 15,135 Foreign exchange (gains)/losses on unhedged US dollar denominated borrowings (1,816) 4,136 (5,967) 3,164 Fair value movement on derivative financial instruments 3,534 (5,288) 3,190 (1,025) Tax expense/(credit)   17,361   12,462   13,797   (2,929) Adjusted profit before tax 53,503 62,816 35,272 13,388 Adjusted tax expense (using a normalised tax rate of 35% (2016: 35%))   (18,726)   (21,986)   (12,345)   (4,686) Adjusted profit for the period (i.e. adjusted net income)   34,777   40,830   22,927   8,702   Adjusted basic earnings per share: Adjusted basic earnings per share (pence) 21.20 24.91 13.98 5.31 Weighted average number of ordinary shares outstanding (thousands) 164,025 163,890 164,025 163,892 Adjusted diluted earnings per share: Adjusted diluted earnings per share (pence) 21.14 24.85 13.94 5.30 Weighted average number of ordinary shares outstanding (thousands)   164,493   164,319   164,493   164,319

4 Cash generated from operations

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Profit/(loss) for the period 39,177   36,371 24,252   (957) Tax expense/(credit)   17,361   12,462   13,797   (2,929) Profit/(loss) before tax 56,538 48,833 38,049 (3,886) Adjustments for: Depreciation 10,228 10,079 2,507 2,588 Impairment (reversal)/charge (4,753) 6,693 - 6,693 Amortization 124,434 88,009 29,275 23,059 (Profit)/loss on disposal of intangible assets (10,926) 9,786 (3,327) 4,948 Net finance costs 24,277 20,017 3,096 7,382 Loss on disposal of property, plant and equipment 43 126 43 116 Equity-settled share-based payments 2,187 1,795 751 625 Foreign exchange losses/(gains) on operating activities 2,646 (7,660) 242 (3,965) Reclassified from hedging reserve 4,765 1,382

2,358

374 Changes in working capital: Inventories (711) (926) (289) 367 Trade and other receivables 17,525 (31,741) (15,745) (33,515) Trade and other payables and deferred revenue   25,506   54,471   123,579   150,477 Cash generated from operations   251,759   200,864   180,539   155,263

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Manchester United plcInvestor Relations:Cliff BatyChief Financial Officer+44 161 868 8650ir@manutd.co.ukorMedia: Philip TownsendManchester United plc+44 161 868 8148philip.townsend@manutd.co.ukorJim Barron / Michael HensonSard Verbinnen & Co+ 1 212 687 8080JBarron@SARDVERB.com