MANU Manchester United Plc

• Q1 REVENUES OF £141.0 MILLION
• Q1 ADJUSTED EBITDA OF £36.6 MILLION
• Q1 OPERATING PROFIT OF £15.2 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 2018 fiscal first quarter ended 30 September 2017.

 

Highlights

• Total revenue for the first quarter £141m – up 17% from first quarter 2017
• Played five tour matches across the US to a cumulative stadium audience of more than 250,000
• Signed three new players in Victor Lindelof, Romelu Lukaku and Nemanja Matic

 

Commentary

Ed Woodward, Executive Vice Chairman, commented, “We are just over a quarter of the way through what promises to be another exciting season. In the Champions League we have won all four games played to-date; we are through to the Quarter Final of the Carabao Cup; and are looking forward to the next few months as the number of matches ramps up.”

 

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 earnings per share)   Three months ended

30 September

        2017   2016   Change Commercial revenue   80.5   74.3   8.3% Broadcasting revenue   38.1   29.1   30.9% Matchday revenue   22.4   16.8   33.3% Total revenue   141.0   120.2   17.3% Adjusted EBITDA1   36.6   31.2   17.3% Operating profit   15.2   6.2   145.2%   Profit for the period (i.e. net income)   7.9   1.2   558.3% Basic earnings per share   4.84   0.71   581.7% Adjusted profit for the period (i.e. adjusted net income)1   6.2   0.7   785.7% Adjusted basic earnings per share (pence)1   3.76   0.43   774.4%   Net Debt1/2   268.1   337.7   (20.6%)      

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

CommercialCommercial revenue for the quarter was £80.5 million, an increase of £6.2 million, or 8.3%, over the prior year quarter.

• Sponsorship revenue for the quarter of £53.2 million, an increase of £6.3 million, or 13.4%, over the prior year quarter, primarily due to playing a greater number of Tour matches. This quarter includes £2.0 million of mobile and content revenue (prior year quarter £2.5 million) previously shown separately in commercial revenue;
• Retail, Merchandising, Apparel & Product Licensing revenue for the quarter was £27.3 million, a decrease of £0.1 million, or 0.4%, over the prior year quarter.

BroadcastingBroadcasting revenue for the quarter was £38.1 million, an increase of £9.0 million, or 30.9%, over the prior year quarter, primarily due to participation in the UEFA Champions League, playing one additional PL home game and participation in the UEFA Super Cup final, partially offset by one fewer PL game broadcast live.

MatchdayMatchday revenue for the quarter was £22.4 million, an increase of £5.6 million, or 33.3% over the prior year quarter, primarily due to playing two additional home games across all competitions.

 

Other Financial Information

 

Operating expensesTotal operating expenses for the quarter were £143.1 million, an increase of £20.9 million, or 17.1%, over the prior year quarter.

Employee benefit expensesEmployee benefit expenses for the quarter were £69.9 million, an increase of £7.6 million, or 12.2%, over the prior year quarter primarily due to player salary uplifts due to participation in the UEFA Champions League.

Other operating expensesOther operating expenses for the quarter were £34.5 million, an increase of £7.8 million, or 29.2%, over the prior year quarter primarily due to playing a greater number of Tour matches and playing two additional games across all competitions.

Depreciation & amortizationDepreciation for the quarter was £2.6 million, an increase of £0.2 million, or 8.3%, over the prior year quarter. Amortization for the quarter was £36.1 million, an increase of £5.3 million, or 17.2%, over the prior year quarter. The unamortized balance of players’ registrations at 30 September 2017 was £378.4 million.

Profit on disposal of intangible assetsProfit on disposal of intangible assets for the quarter was £17.3 million compared to profit of £8.2 million in the prior year quarter.

Net finance costsNet finance costs for the quarter were £0.8 million, a decrease of £5.1 million, or 86.4%, over the prior year quarter, due to foreign exchange gains on unhedged USD borrowings.

TaxThe tax expense for the quarter was £6.5 million, compared to a credit of £0.9 million in the prior year quarter.

Cash flowsNet cash generated from operating activities for the quarter was £17.9 million, a decrease of £34.7 million over the prior year quarter.

Net capital expenditure on property, plant and equipment and investment property for the quarter was £4.4 million, an increase of £2.2 million over the prior year quarter.

Net capital expenditure on intangible assets for the quarter was £84.9 million, a decrease of £37.8 million over the prior year quarter.

Overall cash and cash equivalents (including the effects of exchange rate changes) decreased by £74.1 million in the quarter.

Net DebtNet Debt as of 30 September 2017 was £268.1 million, a decrease of £69.6 million over the year. The gross USD debt principal remains unchanged.

DividendA semi-annual cash dividend of $0.09 per share will be paid on 5 January 2018, to shareholders of record on 30 November 2017. The stock will begin to trade ex-dividend on 29 November 2017.

 

Conference Call Information

The Company’s conference call to review first quarter fiscal 2018 results will be broadcast live over the internet today, 16 November 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 teams 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 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 EBITDAAdjusted 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 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%; 2017: 35%). The normalized tax rate of 35% is the current US federal income tax rate.

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) equivalent to 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 shareAdjusted 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 debtNet debt is calculated as non-current and current borrowings minus cash and cash equivalents.

 

Key Performance Indicators

 

Three months ended30 September

2017   2016   Commercial % of total revenue 57.1% 61.8% Broadcasting % of total revenue 27.0% 24.2% Matchday % of total revenue 15.9% 14.0% Home Matches Played PL 4 3 UEFA competitions 1 1 Domestic Cups 1 - Away Matches Played UEFA competitions 2 1 Domestic Cups - 1   Other Employees at period end 914 837 Employee benefit expenses % of revenue 49.6% 51.8%                    

Phasing of Premier League homegames

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)

 

Three months ended30 September

  2017   2016 Revenue 140,980   120,213 Operating expenses (143,036) (122,242) Profit on disposal of intangible assets   17,279   8,205 Operating profit   15,223   6,176 Finance costs (1,001) (6,098) Finance income   218   180 Net finance costs   (783)   (5,918) Profit before tax 14,440 258 Tax (expense)/credit   (6,493)   903 Profit for the period   7,947   1,161   Basic earnings per share: Basic earnings per share (pence) 4.84 0.71 Weighted average number of ordinary shares outstanding (thousands) 164,195 164,025 Diluted earnings per share: Diluted earnings per share (pence) 4.83 0.71 Weighted average number of ordinary shares outstanding (thousands)   164,585   164,483    

CONSOLIDATED BALANCE SHEET

(unaudited; in £ thousands)

                  As of

30 September

2017

     

     As of

     30 June

     2017

      As of

30 September

2016

ASSETS Non-current assets Property, plant and equipment 246,831 244,738 245,004 Investment property 13,934 13,966 14,060 Intangible assets 805,694 717,544 800,290 Derivative financial instruments 479 1,666 3,313 Trade and other receivables 9,991 15,399 4,005 Deferred tax asset   136,705       142,107       148,016     1,213,634       1,135,420       1,214,688 Current assets Inventories 2,074 1,637 1,422 Derivative financial instruments 2,433 3,218 5,218 Trade and other receivables 80,415 103,732 68,600 Tax receivable - - 97 Cash and cash equivalents   216,236       290,267       164,277     301,158       398,854       239,614 Total assets   1,514,792       1,534,274       1,454,302    

CONSOLIDATED BALANCE SHEET (continued)

(unaudited; in £ thousands)

                  As of

30 September

2017

     

     As of

     30 June

     2017

      As of

30 September

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 (24,264) (31,724) (37,619) Retained earnings   199,968       191,436       174,985     493,609       477,617       455,270 Non-current liabilities Derivative financial instruments 523 655 8,773 Trade and other payables 69,898 83,587 67,412 Borrowings 478,065 497,630 499,305 Deferred revenue 35,060 39,648 35,836 Deferred tax liabilities   25,802       20,828       11,975     609,348       642,348       623,301 Current liabilities Derivative financial instruments - 1,253 1,163 Tax liabilities 8,675 9,772 5,054 Trade and other payables 202,534 190,315 170,705 Borrowings 6,236 5,724 2,683 Deferred revenue   194,390       207,245       196,126     411,835       414,309       375,731 Total equity and liabilities   1,514,792       1,534,274       1,454,302    

CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited; in £ thousands)

  Three months ended

30 September

    2017   2016 Cash flows from operating activities   Cash generated from operations (see supplemental note 4) 26,951 63,783 Interest paid (8,018) (7,904) Interest received 218 180 Tax paid   (1,238)   (3,452) Net cash generated from operating activities   17,913   52,607 Cash flows from investing activities Payments for property, plant and equipment (4,344) (1,557) Payments for investment property - (644) Payments for intangible assets (117,121) (158,848) Proceeds from sale of intangible assets   32,186   36,159 Net cash used in investing activities   (89,279)   (124,890) Cash flows from financing activities Repayment of borrowings   (100)   (94) Net cash used in financing activities   (100)   (94) Net decrease in cash and cash equivalents (71,466) (72,377) Cash and cash equivalents at beginning of period 290,267 229,194 Effects of exchange rate changes on cash and cash equivalents   (2,565)   7,460 Cash and cash equivalents at end of period   216,236   164,277  

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

  Three months ended

30 September

    2017

£’000

  2016

£’000

Profit for the period 7,947   1,161 Adjustments: Tax expense/(credit) 6,493 (903) Net finance costs 783 5,918 Profit on disposal of intangible assets (17,279) (8,205) Amortization 36,054 30,805 Depreciation   2,574   2,412 Adjusted EBITDA   36,572   31,188  

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

  Three months ended

30 September

 

  2017

£’000

  2016

£’000

Profit for the period 7,947   1,161 Foreign exchange (gains)/losses on unhedged US dollar borrowings (5,496) 2,111 Fair value movement on derivative financial instruments 554 (1,274) Tax expense/(credit)   6,493   (903) Adjusted profit before tax 9,498 1,095

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

  (3,324)   (383) Adjusted profit for the period (i.e. adjusted net income)   6,174   712   Adjusted basic earnings per share: Adjusted basic earnings per share (pence) 3.76 0.43 Weighted average number of ordinary shares outstanding (thousands) 164,195 164,025 Adjusted diluted earnings per share: Adjusted diluted earnings per share (pence) 3.75 0.43 Weighted average number of ordinary shares outstanding (thousands)   164,585   164,483  

4 Cash generated from operations

  Three months ended

30 September

    2017

£’000

  2016

£’000

Profit for the period 7,947   1,161 Tax expense/(credit)   6,493   (903) Profit before tax 14,440 258 Depreciation 2,574 2,412 Amortization 36,054 30,805 Profit on disposal of intangible assets (17,279) (8,205) Net finance costs 783 5,918 Equity-settled share-based payments 585 457 Foreign exchange losses/(gains) on operating activities 991 (2,036) Reclassified from hedging reserve 4,001 766 Increase in inventories (437) (496) Decrease in trade and other receivables 16,673 39,447 Decrease in trade and other payables and deferred revenue   (31,434)   (5,543) Cash generated from operations   26,951   63,783  

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Manchester United plcInvestor Relations:Cliff Baty, +44 161 868 8650Chief Financial Officerir@manutd.co.ukorMedia:Manchester United plcPhilip Townsend, +44 161 868 8148philip.townsend@manutd.co.ukorSard Verbinnen & CoJim Barron / Michael Henson+ 1 212 687 8080JBarron@SARDVERB.com