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Manchester United announce second-quarterly financial results

Thu 11th Feb 2016 | Money & Finance

Manchester United today announced financial results for the 2016 fiscal second quarter and six months ended 31 December 2015.

Highlights

  • Commercial revenues of £66.1 million up 42.5% for the quarter.
  • Broadcasting revenues of £37.3 million up 31.3% for the quarter
  • Two sponsorship deals announced in the quarter:
    • Renewal of partnership with Thomas Cook
    • Cable and Wireless Communications
  • Announced licensing deals with New Era and Heroes

 

Ed Woodward, Executive Vice Chairman, commented, “Our strong commitment to investing in our squad, youth academy and the broader club are ultimately underpinned by our financial strength and the hard work and dedication of everyone at the Club. Our solid results off the pitch help contribute to what remains our number one priority - success on the pitch.”

Outlook

For fiscal 2016, Manchester United expects:

  • Revenue to be £500m to £510m.
  • Adjusted EBITDA to be £178m to £188m.

 

Key Financials (unaudited)

£ million (except adjusted diluted earnings per share)   Three months ended

31 December

      Six months ended

31 December

     
    2015   2014   Change   2015   2014   Change  
Commercial revenue   66.1   46.4   42.5%   137.3   103.2   33.0%  
Broadcasting revenue   37.3   28.4   31.3%   64.9   45.2   43.6%  
Matchday revenue   30.4   30.9   (1.6%)   55.2   46.0   20.0%  
Total revenue   133.8   105.7   26.6%   257.4   194.4   32.4%  
Adjusted EBITDA*   56.1   42.4   32.3%   97.7   62.7   55.8%  
   
Profit for the period (i.e. net income)   18.6   0.0   -   23.6   8.9   165.2%  
Adjusted profit for the period (i.e. adjusted net income)*   17.7   4.4   302.3%   20.4   8.6   137.2%  
Adjusted diluted earnings per share (pence)*   10.77   2.66   304.9%   12.41   5.25   136.4%  
   
Net debt   322.1   343.4   (6.2%)   322.1   343.4   (6.2%)  

 

* Adjusted EBITDA, adjusted profit for the period and adjusted diluted earnings per share 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.

Revenue Analysis

Commercial

Commercial revenue for the second quarter was £66.1 million, an increase of £19.7 million, or 42.5%, over the prior year quarter.

  • Sponsorship revenue for the second quarter was £37.4 million, an increase of £1.6 million, or 4.5%, over the prior year quarter.
  • Retail, Merchandising, Apparel & Product Licensing revenue for the second quarter was £25.7 million, an increase of £17.8 million, or 225.3% over the prior year quarter, primarily due to the commencement of the new agreement with adidas from 1 August 2015, which included a step-up in minimum guaranteed revenues and the contribution from several businesses previously operated by Nike.
  • Mobile & Content revenue for the second quarter was £3.0 million, an increase of £0.3 million, or 11.1% over the prior year quarter.

 

Broadcasting

Broadcasting revenue for the second quarter was £37.3 million, an increase of £8.9 million, or 31.3%, over the prior year quarter, primarily due to participation in the UEFA Champions League, partially offset by two fewer FAPL home games and two fewer FAPL live broadcast games in the current quarter.

Matchday

Matchday revenue for the three months ended 31 December 2015 was £30.4 million, a decrease of £0.5 million, or 1.6%, over the three months ended 31 December 2014, primarily due to playing two fewer FAPL home games and hosting a friendly international game (in the second quarter last year), largely offset by two UEFA Champions League home games and one domestic cup home game in the current quarter.

Other Financial Information

Operating expenses

Total operating expenses for the second quarter were £101.8 million, an increase of £8.7 million, or 9.3%, over the prior year quarter.

Employee benefit expenses

Employee benefit expenses for the second quarter were £55.7 million, an increase of £7.0 million, or 14.4%, over the prior year quarter, primarily due to renewals of existing player contracts, coupled with an uplift from participation in the UEFA Champions League.

Other operating expenses

Other operating expenses for the second quarter were £22.0 million, an increase of £7.4 million, or 50.7%, over the prior year quarter, primarily due to retail, merchandising, apparel and licensing costs now being recognized in-house, plus an increase in matchday costs as a result of playing two UEFA Champions League games in the quarter compared to the prior year quarter.

Depreciation & amortization

Depreciation for the second quarter was £2.5 million, a decrease of £0.1 million, or 3.8%, over the prior year quarter. Amortization for the second quarter was £21.6 million, a decrease of £5.4 million, or 20.0%, over the prior year quarter. The unamortized balance of players’ registrations at 31 December 2015 was £240.4 million.

Net finance costs

Net finance costs for the second quarter were £4.7 million, a decrease of £1.6 million, or 25.4%, over the prior year quarter. The decrease was primarily due to a reduction in interest payable on the secured term loan facility and senior secured notes following the refinancing in June 2015.

Tax

The tax expense for the second quarter was £9.3 million, compared to an expense of £7.8 million in the prior year quarter.

Cash flows

Net cash used in operating activities for the second quarter was £9.2 million, a decrease of £29.8 million over the prior year quarter, primarily due to increased profit and movements in working capital.

Capital expenditure on property, plant and equipment for the second quarter was £0.2 million, a decrease of £1.7 million over the prior year quarter.

Net player and other intangible assets capital expenditure for the second quarter was £10.2 million, a decrease of £4.0 million over the prior year quarter.

Dividend

As previously approved, a $0.045 per share quarterly cash dividend on the Company's outstanding Class A and Class B ordinary shares will be payable on 10 March 2016, to shareholders of record on 25 February 2016. The stock will begin to trade ex-dividend on 23 February 2016.

Key Performance Indicators  
    Three months ended   Six months ended  
  31 December   31 December  
    2015   2014   2015   2014  
Commercial % of total revenue   49.4%   43.0%   53.3%   52.7%  
Broadcasting % of total revenue   27.9%   27.3%   25.2%   23.4%  
Matchday % of total revenue   22.7%   29.7%   21.5%   23.9%  
Home Matches Played                  
FAPL   5   7   9   10  
UEFA competitions   2   -   4   -  
Domestic Cups   1   -   2   -  
Away Matches Played                  
UEFA competitions   2   -   4   -  
Domestic Cups   -   -   -   1  
   
Other                  
Employees at period end   788   814   788   814  
Staff costs % of revenue   41.6%   46.1%   44.5%   50.5%  
Phasing of Premier League home games   Quarter 1   Quarter 2   Quarter 3   Quarter 4   Total  
2015/16 season*   4   5   6   4   19  
2014/15 season   3   7   5   4   19  
2013/14 season   3   6   7   3   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

 

 

  2015   2014   2015   2014  
Revenue   133,764   105,761   257,326   194,431  
Operating expenses   (101,804)   (93,137)   (208,410)   (185,888)  
Profit/(loss) on disposal of players’ registrations   648   1,432   (6,788)   19,760  
Operating profit   32,608   14,056   42,128   28,303  
Finance costs   (4,799)   (6,241)   (9,178)   (12,477)  
Finance income   67   -   105   99  
Net finance costs   (4,732)   (6,241)   (9,073)   (12,378)  
Profit before tax   27,876   7,815   33,055   15,925  
Tax expense   (9,269)   (7,870)   (9,488)   (7,036)  
Profit/(loss) for the period   18,607   (55)   23,567   8,889  
                   
Basic earnings/(loss) per share:                  
Basic earnings/(loss) per share (pence)   11.35   (0.03)   14.38   5.43  
Weighted average number of ordinary shares outstanding (thousands)   163,892   163,797   163,888   163,792  
Diluted earnings/(loss) per share:                  
Diluted earnings/(loss) per share (pence)   11.33   (0.03)   14.35   5.42  
Weighted average number of ordinary shares outstanding (thousands)   164,263   164,146   164,263   164,146  

CONSOLIDATED BALANCE SHEET

(unaudited; in £ thousands)

    As of

31 December

2015

  As of

30 June

2015

  As of

31 December

2014

 
ASSETS              
Non-current assets              
Property, plant and equipment   248,314   250,626   254,398  
Investment property   13,503   13,559   13,615  
Goodwill   421,453   421,453   421,453  
Players’ registrations and other intangible assets   241,892   238,944   270,061  
Derivative financial instruments   1,680   -   857  
Trade and other receivables   10,375   3,836   -  
Deferred tax asset   132,910   133,640   128,797  
    1,070,127   1,062,058   1,089,181  
Current assets              
Inventories   1,504   -   -  
Derivative financial instruments   1,971   27   544  
Trade and other receivables   81,807   83,627   83,716  
Current tax receivable   -   124   81  
Cash and cash equivalents   121,611   155,752   37,115  
    206,893   239,530   121,456  
Total assets   1,277,020   1,301,588   1,210,637  

CONSOLIDATED BALANCE SHEET (continued)

(unaudited; in £ thousands)

    As of

31 December

2015

  As of

30 June

2015

  As of

31 December

2014

 
EQUITY AND LIABILITIES              
Equity              
Share capital   52   52   52  
Share premium   68,822   68,822   68,822  
Merger reserve   249,030   249,030   249,030  
Hedging reserve   (9,220)   4,729   6,185  
Retained earnings   174,834   155,285   164,424  
    483,518   477,918   488,513  
Non-current liabilities              
Derivative financial instruments   2,454   2,769   1,612  
Trade and other payables   19,587   48,078   47,181  
Borrowings   437,656   410,482   374,034  
Deferred revenue   16,944   21,583   14,260  
Deferred tax liabilities   14,070   17,311   24,085  
    490,711   500,223   461,172  
Current liabilities              
Derivative financial instruments   2,207   2,966   617  
Current tax liabilities   4,870   2,105   2,399  
Trade and other payables   164,769   131,283   123,058  
Borrowings   6,057   485   6,447  
Deferred revenue   124,888   186,608   128,431  
    302,791   323,447   260,952  
Total equity and liabilities   1,277,020   1,301,588   1,210,637  

 

CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited; in £ thousands)

   

Three months ended 
31 December

  Six months ended

31 December

 
    2015   2014   2015   2014  
Cash flows from operating activities                  
Cash (used in)/generated from operations (see supplemental note 4)   (7,007)   (34,421)   31,108   48,921  
Interest paid   (1,576)   (4,500)   (3,118)   (13,229)  
Debt finance costs relating to borrowings   -   42   -   (824)  
Interest received   50   40   117   89  
Income tax paid   (660)   (123)   (1,602)   (1,010)  
Net cash (used in)/generated from operating activities   (9,193)   (38,962)   26,505   33,947  
Cash flows from investing activities                  
Purchases of property, plant and equipment   (223)   (1,851)   (576)   (3,793)  
Proceeds from sale of property, plant and equipment   (2)   -   19   -  
Purchases of players’ registrations and other intangible assets   (9,360)   (15,564)   (95,892)   (86,866)  
Proceeds from sale of players’ registrations   (818)   1,273   35,773   16,716  
Net cash used in investing activities   (10,403)   (16,142)   (60,676)   (73,943)  
Cash flows from financing activities                  
Proceeds from borrowings   -   -   -   4,704  
Repayment of borrowings   (94)   (102)   (183)   (199)  
Dividends paid   (4,813)   -   (4,813)   -  
Net cash (used in)/generated from financing activities   (4,907)   (102)   (4,996)   4,505  
Net decrease in cash and cash equivalents   (24,503)   (55,206)   (39,167)   (35,491)  
Cash and cash equivalents at beginning of period   143,525   90,266   155,752   66,365  
Foreign exchange gains on cash and cash equivalents   2,589   2,055   5,026   6,241  
Cash and cash equivalents at end of period   121,611   37,115   121,611   37,115  

 

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

31 December

  Six months ended

31 December

 
    2015

£’000

  2014

£’000

  2015

£’000

  2014

£’000

 
Profit/(loss) for the period   18,607   (55)   23,567   8,889  
Adjustments:                  
Tax expense   9,269   7,870   9,488   7,036  
Net finance costs   4,732   6,241   9,073   12,378  
(Profit)/loss on disposal of players’ registrations   (648)   (1,432)   6,788   (19,760)  
Exceptional items   -   185   -   1,061  
Amortization   21,639   27,046   43,786   48,223  
Depreciation   2,473   2,560   4,967   4,896  
Adjusted EBITDA   56,072   42,415   97,669   62,723  

3 Reconciliation of profit/(loss) 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

 

 

  2015

£’000

  2014

£’000

  2015

£’000

  2014

£’000

 
Profit/(loss) for the period   18,607   (55)   23,567   8,889  
Exceptional items   -   185   -   1,061  
Foreign exchange losses/(gains) on unhedged US dollar denominated borrowings   455   (303)   1,214   (998)  
Fair value movement on derivative financial instruments   (1,105)   (1,185)   (2,912)   (2,486)  
Hedge ineffectiveness of cash flow hedges   -   201   -   (234)  
Tax expense   9,269   7,870   9,488   7,036  
Adjusted profit before tax   27,226   6,713   31,357   13,268  

Adjusted tax expense (using a normalised tax rate of 35% (2014: 35%))

  (9,529)   (2,350)   (10,975)   (4,644)  
Adjusted profit for the period (i.e. adjusted net income)   17,697   4,363   20,382   8,624  
                   
Adjusted basic earnings per share:                  
Adjusted basic earnings per share (pence)   10.80   2.66   12.44   5.27  
Weighted average number of ordinary shares outstanding (thousands)   163,892   163,797   163,888   163,792  
Adjusted diluted earnings per share:                  
Adjusted diluted earnings per share (pence)   10.77   2.66   12.41   5.25  
Weighted average number of ordinary shares outstanding (thousands)   164,263   164,146   164,263   164,146  

 

4 Cash generated from operations

    Three months ended

31 December

  Six months ended

31 December

 
    2015

£’000

  2014

£’000

  2015

£’000

  2014

£’000

 
Profit/(loss) for the period   18,607   (55)   23,567   8,889  
Tax expense   9,269   7,870   9,488   7,036  
Profit before tax   27,876   7,815   33,055   15,925  
Depreciation   2,473   2,560   4,967   4,896  
Amortization   21,639   27,046   43,786   48,223  
(Profit)/loss on disposal of players’ registrations   (648)   (1,432)   6,788   (19,760)  
Net finance costs   4,732   6,241   9,073   12,378  
Loss on disposal of property, plant and equipment   1   1   10   5  
Equity-settled share-based payments   420   377   795   707  
Foreign exchange losses/(gains) on operating activities   123   (329)   2,189   (968)  
Other fair value losses/(gains) on derivative financial instruments   201   577   (4,046)   1,211  
Reclassified from hedging reserve   321   (1,196)   663   (2,391)  
Increase in inventories   (144)   -   (1,504)   -  
Decrease/(increase) in trade and other receivables   24,541   (12,110)   14,375   52,398  
Decrease in trade and other payables and deferred revenue   (88,542)   (63,971)   (79,043)   (63,703)  
Cash (used in)/generated from operations   (7,007)   (34,421)   31,108   48,921  

 

Image: Action Images via Reuters / Carl Recine

 Posted by: Kev Howland

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