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
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| 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
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| 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)
|
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| 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
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| 2015
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| 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
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| 2015
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| 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
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| 2015
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2014
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| 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
