Manchester United plc 2013 Second Quarter Results

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Manchester United plc 2013 Second Quarter Results

  • Sponsorship Revenue Increased 48.6%
  • Profit before Tax Increased 47.9%
  • Record Second Quarter Revenue of £110.1 Million
  • Record SecondQuarter EBITDA of £50.2 Million

MANCHESTER, England--(BUSINESS WIRE)-- 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 three and six month periods ended 31 December 2012.

Highlights
  • Increased second quarter commercial revenue 29.0% year on year.
  • Completed the strategic acquisition of BskyB's one-third stake in MUTV, taking full control of our global television channel.
  • Executed an additional six new Sponsorship deals - Kansai and Singha (global; headquartered in Japan/South Africa and Thailand), Wahaha and Multistrada (regional; China and Indonesia respectively); and China Construction Bank and Denizbank (financial services; China and Turkey respectively).
  • Premier League Clubs agreed to a system of enhanced financial regulations - The new regulations include a short-term cost control protocol, which would limit the amount by which clubs could raise their player costs.
  • Finalised 2013 summer tour which includes games in Australia, Japan, and Hong Kong.
Commentary

Ed Woodward, Executive Vice Chairman commented, 'Manchester United achieved record revenue and record adjusted EBITDA in the second quarter driven by our commercial operation, which continues to experience extremely strong growth particularly in sponsorship. In addition, our acquisition of BskyB's one third stake in Manchester United's global television channel MUTV will be key in expanding our media business in the future'.

Outlook

For fiscal 2013, Manchester United continues to expect:

  • Revenue to be £350m to £360m.
  • Adjusted EBITDA to be £107m to £110m.
 
 

Key Financials (unaudited)

                
£ million  Three months ended

31 December

     Six months ended

31 December

  
   2012 2011 Change   2012 2011 Change
Commercial revenue  35.6 27.6 29.0%   78.6 62.2 26.4%
Broadcasting revenue  39.5 37.7 4.8%   53.2 59.6 (10.7%)
Matchday revenue  35.0 36.0 (2.8%)   54.6 53.3 2.4%
Total revenue  110.1 101.3 8.7%   186.4 175.1 6.5%
Adjusted EBITDA*  50.2 44.9 11.8%   66.5 64.2 3.6%
                
Profit on ordinary activities before Tax  28.4 19.2 47.9%   22.3 12.8 74.2%
Tax (expense)/credit  (12.2) 22.9 -   14.4 24.3 (40.7%)
                
Profit for the period from continuing operations (i.e. Net Income)  16.2 42.1 (61.5%)   36.7 37.1 (1.1%)
Basic and diluted earnings per share (EPS)**  0.10 0.27 (63.0%)   0.23 0.24 (4.2%)
Gross debt***  366.6 438.9 (16.5%)   366.6 438.9 (16.5%)
Cash and cash equivalents  66.6 50.9 30.8%   66.6 50.9 30.8%
         

* Adjusted EBITDA is a non-IFRS measure. We define Adjusted EBITDA as profit/(loss) for the period from continuing operations before net finance costs, tax credit/(expense), depreciation, amortisation of, and profit on disposal of, players' registrations and exceptional items. 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 capital structure (primarily interest expense and exchange rate gains or losses), asset base (primarily depreciation and amortisation) and items outside the control of our management (primarily income taxes and interest income and expense). 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 Adjusted EBITDA to profit/(loss) for the period from continuing operations is presented in supplemental note 4.

** See supplemental note 2.

*** Gross debt has decreased by 16.1% since 30 June 2012 (£436.9 million).

 
Revenue Analysis

Commercial

Commercial revenue for the second quarter increased 29.0% year on year to £35.6 million driven by the addition of several new sponsorship deals. For the second quarter:

  • Sponsorship revenue increased 48.6% to £20.8 million;
  • Retail, Merchandising, Apparel & Product Licensing increased 13.1% to £9.5 million; and
  • New Media & Mobile increased 1.9% to £5.3 million.

We have secured a new eight year sponsorship agreement for our training kit rights; and will be making an announcement with further details in the near future.

Broadcasting

Broadcasting revenues for the second quarter increased 4.8% year on year to £39.5 million. The main reason for this increase relates to one extra Champions League game being played and two additional live Premier League TV appearances compared to the same period last year.

Matchday

Matchday revenues for the second quarter decreased 2.8% year on year to £35.0 million, due mainly to one less domestic cup home game being played in the period.

Other Financial Information

Operating expenses

Total operating expenses for the second quarter increased 4.6% year on year to £73.2 million.

Staff costs

Staff costs for the second quarter increased 14.2% year on year to £44.2 million, primarily due to new player signings, player wage increases and growth in commercial headcount. The six months year to date increase is 10.5% year on year to £84.5 million.

Other operating expenses

Other operating expenses for the second quarter decreased 11.3% year on year to £15.7 million, primary due to a reduction in gateshare costs relating to the one less domestic cup home game compared with the same period last year.

Depreciation & amortisation of players' registrations

Depreciation for the second quarter increased 5.9% year on year to £1.8 million, from £1.7 million in the prior period; and amortisation of players' registrations for the quarter increased 8.1% year on year to £10.7 million. The unamortised balance of existing players' registrations at 31 December 2012 was £125.9 million.

Exceptional items

Exceptional items for the second quarter were £0.8 million and related to professional adviser fees in connection with the IPO compared with £2.0 million in the prior year quarter.

Profit on disposal of players' registrations

Profit on the disposal of players' registrations for the second quarter was £0.7 million due to additional conditional payments being received for players sold in prior periods.

Net finance costs

Net finance costs for the second quarter decreased 25.2% year on year to £9.2 million. The decline was driven by the re-purchase and retirement of the sterling equivalent of £62.6 million of senior secured notes comprising US$101.7 million of US dollar denominated notes and a favourable foreign exchange movement of £2.3 million year on year on translation of the US dollar denominated senior secured notes.

These foreign exchange gains or losses are not a cash benefit or charge and could reverse depending on dollar/sterling exchange rate movements. Any gain or loss on a cumulative basis will not be realised until 2017 (or earlier if our senior secured notes are refinanced or redeemed prior to their stated maturity).

Tax

The Group recorded a non-cash tax charge for the second quarter of £12.2 million, which primarily reflects the utilisation of a portion of the deferred tax asset recognised in the first quarter of fiscal 2013. In the prior year period, the Group recorded a tax credit of £22.9 million due primarily to the recognition of a deferred tax asset relating to pre-existing UK losses. The effective tax rate for the quarter is 42.8%, which is higher than the US statutory tax rate of 35%, due to a current mismatch in the recognition of the UK and US deferred tax assets and liabilities. It should be noted that these are all non-cash tax charges.

Profit for the period from continuing operations

Profit from continuing operations for the second quarter decreased to £16.2 million, compared with a profit of £42.1 million in the prior year quarter. Earnings per share for the second quarter decreased to £0.10, compared with £0.27 in the prior year quarter. This decrease is largely due to a tax credit of £22.9 million realised in the prior year quarter, compared to a tax charge of £12.2 million in this year's second quarter.

Cash flows

Cash generated from operating activities for the second quarter was £25.4 million, an increase of £31.7 million compared to £6.3 million cash used in the prior year quarter.

Capital expenditures on property, plant and equipment and investment property for the second quarter were £5.9 million, an increase of £4.3 million compared to £1.6 million in the prior year quarter mainly due to the continuing redevelopment of the Carrington training facility.

Net player capital expenditure for the second quarter was £2.4 million, an increase of £1.5 million compared to £0.8 million in the prior year quarter due mainly to conditional payments being made on players acquired in prior periods.

Net cash used in financing activities for the second quarter was £1.6 million, a decrease of £3.7 million compared to £5.3 million in the prior year quarter. The current year quarter includes expenses of £1.5 million directly attributable to the issue of new shares. The prior year quarter includes £5.3 million relating to the repurchase of senior secured notes.

Cash and cash equivalents

Cash and cash equivalents at 31 December 2012 were £66.6 million compared to £50.9 million at 31 December 2011.

Borrowings

Total borrowings were £366.6 million at 31 December 2012 compared to £439.0 million at 31 December 2011. During the six months we re-purchased and retired the sterling equivalent of £62.6 million of senior secured notes comprising US$101.7 million of US dollar denominated notes. The consideration paid amounted to £67.9 million.

Conference Call Information

The Company's conference call to review the second quarter and six months fiscal 2013 results will be broadcast live over the internet today, 14 February 2013 at 08:00 am 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 135 year heritage we have won 60 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 & 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).

 
 

Key Performance Indicators

           
       Three months ended  Six months ended
      31 December  31 December
       2012 2011  2012 2011
Commercial % of total revenue      32.3% 27.3%  42.2% 35.5%
Nike and Aon % of Commercial      40.2% 47.8%  36.3% 42.4%
Partners and other % of Commercial      59.8% 52.2%  63.7% 57.6%
Broadcasting % of total revenue      35.9% 37.2%  28.5% 34.0%
Matchday % of total revenue      31.8% 35.5%  29.3% 30.5%
Home Matches Played              
FAPL 7 7  10 10
UEFA competitions      2 2  3 3
Domestic Cups      - 1  1 1
Away Matches Played              
UEFA competitions      3 2  3 3
Domestic Cups      1 1  1 2
 
Other              
Employees at period end      779 696  779 696
Staff costs % of revenue      40.1% 38.2%  45.3% 43.7%
            

Phasing of Premier League
home games

 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total 
2012/13 season* 3 7 5 4 19 
2011/12 season 3 7 5 4 19 

*Note -Games can be rescheduled for TV or clashes due to domestic cup competitions and will be updated each Quarter accordingly.

 
 

CONSOLIDATED INCOME STATEMENT

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

       
Three months ended

31 December

Six months ended

31 December

    

 

    2012   2011    2012   2011 
Revenue110,056101,278186,372175,060
Operating expenses(73,169)(70,031)
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