Manchester United: 2013 Fourth Quarter and Full Year Results

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Manchester United: 2013 Fourth Quarter and Full Year Results

  • RECORD ANNUAL REVENUE UP 13.4% TO £363.2M
  • SPONSORSHIP REVENUE FOR THE YEAR INCREASED 44.1%
  • ADJUSTED EBITDA FOR FISCAL 2013 UP 18.6% TO £108.6M
  • ADJUSTED EBITDA OUTLOOK FOR FISCAL 2014 UP 18% TO 22%

MANCHESTER, England--(BUSINESS WIRE)-- Manchester United (NYSE: MANU; "the Company", "the parent" and "the Group") - one of the most popular and successful sports teams in the world - today announced financial results for the quarter and year ended 30 June 2013.

Annual Highlights
  • FAPL Champions in 2012/13: a record 20 English League titles.
  • Adjusted net income for fiscal 2013 increased 282.2% to £17.2m and adjusted earnings per share was up 266.7% to £0.11.
  • Commercial revenues grew 29.7% for the year 2013 to a record £152.5m - 42.0% of total revenue. During the fiscal year, we announced:
    • 7 global sponsorship partnerships including a world record shirt deal with Chevrolet
    • 4 regional sponsorship partnerships, and
    • 9 financial services and telecom agreements.
  • Opened our first regional sales office in Hong Kong in August 2012 which has made an excellent contribution, concluding multiple deals.
  • Acquired the remaining one-third stake in MUTV - securing full control of all our content generation and distribution capabilities.
  • Reached 34 million Facebook followers and 32 million unique records on our CRM database compared to 26 million and 15 million respectively a year ago.
  • Refinanced all our outstanding £177.8m GBP bonds and $22.1m of the US dollar bonds with a new term loan, resulting in interest saving of around £10m per year.
Commentary

Ed Woodward, Executive Vice Chairman commented, "We are very proud of our results for fiscal 2013. It has been a little over a year since our IPO and in that time we have delivered on our targets and objectives. Our commercial business continues to be a very powerful engine of growth enabling the team to continue to be successful. We won our 20th English League title last season and are delighted to have David Moyes lead our football team into a new and exciting chapter. We look forward to a successful 2013/14, both on and off the pitch."

Outlook

For fiscal 2014, Manchester United expects:

  • Revenue to be £420m to £430m.
  • Adjusted EBITDA to be £128m to £133m.

This assumes the team finishes third in the FA Premier League and reaches the quarter-finals of the UEFA Champions League and the domestic cups.

Key Financials (unaudited)

£ million (except adjusted earnings per share)

 Twelve months ended

30 June

   Three months ended

30 June

  
 2013 2012Change2013 2012Change
Commercial revenue152.5117.629.7%37.928.134.9%
Broadcasting revenue101.6104.0(2.3)%26.627.5(3.3)%
Matchday revenue109.198.710.5%20.618.99.0%
Total revenue363.2320.313.4%85.174.514.2%
Adjusted EBITDA*108.691.618.6%17.07.0142.9%
 
Profit/(loss) for the period (i.e. Net Income)146.423.3528.3%106.1(14.9)-
Adjusted profit/(loss) for the period (i.e. Adjusted Net Income)*17.24.5282.2 %(2.7)(10.6)(74.5)%
Adjusted basic and diluted earnings/(loss) per share*0.110.03266.7%(0.02)(0.07)(71.4)%
 
Gross debt389.2436.9(10.9)%389.2436.9(10.9)%
Cash and cash equivalents94.470.633.7%94.470.633.7%

* Adjusted EBITDA, adjusted profit/(loss) for the period and adjusted basic and diluted earnings/(loss) 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 year increased 29.7% to £152.5 million driven by several new sponsorship partners, an increase in profit share from Nike, new mobile and financial services agreements, and higher renewals from existing partners.

For the year:

  • Sponsorship revenue was up 44.1% to £90.9 million;
  • Retail, Merchandising, Apparel & Product Licensing was 14.2% higher to £38.6 million; and
  • New Media & Mobile increased 11.1% to £23.0 million.

For the fourth quarter, Commercial revenue increased 34.9% to £37.9 million with:

  • Sponsorship revenue up 49.0% to £21.3 million;
  • Retail, Merchandising, Apparel & Product Licensing 22.1% higher to £10.5 million; and
  • New Media & Mobile increasing 17.3% to £6.1 million.

Broadcasting

Broadcasting revenues for the year decreased 2.3% to £101.6 million primarily as a result of the market pool element of our UEFA Champions League distributions for fiscal 2013 being based on a 25% share for finishing as runners-up in the Premier League in the preceding season compared to a 40% share in fiscal 2012 for finishing the preceding Premier League season as Champions.

For the fourth quarter, revenues decreased 3.3% year on year to £26.6 million for the same reason but were offset slightly by higher merit revenue from the English Premier League as a result of finishing in first place in 2013 compared to runners up in 2012.

Matchday

Matchday revenues for the year increased 10.5% to £109.1 million, as we hosted a number of matches during the 2012 Olympic Games and had five home domestic cup fixtures in fiscal 2013 compared to one in fiscal 2012.

For the fourth quarter, revenues increased 9.0% year on year to £20.6 million, due primarily to particularly strong matchday hospitality.

Other Financial Information - Full Year

Operating expenses

Total operating expenses for the year increased 8.8% to £310.3 million.

Staff costs

Staff costs for the year were up 11.6% to £180.5 million, primarily due to increased headcount to facilitate the continued expansion of our commercial business (at 30 June 2013, we employed 793 people versus 713 a year earlier), new player signings and higher wages and bonuses for existing players.

Other operating expenses

Other operating expenses for the year were up 10.6% to £74.1 million, primarily due to an increase in domestic cup gateshare expenses, catering, police and security costs associated with the home domestic cup games played in the year; together with the costs of hosting the matches at the 2012 Olympic Games.

Depreciation and amortisation of players' registrations

Depreciation for the year increased 4.0% to £7.8 million and amortisation of players' registrations for the year was 8.9% higher at £41.7 million. The unamortised balance of players' registrations as of 30 June 2013 was £119.9 million.

Exceptional items

Exceptional items for the year were £6.2 million, which related to professional advisory costs in connection with the IPO and compensation payments to former coaching staff for loss of office following the appointment of the new manager and coaching team, compared with £10.7 million in the prior year, which related to professional advisory costs in connection with the IPO and increase in the provision for the Football League pension scheme. For the fourth quarter they were £2.3 million compared with £4.4 million in the prior year quarter.

Profit on disposal of players' registrations

Profit on the disposal of players' registrations for the year was £9.1 million compared with £9.7 million in the prior year. For the fourth quarter it was £1.1 million compared with £1.8 million in the prior year quarter.

Net finance costs

Net finance costs for the year increased £21.3 million to £70.8 million primarily due to the £22.0 million premium paid on the redemptions of senior secured notes (£16.7 million related to the refinancing in June 2013 and the £5.3 million balance due to the retirement of notes following the IPO in September 2012) compared to £2.2 million in the prior year. Accelerated amortisation of issue discount and debt finance costs were £11.8 million compared to £2.3 million in the prior year. This increase is offset by reduced interest payable on senior secured notes of £4.3 million, a £1.7 million favourable FX swing on the translation of the Group's US dollar denominated senior secured notes, a £1.0 million FX gain on the translation of the Group's new US dollar denominated loan and a £0.5 million increase in interest receivable.

Tax

The group recorded a non-cash tax credit for the year of £155.2 million, largely comprising the recognition of US deferred tax assets.

As a result of the reorganisation transactions related to the IPO, the Company inherited the £96.1 million carried forward US tax bases of Red Football LP, which the Company will benefit from by way of future US tax deductions.

Furthermore, the reorganisation resulted in additional US tax bases or 'step-up' that is currently expected to result in the availability of further US tax deductions. The resulting increase in tax bases is currently estimated to be approximately $350 million (£225 million) gross, although not all of this is expected to result in increased tax deductions. At the time of preparing these financial statements, the deductible element of the 'step-up' had not yet been finalized and consequently the £31.9 million recognised as a deferred tax asset with respect to the 'step-up' reflects management's current best estimate. The Company expects to finalise the position by the end of the fiscal 2014.

In addition, the Company is expected to utilise future UK taxes paid as foreign tax credits in the US; and as such can 'mirror' the existing UK net deferred tax liability as a deferred tax asset in the US. As the UK deferred tax liability unwinds, there will be UK taxable income which will result in a US foreign tax credit. The benefit of the additional expected foreign tax credits results in a deferred tax asset of £25.3m.

The total amount of the US deferred tax assets recognised by the Company in relation to the reorganisation (i.e. £153.3 million), a portion of which has been utilised during the year, reflects management's current expectation that there will be sufficient taxable profits in the future to utilise the future US tax deductions.

Cash flows

Cash generated from operating activities for the year was £57.2 million, an increase of £26.3 million compared to £30.9 million in the prior year.

Capital expenditure on property, plant and equipment and investment property for the year was £12.5 million, a decrease of £10.2 million compared to £22.7 million in the prior year.

Net player capital expenditure for the year was £36.4 million, a decrease of £13.1 million compared to £49.5 million in the prior year.

Net cash generated from financing activities for the year was £16.1 million, an increase of £54.9 million compared to £38.8 million net cash used in financing activities in the prior year. During the year the Group raised £70.3 million ($110.2 million) through the initial public offering of shares on the New York Stock Exchange. The net proceeds from the offering were used to repurchase a portion of the Group's US dollar denominated senior secured notes with a value of £62.6 million ($101.7 million) and a premium of £5.3 million ($8.5 million).

In June 2013 the Group refinanced a portion of its borrowing with a new $315.7 million (£209.2 million) secured term loan, repurchasing all £177.8 million of the sterling denominated senior secured notes and $22.1 million (£14.0 million) of the US dollar denominated senior secured notes, paying a premium of £16.7 million.

During the year the Group also acquired the remaining 33.3% of the issued share capital of MUTV Limited for a purchase consideration (including transaction costs) of £2.7 million. The Group also repaid the loan stock, of £4.4 million plus accrued interest of £2.9 million, issued to the former minority shareholder, and now holds 100% of the issued share capital of MUTV Limited.

Conference Call Information

The Company's conference call to review the fourth quarter and fiscal 2013 results will be broadcast live over the internet today, 18 September 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 62 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).

Non-IFRS Measures: Definitions and Use

1. Adjusted EBITDA

Adjusted EBITDA is defined as profit/(loss) for the period before depreciation, amortisation of, and profit on disposal of, players' registrations, exceptional items, net finance costs, and tax credit.

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 amortisation), 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/(loss) for the period (i.e. Adjusted Net Income)

Adjusted profit/(loss) for the period is the adjusted profit/(loss) for the period attributable to owners of the parent, calculated by adding the profit for the period attributable to non-controlling interest to the profit/(loss) for the period attributable to owners of the parent, adding/(subtracting) material charges/(credits) related to the IPO and the repurchase of senior secured notes, subtracting the actual tax credit for the period, (subtracting)/adding the adjusted tax (expense)/credit for the period (based on an normalised tax rate of 35%; 2012: 35%) and subtracting the profit for the period attributable to non-controlling interest. The normalised tax rate of 35% is management's estimate of the tax rate likely to be applicable to the Group in the long-term.

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 material charges/(credits) related to 'one-off' transactions such as the IPO (including the associated recognition of deferred tax assets or liabilities) and repurchase of senior secured notes; and then to apply a 'normalised' tax rate (for both the current and prior periods) of the US statutory rate of 35%. A reconciliation of profit/(loss) for the period attributable to owners of the parent to adjusted profit/(loss) for the period attributable to owners of the parent is presented in supplemental note 3.

3. Adjusted basic and diluted earnings/(loss) per share

Adjusted basic and diluted earnings/(loss) per share is calculated by dividing the adjusted profit/(loss) for the period attributable to owners of the parent by the weighted average number of ordinary shares in issue during the period, as adjusted for the reorganisation transactions described in supplemental note 1.1 and presented in supplemental note 3.

Key Performance Indicators
  Twelve months ended

30 June

 Three months ended

30 June

 2013 20122013 2012
Commercial % of total revenue42.0%36.7%44.5%37.7%
Broadcasting % of total revenue28.0%32.5%31.3%36.9%
Matchday % of total revenue30.0%30.8%24.2%25.4%
Home Matches Played    
FAPL191944
UEFA competitions45--
Domestic Cups51--
Away Matches Played    
UEFA competitions45--
Domestic Cups341-
 
Other    
Employees at period end793713793713
Staff costs % of revenue49.7%50.5%60.1%66.2%
Phasing of Premier League home games Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total
2013/14 season*367319
2012/13 season375419
2011/12 season375419

*Subject to changes in broadcasting scheduling

CONSOLIDATED INCOME STATEMENT

(unaudited, in £ thousands, except per share and shares outstanding data)

  
Twelve months ended

30 June

Three months ended

30 June

 

2013 20122013 2012
Revenue363,189320,32085,09674,492
Operating expenses(310,337)(285,139)(83,288)(82,138)
Profit on disposal of players' registrations9,1629,6911,1371,795
Operating profit/(loss)62,01444,8722,945(5,851)
Finance costs(72,082)(50,315)(31,722)(14,591)
Finance income1,275779834103
Net finance costs(70,807)(49,536)(30,888)(14,488)
Loss before tax(8,793)(4,664)(27,943)(20,339)
Tax credit155,21227,977134,0425,434
Profit/(loss) for the period146,41923,313106,099(14,905)

Attributable to:

Owners of the parent

146,25022,986106,099(14,998)
Non-controlling interest169327-93
 146,41923,313106,099(14,905)
 
Earnings per share attributable to owners of the parent:
Basic and diluted earnings per share (pounds sterling)0.900.15(1)0.65(0.10)(1)
Weighted average shares outstanding (thousands)162,895155,352163,826155,352
 
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CONSOLIDATED BALANCE SHEET

(unaudited, in £ thousands)

   30 June

2013

 

30 June

2012(1)

ASSETS 
Non-current assets
Property, plant and equipment252,808247,866
Investment property14,08014,197
Goodwill421,453421,453
Players' registrations119,947112,399
Trade and other receivables1,5833,000
Deferred tax asset 145,128-
  954,999798,915
Current assets
Derivative financial instruments260967
Trade and other receivables68,61974,163
Current tax receivable-2,500
Cash and cash equivalents 94,43370,603
  163,312148,233
Total assets 1,118,311947,148