Manchester United plc 2013 First Quarter Results

Manchester United plc 2013 First Quarter Results

  • Record First Quarter Revenue of £76.3 Million

  • Sponsorship Revenue Increased 32.4%

  • First Quarter Net Income £20.5M

MANCHESTER, England--(BUSINESS WIRE)-- Manchester United (NYSE: MANU; the "Company" and "Group") - one of the most popular and successful sports teams in the world - today announced financial results for the 2013 fiscal first quarter ended 30 September 2012.


Highlights

  • Commercial revenues grew 24%

    • Sponsorship revenue increased 32.4%

    • Retail, merchandising apparel & product licensing revenue increased 11.9%

    • New media & mobile increased 11.5%

  • Ten new Sponsorship deals were entered into in the first quarter - General Motors, Bwin, Toshiba Medical Systems, Yanmar (global); Kagome (regional); Santander, Shinsei Bank and MBNA (financial services); Bakcell (mobile); and Fuji TV (MUTV)

  • Our new Hong Kong office opened in August 2012 and has already made a positive impact on sponsorship

  • 1stplace in Premier League & Champions League Group H

Commentary

Ed Woodward, Executive Vice Chairman commented, 'Manchester United had a record first quarter driven by our commercial operation, which continues to experience extremely strong global revenue growth in new media & mobile, retail merchandising & sponsorship. The team has also made a strong start to the 12/13 season - currently 1st place in the Premier League and 1st place (and undefeated) in our Champions League Group'.

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

30 September

2012

2011

Change

Commercial revenue

43.0

34.6

24.3%

Broadcasting revenue

13.7

21.9

(37.4%)

Matchday revenue

19.6

17.3

13.3%

Total revenue

76.3

73.8

3.4%

Adjusted EBITDA*

16.3

19.3

(15.5%)

Profit/(loss) for the period from continuing operations (i.e. Net Income)

20.5

(5.0)

N/A

Basic and diluted earnings/(loss) per share**

0.13

(0.03)

N/A

Gross debt***

359.7

433.2

(17.0%)

Cash and cash equivalents

52.5

65.0

(19.2%)

*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, 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), 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 IASB. A reconciliation of Adjusted EBITDA to profit/(loss) for the period from continuing operations is presented in supplemental note 3.

**Basic and diluted earnings/(loss) per share is calculated by dividing the profit/(loss) attributable to owners of the Company by the weighted average number of ordinary shares in issue during the year, as adjusted for the reorganisation transactions described in supplemental note 1.

*** Gross debt is down 18% compared with 30 June 2012, £436.9m.

Revenue Analysis

Commercial

Commercial revenue for the quarter increased 24.3% to £43.0 million driven by the addition of several new global (including General Motors - Chevrolet) and regional sponsorships; an increase in receipts from existing partnerships; an increase in profit share pursuant to the arrangement with Nike; and the commencement of new mobile partnerships. For the quarter:

  • Sponsorship revenue increased 32.4% year on year to £27.8 million. Manchester United entered into ten new sponsorship agreements during the quarter;

  • Retail, Merchandising, Apparel & Product Licensing revenue increased 11.9% year on year to £9.4 million; and

  • New Media & Mobile revenue increased 11.5% year on year to £5.8 million.

Broadcasting

Broadcasting revenues for the quarter decreased 37.4% year on year to £13.7 million. The main components of this reduction are:

a)

timing differences of £5.6m as a result of playing one UEFA Champions League game in the current year quarter compared to two games in the prior year quarter; a 'residual receipt' from UEFA relating to the 2011/12 UEFA Champions League competition will be received in Q2; and two fewer live FAPL broadcasts this year compared to the same period in the prior year.

b)

permanent differences of c.£2.6m resulting largely from lower distributions from the UEFA Champions League fixed pool, as a consequence of finishing 2nd in the Premier League in season 2011/12 compared to finishing 1st in season 2010/11.

Matchday

Matchday revenues for the quarter increased 13.3% year on year to £19.6 million principally as a result of one-off fees earned from the staging of nine Olympic Games football matches at Old Trafford together with the impact of a home fixture in the League Cup (compared with nil in the prior year quarter).

Other Financial Information

Operating expenses

Total operating expenses for the quarter increased 12.7% year on year to £74.8 million.

Staff costs

Staff costs for the quarter increased 6.6% year on year to £40.3 million, primarily due to growth in commercial headcount, partially offset by a one-off receipt of £1.3m for players on International duty at Euro 2012. Staff costs for the remaining quarters of the year are expected to be higher due to this one-off receipt and the fact that certain player acquisitions did not take place until half way through the period.

Other operating expenses

Other operating expenses for the quarter increased 18.0% year on year to £19.7 million, primarily due to increased pre-season tour travel costs, gateshare payments to domestic cup opponents following our home League Cup fixture (£nil in the prior year quarter due to the equivalent fixture being played away from home), and one-off Olympic games costs.

Depreciation & amortisation of players' registrations

Depreciation for the quarter increased 4.2% year on year to £1.9 million; and amortisation of players' registrations for the quarter decreased 2.7% year on year to £9.8 million. The unamortised balance of existing players' registrations at 30 September 2012 was £135.6 million.

Exceptional items

Exceptional items for the quarter were for £3.1 million and related to professional advisor fees in connection with the IPO (compared with £nil for the prior year quarter).

Profit on disposal of players' registrations

Profit on the disposal of players' registrations for the quarter was £4.8 million (compared with £5.6 million in the prior year quarter) - key disposals being Berbatov and Park.

Net finance costs

Net finance costs for the quarter decreased 35.9% year on year to £12.4 million compared with the same quarter last year. The main reasons for this decrease are a favourable FX movement of £13.9 million year on year on translation of the Group's US dollar denominated senior secured notes, partially offset by a £3.3 million increase in premium paid on repurchases of US dollar denominated senior secured notes and a £2.3 million increase in accelerated amortisation of debt issue costs on repurchased notes with proceeds for the IPO.

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). This exposure to FX movements has been reduced now that the net IPO proceeds (of approximately $110.3m) have been used to reduce our USD denominated senior secured notes.

Tax

The tax credit for the quarter was £26.5 million (compared with a credit of £1.4 million in the prior year quarter). Following the transfer of Red Football Shareholder Ltd and its subsidiaries from the controlling shareholders to the Company, the Company has assumed certain US tax bases. A related deferred tax asset has been recognised in respect of the US tax bases in the period, relating to future tax deductions. The amount recognised reflects management's current best assessment of probable taxable profits in the future against which the tax deductions may be offset. This has been determined on the basis of only those commercial agreements in place at the balance sheet date. An element of this deferred tax asset will unwind during fiscal 2013. The potential deferred tax asset available, but which currently remains unrecognised, amounts to at least £60m and will be recognised when key commercial contracts are renewed or replaced.

Profit/(loss) for the period from continuing operations

Profit for the period from continuing operations for the quarter increased to £20.5 million, compared to a loss in the prior year quarter of £5.0 million.

Cash flows

Cash generated from operating activities for the quarter were £9.3 million, an increase of £10.9 million compared to £1.6 million cash used in the prior year quarter.

Capital expenditures on property, plant and equipment and investment property for the quarter were £3.4 million, a decrease of £10.4 million compared to £13.8 million in the prior year quarter. Expenditure in the current year quarter mainly related to the redevelopment of the First Team's training facility at Carrington. In the prior year quarter we acquired investment properties amounting to £8.1m around the Old Trafford stadium.

Net player capital expenditure for the quarter was £29.5 million, a decrease of £17.6 million compared to £47.1 million in the prior year quarter. Expenditure in the current year quarter mainly related to the acquisition of Shinji Kagawa and Nick Powell and the first of two staged payments for Robin van Persie.

Net cash generated from financing activities for the quarter was £7.6 million, an increase of £30.7 million compared to £23.1 million cash used in the prior year quarter. In the current year quarter the Company raised £70.3 million following the public offering of shares on the New York Stock Exchange. The proceeds were used to repurchase the Company's US dollar denominated senior secured notes (see "Borrowings" below) - the principal value of which was £62.6 million.

Cash and cash equivalents

Cash and cash equivalents at 30 September 2012 were £52.5 million compared to £65.0 million at 30 September 2011.

Borrowings

Total borrowings were £359.7 million at 30 September 2012 compared to £436.9 million at 30 June 2012. During the quarter 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 first quarter fiscal 2013 results will be broadcast live over the internet today, 14 November 2012 at 8:00 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 team in the world, playing one of the most popular spectator sports on Earth.

Through our 134-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

30 September

2012

2011

Commercial % of total revenue

56.4%

46.8%

Nike and Aon % of Commercial

33.1%

38.2%

Partners and other % of Commercial

66.9%

61.8%

Broadcasting % of total revenue

18.0%

29.7%

Matchday % of total revenue

25.6%

23.5%

Home Matches Played

FAPL

3

3

UEFA competitions

1

1

Domestic Cups

1

-

Away Matches Played*

UEFA competitions

-

1

Domestic Cups

-

1

*Away matches played includes games at a neutral venue, where appropriate

Other

Employees at period end

735

670

Staff costs % of revenue

52.8%

51.3%

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

2010/11 season

3

7

5

4

19

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

CONSOLIDATED INCOME STATEMENT

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

Three months ended

30 September

2012

2011

Revenue

76,316

73,782

Operating expenses

(74,811)

(66,426)

Profit on disposal of players' registrations

4,818

5,624

Operating profit

6,323

12,980

Finance costs

(12,476)

(19,619)

Finance income

89

284

Net finance costs

(12,387)

(19,335)

Loss on ordinary activities before tax

(6,064)

(6,355)

Tax credit

26,532

1,385

Profit/(loss) for the period from continuing operations(1)

20,468

(4,970)

Attributable to:

Owners of the Company

20,386

(5,018)

Non-controlling interest

82

48

20,468

(4,970)

Earnings/(loss) per share attributable to the equity holders of the Company during the period

Basic and diluted earnings/(loss) per share (Pounds Sterling)

0.13

(0.03)(2)

(1) Also referred to as Net Income.

(2) As adjusted retrospectively to reflect the reorganisation transactions described in supplemental note 1.

CONSOLIDATED BALANCE SHEET

(unaudited; in £ thousands)

30 September

2012

30 June

2012

30 September

2011

ASSETS

Non-current assets

Property, plant and equipment

250,479

247,866

244,746

Investment property

14,169

14,197

13,816

Goodwill

421,453

421,453

421,453

Players' registrations

135,634

112,399

120,234

Trade and other receivables

1,500

3,000

13,000

Non-current tax receivable

-

-

2,500

Deferred tax asset

24,589

-

-

847,824

798,915

815,749

Current assets

Derivative financial instruments

1,228

967

643

Trade and other receivables

69,887

74,163

55,860

Current tax receivable

3,551

2,500

-

Cash and cash equivalents

52,527

70,603

64,967

127,193

148,233

121,470

Total assets

975,017

947,148

937,219

CONSOLIDATED BALANCE SHEET (continued)

(unaudited; in £ thousands)

30 September

2012

30 June

2012(1)

30 September

2011(1)

EQUITY AND LIABILITIES

Equity

Share capital

52

50

50

Share premium

68,666

25

25

Merger reserve

249,030

249,030

249,030

Hedging reserve

791

666

482

Retained earnings/(deficit)

8,069

(12,671)

(30,818)

Equity at