MANCHESTER UNITED PLC: 2014 First Quarter Results

  MANCHESTER UNITED PLC: 2014 First Quarter Results

  *TOTAL REVENUE UP 29.1%
  *RECORD FIRST QUARTER REVENUE OF £98.5 MILLION
  *COMMERCIAL REVENUE INCREASED 39.3%
  *RECORD ADJUSTED EBITDA UP 36.2%

Business Wire

MANCHESTER, England -- November 14, 2013

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 2014 fiscal first quarter ended 30 September 2013.

                                  Highlights

  *Commercial revenues of £59.9 million

       *Sponsorship revenue increased 62.6%.
       *Retail, merchandising apparel & product licensing revenue up 13.8%.

  *Twelve new sponsorship deals activated in the first quarter – Aeroflot and
    Bulova (global); Pepsi, Apollo Tyres, Federal Tyres and Manda Fermentation
    (regional); Commercial Bank Qatar, Emirates Bank, MBNA and afb (financial
    services); Sky NZ (MUTV) and True Corporation (mobile and MUTV).
  *Broadcasting revenues increased 40.9% due to the new FAPL domestic and
    international TV rights agreements.

                                  Commentary

Ed Woodward, Executive Vice Chairman commented, “We are pleased to have
achieved another record first quarter, driven by the strength of our
commercial business and increased broadcasting revenues. Ourunique approach
to the commercial business will continue to drive future growth. We are also
excited by the continuing rise in the value of sports content, evidenced,
amongst other things, by the recently announced BT deal for the UK rights to
broadcast the Champions League and Europa League matches for three seasons
from 2015/16. This deal represents a meaningful increase over the current
arrangement, which should translate into higher broadcasting revenues for the
participating clubs.”

                                   Outlook

For fiscal 2014, Manchester United continues to expect:

  *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)
                                                  Three months ended
£ million (except adjusted earnings per share)                       
                                                  30 September
                                                 2013      2012      Change
Commercial revenue                                59.9       43.0      39.3%
Broadcasting revenue                              19.3       13.7      40.9%
Matchday revenue                                  19.3       19.6      (1.5)%
Total revenue                                     98.5       76.3      29.1%
Adjusted EBITDA*                                  22.2       16.3      36.2%

(Loss)/profit for the period (i.e. Net Income)    (0.3)      20.5      N/A
Adjusted profit/(loss) for the period (i.e.       2.2        (0.6)     N/A
Adjusted Net Income/(Loss))*
Adjusted basic and diluted earnings/(loss) per    1.37       (0.39)    N/A
share (pence)*

Gross debt                                        361.0      359.7     0.4%
Cash and cash equivalents                         83.6       52.5      59.2%

* Adjusted EBITDA, adjusted profit 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 quarter was £59.9 million, an increase of £16.9
million, or 39.3%, over the prior year quarter.

  *Sponsorship revenue for the quarter was £45.2 million, an increase of
    £17.4 million, or 62.6%, over the prior year quarter primarily due to a
    significant increase from the pre-season tour, higher renewals and the
    activation of new global and regional sponsorships.
  *Retail, Merchandising, Apparel & Product Licensing revenue for the quarter
    was £10.7 million, an increase of £1.3 million, or 13.8%, over the prior
    year quarter, primarily due to additional profit share pursuant to the
    agreement with Nike.
  *New Media & Mobile revenue for the quarter was £4.0 million, a decrease of
    £1.8 million over the prior year quarter, due to the expiration of a few
    of our mobile partnerships.

Broadcasting

Broadcasting revenue for the quarter was £19.3 million, an increase of £5.6
million, or 40.9%, over the prior year quarter, due to increased revenue from
the Premier League domestic and international rights agreements, one
additional live Premier League game compared to the prior year quarter, and
increases in share of UEFA Champions League fixed pool distributions as we
finished 1^st in the Premier League in season 2012/13 compared to 2^nd in the
2011/12 season.

Matchday

Matchday revenue for the quarter was £19.3 million compared to £19.6 million
in the prior year quarter, which included one-off fees earned from the staging
of Olympic Games football matches at Old Trafford whereas the current year
quarter included fees earned from participating in this season’s Community
Shield match which we did not participate in last season.

                         Other Financial Information

Operating expenses

Total operating expenses for the quarter were £90.2 million, an increase of
£15.4 million, or 20.6%, over the prior year quarter.

Staff costs

Staff costs for the quarter were £52.9 million, an increase of £12.6 million,
or 31.3%, over the prior year quarter. This increase was primarily due to the
impact of a full period of wage costs relating to players signed part way
through the prior year quarter, contractual player wage increases and bonuses
associated with the growth of our commercial business. Additionally, the prior
year quarter benefitted from a one-off receipt of £1.3 million in respect of
players on International duty at Euro 2012.

Other operating expenses

Other operating expenses for the quarter were £23.4 million, an increase of
£3.7 million, or 18.8%, over the prior year quarter primarily due to increased
pre-season tour travel costs, and higher gateshare payments to domestic cup
opponents and sponsorship servicing.

Depreciation & amortization of players’ registrations

Depreciation for the quarter was £2.0 million, an increase of £0.1 million, or
5.3%, over the prior year quarter. Amortization of players’ registrations was
£11.9 million, £2.1 million or 21.4% higher than the prior year quarter. The
unamortized balance of players’ registrations at 30 September 2013 was £144.7
million.

Net finance costs

Net finance costs for the quarter were £9.8 million, a decrease of £2.6
million, or 21.0%, over the prior year quarter. The decrease was primarily due
to a £4.1 million reduction in interest payable on our secured borrowings and
a £7.8 million reduction in premium paid and accelerated amortization related
to the senior secured note repurchases in the prior year quarter; partially
offset by a £7.6 million gain on re-translation of our US dollar borrowings in
the prior year quarter.

On 1 July 2013 we started hedging the foreign exchange risk on a portion of
our future US dollar revenues using our US dollar borrowings as the hedging
instrument. As a result, FX gains or losses arising on re-translation of our
US dollar borrowings are now initially recognized in other comprehensive
income, rather than recognized in the income statement immediately. Amounts
previously recognized in other comprehensive income and accumulated in a
hedging reserve are subsequently reclassified into the income statement in the
same accounting period and within the same income statement line (i.e.
commercial revenue) as the underlying future US dollar revenues. This will
reduce foreign exchange volatility in our income statement.

More recently, we have entered into a floating to fixed interest rate swap on
our $315.7 million secured term loan creating a maximum and minimum interest
rate of approximately 4.1% and 2.8% respectively (subject to leverage grid)
from 25 ^ November 2013 for the remaining life of the facility.

Tax

The tax credit for the quarter was £0.2 million, compared to a credit of £26.5
million in the prior year quarter (which predominantly related to the
recognition of a deferred tax asset for the US tax basis inherited from Red
Football LP). There have been no changes to the estimates and judgements in
relation to the valuation of deferred tax assets since the June 2013 year end.

Cash flows

Net cash generated from operating activities for the quarter was £23.2
million, an increase of £13.9 million, primarily due to a £15.4 million
reduction in interest paid.

Capital expenditure on property, plant and equipment for the quarter was £4.1
million, £0.7 higher than the £3.4 million in the prior year quarter.

Net player capital expenditure for the quarter was £26.8 million, a decrease
of £2.7 million from the prior year quarter.

Net cash used in financing activities for the quarter was £0.1 million, a
decrease of £7.6 million from £7.5 million net cash generated in the prior
year quarter. In the prior year quarter the Company raised £70.3 million from
our IPO, the proceeds of which were used to repurchase a portion of our US
dollar denominated senior secured notes, comprising a principal value of £62.6
million and a premium on repurchase of £5.3 million.

                         Conference Call Information

The Company’s conference call to review first quarter fiscal 2014 results will
be broadcast live over the internet today, 14 November 2013 at 8:00 a.m.
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 135-year heritage we have won 62 trophies, enabling us to develop
the world’s leading sports brand and a global community of 659million
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 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 for the period to
adjusted EBITDA is presented in supplemental note 2.

2. Adjusted profit/(loss) for the period (i.e. Adjusted Net Income/(Loss))

Adjusted profit/(loss) for the period is the adjusted profit/(loss) for the
period attributable to owners of the parent, calculated, where appropriate, by
adding the profit for the period attributable to non-controlling interest to
the (loss)/profit for the period attributable to owners of the parent,
adjusting for material charges related to the IPO, the repurchase of senior
secured notes, foreign exchange losses/gains on US dollar denominated bank
accounts and borrowings, and fair value movements on derivative financial
instruments, subtracting the actual tax credit for the period,
(subtracting)/adding the adjusted tax (expense)/credit for the period (based
on an normalized tax rate of 35%; 2012: 35%) and subtracting the profit for
the period attributable to non-controlling interest. The normalized 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
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, plus the impact of foreign exchange reflected in the
retranslation of the US dollar denominated bank accounts and borrowings, and
in the fair value movement on derivative financial instruments; and then to
apply a ‘normalized’ tax rate (for both the current and prior periods) of the
US statutory rate of 35%. We have refined the calculation of adjusted
profit/(loss) by also now adjusting for foreign exchange losses/gains on US
dollar denominated bank accounts and borrowings and fair value movements on
derivative financial instruments. A reconciliation of (loss)/profit 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,
and is presented in supplemental note 3.

Key Performance Indicators
                                          Three months ended
                                                    30 September
                                                    2013       2012
Commercial % of total revenue                       60.8%       56.4%
Broadcasting % of total revenue                     19.6%       18.0%
Matchday % of total revenue                         19.6%       25.6%
Home Matches Played
FAPL                                                3           3
UEFA competitions                                   1           1
Domestic Cups                                       1           1
                                                                       
Other
Employees at period end                             810         735
Staff costs % of revenue                            53.7%       52.8%

Phasing of Premier     Quarter 1  Quarter 2  Quarter 3  Quarter 4  Total
League home games
2013/14 season*         3           6           7           3           19
2012/13 season          3           7           5           4           19
2011/12 season          3           7           5           4           19

*Subject to changes in broadcasting scheduling

CONSOLIDATED INCOME STATEMENT

(unaudited; in £ thousands, except per share and shares outstanding data)
                                                         Three months ended
                                                       
                                                         30 September
                                                       2013      2012
Revenue                                                  98,521    76,316
Operating expenses                                       (90,208)   (74,811)
Profit on disposal of players’ registrations            996       4,818
Operating profit                                        9,309     6,323
Finance costs                                            (9,838)    (12,476)
Finance income                                          59        89
Net finance costs                                       (9,779)   (12,387)
Loss before tax                                          (470)      (6,064)
Tax credit                                              177       26,532
(Loss)/profit for the period                            (293)     20,468
Attributable to:
                                                         (293)      20,386
Owners of the parent
Non-controlling interest                                -         82
                                                       (293)     20,468
                                                                             
(Loss)/earnings per share attributable to owners of
the parent:
Basic and diluted (loss)/earnings per share (pence)      (0.18)     12.73
Weighted average number of ordinary shares outstanding  163,819   160,134
(thousands)

                                                            
CONSOLIDATED BALANCE SHEET

(unaudited; in £ thousands)
                                                                             
                                     As of          As of       As of

                                   30 September  30 June    30 September

                                     2013           2013        2012
ASSETS
Non-current assets
Property, plant and equipment        256,244        252,808     250,479
Investment property                  14,051         14,080      14,169
Goodwill                             421,453        421,453     421,453
Players’ registrations               144,680        119,947     135,634
Trade and other receivables          241            1,583       1,500
Deferred tax asset                  139,434       145,128    24,589
                                   976,103       954,999    847,824
Current assets
Derivative financial instruments     882            260         1,228
Trade and other receivables          64,292         68,619      69,887
Current tax receivable               -              -           3,551
Cash and cash equivalents           83,602        94,433     52,527
                                   148,776       163,312    127,193
Total assets                        1,124,879     1,118,311  975,017
                                                                             
                                                                             
CONSOLIDATED BALANCE SHEET (continued)

(unaudited; in £ thousands)
                                                                             
                                     As of          As of       As of

                                   30 September  30 June    30 September

                                     2013           2013        2012
EQUITY AND LIABILITIES
Equity
Share capital                        52             52          52
Share premium                        68,822         68,822      68,666
Merger reserve                       249,030        249,030     249,030
Hedging reserve                      16,342         231         791
Retained earnings                   129,949       129,825    8,069
Equity attributable to owners of     464,195        447,960     326,608
the parent
Non-controlling interest            -             -          (1,921)
                                   464,195       447,960    324,687
Non-current liabilities
Derivative financial instruments     1,649          1,337       1,701
Trade and other payables             18,014         18,413      23,232
Borrowings                           353,476        377,474     353,966
Deferred revenue                     18,023         17,082      7,131
Provisions                           845            988         1,247
Deferred tax liabilities            14,913        17,168     25,608
                                   406,920       432,462    412,885
Current liabilities
Derivative financial instruments     571            29          -
Current tax liabilities              5,472          900         1,128
Trade and other payables             72,929         78,451      79,437
Borrowings                           7,571          11,759      5,740
Deferred revenue                     166,757        146,278     150,714
Provisions                          464           472        426
                                   253,764       237,889    237,445
Total equity and liabilities        1,124,879     1,118,311  975,017

                                                                             
CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited; in £ thousands)
                                                         Three months ended
                                                       
                                                         30 September
                                                       2013      2012
Cash flows from operating activities                              
Cash generated from operations (see supplemental note    32,770     33,883
4)
Interest paid                                            (9,146)    (24,503)
Debt finance costs relating to borrowings                (19)       -
Interest received                                        59         85
Income tax paid                                         (487)     (202)
Net cash generated from operating activities            23,177    9,263
Cash flows from investing activities
Purchases of property, plant and equipment               (4,093)    (3,396)
Purchases of players’ registrations                      (33,450)   (34,897)
Proceeds from sale of players’ registrations            6,655     5,364
Net cash used in investing activities                   (30,888)  (32,929)
Cash flows from financing activities
Proceeds from issue of shares                            -          70,258
Repayment of borrowings                                 (91)      (62,704)
Net cash (used in)/generated from financing activities  (91)      7,554
Net decrease in cash and cash equivalents                (7,802)    (16,112)
Cash and cash equivalents at beginning of period         94,433     70,603
Exchange losses on cash and cash equivalents            (3,029)   (1,964)
Cash and cash equivalents at end of period              83,602    52,527

                              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 (loss)/profit for the period to adjusted EBITDA
                                                     Three months ended
                                                
                                                     30 September
                                                     2013         2012
                                                         
                                                     £’000        £’000
(Loss)/profit for the period                         (293)     20,468
Adjustments:
Tax credit                                           (177)        (26,532)
Net finance costs                                    9,779        12,387
Profit on disposal of players’ registrations         (996)        (4,818)
Exceptional items                                    -            3,098
Amortization of players’ registrations               11,904       9,823
Depreciation                                     1,983     1,917
Adjusted EBITDA                                  22,200    16,343


3 Reconciliation of (loss)/profit for the period attributable to owners of
the parent to adjusted
profit/(loss) for the period and adjusted basic and diluted earnings/(loss)
per share
                                                          Three months ended
                                                        
                                                          30 September
                                                          2013      2012
                                                                
                                                          £’000     £’000
(Loss)/profit for the period attributable to owners of    (293)    20,386
the parent
Add: profit for the period attributable to               -        82
non-controlling interest
(Loss)/profit for the period                              (293)     20,468
Professional advisors fees relating to the issue of       -         3,098
shares
Accelerated amortisation of issue discount and debt
finance costs                                             -         2,543
associated with the repurchase of senior secured notes
Premium on repurchase of senior secured notes             -         5,244
Foreign exchange loss on US dollar denominated bank       3,029     1,964
accounts
Foreign exchange gain on US dollar denominated            -         (7,644)
borrowings
Fair value movement on derivative financial instruments   884       16
Tax credit                                               (177)    (26,532)
Adjusted profit/(loss) before tax                         3,443     (843)
Adjusted tax (expense)/credit (using a normalised US     (1,205)  295
statutory rate of 35%)
                                                          2,238     (548)
Subtract: profit for the period attributable to          -        (82)
non-controlling interest
Adjusted profit/(loss) for the period (i.e. Adjusted     2,238    (630)
Net Income/(Loss))
                                                                             
Adjusted basic and diluted earnings/(loss) per share      1.37      (0.39)
(pence)
Weighted average number of ordinary shares outstanding   163,819  160,134
(thousands)

The Group has refined the calculation of adjusted profit/(loss) by also now
adjusting for foreign exchange losses/gains on US dollar denominated bank
accounts and borrowings and fair value movements on derivative financial
instruments.

                                                                             
4 Cash generated from operations
                                                       Three months ended
                                                  
                                                       30 September
                                                       2013         2012
                                                           
                                                       £’000        £’000
(Loss)/profit from continuing operations               (293)     20,468
Tax credit                                         (177)     (26,532)
Loss on ordinary activities before tax                 (470)        (6,064)
Depreciation charges                                   1,983        1,917
Amortisation of players’ registrations                 11,904       9,823
Profit on disposal of players’ registrations           (996)        (4,818)
Net finance costs                                      9,779        12,387
Share-based payments                                   383          327
Fair value gains on derivative financial               (160)        (111)
instruments
Reclassified from hedging reserve                      (188)        -
Decrease in trade and other receivables                10           6,358
Increase in trade and other payables and               10,685       14,210
deferred revenue
Decrease in provisions                             (160)     (146)
Cash generated from operations                     32,770    33,883

Contact:

Investor Relations:
Samanta Stewart
+44 207 054 5928
ir@manutd.co.uk
or
Media: Philip Townsend
Manchester United plc
+44 161 868 8148
philip.townsend@manutd.co.uk
or
Jim Barron / Michael Henson
Sard Verbinnen & Co + 1 212 687 8080
 
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