Manchester United Plc: 2014 Second Quarter Results

  Manchester United Plc: 2014 Second Quarter Results                 RECORD SECOND QUARTER REVENUE OF £122.9 MILLION            SPONSORSHIP REVENUE FOR THE SECOND QUARTER INCREASED 39.4%                    YEAR-TO-DATE ADJUSTED NET INCOME UP 19.6%  Business Wire  MANCHESTER, England -- February 12, 2014  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 second quarter and six months ended 31 December 2013.                                    Highlights    *Commercial revenues of £42.3 million up 18.8% for the quarter and 30.0%     for the year to date.   *Six new sponsorship deals activated in the second quarter – Unilever and     Hong Kong Jockey Club (regional); Banif Bank (financial services); Fuji TV     and SPOTV Korea (MUTV) and STC (mobile).   *Broadcasting revenues increased 18.7% for the quarter primarily due to the     new FAPL domestic and international TV rights agreements.                                    Commentary  Ed Woodward, Executive Vice Chairman commented, “We once again achieved a record revenue quarter with strong contributions from our commercial and broadcasting businesses despite the current league position, which everyone from the Team Manager down has acknowledged is disappointing. We continue to see meaningful opportunities to grow our commercial business and the popularity of football on TV is leading to continued broadcasting revenue growth – all of which bodes well for the long-term stability and financial strength of our business. We are also very pleased to have added a world class player in Juan Mata to our squad, who has already made a positive impact."                                     Outlook  For fiscal 2014, Manchester United continues to expect:    *Revenue to be £420m to £430m.   *Adjusted EBITDA to be £128m to £133m.                            Key Financials (unaudited)  £ million (except      Three months                Six months ended adjusted              ended                                       earnings/(loss) per                                31 December share)                 31 December                       2013     2012     Change   2013     2012     Change Commercial revenue     42.3      35.6     18.8%    102.2     78.6     30.0% Broadcasting revenue   46.9      39.5     18.7%    66.2      53.2     24.4% Matchday revenue       33.7      35.0     (3.7%)   53.0      54.6     (2.9%) Total revenue          122.9     110.1    11.6%    221.4     186.4    18.8% Adjusted EBITDA*       51.0      50.2     1.6%     73.2      66.5     10.1%  Profit for the period (i.e. net       19.0      16.2     17.3%    18.7      36.7     (49.0%) income) Adjusted profit for the period (i.e.       19.8      19.0     4.2%     22.0      18.4     19.6% adjusted net income)* Adjusted basic and diluted earnings per   12.08     11.60    4.1%     13.45     11.34    18.6% share (pence)*  Gross debt             356.6     366.6    (2.7%)   356.6     366.6    (2.7%) Cash and cash          72.1      66.6     8.3%     72.1      66.6     8.3% equivalents  * Adjusted EBITDA, adjusted profit for the period and adjusted basic and 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 £42.3 million, an increase of £6.7 million, or 18.8%, over the prior year quarter.    *Sponsorship revenue for the second quarter was £29.0 million, an increase     of £8.2 million, or 39.4%, primarily due to higher renewals and the     activation of new global and regional sponsorships.   *Retail, Merchandising, Apparel & Product Licensing revenue for the second     quarter was £9.1 million, a decrease of £0.4 million. For the year to     date, revenue was £19.8 million, an increase of £0.9 million, or 4.8%.   *New Media & Mobile revenue for the second quarter was £4.2 million, a     decrease of £1.1 million, due to the expiration of a few of our mobile     partnerships.  Broadcasting  Broadcasting revenue for the second quarter was £46.9 million, an increase of £7.4 million, or 18.7%, over the prior year quarter, due to increased revenue from the Premier League domestic and international rights agreements, partly offset by one fewer Premier League game, 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 second quarter was £33.7 million, a decrease of £1.3 million, or 3.7%, over the prior year quarter, primarily due to playing one fewer home Premier League game, partly offset by one more Capital One cup game.                           Other Financial Information  Operating expenses  Total operating expenses for the second quarter were £87.7 million, an increase of £14.5 million, or 19.8%, over the prior year quarter.  Staff costs  Staff costs for the second quarter were £51.6 million, an increase of £7.4 million, or 16.7%, primarily due to the impact of player acquisitions and renegotiated player contracts.  Other operating expenses  Other operating expenses for the second quarter were £20.3 million, an increase of £4.6 million, or 29.3% primarily due to foreign exchange losses and an increase in domestic cup gate share expenses from having one home domestic cup game in the second quarter (none in the prior year quarter).  Depreciation & amortisation of players’ registrations  Depreciation for the second quarter was £2.1 million, an increase of £0.3 million, or 16.7%, over the prior year quarter. Amortisation of players’ registrations was £13.4 million, an increase of £2.7 million, or 25.2%, over the prior year quarter. The unamortised balance of players’ registrations at 31 December 2013 was £132.1 million.  Exceptional items  Exceptional items for the second quarter of £0.3 million related to investment property impairment charges. Exceptional items for the prior year quarter were £0.8million and related to professional advisor fees in connection with our initial public offering.  Net finance costs  Net finance costs for the second quarter were £5.7 million, a decrease of £3.5 million, or 38.0%, over the prior year quarter. The decrease was primarily due to a reduction in interest payable on our secured borrowings following the refinancing in June 2013.  Tax  The tax expense for the second quarter was £11.3 million, compared to an expense of £12.2 million in the prior year quarter. 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 used in operating activities for the second quarter was £3.7 million, a decrease of £29.1 million from £25.4 million net cash generated in the prior year quarter, primarily due to adverse movements in working capital.  Capital expenditure on property, plant and equipment for the second quarter was £2.8 million, a decrease of £3.1 million from the prior year quarter.  Net player capital expenditure for the second quarter was £3.4 million, a decrease of £1.0 million from the prior year quarter.                           Conference Call Information  The Company’s conference call to review second quarter fiscal 2014 results will be broadcast live over the internet today, 12 February 2014 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 for the period (i.e. adjusted net income)  Adjusted profit for the period is the adjusted profit 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 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, the fair value movements on derivative financial instruments, and hedge ineffectiveness on cash flow hedges, adding/(subtracting) the actual tax expense/(credit) for the period, subtracting the adjusted tax expense 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, the fair value movement on derivative financial instruments, and hedge ineffectiveness on cash flow hedges; and then to apply a ‘normalized’ tax rate (for both the current and prior periods) of the US statutory rate of 35%. A reconciliation of profit for the period attributable to owners of the parent to adjusted profit for the period attributable to owners of the parent is presented in supplemental note 3.  3. Adjusted basic and diluted earnings per share  Adjusted basic and diluted earnings per share is calculated by dividing the adjusted profit 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  Six months ended                                   31 December          31 December                                  2013       2012     2013     2012 Commercial % of total revenue     34.4%       32.3%    46.2%     42.2% Broadcasting % of total revenue   38.2%       35.9%    29.9%     28.5% Matchday % of total revenue       27.4%       31.8%    23.9%     29.3% Home Matches Played                                            FAPL                              6           7        9         10 UEFA competitions                 2           2        3         3 Domestic Cups                     1           -        2         1 Away Matches Played                                            UEFA competitions                 3           3        3         3 Domestic Cups                     1           1        1         1  Other                                                          Employees at period end           849         779      849       779 Staff costs % of revenue          42.5%       40.2%    47.5%     45.3%  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    Six months ended                                                                                      31 December           31 December                                 2013      2012       2013       2012 Revenue                          122,927    110,056    221,448     186,372 Operating expenses               (87,715)   (73,169)   (177,923)   (147,980) Profit on disposal of players’   846        687        1,842       5,505 registrations Operating profit                 36,058     37,574     45,367      43,897 Finance costs                    (5,765)    (9,277)    (15,603)    (21,753) Finance income                   48         67         107         156 Net finance costs                (5,717)    (9,210)    (15,496)    (21,597) Profit before tax                30,341     28,364     29,871      22,300 Tax (expense)/credit             (11,301)   (12,146)   (11,124)    14,386 Profit for the period            19,040     16,218     18,747      36,686 Attributable to:                                  19,040     16,131     18,747      36,517 Owners of the parent Non-controlling interest         -          87         -           169                                 19,040     16,218     18,747      36,686                                                                               Earnings per share attributable to owners of the parent: Basic and diluted earnings per   11.62      9.85       11.44       22.54 share (pence) Weighted average number of ordinary shares outstanding      163,812    163,826    163,816     161,980 (thousands)                            CONSOLIDATED BALANCE SHEET                           (unaudited; in £ thousands)                                     As of         As of       As of                                   31 December  30 June    31 December                                     2013          2013        2012 ASSETS                                                    Non-current assets Property, plant and equipment      256,511       252,808     253,609 Investment property                13,728        14,080      14,140 Goodwill                           421,453       421,453     421,453 Players’ registrations             132,123       119,947     125,945 Derivative financial instruments   1,013         -           - Trade and other receivables        141           1,583       1,500 Deferred tax asset                134,261      145,128    15,481                                  959,230      954,999    832,128 Current assets Derivative financial instruments   201           260         161 Trade and other receivables        68,787        68,619      61,970 Current tax receivable             -             -           2,500 Cash and cash equivalents         72,144       94,433     66,631                                  141,132      163,312    131,262 Total assets                      1,100,362    1,118,311  963,390                                           As of         As of       As of                                         31 December  30 June    31 December                                           2013          2013        2012 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                          20,483        231         1 Retained earnings                       149,139      129,825    24,323    Equity attributable to owners of the     487,526       447,960     342,228 parent Non-controlling interest                -            -          (1,834   )                                        487,526      447,960    340,394   Non-current liabilities Derivative financial instruments         1,864         1,337       1,629 Trade and other payables                 14,829        18,413      21,086 Borrowings                               341,121       377,474     349,005 Deferred revenue                         12,828        17,082      4,888 Provisions                               -             988         1,158 Deferred tax liabilities                22,184       17,168     28,161                                           392,826      432,462    405,927   Current liabilities Derivative financial instruments         1,048         29          60 Current tax liabilities                  5,813         900         1,128 Trade and other payables                 67,221        78,451      66,106 Borrowings                               15,438        11,759      17,625 Deferred revenue                         130,490       146,278     131,712 Provisions                              -            472        438                                              220,010      237,889    217,069   Total equity and liabilities            1,100,362    1,118,311  963,390                         CONSOLIDATED STATEMENT OF CASH FLOWS                           (unaudited; in £ thousands)                                    Three months ended 31   Six months ended                                  December                                                                         31 December                                  2013        2012       2013      2012 Cash flows from operating activities Cash generated from operations    1,893        27,980     34,663     61,863 (see supplemental note 4) Debt finance costs relating to    (104)        -          (123)      - borrowings Interest paid                     (4,818)      (3,431)    (13,964)   (27,934) Interest received                 48           72         107        157 Income tax (paid)/refund          (759)        802        (1,246)    600 Net cash (used in)/generated      (3,740)      25,423     19,437     34,686 from operating activities Cash flows from investing activities Purchases of property, plant      (2,785)      (5,942)    (6,878)    (9,338) and equipment Proceeds from sale of property,   50           -          50         - plant and equipment Purchases of players’             (3,837)      (3,361)    (37,287)   (38,258) registrations Proceeds from sale of players’    401          999        7,056      6,363 registrations Net cash used in investing        (6,171)      (8,304)    (37,059)   (41,233) activities Cash flows from financing activities Proceeds from issue of shares     -            -          -          70,258 Expenses directly related to      -            (1,459)    -          (1,459) the issue of shares Repayment of borrowings           (96)         (92)       (187)      (62,796) Net cash (used in)/generated      (96)         (1,551)    (187)      6,003 from financing activities Net (decrease)/increase in cash   (10,007)     15,568     (17,809)   (544) and cash equivalents Cash and cash equivalents at      83,602       52,527     94,433     70,603 beginning of period Exchange losses on cash and       (1,451)      (1,464)    (4,480)    (3,428) cash equivalents Cash and cash equivalents at      72,144       66,631     72,144     66,631 end of period                                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                                        Three months ended   Six months ended                                                                                                31 December          31 December                                       2013       2012      2013      2012                                                                                                         £’000      £’000     £’000     £’000 Profit for the period                 19,040     16,218    18,747    36,686 Adjustments: Tax expense/(credit)                  11,301     12,146    11,124    (14,386) Net finance costs                     5,717      9,210     15,496    21,597 Profit on disposal of players’        (846)      (687)     (1,842)   (5,505) registrations Exceptional items                     293        781       293       3,879 Amortisation of players’              13,418     10,660    25,322    20,483 registrations Depreciation                          2,085      1,852     4,068     3,769 Adjusted EBITDA                       51,008     50,180    73,208    66,523  3 Reconciliation of profit for the period attributable to owners of the parent to adjusted profit for the period and adjusted basic and diluted earnings per share                                     Three months ended    Six months ended                                                                                           31 December           31 December                                    2013       2012       2013       2012                                                                                                     £’000      £’000      £’000      £’000 Profit for the period attributable to owners of the      19,040     16,131     18,747     36,517 parent Add: profit for the period attributable to non-controlling    -          87         -          169 interest Profit for the period              19,040     16,218     18,747     36,686 Professional advisors fees         -          781        -          3,879 relating to the issue of shares Accelerated amortisation of issue discount and debt finance costs associated with the          -          -          -          2,543 repurchase of senior secured notes Premium on repurchase of senior    -          -          -          5,244 secured notes Foreign exchange (gain)/loss on US dollar denominated bank         (317)      1,464      2,712      3,428 accounts Foreign exchange gain on US        -          (1,165)    -          (8,809) dollar denominated borrowings Fair value movement on             666        (73)       1,550      (57) derivative financial instruments Hedge ineffectiveness of cash      (248)      -          (248)      - flow hedges Tax expense/(credit)               11,301     12,146     11,124     (14,386) Adjusted profit before tax         30,442     29,371     33,885     28,528 Adjusted tax expense (using a normalised US statutory rate of    (10,655)   (10,280)   (11,860)   (9,985) 35%)                                    19,787     19,091     22,025     18,543 Subtract: profit for the period attributable to non-controlling    -          (87)       -          (169) interest Adjusted profit for the period     19,787     19,004     22,025     18,374 (i.e. adjusted net income)                                                                               Adjusted basic and diluted         12.08      11.60      13.45      11.34 earnings per share (pence) Weighted average number of ordinary shares outstanding        163,812    163,826    163,816    161,980 (thousands)  4 Cash generated from operations                                      Three months ended    Six months ended                                                                                             31 December           31 December                                     2013       2012       2013       2012                                                                                                       £’000      £’000      £’000      £’000 Profit for the period               19,040     16,218     18,747     36,686 Tax expense/(credit)                11,301     12,146     11,124     (14,386) Profit before tax                   30,341     28,364     29,871     22,300 Depreciation charges                2,085      1,852      4,068      3,769 Impairment charges                  293        -          293        - Amortisation of players’            13,418     10,660     25,322     20,483 registrations Profit on disposal of players’      (846)      (687)      (1,842)    (5,505) registrations Net finance costs                   5,717      9,210      15,496     21,597 Profit on disposal of property,     (43)       -          (43)       - plant and equipment Equity-settled share-based          158        154        541        481 payments Exchange losses on operating        372        -          372        - activities Fair value losses/(gains) on        34         102        (126)      (9) derivative financial instruments Reclassified from hedging reserve   (330)      -          (518)      - (Increase)/decrease in trade and    (3,951)    8,369      (3,941)    14,727 other receivables Decrease in trade and other         (44,040)   (29,954)   (33,355)   (15,744) payables and deferred revenue Decrease in provisions              (1,315)    (90)       (1,475)    (236) Cash generated from operations      1,893      27,980     34,663     61,863  Contact:  Manchester United plc Investor Relations: Samanta Stewart +44 207 054 5928 ir@manutd.co.uk or Media: Philip Townsend +44 161 868 8148 philip.townsend@manutd.co.uk or Sard Verbinnen & Co Jim Barron / Michael Henson + 1 212 687 8080