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
 
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