Manchester United PLC Reports Fourth Quarter and Full Year Fiscal 2019 Results; Provides Fiscal 2020 Outlook

  • Record fiscal 2019 Revenues of £627.1 million, in line with annual guidance
  • Fiscal 2019 adjusted EBITDA of £185.8 million, in line with annual guidance
  • Fiscal 2019 Operating Profit of £50.0 million

Highlights

  • Signed three new first team players, completed several key player contract extensions
  • Announced 10 new or renewed global sponsorship deals for fiscal 2019
  • Global fans and followers increased to 1.1 billion, as measured by Kantar
  • Partnership with Harves China to open multiple club ‘Experience Centres’
  • New EPL broadcasting cycle with improved international distribution begins 2019/20

 

MANCHESTER, England–(BUSINESS WIRE)–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 2019 fiscal fourth quarter and twelve months ended 30 June 2019.

Management Commentary

Ed Woodward, Executive Vice Chairman, commented, “We remain focused on our plan of rebuilding the team and continuing to strengthen our youth system, in line with the philosophy of the club and the manager. This is reflected in the recent addition of three exciting first team players, key player contract extensions and the talent we have coming through our Academy. Everyone at Manchester United is committed to delivering on our primary objective of winning trophies.”

Outlook

For fiscal 2020, the company expects total revenues to be in a range of £560 to £580 million and total adjusted EBITDA to be in a range of £155 to £165 million. For fiscal 2020, the team will compete in the UEFA Europa League contributing to a reduction versus fiscal 2019 due to the absence of Champions’ League competition revenues.

Phasing of Premier League games

Quarter 1

Quarter 2

Quarter 3

Quarter 4

Total

2019/20 season*

7

13

12

6

38

2018/19 season

7

13

11

7

38

2017/18 season

7

14

10

7

38

*Subject to changes in broadcasting scheduling

Key Financials (unaudited)

£ million (except earnings/(loss) per share)

Twelve months ended

30 June

 

Three months ended

30 June

 

 

 

2019

Restated(1)

2018

Change

 

2019

Restated(1)

2018

Change

Commercial revenue

275.1

275.8

(0.3%)

66.7

63.4

5.2%

Broadcasting revenue

241.2

204.2

18.1%

40.9

38.8

5.4%

Matchday revenue

110.8

109.8

0.9%

23.8

19.4

22.7%

Total revenue

627.1

589.8

6.3%

131.4

121.6

8.1%

Adjusted EBITDA(2)

185.8

176.8

5.1%

10.9

10.6

2.8%

Operating profit/(loss)

50.0

43.9

13.9%

(22.1)

(23.5)

(6.0%)

 

Profit/(loss) for the period (i.e. net income/(loss)) (3)

18.9

(37.6)

(22.2)

(34.4)

(35.5%)

Basic earnings/(loss) per share

11.48

(22.92)

(13.49)

(20.95)

(35.6%)

Adjusted profit/(loss) for the period (i.e. adjusted net income/(loss))(2)

39.6

17.2

130.2%

(21.5)

(19.5)

10.3%

Adjusted basic earnings/ (loss) per share (pence)(2)

24.06

10.47

129.8%

(13.06)

(11.90)

9.7%

 

Net debt(2)/(4)

203.6

253.7

(19.7%)

203.6

253.7

(19.7%)

(1) Comparative amounts have been restated following the implementation of IFRS 15 – see supplemental note 5 for further details.

(2) Adjusted EBITDA, adjusted profit/(loss) for the period, adjusted basic earnings/(loss) per share and net debt are non-IFRS measures. See “Non-IFRS Measures: Definitions and Use” on page 6 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.

(3) The US federal corporate income tax rate reduced from 35% to 21% following the enactment of US tax reform on 22 December 2017. This necessitated a re-measurement of the then existing US deferred tax position in the period to 31 December 2017. As a result the loss for the twelve months ended 30 June 2018 included a non-cash tax accounting write off of £49.0 million.

(4) The gross USD debt principal remains unchanged.

Revenue Analysis

Commercial

Commercial revenue for the year was £275.1 million, a decrease of £0.7 million, or 0.3%, over the prior year.

  • Sponsorship revenue was £173.0 million, consistent with the prior year, reflecting lower tour revenue as a result of a shorter summer tour, offset by an increase in underlying sponsorship revenues.
  • Retail, Merchandising, Apparel & Product Licensing revenue was £102.1 million, a decrease of £0.7 million, or 0.7%, over the prior year.

For the quarter, commercial revenue was £66.7 million, an increase of £3.3 million, or 5.2%, over the prior year quarter.

  • Sponsorship revenue was £41.5 million, an increase of £2.6 million, or 6.7%, over the prior year quarter.
  • Retail, Merchandising, Apparel & Product Licensing revenue was £25.2 million, an increase of £0.7 million, or 2.9%, over the prior year quarter.

Broadcasting

Broadcasting revenue for the year was £241.2 million, an increase of £37.0 million, or 18.1%, over the prior year, primarily due to the new UEFA Champions League broadcasting rights agreement.

Broadcasting revenue for the quarter was £40.9 million, an increase of £2.1 million, or 5.4%, over the prior year quarter.

Matchday

Matchday revenue for the year was £110.8 million, an increase of £1.0 million, or 0.9%, over the prior year.

Matchday revenue for the quarter was £23.8 million, an increase of £4.4 million, or 22.7%, over the prior year quarter, primarily due to playing two additional home games in the quarter.

Other Financial Information

Operating expenses

Total operating expenses for the year were £602.9 million, an increase of £38.9 million, or 6.9%, over the prior year.

Employee benefit expenses

Employee benefit expenses for the year were £332.3 million, an increase of £36.3 million, or 12.3%, over the prior year, primarily due to investment in the first team playing squad.

Other operating expenses

Other operating expenses for the year were £109.0 million, a decrease of £8.0 million, or 6.8%, over the prior year, in part due to a shorter summer tour and reduced domestic cup related costs.

Depreciation, impairment and amortization

Depreciation and impairment for the year was £12.8 million, an increase of £2.1 million, or 19.6%, over the prior year. Amortization for the year was £129.2 million, a decrease of £9.2 million, or 6.6%, over the prior year. The unamortized balance of registrations at 30 June 2019 was £340.4 million.

Exceptional items

Exceptional items for the year were £19.6 million, relating to compensation to the former manager and certain members of the coaching staff for loss of office. Exceptional costs for the prior year were £1.9 million, relating to the present value of the additional contributions the Group is expected to pay to make good the increased deficit of the Football League pension scheme pursuant to the latest triennial actuarial valuation at 31 August 2017.

Profit on disposal of intangible assets

Profit on disposal of intangible assets for the year was £25.8 million, compared to £18.1 million for the prior year.

Net finance costs

Net finance costs for the year were £22.5 million, an increase of £4.4 million, or 24.3%, over the prior year. The increase was due to unrealized foreign exchange losses on unhedged USD borrowings.

Tax

The tax expense for the year was £8.6 million, compared to £63.4 million in the prior year. The prior year charge included a non-cash, tax accounting write-off of £49.0 million following the enactment of US tax reform on 22 December 2017. The non-cash write-off was primarily due to the reduction in the US federal corporate income tax rate from 35% to 21%, which necessitated re-measurement of the then existing US deferred tax position in the period to 31 December 2017.

Cash flows

Overall cash and cash equivalents (including the effects of exchange rate movements) increased by £65.6 million in the year.

Net cash inflow from operating activities for the year was £244.8 million, an increase of £149.6 million over the prior year, primarily due to timing of cash receipts on commercial contractual arrangements.

Net capital expenditure on property, plant and equipment for the year was £13.7 million, an increase of £0.5 million over the prior year.

Net capital expenditure on investment properties for the year was £12.4 million compared to £nil in the prior year.

Net capital expenditure on intangible assets for the year was £135.2 million, an increase of £27.1 million over the prior year.

Net debt

Net Debt as of 30 June 2019 was £203.6 million, a decrease of £50.1 million over the year, primarily due to an overall increase in cash and cash equivalents as described above. The gross USD debt principal remains unchanged.

Dividend

Two semi-annual dividends of $0.09 per share were paid during the year.

Conference Call Details

The Company’s conference call to review fiscal 2019 and fourth quarter results will be broadcast live over the internet today, 24 September 2019 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 teams in the world, playing one of the most popular spectator sports on Earth. Through our 141-year football heritage we have won 66 trophies, enabling us to develop what we believe is one of the world’s leading sports and entertainment brands with a global community of 1.1 billion fans and followers. Our large, passionate and highly engaged fan base 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 initiatives which in turn, directly fund our ability to continuously reinvest in the club.

Cautionary Statements

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).

Statement Regarding Unaudited Financial Information

The unaudited financial information set forth is preliminary and subject to adjustments. The audit of the financial statements and related notes to be included in our annual report on Form 20-F for the year ended 30 June 2019 is still in progress. Adjustments to the financial statements may be identified when audit work is completed, which could result in significant differences from this preliminary unaudited financial information.

Non-IFRS Measures: Definitions and Use

1. Adjusted EBITDA

Adjusted EBITDA is defined as profit/(loss) for the period before depreciation and impairment, amortization, profit on disposal of intangible assets, exceptional items, net finance costs, and tax.

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, impairment and amortization), material volatile items (primarily profit on disposal of intangible assets and exceptional items), capital structure (primarily finance costs), and items outside the control of our management (primarily taxes). Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for an analysis of our results as reported under IFRS as issued by the IASB. A reconciliation of profit/(loss) for the period to adjusted EBITDA is presented in supplemental note 2.

2. Adjusted profit/(loss) for the period (i.e. adjusted net income/(loss)

Adjusted profit/(loss) for the period is calculated, where appropriate, by adjusting for charges/credits related to exceptional items, foreign exchange gains/losses on unhedged US dollar denominated borrowings, and fair value movements on embedded foreign exchange derivatives, adding/subtracting the actual tax expense/credit for the period, and subtracting/adding the adjusted tax expense/credit for the period (based on an normalized tax rate of 21%; 2018: 28%). The normalized tax rate of 21% is the current US federal corporate income tax rate.

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 the items referred to above and then to apply a ‘normalized’ tax rate (for both the current and prior periods) of the weighted average US federal corporate income tax rate of 21% (2018: 28%) applicable during the financial year. A reconciliation of profit/(loss) for the period to adjusted profit/(loss) for the period is presented in supplemental note 3.

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

Adjusted basic and diluted earnings/(loss) per share are calculated by dividing the adjusted profit/(loss) for the period by the weighted average number of ordinary shares in issue during the period. Adjusted diluted earnings/(loss) per share is calculated by adjusting the weighted average number of ordinary shares in issue during the period to assume conversion of all dilutive potential ordinary shares. There is one category of dilutive potential ordinary shares: share awards pursuant to the 2012 Equity Incentive Plan (the “Equity Plan”). Share awards pursuant to the Equity Plan are assumed to have been converted into ordinary shares at the beginning of the financial year. Adjusted basic and diluted earnings/(loss) per share are presented in supplemental note 3.

4. Net debt

Net debt is calculated as non-current and current borrowings minus cash and cash equivalents.

Key Performance Indicators

 

Twelve months ended

Three months ended

30 June

30 June

 

 

2019

Restated(1)

2018

 

2019

Restated(1)

2018

Commercial % of total revenue

43.9%

46.8%

50.8%

52.1%

Broadcasting % of total revenue

38.4%

34.6%

31.1%

31.9%

Matchday % of total revenue

17.7%

18.6%

18.1%

16.0%

Home Matches Played

 

 

 

 

PL

19

19

4

3

UEFA competitions

5

4

1

Domestic Cups

2

3

Away Matches Played

 

 

 

 

PL

19

19

3

4

UEFA competitions

5

5

1

Domestic Cups

3

6

2

 

Other

 

 

 

 

Employees at period end

958

922

958

922

Employee benefit expenses % of revenue

53.0%

50.2%

70.5%

66.9%

(1) Comparative amounts have been restated following the implementation of IFRS 15 – see supplemental note 5 for further details.

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

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

 

Twelve months ended

30 June

Three months ended

30 June

 

 

2019

Restated(1)

2018

2019

Restated(1)

2018

Revenue from contracts with customers

627,122

589,758

131,416

121,619

Operating expenses

(602,936)

(564,006)

(154,906)

(148,307)

Profit on disposal of intangible assets

25,799

18,119

1,342

3,273

Operating profit/(loss)

49,985

43,871

(22,148)

(23,415)

Finance costs

(25,470)

(24,233)

(8,593)

(14,868)

Finance income

2,961

6,195

704

884

Net finance costs

(22,509)

(18,038)

(7,889)

(13,984)

Profit/(loss) before tax

27,476

25,833

(30,037)

(37,399)

Tax (expense)/credit(2)

(8,595)

(63,462)

7,849

3,004

Profit/(loss) for the period(2)

18,881

(37,629)

(22,188)

(34,395)

 

 

 

 

 

Basic earnings/(loss) per share:

 

 

 

 

Basic earnings/(loss) per share (pence)(2)

11.48

(22.92)

(13.49)

(20.95)

Weighted average number of ordinary shares outstanding (thousands)

164,526

164,195

164,526

164,195

Diluted earnings/(loss) per share:

 

 

 

 

Diluted earnings/(loss) per share (pence)(2)/(3)

11.47

(22.92)

(13.49)

(20.95)

Weighted average number of ordinary shares outstanding (thousands)

164,666

164,610

164,666

164,610

(1) Comparative amounts have been restated following the implementation of IFRS 15 – see supplemental note 5 for further details.

(2) The US federal corporate income tax rate reduced from 35% to 21% following the enactment of US tax reform on 22 December 2017. This necessitated a re-measurement of the then existing US deferred tax position in the period to 31 December 2017. As a result the tax expense for the year ended 30 June 2018 included a non-cash tax accounting write off of £49.0 million. Accordingly, this resulted in a loss for the twelve months ended 30 June 2018 and also a basic and diluted loss per share.

(3) For the three months ended 30 June 2019, and the twelve and three months ended 30 June 2018, potential ordinary shares are anti-dilutive, as their inclusion in the diluted loss per share calculation would reduce the loss per share, and hence have been excluded.

CONSOLIDATED BALANCE SHEET

(unaudited; in £ thousands)

 

As of

30 June

2019

Restated(1)

As of

30 June

2018

ASSETS

 

 

Non-current assets

 

 

Property, plant and equipment

246,032

245,401

Investment properties

24,979

13,836

Intangible assets

768,857

799,640

Deferred tax asset

58,415

63,332

Trade receivables

9,889

4,724

Tax receivables

547

Derivative financial instruments

30

4,807

 

1,108,202

1,132,287

Current assets

 

 

Inventories

2,130

1,416

Prepayments

13,030

10,862

Contract assets – accrued revenue

39,532

38,018

Trade receivables

23,851

119,073

Other receivables

1,188

107

Tax receivables

643

800

Derivative financial instruments

312

1,159

Cash and cash equivalents

307,637

242,022

 

388,323

413,457

Total assets

1,496,525

1,545,744

(1) Comparative amounts have been restated following the implementation of IFRS 15 – see supplemental note 5 for further details.

CONSOLIDATED BALANCE SHEET (continued)

(unaudited; in £ thousands)

 

As of

30 June

2019

Restated(1)

As of

30 June

2018

EQUITY AND LIABILITIES

 

 

Equity

 

 

Share capital

53

53

Share premium

68,822

68,822

Merger reserve

249,030

249,030

Hedging reserve

(35,544)

(27,558)

Retained earnings

132,841

136,757

 

415,202

427,104

Non-current liabilities

 

 

Deferred tax liabilities

31,865

29,134

Contract liabilities – deferred revenue

33,354

37,085

Trade and other payables

79,183

104,271

Borrowings

505,779

486,694

Derivative financial instruments

2,298

 

652,479

657,184

Current liabilities

 

 

Contract liabilities – deferred revenue

190,146

180,512

Trade and other payables

230,386

267,996

Tax liabilities

2,859

3,874

Borrowings

5,453

9,074

 

428,844

461,456

Total equity and liabilities

1,496,525

1,545,744

(1) Comparative amounts have been restated following the implementation of IFRS 15 – see supplemental note 5 for further details.

CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited; in £ thousands)

 

Twelve months ended 30 June

Three months ended

30 June

 

2019

2018

2019

2018

Cash flows from operating activities

 

 

 

 

Cash generated from operations (see supplemental note 4)

263,609

119,604

151,469

102,350

Interest paid

(18,986)

(18,904)

(1,800)

(2,055)

Interest received

2,857

1,187

805

533

Tax paid

(2,696)

(6,637)

(308)

(249)

Net cash inflow from operating activities

244,784

95,250

150,166

100,579

Cash flows from investing activities

 

 

 

 

Payments for property, plant and equipment

(13,737)

(13,260)

(4,860)

(3,675)

Proceeds from sale of property, plant and equipment

81

6

Payments for investment properties

(12,424)

(12,424)

Payments for intangible assets

(178,175)

(154,955)

(18,310)

(19,022)

Proceeds from sale of intangible assets

42,994

46,865

5,102

6,220

Net cash outflow from investing activities

(161,342)

(121,269)

(30,492)

(16,471)

Cash flows from financing activities

 

 

 

 

Repayment of borrowings

(3,750)

(419)

(107)

Dividends paid

(23,326)

(21,982)

(11,716)

(11,053)

Net cash outflow from financing activities

(27,076)

(22,401)

(11,716)

(11,160)

Net increase/(decrease) in cash and cash equivalents

56,366

(48,420)

107,958

72,948

Cash and cash equivalents at beginning of period

242,022

290,267

193,855

161,717

Effects of exchange rate changes on cash and cash equivalents

9,249

175

5,824

7,357

Cash and cash equivalents at end of period

307,637

242,022

307,637

242,022

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/(loss) for the period to adjusted EBITDA

 

Twelve months ended

30 June

Three months ended

30 June

 

2019

£’000

Restated(1)

2018

£’000

2019

£’000

Restated(1)

2018

£’000

Profit/(loss) for the period

18,881

(37,629)

(22,188)

(34,395)

Adjustments:

 

 

 

 

Tax expense/(credit)

8,595

63,462

(7,849)

(3,004)

Net finance costs

22,509

18,038

7,889

13,984

Profit on disposal of intangible assets

(25,799)

(18,119)

(1,342)

(3,273)

Exceptional items

19,599

1,917

1,917

Amortization

129,154

138,380

30,149

32,591

Depreciation and impairment

12,850

10,755

4,219

2,804

Adjusted EBITDA

185,789

176,804

10,878

10,624

(1) Comparative amounts have been restated following the implementation of IFRS 15 – see supplemental note 5 for further details.

3 Reconciliation of profit/(loss) for the period to adjusted profit/(loss) for the period and adjusted basic and diluted earnings/(loss) per share

 

Twelve months ended

30 June

Three months ended

30 June

 

 

2019

£’000

Restated(1)

2018

£’000

2019

£’000

Restated(1)

2018

£’000

Profit/(loss) for the period

18,881

(37,629)

(22,188)

(34,395)

Exceptional items

19,599

1,917

1,917

Foreign exchange losses/(gains) on unhedged US dollar denominated borrowings

2,650

(4,952)

2,545

8,633

Fair value movement on embedded foreign exchange derivatives

380

1,089

298

(295)

Tax expense/(credit)

8,595

63,462

(7,849)

(3,004)

Adjusted profit/(loss) before tax

50,105

23,887

(27,194)

(27,144)

Adjusted tax (expense)/credit (using a normalized tax rate of 21% (2018: 28%))

(10,522)

(6,688)

5,711

7,600

Adjusted profit/(loss) for the period (i.e. adjusted net income/(loss))

39,583

17,199

(21,483)

(19,544)

 

 

 

 

 

Adjusted basic earnings/(loss) per share:

 

 

 

 

Adjusted basic earnings/(loss) per share (pence)

24.06

10.47

(13.06)

(11.90)

Weighted average number of ordinary shares outstanding (thousands)

164,526

164,195

164,526

164,195

Adjusted diluted earnings/(loss) per share:

 

 

 

 

Adjusted diluted earnings/(loss) per share (pence)(2)

24.04

10.45

(13.06)

(11.90)

Weighted average number of ordinary shares outstanding (thousands)

164,666

164,610

164.666

164,610

Contacts

Investor Relations:
Corinna Freedman

Head of Investor Relations

+44 161 868 8431

Corinna.Freedman@manutd.co.uk

Media Relations:
Charlie Brooks

Director of Communications

+44 161 868 8148

charlie.brooks@manutd.co.uk

Sard Verbinnen & Co

Jim Barron / Devin Broda

+ 1 212 687 8080

JBarron@SARDVERB.com
dbroda@SARDVERB.com

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