Manchester United PLC (MANU) 2018 Q1 法說會逐字稿

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Manchester United earnings conference call. (Operator Instructions) We would like to remind everyone that this conference call is being recorded.

Before we begin, we would like to inform everyone that this conference call will include estimates and forward-looking statements, which are subject to various risks and uncertainties that could cause actual results to differ materially from these statements. Any such estimates or forward-looking statements should be considered in conjunction with the cautionary note in our earnings release regarding forward-looking statements and risk factor discussions in our filings with the SEC. Manchester United plc assumes no obligation to update any of the estimates or forward-looking statements.

I will now turn the conference over to Mr. Ed Woodward, Executive Vice Chairman of Manchester United. Please go ahead, sir.

Thank you, operator, and thank you, everyone, for joining us today. With me on the call is Cliff Baty, our CFO. It feels like very little time has passed since we were discussing our year-end numbers and my comments will be fairly brief.

As you can see from the numbers released this morning, we've had a strong Q1, with revenues and EBITDA up significantly on last year. And Cliff will go through the numbers in detail shortly. We've had a good start to the season on the pitch. We're second in the league, reached the quarterfinals of the Carabao Cup, where we face Bristol City next month, and we've won all 4 of our group stage matches in the Champions League.

Our Megastore has traded well through Q1, with revenue and profit broadly in line with the record prior year. The adidas wholesale business continues to perform well, with strong demands for key products. The current black away kit represents the fastest-selling away kit Manchester United has ever released, whilst the limited edition '92 adidas Originals trainer generated huge demand and overnight queues for the product.

On the venue side, having sold out our seasonal ticketing products in record time last May, we've now beaten last season's official membership record with sales currently at just over the 190,000 mark. Our match-by-match ticketing products for the '17-'18 season are also selling well. In terms of match tickets, we will sell out all Premier League matches exclusively to official members.

As such, the only way for a nonmember to see a Premier League match is through our match-by-match hospitality product. This, coupled with the positive performance of our new premium facility, which is called No. 7 at Old Trafford, means we anticipate another record-breaking year for Matchday VIP. For this season, we've also introduced a contactless card payment solution in all kiosks across the stadium, which has increased the efficiency of our kiosk service, and as a result, driven a significant increase in spend per head.

Turning to our media business. We continue to evolve our MUTV direct-to-consumer proposition. As mentioned on the last call, the app and online products have diversified MUTV's audience, with subscribers now in 140 territories and a reduction in the average age of subscribers. We've also made several programming changes to improve the content experience, including expanding our pre-match coverage from 1 to 2 hours and focusing on in-house original productions and documentaries, for example, with the up-and-coming behind-the-scenes player documentary series on Mkhitaryan, Rashford and Bailly. Indeed, and perhaps a note too that our program, Star Maker: The Jimmy Murphy Story, has been nominated for the Best Sports Programme for 2017 Royal Television Awards. And MUTV has been nominated for the Best Sports Thematic Channel Award at the 2017 TV Sports Awards, alongside the Olympic Channel and NBA TV.

Turning to our social footprint. We've garnered close to 300 million interactions across Facebook, Instagram and Twitter during the first 4 months of the season, representing an 11% year-on-year increase. To put that in perspective, this is over 80% more interactions than the next biggest Premier League club and more interactions than that generated by the third to sixth largest Premier League clubs combined. Moreover, over the first 4 months of the season, @ManUtd has also been the fastest-growing and most engaged football club on Twitter and has generated 16.5 million likes and retweets, which is the same number of Twitter interactions of the next 2 biggest European clubs combined.

I'll now hand you over to our CFO, Cliff Baty.

Thank you, Ed. Hello, everyone. I'm going to talk to our results for the first 3 months of fiscal 2018. As a reminder, the fiscal year 2018 year-on-year comparisons will be impacted by 2 main themes: our qualification to the Champions League in 2018 and also the cadence of matches on a quarterly basis.

In terms of the headlines figures, total revenues for the period were up 17.3% to GBP 141 million, with adjusted EBITDA up 17.3% to GBP 36.6 million, giving an EBITDA margin of 26%. Profit for the period was GBP 7.9 million compared to GBP 1.2 million in the prior year.

Turning to the key items in the financial statements. Commercial revenues were up GBP 6.2 million to GBP 80.5 million, driven by the increase in revenues from our preseason tour, where we played a greater number of games compared to the prior year. I would just like to highlight that within our earnings release, we have simplified the analysis of commercial revenues into sponsorship and retail. Mobile and content revenues will now be reported within the sponsorship line as they primarily comprise of sponsorship agreements with partners in the telecom sector.

Moving over to broadcasting revenues. These are up GBP 9 million due to participation in the Champions League and the Super Cup as well as the impact from one additional Premier League home game. Similarly, matchday revenues were up by GBP 5.6 million, again due to the additional Premier League home game, together with the revenues from the opening Champions League fixture.

During the period, total operating expenses, excluding depreciation and amortization, were up 17.3%, including wages up 12.2% due to an increase in first team salaries from uplift in connection with the Champions League qualification. Other operating expenses increased 29.2% due to the greater number of games on the preseason tour and the 2 additional home games played in the period.

Amortization costs were GBP 36.1 million, an increase of GBP 5.3 million over the prior year due to the investment in the playing squad in the recent years. Also in this quarter, we recorded a profit on disposal of GBP 17.3 million due to the sale of Januzaj, together with sell-on fees received. Net finance costs for the quarter were just GBP 0.8 million, a decrease of GBP 5.8 million -- GBP 5.1 million over the prior year due to the favorable noncash exchange rate movements on our unhedged U.S. dollar debt. As we have previously mentioned, foreign exchange movements can cause volatility in this line, but cash interest costs in U.S. dollars remain consistent year-on-year.

Looking at the balance sheet. Cash of GBP 216.2 million was up by GBP 51.9 million against prior year. Net debt at period-end was GBP 268.1 million, a decrease of GBP 69.6 million compared to the prior year due to the increased cash balances and impact of foreign exchange movements. Based on our third quarter results, we reiterate our previously stated guidance of fiscal 2018 of revenues between GBP 575 million and GBP 585 million, EBITDA between GBP 175 million to GBP 185 million. Finally, please note that a semiannual cash dividend of $0.09 per share will be paid on the 5th of January 2018 to shareholders of record on the 30th of November 2017.

With that, I'll hand back to the operator, and we're ready to take your questions. Thank you.

(Operator Instructions) Our first question comes from John Janedis of Jefferies.

Maybe two quick questions for me. One is, on the last call, you mentioned that you had hired a new Director of Partnerships. So I wanted to ask, can you talk a bit more about the outlook here in terms of potential pipeline? Any changes you're seeing in your overall strategy with brands, particularly on digital and social media platforms? And then separately, look, I know it's kind of early, I guess, but any update on the progress of where UEFA is on the Champions League broadcast rights? I think the new cycle kicks in sometime over the next year.

Just to recap, I'm not sure I heard -- were that 2 questions, the question about the Director of Partnerships and the second question about UEFA rights?

Correct.

Okay. On the Director of Partnerships, yes, we've hired Sean Jefferson earlier this year, which we communicated, and as such is doing very well, he's been a great addition, spending a lot of time talking to existing partners and understanding where they are in their marketing plans and how we are helping them to achieve their goals. You're right in asking a question around digital and how that is becoming much more relevant to our partners from a marketing perspective. And we are looking at tweaking what we do and how we deliver our products and inventory to our partners to enhance that in a better way. So without -- I'm not going to go into any detail around that because it's commercially sensitive. But we feel like Sean has been a great addition to really hone in on that part of the business. The second question on UEFA rights, as everybody, I think, is aware, the UEFA through TEAM have been in the market. And a number of the deals have been announced. And I think they're a long, long way through close to conclusion, really. Nothing has been announced yet. But we are expecting an uplift. And hopefully, that will be in the market before the next call in February.

Our next question comes from Clay Griffin of Deutsche Bank.

How should we think about net player CapEx for the year?

Just quickly, the question was how should we think about net player CapEx?

Yes, just apart from the committee CapEx, I mean. And I apologize if I missed it in your prepared remarks. But just for the full year...

Yes, sure. I think when we announced our fourth quarter results, so the full year last time, which is September, that was post the end of the year of the transfer window. So we gave a figure there, which was GBP 95 million would be the net player CapEx as at that point for the year '17-'18. And that closed out with the position where we were at. We don't guide on that figure because things can, obviously, move. But that's the actual position as we are now for the year before we get into the transfer window in January, whether we do any activity or not.

Understood. And then there was -- understanding there was -- the EPL was reviewing or considering changing the allocation of international broadcast rights, and not asking you to comment on that directly, but just how should we think about the mechanism by which the league addresses that type of issue?

So the mechanism is about international rights? No, no, no, just continue to assume the same assumptions going forward as they are today.

This concludes our question-and-answer session. This also concludes today's conference. Thank you for attending today's presentation. You may now disconnect your lines.