Manchester United PLC (MANU) 2019 Q1 法說會逐字稿

Good day, ladies and gentlemen, 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 statements or 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 would now like to turn the conference over to 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 are Richard Arnold, our Group Managing Director; and Cliff Baty, our CFO. So it's been a couple of months, obviously, since Q4 and the year-end update, so our prepared remarks would be relatively brief. Over the summer, we had a good preseason tour to the U.S., and while we couldn't have all of the first-team squad with us due to many of our players advancing deep into knockout stages of the World Cup, it provided a good opportunity for many of our emerging prospects to experience being part of the team -- the first team setup, and we look forward to a number of them making a successful transition to the first team like many before them, including Lingard, Rashford, McTominay and Andreas Pereira in the current squad.

As Cliff mentioned at Q4, our committed net player CapEx for the year currently stands at GBP 124 million, reflecting the recent investment in the first team squad. Moreover, we have agreed new contracts with a number of players including Fellaini and Shaw. These player investments, along with the investment in the club's academy, come as a direct result of our ongoing commercial and financial strength and underpin our long-term strategic plan to create sustainable growth across all areas of the club. On the pitch, we remain well positioned in the Champions League, although we've had a mixed start to our domestic campaign. The squad and the manager are fully united in their determination to regain our momentum in the Premier League. I'll now hand over to our Group Managing Director, Richard Arnold, who'll update you on the key business activities. Thank you.

Thank you, Ed. Turning to our businesses. In sponsorship, we announced 2 global sponsorship deals in the first quarter. Our first league partnership with Kohler, and the renewal of our global partnership with Canon Medical Systems.

In the quarter, we've also renewed our global partnership with Deezer. The launch of the Kohler partnership is another great case study of what we deliver of arguably the world's #1 marketing platform. In the 2-month partnership, launch period from mid-July to mid-September, our partnership with Kohler achieved over 1 billion media impressions. To be clear, this excludes visibility in live games or highlights and is purely from editorial and social content.

The benefits to Kohler to date have been a near 5x increase in Kohler's brand awareness and amplified positive brand association in our key markets.

As I mentioned a couple of months ago, we remain pleased with our pipeline and continue to expect the strong contribution from sponsorship.

Turning to the media business. Following the launch of our new website and mobile application this summer, we continue to focus on driving deep and more meaningful engagement through our owned and operated products.

As I mentioned a couple of months ago, the mobile app reached the #1 sports download ranking in over 70 territories and now has monthly active users in over 225 markets.

We continue to see significant increases in fan engagement on our owned and operated products. Through better product capabilities and more engaging content, our fans now spend more time interacting with the club through our digital products giving us the ability to cross-promote other club products and services including retail, e-commerce and ticketing. MUTV direct-to-consumer products continue to grow, and we now have downloading over 168 markets.

As previously mentioned, we improved the use of value proposition by introducing a discounted annual pass and launching a free front porch on the MUTV app. So the nonsubscribers are able to view video content. And we are currently experiencing the benefit of this strategy, most notably, in our lowest levels of consumer churn.

In respect of our social network, we are happy with the progress of our 3 main global channels: Facebook, Instagram and Twitter. We continue to see year-on-year growth, strong engagement, and we continue to be the most engaged Premier League club.

In respect to retail, the adidas wholesale business continues to show growth year-on-year, driven by high demand of the pink away kit and continued strength in Asia.

During the quarter, we announced the partnership with the iconic American denim brand, True Religion. The partnership with True Religion has seen the launch of a co-branded premium denim range, initially sold exclusively through MU and True Religion channels. This launch was complemented by the launch of the first Manchester United and Paul Smith collection focused on luxury accessories.

These 2 partnerships enhance our existing portfolio of brand partnerships such as adidas, New Era, TAG Heuer and Columbia, which enables us to offer our fans a broader and exciting selection of merchandise.

From a venue perspective, our official membership product is on course for another record year, having sold out our seasonal ticket-related products in record time last May, we are now focused on selling our match-by-match ticket-related products.

In terms of match tickets, we're again on course to sell out all Premier League matches exclusively to official members.

Over the summer, we had major upgrades to 2 facilities creating our new most premium seasonal hospitality suite, 1878, named after the year the club was founded as well as the Ambassador's Lounge, a suite dedicated for our sponsorship partners and their guests. Both new facilities have been extremely well received and focus now turned to planning ahead for the summer 2019 work. I'll now hand you over to our CFO, Cliff Baty.

Thank you, Richard. I'm going talk through our results for the 3 months of fiscal 2019. As a reminder, for fiscal year 2019, year-on-year comparisons will be impacted by 2 main themes: the new Champions League broadcasting deal; and secondly, the cadence of matches on a quarterly basis.

In the first quarter 2019, we played just 1 Champions League match compared with 2 games in the first quarter last year. Given that broadcasting revenue's recognized on a games-played basis, this materially impacts the financial comparisons.

In addition, match-day revenues have been impacted by the reduced Champions League fixtures as well as playing 1 less home Premier League match in the quarter.

In terms of the headline figures, total revenues for the period were down 6.1% to GBP 135 million with adjusted EBITDA of GBP 29.4 million giving an EBITDA margin of 21.8%.

To note, had we played our second Champions League fixture against Valencia within the first quarter, consistent with the prior year, broadcasting revenues alone would have been approximately GBP 10 million higher with consequent increase in EBITDA and EBITDA margin.

Turning to the key items in our reported financial statements. Commercial revenues were down GBP 4.6 million, GBP 75.9 million, largely due to smaller summer tour as a result of the World Cup year.

Broadcasting revenues were up GBP 2 million, driven by the increase in Champions League revenues despite playing the 1 less game.

Match-day revenues were down by GBP 6.1 million due to 2 fewer home games, 1 less Premier League game and 1 less Champions League game, compared to the prior year.

During the period, total operating expenses, excluding depreciation and amortization, were up 1.1%, including wages up 10.2%, primarily due to an increase in first team salaries following the additions made to the first team squad.

Other operating expenses decreased 17.1%, largely due to reduced cost from the smaller tour and 2 fewer home games.

Amortization cost was GBP 35.1 million, a decrease of GBP 1 million over the prior quarter. Also in this quarter, we've recorded a profit on disposal of GBP 22.4 million, driven primarily by the sales of [Blind and Johnsen].

Net finance costs for the quarter were GBP 5.2 million, an increase of GBP 4.4 million due to exchange rates movements on our unhedged U.S. dollar debt. As we've mentioned, foreign exchange movements can cause volatility of this line but cash interest cost in U.S. dollars remain consistent year-on-year.

Looking at the balance sheet, cash balances at the period-end were GBP 247.5 million, up GBP 31.3 million against prior year.

Net debt at the period end was GBP 247.2 million, a decrease of GBP 20.2 million, compared to the prior year due to the increased cash balances and partially offset by the impact of foreign exchange movements.

Based on the fourth quarter -- first quarter results, we reiterate our previously stated guidance of fiscal 2019 of revenues between GBP 615 million to GBP 630 million and EBITDA between GBP 175 million to GBP 190 million.

Finally, please note that a semiannual cash dividend of $0.09 per share will be paid on the 4th of January, 2019 to shareholders on record on the 29th of November, 2018. With that I'll hand back to the operator, and we are ready to take your questions.

(Operator Instructions) The first question today comes from Clay Griffin with Deutsche Bank.

I wanted to follow up on MUTV. I know you launched on the major connected devices there this summer. But just any kind of update on the uptake and engagement on those specific platforms? And then I guess the broader question is, are you seeing growth there on those platforms? Do you think that, that has an impact on, kind of, subscriber levels across your traditional, kind of, distribution partners, Sky, et cetera?

Richard, could you answer that question, please?

Yes. So the move on the connected TV-related platforms has seen comparatively small numbers of subscriber growth against the back growth -- background of significant growth in the digital subscribers we've seen through app and website. So a smaller channel in terms of numbers, but the engagement and dwell times are very high in respect to those connected TV offerings. Going forward, it remains to be seen, obviously, we only had a few weeks as a sample in terms of this summer for the number of subscribers acquired. And we probably need another year of data before we can conclude too much around that. And obviously, the live games we show during the summer drive the majority of acquisitions during the year.

Okay. And then I noticed [detailed] named Susanna Dinnage to the Chief Executive role starting early next year. I guess with her extensive media background, do you all anticipate any major differences in the way the league looks to monetize broadcasting rights?

I'll take that one. So yes, Susanna's starting, as you say, in 2019, comes with a strong CV from a media background perspective, and I think, more candidly, I'd say that she is going to continue the work that's already been done by the Premier League to look at possible other ways to monetize the rights. We've spent a lot of time recently looking at Singapore and Canada, for example, to see whether there are markets to sell through an AT&T-type platform. So I expect her to pick the baton up and run with it, as Richard has done to this date. So we're looking forward to working with her.

You -- this is a follow-up. Are there any other areas that you'd like to see her prioritize in the near term, maybe outside of the broadcasting rights?

Well I think they need -- she needs quite a lot of time to focus on engaging with Europe and what's happening around, some of the conversations are happening there, I think, it's going to take quite a lot of her time actually on playing back and forth.

Got it, got it. And then just last one for me. U.S. to China, obviously, 2 areas of growth for the league and for the club. I guess, what are you seeing in terms of TV viewership of matches and then just overall levels of engagement in those 2 markets?

My understanding is this has gone -- the audience actually is going up in the U.S. about 7% per year-on-year, so -- compared to last year, so we're seeing strong growth, I would categorize as, in the U.S. We don't have figures for China, but anecdotally, we're hearing, again, it's very, very strong interest in football. I think you'll have noticed the Alipay announcement regarding the rights for the EUROs and the Nations League that UEFA announced recently, which is, again, reflecting huge interest from China.

Since there appears to be no further questions, this will conclude our question-and-answer session and our conference. Thank you for attending today's presentation. You may now disconnect.

Many thanks, everybody.