Q2 2021 Manchester United PLC Earnings Call
And Jerry law since two sales.
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The winning.
Winning winning with enjoyment.
I think that's.
It's what all fans of Manchester, United and expect.
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For 25 years with Alex Ferguson.
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That's the Manchester United It's why we love Manchester.
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Good afternoon, ladies and gentlemen, and thank you for standing by welcome to the Manchester United Earnings Conference call. At this time, all participants are in listen only mode.
Following the presentation, we will conduct a question and answer session.
The queue for questions. Please press star one.
And everyone has difficulty hearing the call. Please press star zero for operator assistance at any time.
We would like to remind everyone that this conference call is being recorded.
I will now turn the call over to Corinna Freedman head of Investor Relations for match.
And Sterling and items.
Thank you grant Hello, everyone and welcome to the Manchester United Second quarter 2021 earnings call. Our call is being recorded and webcast and a replay of this call will be available on our site for 30 days.
Before we begin and as a matter of formality and he would like to remind everyone that this conference call will include estimates and forward looking statements, which are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements and.
Any such estimates or forward looking statements should be considered along with the cautionary note included with our earnings release as.
And as well as additional risk factor discussions and our filings with the SEC.
With us today on our call this evening and blood work, our executive Vice Chairman Richard Arnold Our group managing director Cliff Baty, Our Chief Financial Officer, and had meant to say Oh, our director of corporate development I will now turn the conference call over to our executive Vice Chairman for opening remarks and.
Thank you Karina and thank you everyone for joining us.
If I could for days on the second fiscal quarter. There's also an opportunity to reflect on what has been an extraordinarily challenging year for Manchester United The simple and of course for society as a whole is low.
And last 12 months into the pandemic began to price in the script from the U K and we would we ever of crime to close the old traffic the supporters.
As I've said before their absence of any highlights the importance of fans to the topic of football and we can't wait to welcome them back.
While my studies of not being the same.
And we're proud to play that pie and keeping simple guy and the maintained of precious schools of entertainment and community for fans around the world I want to pay tribute and particular tried coaching and medical and support staff.
Enable the hectic schedule that matches, the continue and very difficult circumstances.
The policy of attached to that clubs of resilience and values and I'm pleased with how we performed and vice respects.
Since the start of the pandemic the club and our foundation and together provided out of 5 million pounds of charitable support the good causes and other local community and beyond this reflects the commitment to being a positive for us in society and the source of pride for our fans.
And those are reflects the dedication of all of our employees and robustness of the finances fueled by our commercial business and responding to this once the century level of crisis.
And Europe, we continue to play an active role through the ECA and discussions on the future of UA for European Club competition. After the current competition cycle and in 2024.
And many details of yet to be resolved and we look forward to seeing the full final proposal from <unk> and we anticipate will include the greater involvement of clubs and the governance and controls of the competitions and of course and the format with great for appeal to fund and we.
Crucially, we will continue to go hand in hand with driving domestic leagues.
Demand for life the remained strong.
And we feel very confident about the long term prospects for our sport.
And the near term our focus remains on preparing for the return of funds to all the traffic.
The thing as opposed to the examples around the world and live events with reduced capacity crowds and living safely with social distancing.
And the successful rapid rollout of vaccines and falling rates and the infections and the U K makes us optimistic about the government's right out of the lockdown, including plans for the gradual reopening of sports stadium spectators. Beginning this spring.
And initially this will be with limits on capacity with the high school of crowds ramping back up to full capacity next season.
As we look beyond the pandemic, we feel low called for them than ever about the power of sports United's inspire of course generations of couches and my geologist.
Football in particular is playing an active role and the campaign against racism and other forms of discrimination, but still slightly probably the challenge for our game and ask the saucy today with the club will continue to be at the forefront of those efforts.
In summary, I'd like to reiterate the club's strong underlying fundamentals.
We're excited about kind of total traffic enabled by strong vaccine deployment and the U K and the easing of lockdown restrictions as no doubt of light at the end of the time and in the near term.
And while we're pleased about the seasons on the pitch progress and the strength of our current squad well.
Equally bullish on our long term prospects are best in class digital operations increased funding gauged mint and <unk>.
Hearing spunk and partnerships that facilitates investment and the playing squad the.
Strength of our Academy, and most importantly, and self sustaining off price and muddle, but it'll blow all the enable this club to emerge from this crisis and a stronger relative position.
And it made me and I'll hand laboratory grandmothers and tried to rich Donald's update you on our key business activities and provide an operational overview.
Final comment I would like to extend my thanks to all of our teams both on and off the pitch for the hard work and sacrifice for you this quarter and through the whole of 2020.
And <unk>.
Thank you Ed and thanks to everyone for joining us today.
As we reflect on the past year you understood at the outset it depend on it and the bull ramifications of the exponential the spread of this virus for the huge social and economic impact of the global Lockdown measures would impose.
So that's the sentiment.
Last year was tested all of our resilient.
And we are eager for the continued widespread vaccination rollout rollout.
Which will help save lives and steadily but surely put it all back on the path towards normality.
At the same time, we recognize that not everything will revert to the way things were the pool and that the.
Pandemic has created an opportunity for us to rebuild the better.
And said many times of the pandemic and global Florida, the accelerating trends that were already in motion and they said no doubt for the impact. This has had on our operations of the club.
Whether it be providing a more flexible modern workplace.
Well by deepening of digital connections with our fans and followers.
Despite the uncertain backdrop and the profound absence of our support for the old Trafford the season.
We are proud of the way we've responded to the crisis with resilience and adaptability.
While the ongoing global pandemic remains of significant headwind.
Quickly pivoted and.
Transformed many aspects of our business.
The results of which.
We expect will generate benefits for many years to come.
And that briefly touched on we are humbly proud of the positive difference we were.
We're able to make and our communities and 2020.
As chairman of our foundation I'm really proud of the work that has been accomplished.
We support the dog community with approximately $5 million and contributions and crew.
The direct the Nations fund.
Fund raising efforts and payments to our casuals and stuff.
We believe that nearly 93000, you meet people benefited from our efforts across the NHS local schools and food banks and 2020.
We've also recently opened the old Trafford for use by the NHS and the training center for hundreds of volunteers that are taking part and the national vaccination program.
And we will continue initiatives of this kind of to help our communities for as long as the pandemic continues.
We will also remain committed to advancing diversity and equality and all of club and then off the ball.
The club was one of the founding signatory of the S.
Hey.
The leadership diversity Covid.
Our commitment to divest the spans all areas of our club and.
Alright and to achieve appropriate representation of all under represented groups and the society.
Bleeding the.
And the upgrade of our accessible facilities was completed at the end of 2020.
And at old Trafford will be better equipped than ever the welcome back all of our friends.
And you will may be aware last week the gun.
Government released the sports that roadmap for the easing of the National Lockdown.
The plan to proceed according to the current and schedule.
Crowds of up to 10000 people will be allowed to return to football stadiums and the U K. After the May 17.
With all restrictions and then from the 20 for the G.
Is that of our understanding that this would mean a return to normal operations the old Trafford.
Obviously this will continue to be subject.
Of circumstances in the U K.
In parallel we were establishing protocols to do with testing passports and ongoing thing.
We know the all season ticket holders members and other funds are very eager to return.
We expect all supporters of a tragedy share experiences now more than ever before.
We look forward to sharing more details and our plans on the next earning call.
<unk> and our plans for next season.
Hope to return to full capacity.
Moving now to our business update.
Turning first of all digital and media operations.
Given the absence of match day supporters, we continued to prioritize digital initiatives to drive engagement and part of our ongoing club wide digital transformation.
The rates of the acceleration has increased and we've continued to invest.
And platforms and technology.
But we have also further strengthened our leadership team and digital marketing and CRM.
And social media, we continue to broaden our geographic and demographic reach.
And we launched the club presence from several new and growing social media platforms. This quarter.
Our women's team launched in July of 'twenty a T S.
Recently surpassed 1 million followers on Instagram and mass.
And the bigger following the nine primarily men and stuff.
On the road platforms, we have developed and launched several new mobile App and handsome and features.
Specifically, our gamify predictions and the strength functionality.
Which has significantly increased our mobile app usage this quarter.
The more users and now logged into our mobile app than ever before.
More compelling and personalized data led engagement.
But the benefited and of superior end to end and fan experience.
The strong engagement and ton drove strong traffic to our E Commerce channel.
I think it's useful to note the E.
Almost merchandize sales for the six month period of.
Already in the past the entire pricing.
In fact, all three of the season's men's kit achieved record low and as day sales.
And we're also enjoying record sales of our women's debt.
And this momentum is continuing into the current quarter.
As we achieve record ecommerce sales in January.
While these are impressive.
We believe we revenue just getting started.
And we see significant open runway for continued to drive traffic and conversion as well.
Well its diversify our geographic reach and product mix.
On a gross basis, we are seeing that the sales of help to offset the revenue losses of the Mega score, which was closed on December 31st part of the latest lockdown.
We expect the store the.
Reopened.
The Sun on April 12 and of course.
And with the time line communicated by the government.
Turning to our sponsorship of operations.
We believe the market continues to stabilize and we're seeing a flight to quality across the industry.
Since the first quarter, we've signed renewal deals with two of our global partners and.
We continue just for all of our partners with new and exclusive interactive digital live and.
In mid December we took all of you and I can support for and part and the programming the India virtually buyer of multi platform broadcast featuring local hosts and influences.
This event generates a 24 million.
And you impressions.
General impression and.
And 223000 and support the streaming event line.
We also recently held and I Love, you and I said USA side of that and last weekend.
23 of our partners activating across the event.
Hosted by high profile, you know what the supporters and see.
Featuring our lives and our recent U S signing Towbin Hey.
This event was viewed by nearly six times the amount of the viewers of our India of event with one 4 million live streaming of our face to Youtube the web and all right.
Yeah.
Turning to China.
It is the most engaging football club and China's Nathan Weibo and Wechat platform for the 'twenty to 'twenty one the season this quarter.
We by month.
Currently the most followed football club on the platform.
We also launched on the Dalian and platform simultaneously with our global tick Tock launch in November and.
And maybe 2 million followers and over 17 million likes and the brief three months since launch.
Becoming the fastest growing football club on the App.
Offline, we remain on track for.
And the late March early April opening of our first experience at the center in Beijing.
The theater of Dreams experience center with our partner hubs.
And finally, though we continue to expect some challenges.
And there remains much to be optimistic about.
We will continue to relentlessly for the many growth opportunities that remain for our club and we're excited about the potential to deepen our community engagement by raw and platforms as well as launch of new and emerging platforms.
Which we expect will drive engagement for the next generation of support.
Ultimately the strong commercial engine of this club.
Inspired by our commitment to deliver the engagement of all fan demand.
So all of the virtuous cycle of views of our ability to continuously and sustainably reinvest and the T.
Fortifying our clubs future.
Not just the avis seasons, but tell you of a decade.
And with that I will now turn the call over to our CFO Cliff Baty to review the results the details of our results and discuss our financial outlook.
Thank you Richard.
For fiscal year results, which continued to be impacted by the COVID-19 pandemic and related lockdown.
Given the uncertainty.
Are you, providing any forward revenue or adjusted EBITDA guidance day.
As a reminder, euro and your comparisons relative to fiscal 2020 will be impacted by other items of the champions League.
Number of games played and the year.
Total revenue for the quarter of 172 per day.
For 4 million versus the prior year.
The impact of the Champions League revenues relative to the locally.
Adjusted EBITDA was $70 3 million down just one for 8 million and Friday Airport.
Thank you for the CAC and some of the results.
Total commercial revenues of $62 6 million.
Bunch of revenues of $37 8 million $7 3 million lower than the prior quarter due primarily to a one off credit and the prior year together with low revenue and to our ship for the extension.
Merchandising and licensing revenues of $24 8 million $2, 7% below the price pick up which reflects the significant contribution and not make it.
Significant reduction and a negative growth rate due to COVID-19 effects offset by increased the promise of royalties wholesale of it.
Broadcasting revenue has increased by 44 million the $108 7 million.
Zinc revenue compared to the prior year ended up for them.
In addition, all fixed.
The state's games for play and the second quarter of his team.
Like I say revenue for the quarter of $1 5 million the membership fees and property income.
And home matches of played at the old Trafford with no friends and of Kansas, That's moving Street Champions League matches.
Moving down the income statement operating expenses, excluding depreciation and amortization increased by five 6% and specify a quarter.
And this includes total wages, which were up 15, 2% primarily due to higher play of wages for participation of the Champions League.
Other operating expenses for the quarter decreased by $4 6 million, reflecting the impact of play much and behind closed doors.
Depreciation and amortization costs of $36 4 million and increase of $1 2 million versus the prior year.
Net finance income for the periods of $19 7 million and increase of $4 4 million foreign exchange gain on the <unk>.
The hedged portion of our U S debt.
And you had mentioned in previous quarters of cash interest cost and U S dollars remain broadly consistent year on year.
Turning now to our balance sheet at the end of December net debt of $455 5 million.
And increase of $64 3 million over the prior year, reflecting.
Reflecting the impact of Covid and lots of Matchday revenue.
The other thing at <unk>.
And as drawing down $60 million of other available 200 million credit lines during the quarter.
December we had just at the $80 million of cash flow and the balance sheet.
Finally, we expect the play of cash Capex and fiscal year 'twenty of ball and approximately $110 million with amortization of 127 day.
Looking forward for the current quarter, it's worth noting that the lapping the early stages and the pandemic and the initial cancellation of matches, which of course are getting lots of 12 last year.
And therefore expect to play of additional five Premier League matches and the current quarter, especially the price.
In closing I'll reiterate the sentiments of Ed and Richard.
We're well positioned to weather the current uncertainty and optimistic for the future.
And with that right now we're just taking the question.
Operator.
We will now begin the question answer session.
For the question you May Press Star then one on your telephone keypad.
If you are using a speakerphone please pick up your handset before pressing the keys.
And at any time of your question has been addressed and we would like to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question and they will come from Laurent.
Well the other SKU with Exane BNP Paribas. Please go ahead.
Hey, guys. This is the on off for Lauren.
A couple for me first on the retail side.
Died down only three percentage you mentioned and I thought that was pretty impressive considering the retail the megastore debt.
Close.
You mentioned E. Commerce was strong can you help dimensionalize a bit and how big E. Commerce is for you guys and.
How big was the decline and the megastore.
Richard you and say that.
Yeah. So I think the first thing to understand is debt.
And then the difference and the growth for us isn't that reporting.
And between the what goes through the Mega store, where we report.
The gross retail.
Passing through to consumers.
Whereas for the E Commerce, we report the licensed share of net profit.
The revenue so a difference of mechanism.
In terms of the draw and that's been offset.
And by both the explosion and the scale of the license profit as well as wholesale.
The sales by us to our E Commerce license partner of product, that's offset and the reduction and say Wow.
Gross numbers are broadly the same year on year and that translate in total that translate to a.
Smaller reduction and you would expect purely from the closing of the microscope.
Okay got it thanks, and then second on broadcasting rights as you think about it longer term I think there was and articles recently about the NFL potentially.
Getting double the fees.
I was wondering how youre thinking about the growth profile for the broadcasting revenue and maybe if you can break it out between maybe domestic broadcasting rights for international what how you're kind of thinking about potential growth rates.
Overtime.
And then let me start with that and then maybe cliff and teach them pay and I mean.
Yeah.
And the NFL is the Best example, I think the point.
And.
Instead of the premium Sports League.
And.
I think the way the way, we think about the growth that we expect to come I think it's likely to be less.
Less than the lower rates of growth and we've experienced the last two cycles and and the UK right sales.
But the set off that.
Of that reduction of growth is covered by <unk>.
Still big growth that we're seeing on the international side.
And so the cycle of 'twenty, one 'twenty for the Premier League.
And have been selling during COVID-19 as well as a couple of deals just for the stock.
Has seen some good growth rates, so I can't I can't really I don't really want to put a number on an year on year growth.
The the there is positivity that we're hearing with regard to the deals as they come through even during Covid and I think that that's the same as the NFL at least in terms of positivity. Despite the environment that that obviously that that study and the write them.
Okay.
Thanks, Rob and Mike.
No I think you've mentioned I mean, we had the the net daily mentioned bad debt, which just happened just before sort of COVID-19, which again sort of shows the.
[noise] appeal of the family of course international.
And otherwise okay.
Okay very helpful. Thank you guys.
Right.
Yeah.
Our next question will come from the R&D colleagues with Jefferies. Please go ahead.
Yeah. Thanks, a lot you touched on China, a little bit in the remarks.
And you just give us some perspective and a perspective on how you're thinking about monetizing the region and a and a deeper way obviously you talk because they gave us the great statistics on the page.
The age Mint.
New York team.
<unk> versus everyone else. So I was just curious on the.
On the the different part of the partnership you have over there of what's going on and what's the latest there and just any other areas of of monetization of your thinking about lots of really kind of capitalize on the strength you have for the brand and the <unk>.
And China.
Yeah, actually I'll kind of everyone.
So three.
Main monetization routes that we are actively pursuing.
The shooting and participating in.
The first obviously with such an important part of our family of findings and China raised the.
And the benefit that comes and the attractiveness of.
All of our.
Our right to sponsors.
And so that engagement and translates into and ability to engage with those funds and higher sponsorship revenues.
Secondly, the integrated partnership we have with them.
And the Alibaba group with the content and distribute it on Youtube and.
As well as the work that we're doing two and pass.
Part of that traffic and the team all of them and integrated ecosystem basis drives the.
Commerce revenue and then finally, the and market experiential work and.
And that we're doing particularly with hubs and.
Obviously.
We will drive and that's getting the opening the first of those this spring and we're.
The further for sites identified and 14 sites contracted so.
The big and expansion of that in terms of its reach across the country and the very excited about what that can bring for us in terms of the final engagement and the sponsor driving.
That's super helpful.
One thing that we're seeing at least from the U S market I'm sure. It's around the world is the.
The traditional media companies are or.
The box.
And they're trying to do more.
And.
And of selling more of like Netflix like content, which means less commercials of what happened and so are you still there.
It was disproportionately more interest in.
The.
And your different items.
Sponsor side and the different brands out there that wants to get more exposure.
Your your brand and the live exposure and get across the world and just give some more thoughts there and any type of out of the ordinary the man that youre seeing from within the sponsorship and commercial segments.
Yeah, that's a good question so.
And I think the there are a couple of items that set us apart.
And while I would say the unique like globally and.
First is the scale of the fan base and the passion of the engagement and and that translates into them.
Yeah, the part and I was looking to activate with it particularly in the digital affecting a very deep and.
Engagement level with our fans yeah, it would not translate to and get deep engagements with sponsors and successful commercial engagement and you know.
That is a huge multiple of the typical advertising you've seen as each of the affecting for that itself is very powerful.
And then further to your previous question and.
And we're able to work for that engagement and commercial success.
Only and the western digital ecosystem.
But and I.
I strongly equally strongly if not more so.
And the Chinese digital ecosystem and that you know their jobs.
Play this thing.
Subset. So that is unique in terms of being able to solve for that strength on the genuinely global basis.
And that attract the partners that are seeking to be successful.
And that way and in that market and that.
Tends to be the large and powerful fast growing global company.
Super helpful. Thanks, guys.
Thanks Randy.
Grant there being no further questions. This will conclude our question and answer session.
And the conference has now for that thank you for attending today's presentation day.
And now disconnect.
Yeah.
Okay.