6-K
Manchester United plc (MANU)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of February, 2020 Commission File Number: 001-35627
MANCHESTER UNITED PLC
(Translation of registrant’s name into English)
Old Trafford
Manchester M16 0RA
United Kingdom
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form 20-F x Form 40-F o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1). o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7). o
EXHIBIT INDEX
| Exhibit Number | Description |
|---|---|
| 99.1 | Press Release of Manchester United plc, dated February 25, 2020 |
2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: February 25, 2019
| MANCHESTER UNITED PLC | |
|---|---|
| By: | /s/ Edward Woodward |
| Name: Edward Woodward | |
| Title: Executive Vice Chairman |
3
Exhibit 99.1
| CORPORATE RELEASE | 25 February 2020 |
|---|
Manchester United PLC Reports Second Quarter Fiscal 2020 Results;
Reiterates Fiscal Year 2020 Guidance
· 2Q Fiscal 2020 Revenues of £168.4 million
· 2Q Fiscal 2020 Adjusted EBITDA of £ 72.1 million
· 2Q Fiscal 2020 Operating Profit of £ 36.5 million
Highlights
· Announced recent first team addition of Bruno Fernandes
· Announced new global partnership with Mondelez International — the multinational group behind many renowned brands including Cadbury, Oreo and belVita
· Commenced strategic partnership with Alibaba including future cross-platform collaboration
· The Premier League announced a ground-breaking new 6-year pan-Nordic broadcasting deal with NENT Group effective in 2022 through 2028
· Reiterates Fiscal Year 2020 guidance of Revenues of £560 to £580 million and Total Adjusted EBITDA of £155 to £165 million
MANCHESTER, England. — 25 February 2020 — 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 2020 fiscal second quarter ended 31 December 2019.
Management Commentary
Ed Woodward, Executive Vice Chairman, commented, “We are pushing for a strong finish in the Premier League, the Europa League and the FA Cup as we enter the final third of the season. We have continued to make progress on our squad rebuild, with many changes in terms of players that we have brought in and players that have come through our Academy; the foundation for delivering the long-term success that we are all working towards is in place as we implement our plan and our footballing vision with Ole.”
1
Outlook
For fiscal 2020, the Company continues to expect 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.
| Phasing of Premier League games | Quarter 1 | Quarter 2 | Quarter 3 | Quarter 4 | Total |
|---|---|---|---|---|---|
| 2019/20 season* | 7 | 13 | 11 | 7 | 38 |
| 2018/19 season | 7 | 13 | 11 | 7 | 38 |
*Subject to changes in broadcasting scheduling
Key Financials (unaudited)
| **** | Three months ended **** 31 December | **** | **** | Six months ended **** 31 December | **** | **** | ||
|---|---|---|---|---|---|---|---|---|
| £ million (except earnings per share) | 2019 | 2018 | Change | **** | 2019 | 2018 | Change | **** |
| Commercial revenue | 70.6 | 65.9 | 7.1 | % | 151.0 | 141.8 | 6.5 | % |
| Broadcasting revenue | 64.7 | 103.7 | (37.6 | )% | 97.6 | 146.5 | (33.4 | )% |
| Matchday revenue | 33.1 | 39.0 | (15.1 | )% | 55.2 | 55.3 | (0.2 | )% |
| Total revenue | 168.4 | 208.6 | (19.3 | )% | 303.8 | 343.6 | (11.6 | )% |
| Adjusted EBITDA(1) | 72.1 | 104.3 | (30.9 | )% | 106.9 | 133.7 | (20.0 | )% |
| Operating profit | 36.5 | 44.0 | (17.0 | )% | 47.5 | 57.9 | (18.0 | )% |
| Profit for the period (i.e. net income)(2) | 35.0 | 26.8 | 30.6 | % | 36.1 | 33.4 | 8.1 | % |
| Basic earnings per share (pence) | 21.27 | 16.27 | 30.7 | % | 21.96 | 20.31 | 8.1 | % |
| Adjusted profit for the period (i.e. adjusted net income)(1) | 25.8 | 46.3 | (44.3 | )% | 29.7 | 53.3 | (44.3 | )% |
| Adjusted basic earnings per share (pence)(1) | 15.67 | 28.13 | (44.3 | )% | 18.02 | 32.40 | (44.4 | )% |
| Net debt(1)/(2) | 391.3 | 317.7 | 23.2 | % | 391.3 | 317.7 | 23.2 | % |
(1) Adjusted EBITDA, adjusted profit for the period, adjusted basic earnings 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.
(2) The gross USD debt principal remains unchanged.
2
Revenue Analysis
Commercial
Commercial revenue for the quarter was £70.6 million, an increase of £4.7 million, or 7.1%, over the prior year quarter.
· Sponsorship revenue was £45.1 million, an increase of £4.8 million, or 11.9%, over the prior year quarter, primarily due to increased sponsorship deals.
· Retail, Merchandising, Apparel & Product Licensing revenue was £25.5 million, a decrease of £0.1 million, or 0.4%, over the prior year quarter.
Broadcasting
Broadcasting revenue for the quarter was £64.7 million, a decrease of £39.0 million, or 37.6%, over the prior year quarter, primarily due to non-participation in the UEFA Champions League. Guaranteed UEFA broadcasting revenues are typically recognised evenly over the course of the competition’s group stages. Given 5 of the 6 group stage matches were played in the quarter, the majority of the full year revenue impact has occurred in Q2.
Matchday
Matchday revenue for the quarter was £33.1 million, a decrease of £5.9 million, or 15.1%, over the prior year quarter, primarily due to playing two fewer home games across the Premier League and UEFA competitions; partially offset by playing an additional domestic cup home game.
Other Financial Information
Operating expenses
Total operating expenses for the quarter were £131.2 million, a decrease of £29.1 million, or 18.2%, over the prior year quarter.
Employee benefit expenses
Employee benefit expenses for the quarter were £70.9 million, a decrease of £7.0 million, or 9.0%, over the prior year quarter, primarily due to reductions in player salaries as a result of non-participation in the UEFA Champions League.
Other operating expenses
Other operating expenses for the quarter were £25.4 million, a decrease of £1.0 million, or 3.8%, over the prior year quarter.
Depreciation and amortization
Depreciation for the quarter was £3.7 million, an increase of £0.7 million, or 23.3%, over the prior year quarter. Amortization for the quarter was £31.2 million, a decrease of £2.2 million, or 6.6%, over the prior year quarter. The unamortized balance of registrations at 31 December 2019 was £329.2 million.
Exceptional items
Exceptional items for the quarter were £nil. Exceptional items for the prior year quarter £19.6 million, relating to compensation to the former manager and certain members of the coaching staff for loss of office.
3
Loss on disposal of intangible assets
Loss on disposal of intangible assets for the quarter was £0.7 million, compared to £4.3 million for the prior year quarter.
Net finance income/(costs)
Net finance income for the quarter was £15.3 million, compared to net finance costs of £6.3 million in the prior year quarter, primarily due to unrealized foreign exchange gains on unhedged USD borrowings compared to losses in the prior year quarter.
Income tax
The income tax expense for the quarter was £16.8 million, compared to £10.9 million in the prior year quarter.
Cash flows
Overall cash and cash equivalents (including the effects of exchange rate movements) decreased by £39.4 million in the quarter, compared to a decrease of £57.1 million in the prior year quarter.
Net cash outflow from operating activities for the quarter was £15.2 million, a decrease of £27.2 million over the prior year quarter. This is primarily due to lower working capital movements as a result of non-participation in the UEFA Champions League.
Net capital expenditure on property, plant and equipment for the quarter was £9.9 million, an increase of £7.5 million over the prior year quarter.
Net capital expenditure on intangible assets for the quarter was £7.1 million, a decrease of £9.1 million over the prior year quarter.
Net debt
Net Debt as of 31 December 2019 was £391.3 million, an increase of £73.6 million over the year, primarily due to an overall decrease in cash and cash equivalents. The gross USD debt principal remains unchanged.
Dividend
A semi-annual cash dividend of $0.09 per share was paid on 6 January 2020. A further semi-annual cash dividend of $0.09 per share will be paid on 3 June 2020, to shareholders of record on 24 April 2020. The stock will begin to trade ex-dividend on 23 April 2020.
4
Conference Call Details
The Company’s conference call to review fiscal 2020 second quarter results will be broadcast live over the internet today, 25 February 2020 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 142-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, 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).
5
Non-IFRS Measures: Definitions and Use
1. Adjusted EBITDA
Adjusted EBITDA is defined as profit for the period before depreciation, amortization, profit/loss on disposal of intangible assets, exceptional items, net finance costs/income, 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 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 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 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: 21%). 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: 21%) applicable during the financial year. A reconciliation of profit for the period to adjusted profit for the period is presented in supplemental note 3.
3. Adjusted basic and diluted earnings per share
Adjusted basic and diluted earnings per share are calculated by dividing the adjusted profit for the period by the weighted average number of ordinary shares in issue during the period. Adjusted diluted earnings 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 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.
6
Key Performance Indicators
| **** | Three months ended 31 December | **** | Six months ended **** 31 December | **** | ||||
|---|---|---|---|---|---|---|---|---|
| **** | 2019 | **** | 2018 | **** | 2019 | **** | 2018 | **** |
| Commercial % of total revenue | 41.9 | % | 31.6 | % | 49.7 | % | 41.3 | % |
| Broadcasting % of total revenue | 38.4 | % | 49.7 | % | 32.1 | % | 42.6 | % |
| Matchday % of total revenue | 19.7 | % | 18.7 | % | 18.2 | % | 16.1 | % |
| Home Matches Played | ||||||||
| PL | 6 | 7 | 10 | 10 | ||||
| UEFA competitions | 2 | 3 | 3 | 3 | ||||
| Domestic Cups | 1 | — | 2 | 1 | ||||
| Away Matches Played | ||||||||
| PL | 7 | 6 | 10 | 10 | ||||
| UEFA competitions | 3 | 2 | 3 | 3 | ||||
| Domestic Cups | 1 | — | 1 | — | ||||
| Other | ||||||||
| Employees at period end | 979 | 937 | 979 | 937 | ||||
| Employee benefit expenses % of revenue | 42.1 | % | 37.3 | % | 46.5 | % | 45.1 | % |
Contacts
| Investor Relations*:* | Media Relations*:* |
|---|---|
| Corinna Freedman | Charlie Brooks |
| Head of Investor Relations | Director of Communications |
| +44 161 868 8431 | +44 161 868 8148 |
| Corinna.Freedman@manutd.co.uk | charlie.brooks@manutd.co.uk |
| Sard Verbinnen & Co | |
| Jim Barron / Devin Broda | |
| + 1 212 687 8080 | |
| JBarron@SARDVERB.com | |
| dbroda@SARDVERB.com |
7
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
(unaudited; in £ thousands, except per share and shares outstanding data)
| **** | Three months ended **** 31 December | **** | Six months ended **** 31 December | **** | ||||
|---|---|---|---|---|---|---|---|---|
| **** | 2019 | **** | 2018 | **** | 2019 | **** | 2018 | **** |
| Revenue from contracts with customers | 168,455 | 208,612 | 303,826 | 343,638 | ||||
| Operating expenses | (131,253 | ) | (160,269 | ) | (267,674 | ) | (303,849 | ) |
| (Loss)/profit on disposal of intangible assets | (715 | ) | (4,349 | ) | 11,302 | 18,079 | ||
| Operating profit | 36,487 | 43,994 | 47,454 | 57,868 | ||||
| Finance costs | (5,386 | ) | (7,131 | ) | (11,912 | ) | (12,946 | ) |
| Finance income | 20,644 | 785 | 18,732 | 1,474 | ||||
| Net finance income/(costs) | 15,258 | (6,346 | ) | 6,820 | (11,472 | ) | ||
| Profit before income tax | 51,745 | 37,648 | 54,274 | 46,396 | ||||
| Income tax expense | (16,738 | ) | (10,878 | ) | (18,139 | ) | (12,980 | ) |
| Profit for the period | 35,007 | 26,770 | 36,135 | 33,416 | ||||
| Basic earnings per share: | ||||||||
| Basic earnings per share (pence) | 21.27 | 16.27 | 21.96 | 20.31 | ||||
| Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share (thousands) | 164,573 | 164,526 | 164,573 | 164,526 | ||||
| Diluted earnings per share: | ||||||||
| Diluted earnings per share (pence) | 21.25 | 16.26 | 21.94 | 20.29 | ||||
| Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share (thousands) | 164,746 | 164,663 | 164,737 | 164,663 |
8
CONSOLIDATED BALANCE SHEET
(unaudited; in £ thousands)
| **** | As of | ||
|---|---|---|---|
| **** | 31 December 2019 | 30 June 2019 | 31 December 2018 |
| ASSETS | |||
| Non-current assets | |||
| Property, plant and equipment | 253,523 | 246,032 | 246,910 |
| Right-of-use assets(1) | 5,168 | — | — |
| Investment properties | 24,792 | 24,979 | 13,772 |
| Intangible assets | 758,476 | 768,857 | 739,472 |
| Deferred tax asset | 53,862 | 58,415 | 57,636 |
| Trade receivables | 40,586 | 9,889 | 10,387 |
| Income tax receivable | — | — | 547 |
| Derivative financial instruments | — | 30 | 2,559 |
| 1,136,407 | 1,108,202 | 1,071,283 | |
| Current assets | |||
| Inventories | 2,535 | 2,130 | 2,610 |
| Prepayments | 13,211 | 13,030 | 10,320 |
| Contract assets — accrued revenue | 78,098 | 39,532 | 79,496 |
| Trade receivables | 26,313 | 23,851 | 32,819 |
| Other receivables | 614 | 1,188 | 1,597 |
| Income tax receivable | 618 | 643 | 598 |
| Derivative financial instruments | — | 312 | 625 |
| Cash and cash equivalents | 100,856 | 307,637 | 190,395 |
| 222,245 | 388,323 | 318,460 | |
| Total assets | 1,358,652 | 1,496,525 | 1,389,743 |
(1) Relates to adoption of IFRS 16, “Leases” with effect from 1 July 2019. See supplemental note 5 for further details.
9
CONSOLIDATED BALANCE SHEET (continued)
(unaudited; in £ thousands)
| **** | As of | **** | ||||
|---|---|---|---|---|---|---|
| **** | 31 December 2019 | **** | 30 June 2019 | **** | 31 December 2018 | **** |
| EQUITY AND LIABILITIES | ||||||
| Equity | ||||||
| Share capital | 53 | 53 | 53 | |||
| Share premium | 68,822 | 68,822 | 68,822 | |||
| Merger reserve | 249,030 | 249,030 | 249,030 | |||
| Hedging reserve | (26,247 | ) | (35,544 | ) | (35,693 | ) |
| Retained earnings | 169,341 | 132,841 | 170,544 | |||
| 460,999 | 415,202 | 452,756 | ||||
| Non-current liabilities | ||||||
| Deferred tax liabilities | 37,766 | 31,865 | 33,302 | |||
| Contract liabilities - deferred revenue | 23,605 | 33,354 | 32,952 | |||
| Trade and other payables | 31,241 | 79,183 | 46,644 | |||
| Borrowings | 486,852 | 505,779 | 502,576 | |||
| Lease liabilities(1) | 3,626 | — | — | |||
| Derivative financial instruments | 2,323 | 2,298 | — | |||
| 585,413 | 652,479 | 615,474 | ||||
| Current liabilities | ||||||
| Contract liabilities - deferred revenue | 143,577 | 190,146 | 129,662 | |||
| Trade and other payables | 152,093 | 230,386 | 180,588 | |||
| Income tax liabilities | 9,429 | 2,859 | 5,771 | |||
| Borrowings | 5,288 | 5,453 | 5,492 | |||
| Lease liabilities(1) | 1,622 | — | — | |||
| Derivative financial instruments | 231 | — | — | |||
| 312,240 | 428,844 | 321,513 | ||||
| Total equity and liabilities | 1,358,652 | 1,496,525 | 1,389,743 |
(1) Relates to adoption of IFRS 16, “Leases” with effect from 1 July 2019. See supplemental note 5 for further details.
10
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited; in £ thousands)
| **** | Three months ended 31 December | **** | Six months ended **** 31 December | **** | ||||
|---|---|---|---|---|---|---|---|---|
| **** | 2019 | **** | 2018 | **** | 2019 | **** | 2018 | **** |
| Cash flows from operating activities | ||||||||
| Cash (used in)/generated from operations (see supplemental note 4) | (13,833 | ) | (41,019 | ) | (18,439 | ) | 82,337 | |
| Interest paid | (1,585 | ) | (1,734 | ) | (9,951 | ) | (9,507 | ) |
| Debt finance costs paid | — | — | (555 | ) | — | |||
| Interest received | 406 | 722 | 1,050 | 1,355 | ||||
| Tax paid | (208 | ) | (376 | ) | (1,697 | ) | (1,810 | ) |
| Net cash (outflow)/inflow from operating activities | (15,220 | ) | (42,407 | ) | (29,592 | ) | 72,375 | |
| Cash flows from investing activities | ||||||||
| Payments for property, plant and equipment | (9,879 | ) | (2,414 | ) | (13,030 | ) | (7,318 | ) |
| Payments for intangible assets | (11,598 | ) | (16,418 | ) | (187,311 | ) | (145,056 | ) |
| Proceeds from sale of intangible assets | 4,530 | 255 | 22,009 | 25,183 | ||||
| Net cash outflow from investing activities | (16,947 | ) | (18,577 | ) | (178,332 | ) | (127,191 | ) |
| Cash flows from financing activities | ||||||||
| Repayment of borrowings | — | — | — | (3,750 | ) | |||
| Principal elements of lease payments(1) | (382 | ) | — | (761 | ) | — | ||
| Net cash outflow from financing activities | (382 | ) | — | (761 | ) | (3,750 | ) | |
| Net decrease in cash and cash equivalents | (32,549 | ) | (60,984 | ) | (208,685 | ) | (58,566 | ) |
| Cash and cash equivalents at beginning of period | 140,307 | 247,505 | 307,637 | 242,022 | ||||
| Effects of exchange rate changes on cash and cash equivalents | (6,902 | ) | 3,874 | 1,904 | 6,939 | |||
| Cash and cash equivalents at end of period | 100,856 | 190,395 | 100,856 | 190,395 |
(1) Relates to adoption of IFRS 16, “Leases” with effect from 1 July 2019. See supplemental note 5 for further details.
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SUPPLEMENTAL NOTES
1 General information
Manchester United plc (the “Company”) and its subsidiaries (together the “Group”) is a men’s and women’s professional football club together with related and ancillary activities. The Company incorporated under the Companies Law (as amended) of the Cayman Islands.
2 Reconciliation of profit for the period to adjusted EBITDA
| **** | Three months ended 31 December | Six months ended 31 December | ||
|---|---|---|---|---|
| **** | 2019 ’000 | 2018 **** £’000 | 2019 ’000 | 2018 ’000 |
| Profit for the period | 35,007 | 26,770 | 36,135 | 33,416 |
| Adjustments: | ||||
| Income tax expense | 16,738 | 10,878 | 18,139 | 12,980 |
| Net finance (income)/costs | (15,258 | 6,346 | (6,820 | 11,472 |
| Loss/(profit) on disposal of intangible assets | 715 | 4,349 | (11,302 | (18,079 |
| Exceptional items | — | 19,599 | — | 19,599 |
| Amortization | 31,257 | 33,440 | 63,444 | 68,571 |
| Depreciation | 3,626 | 2,970 | 7,268 | 5,779 |
| Adjusted EBITDA | 72,085 | 104,352 | 106,864 | 133,738 |
All values are in British Pounds.
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3 Reconciliation of profit for the period to adjusted profit for the period and adjusted basic and diluted earnings per share
| **** | Three months ended 31 December | Six months ended 31 December | ||
|---|---|---|---|---|
| **** | 2019 ’000 | 2018 ’000 | 2019 ’000 | 2018 ’000 |
| Profit for the period | 35,007 | 26,770 | 36,135 | 33,416 |
| Exceptional items | — | 19,599 | — | 19,599 |
| Foreign exchange (gains)/losses on unhedged US dollar denominated borrowings | (19,522 | 1,316 | (17,074 | 1,535 |
| Fair value movement on embedded foreign exchange derivatives | 425 | 25 | 346 | (56 |
| Income tax expense | 16,738 | 10,878 | 18,139 | 12,980 |
| Adjusted profit before income tax | 32,648 | 58,588 | 37,546 | 67,474 |
| Adjusted income tax expense (using a normalized tax rate of 21% (2018: 21%)) | (6,856 | (12,303 | (7,885 | (14,170 |
| Adjusted profit for the period (i.e. adjusted net income) | 25,792 | 46,285 | 29,661 | 53,304 |
| Adjusted basic earnings per share: | ||||
| Adjusted basic earnings per share (pence) | 15.67 | 28.13 | 18.02 | 32.40 |
| Weighted average number of ordinary shares used as the denominator in calculating adjusted basic earnings per share (thousands) | 164,573 | 164,526 | 164,573 | 164,526 |
| Adjusted diluted earnings per share: | ||||
| Adjusted diluted earnings per share (pence) | 15.66 | 28.11 | 18.01 | 32.37 |
| Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating adjusted diluted earnings per share (thousands) | 164,746 | 164,663 | 164,737 | 164,663 |
All values are in British Pounds.
13
4 Cash (used in)/generated from operations
| **** | Three months ended 31 December | Six months ended 31 December | ||
|---|---|---|---|---|
| **** | 2019 ’000 | 2018 ’000 | 2019 ’000 | 2018 ’000 |
| Profit for the period | 35,007 | 26,770 | 36,135 | 33,416 |
| Income tax expense | 16,738 | 10,878 | 18,139 | 12,980 |
| Profit before income tax | 51,745 | 37,648 | 54,274 | 46,396 |
| Adjustments for: | ||||
| Depreciation | 3,626 | 2,970 | 7,268 | 5,779 |
| Amortization | 31,257 | 33,440 | 63,444 | 68,571 |
| Loss/(profit) on disposal of intangible assets | 715 | 4,349 | (11,302 | (18,079 |
| Net finance (income)/costs | (15,258 | 6,346 | (6,820 | 11,472 |
| Non-cash employee benefit expense — equity-settled share-based payments | 227 | 161 | 365 | 371 |
| Foreign exchange losses/(gains) on operating activities | 87 | (95 | (286 | 182 |
| Reclassified from hedging reserve | 2,957 | 1,536 | 5,811 | 2,844 |
| Changes in working capital: | ||||
| Inventories | 129 | 56 | (405 | (1,194 |
| Prepayments | 2,171 | 2,336 | (181 | 542 |
| Contract assets — accrued revenue | (38,165 | (33,643 | (38,566 | (41,478 |
| Trade receivables | 6,160 | 2,442 | 8,504 | 81,719 |
| Other receivables | 14,655 | (1,438 | 574 | (1,490 |
| Contract liabilities — deferred revenue | (66,449 | (97,181 | (56,318 | (54,983 |
| Trade and other payables | (7,690 | 54 | (44,801 | (18,315 |
| Cash (used in)/generated from operations | (13,833 | (41,019 | (18,439 | 82,337 |
All values are in British Pounds.
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5 Adoption of IFRS 16
The Group adopted IFRS 16, “Leases” with effect from 1 July 2019. The Group has elected to apply the ‘simplified approach’ on initial adoption of IFRS 16, consequently comparative information has not been restated.
The new treatment of leases has resulted in an increase in non-current assets and financial liabilities as well as increasing underlying EBITDA, offset by an increase in depreciation and an increase in finance charges.
The Group expects that adjusted EBITDA for the year ended 30 June 2020 will increase by approximately £1.7 million. Profit before tax is expected to decrease by approximately £0.1 million.
Lease payments were previously presented as operating cash flows. Lease payments are now split into payments for the principal portion of the lease liability which are presented as financing cash flows, and payments for the interest portion of the lease liability which are presented as operating cash flows. There is no impact on overall cash flow.
Note 3 and note 15 to the interim consolidated financial statements for the three and six months ended 31 December 2019 provide further detail on the adoption of IFRS 16 and the impact on the consolidated income statement, consolidated balance sheet, and consolidated statement of cash flows.
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