Wanda Sports Group Company Limited Reports Second Quarter 2019 Results
Second Quarter 2019 Financial Highlights:
- Total revenue reached €283.8 million (
US$322.8 million ), a decrease of 30% year-over-year. Excluding the impact of reimbursement revenue1, total revenue would have been €256.1 million (US$291.3 million ), representing an increase of 4% year-over-year. - Gross profit was €104.4 million (
US$118.7 million ), compared with €108.2 million in the second quarter of 2018. The slight decrease was mainly attributable to event cyclicality related to the 2018 FIFA World Cup Russia™. - Net profit attributable to ordinary shareholders was €23.4 million (
US$26.6 million ), up 39% year-over-year. - Adjusted EBITDA was €58.8 million (
US$66.9 million ), compared with €65.4 million in the second quarter of 2018. - Basic and diluted net income per American Depositary Share (“ADS”)2 were both €0.17(US$ 0.19), compared with basic net income per ADS of €0.14 and diluted net income per ADS of €0.13 in the second quarter of 2018.
Mr. Hengming Yang, Chief Executive Officer of
Mr.
Second Quarter 2019 Financial Results
Total revenue was €283.8 million (
Revenue in our Mass Participation segment was €90.9 million (
Revenue in our Spectator Sports segment was €138.1 million (
Revenue in our DPSS segment was €54.8 million (
Cost of sales was €179.4 million (
Gross profit was €104.4 million (
Gross profit in our Mass Participation segment was €35.9 million (
Gross profit in our Spectator Sports segment was €55.4 million (
Gross profit in our DPSS segment was €13.1 million (
Gross margin, or gross profit as a percentage of revenue, was 37%, compared with 27% in the same quarter of 2018. Excluding the impact of reimbursement revenue and costs, gross margin would have been 41%, compared with 44% in the same quarter of 2018.
Personnel expenses were €35.9 million (
Selling, office and administrative expenses were €17.8 million (
Depreciation and amortization expenses were €8.4 million (
Other operating expenses, net were €0.6 million (
Finance costs were €16.2 million (
Finance income was €0.3 million (
Income tax expenses were €1.2 million (
Profit was €24.6 million (
Adjusted EBITDA was €58.8 million (
Net profit attributable to ordinary shareholders was €23.4 million (
Basic and diluted net income per ADS were both €0.17
Cash and cash equivalents
As of
Business Updates
Mass Participation
We continued to take advantage of favorable global conditions in the mass participation events industry. In the second quarter of 2019, we operated 104 events. In the first half of 2019, we operated a total of 133 of the 322 owned and managed events scheduled for the full year.
Triathlon:
- We operated five inaugural events in
France (Les Sables d’Olonne),Greece (Costa Navarino),Ireland (Cork), andUnited States (Connecticut andVirginia ). Other key events included the Hamburg Wasser World Triathlon Series, one of the world’s largest short distance triathlons, as well as IRONMAN and IRONMAN 70.3 Regional Championships inAustralia ,Denmark ,Germany ,South Africa andthe United States . - In May,
St. George, Utah won a competitive bid to host the 2021 IRONMAN 70.3 World Championship.St. George will be the first IRONMAN 70.3 event to rotate to a full-distance event in 2020, providing athletes with new opportunities to race in a highly popular event location.
Running:
- We continued to develop our global running brand – the Rock ‘n’ Roll Marathon Series. We launched two inaugural events in
Shanghai andJixi, China in the second quarter. - We strengthened our market leading position in
Oceania through the acquisition of Nine’s Events & Entertainment division, adding four events, highlighted byThe Sun Herald City2Surf presented by Westpac – one of the world’s largest fun runs. - In May, Chengdu Marathon of
China was recognized as a candidate race for the Abbott World Marathon Majors. This is the first and only candidate race inChina for the Abbott World Marathon Majors series. The Abbott World Marathon Majors is the world’s largest and most renowned Marathon series, consisting of the world’s six premier marathons.
Others:
- We completed the acquisition of
London -based Threshold Sports, organizer of unique events such as a 9-day 1,500 km cycling challenge, andGermany -based hundert24, organizer of 14 non-competitive extreme hiking challenges. We had also acquired the Vienna Business Run, a popular annual 4.1-km road race.
Spectator Sports
In the second quarter, we made good progress in further diversifying our portfolio of sports rights with a number of new agreements signed with IP holders.
- In May, we and the
English Premier League agreed a new partnership for free-to-air rights across sub-Saharan Africa for three years commencing with the 2019/20 season. - In May, the 83rd IIHF World Championship in ice hockey was held in
Slovakia . Over 470,000 fans attended the event with 1.3 billion people watching on TV. We were the exclusive media and marketing partner of the IIHF. - In June, a new agreement was signed with the
International Olympic Committee (IOC) that includes the media rights to Sub-Saharan Africa for all Olympic properties through 2024.
DPSS
- In May, we launched iX.co, an entity aimed at becoming a world leading digital media and solutions company that connects brands and sports rights holders to global fan audiences.
- For the 83rd IIHF World Championship in ice hockey held in
Slovakia , we also provided media production and digital solutions services. - 2019 FIFA Women’s World Cup France™ took place across 11 cities in
France in June. As the host broadcaster,Infront was on-site with more than 1,000 staff and six production teams per match. A maximum of 29 cameras captured the action on the pitches and delivered spectacular images.
Recent Developments
- In July 2019, we completed our IPO of 23.8 million ADSs at a price of US$8 per ADS. Every two ADSs represent three ordinary shares. We received approximately US$190.4 million in gross proceeds. We now have a total of approximately 205 million ordinary shares issued and outstanding.
- In
August 2019 , we repaidUS$200 million (€175.8 million) principal amount of theUS$400 million unsecured senior 364-day term loan facility that was entered into onMarch 15, 2019 at the holding company level and also paid the related interest and make-whole amount ofUS$17.6 million (€15.4 million). We used the net proceeds from the IPO as well as cash on hand to fund the repayment. - In
August 2019 ,World Triathlon Corporation (“WTC”), a Group company, refinanced its existing credit facility, which includes a term loan that matures onAugust 15, 2026 and a revolving line of credit that matures onMay 15, 2024 . The term loan portion of the credit facility isUS$275 million (€241.8 million), and the revolving line of credit isUS$25 million (€22.0 million). Interest on the term loan and revolving line of credit is the alternate base rate or LIBOR plus the applicable margin that falls between 2.75% and 4.25%. The other key terms remain materially the same as the existing credit facility. - In
August 2019 , FIBA, the world governing body of basketball, andWanda Group , our parent company, signed a strategic partnership agreement.Wanda Group will continue as a global partner for the next 12 years, covering the next three World Cup cycles. We, throughInfront , have global marketing rights to the next three cycles of the FIBA Basketball World Cups and World Cup Qualifiers, the Women’s Basketball World Cups, the FIBA Continental Cups and also the FIBA Youth World Cups.
Third Quarter and Full Year 2019 Guidance
For the third quarter, we currently expect:
Total revenue to be in the range of €239 million to €253 million, or up 5% to 11% year-over-year.
Excluding reimbursement revenue, total revenue to be in the range of €236 million to €251 million, or up 30% to 38% year-over-year.
Adjusted EBITDA3 to be in the range of €39 million to €41 million, or down 1% to up 6% year-over-year.
For 2019, we currently expect:
Total revenue to be in the range of €1,008 million to €1,070 million, or down 11% to 5% from 2018.
Excluding reimbursement revenue, total revenue to be in the range of €976 million to €1,036 million, or up 7% to 14 % from 2018.
Adjusted EBITDA3 to be in the range of €167 million to €177 million, or down 15% to 9% from 2018.
Compared with 2018, total revenue and Adjusted EBITDA of 2019 are expected to be lower mainly due to event cyclicality in 2018.
The guidance aforementioned reflects our expectations for the third quarter and full year 2019 as of
________________
1 Cyclicality driven by the timing cycle of sports events has a significant impact on the comparability of our results from one period to the next. In 2018, both total revenue and total cost of sales were impacted due to media production activities in connection with the 2018 FIFA World Cup Russia™, which is accounted for in our DPSS segment. These activities are undertaken pursuant to our cost-plus contractual model under which both revenue and costs are fully accounted for in our consolidated statement of profit or loss, including reimbursement revenues and reimbursement costs. Reimbursement revenues represent revenue that has associated costs of a similar, generally matching, amount (reimbursement costs), thereby resulting in a negligible gross margin impact. The negligible gross margin impact from reimbursement revenues and reimbursement costs (as opposed to a zero gross margin impact as may be otherwise expected) is due to temporary timing differences mainly resulting from foreign exchange effects on invoice settlements.
2 Basic and diluted earnings per share and profit attributable to ADS holders of the parent for the three months ended
3 A reconciliation of our Adjusted EBITDA guidance to the most directly comparable IFRS financial measure cannot be provided because of the inherent difficulty in forecasting and quantifying certain amounts and in reliance on the “unreasonable efforts” exception provided for in Regulation G. Our Adjusted EBITDA guidance for the third quarter of 2019 reflects adjustments that exclude estimated stock-based compensation of approximately €24 million to €26 million and estimated depreciation and amortization of approximately €8 million to €9 million. Our Adjusted EBITDA guidance for the full year 2019 reflects adjustments that exclude estimated stock-based compensation of approximately €40 million to €43 million and estimated depreciation and amortization of approximately €33 million to €35 million. We are unable to forecast the timing or magnitude of other items that we expect will impact our IFRS profit/(loss) for the period and which we expect to adjust for in our Adjusted EBITDA, such as those included in the reconciliation table included at the end of this release, due to the nature of these items, being inherently unpredictable and not reliably quantifiable. These items could significantly impact, either individually or in the aggregate, our IFRS profit/(loss) for the period in the future.
Conference Call Information
Wanda Sports’ management will host an earnings conference call at
The dial-in details for the live conference call are as follows:
United States: | +1 866 519 4004 |
International: | +65 6713 5090 |
Hong Kong: | +852 3018 6771 |
China: | 4006 208038 |
Conference ID: | 9269765 |
Additionally, a live and archived webcast of the conference call will be available on Wanda Sports’ investor relations website at investor.wsg.cn.
A replay of the conference call will be accessible approximately two hours after the conclusion of the live call until
United States: | +1 855 452 5696 |
International: | +61 2 8199 0299 |
Hong Kong: | 800 963 117 |
China: | 4006 322 162 2 |
Replay Access Code: | 9269765 |
About
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For more information, please visit investor.wsg.cn.
Use of Non-IFRS Financial Measures
To supplement our consolidated financial statements which are presented in accordance with International Financial Reporting Standards as issued by the
Non-IFRS financial measures should not be considered in isolation or construed as an alternative to profit/(loss) from operations and net profit/(loss) or any other measure of performance, or as an indicator of our operating performance. Adjusted EBITDA may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to our data. We encourage investors and others to review our financial information in its entirety and not rely on a single financial measure. Reconciliation of Adjusted EBITDA and EBITDA, another non-IFRS financial measure, to the most directly comparable IFRS financial measure is set forth at the end of this release.
Exchange Rate Information
This press release contains translation of certain EURO amounts into U.S. dollars at specified rates solely for the convenience of readers. Unless otherwise noted, all translations from EURO to U.S. dollars were made at the exchange rate of €0.8792 to
Forward-Looking Statements
This announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements include but are not limited to management quotes and our financial outlook. These forward-looking statements can be identified by terminology such as “will,” “estimate,” “project,” “predict,” “believe,” “expect,” “anticipate,” “intend,” “potential,” “plan,” “goal” and similar statements. We may also make written or oral forward-looking statements in our periodic reports to the
For investor and media inquiries, please contact:
In
Tel: +86 10-8558-8813
E-mail: ir@wsg.cn
In U.S.
Tel: +1 212-687-8080
E-mail: WandaSports-SVC@SARDVERB.com
INTERIM CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS
(Amounts in thousands of Euro (“€”) or, for convenience translation, thousands of U.S. Dollar (“$”), except for number of shares and per share data)
For the three months ended |
||||||||
June 30, 2019 |
June 30, 2018 |
|||||||
$ |
€ |
€ |
||||||
Revenue | 322,796 | 283,802 | 404,478 | |||||
Cost of sales | (204,047 | ) | (179,398 | ) | (296,242 | ) | ||
Gross profit | 118,749 | 104,404 | 108,236 | |||||
Personnel expenses | (40,846 | ) | (35,912 | ) | (35,196 | ) | ||
Selling, office and administrative expenses | (20,231 | ) | (17,787 | ) | (11,928 | ) | ||
Depreciation and amortization | (9,569 | ) | (8,413 | ) | (9,300 | ) | ||
Other operating expense, net | (647 | ) | (569 | ) | (11,970 | ) | ||
Finance costs | (18,384 | ) | (16,163 | ) | (18,209 | ) | ||
Finance income | 365 | 321 | 4,392 | |||||
Share of profit/(loss) of associates and joint ventures | (167 | ) | (147 | ) | 345 | |||
Profit before tax | 29,270 | 25,734 | 26,370 | |||||
Income tax | (1,330 | ) | (1,169 | ) | (7,881 | ) | ||
Profit for the period | 27,940 | 24,565 | 18,489 | |||||
Attributable to: | ||||||||
Equity holders of the parent | 26,667 | 23,446 | 16,836 | |||||
Non‑controlling interests | 1,273 | 1,119 | 1,653 | |||||
27,940 | 24,565 | 18,489 | ||||||
Earnings per share: | ||||||||
Basic profit for the period attributable to ordinary equity holders4 of the parent | 0.13 | 0.11 | 0.09 | |||||
Diluted profit for the period attributable to ordinary equity holders4 of the parent | 0.13 | 0.11 | 0.08 | |||||
Basic profit for the period attributable to ADS4 holders of the parent | 0.19 | 0.17 | 0.14 | |||||
Diluted profit for the period attributable to ADS4 holders of the parent | 0.19 | 0.17 | 0.13 | |||||
________________
4 Basic and diluted earnings per share and profit attributable to ADS holders of the parent for the three months ended
INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Amounts in thousands of Euro (“€”) or, for convenience translation, thousands of U.S. Dollar (“$”))
For the three months ended |
||||||||
June 30, 2019 |
June 30, 2018 |
|||||||
$ |
€ |
€ |
||||||
Profit for the period | 27,940 | 24,565 | 18,489 | |||||
Other comprehensive income: | ||||||||
Other comprehensive income (loss) to be reclassified to profit or loss in subsequent periods (net of tax): | ||||||||
Net gain on cash flow hedges | 270 | 237 | 6,549 | |||||
Exchange differences on translation of foreign operations | (15,552 | ) | (13,673 | ) | (1,091 | ) | ||
Net other comprehensive (loss) income to be reclassified to profit or loss in subsequent periods | (15,282 | ) | (13,436 | ) | 5,458 | |||
Other comprehensive income not to be reclassified to profit or loss in subsequent periods: | ||||||||
Net remeasurement on defined benefit plans | (14 | ) | (12 | ) | - | |||
Other comprehensive (loss) income for the period, net of tax | (15,296 | ) | (13,448 | ) | 5,458 | |||
Total comprehensive income for the period, net of tax | 12,644 | 11,117 | 23,947 | |||||
Attributable to: | ||||||||
Equity holders of the parent | 11,707 | 10,293 | 21,889 | |||||
Non‑controlling interests | 937 | 824 | 2,058 | |||||
12,644 | 11,117 | 23,947 | ||||||
INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Amounts in thousands of Euro (“€”) or, for convenience translation, thousands of U.S. Dollar (“$”))
June 30, 2019 |
December 31, 2018 | ||||
$ | € | € | |||
ASSETS | |||||
CURRENT ASSETS | |||||
Cash and cash equivalents | 212,130 | 186,505 | 177,048 | ||
Trade and other receivables | 273,384 | 240,359 | 299,898 | ||
Accrued income | 17,751 | 15,607 | 6,474 | ||
Contract assets | 36,440 | 32,038 | 39,714 | ||
Inventories | 10,464 | 9,200 | 5,935 | ||
Income tax receivables | 8,384 | 7,371 | 8,816 | ||
Other assets | 85,051 | 74,777 | 81,561 | ||
643,604 | 565,857 | 619,446 | |||
NON‑CURRENT ASSETS | |||||
Long‑term receivables | 12,028 | 10,575 | 6,271 | ||
Investments in associates and joint ventures | 1,257 | 1,105 | 5,551 | ||
Property, plant and equipment | 30,266 | 26,610 | 26,048 | ||
Right of use assets | 37,509 | 32,978 | 35,789 | ||
Intangible assets | 485,104 | 426,504 | 423,488 | ||
Goodwill | 938,822 | 825,411 | 677,326 | ||
Contract assets | 11,341 | 9,971 | 9,077 | ||
Deferred tax assets | 26,640 | 23,422 | 24,562 | ||
Other assets | 70,378 | 61,876 | 54,953 | ||
1,613,345 | 1,418,452 | 1,263,065 | |||
TOTAL ASSETS | 2,256,949 | 1,984,309 | 1,882,511 | ||
INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Amounts in thousands of Euro (“€”) or, for convenience translation, thousands of U.S. Dollar (“$”))
June 30, 2019 |
December 31, 2018 |
|||||||
$ |
€ |
€ |
||||||
LIABILITIES | ||||||||
CURRENT LIABILITIES | ||||||||
Trade and other payables | 160,245 | 140,887 | 816,451 | |||||
Interest‑bearing liabilities | 422,450 | 371,418 | 25,487 | |||||
Lease liabilities | 12,166 | 10,696 | 9,863 | |||||
Accrued expense | 101,713 | 89,426 | 83,516 | |||||
Deferred income | 6 | 5 | 7 | |||||
Contract liabilities | 176,009 | 154,747 | 185,681 | |||||
Other liabilities | 19,926 | 17,519 | 17,097 | |||||
Income tax payable | 18,513 | 16,277 | 31,009 | |||||
Provisions | 8,011 | 7,043 | 3,419 | |||||
919,039 | 808,018 | 1,172,530 | ||||||
NON‑CURRENT LIABILITIES | ||||||||
Interest‑bearing liabilities | 728,234 | 640,263 | 535,630 | |||||
Lease liabilities | 29,440 | 25,884 | 28,841 | |||||
Accrued expenses | 5,620 | 4,941 | 4,941 | |||||
Deferred income | - | - | 10 | |||||
Contract liabilities | 16,368 | 14,391 | 13,485 | |||||
Deferred tax liabilities | 94,207 | 82,827 | 82,941 | |||||
Provisions | 4,233 | 3,722 | 8,576 | |||||
Long‑term payroll payables | 15,031 | 13,215 | 12,770 | |||||
Other liabilities | 60,298 | 53,014 | 31,802 | |||||
953,431 | 838,257 | 718,996 | ||||||
TOTAL LIABILITIES | 1,872,470 | 1,646,275 | 1,891,526 | |||||
EQUITY | ||||||||
Share capital | 1,729,773 | 1,520,816 | 1,520,816 | |||||
Reserves | (1,127,232 | ) | (991,062 | ) | (1,321,685 | ) | ||
Accumulated deficit | (219,496 | ) | (192,981 | ) | (207,566 | ) | ||
Equity/(deficit) attributable to equity holders of the parent | 383,045 | 336,773 | (8,435 | ) | ||||
Non‑controlling interests | 1,434 | 1,261 | (580 | ) | ||||
Total equity/(deficit) | 384,479 | 338,034 | (9,015 | ) | ||||
Total liabilities and equity | 2,256,949 | 1,984,309 | 1,882,511 | |||||
SUMMARY OF INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in thousands of Euro (“€”) or, for convenience translation, thousands of U.S. Dollar (“$”))
For the three months ended | ||||||||
June 30, 2019 |
June 30, 2018 |
|||||||
$ |
€ |
€ |
||||||
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES | 34,923 | 30,704 | (9,725 | ) | ||||
NET CASH FLOWS (USED IN) FROM INVESTING ACTIVITIES | (47,760 | ) | (41,991 | ) | (22,385 | ) | ||
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES | 14,059 | 12,361 | (60,403 | ) | ||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 1,222 | 1,074 | (92,513 | ) | ||||
Cash and cash equivalents at beginning of the period | 212,397 | 186,739 | 233,112 | |||||
Effect of foreign exchange rate changes, net | (1,489 | ) | (1,308 | ) | 4,771 | |||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | 212,130 | 186,505 | 145,370 | |||||
RECONCILIATION OF NON-IFRS MEASURE – IFRS Profit for the Period to Adjusted EBITDA (unaudited)
(Amounts in thousands of Euro (“€”) or, for convenience translation, thousands of U.S. Dollar (“$”))
For the three months ended |
||||||||
June 30, 2019 |
June 30, 2018 |
|||||||
$ | € | € | ||||||
Profit for the period | 27,940 | 24,565 | 18,489 | |||||
Income tax | 1,330 | 1,169 | 7,881 | |||||
Net interest expenses | 21,423 | 18,835 | 6,429 | |||||
Depreciation and amortization | 9,569 | 8,413 | 9,300 | |||||
EBITDA | 60,262 | 52,982 | 42,099 | |||||
Share-based compensation(1) | 2,396 | 2,107 | 3,264 | |||||
Expenses or charges relating to acquisition(2) | 1,289 | 1,133 | 1,415 | |||||
Expenses or charges relating to IPO or financing(3) | 4,736 | 4,164 | 294 | |||||
Restructure and disposal of investments / subsidiaries(4) | 430 | 378 | (56 | ) | ||||
Loss from termination of customer(5) | - | - | 1,365 | |||||
Bad debt expenses relating to specific customer(6) | - | - | 9,601 | |||||
Losses/(gains) on foreign exchange and derivatives, and other financial charges(7) | (3,404 | ) | (2,993 | ) | 7,388 | |||
Estimated client compensation relating to fraudulent activities(8) | 1,170 | 1,029 | - | |||||
Adjusted EBITDA | 66,879 | 58,800 | 65,370 | |||||
________________
- Share-based compensation has been excluded as it is a non-cash expense. Our adjustment removes all of the historical share-based compensation for employees.
- Represents expenses incurred for professional fees such as legal counsel, auditors, underwriters, valuation experts and consultants in respect of strategic acquisitions in our mass participation sports business, including
Lagardere Unlimited Events AG in 2016 andCompetitor Group Holdings, Inc. , or CGI, in 2017. - Represents professional fees of legal counsel, auditors, due diligence services experts, consultants, and related IPO expenses or financing.
- Represents expenses or costs incurred in the restructuring and disposal of investments and subsidiary companies. Following our acquisitions of
Infront and WEH, we went through a restructuring process which involved divestment of certain investments and subsidiaries. Following the acquisition of CGI in 2017, WEH undertook a similar process. While event and contract performance reviews are performed as a normal course of business, these larger restructuring processes are considered non-recurring. - Eliminates the impact from the extraordinary loss of certain rights-in partners following their insolvency.
- Eliminates expenses reflecting expected credit losses in trade account receivables that we had outstanding from a sports marketing and media rights firm (MP & Silva) as well as contract assets, as a result of the initiation of MP & Silva’s insolvency process.
- Represents the losses/(gains) on foreign exchange, derivative financial instruments at fair value through profit or loss, termination of the cross-currency swap and other financial charges.
- Represents the amount estimated to be paid by
Infront as compensation in connection with fraudulent activities presumably undertaken by a former senior employee ofInfront , for which we have taken a revenue deduction in the three months endedJune 30, 2019 .
Source: Wanda Sports Group Company Limited