Wanda Sports’ 26-per-cent Q1 revenue drop caused by cyclicality and Covid-19

Wanda Sports Group, the owner of the Infront agency, among other interests in sport, suffered a 26-per-cent year-on-year revenue drop in the first quarter of 2020 as its Spectator Sports and Mass Participation units were hit by a cyclicality effect and the Covid-19 pandemic, respectively.

Total first-quarter revenue was €163.7m ($180.3m), comprised of €139.8m from the Spectator Sports unit, €1m from the Mass Participation unit and €22.9m from the Digital, Production and Sports Solutions (DPSS) operations.

The Spectator Sports revenues fell by 28 per cent as a result of the non-recurrence of skiing’s 2019 FIS World Championships, which was only partially offset by men’s handball’s EHF Euro in January.

Mass Participation revenues dropped by 78 per cent as a result of the fall to 4,000 paying athletes for races (from 45,000 in the same period last year) as Covid-19 began to take hold. Following the recent sale of its Ironman business to American media company Advance Publications, revenues and operating data from the long-distance triathlon series were excluded from the year-on-year comparative first-quarter figures.

First-quarter revenues at the DPSS segment rose by 6 per cent to €22.9m as a result of the “continuing growth in the Group’s digital business”.

Despite the cancellation and postponement of events in March and the decreased revenue, Wanda Sports generated €57.8m in gross profit, an 8-per-cent uplift. This was driven largely by the Spectator Sports unit (€47.5m) and the DPSS operations (€10.2m) with the Mass Participation unit generating gross profit of just €100.000.

Loss for the period from continuing operations was €4.3m, compared to a €3.4m profit in the first three months of 2019. This was the results of additional finance costs and increased personnel expenses. Personnel costs rose to €29.1m in the first quarter of 2020 (from €26.4m in the first quarter of 2019) as a result of the increased headcount due to business expansion.

First-quarter adjusted Ebitda (earnings before interest, tax, depreciation and amortization) from continuing operations was €20.7m, down from €28.2m, which was mainly a result of the increase in operating expenses.

Hengming Yang, chief executive at Wanda Sports Group, said: “We started off the year with good momentum from all of our business segments. However, almost all major sporting events were postponed or cancelled starting in March of this year due to the global Covid-19 pandemic.

“Despite unprecedented market conditions, we still delivered revenue of €163.7m, primarily driven by our resilient business model and long-term contractual agreements, especially from our Spectator Sports segment. In facing the market challenges, we plan to leverage our advanced technology and to concentrate our innovative efforts for expanded and differentiated content and digital solutions to further drive the engagement of our athletes, fans and partners.”

Given the widespread calendar disruption that continued into April and May, headlined by the cancellation of ice hockey’s Infront-marketed IIHF World Championship, Wanda Sports is bracing itself for that impact to be felt in its second-quarter results.

The Group said: “…races and events in China were postponed due to containment efforts in much of the country in the first quarter of 2020. Although the Group continued to host some races and sports events in Europe and North America in the first quarter of 2020, by April 2020, all the remaining sports events were cancelled or postponed.

“Currently, the Group is significantly involved, together with other relevant stakeholders, in active efforts to help in the resumption of cancelled or postponed sports events (including if events are held without spectators).”

In March, Wanda’s sports unit agreed a $240m (€213m) senior term loan facility with Credit Suisse. This followed a continued fall in the company’s share price on the Nasdaq stock market amid the warning of the potential for a “material adverse impact” on its business because of the global spread of the Covid-19 virus.

Brian Liao, Wanda Sports Group’s chief financial officer, said today (Tuesday): “In addition to managing our financial and operating performance, one of our key focuses was on improving our liquidity, in particular in light of the uncertainty prompted by the global pandemic. We are pleased with the successful completion of the refinancing in March which enabled us to prepay the unsecured senior 364-day term loan facility entered in March 2019.

“By the end of the first quarter 2020, we had €164.7m cash on hand and we are expecting to further increase our liquidity position with net proceeds of approximately €345m to €363m from the closing sale of The Ironman Group.

“Since the outbreak of the Covid-19 pandemic, we also quickly adopted cost cutting measures across the entire Group in order to minimise the overall impact on our business, including global hiring freeze, reduction in non-essential spending and capital expenditure, furloughs of employees in certain markets where possible, and salary reductions where appropriate, as well as taking advantage of various government assistance programs available to us.”

Liao expressed his confidence that these measures would “further enhance our financial flexibility and resources as we address the economic uncertainty”.

In April, Wanda Sports reported full-year revenues of €1.03bn in 2019, a 9-per-cent fall on 2018.