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Wanda Sports suffers 75-per-cent revenue drop, headcount cut by 13 per cent

The sports shutdown caused by the Covid-19 pandemic has led to a 75-per-cent fall in second-quarter revenues at Wanda Sports Group, the owner of the Infront agency, among other interests in sport.

Wanda Sports’ second-quarter revenue from continuing operations was €51.8m ($62m) as its Spectator Sports, Digital, Production and Sports Solutions (DPSS) and Mass Participation units were all badly hit.

Commenting on the results today (Tuesday), Brian Liao, Wanda Sports Group’s chief financial officer, said that, in response to the pandemic, the group’s headcount had been reduced by 13 per cent since the first quarter of 2020.

The second-quarter revenue was comprised of €38.4m from the Spectator Sports unit, down 72 percent, €13.1m from the DPSS unit, down 76 per cent, and just €300,000 from the Mass Participation operations, a 98-per-cent drop with all scheduled events cancelled.

Following the sale of its Ironman business to American media company Advance Publications, results and operating data from the long-distance triathlon series were excluded from the year-on-year comparative second-quarter figures.

The cancellation of May’s IIHF World Championship in Switzerland had a sizeable effect on the Spectator Sports revenues, along with the suspension of Italian football’s Serie A in the second quarter. The non-recurrence of the host broadcast work undertaken at the 2019 Fifa Women’s World Cup (by the Infront-owned HBS) also hit the DPSS results.

Wanda Sports generated €34.5m in gross profit in the second quarter, made up of €29m from the Spectator Sports unit (down 48 per cent), €6m from the DPSS operations (down 54 per cent) and a €500,000 loss for the Mass Participation activities (down 106 per cent).

Net profit for the period from continuing operations was €5.5m, compared to €19m profit in the second quarter of 2019. This was attributed the decreased gross profit being partially offset by savings in overhead expenses. First-quarter adjusted Ebitda (earnings before interest, tax, depreciation and amortization) from continuing operations was €20.9m, down from €41.2m.

Inclusive of discontinued operations, the net loss attribute to shareholders was €30m, compared to a net profit of €23.4m reported 12 months ago.

Personnel expenses fell by €4.6m to €22.8m with a hiring freeze implemented, along with salary reductions and reduced hours. Wanda Sports also received “reduced working time” compensation from local authorities to help offset personnel expenses. Cost savings in travel and marketing helped to reduce the selling, office and administrative expenses to €6.2m, down from €12.8m in the second quarter of 2019 (when Wanda’s IPO-related expenses also took effect).

Outlining the cost cuts undertaken, Liao said: “Despite the expected contraction in our revenue and profitability, our personnel expenses and selling, office and administrative expenses in the second quarter of 2020 decreased by approximately 28 per cent year-over-year, mainly driven by our cost reduction efforts from the start of the pandemic. Several cost categories will continue to decrease throughout the year as we continue to respond to the crisis, such as personnel costs, office and travel expenses, and marketing expenses.

“In addition, regrettably we had to reduce the number of employees by 13 per cent since the first quarter 2020, but will continue to invest in core capabilities. We will continue to further streamline our operations in order to preserve cash and protect our profitability.”

The chief financial officer continued: “In terms of liquidity, after the Ironman transaction, as of July 31, 2020, we have a €208.7m cash balance. We intend to use the balance of the net proceeds of the Ironman transaction, subject to business conditions, to return capital to its shareholders (either through a special dividend or a share repurchase program; in either case, subject to shareholder approval), and/or for general corporate purposes.”

Hengming Yang, Wanda Sports Group’s chief executive, noted: “Despite our revenue of €51.8m in the second quarter being much lower than the previous year, our gross margin was significantly enhanced. Looking forward, although visibility is still unclear in terms of public health and macroeconomic conditions, we remain positive about our partnerships with clients and our business opportunities.”

In June, Wanda Sports announced a 26-per-cent year-on-year revenue drop in the first quarter as a cyclicality effect and the Covid-19 pandemic started to impinge on its financial results.

In March, Wanda’s sports unit agreed a $240m (€200m) 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.