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Wanda Sports reports full-year revenue dip, reiterates Covid-19 warning

Wanda Sports Group, the owner of the Infront agency, among other interests in sport, has reported revenues of €1.03bn ($1.16bn) in 2019, a 9-per-cent fall on 2018.

Reporting its fourth-quarter and full-year figures today, Wanda Sports also issued another warning of the effect of the Covid-19 pandemic on its various business units due to the mass postponement or cancellation of sports events.

A full-year loss of €273.8m was chiefly attributed to the “non-cash goodwill impairment loss” of €254.3m for impairment of goodwill at Wanda’s Ironman Group related to its North American and Oceanian units.

The fall in revenues was mainly attributed to a €185.7m decrease in reimbursement revenues given the cyclicality effect of the 2018 Fifa World Cup, at which Infront’s HBS was in charge of the host broadcast services.

Wanda Sports Group divides revenues into three core segments, namely Mass Participation, Spectator Sports and Digital, Production and Sports Solutions (DPSS).

Full-year revenues at the Mass Participation unit rose by 15 per cent to €326.9m and represented 32 per cent of revenues. This was, Wanda Sports said, principally driven by “the increase in the number of gross-paid athletes from 1.322m in 2018 to 1.524m in 2019 as well as the increase in total number of events from 326 in 2018 to 343 in 2019”.

The revenue growth in sector, which includes Wanda’s recently-sold Ironman business, was mainly attributed to the “successful expansion” of the event platform in China and the acquisition of a number of new international events.

The Spectator Sports segment registered an 8-per-cent year-on-year revenue uplift, bringing in €567.3m, or 55 per cent of total revenues, and on the back of 3,700 event days delivered in 2019.

Wanda Sports noted: “Some of our key events included the 2019 Fiba Basketball World Cup, the 2019 Fifa Women’s World Cup France and the IIHF Ice Hockey World Championship 2019. At the same time, we successfully prolonged major rights-in business engagements, such as with the International Ice Hockey Federation (IIHF), the Confédération Européenne de Volleyball (CEV) and the Champions Hockey League (CHL).”

Business from the FIM Motocross World Championship also contributed to the revenue growth following Infront’s acquisition of promoter Youthstream at the start of 2019.

DPSS revenues were down by 58 per cent to €135.9m, or 13 per cent of all revenues, due to the non-recurrence of the men’s World Cup host broadcast business. Stripping out the reimbursement revenues, Wanda Sports said that DPSS revenues were €102.4m in 2019 and “substantially similar to revenue, excluding reimbursement revenues, in 2018”.

Hengming Yang, Wanda Sports’ chief executive, described 2019 as a “busy year with a set of solid achievements, including the expansion of our Mass Participation business portfolio, the extension of existing rights agreements with long-term partners and our entry into new contracts, the expansion of our position and footprint in China and our increased digital capabilities through iX.co”.

He continued: “With respect to 2020, we are proud that we were able to refinance a 364-day term loan facility with a new 364-day term loan facility and enter into a share purchase agreement with Advance to sell The Ironman Group, which we believe will unlock significant shareholder value.”

However, he warned that the rapid spread of Covid-19 has “significantly impacted, and is expected to continue to impact, our business as governments, businesses and communities continue to grapple with the toll of the pandemic and the widespread mitigation efforts”.

He added: “We currently are unable to predict the duration and severity of the spread of the coronavirus. Despite the current global uncertainty, however, we are confident in our long-term outlook.”

On the full-year net loss, Wanda Sports said: “Loss for the period was €273.8m in 2019, compared to a profit of €54m in 2018, principally due to non-cash impairment loss of €254.3m for impairment of goodwill, as well as the decreased gross profit in 2019 due to event cyclicality, the increased stock-based compensation expense, the increased financing costs and IPO-related costs. Excluding non-cash goodwill impairment loss and stock-based compensation expenses, profit for the period would have been €6m.”

Total gross profit was €343.7m, a 6-per-cent fall on 2018. This comprised €117.4m in gross profit at the Mass Participation unit (up 16 per cent), €184.8m at the Spectator Sports division (down 11 per cent) and €41.5m at the DPSS unit (down 26 per cent).

On the fall in gross profit at the Spectator Sports unit, Wanda Sports remarked: “The main profit contribution in 2019 was from the expansion of our summer sports portfolio as well as the FIS World Championships 2019, which was offset by the absence of the 2018 Fifa World Cup Russia due to event cyclicality, as well as a revenue deduction in connection with fraudulent activities committed by a former employee of Infront.”

Wanda Sports’ total personnel expenses rose to €163.6m in 2019 (up from €144.4m in 2018).

Covid-19 impact

The “material adverse impact” of the coronavirus global shutdown on its business was first flagged by Wanda Sports in early March.

Issuing an update today, Wanda Sports said that it has “implemented strict cost management procedures, including a hiring freeze and elimination of discretionary spending, while ensuring we have the resources available to continue to support partners and promptly restart all of our activities once sporting events resume”.

Wanda Sports stated: “The Covid-19 pandemic began impacting Wanda Sports in China in January and February 2020 as races and events were postponed due to containment efforts in much of the country. During this period, we continued to host races and sports events in Europe and North America.

“As the pandemic spread around the world, we cancelled or postponed mass participation sports events also in other markets, while sports federations and organisers postponed or cancelled more sports events and entire seasons, beginning in March 2020. By April 2020, substantially all of our remaining sports events had been cancelled or postponed, and it is currently unclear when these sport events will resume.

“We are working closely with our partners, rights-holders, sponsors and event organisers to assess the impact of Covid-19 on timing and the protocols for future events and to manage the financial impact across our value chain. In anticipation that sports events and games might proceed in the future without spectators, we are developing additional digital and broadcast solutions to offer to and prepare partners for the expected demand for new forms of live and digital sports consumption.”

“We are also partnering with leading sports organisations to provide innovative online racing and event experiences to keep our athlete communities connected and engaged. For instance, we recently hosted several virtual Ironman races and organized the Chengdu Shuangyi Online Marathon and Nanning Online Marathon. We are also working to virtualise part of the racing trail for the UCI world Tour of Guangxi.

“Our active support of rights-holders’ efforts to develop eSports events has enabled us to benefit from rapid growth of the industry. For example, we are currently providing post-production services for LaLiga’s EA FIFA tournament, supporting the Lega Serie A’s eSports tournaments and working with the IIHF to organise and promote a virtual world championship for ice hockey fans.”