Lagardère Sports and Entertainment reports 30-per-cent Ebit rise
By Martin Ross
Lagardère Sports and Entertainment, a division of the Lagardère conglomerate, reported full-year recurring Ebit (earnings before interest and taxes) of €26 million ($21.1 million) last year, a 30-per-cent improvement on the 2016 figure.
Following wide-ranging restructuring of the division a few years ago, the unit continues to deliver a positive figure, and the 2017 result follows on from Ebit of €20 million in both 2015 and 2016.
Commenting on the 2017 figures, Lagardère said: “Whilst the sporting calendar effect was neutral in 2017, sales and business development efforts, especially in football activities in Europe and Asia, contributed to an improved performance.”
Operating margin was up 1.4 percentage points to 5.2 per cent.
The Paris-based group last month announced 2017 revenues of €496 million ($610 million) at its sports and entertainment division, a 3.4-per-cent fall attributed to an unfavourable calendar effect and the termination of an agreement to operate the Friends Arena in the Swedish capital Stockholm.
These factors were partially offset by the “successful rollout of the contract for the 2017 Total African Cup of Nations in Gabon,” while “football activities in Europe (particularly in Germany) as well as consulting activities turned in good performances.”
In 2014, the sports and entertainment division finally reported a positive Ebit figure (of €4 million) after a restructuring of operations and following years of results that analysts perceived to have weighed down the group’s performance in other sectors.
Commenting on the margins expected in 2018, Andrew Georgiou, chief executive at Lagardère Sports and Entertainment, remarked: “Over the last couple of years, we have put a bit of work into maintaining our margins. The division has performed well, but 2018 is not a fantastic year in our cycle.
“The cyclicality of ’18 has to be compensated by the business and I think we’re going to go close but I don’t know that we’re going to go exactly the same place that we are this year .”
The improved financial performance has now led many of the same analysts to ask whether it is time to sell the unit (given its improved financial performance), a scenario that Arnaud Lagardère, general and managing partner at Lagardère, last month said he was “open” to.
However, he remained tight-lipped when discussing the sports unit in the presentation of the 2017 results last night in Paris and stressed that the focus is on retaining the Asian Football Confederation rights in the ongoing invitation to tender process.
Asked if the sports operation was for sale, he replied: “There are priorities in the life of a company and I can’t have 2,000 priorities at once. We’re all together to win this invitation to tender and I’m not going to say more about it.”
Lagardère Sports holds the AFC’s worldwide broadcast and sponsorship rights from 2013 to 2020 in a $1-billion agreement, and an invitation to tender for rights from 2021 to 2028 was issued at the start of February and has attracted the interest of several rival agencies.
The contracts with the AFC, and CAF, the African soccer confederation, represent the two leading components of Lagardère’s sports business.
Arnaud Lagardère said: “We have to show a project that will be novel and we intend on winning the bid. Of course we have to be extremely cautious - we always are - and we’ll be extremely careful with the minimum guarantee and cautious about the collaboration we can have with the AFC.”
The media mogul, who has previously faced accusations that sport is something of a personal ‘passion project’ or ‘hobby’ for him, said last month: “My personal duty is to be open to everything in the interests of the shareholders. As I said before, [Lagardère] Publishing, [Lagardère ] Travel Retail, some assets of [Lagardère] Active are assets that I don’t want to sell for a lot of different reasons and I’m open to the rest. This doesn’t mean we would sell sport quickly.
“It’s difficult for me, if you are in my shoes, to bid on such an important asset like AFC and at the same time to say we will walk away and sell it. Let me avoid the answer [as to whether the sports division could be sold]. The priority on sport is to win [the] AFC contract.”
|Lagardère Sports and Entertainment’s revenues by region|
|Region||% of 2017 revenues||% of 2016 revenues|
|Asia & Australia||15%||18%|
|Rest of Europe||11%||14%|
|Rest of World||24%||21%|
Towards the end of 2016, it emerged that Lagardère Sports and Entertainment was engaged in negotiations about the sale of a minority stake in its business.
Georgiou told Sportcal last March that China and North America were areas in which he was looking for “strategic partners” although any shareholding taken up would not be able to exceed 49 per cent.
However, with Arnaud Lagardère becoming increasingly receptive to a sale of the sports business, there is now the possibility of conversations with potential investors about an investment in a minority stake that could, in turn, lead to a majority ownership (thus making the economics of any deal more appealing and widening the net of potential suitors).
Under the leadership of Georgiou, Lagardère Sports and Entertainment has been overhauled in recent years to reduce its dependency on media rights trading in Europe, shifting much of the focus to other business areas such as athlete representation, creating sports events, consulting and stadium management.
Indeed, the breakdown of revenues by sector in 2017 continues to underline Lagardère’s lessening of dependency on media rights trading (and the associated hefty minimum guarantees).
A total of 20 per cent of revenues last year stemmed from media rights, down from 21 per cent in 2016, while sponsorship rights revenue jumped from 44 per cent (in 2016) to 46 per cent last year.
Lagardère’s 2017 group revenues came in at €7.069 billion, a fall of €322 million on 2016, but group Ebit increased from €395 million to €403 million.
Lagardère said that it “expects group recurring Ebit in 2018 to remain stable versus 2017, at constant exchange rates.”