ODEON & UCI CINEMAS GROUP Odeon & UCI Finco plc Financial Results 2014 Q3

Transcription

1 ODEON & UCI CINEMAS GROUP Odeon & UCI Finco plc Financial Results 2014 Q3

2 Contents Page Summary 3 Operating and Financial Review 4 Outlook 6 Unaudited Condensed Consolidated Financial Statements: Profit & Loss Account 7 Cash Flow Statement 7 Balance Sheet 8 Notes to the Financial Statements 9 Presentation of Financial Data This report summarises consolidated financial and operating data derived from the unaudited consolidated financial statements of Odeon & UCI Bond Midco Ltd ( Odeon Midco ). The summary financial information provided has been derived from our records for the accounting periods to September 2014, which are maintained in accordance with UK GAAP. These interim results are not necessarily indicative of results to be expected for the full year. We have presented certain non GAAP information in this quarterly report. This information includes EBITDA, which represents earnings before interest, tax, depreciation, amortisation and one off exceptional and strategic items. Our management believes that EBITDA is meaningful for investors because it provides an analysis of our operating results, profitability and ability to service debt and because EBITDA is used by our chief operating decision makers to track our business evolution, establish operational and strategic targets and make important business decisions. In addition, we believe that EBITDA is a measure commonly used by investors and other interested parties in our industry. DISCLAIMER THIS DOCUMENT HAS BEEN PREPARED BY ODEON & UCI FINCO PLC ( ODEON ). BY REVIEWING THIS DOCUMENT OR PARTICIPATING IN THE CONFERENCE CALL THAT PRESENTS IT, YOU AGREE TO BE BOUND BY THE FOLLOWING CONDITIONS. THIS DOCUMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SECURITIES IN ODEON. FURTHERMORE, IT DOES NOT CONSTITUTE A RECOMMENDATION BY ODEON OR ANY OTHER PARTY TO SELL OR BUY SECURITIES IN ODEON OR ANY OTHER SECURITIES. ALL WRITTEN OR ORAL FORWARD LOOKING STATEMENTS ATTRIBUTABLE TO ODEON OR PERSONS ACTING ON THEIR BEHALF ARE QUALIFIED IN THEIR ENTIRETY BY THESE CAUTIONARY STATEMENTS. Odeon & UCI Finco plc Group Financial Results for 2014 Q3 2

3 Summary Odeon & UCI Cinemas Group announces its results for the third quarter of Q3 Q3 market volumes were more stable (down 3% in aggregate) than the challenging conditions in Q2. Despite lower markets, we delivered Q3 EBITDA (1) of 3.8m (Q3 2013: 5.2m). Our strategic actions are driving business performance in weak markets: Group market share improved. Retail per head (RPH) improved 2.5%. Strong cost management indirect costs down. Increase in net debt is 10m smaller than last year, benefiting from better working capital and lower finance costs. YTD increase in net debt better than last year, despite lower EBITDA (1). Liquidity remains comfortable with 38m RCF headroom as at Q3. Looking forward Q4 will be the strongest quarter of the year with a good film slate, but FY2014 will still be a low market volume year for most of our territories and 2016 film slate outlook remains strong we are well placed to benefit from our operational leverage. Implementation of strategic change programmes is progressing well. Paul Donovan, CEO of Odeon & UCI Cinemas Group, said There is increasing momentum behind our strategic changes and this is starting to make a difference. We are pleased with our progress so far, though there is a lot of work still to do. Our teams across the group have worked hard to deliver a better experience for our guests, and I am grateful to them all. Though cinema markets have been weak globally in 2014, we are encouraged by the number and quality of films due to be released in 2015 and 2016, and we are in a good position to capitalise on this. (1) Earnings before interest, tax, depreciation, amortisation and one off exceptional and strategic items. Odeon & UCI Finco plc Group Financial Results for 2014 Q3 3

4 Operating and Financial Review Q3 markets were down in aggregate, with an average weighted decline (3) of 3% on last year. The start of the quarter was affected by unseasonably good weather and a weak slate, particularly a lack of family films, as distributors avoided clashes with the final stages of the World Cup. Germany was ahead, buoyed by the success of the French arthouse title Qu est ce Qu on A Fait Au Bon Dieu, which more than offset the impact of the World Cup football. Spain was flat with the quarter seeing the release of another strong local title El Nino following the Q2 local record breaker, Ocho Apellidos Vascos. The UK was down; although August improved, with The Inbetweeners 2 and other strong titles, September saw warm, dry weather and had no particular stand out releases. Italy was down, with a lack of strong releases, warm weather and a weak economy. Improved market share contributed to our own attendance being only 1.5% down despite a 3% drop in market volumes. Group revenue (2) was million (down 1.0%). Average ticket price (4) was slightly improved overall; the UK and Germany were well ahead, boosted by a more adult slate and stronger 3D, but offset by continued competitive pricing in Spain and increased promotional activity in the UK. Retail revenue per head (4) was up in the quarter and YTD. The UK and Germany continued to perform very strongly. Spain remained price sensitive, although Italy saw an improvement due to favourable film mix. Strong cost management (such as a 5% FTE reduction year on year) also helped to mitigate the market volume shortfall. EBITDA (1) was 3.8 million in the quarter. Three months ended 30 Sep Nine months ended 30 Sep % change % change Paid attendance (millions) (1.5%) (3.0%) Group revenue (2) ( millions) (1.0%) (5.4%) Average ticket price (4) % (2.2%) Retail revenue per head (4) % % EBITDA (1) ( millions) (26.5%) (36.1%) The following comments relate to the financial statements set out on pages 7 to 9. Profit & Loss Account (page 7) Group revenue in Q3 was down 1% at constant FX, as described above. Gross profit margin in Q3 declined slightly on last year due to a higher film hire rate from higher weighting of big films. YTD margin was slightly upon last year. Operating costs were lower, with ongoing benefits from strong cost management. Strategic costs were 0.7m in the quarter. These costs relate to the development of potential new business. Some of these activities lead to ongoing new business, some are aborted. (1) Earnings before interest, tax, depreciation, amortisation and one off exceptional and strategic items. (2) At constant fx rate. (3) Change in group weighted average market attendance (all Odeon & UCI territories). (4) At constant fx rate and constant territory weighting Odeon & UCI Finco plc Group Financial Results for 2014 Q3 4

5 Operating and Financial Review (cont) Profit & Loss Account (cont) Depreciation and amortisation were 14.2m for the quarter. Of the total, 3.0m was amortisation of goodwill. Exceptional costs were 5.0m in the quarter, primarily from a provision made following the successful outcome of settlement negotiations in a property litigation case that has been ongoing since It relates to an action brought by the landlord of a cinema in Chemnitz, Germany. Details were disclosed in the bond offering memorandum, citing a potential 16m risk. The negotiated settlement (which is subject to landlord shareholder approval) results in a net cost of 5.6m to the group, which thus represents a good outcome. A copy of the bond offering memorandum remains available on the group s corporate website ( Interest reported in the profit & loss account contained both cash and non cash elements. The cash payable element was primarily interest on the senior secured notes, commitment and other fees, local bank charges and finance lease interest. The benefit from the new Euro swap began in early May. The non cash items ( 0.9m) were primarily the amortisation of capitalised loan issue costs and the discount unwind on the onerous lease provision. Certain FX movements were also included. Tax reflected relatively small current tax charges in Germany and Italy. Cash Flow Statement (page 7) Net debt increased 21.9m in the quarter from cash flows net of foreign exchange movements. The seasonal increase in net debt for Q3 was 10.5m better than last year, with the net debt increase for the YTD significantly better than Working capital movement was better than last year and capital expenditure was tightly controlled, with working capital movement negative 2.1m and net capital expenditure of 6.8m in the quarter. Finance costs paid in the quarter of 17.5m were mostly one quarter s interest on the Euro notes and one half year s interest on the Sterling notes. The benefit from the new Euro swap began in early May. Net debt (including finance leases) finished the quarter at 488.6m with balance sheet cash at 12.2m. Balance Sheet (page 8) Year on year, the change in the FX rate has resulted in Euro denominated assets and liabilities being 6.9% lower when expressed in Sterling. Fixed assets have decreased year on year principally due to depreciation, amortisation and reclassifications of assets held under finance leases. Current liabilities decreased by 37m year on year, principally due to a lower cash loan utilisation of the RCF at the September 2014 month end, a 20m decrease on the previous September, with the balance due to trading patterns and timing of payments. Net current assets are naturally favourable (negative) in this business, because revenues are collected from customers close to the day of attendance, whereas most direct costs and expenses are paid after a period of credit. Odeon & UCI Finco plc Group Financial Results for 2014 Q3 5

6 Operating and Financial Review (cont) Balance Sheet (cont) Non current liabilities decreased by 34m year on year, for a combination of reasons, principally: senior secured notes (gross) decreased by 11m, primarily due to the impact of different foreign exchange rates on the Euro senior secured notes. other non current liabilities (including amortization of issue costs) decreased by 23m, principally in the finance lease category, where there have been accounting reclassifications from finance leases to operating leases on properties previously owned by the Odeon PropCo group. Outlook Q4 is very dependent on December, but has started ahead of last year: Gone Girl and Teenage Mutant Ninja Turtles played well in the UK Local product, Torrente 5, in Spain performed well Industry wide promotional event in Spain, Fiesta Del Cine (27 29 October), attracted 2.3m attendees compared to 1.9m in a similar promotion in March. In the key market of the group, UK gross box office market share is improving (5). We expect Q4 as a whole to be similar to last year: Italy saw a record breaking title last November and number 1 film of the year, Sole A Catinelle Germany saw stronger top product last November, including the local number 1 film of the year, Fack Ju Gohte Concerns in Italy over the impact of a sluggish economy The recovery in Spanish cinema is encouraging, but competition intense. (5) To mid November. Odeon & UCI Finco plc Group Financial Results for 2014 Q3 6

7 Unaudited Condensed Consolidated Profit & Loss Account millions Three months Nine months ended 30 September ended 30 September Group revenue Cost of sales (53.2) (52.5) (178.5) (163.0) Gross profit Operating costs (62.7) (58.3) (190.2) (180.1) Rent (33.2) (32.1) (99.8) (97.6) EBITDA Strategic one off costs (0.2) (0.7) (1.8) (1.6) Depreciation and amortisation (14.8) (14.2) (45.6) (43.3) Operating profit/(loss) before exceptional items (9.8) (11.1) (11.3) (21.9) Exceptional costs (0.8) (5.0) (1.3) (7.4) Operating profit/(loss) (10.6) (16.0) (12.6) (29.3) Share of operating profit/(loss) of joint ventures 0.2 (0.1) 0.0 (0.3) Profit/(loss) on disposal of properties 0.0 (0.0) 0.2 (0.2) Profit/(loss) on ordinary activities before interest and taxation (10.4) (16.1) (12.4) (29.8) Interest payable and similar charges (14.9) (11.0) (43.8) (37.2) Profit/(loss) on ordinary activities before taxation (25.3) (27.1) (56.2) (67.0) Taxation 0.0 (0.3) (0.4) (0.8) Profit/(loss) on ordinary activities after taxation (25.3) (27.5) (56.5) (67.8) Unaudited Condensed Consolidated Cash Flow Statement millions Three months Nine months ended 30 September ended 30 September EBITDA Movement in working capital and other (a) (9.6) (2.1) (44.1) (33.9) Net capital expenditure (7.5) (6.8) (24.0) (16.4) Provisions and one offs (3.1) (3.2) (9.5) (10.5) Finance costs (b) (20.9) (17.5) (48.6) (43.4) Tax (0.2) 0.0 (0.8) 0.6 Acquisitions and disposals (0.0) 0.2 (0.6) (0.4) Share capital issued 16.5 (36.1) (25.6) (91.6) (64.3) Borrowing (repayment)/drawdown Net increase/(decrease) in cash (7.8) (6.5) (35.2) (26.5) Cash balance, beginning of period Net increase/(decrease) in cash (7.8) (6.5) (35.2) (26.5) Foreign exchange movements (0.1) (0.3) 1.2 (1.2) Cash balance, end of period Net Debt, beginning of period (511.1) (466.7) (450.2) (436.0) Net increase/(decrease) in cash (7.8) (6.5) (35.2) (26.5) Borrowing repayment/(drawdown) (28.3) (19.0) (56.4) (37.7) Foreign exchange movements (1.7) 11.7 Net Debt, end of period (543.5) (488.6) (543.5) (488.6) (Increase)/decrease in Net Debt (32.4) (21.9) (93.3) (52.6) (a) (b) Includes LT debtors and LT creditors relating to digital and landlord contribution accounting. Includes refinancing fees and pension deficit reduction costs. Odeon & UCI Finco plc Group Financial Results for 2014 Q3 7

8 Unaudited Condensed Consolidated Balance Sheet millions Note Fixed assets Intangible assets Tangible assets Investments Current assets excluding cash Cash Debtors due after more than one year Current liabilities 2 (184.8) (148.1) Total assets less current liabilities Non current liabilities 3 (655.7) (621.8) Net assets / (liabilities) (70.1) (95.5) Capital and reserves Share capital and premium Reserves (617.5) (687.7) (70.1) (95.5) Odeon & UCI Finco plc Group Financial Results for 2014 Q3 8

9 Unaudited Condensed Notes to the Financial Statements millions Note 1 Current assets excluding cash Stocks Prepayments and accrued income Other debtors due within one year Note 2 Current liabilities Bank loans and overdrafts RCF facility Bank loans and overdrafts other Trade creditors Finance leases Other creditors, accruals and deferred income Note 3 Non current liabilities Bank loans and overdrafts other 1.2 Finance leases Senior secured notes Other creditors, accruals and deferred income Note 4 Net debt summary Senior secured notes (net) Note Unamortised issue costs Note Senior secured notes (gross) Bank loans and overdrafts RCF facility Note Bank loans and overdrafts other (current) Note 2 Bank loans and overdrafts other (non current) Note Finance leases (current) Note Finance leases (non current) Note Cash (18.1) (12.2) Net Debt Odeon & UCI Finco plc Group Financial Results for 2014 Q3 9