ODEON & UCI CINEMAS GROUP Odeon & UCI Finco plc. Financial Results 2014 Q2

Transcription

1 ODEON & UCI CINEMAS GROUP Odeon & UCI Finco plc Financial Results 2014 Q2

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 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. Some information presented in this report is described as Like-For-Like ( LFL ). This information excludes any cinemas trading in the group in the period or the comparative period but not in both. 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 Q2 2

3 Summary Odeon & UCI Cinemas Group announces its results for the second quarter of Q2 As expected and previously indicated, Q2 results were down year-on-year - largely due to lower market volumes, with film distributors avoiding the World Cup period - the UK, Germany and Italy markets at their lowest Q2 since 2010 (South Africa World Cup) - our market share improved vs Q1 this year but was down slightly vs 2013 Q2, because of fewer higher grossing films Benefits from cost restructuring continued - 4m year-to-date LFL Seasonal increase in net debt in line with last year, despite lower EBITDA (1) Looking forward Film slate for H2 looks good, but 2014 overall will be a low market volume year for most of our territories 2015 and 2016 film slate outlook continues to be strong Strategy review identified significant medium term opportunities; planning and implementation of wide ranging change programmes making good progress Management team strengthened with the appointments of highly experienced CFO and COO (1) Earnings before interest, tax, depreciation, amortisation and one-off exceptional and strategic items. Odeon & UCI Finco plc Group Financial Results for 2014 Q2 3

4 Operating and Financial Review Q2 markets were down in aggregate, with an average weighted decline (3) of 5% on last year. Spain was ahead due to the strength of promotions and local record breaker, Ocho Apellidos Vascos. However, the UK, Germany and Italy were down. The timing of Easter gave a strong start to the quarter, but the end was weaker, with a lack of blockbuster product, largely from distributors avoiding scheduling big films around the World Cup. By comparison, Q2 last year saw some reasonable titles: Iron Man 3, Man Of Steel and Star Trek: Into Darkness (all 3D) plus Fast & Furious 6 and The Hangover 3. H1 markets were down in aggregate, with only Spain ahead. Market share improved since Q1 in all our territories, although it was slightly lower than 2013 Q2 in most territories. Typically, our share is stronger when the slate is made up of Hollywood blockbusters and attendance volumes are high. The lower volumes in 2014 mean our share was impacted in the UK, Germany and Italy. Lower markets and change in market share resulted in paid attendance of 16.9 (down 5%). Group revenue (2) was million (down 10%) and LFL million (down 12%). Average ticket price (4) was lower due to volume generating promotions in Spain and Italy. Germany was up, despite a World Cup promotion, due to better 3D. Retail revenue per head (4) was broadly in line in the quarter and ahead in the YTD. The UK and Germany were positive, reflecting ongoing benefits from capex initiatives. Spain and Italy remained very price sensitive. Other revenue was down overall against stronger screen advertising last year with the UK and Italy particularly weak. Lower direct and indirect costs went some way towards mitigating the revenue reduction, with ongoing benefits from staff restructuring (5% FTE reduction year-on-year) and management of other costs. EBITDA (1) was 0.5 million and LFL EBITDA (1) was 0.2 million. Three months ended 30 Jun Six months ended 30 Jun % change % change Total Estate Paid Attendance (millions) (5%) (4%) Group revenue (2) ( millions) (10%) (7%) Average ticket price (4) (4%) (3%) Retail revenue per head (4) (0%) % EBITDA (1) ( millions) (95%) (38%) Like-for-like (LFL) comparisons (5) Paid Attendance LFL (millions) (6%) (5%) Group revenue LFL (2) ( millions) (12%) (9%) Average ticket price LFL (4) (4%) (3%) Retail revenue per head LFL (4) (0%) % EBITDA LFL (1) ( millions) (98%) (40%) (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. (5) LFL information excludes any cinemas trading in the group in the period or the comparative period but not in both. Odeon & UCI Finco plc Group Financial Results for 2014 Q2 4

5 Operating and Financial Review (cont) The following comments relate to the financial statements set out on pages 7 to 9. Profit & Loss Account (page 7) Group revenue in Q2 was down 10% and LFL group revenue was down 12% at constant FX, as described in further detail on page 4. Gross profit margin in Q2 improved on last year due to lower direct costs, including lower film hire rate from weaker slate. Operating costs were lower, with ongoing benefits from staff restructuring (5% FTE reduction year-on-year). Strategic costs were 0.6m 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. Depreciation and amortisation were 14.4m for the quarter. amortisation of goodwill. Exceptional costs were 1.0m in the quarter and related to staff restructuring. Of the total, 3.1m was 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 ( 2.1m) 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 10.8m in the quarter from cash flows net of foreign exchange movements. The seasonal increase in net debt for Q2 was in line with last year, with the net debt increase for H1 significantly better than Working capital movement was negative 3.2m in the quarter, a strong result given the lower trade, particularly in. Net capital expenditure was 4.6m. Finance costs paid in the quarter of 6.0m were mostly one quarter s interest on the Euro notes. The benefit from the new Euro swap began in early May. Deferred consideration with regard to a 2011 acquisition was paid as scheduled. Net debt (including finance leases) finished the quarter at 466.7m with balance sheet cash at 19.1m. Odeon & UCI Finco plc Group Financial Results for 2014 Q2 5

6 Operating and Financial Review (cont) Balance Sheet (page 8) Year-on-year, the change in the FX rate has resulted in Euro denominated assets and liabilities being 6.7% 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 34m year-on-year, principally due to a lower cash loan utilisation of the RCF at the 2014 month-end, a 11m decrease on the previous, 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. Non-current liabilities decreased by 38m 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 decreased by 27m, 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 Q3 started slowly due to: final stages of the World Cup and its impact on releases date decisions. delay of Fast & Furious 7 and Jupiter Ascending to arrival of very warm weather in the UK and Spain. However, July saw some good performances including Dawn Of The Planet Of The Apes and Transformers: Age Of Extinction, whilst August has seen a strong performance from Inbetweeners 2. Overall we expect H2 to be ahead of last year because it contains the bulk of the year s stronger releases such as The Hunger Games and The Hobbit. However, we expect 2014 overall to be a low market volume year for most of our territories. The recovery in Spanish cinema is very encouraging but the competition is intense. There are some concerns in Italy over the impact of a very sluggish economy. Development of the estate continues: - our new Hereford cinema in the UK opened in May and is performing extremely well - we are shortly to take over three cinemas in Spain from the liquidator of the Abaco estate - our new Charlestown cinema in Ireland is scheduled to open in 2015 Q1. Odeon & UCI Finco plc Group Financial Results for 2014 Q2 6

7 Unaudited Condensed Consolidated Profit & Loss Account millions Three months Six months ended 30 ended Group revenue Cost of sales (59.2) (50.9) (125.2) (110.6) Gross profit Operating costs (62.0) (59.1) (127.4) (121.9) Rent (32.9) (32.7) (66.5) (65.5) EBITDA Strategic one-off costs (1.0) (0.6) (1.6) (0.9) Depreciation and amortisation (14.6) (14.4) (30.7) (29.1) Operating profit/(loss) before exceptional items (5.6) (14.5) (1.5) (10.8) Exceptional costs (0.1) (1.0) (0.5) (2.5) Operating profit/(loss) (5.7) (15.5) (2.0) (13.2) Share of operating profit/(loss) of joint ventures (0.1) (0.1) (0.2) (0.2) Profit/(loss) on disposal of properties 0.2 (0.2) 0.2 (0.2) Profit/(loss) on ordinary activities before interest and taxation (5.6) (15.8) (2.0) (13.7) Interest payable and similar charges (14.4) (12.3) (28.9) (26.2) Profit/(loss) on ordinary activities before taxation (20.0) (28.1) (30.8) (39.9) Taxation (0.1) (0.1) (0.4) (0.5) Profit/(loss) on ordinary activities after taxation (20.1) (28.2) (31.2) (40.4) Unaudited Condensed Consolidated Cash Flow Statement millions Three months Six months ended 30 ended EBITDA Movement in working capital and other (a) (2.9) (3.2) (34.5) (31.8) Net capital expenditure (6.7) (4.6) (16.5) (9.6) Provisions and one offs (3.3) (3.5) (6.4) (7.3) Finance costs (b) (6.9) (6.0) (27.7) (25.9) Tax (0.4) 0.3 (0.6) 0.6 Acquisitions and disposals (0.5) (0.6) (0.6) (0.6) Share capital issued (10.8) (17.1) (55.5) (38.7) Borrowing (repayment)/drawdown Net increase/(decrease) in cash (1.9) (0.1) (27.4) (20.0) Cash balance, beginning of period Net increase/(decrease) in cash (1.9) (0.1) (27.4) (20.0) Foreign exchange movements 0.2 (0.7) 1.3 (0.9) Cash balance, end of period Net Debt, beginning of period (499.8) (456.0) (450.2) (436.0) Net increase/(decrease) in cash (1.9) (0.1) (27.4) (20.0) Borrowing repayment/(drawdown) (8.8) (17.1) (28.1) (18.7) Foreign exchange movements (0.6) 6.4 (5.4) 8.0 Net Debt, end of period (511.1) (466.7) (511.1) (466.7) (Increase)/decrease in Net Debt (11.3) (10.8) (60.9) (30.7) (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 Q2 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 (174.5) (140.5) Total assets less current liabilities Non-current liabilities 3 (663.5) (625.2) Net assets / (liabilities) (44.5) (67.6) Capital and reserves Share capital and premium Reserves (591.9) (659.9) (44.5) (67.6) Odeon & UCI Finco plc Group Financial Results for 2014 Q2 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 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 Bank loans and overdrafts - other (non-current) Note Finance leases (current) Note Finance leases (non-current) Note Cash (26.0) (19.1) Net Debt Odeon & UCI Finco plc Group Financial Results for 2014 Q2 9