2014 Q3 INVESTOR PRESENTATION 26 November 2014

Transcription

1 2014 Q3 INVESTOR PRESENTATION 26 November 2014

2 IMPORTANT INFORMATION 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. Unaudited Information This document contains financial information regarding ODEON and its fellow subsidiaries (the Group ). Such financial information may not have been audited, reviewed or verified by any independent accounting firm. The inclusion of such financial information in this document or any related presentation should not be regarded as a representation or warranty by ODEON, any of its respective affiliates, advisors or representatives or any other person as to the accuracy or completeness of such information s portrayal of the financial condition or results of operations by the Group. Non-GAAP information We have presented certain non-gaap information in this document. As used in this document, this information includes EBITDA, which represents earnings before interest, tax, depreciation, amortisation, exceptional items and strategic costs. 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. Forward-Looking Statements This document includes forward-looking statements. When used in this document, the words anticipate, believe, estimate, forecast, expect, intend, plan and project and similar expressions, as they relate to ODEON, its management or third parties, identify forward-looking statements. Forward-looking statements include statements regarding ODEON s business strategy, financial condition, results of operations, and market data, as well as any other statements that are not historical facts. These statements reflect beliefs of ODEON s management, as well as assumptions made by its management and information currently available to ODEON. Although ODEON believes that these beliefs and assumptions are reasonable, the statements are subject to numerous factors, risks and uncertainties that could cause actual outcomes and results to be materially different from those projected. These factors, risks and uncertainties expressly qualify all subsequent oral and written forward-looking statements attributable to ODEON or persons acting on its behalf. 2

3 AGENDA Summary 2014 Q3 Performance Markets and films Financial highlights Paul Donovan Group Chief Executive Officer Looking Forward Future film slate Current trading and outlook Strategic initiatives update Q&A Mark Way Group Chief Financial Officer Ian Shepherd Group Chief Commercial Officer 3

4 SUMMARY Q Q3 market volumes were more stable (down 3% in aggregate) than the challenging conditions in Q2. Despite lower markets, we delivered Q3 EBITDA 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. 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. 4

5 MARKETS AND FILMS 5

6 Q3 MARKETS DOWN 3% IN AGGREGATE Millions Q3 Vs LY YTD Vs LY Spain % UK 38.2 (6%) (8%) Germany % 86.0 (4%) Italy 14.5 (5%) 67.5 (2%) Average weighted market movement (1) (3%) (3%) 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 ahead: The successful French arthouse title, Qu est-ce Qu on A Fait Au Bon Dieu, and other strong titles more than offset the impact of the World Cup football. Spain flat: Following the Q2 local record breaker, Ocho Apellidos Vascos, Q3 saw the release of another strong local title, El Niño (market 1 st ). Together with Dawn Of The Planet Of The Apes (2 nd ) and box office promotions, a weaker mid range slate was offset. UK down: August improved, with The Inbetweeners 2 and other strong titles. However, September saw warm weather and had no particular stand-out releases. Italy down: Lack of strong releases, warm weather and weak economy. (1) Change in group weighted average market attendances (all Odeon & UCI territories). 6

7 Market Att. (m) Market Att. (m) Market Att. (m) Market Att. (m) Q3 MARKET HISTORY BY TERRITORY UK -6% Some strong top titles, but midrange films weaker than last year and unseasonably warm September. Spain flat Stronger top films, including local hit El Niño, broadly offset a less robust mid-range slate UK Q3 Markets Spain Q3 Markets Germany +13% Stronger line-up of films vs Italy -5% Lowest Q3 since Quiet release schedule, particularly around World Cup, and warm weather in September Germany Q3 Markets Italy Q3 Markets Q3 7 year average 7

8 Market Attendance (m) LONG TERM MARKET STABILITY 10 year market history demonstrates that variations over 1 or 2 years are not generally evidence of long term trends UK Spain Germany Italy 2014E is the estimated full year 2014 position. 8

9 BOX OFFICE SAW 45% GROWTH IN UK & IRELAND TOP 5 MOVIES Top 5 films were 45% higher in GBOR terms compared to last year, but the rest of the titles were weaker, leading to a 1% increase in the overall market GBOR and a 6% fall in attendance. The mix of films was quite different, with fewer strong family films than Q market GBOR m Q market GBOR m % change 1 Monsters University 30 1 The Inbetweeners Despicable Me Dawn of the Planet of the Apes 33 3 The Wolverine 14 3 Guardians of the Galaxy 28 4 The Smurfs How to Train Your Dragon The Conjuring 10 5 Transformers: Age of Extinction 19 Top 5 93 Top % Total market (GBOR) 277 Total market (GBOR) % Total market (Attendance m) 40.5 Total market (Attendance m) 38.2 (6%) Family films highlighted in blue font 9

10 WE SAW ANOTHER STRONG LOCAL TITLE IN SPAIN The local film El Nino performed very strongly in Spain. The top 5 films were 7% up on last year but overall the market was flat. Q market attendance (m) Q market attendance (m) % change 1 Despicable Me El Niño World War Z Dawn of the Planet of the Apes The Smurfs How to Train Your Dragon Now You See Me Lucy Elysium Guardians of the Galaxy 1.3 Top Top % Total market 21.4 Total market Local titles in bold 10

11 A TOUGH QUARTER FOR THE ITALIAN MARKET Although the Top 5 films were up on last year, similar to other territories there was a lack of strength in the rest of the slate, leading to an overall drop of 5% compared to last year. Q market attendance (m) Q market attendance (m) % change 1 Monsters University How to Train Your Dragon The Wolverine Transformers: Age of Extinction Elysium The Fault In Our Stars Now You See Me Dawn of the Planet of the Apes Turbo Lucy 0.6 Top Top % Total market 15.3 Total market 14.5 (5%) No Top 5 local titles 11

12 GERMANY SAW STRONG GROWTH IN TOP 5 AND IN OTHER FILMS The market increased 13% compared to last year, with the Top 5 performing particularly strongly (20% up). Q market attendance (m) Q market attendance (m) % change 1 Hangover Part III Qu est-ce Qu on A Fait Au Bon Dieu Fast & Furious How to Train Your Dragon Iron Man Transformers: Age of Extinction Star Trek: Into Darkness Lucy The Great Gatsby Guardians of the Galaxy 1.6 Top Top % Total market 26.1 Total market % 12

13 INCREASING WEIGHT OF CUSTOMER PROMOTIONS 13

14 RETAIL OFFERS TO ENCOURAGE SPEND 14

15 FINANCIAL HIGHLIGHTS 15

16 FINANCIAL HIGHLIGHTS QUARTER 3 YEAR TO DATE Q3 vs LY Fav/(Adv) YTD Q3 vs LY Fav/(Adv) Paid Attendance (m) 17.6 (1.5%) 55.3 (3.0%) Average Ticket Price (2) ( ) (ATP) % 5.67 (2.2%) Retail Revenue per Head (2) ( ) (RPH) % % Total Revenue (1) ( m) (1.0%) (5.4%) ATP - UK was well ahead, boosted by a more adult slate, stronger IMAX and alternative content. Germany was particularly strong, benefiting from stronger 3D, price rises and film mix. These factors offset continued competitive pricing in Spain and increased UK promotional activity. RPH - UK and Germany up strongly in the quarter and YTD. Spain remained price sensitive, although Italy saw an improvement due to favourable film mix. Total Revenue - only down 1.0% despite paid attendance falling 1.5%. (1) At constant fx rate (2) At constant fx rate and constant territory weighting. 16

17 FINANCIAL HIGHLIGHTS QUARTER 3 YEAR TO DATE Group Revenue (1) ( m) Gross Profit (1) ( m) Gross Profit Margin (1) (%) 64.2% 65.6% 64.8% 64.7% Operating Costs (1) ( m) EBITDA ( m) Gross Profit Margin (1) declined slightly - largely due to a higher film hire rate from a higher weighting of big films. YTD margin slightly up on last year. Operating Costs lower - with ongoing benefits from strong cost management (5% FTE reduction year-to-date). EBITDA down slightly - with strong cost control mitigating lower Gross Profit. (1) At constant fx rate 17

18 CASH FLOW AND NET DEBT MOVEMENT m 2014 Q Q YTD 2013 YTD EBITDA Working capital and other (2.1) (9.6) (33.9) (44.1) Net capital expenditure (6.8) (7.5) (16.4) (24.0) Provisions and one offs (3.2) (3.1) (10.5) (9.5) Finance costs (17.5) (20.9) (43.4) (48.6) Tax (paid)/received 0.0 (0.2) 0.6 (0.8) Acquisitions & disposals (0.4) (0.6) FX and other (1.7) (21.9) (32.4) (69.1) (93.3) Propco Seasonal increase in net debt for Q3 was 10m better than last year. YTD net debt increase was significantly better than last year. Working capital movement was better and capital expenditure was tightly controlled. Finance costs in the quarter and YTD were better than last year, benefiting from the new swap rate which began in May. Foreign exchange (FX) rate movements reduced net debt expressed in Sterling. YTD position includes 16m additional cash following Propco group disposals. Change in net debt (21.9) (32.4) (52.6) (93.3) Memo: RCF Headroom

19 DEBT AND LEVERAGE LTM EBITDA remained broadly unchanged from Q2. Net debt increased in the period following the seasonal outflow in working capital and the payment of both Sterling and Euro bond interest. We expect leverage to improve as a result of stronger market volumes in 2015 and No maintenance covenants in our facilities Q Q Q Q Q3 LTM EBITDA m Proforma adjustments (1) m Proforma LTM EBITDA m Net Debt m Net Debt to EBITDA 5.9x 6.1x 6.6x 7.9x 8.4x Fixed Charge Cover 2.5x 1.9x 1.9x 1.6x 1.6x (1) Proforma adjustments for 2014 Q3 relate to digital cost savings and new sites. 19

20 FUTURE FILM SLATE 20

21 2013 AND 2014 Q4 FILM RELEASE PHASING UK 2013 Top Estimated Top 50 Q4 Oct Captain Philips Gone Girl Cloudy With A Chance Of Meatballs 2 Teenage Mutant Ninja Turtles Turbo Fury Maze Runner Annabelle Nov Thor: The Dark World The Hunger Games: Mockingjay Part 1 Gravity Interstellar The Hunger Games: Catching Fire Nativity 3: Dude Where s My Donkey? Philomena The Imitation Game Mr Turner Dec Frozen The Hobbit: The Battle Of The Five Armies The Hobbit: The Desolation Of Smaug Paddington Anchorman 2 Penguins Of Madagascar Night At The Museum: Secret Of The Tomb Horrible Bosses 2 Top 5 (potential) films of each year in bold 21

22 2014 Q4 LOCAL CONTENT LOOKS ENCOURAGING Spain Germany Italy Oct Torrente 5 Männerhort Il Giovane Fovoloso Nov Andiamo A Quel Paese Dec Mortadelo y Filemón Alles Ist Liebe Un Natale Stupefacente Der Kleine Drache Kokosnuss Honig Im Kopf Il Ricco, Il Povero e Il Paggiordomo Il Ragazzo Invisibile 22

23 FILM SLATE 2015 Q1 Q2 Q3 Q4 Fifty Shades of Grey Avengers: Age of Ultron Ted 2 Bond 24 Big Hero 6 Jurassic World Inside Out Hunger Games The Best Exotic Marigold Hotel 2 Fast & Furious 7 The Minions Movie (1) Star Wars Episode VII Shaun the Sheep Movie The Minions Movie (1) Ant-Man The Jungle Book The Theory of Everything Tomorrowland Pan The Good Dinosaur These are our current expectations of the top 5 film releases for each quarter (based on year of release in the UK) all subject to timing changes, deletions and additions. Films with expected GBOR greater than 30m highlighted in red. (1) The Minions Movie is expected to be released in June, but the performances will continue into Q3. 23

24 FILM SLATE 2016 Batman v Superman How To Train Your Dragon 3 Finding Dory Ice Age 5 Planet of the Apes 3 Avatar 2 Fantastic Beasts And Where To Find Them Star Wars spinoff Wicked These are our current expectations of major film releases (based on year of release in the UK) all subject to timing changes, deletions and additions. 24

25 CURRENT TRADING 25

26 CURRENT TRADING 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, 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 improving (1) We expect Q4 as a whole to be similar to last year: Italy saw a record breaking title last November and #1 film of the year, Sole A Catinelle Germany saw stronger top product last November, including the local #1 film of the year, Fack Ju Gohte Concerns in Italy over the impact of a sluggish economy The recovery in Spanish cinema attendance is encouraging, but competition intense (1) To mid-november 26

27 CINEMA DEVELOPMENT 27

28 ABACO SITES, SPAIN 28

29 PALARIVIERA, ITALY 29

30 MILTON KEYNES, UK 30

31 EDINBURGH, UK 31

32 We are making good progress in our strategic initiatives Customer Segmentation Pan-European segmentation model embedded in marketing systems Segment specific propositions for launch in 2015 Early promotional initiatives bearing fruit in UK market share Estate Turnaround Digital Operational excellence programme designed Acquisition of low capex Spanish sites complete Continue review of performance across the estate New multi-channel ticketing in retail platform is on track to launch in the UK for Q2. Wi-fi rolled out to UK cinemas Data and Insights investments underway to drive data capture and utilisation People Vision, values and strategy cascaded in all markets Comprehensive People Strategy agreed Internal communications upgraded Guest Experience Programmes underway to improve key guest touch points New Retail head appointed to drive innovation and sales skills 32

33 SUMMARY Q Q3 market volumes were more stable (down 3% in aggregate) than the challenging conditions in Q2. Despite lower markets, we delivered Q3 EBITDA 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. 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. 33

34 Q&A Further questions can be addressed to: Financial PR: 34