odeon & uci finco plc€¦ · markets slightly down in aggregate: • spain ahead: strong...
TRANSCRIPT
Odeon & UCI Finco plc
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2014 Q1 Investor Presentation29 May 2014
Disclaimer
DISCLAIMERTHIS DOCUMENT HAS BEEN PREPARED BY ODEON & UCI FINCO PLC (“ODEON”). BY REVIEWING THISDOCUMENT OR PARTICIPATING IN THE CONFERENCE CALL THAT PRESENTS IT, YOU AGREE TO BE BOUND BYTHE FOLLOWING CONDITIONS.THIS DOCUMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE AN OFFER TO SELL ORTHE SOLICITATION OF AN OFFER TO BUY SECURITIES IN ODEON. FURTHERMORE, IT DOES NOT CONSTITUTE ARECOMMENDATION BY ODEON OR ANY OTHER PARTY TO SELL OR BUY SECURITIES IN ODEON OR ANY OTHERSECURITIES. ALL WRITTEN OR ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO ODEON ORPERSONS ACTING ON THEIR BEHALF ARE QUALIFIED IN THEIR ENTIRETY BY THESE CAUTIONARYSTATEMENTS.
Unaudited InformationThis document contains financial information regarding ODEON and its fellow subsidiaries (the “Group”). Such financialinformation may not have been audited, reviewed or verified by any independent accounting firm. The inclusion of suchfinancial information in this document or any related presentation should not be regarded as a representation or warranty byODEON, any of its respective affiliates, advisors or representatives or any other person as to the accuracy or completenessof such information’s portrayal of the financial condition or results of operations by the Group.Non-GAAP informationWe 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 ourbusiness evolution, establish operational and strategic targets and make important business decisions. In addition, webelieve that EBITDA is a measure commonly used by investors and other interested parties in our industry.
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Forward-Looking Statements
Forward-Looking StatementsThis 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 toODEON, its management or third parties, identify forward-looking statements. Forward-looking statementsinclude statements regarding ODEON’s business strategy, financial condition, results of operations, and marketdata, as well as any other statements that are not historical facts. These statements reflect beliefs of ODEON’smanagement, 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 tonumerous factors, risks and uncertainties that could cause actual outcomes and results to be materially differentfrom those projected. These factors, risks and uncertainties expressly qualify all subsequent oral and writtenforward-looking statements attributable to ODEON or persons acting on its behalf.
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Agenda
Highlights
Markets & Films including focus on Spain
Financial Highlights - KPIs, Margins and Costs
Cash Flow, Net Debt and Leverage
Strategic Review
Current Trading and Outlook
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2014 Q1 Highlights
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Q1 in line with expectation:EBITDA £19m
EBITDA £2m down vs 2013 Q1 (timing of Easter), recovered in April.
4% retail revenue per head growth and favourable direct costs positively impacted EBITDA.
Indirect cost benefits from restructuring continued, with £2m(1) YoY reduction in Q1.
Encouraging signs in Spain, headwinds in Italy
Spain market volume showing signs of turning, with strong (13%) growth in Q1. Latest consumerconfidence indicators are positive.
Italy on track at end of Q1 but facing some strong headwinds relating to economy and slate.
Strong result on cash flow and net debt
Seasonal increase in net debt was £30m better than the same period last year, helped by £16mfurther cash equity injection from the completion of the PropCo sales process.
Strategic review
Paul Donovan appointed in February and began comprehensive strategic review.
This is nearing completion, encompassing marketing, estate, IT and organisational capability.Detailed programme at planning stage.
New organisational model launched.
(1) Stated at constant fx rates.
Markets slightly down in aggregate:• Spain ahead: strong promotions; surprise local record breaking release, Ocho Apellidos Vascos.
• Italy ahead: strong product mix and favourable weather offset the timing of Easter.
• UK and Germany down: timing of Easter; number one films played well but faced stronger prior year films, which ranked No. 2in 2013 full year (UK: Les Miserables; Germany: Django Unchained).
Slight reduction in aggregate market share following strong 2013 Q1 comparison.• UK share: 2013 Q1 included a strong result on Les Miserables, boosted by IMAX and Leicester Square screenings; 2014 Q1
was hit by a typically lower share on the art house title, The Grand Budapest Hotel.
• Spain share: The Wolf Of Wall Street was not screened (No.2 film in the market).
• German share: unfavourable film mix due to art house content (The Physician, The Grand Budapest Hotel).
Total Market Attendance
6(1) Change in group weighted average market attendance (all territories).
Market Attendance (000) 2013 Q1 2014 Q1 Change from 2013 Odeon & UCI
Attendance
Spain 20,425 23,168 13.4%
Italy 30,515 33,441 9.6%
UK & Ireland 48,229 44,587 (7.6%)
Germany 36,896 33,442 (9.4%)
Average Weighted Market growth for group territories (1) (1.4%) (2.7%)
Q1 Markets by Territory
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Spain and Italy ahead of 2013 Q1; UK and Germany behind.
• UK down (8%): 2013 Q1 wasamongst the strongest in recentyears and included the success ofLes Miserables, the No.2 film of theentire year, plus Easter.
• Spain up +13%: surprise smashhit, Ochos Apellidos Vascos, andpromotional activity.
• Germany down (9%): weaker filmline-up and Easter timing. Q1 lastyear included the No.2 film of2013, Django Unchained.
• Italy up +10%: overall stronger filmmix and some favourable weather.
Q1 7 year average
37.5
41.644.5 44.0
39.5
44.240.7
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30
35
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2008 2009 2010 2011 2012 2013 2014Market A
tt. (m
)
UK
27.225.6
29.8
26.0
20.6 20.4
23.2
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20
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30
35
2008 2009 2010 2011 2012 2013 2014
Market A
tt. (m
)
Spain
41.3
37.2 38.1
33.5 33.2
36.933.4
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30
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40
45
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2008 2009 2010 2011 2012 2013 2014
Market A
tt. (m
)
Germany
34.832.9
43.040.4
30.4 30.5
33.4
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45
50
2008 2009 2010 2011 2012 2013 2014
Market A
tt. (m
)
Italy
Group Average Market Share
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17.4%
18.0%
18.5%
18.9%
18.4%18.5% 18.6%
18.4%
17.5%
16.5%
17.0%
17.5%
18.0%
18.5%
19.0%
2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1
Weighted average of all our territories’ attendance market shares.
Top Films Q1 - UK & Ireland
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UK/ IRELAND2013 2014 Change
Q1 GBOR £m
Q1 GBOR £m
1) Les Miserables 40 1) The Lego Movie (2D&3D) 322) Wreck It Ralph (2D&3D) 23 2) The Wolf Of Wall Street 233) Life of Pi (2D&3D) 18 3) 12 Years A Slave 204) Django Unchained 16 4) American Hustle 145) The Croods (2D&3D) 15 5) Frozen (2D&3D) 13Top 5 Total 112 Top 5 Total 101 (10%)Total Market 308 Total Market 293 (5%)
Early Signs of Spanish Recovery
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8.3
11.3
18.020.1
21.6
25.027.2
26.3 26.0 26.0 25.9
0
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10
15
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30
2007 2008 2009 2010 2011 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014
%Unemployment rate
Sources: Historic information from National Statistics Institute, Consumer confidence from Eurostat.
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‐40
‐30
‐20
‐10
0
10
‐6%
‐4%
‐2%
0%
2%
4%
6%
8%
10%
2000
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CCI
GDP
growth
Spain ‐ GDP vs. Consumer confidence indicator
GDP YoY Var Consumer confidence indicator
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21 2023
0
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2010 2011 2012 2013 2014M
illio
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Spain Market Attendance up 13%
Spain market attendance was 13% up on prior year.
This was not only due to the extraordinary success of local product, with Ocho ApellidosVascos beating all-time records, but also due to the new pricing strategy applied at industrylevel:
• ‘Miércoles al Cine’ (low price day on Wednesday €3.90)• 3 day national festival, ‘Fiesta del Cine’.
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Q1 Market Attendance
The underlying demand for cinema is still presentbut will need careful management.
Macroeconomic indicators look positive but mustbe treated with caution.
Top Films Q1 – Spain
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SPAIN2013 2014 Change
Q1 Att (m) Q1 Att (m)
1) Django Unchained 1.5 1) Ocho Apellidos Vascos 3.62) The Croods (2D&3D) 1.3 2) The Wolf of Wall Street 1.9
3) Silver Linings Playbook 1.3 3) 300: Rise of an Empire (2D&3D) 1.0
4) Mama 1.2 4) Mr Peabody & Sherman (2D&3D) 0.9
5) Wreck-It Ralph! (2D&3D) 1.0 5) The Book Thief 0.9Top 5 Total 6.2 Top 5 Total 8.4 35%Total Market 20.4 Total Market 23.2 13%
Audiences appear to be returning to the cinema, not only because of Ocho Apellidos Vascos, but also due tothe promotional activity and special pricing (eg. ‘Miércoles al Cine’, ‘Fiesta Del Cine’).
The increased attendance more than offset the lower prices. All operators invested significantly in promotions to rebuild attendance. There are two local films before the end of the year which are expected to play well (Torrente 5 in October,
Mortadelo y Filmeno in November). Market outturn for 2014 could be in the range of 85-90m which would be a 8-14% increase on 2013.
Local titles in red
Top Films Q1 – Germany
In Germany, lower market performance due to the strong result for Django Unchainedin 2013 (the No.2 film of the year), a generally weaker line-up and the timing ofEaster.
13Local titles in red
GERMANY2013 2014 Change
Q1 Att (m) Q1 Att (m)
1) Django Unchained 4.2 1) The Physician 2.52) Kokowääh 2 2.5 2) The Wolf of Wall Street 2.43) Schlussmacher 2.4 3) Vaterfreuden 2.2
4) The Hobbit (2D&3D) 2.1 4) The Hobbit: Desolation of Smaug (2D&3D) 1.6
5) Life of Pi (2D&3D) 1.5 5) Fack Ju Gohte 1.5Top 5 Total 12.7 Top 5 Total 10.1 (21%)Total Market 36.9 Total Market 33.4 (9%)
Top Films Q1 – Italy
In Italy, strong local and international titles combined to give a 10% market increaseoverall.
Weaker slate in Q2 will slow the 12 month growth rate.
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ITALY2013 2014 Change
Q1 Att (m) Q1 Att (m)
1) Il Principe Abusivo 2.6 1) Un Boss In Salotto 2.12) Django Unchained 2.1 2) The Wolf of Wall Street 2.03) La Migliore Offerta 1.6 3) Sotto Una Buona Stella 1.84) The Croods (2D&3D) 1.3 4) Tutta Colpi Di Freud 1.45) Lincoln 1.2 5) Frozen (2D&3D) 1.3Top 5 Total 8.8 Top 5 Total 8.5 (3%)Total Market 30.5 Total Market 33.4 10%
Successful volume generating promotions in Spain meant ATP was lower. UK andGermany were higher from price rises and ticket premia. Excluding Spain, ATPincreased by 1.2% on a LFL basis.
RPH was 3.6% ahead of prior year in total, reflecting the ongoing benefit of capexinitiatives and favourable film mix in UK and Germany. Excluding Spain, RPH increasedby 6.5% on a LFL basis.
Other Revenue(1) was 2% down overall against strong screen advertising in 2013 Q1 inUK and Germany. Very encouragingly, Spain screen advertising revenue (LFL)increased strongly.
2014 Q1 Financial HighlightsRevenue
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TOTAL ESTATE LIKE-FOR-LIKE
2013 Q1 2014 Q1 ChangeFav/(Adv) 2013 Q1 2014 Q1 Change
Fav/(Adv)
Paid Attendance (m) 21.3 20.8 (2.7%) 21.3 20.4 (4.0%)
Average Ticket Price(2) (£) 5.89 5.75 (2.4%) 5.89 5.76 (2.2%)
Retail Revenue per Head(2) (£) 1.84 1.91 3.6% 1.84 1.91 3.7%
Group Revenue(1) (£m) 182.3 173.9 (4.6%) 181.9 171.4 (5.8%)
(1) At constant fx rate(2) At constant fx rate and constant territory weighting, for main territories
Gross profit margin(1) improved 1.2% pts from stronger RPH and lower direct costs. Operating costs were lower, including ongoing benefits from staff restructuring (6%
FTE reduction year-on-year) and negotiations to reduce rent. EBITDA margin(1) decreased slightly due to the lower attendance. Adjusting for Easter, EBITDA was comparable to 2013.
2014 Q1 Financial HighlightsMargins and Costs
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(1) At constant fx rate(2) Stated at historic fx
TOTAL ESTATE LIKE-FOR-LIKE
2013 Q1 2014 Q1 ChangeFav/(Adv) 2013 Q1 2014 Q1 Change
Fav/(Adv)
Group Revenue(1) (£m) 182.3 173.9 (4.6%) 181.9 171.4 (5.8%)
Gross Profit(1) (£m) 117.6 114.2 (2.9%) 117.3 112.6 (4.1%)
Gross Profit Margin(1) (%) 64.5% 65.7% 1.2% pts 64.5% 65.7% 1.2% pts
Operating Costs (£m) (97.0) (95.5) 1.5% (96.7) (94.3) 2.5%
EBITDA (1) (£m) 20.6 18.7 (9.3%) 20.6 18.3 (11.3%)
EBITDA Margin (1) (%) 11.3% 10.7% (0.6%) pts 11.3% 10.7% (0.7%) pts
EBITDA (2) (£m) 20.9 18.7 (10.5%) 20.9 18.3 (12.5%)
2014 Q1 Cash Flow and Net Debt
Seasonal increase in Net Debt was £30mbetter than the same period last year.
Working capital movement was negative£29m in the quarter, reflecting the normalseasonal outflow.
Capital expenditure was £5m in the quarter,lower than in Q1 last year.
Finance costs in the quarter were £20m,mostly one quarterly Euro note and one half-yearly Sterling note interest payment.
Further PropCo disposals completed in thequarter, resulting in an equity contribution toOpCo of over £16m.
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2013 Q1 2014 Q1
£m
EBITDA 20.9 18.7
Working capital and other (31.5) (28.6)
Net capital expenditure (9.8) (5.0)
Provisions and one offs (3.1) (3.7)
Finance costs (20.8) (19.8)
Tax (paid)/received (0.2) 0.3
Acquisitions (0.1) 0.0
FX and other (4.9) 1.6
(49.6) (36.5)
Propco 0.0 16.5
Change in Net Debt (49.6) (20.0)
Debt and Leverage
LTM EBITDA fell slightly to £67m, which together with the seasonal cash outflow in thequarter led to our leverage ratio increasing.
Fixed charge coverage remained consistent with Q4.
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2013 Q1
2013Q2
2013Q3
2013 Q4
2014Q1
LTM EBITDA £m 97 93 90 69 67
Proforma adjustments(1) £m 4 3 2 3 2
Proforma LTM EBITDA £m 101 96 92 72 69
Net Debt £m 500 511 544 436 456
Net Debt to EBITDA 4.9x 5.3x 5.9x 6.1x 6.6x
Fixed Charge Cover 2.7x 2.6x 2.5x 1.9x 1.9x
(1) Proforma adjustments for 2014 Q1 relate to digital cost savings and new sites.
Strategic Review
CEO appointment
Detailed review of business
strategy
Organisational restructure announced
Implementation of Change
Programmes
17 February March – May 22 May June – Sept
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Strategic Review
Root and branch review of strategy and capability Build on current strengths
– Geographic diversity.– Well developed in market strategies.– Great brands.– Discipline on cost and capex.– Ability to rapidly roll out new concepts.
Increase focus on customer segmentation, estate segmentation, technology capability and organisation effectiveness by market.
Revealed opportunity to drive improved performance across the Group:– Marketing led approaches.– Site turnaround strategies.– Digital capability.– Organisation effectiveness and alignment.
Now at detailed planning stage
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CEOappointment
Detailed reviewof business
strategy
Organisationalrestructureannounced
Implementationof Change
Programmes
17 February March – May 22 May June – Sept
New Integrated Organisation Model
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Group CEO
Group CCO Group CTO Film Buying
DirectorChief People
Officer
DirectorStrategic
ProgrammesGroup CFO
CFO Europe
CFO UK
New hire
New position (existing manager)
Position no longer exists
UK Commercial Director
UK & IRELAND
UK COOSteps down 31/5
MD UK Operations
SPAIN & PORTUGAL ITALY GERMANY & AUSTRIA
Cinesa UCI
No changes No changes
MD Germany & AustriaSteps down 31/5
General ManagerGermany & Austria
New structure creates leaner, more efficient organisation
CEOappointment
Detailed reviewof business
strategy
Organisationalrestructureannounced
Implementationof Change
Programmes
17 February March – May 22 May June – Sept
Key Change Programmes
Areas of focus Direction
Customer segmentation Marketing led propositions
Estate segmentation Focus on underperforming sites
Systems and digital capabilities Digital end to end
Revenue growth opportunities Increased focus on alternative content
Organisational health - 8,000 employees Commitment, performance, engagement
Leadership capability Organisational model to execute strategy
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CEOappointment
Detailed reviewof business
strategy
Organisationalrestructureannounced
Implementationof Change
Programmes
17 February March – May 22 May June – Sept
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Top 7 films of each year in red.
2013 and Estimated 2014 Top 20 Title Phasing
Strongest product slated for second half of year with 6 of the expected top 7 films of the year released in H2
UK Slate Phasing 2013 Top 20 Anticipated 2014 Top 20Q1 Dec Life Of Pi 3D Frozen 3D
The Hobbit: An Unexpected Journey 3D IMAXJan Les Miserables IMAX The Wolf Of Wall Street
Django Unchained 12 Years A Slave American Hustle
Feb Wreck-It Ralph 3D Lego 3DMar The Croods 3D Captain America 2: The Winter Soldier 3D IMAX
Q2 Apr Iron Man 3 3D IMAX The Amazing Spider-Man 2 3D IMAX May Star Trek Into Darkness 3D IMAX Bad Neighbours
Fast & Furious 6 Godzilla 3D IMAX The Great Gatsby 3D X-Men: Days Of Future Past 3DThe Hangover Part III
June Man Of Steel 3D IMAX Mrs Brown’s Boys Q3 Late June Despicable Me 2 3D
July Monsters University 3D How To Train Your Dragon 2 3D IMAX Dawn Of The Planet Of The Apes Transformers 4 3D IMAX
Aug Inbetweeners 2 Guardians Of The Galaxy 3D IMAX
Q4 Oct Captain Philips Nov Thor: The Dark World 3D IMAX The Hunger Games: Mockingjay Part 1 3D IMAX
Gravity 3D IMAX Paddington The Hunger Games: Catching Fire IMAX Interstellar 3D IMAX
Dec Frozen 3D The Hobbit: The Battle Of The Five Armies 3D IMAX The Hobbit: The Desolation Of Smaug 3D IMAX
Current Trading & Outlook
Q2 started strongly, with Easter in April this year and some good film product releasedfor the school holiday period (Spider-Man, Captain America, Noah). However, thecombination of film product, weather and World Cup makes for a challenging outlook.
Overall we expect Q2 to be lower than last year, with Q3 and Q4 containing the bulk ofthe stronger releases for the remainder of the year.
In Spain, the strong performance of the cinema market and improving macroeconomicindicators are very encouraging. This is offset by some strong economic headwinds inItaly.
Limited estate development continued in Q1 with the take-over in February of the Gloriacinema in Italy for a small amount of capex. Our new Hereford cinema in the UKopened in May. We are working on further low cost take-over opportunities across thegroup.
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Q&A & AOB
Any questions?
Further questions can be addressed below:– Email: [email protected]– PR: [email protected]– Financial PR: [email protected]
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