2014 q2 investor presentation - amazon s3€¦ · ‐ spain ahead: strength of promotions and local...
TRANSCRIPT
2014 Q2 INVESTOR PRESENTATION
28 August 2014
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.
IMPORTANT INFORMATION
2
Summary
2014 Q2 Performance
• Markets and films
• Financial highlights
Looking Forward
• Future film slate
• Current trading and outlook
• Strategic initiatives update
Q&A
AGENDA
3
Paul Donovan
Group Chief Executive Officer
Q2 2014
• Q2 EBITDA was lower as indicated – down £9m year-on-year
– largely due to lower market volumes, with film distributors avoiding World Cup period
– UK, Germany and Italy markets at their lowest Q2 since 2010 (South Africa World Cup)
• Our market share improved vs Q1 2014 but was down slightly vs Q2 2013, based on fewer high grossing films
• RPH performed well in UK and Germany, but is proving challenging in southern Europe
• Spain EBITDA positive in H1, buoyed by strong attendance
• Benefits from cost restructuring continue – £4m YTD (LFL)
• Seasonal increase in net debt in line with last year, despite lower EBITDA
Looking forward
• Film slate for H2 looks promising, 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 CCO
SUMMARY
4
MARKETS AND FILMS
5
Millions Q2 Vs LY H1 Vs LY
Spain 20.4 +44% 43.6 +26%
UK 36.0 (11%) 76.8 (9%)
Germany 23.1 (13%) 56.5 (11%)
Italy 19.6 (15%) 53.1 (1%)
Average weighted market movement (1) (5%) (3%)
Q2 MARKETS DOWN IN AGGREGATE
(1) Change in group weighted average market attendances (all Odeon & UCI territories).
‐ Spain ahead: strength of promotions and local record breaker, Ocho Apellidos Vascos, continued.
Limited impact from World Cup due to Spain’s early exit.
‐ UK, Germany, Italy down: timing of Easter gave strong start to quarter.
Distributors chose not to schedule big films around FIFA World Cup, so the end of the quarter was much
weaker, as anticipated.
‐ Tough comps versus last year, which included heavyweight titles: Iron Man 3, Man of Steel and Star Trek:
Into Darkness (all 3D) plus Fast & Furious 6 and The Hangover 3.
6
Q2 MARKET HISTORY BY TERRITORY
• Spain +44%:
Local hit Ocho Appelidos Vascos
and promotional activity drove
the market back to average
levels.
Limited World Cup impact.
• UK -11%
• Germany -13%
• Italy -15%
Quiet release schedules for
World Cup.
Strong releases in Q2 2013
made tough comparatives
Q2 7 year average
34.6
42.2
35.9 37.241.2 40.6
36.0
05
1015202530354045
2008 2009 2010 2011 2012 2013 2014
Mar
ket
Att
. (m
)
UK Q2 Markets
20.1
24.421.2 21.3
20.5
14.2
20.4
0
5
10
15
20
25
30
2008 2009 2010 2011 2012 2013 2014
Mar
ket
Att
. (m
)
Spain Q2 Markets
19.5
28.1
22.2
28.3 29.026.4
23.1
0
5
10
15
20
25
30
35
2008 2009 2010 2011 2012 2013 2014
Mar
ket
Att
. (m
)Germany Q2 Markets
21.7 22.3 21.4 21.0 20.123.1
19.6
0
5
10
15
20
25
2008 2009 2010 2011 2012 2013 2014
Mar
ket
Att
. (m
)
Italy Q2 Markets
7
TOP 5 MOVIES UK & IRELAND GBOR FELL BY 25% IN Q2
2013 Market GBOR £m 2014 Market GBOR £m % change
1 Iron Man 3 37 1 X-Men: Days Of Future Past 27
2 Man Of Steel 28 2 The Amazing Spider-Man 2 24
3 Star Trek Into Darkness 26 3 Godzilla 17
4 Fast & Furious 6 25 4 Maleficent 17
5 Hangover Part III 19 5 Bad Neighbours 16
Top 5 135 Top 5 101 (25%)
Total market 293 Total market 261 (11%)
8
WE SAW CONTINUED RECOVERY IN SPAIN
Q2 2013 market attendance (m) Q2 2014 market attendance (m) % change
1 Fast & Furious 6 1.4 1 Ocho Apellidos Vascos 5.6
2 Iron Man 3 1.4 2 Maleficent 1.7
3 Monsters University 1.1 3 Rio 2 1.3
4 Oblivion 1.0 4 Noah 1.1
5 Man of Steel 0.8 5 The Amazing Spider-Man 2 1.0
Top 5 5.7 Top 5 10.8 +89%
Total market 14.2 Total market 20.4 +44%
Local titles in bold 9
TOP 5 FILMS DOWN 24% IN ITALY
Q2 2013 market attendance (m) Q2 2014 market attendance (m) % change
1 Iron Man 3 2.5 1 Maleficent 2.1
2 Fast and Furious 6 2.2 2 The Amazing Spider-Man 2 1.6
3 The Hangover Part III 2.1 3 Noah 1.3
4 The Great Gatsby 1.3 4 X-Men: Days of Future Past 1.1
5 La Grande Bellezza 1.1 5 Rio 2 1.1
Top 5 9.2 Top 5 7.0 (24%)
Total market 23.1 Total market 19.6 (15%)
10 Local titles in bold
GERMANY HINDERED BY WORLD CUP AND LOW TOP 5
Q2 2013 market attendance (m) Q2 2014 market attendance (m) % change
1 Hangover Part III 2.7 1 Rio 2 1.6
2 Fast & Furious 6 2.4 2 Bad Neighbours 1.6
3 Iron Man 3 1.8 3 The Lego Movie 1.2
4 Star Trek: Into Darkness 1.4 4 The Other Woman 1.1
5 The Great Gatsby 1.2 5 Maleficent 1.1
Top 5 9.6 Top 5 6.7 (30%)
Total market 26.4 Total market 23.1 (13%)
11
FINANCIAL HIGHLIGHTS
12
FINANCIAL HIGHLIGHTS
(1) At constant fx rate (2) At constant fx rate and constant territory weighting.
• ATP mix: continued competitive pricing in Spain and in Italy. UK was lower due to weaker 3D and IMAX
product. Germany stronger, despite a World Cup promotion, due to better 3D share.
• RPH mix: Broadly in line for the quarter and ahead in YTD. UK and Germany positive, reflecting ongoing
benefits from capex initiatives. Spain and Italy still very price sensitive.
• Other revenue(1): 18% down overall against stronger screen advertising last year.
QUARTER 2 YEAR TO DATE
LFL Total Estate LFL Total Estate
Q2 vs LY Fav/(Adv)
Q2 vs LY Fav/(Adv)
Q2 vs LY Fav/(Adv)
Q2 vs LY Fav/(Adv)
Paid Attendance (m) 16.6 (6.4%) 16.9 (5.0%) 37.0 (5.1%) 37.7 (3.7%)
Average Ticket Price(2)
(£) 5.69 (4.0%) 5.69 (4.3%) 5.73 (3.0%) 5.72 (3.2%)
Retail Revenue per Head (2)
(£) 2.06 (0.3%) 2.06 (0.5%) 1.98 1.9% 1.98 1.7%
Group Revenue(1)
(£m) 140.6 (11.7%) 143.2 (10.4%) 312.0 (8.5%) 317.1 (7.3%)
13
FINANCIAL HIGHLIGHTS
QUARTER 2 YEAR TO DATE
LFL Total Estate LFL Total Estate
2014 2013 2014 2013 2014 2013 2014 2013
Group Revenue(1)
(£m) 140.6 159.3 143.2 159.8 312.0 341.2 317.1 342.1
Gross Profit(1)
(£m) 90.7 101.8 92.4 102.2 203.2 219.1 206.6 219.7
Gross Profit Margin(1)
(%) 64.5% 63.9% 64.5% 63.9% 65.1% 64.2% 65.1% 64.2%
Operating Costs (1)
(£m) 90.5 91.9 91.8 92.2 184.8 188.6 187.4 189.2
EBITDA (£m) 0.2 10.0 0.5 9.9 18.4 30.9 19.2 30.8
• Gross profit margin(1) improved - due to lower direct costs, including lower film hire rate as a consequence
of the weaker slate.
• Operating costs lower - with ongoing benefits from staff restructuring (5% FTE reduction year-on-year) and
cost management.
• EBITDA decreased - due to the lower attendance and impact of operational leverage.
(1) At constant fx rate 14
CASH FLOW AND NET DEBT MOVEMENT
£m 2013
Q2
2014
Q2
2013
H1
2014
H1
EBITDA 9.9 0.5 30.8 19.2
Working capital and other (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 (6.9) (6.0) (27.7) (25.9)
Tax (paid)/received (0.4) 0.3 (0.6) 0.6
Acquisitions & disposals (0.5) (0.6) (0.6) (0.6)
FX and other (0.5) 6.4 (5.4) 8.0
(11.3) (10.8) (60.9) (47.2)
Propco 0.0 0.0 0.0 16.5
Change in net debt (11.3) (10.8) (60.9) (30.7)
• Seasonal increase in net debt for Q2 was
in line with last year, despite lower
EBITDA.
• Net debt increase for H1 significantly
better than 2013.
• Working capital movement was negative
£3m in 2014 Q2, a strong result given the
lower trade, particularly in June.
• Capital expenditure was tightly controlled
pending strategic investment decisions.
• Finance costs in the quarter were £6m,
mostly one quarterly Euro note interest
payment. Benefit from new Euro swap
began in May.
• Foreign exchange (FX) rate movements
reduced net debt expressed in Sterling.
• H1 benefited from £16m additional cash
following Propco group disposals.
15
DEBT AND LEVERAGE
• As anticipated, LTM EBITDA decreased due to a weaker Q2 with a consequent increase in leverage ratio
• However, net debt was £44m lower than at 2013 Q2
• Whilst we expect a stronger second half to 2014, we anticipate leverage to improve more significantly in 2015 and 2016
rather than this year
2013
Q2
2013
Q3
2013
Q4
2014
Q1
2014
Q2
LTM EBITDA £m 93 90 69 67 57
Proforma adjustments(1) £m 3 2 3 2 2
Proforma LTM EBITDA £m 96 92 72 69 59
Net Debt £m 511 544 436 456 467
Net Debt to EBITDA 5.3x 5.9x 6.1x 6.6x 7.9x
Fixed Charge Cover 2.6x 2.5x 1.9x 1.9x 1.6x
(1) Proforma adjustments for 2014 Q2 relate to digital cost savings and new sites. 16
FUTURE FILM SLATE
17
2013 AND 2014 FILM RELEASE PHASING – UK
2013 Top 20 2014 Estimated Top 20
Q3 Late
June Despicable Me 2 3D
July Monsters University 3D Dawn Of The Planet Of The Apes 3D
Transformers 4 3D IMAX
How To Train Your Dragon 2 3D IMAX
Aug Inbetweeners 2
Guardians Of The Galaxy 3D IMAX
Q4 Oct Captain Philips IMAX
Nov Thor: The Dark World 3D IMAX The Hunger Games: Mockingjay Part 1 IMAX
Gravity 3D IMAX Paddington
The Hunger Games: Catching Fire IMAX Interstellar IMAX
Dec Frozen 3D The Hobbit: The Battle Of The Five Armies 3D IMAX
The Hobbit: The Desolation Of Smaug 3D IMAX
Top 7 films of each year in bold. 18
2014 Q3 and Q4 LOCAL CONTENT PHASING
19
Spain Germany Italy
Q3 El Nino
Q4 Torrente 5 Männerhort Confusi e Felici
Mortadelo y Filemón Alles ist Liebe Il Ricco, Il Povero e Il Paggiordomo
Un Natale Stupefacente
Il Ragazzo Invisibile
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.
BOND 24
STAR WARS VII
THE AVENGERS 2
THE MINIONS MOVIE
THE HUNGER GAMES: MOCKINGJAY PART 2
INSIDE OUT
FAST & FURIOUS 7
JURASSIC WORLD
THE GOOD DINOSAUR
TED 2
FIFTY SHADES OF GREY
AVATAR 2
UNTITLED SUPERMAN/BATMAN FILM
FINDING DORY
FANTASTIC BEASTS AND WHERE TO FIND THEM
ICE AGE 5
PLANET OF THE APES 3
STAR WARS SPINOFF
WICKED
X-MEN: APOCALYPSE
INDEPENDENCE DAY 2 (ID FOREVER PART 1)
20
CURRENT TRADING AND
STRATEGIC INITIATIVES
21
• Q3 started slowly:
– Final stages of World Cup impacted on release date decisions
– Delay of Fast & Furious 7 and Jupiter Ascending to 2015
– Arrival of very warm weather in the UK and Spain
– Some good performances including Dawn Of The Planet of the Apes and Transformers
– August has seen a strong performance from Inbetweeners 2
– September has no particular stand-out titles
• We expect H2 to be ahead of last year, but overall a low volume year in aggregate
– Stronger film line up - The Hunger Games and The Hobbit
– The recovery in Spanish cinema attendance is encouraging, but competition intense
– Concerns in Italy over the impact of a very sluggish economy
• Development of the estate continues:
– New Hereford cinema in the UK opened in May and is performing extremely well
– This week we will take over three new sites in Spain from liquidator of the Abaco estate
– New Charlestown cinema in Ireland scheduled to open in 2015 Q1
CURRENT TRADING AND OUTLOOK
22
• Group CEO – Paul Donovan
(appointed in February)
• Group CFO – Mark Way
(arrives in September)
• Group CCO – Ian Shepherd
(appointed in June)
• All other roles filled from
within the business
NEW ORGANISATIONAL MODEL
23
NEW SENIOR MANAGEMENT WITH RELEVANT SKILLS
Mark Way - Group Chief Financial Officer effective 1st September.
Mark was Senior Vice President Group Operations Finance at Hilton Worldwide since 2006 where he
drove significant change
• leading the sale of Scandic Hotels for over $1.1bn
• spearheading the integration of core business processes and capabilities between Hilton Hotels
Corporation and Hilton International
• establishing a Global Operations Finance function and Operational Effectiveness team to enhance
business management practices.
Ian Shepherd - Group Chief Commercial Officer effective 30th June.
Ian has a deep experience in consumer marketing and retail
• 2012-14: Digital Practice Leader for Barracuda, a leading executive search business. Advisor on
consumer marketing and digital transformation
• 2010-12: Chief Executive of Game Group plc, a £1.5bn revenue video games retailer operating in 9
countries and online.
• 2006-10: Consumer Director at Vodafone UK, responsible for all sales and marketing activities
including retail and online.
• 1997-05: Customer Marketing Director at BSkyB, where he led all CRM and loyalty activities for the
installed base and led the growth of interactive TV.
24
•Pan European segmentation model completed
•New Propositions formulated for high potential segments in research
•Successful approaches to be implemented into core business activities Customer segmentation
•Repositioning plans completed for six UK pilots
•Detailed plans to improve performance initiated
•Continental Europe adopting similar approach Estate segmentation
•Group Digital strategy complete and resourcing plan in place
•UK Multi Channel systems scheduled for Q2 2015 introduction
•Customer Insight and Analytics scoped and in planning
Systems and digital capabilities
•Strategic partnership opportunities identified
•Operational partnerships under review
Revenue growth through partnerships
•Group-wide people strategy complete and key programmes initiated
•Strategy vision and values cascaded to employees
•Head of Communications appointed High Performing Organisation
STRATEGIC CHANGE PROGRAMMES UNDERWAY
25
Q2 2014
• Q2 EBITDA was lower as indicated – down £9m year-on-year
– largely due to lower market volumes, with film distributors avoiding World Cup period
– UK, Germany and Italy markets at their lowest Q2 since 2010 (South Africa World Cup)
• Our market share improved vs Q1 2014 but was down slightly vs Q2 2013, based on fewer high grossing films
• RPH performed well in UK and Germany, but is proving challenging in southern Europe
• Spain EBITDA positive in H1, buoyed by strong attendance
• Benefits from cost restructuring continue - £4m YTD (LFL)
• Seasonal increase in net debt in line with last year, despite lower EBITDA
Looking forward
• Film slate for H2 looks promising, 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 CCO
SUMMARY
26
