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TRANSCRIPT
0 August / September 2012 Corporate Presentation
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Disclaimer
The material that follows is a presentation of general background information about T4F Entretenimento S.A (“T4F”) as of the date of the presentation. It is information in summary form and does not purport to be complete. This material contains confidential information regarding and may not be reproduced or circulated, partially or completely, without the prior written consent of the T4F.
Any statements, projections, expectations, estimates and plans contained in this document that do not describe historical facts, and the factors or trends affecting financial condition, liquidity or results of operations, are forward-looking statements and involve several risks and uncertainties. Such statements are based on assumptions and analyses made by the Company based on its experience and the economic climate and on market conditions and expected future events, many of which are beyond the Company’s control.
No investment decision should be based on validity, accuracy or completeness of the information or opinions contained in this presentation. Under no circumstances, neither the Company nor its subsidiaries, directors, officers, agents or employees be liable to third parties (including investors) for any investment decision based on information and statements in this presentation, or for any damages resulting therefrom, corresponding or specific.
This presentation does not constitute an offer, or invitation, or solicitation of an offer, to subscribe for or purchase any securities. Neither this presentation nor anything contained herein shall form the basis of any contract or commitment whatsoever.
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1. A Strategic View of our Industry
3
A strategic View of our Industry
A favorable macroeconomic environment in South America and
structural changes in the global media and live entertainment industry
are the foundations of T4F’s sustainable growth
5 out of the 10 largest GDP growths in emerging economies are in South America
Global touring became essential for the world’s major artists
Top live entertainment contents willing to go on tour in South America
Migration of marketing budgets to sponsorships of live entertainment
Brazil
Argentina
Chile
Peru
4
A strategic View of our Industry
Wide range of quality content for tours in South America
The region is definitely in the international route of the major artists
Strong growth in the number of tickets sold not only in Brazil, Argentina and Chile, as well as in Peru and Colombia
The live entertainment industry in South America keeps its robust growth
According to a study by Nielsen Institute, published in Feb/2012, out-of-home entertainment is the first choice of spending for 39% of Brazilians, ahead of payments of debts...
A study made in Jun/2012 by PwC highlighted Brazil as one of the highest-growing markets in global entertainment and media industry in coming years. The projection indicates that spending in this sector in Brazil will register compound annual growth of 10.6% vs. global average of 5.7% p.y...South America will be the region with the greatest development in the period 2011-2016, growing 60% with investments reaching US$ 134 billion...
Migration of marketing budgets towards non-traditional media (sponsorships)
E-Marketer, a leading global media and digital marketing research company, estimates that naming rights and sponsorships should amount US$ 5 billion worldwide in 2011...
Very favorable environment for the live entertainment industry
Research by “Jornal Valor Econômico” in Jan/2011, a Brazilian leading newspaper, reveals that the sponsorship of shows in Brazil is becoming more expensive. The master sponsorship quotas have been
at the R$10 million to R$ 15 million range. ...those amounts have suffered the greatest increases in the last
5 years...
5
1. Descrição da Companhia 2. Company Overview
Shareholding Structure
6 6 6
Use of Proceeds (i) Acquisition of companies and venues, (ii) construction of venues and (iii) geographic expansion
1: Assuming the exchange rate of US$1 = R$1.6207 as of May 12th , according to Bacen.
Bookrunners
IPO Summary Pricing Date - April 7th 2011; Price - R$16.00 ; Offering Size - R$503 million (US$310 million1)
Shareholding Structure
5.5%
6.8%
8.4%
50.1% 49.9%
27.5%
Free-Float 51.8%
Gávea Investimentos
FA Comércio e Participações CIE International Shareholders
Stake Direct + Indirect
Fernando Luiz Alterio 31.7%
CIE International 9.7%
Gávea Investimentos 6.8%
Shareholders’ Agreement 48.2%
Free Float 51.8%
Fernando Luiz Alterio
Leading company in live entertainment
in South America
Our Presence (Net Revenue 2011)
Unique Industry Knowledge
High Growth and Strong Cash Generation
Diversified and Verticalized Model
Company Overview
7
ONE AND ONLY INVESTMENT OPPORTUNITY IN THE ENTERTAINMENT INDUSTRY IN SOUTH AMERICA
T4F is the leading live / out-of-home entertainment promoter in South America with a diversified and verticalized business model
4th largest player worldwide by Billboard
1.2 thousand shows promoted in 2011
2.9 millions tickets sold in 2011
Brazil 76%
Argentina 16%
Chile 8%
30 years of experience
Promotion of the most successful events in Brazil, Chile and Argentina
Pioneer in naming rights model in 1999
Promotion of multi-content events
Venues Operation
Food & Beverage and Merchandising
Ticketing Services
Net Operation Cash Flow = 87% of EBITDA ( ∑ 05-11)
Net Revenues CAGR 11% (07-11)
EBITDA CAGR 21% (07-11)
Sustainable margins going forward
Food & Beverage, Merchandising,
and Parking Ticketing Services Sponsorships and
Naming Rights Suites and Hospitality
Centers Box Office Private Events
A Diversified Portfolio of Entertainment
Verticalization
Revenue Sources
VENUE OPERATIONS FOOD & BEVERAGE MERCHANDISING TICKETING SERVICES
Live Music Sport Events Theatrical Production Performing Arts
U2 Stock Car
Mini Challenge
The Phantom of the Opera
Blue Man Group
8
Copa Montana
Marcas
Cats
Cirque Du Soleil
Roger Waters Pearl Jam
Madonna The Addams Family
Stomp
Bodies The Lion King
Leadership Position in Live Entertainment Industry
Guns N’ Roses
Promoted 7 out of the 10 largest shows of the tour
Coldplay
Promoted the 1st and 5th largest shows of all tours
Madonna
3 out of the 5 largest shows of the tour in 2008
9
Bon Jovi
Promoted the 2 largest shows of the 2010 world
tour
U2
3 out of the 11 largest shows of 360º World Tour
Pearl Jam
4 out of the 5 largest shows of the world
tour in 2011
Leadership Position in Live Entertainment Industry
- More than 1,450 performances - 12 cities visited - More than 2.5 million tickets sold - Quidam in Sao Paulo was Cirque du Soleil’s biggest box office and the 6th biggest international box office in 2010
- Corteo will start in Mar/2013
Cirque du Soleil
12 different contents
The only player that ever promoted authentic Broadway productions in the region
More than 3.5 million tickets sold since 1999
Les Misérables, Chicago, Beauty and the Beast, Mamma Mia, Miss Saigon, Phantom of the Opera, The Sound of Music, Cats, Sweet Charity, Cabaret, The Witches of Eastwick, The Addams Family
Theatrical Plays
12 races per season in 10 different cities Stock Car is the third largest touring car series worldwide and the largest in South America Broadcasted by TV Globo since 2001
Sports Events
2006
2007-2008
2009-2010
10
2011-2013
2013-2014
11
2. Tese de Investimento 3. Investment Highlights
12
Investment Case
Live Entertainment Industry Growth
Attractive Macroeconomic
Environment and Robust Consumption Growth
Superior business model: higher return with lower risk
Credibility with international and domestic agents and privileged access to high quality entertainment providers
Compelling business model and Superior
Management and Expertise
Live music:
Touring became essential for artists
Aggressive growth in South America in terms of ticket sold and average ticket price
Massive increase in disposable income and expansion of consumer base
Expenditure of entertainment is extremely correlated to consumer spending
13
Positive Trends for Expenditures with Entertainment in Emerging Markets…
Expenditures with entertainment are expected to significantly increase in emerging markets
2011E-2016E GDP Growth (1)
(1) In local currency real terms. Source: IMF – World Economic Outlook.
France
USA
Japan
Argentina
Chile
Croatia
Peru
Israel
Portugal
Colombia
Brazil
ChinaIndia
Mexico
Greece
New Zeland
Spain
Italy
Venezuela
UKR2 = 0.66
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
0 10,000 20,000 30,000 40,000 50,000
GDP per capita in 2009 (US$ '000)
Expe
nditu
re w
ith e
nter
taim
ent a
s a
% o
f dis
posa
ble
inco
me R2 (ex Argentina) = 0.81
Source: Euromonitor.
Expenditure with Entertainment as a % of the Disposable Income vs GDP per Capita
56.6%47.0%
38.9%33.3%
28.0%24.7%24.5%
22.6%22.6%
22.0%21.5%
19.0%17.9%
16.3%15.0%15.0%
13.7%12.5%
12.0%12.0%
9.9%9.5%
5 out of the 10 largest growths
in GDP are in South America
China
India
Indonesia
Peru
Malaysia
Chile
Colombia
Singapore
Argentina
Brazil
Russia
Mexico
Australia
Sweden
United States
New Zealand
Croatia
United Kingdom
Canada
Venezuela
France
Japan
14
Boom of the Live Entertainment Industry
Live music has significantly increased importance in the music industry, with touring becoming essential for artists, while recorded music revenues have been shrinking
Source: Pollstar / IFPI
(US$ billion)
7.5 6.8
5.8
5.2 4.7 4.8
3.6 3.9
4.2
4.6 4.3 4.4
2006 2007 2008 2009 2010 2011
(US$ million)
Total Recorded Music Revenues vs. Total Revenues with Tickets Sold in North America
12%
5%
6%
6%
9%
88%
95%
94%
94%
91%
137
105
90
86
79
U2
Bruce Springsteen
Britney Spears
AC/ DC
Jonas Brothers
Album sales
Tour Gross
Total
Top Music Acts – Sales Breakdown
Source: Live Nation (2009)
15
Superior Business Model
High
Margins
and
Returns
• 18% EBITDA margin
• 31% ROIC
• 26% ROE
• No revenue concentration in specific content
• Increased control over the entertainment value chain
Verticalization Ability to generate
revenues from multiple sources in each event
Low Risk
Diversification Multi-content platform
= reduced risk
Asset Light Maintenance capex = 1%
of net revenues; PP&E represent <5% of total
assets
Strong Cash Flow Low capex and negative
working capital (sponsorships + tickets
sold in advance)
Strong Cash
Conversion
• 87% of EBITDA in the period 2005-2011 was converted to cash
Note: FY2011 figures.
16
Solid Sponsorship Revenues Flow
• Migration of marketing budgets from traditional media to below-the-line advertising (sponsorship is the largest category within)
• Content sponsorship, priority benefit, naming rights sold in our 5 venues
• Over 100 active clients, including major corporations
• T4F’s contents attract strong media interest, generating a significant amount of spontaneous media (about R$500 million per year)
• Sponsorship corresponded to 23% of T4F’s Net Revenue in 2011
Naming Rights
Largest Corporate Sponsors
Source: IEG.
North American Annual Growth in Advertisement, Sales Promotion and Sponsorship
0.6%
-7.1%
2.0%
4.0% 4.0%
2.0%
-4.6%-3.3%
1.7% 2.1%
11.4%
-0.6%
3.9%5.5%
4.1%
2008 2009 2010 2011 2012E
Advertising
Sales Promotion
Sponsorship
T4F is the only company that can offer a multi content range of platforms that is able to access all target audiences.
Teen Live Music
Kids
Adult – Male 18 – 45 Car Sports
Family
Adult Live Music Exhibitions Broadway
Laura Pausini
A Diversified Platform Providing a One-Stop-Shop Marketing Solution to our Sponsors
T4F becomes part of the brand’s long-term marketing strategy due to the relevance and innovation of its contents
Strong Competitive Advantages
Emerging markets’ high costs of traditional media due to monopolies, encourage companies to pursue other marketing tools
Migration from traditional media to the Below the Line marketing
Increase in sponsorship revenues
Positive Scenario for T4F
17
18
High Barriers of Entry Po
tent
ial C
ompe
titor
s
Controls 5 of the most important venues in South America Exclusive long-term access to premium venues
Possibility to capture economies of scale on the acquisition of content, by operating in four countries
The only totally integrated business model
Naming Rights: Citibank, Credicard, General Motors, Abril, Caixa Econômica Federal, BMW, Petrobras
Sponsorships: Bradesco, Credicard, Mastercard, American Express, Citibank, Cielo, Entel, Claro, Sky, AmBev, Renault, Honda, Allianz, Cosan, Vivo
Long-term agreements and solid relationships with corporate sponsors
Agreement with Cirque du Soleil valid through 2015 Partnership with Disney Theatrical Group to promote theatrical plays over the
next five years Exclusivity and non-compete agreement with Live Nation valid through August
2015
Guaranteed access to premium content
Family Entertainment: Disney, Andrew Lloyd Weber, Cameron Mackintosh and the Blue Man Group
Sports: Stock Car, Brazilian TCC, Fórmula Montana and Mini Challenge Music Concerts: CAA, William Morris, ITB – International Talent Booking, The
Agency Group, among others
Privileged access to high-quality entertainment providers
T4F is the most credible producer and promoter in South America, both in execution capability and financial strength Credibility
Various business lines: Latin Music, Anglo Music, Performing Arts, Venues and Ticketing
4. Growth Strategy
20
T4F’s Growth Opportunities
T4F’s cash position provides a unique competitive advantage to capture the booming industry prospects
T4F is the natural consolidator of the South American live entertainment industry
Construction of Venues, 35% Indoor Venues in Brazil
(SP & Others) Outdoor Venue in SP (T4F
Arena) Indoor venue in Buenos Aires
Ticketing Service, 7% 1 in Brazil Start-up in Peru
Acquisition of Equipment, 5% Lighting Sound Stage & Others
Acquisition Opportunities, 45% Venues Festivals Promoters
Geographic Expansion, 8% Brazil South America
Financial Sources
Strong Cash Generation
IPO Proceeds
Leverage Capacity
21
Geographic Expansion
80% of T4F’s revenues in Brazil come from SP and RJ which represent only 17% of Brazil’s GDP
Main Cities in Brazil
Indicates cities in which T4F is currenlty present.
Cities to which T4F plans to expand operations.
Brazil
Sao Paulo Rio de Janeiro
Belo Horizonte Brasília
Recife
Belém
Campinas
Curitiba
Salvador
Fortaleza
680 presentations/year and 1.5 mm tickets
sold/year in SP and RJ
Porto Alegre
Natal Manaus
Main Cities in South America
Uruguay
Chile
Paraguay
French Guiana Suriname
Guiana Venezuela Colombia
Ecuador
Peru
Bolivia
Buenos Aires Santiago
Lima
Caracas
Bogota
300 presentations/year and 1.0 mm tickets sold/year in BA and
Santiago
Argentina Cordoba
Mendoza
Still a relevant growth opportunity outside Brazil, representing 40% of South America’s GDP
New / retrofitted venues to explore
Potential of 400 presentations/year and 840 thousand tickets sold/year in other cities
Potential of 200 presentations/year and 700 thousand tickets sold in other cities
22
T4F Outdoor Venue in São Paulo
T4F outdoor venue is expected to be a reference among renowned entertainment venues
Project overview
Designed to fill a gap in high-level entertainment venues in the São Paulo metropolitan area
Naming rights revenues reaching up to R$ 9 million a year
Flexible in terms of capacity: events from 15,000 to 60,000 people
Capex should reach R$110 million with expected IRR of 33%
Control of the agenda and integrated model translate into a strong barrier of entry
Foro Sol – Mexico City, Mexico
Outlook for 2012
23
Indoor Live Music
Family Entertainment and Theater
Sport Events
Recurrent verticalized revenue from shows by local and international artists in venues we operate Dream Theater # 9 Alanis Morissette #8 Yanni #8 Joss Stone # 6 Scorpions #3 Liza Minnelli #4 G3 #5 Simple Plan #4 Snow Patrol #4 Morten Harket #5 Sara Baras #4 among many others
• Cirque du Soleil – 12 months of presentations in six cities in Brazil, before heading to Buenos Aires and Santiago with more than 320 performances
• Disney on Ice, WWE, Sponge Bob
• The Addams Family in Brazil and Mamma Mia! in Argentina
In-house contents with track record of recurring revenue
Outdoor Live Music
Promotion of tours of top pop/rock music artists
...a strong and diversified pipeline allow us to foresee an important growth in year 2012
Guaranteed access to very attractive contents at the box office and sponsorships, plus many contents under negotiation
24
5. Operational and Financial Highlights
25
Solid Operational Performance
Net Revenues (R$ mm) and Gross Margin (%) EBITDA (R$ mm) and EBITDA Margin (%)
Net Income (R$ mm) and Net Margin (%) Operational Cash Flow vs. EBITDA
Note: Summary of 2009 impacts • Global crisis impact of R$16.8 mm • Postponement impact of R$4.7 mm • H1N1 flu impact of R$21.6 mm
87%
5.358.1 110.3
210.7
256.8
351.9
462.0
36.4105.6
188.7214.5
246.5
347.7402.5
2005 2006 2007 2008 2009 2010 2011
EBITDA - Accumulated Cash Generation - Accumulated
596.6
434.6
569.2 609.8
26.7%24.4%
29.2%30.6%
2008 2009 2010 2011
100.4
46.1
95.1110.1
16.8%
10.6%
16.7%18.0%
2008 2009 2010 2011
46.9
6.0
40.3
61.17.9%
1.4%
7.1%
10.0%
2008 2009 2010 2011
26
Historical Financial Information (cont’d)
.
ROIC, ROE and indebtness metrics
Net Debt and Net Debt / EBITDA
ROE (2)
Net Debt Breakdown (2011)
(%)
(R$ million)
(%)
(R$ million)
(1)ROIC calculated as NOPAT / (Net PP&E + current assets non cash) (2)ROE calculated as Net Income/ Average Shareholders’ Equity.
ROIC (1)
41.9
93.8
263.3
Short Term Debt Long Term Debt Cash and Equivalents
Net Debt
(127.6)
92
29
(128)
2.0x0.3x
2009 2010
2011
(1.2x)
38.3%
25.0%
42.0%
30.7%
2008 2009 2010 2011
46.0%
4.8%
31.7%25.9%
2008 2009 2010 2011
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Why Invest in T4F?
Unique access to high-quality content
One and only investment opportunity in the entertainment industry in South America, with longstanding track-record and leadership
Verticalization and diversification, resulting in high margins and low risk
Asset light model, resulting in high returns and dividend payout capacity
Multi-country operations, creating significant economies of scale and barriers of entry
Strong conversion of EBITDA into cash flow