Odeon & UCI Finco plc 2013 Q1 Investor Presentation 23 May 2013 1
Disclaimer 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. 2
Forward-Looking Statements 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. 3
2013 Q1 Results Highlights Strong earnings in 2013 Q1 with higher volumes from increased market share, a favourable calendar (1) and Easter being 2 weeks earlier. Market attendance was 6% higher on average across our territories, with UK and Germany ahead, whilst Spain and Italy were close to flat. Group paid attendance was up 11%, with LFL (4) paid attendance up 10%. Market share increased in all territories. Group revenue (3) of 186m was ahead 11% in total estate and 10% in LFL (4), in line with the attendance growth. Group EBITDA of 20.9m was ahead 43%, and LFL (4) EBITDA of 20.5m was ahead 47%, against a weaker Q1 last year. Q1 market (2) volume up 6% Our Q1 attendance up 11% Our Q1 revenue (3) up 11% EBITDA in Q1 was 21m, up 43% Market share up in all territories (1) Q1 from 1 st Jan to 4 th April 2013, vs from 1 st Jan to 29 th March in 2012 (2) Weighted average of our major territories market attendance. (3) Constant fx rates. (4) LFL information excludes any cinemas trading in the group in the period or the comparative period, but not in both. 4
Total Market by Major Territory Q1 2012 Q1 2013 Variance UK Attendance (k) 39,506 44,163 11.8% Germany Attendance (k) 33,209 36,554 10.1% Spain Attendance (k) 20,609 20,425 (0.9%) Italy Attendance (k) 30,666 30,895 0.7% Average Weighted Market Increase for group territories (1) 6.0% Group Paid Attendance (k) 19,136 21,335 11.5% Group LFL Paid Attendance (k) 18,947 20,829 9.9% Group attendance increased more than the market because of an increase in market share across all territories. In general, in higher volume periods, our market share is stronger. The film line this year was more favourable to multiplex operators than last year, when The Intouchables, favouring arthouse cinemas, was strong in Continental Europe. In the Southern Europe, where consumers were badly impacted by continuing economic weakness, volumes were flat but revenue lower. We are starting to gain share as other exhibitors cinemas close or we takeover. (1) Weighted average of our major territories market attendance 5
Weighted average Market attendance (1) (M) Market volume in Q1 Q1 2013 was higher than last year, but close to recent historic average Weighted average market attendance in 2013 was up year on year, but broadly in line with the average of prior years. In 2012, The Intouchables performed very well in Germany, but there was no break-out film in UK. In previous quarters, there have been surprise successes, related to the awards season. 45.0 40.0 Sweeney Todd Slumdog Millionaire Avatar The King s Speech Che Bella Giornata The Intouchables Les Miserables 35.0 30.0 25.0 20.0 15.0 2008 2009 2010 2011 2012 2013 2013 Market level (1) Weighted average of our major territories market attendance 6
Market attendance (M) Markets in Q1 UK market attendance increased 12% vs 2012 Q1, principally due to the success of Les Miserables, to be as strong as any other recent first quarter. German market attendance increased 10% on last year because of strong top films, to reach an average level for a first quarter. Spanish and Italian markets in Q1 were in line with 2012 Q1, but lower than previous years, supported by the favourable calendar including Easter. 50.0 45.0 40.0 35.0 30.0 25.0 20.0 37.5 41.6 44.5 44.0 39.5 44.2 41.3 37.2 38.1 33.5 33.2 36.6 27.1 25.6 29.8 26.0 20.6 20.4 34.3 32.9 43.2 40.4 30.7 30.9 15.0 10.0 5.0 0.0 2013 Market level UK Germany Spain Italy 2008 2009 2010 2011 2012 2013 7
Top Films Q1 - UK & Ireland In UK and Ireland, the main driver of the attendance increase was Les Miserables, which performed much stronger than The Woman in Black, the no. 1 film last year, and it was well supported by Wreck it Ralph, Django Unchained and the long-running successes of Life of Pi and The Hobbit. Wreck-It Ralph achieved the same box office level as The Woman in Black, 1st rank in 2012. The stronger film line led to a 27% rise in box office revenue for the Top 5 films. Top 5 UK & Ireland Titles in 2012 Q1 m Top 5 UK & Ireland Titles in 2013 Q1 m The Woman in Black 21 Les Miserables 38 War Horse 19 Wreck-It Ralph! 3D 21 The Best Exotic Hotel Marigold 16 Life of Pi 3D 17 The Muppets 16 The Hobbit: An Unexpected Journey 3D 14 Sherlock Holmes: A Game of Shadows 11 Django Unchained 14 Total 83 Total 105 Top 5 Variance to Q1 2012 27% Total Market 256 Total Market 283 Total Market variance 11% 8
Top Films Q1 Continental Europe In Spain, stronger admissions in top 5 films, with better results across all main films. Local titles in red 2012 2013 Q1 Actual (Adm m) Q1 Actual (Adm m) Spain Sherlock Holmes: A Game of Shadows 1.3 Django Unchained 1.5 The Descendants 1.3 The Croods 3D 1.3 % change In Germany, stronger top 5 performance vs last year, despite the exceptional result of The Intouchables in Q1 2012, due to better local films and strong result of Django Unchained. In Italy, top 5 films performed below last year, mainly due to weaker local product. In particular, no film comparable to the exceptional results of Benvenuti al Nord in Q1 2012. Intouchables 0.9 Silver Linings Playbook 1.3 Safe House 0.8 Mama 1.2 Hugo 3D 0.8 Wreck-It Ralph! 3D 1.0 Top 5 Total 5.0 Top 5 Total 6.2 24.2% Total Market 20.6 Total Market / Variance from Q1 2012 20.4 (0.9%) Germany Intouchables 7.1 Django Unchained 4.2 Alvin & The Chipmunks 3 1.1 Kokowääh 2 2.5 Sherlock Holmes 2 1.1 Schlussmacher 2.4 Puss in Boots 3D 1.1 The Hobbit 3D 2.1 Rubbeldiekatz 1.0 Life of Pi 3D 1.5 Top 5 Total 11.4 Top 5 Total 12.7 11.8% Total Market 33.2 Total Market / Variance from Q1 2012 36.6 10.1% Italy Benvenuti al Nord 4.7 Il principe abusivo 2.6 Immaturi - il viaggio 2.0 Django Unchained 2.1 Intouchables 1.9 La migliore offerta 1.6 Posti in piedi in Paradiso 1.5 Lincoln 1.2 Com'è bello far l'amore 3D 1.2 Benvenuto presidente! 1.1 Top 5 Total 11.3 Top 5 Total 8.5 (24.3%) Total Market 30.7 Total Market / Variance from Q1 2012 30.9 0.7% 9
Odeon / UCI 3D BOR as % of Total BOR 3D Quarterly Performance Odeon/UCI 3D Box Office Revenue (BOR) as a percentage of total group BOR Q1 was strong in 3D, ahead of a weak prior year. Holdover of Life of Pi and The Hobbit: An Unexpected Journey, both released in December 2012, and the strong admissions in the kids films Wreck-It Ralph and The Croods were the main drivers of the good 3D results in Q1 2013. The 3D slate for the remainder of the year also looks stronger than last year, including Man of Steel, Despicable Me 2, Monsters University and The Hobbit: The Desolation of Smaug 40% Avengers Titanic 35% 30% Tangled 27% 31% 34% Harry Potter 7.2 25% 23% 22% 22% 20% 15% 15% 19% 18% Skyfall and Twilight in 2D 10% 5% 0% Q1 Q2 Q3 Q4 2011 2012 2013 3D slate for 2013 looks stronger than in 2012 10
2013 Q1 Financial Highlights Revenue QUARTER 1 Q1 2012 LIKE-FOR-LIKE Q1 2013 Variance from 2012 +Fav/(Adv) Q1 2012 TOTAL ESTATE Q1 2013 Variance from 2012 +Fav/(Adv) Paid Attendance (m) 18.9 20.8 9.9% 19.1 21.3 11.5% Average Ticket Price (2) ( ) 6.06 6.07 0.3% 6.09 6.08 (0.0%) Retail revenue per Head (2) ( ) 1.86 1.92 3.0% 1.86 1.92 3.4% Group Revenue (1) ( m) 165.1 180.9 9.6% 167.6 186.0 11.0% ATP was in line with prior year overall, as the increased ticket premia (UK and Germany) were offset by promotional activity (Spain and Italy). RPH increased, reflecting the benefit of investments in initiatives and refurbishments, in particular in UK and Germany. Screen Advertising (1) LFL was 4% below 2012, and 1% below in Total Estate, with strong results in UK and Germany offset by weaker performance in Spain and Italy. Other revenue was 8% below 2012, both in LFL and Total Estate, mainly due to one-off items received last year, including virtual print fees and dispute settlements, which have not repeated in 2013. Total Group Revenue grew in line with attendance, as increased retail per head offset the impact of weaker screen advertising and one-offs. (1) At constant fx rates. (2) At constant fx rates and constant territory weighting, for major territories. 11
2013 Q1 Financial Highlights Margins and Costs QUARTER 1 Q1 2012 LIKE-FOR-LIKE Q1 2013 Variance from 2012 Fav/(Adv) Q1 2012 TOTAL ESTATE Q1 2013 Variance from 2012 Fav/(Adv) Group Revenue (1) ( m) 165.1 180.9 9.6% 167.6 186.0 11.0% Gross Profit (1) ( m) 109.9 116.6 6.1% 111.7 119.9 7.4% Gross Profit Margin (1) (%) 66.6% 64.4% 66.7% 64.5% Operating Costs ( m) (95.9) (96.1) (0.2%) (97.0) (99.0) (2.0%) EBITDA (1) ( m) 14.1 20.5 44.9% 14.9 20.9 41.0% EBITDA Margin (%) 8.6% 11.3% 8.9% 11.3% EBITDA (2) ( m) 14.0 20.5 46.9% 14.7 20.9 42.8% Gross profit margin (1) was 2.2% pts lower in the quarter, reflecting higher film hire because of the greater mix of blockbuster product and reduction in Screen Advertising. Operating costs were tightly controlled, particularly staff costs and rent, with LFL indirect costs increasing only by 0.2% year on year, despite inflationary pressures on Utilities. Excluding Utilities, LFL indirect costs decreased by 0.9%, even though volume was higher. EBITDA margin (1) increased from 8.6% to 11.3% LFL, due to the higher volume, on partly fixed cost base. (1) At constant fx rate (2) Stated at historic fx 12
Quarterly & Annual EBITDA Progression EBITDA in Q1 was up on last year, and broadly in line with the average of previous 5 years. We expect this year to be more evenly phased than 2012. m EBITDA by quarter m Full year EBITDA 60 50 100 90 80 82.4 93.4 90.8 71.3 40 70 63.4 60 30 50 20 40 30 10 20 10 0 Q1 Q2 Q3 Q4 0 2008 2009 2010 2011 2012 2013 2008 2009 2010 2011 2012 13
2013 Q1 Cashflow As at Q1 2012 FY 2012 Q1 2013 m EBITDA 14.7 90.8 20.9 Working capital and other (13.6) 12.7 (31.5) Net capital expenditure (17.2) (41.9) (9.8) Provisions and one offs (3.1) (15.7) (3.1) Finance Costs (24.5) (60.0) (20.8) Tax (0.0) (2.6) (0.2) Acquisitions and disposals (0.1) (3.6) (0.1) Change in Net Debt (43.9) (20.3) (44.7) Net debt increased by 45m in the quarter, similar to Q1 last year. The cash flow on working capital was negative 31.5m in the quarter, reflecting the normal seasonal outflow, but more than last year because of the strong trading finish to 2012. Capital expenditure was 10m in the quarter, lower than in Q1 last year, which included some digital assets. Finance Costs in the quarter were 20.8m, mostly one quarter s Euro note coupon and one half-yearly Sterling note interest payment, lower than last year which had a longer initial period on the sterling note. 14
Debt and Leverage LTM EBITDA continued to improve from the low point following summer 2012. Credit metrics improved over Q1 last year. Q4 2011 Q4 2012 Q1 2012 Q1 2013 LTM EBITDA m 93 91 84 97 Proforma adjustments (1) m 10 6 10 4 Proforma LTM EBITDA m 103 97 95 101 Net Debt m 434 450 478 500 Net Debt to EBITDA 4.2x 4.6x 5.0x 4.9x Fixed Charge Cover 2.6x 2.6x 2.4x 2.7x (1) Proforma adjustments are: - Q4 2011: 7m from 2011 Acquisitions and 3m Digital cost savings (phase 1) - Q4 2012: 3m Digital cost savings (phase 2) and 3m from New Sites - Q1 2012: 5m from 2011 Acquisitions, 3m Digital costs savings (phase 1) and 2m from New Sites. - Q1 2013: 3m Digital costs savings (phase 2) and 1m from New Sites. 15
Printworks Gallery after refurbishment 2013 Q1 Activity Highlights Development of initiatives across the estate continued in Q1, and is continuing to deliver good returns. Big Screen and Big Sound Innovation: we added 1 new isens auditorium in Spain (Equinoccio). Retail Innovation 1 new Costa Coffee shop in UK (Birmingham Broadway). 1 more Croma pizzeria restaurant opened in the UK (Loughborough). 5 new Yogurt units opened in CE, following the successful trial performance in Spain. The new units opened in Q1 2013 are 3 in Spain (Diagonal Mar, Mendez Alvaro and Los Barrios) and 2 in Italy (Milano Fiori and Roma Est). Refurbishment of the Gallery Bar in Manchester Printworks cinema. 4D trial continued at Liverpool One (July 2012), and Metrocentre (November 2012). VOD platform launched in Spain in Q4 2012, in partnership with Canal + Yomvi trial continues. Both 4D and VOD are in their early stages; their potential and performance will become clearer during 2013. 16
Loyalty scheme / Social Media Continuing focus on knowing our customers, capturing their behavior and learning from it. In Q1 2013 we have already more than 8m records in our total customer database across all territories (loyalty and CRM Members), increasing by almost 14% vs prior year. Development of Social Media strategy, with number of Facebook fans increasing by 160% in 2012, and achieving a level of 911k by Q1 2013. TOTAL GROUP 2010 2011 2012 Full Year Quarter 1 Var. 2012 vs 2011 2012 2013 Var. vs 2012 Total Loyalty Members 2,427 3,474 4,349 25% 3,700 4,528 22% Total CRM Members 3,945 3,959 4,142 5% 4,008 4,195 5% Total Customer Database 5,901 6,819 7,788 14% 7,040 8,021 14% Facebook Fans - 330 859 160% - 911 - Figures in ( 000s) * CRM base shows small increases, as members migrate to loyalty 17
2012 and Estimated 2013 Top 20 Title Phasing Top 7 films of each year in red. UK Slate Phasing 2012 Top 20 2013 Anticipated Top 20 Q1 Woman in Black Life of Pi (1) 3D The Best Exotic Marigold Hotel Les Miserables War Horse Wreck-It Ralph 3D The Muppets The Croods 3D Q2 The Hunger Games Iron Man 3 3D Prometheus 3D Star Trek Into Darkness 3D The Avengers 3D Fast and Furious 6 Men In Black 3 3D The Great Gatsby 3D The Pirates! In An Adventure With Scientists 3D The Hangover Part III American Pie Reunion Man of Steel 3D Despicable Me 2 3D Q3 The Dark Knight Rises Monsters University 3D Ted The World s End Ice Age: Continental Drift 3D The Wolverine 3D The Amazing Spiderman 3D The Smurfs 2 3D Brave 3D The Lone Ranger Q4 Skyfall (Bond 23) Turbo 3D The Hobbit: An Unexpected Journey 3D Thor: The Dark World 3D Twilight Saga: Breaking Dawn Part II Hunger Games: Catching Fire Madagascar 3 3D The Hobbit: The Desolation of Smaug 3D Taken 2 (1) Life of Pi was released in Q4 2012 Product for 2013 seems to be better phased across the year 18
Current trading & Outlook For Q2, April started softer, mainly due to Easter phasing (falling entirely in March this year vs April in 2012) combined with a weaker film slate. Stronger films are expected in the second half of Q2, with the releases of Iron Man 3, Star Trek Into Darkness, Fast and Furious 6, The Great Gatsby, Hangover III, Man of Steel and Despicable Me. Absence of major sporting events will also contribute to improve the results vs 2012, when the European Football Championship impacted negatively on the admissions in June. We continue to monitor closely the Spanish market since the 13% VAT increase in September 2012, in order to assess the impact on attendance. Initial analysis shows volume impact of between 4% and 5%. 3D admissions YTD April increased by 8% for the group vs last year, representing 15% of the total attendance vs 14% prior year. Later in the year, 3D slate is expected to be better than in 2012, with 14 films in 3D within the estimated Top 20 of the year 2013, compared to 9 films in 2012. The film slate for the remainder of the year looks good, including several sequels to established franchises, such as Monsters University, The Smurfs, The Hunger Games and The Hobbit, and some interesting new titles like World War Z, The Lone Ranger and Turbo. It is anticipated that 5 further new cinemas will be added during the year: Gualtieri opened in Italy in May; the balance will be in the UK and Ireland market. We will also continue our retail initiatives strategy, to grow revenue per head. 19
Q&A & AOB Any questions? Further questions can be addressed below: Email: investors@odeonuk.com PR: odeonteam@redconsultancy.com Financial PR: Andrew Dowler, Finsbury +44 (0) 20 7251 3801, andrew.dowler@finsbury.com Telephone: Jonny Mason +44 (0) 20 7321 6221 20
Save the date Special screening of The Lone Ranger for Investors, including partners and children. When? Monday 12 th of August at 5pm Where? at our recently refurbished Odeon Greenwich cinema Email invites will be circulated nearer the event s date 21
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