Odeon & UCI Finco plc Q2 2012 Investor Presentation 15 Aug 2012 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
Q2 Up Year on Year Strong second quarter, with highest Q2 earnings yet achieved of 14m. In April and May, strong titles and favourable weather, attendance up 23%. In June, attendance down 27% year on year, in particular impacted by: European football championships. Weaker product. Continued hot sunny weather in Spain and Italy. For the rest of the year the film slate looks stronger, focussed on Q4: Potentially 7 of the top 10 films to play in the second half. No Harry Potter in Q3 this year, we have Bond and Hobbit in Q4. Q2 markets (1) up 2% Our Q2 Total attendance up 9% Our Q2 Total revenue (2) up 9% EBITDA (2) up 21% EBITDA up 14% (1) Weighted average of all our territories (2) Constant fx rates 4
Total Market by Territory Q2 2011 Q2 2012 Variance UK Attendance (k) 37,168 41,229 11% Germany Attendance (k) 28,316 29,036 3% Spain Attendance (k) 21,680 20,869 (4%) Italy Attendance (k) 20,930 20,053 (4%) Average Weighted Market Increase for group territories* 2% Group Paid Attendance (k) 16,674 18,221 9% Group LFL Paid Attendance (k) 16,451 16,591 1% April and May benefited from strong titles and favourable weather, especially Avengers and especially in the UK. June suffered from the European football championships (the semi finals and final were composed entirely of territories where we operate, with Spain and Italy competing in the final). The studios avoided the championships for their major releases. Group LFL attendance growth was slightly lower than market total which benefited from new site openings. Group total attendance growth well ahead of market. Market share* increased by over one percentage point to 18%. * Weighted average of all our territories 5
Markets in Q2 Avengers was strongest in the UK and American Pie in Germany. Continental Europe was impacted more by the football, and very warm weather in June in Spain and Italy. Film product in June was weaker than last year (Hangover, Pirates of the Caribbean, Fast and Furious) as distributors scheduled to avoid clashing with the European football championships. Prometheus and Snow White both played in June in the UK, but not in any other territory, where either one or both films are scheduled for later in the year. 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 m +33% UK + 11% +32% April May June -17% 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 m +10% Spain -4% -4% -17% April May June 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 m 2011 2012 Germany +3% +66% +10% -36% April May June 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 m 2011 2012 Italy -4% +45% -4% -46% April May June 2011 2012 2011 2012 6
Top Films Q2 - UK & Ireland Marvel s Avengers Assemble was the break-out film of the quarter, playing very strongly in the UK/ Ireland ( 51m) and beating former Marvel titles convincingly (Thor 14m, Iron Man 2 21m). Avengers 2 has been confirmed for 2015 release. UK/Ireland box office was strong (up 17%) with 3D and IMAX performing well. Top 5 UK & Ireland Titles in Q2 2011 m Top 5 UK & Ireland Titles in Q2 2012 m Pirates Of The Caribbean 32 Avengers Assemble 51 Hangover Part II 31 Prometheus 22 Fast & Furious 5 18 Men In Black 20 X-Men: First Class 14 The Hunger Games 17 Thor 14 American Pie: Reunion 17 Total 110 127 Top 5 Variance to Q2 2011 +15% Total Market 245 Total Market 287 Total Market variance +17% 7
Top Films Q2 - CE Avengers played strongly in all CE territories but not as strongly overall as Pirates last year. In Germany, American Pie played stronger, but not as strongly as Pirates and Hangover II last year, and this year films outside the top 5 played better. 2011 2012 Q2 Actual (Adm m) Q2 Actual (Adm m) Spain Pirates of the Caribbean 2.5 Avengers Assemble 2.3 Fast & Furious 5 1.5 Intouchables 1.5 Rio 1.3 The Hunger Games 1.3 Thor 1.2 Snow White and the Huntsman 1.2 Midnight in Paris 0.9 Lorax 1.2 Top 5 Total 7.4 Top 5 Total 7.5 +2% Total Market 21.7 Total Market / Variance from Q2 2011 20.9-4% Germany Pirates of the Caribbean 4.2 American Pie: Reunion 2.4 Hangover Part II 3.4 Avengers Assemble 2.2 Fast & Furious 5 2.4 Men In Black 3 1.9 Rio 1.6 The Hunger Games 1.5 Thor 1.1 Türkisch Für Anfänger 1.4 Top 5 Total 12.7 Top 5 Total 9.4-26% Total Market 28.3 Total Market / Variance from Q2 2011 29.0 +3% Italy Pirates of the Caribbean 2.3 Avengers Assemble 2.3 Fast & Furious 5 1.8 To Rome with Love 1.4 Hangover Part II 1.6 Dark Shadows 1.1 Habemus Papam 1.0 American Pie Reunion 1.0 Cars 2 0.8 Titanic 0.9 Top 5 Total 7.6 Top 5 Total 6.8-10% Total Market 20.9 Total Market / Variance from Q2 2011 20.1-4% 8
3D Quarterly Market Performance Q1 was a weak quarter for 3D films, but Q2 saw a strong recovery in the penetration of 3D showing how 3D uptake depends on the quality of 3D and its appropriateness for the title. Avengers and the Titanic rerelease did especially well in 3D. 3D share of our total Q2 attendance went up year on year by 2.8% points to 24.3%. Our market share of 3D remained higher than our total share in all territories. 35% 30% 25% 20% 32% Avatar Alice in Wonderland 18% 3D UK GBOR as a % of Total UK GBOR 31% 31% Avengers Titanic 21% 22% Toy Story 3 26% 24% 21% 15% 10% 10% 5% 0% Q1 Q2 Q3 Q4 2010 2011 2012 9
Q2 2012 Financial Highlights Year on year growth was driven by the acquisitions with EBITDA up 14%. LFL results in the second quarter increased in Attendance, Revenue and ATP. RPH performance was flat but YTD was up. Attendance: LFL up 1%, Total up 9%. Revenue (1) : LFL up 2%, Total up 9%. ATP (1) : LFL up 2% and YTD up 1%. RPH (1) : LFL flat but YTD up 2%. Screen Advertising in Q2 was below 2011, especially in the UK and Italy. Gross profit margin was down reflecting the lower Screen Advertising. Operating costs (1) : LFL down 1%, supporting an improved margin. Total up 6% because of acquisitions. EBITDA % (1) LFL improved 0.5% pts, Total up 0.8% pts year on year. (1) Stated at constant fx rate 10
Q2 2012 Margins and Costs LIKE-FOR-LIKE ESTATE TOTAL ESTATE m unless otherwise stated Q2 2011 Q2 2012 Variance from Q2 2011 Fav/(Adv) Q2 2011 Q2 2012 Variance from Q2 2011 Fav/(Adv) Group Revenue (1) 148.2 150.5 1.5% 150.7 164.7 9.3% Gross Profit (1) 96.6 97.1 0.5% 98.4 106.3 8.1% Gross Profit Margin (1) 65.2% 64.6% (64 bps) 65.3% 64.6% (74 bps) Operating Costs (1) 85.2 84.7 0.5% 86.9 92.4 (6.4%) EBITDA (1) 11.5 12.4 8.4% 11.5 13.9 21.1% EBITDA Margin (1) 7.7% 8.3% 52 bps 8.1% 8.4% 82 bps EBITDA (2) 12.2 12.4 1.5% 12.2 13.9 13.8% Q2 2012 gross profit margin was down on last year, primarily due to adverse Screen Advertising. Film Hire and Retail Margins were approximately flat. Operating Costs were managed tightly to reduce versus prior year on the LFL estate, leading to an improved EBITDA margin. (1) Variances stated at constant fx rate (2) Stated at historic fx On the total estate, revenue growth was driven by acquisitions. Gross profit margin was similarly impacted by lower Screen Advertising. Costs also increased because of the larger estate, but Q2 2012 EBITDA margin improved, helped by strong cost control and profit improvement programmes on the acquisitions. 11
Quarterly & Annual EBITDA Progression 2012 enjoyed the highest ever earnings in Q2, despite the weak June. 35.0 100 93.4 30.0 90 82.4 25.0 20.0 15.0 10.0 5.0 2007 2008 2009 2010 2011 2012 80 70 60 50 40 30 20 59.8 63.4 71.3 2007* 2008 2009 2010 2011 10 0.0 0 Q1 Q2 Q3 Q4 Full Year EBITDA has progressed strongly in recent years, but phasing each year varies * Proforma for full year PropCo rent 12
Q2 2012 Abbreviated Cashflow As at Q2 2011 Q2 2012 YTD 2012 m EBITDA 12 14 29 Working Capital (15) 11 (2) Net capital expenditure (10) (10) (27) Provisions, one offs & similar items (4) (4) (8) Net Finance Costs (26) (6) (30) Tax (1) (1) (1) Acquisitions and disposals (88) 0 0 Change in Net Debt (132) 4 (40) The cash flow on working capital was positive in the quarter, reversing some of the negative in Q1 and reflecting the stronger trading. Last year s second quarter working capital outflow reflected settlement of film hire following the stronger first quarter trading in 2011. The group continued to invest to grow future earnings and enhance the high quality of the existing estate. Net cash spend on capital expenditure was 10m in the quarter Total interest paid in the quarter was 6m primarily representing one quarter s Euro note floating interest and swap payments. The Sterling interest payment is made half-yearly in February and August. 13
Debt and Leverage Leverage remained flat at Q1 levels, reflecting the mid-year trough in working capital compared to year end. LTM EBITDA was also lower than year end because of different film slate phasing year on year. The long-expected digital refunds of 18m were received in July, marking the completion of the digital roll-out across the entire estate and the corresponding funding of it. Bond OM Q4 2011 Q1 2012 Q2 2012 LTM EBITDA m 82 93 84 86 Proforma adjustments m (eg. new acquisitions, digital) 15 10 9 6 Proforma LTM EBITDA m 97 103 93 92 Net Debt m 398 434 478 467 Net Debt / EBITDA 4.1x 4.2x 5.1x 5.1x Fixed Charge Cover 2.2x 2.3x 2.2x 2.2x 14
2012 Activity Highlights to date Refurbishments In the UK refurbishments were completed at Greenwich and Colchester. This brings the total number of cinemas refurbished over the last three years to 15, a significant improvement in the quality of the estate. In CE a refurbishment was completed at the former UGC site Mendez Alvaro in Spain. This concludes the current phase of 5 major refurbishments in CE over the last few years. Retail refurbishments have been completed at all sites acquired from Giometti and UGC Spain and Italy. Hurth Park Germany and MEC Austria retail were also refurbished in the quarter. Retail Innovation 4 additional Costas added in Q2, plus a further two in July, to bring total estate in UK and Ireland to 35. Launched two Danone frozen yoghurt offers in Spain. Farggi opened at Diagonal Mar in Barcelona, bringing the total to 4 in Spain. New CROMA Pizza restaurant opened in Tunbridge Wells cinema. Big Screen and Big Sound Innovation Opened 4 additional proprietary isens offers; two in Italy, one in Spain and one in Ireland. At the end of June we had 13 isens locations. Installed Dolby s new Atmos sound platform at Diagonal Mar in Spain which was the first installation in Europe. Digital Completed the digitalisation of all cinemas - on time and on budget. External funding of digital also completed. Growing alternative content slate e.g. 3D live Wimbledon. 15
Current trading & Outlook The film slate for the remainder of the year looks promising, mostly in Q4. It includes the release of some of the year s most anticipated films, and potentially 7 out of the top 10 for the year, such as: The Dark Knight, Spiderman, Ice Age, Bond, Twilight, Hobbit, Madagascar, as well as Brave, Ted and Bourne, many of which will be in IMAX. In July we took over the management of the BFI IMAX site at Waterloo in time for Batman, following the OFT s clearance of the deal*. Adds 0.5% BOR market share in the UK. Most successful IMAX Cinema in the World. We now manage the two most prominent destination cinemas in Central London Odeon Leicester Square & BFI IMAX. We have agreed the acquisition of the AMC Birmingham cinema. This is a site with an annual attendance of 700k and a UK BOR market share of 0.4%. This deal is subject to OFT clearance and we anticipate their verdict shortly. It is anticipated that six further new sites will open in 2012 namely Llanelli and Dorchester in the UK, Catania and Gualtieri in Italy, Puerto Venecia (Zaragoza) and Santiago in Spain. The Olympics impacted all our markets on the opening and closing nights, but attendance recovered in between. Our Central London sites were not disproportionately impacted. As part of their austerity measures, the Spanish government has announced that all cultural activities that enjoyed a discounted rate on VAT previously will have the national rate of 21% applied as of 1 st September. There is active lobbying across the whole industry seeking to reverse this decision. It is anticipated that the VAT increase will be passed on to the consumer. * - The OFT concluded that the management agreements did not constitute a merger event. 16
2011 versus 2012 Top 20 Title Phasing UK Slate 2011 Top 20 2012 Anticipated Top 20* Q1 The King s Speech Woman in Black Tangled 3D The Best Exotic Marigold Hotel Black Swan The Muppets Gnomeo & Juliet 3D War Horse Q2 The Hangover 2 The Hunger Games Pirates Of The Caribbean: On Stranger Tides 3D Prometheus 3D Fast & Furious 5 Kung Fu Panda 2 3D Bridesmaids The Avengers 3D Men In Black 3 3D American Pie Reunion The Pirates! In An Adventure With Scientists 3D Q3 Harry Potter & The Deathly Hallows Part II 3D The Dark Knight Rises The Inbetweeners Movie Ice Age: Continental Drift 3D Transformers 3 3D The Smurfs 3D Rise of Planet of the Apes The Amazing Spiderman 3D Brave 3D The Bourne Legacy Cars 2 3D Ted Q4 Twilight Saga: Breaking Dawn Part I Skyfall (Bond 23) Johnny English Reborn The Hobbit: An Unexpected Journey 3D Sherlock Holmes: A Game of Shadows Arthur Christmas 3D Adventures of Tintin: The Secret of the Unicorn 3D Twilight Saga: Breaking Dawn Part II Madagascar 3 3D Several of the key titles are due to be released in the second half of 2012 * Based on actual performance to June 2012 and anticipated performance for the remainder of the year. Top 7 highlighted. Note: Films playing across two years appear in the year of release, in the band corresponding to their expected full gross run based on Odeon forecasts 17
2013-2015 Hollywood Major Film Slate Current indications of future line up all subject to change, deletions, additions, delays and variance in box office estimates. GBOR Potential in UK m 40m + range The Hobbit Part 2 Bridget Jones' Baby Monsters University 2013 2014 2015 Robopocalypse The Hobbit Part 3 Bond 24 Avatar 2 Justice League of America The Avengers 2 Batman Reboot 25m + range Oz: The Great and Powerful Iron Man 3 Star Trek Sequel Despicable Me 2 Les Miserables Fast and Furious 6 The Hangover Part 3 Hunger Games: Catching Fire Dawn of the Planet of the Apes Transformers 4 The Amazing Spider-Man 2 Maleficent The Good Dinosaur The Hunger Games: Mockingjay 1 Inside the Mind (Pixar) The Hunger Games: Mockingjay 2 Paradise (Prometheus 2) Pirates of the Caribbean 5 Jurassic Park 4 15m + range The Smurfs 2 Thor 2 The Wolverine Man of Steel (Superman) Alan Partridge Movie The Lone Ranger The Great Gatsby Fast and Furious 6 World's End Captain America 2 Lego: Piece of Resistance Noah Rio 2 Guardians of the Galaxy Kung Fu Panda 3 How to Train Your Dragon 2 Fifty Shades of Grey Penguins of Madagascar Angry Birds The Chronicles of Narnia: Silver Chair Divergent The Smurfs 3 Bad Boys 3 Tintin: Red Rackham's Treasure Mission: Impossible 5 Terminator 5 18
Summary Earnings this year were our strongest ever for a second quarter, despite a weaker June. UK & German markets performed better than Spain and Italy. This was largely we believe due to football and warm June weather in Southern Europe, but we are watching the economic issues closely. Development activity and investment will continue to grow earnings with 9 refurbishments in 2012 and 8 new sites opening/takeovers scheduled for the second half of the year. We are looking forward to a strong slate in Q4, with Bond, Twilight, Hobbit and Madagascar and Life of Pi among others. 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 Q3 results to be announced w/c November 19 th 20