ODEON & UCI CINEMAS GROUP

Transcription

1 ODEON & UCI CINEMAS GROUP Odeon & UCI Finco plc Financial Results for the three months to 31 March 2012

2 Table of Contents Page Presentation of Financial Data 3 Commentary on Results 4 Unaudited Condensed Consolidated Financial Statements: Profit & Loss Account 8 Cashflow Statement 8 Balance Sheet 9 Notes to the Financial Statements 10 Odeon & UCI Finco plc Group Financial Results for 2012 Q1 2

3 Presentation of Financial Data This report summarises consolidated financial and operating data derived from the unaudited consolidated financial statements of Odeon & UCI Bond Midco Ltd ( Odeon Midco ). The summary financial information provided has been derived from our records for the accounting periods to March 2012, which are maintained in accordance with UK GAAP. These interim results are not necessarily indicative of results to be expected for the full year. The report includes the period prior to the closing of the notes offering by Odeon & UCI Finco plc, which took place on 24 May 2011 ( closing ). On that day, Odeon Midco became the parent company of the trading entities in the Odeon & UCI Cinemas operating group. Merger accounting under UK GAAP is applied in these accounts with regard to the 2012 information presented. Prior to closing, the group owed shareholder debt to Odeon and UCI Cinemas Group Limited ( OUCGL ). Interest on the shareholder debt was accrued by the acquired group up to 24 May Following closing, Odeon Midco group has no shareholder debt and thus no shareholder interest payable. A summarised corporate structure chart was presented in the Offering Memorandum, showing the structure subsequent to 24 May The comparative information presented in this report is for OUCGL, consistent in approach with the notes Offering Memorandum. We have presented certain non GAAP information in this quarterly report. This information includes EBITDA, which represents earnings before interest, tax, depreciation, amortisation and one off exceptional and strategic items. 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. Also presented in this report is pro forma financial data which has been prepared to give an indication of full year pro forma results for the completed acquisitions. The pro forma financial data is for information purposes only, and does not purport to present what our results of operations and financial condition would have been had these transactions actually occurred on these dates, nor does it project our results of operations for any future period or our financial condition at any future date. While the pro forma financial data has been derived from historical financial information prepared in accordance with UK GAAP, it should not be considered in isolation from or as a substitute for our historical financial information. Some information presented in this report is described as Like For Like ( LFL ). This information excludes any cinemas trading in the group in the period or the comparative period but not in both. Odeon & UCI Finco plc Group Financial Results for 2012 Q1 3

4 Commentary on Results Odeon & UCI Cinemas Group is pleased to announce its results for the first quarter of Markets and Films Film phasing in 2012 so far has been quite different from the prior year. Market volume* was down 16% in quarter 1, but up 25% in quarter 2 to date. Year on year change Q1 * Q2 to date Market volumes (16%) 25% Attendance LFL (16%) 25% Revenue LFL** (14%) 26% Revenue Total (2%) 32% In the first quarter, there were no break out, surprise films, in contrast to King s Speech and Che Bella Giornata in 2011, Avatar in 2010 and Slumdog Millionaire in In fact, in 2012, there were some significant film disappointments, most notably John Carter. The weaker slate was exacerbated by unfavourable weather, with snow in February in Italy and the UK, and long very warm spells in March in the UK and Italy and throughout the quarter in Spain. The strongest films in the UK were Women in Black ( 21m) and War Horse ( 19m), compared to last year s King Speech ( 45m) and Tangled ( 20m). In Spain this year the strongest film was Sherlock Holmes (1.3m) compared to Torrente 4 last year (2.3m), and in Italy this year the strongest film was Benvenuti Al Nord (4.7m) compared to Che Bella Giornata last year (7.6m). Only Germany of our main markets had a comparatively strong film this year, with Intouchables (7.1m). In the second quarter to date the slate has been stronger, in particular with the notable success of Avengers. The weather has also been more favourable to cinemas, with some overcast and rainy spells across most of Europe. For the rest of the year, there will be further phasing differences because of the European football championships and the Olympics, but overall the slate looks strong compared to prior year, including in particular: Batman, Ice Age, Spiderman, Hobbit and Bond. Financial results Relative to this level of market volume, financial results in the first quarter were good. Revenues per head increased, gross margin improved and operating costs were tightly controlled. The acquisitions of 2010/2011 are well integrated and contributed strongly. * As an average of our 4 main markets weighted by our attendance Estimate to 24 th May ** Constant fx rates. Odeon & UCI Finco plc Group Financial Results for 2012 Q1 4

5 Three months ended 31 Mar % change Paid Attendance (millions) (0.9%) Group turnover ( millions) (2.2%) Average ticket price (1) (2.1%) Retail revenue per head (1) % EBITDA (2) ( millions) (38.1%) Like for like (LFL) comparisons (3) Paid Attendance LFL (millions) (15.7%) Group turnover LFL ( millions) (15.5%) Average ticket price LFL (1) % Retail revenue per head LFL (1) % EBITDA LFL (2) ( millions) (49.0%) KPIs (1) Comparatives stated at constant fx rates and constant territory weighting, for major territories. (2) Earnings before interest, tax, depreciation, amortisation and one off exceptional and strategic items. (3) LFL information excludes any cinemas trading in the group in the period or the comparative period but not in both. Total attendance was close to prior year, as the impact of lower markets was offset by contribution from acquisitions. LFL attendance was down 15.7%, in line with market volume, despite a lower proportion of 3D, where we have a relatively strong share, and a higher proportion of art house product, where the independent chains play strongly. Average ticket price (1) ( ATP ) LFL was flat year on year as the lower proportion of 3D was offset by underlying increases, including the beneficial impact of investments. The proportion of 3D has recovered strongly in quarter two to date. ATP on total estate declined year on year, reflecting the mix effect of including the new acquisitions with lower ATP, before the full impact of profit improvements has been delivered. Retail revenue per head (1) ( RPH ) was 3.7% up (LFL). Last year was impacted by film mix which attracted customer types that spend less on retail, particularly The King s Speech and strong local product in Italy. The year on year uplift was also supported by successful implementation of initiatives such as Costa Coffee. The following comments relate to the financial statements set out on pages 8 to 10. Profit & Loss Account (page 8) Total turnover was down 0.5% at constant foreign exchange rates ( fx ), as the lower markets, were offset by growth from acquisitions. Total turnover was 2.2% down at actual historic fx. LFL turnover was down 14.1% at constant fx, as a combination of the lower market volumes offset by the growth in RPH. Gross profit margin (LFL) improved from 65.3% to 66.6%, primarily from lower film hire rates (% of box office revenue) due to the variety and mix of films. In the prior year, the attendance was focused on a smaller number of bigger titles, which can lead to higher film hire rates. Operating costs in the LFL estate, at constant fx, decreased by 2.8%, demonstrating firm cost control despite inflationary pressures. Staff costs in particular were well controlled and flexed in response to lower attendance volumes. Total operating costs for the quarter increased by 10.2% because of the acquisitions. Odeon & UCI Finco plc Group Financial Results for 2012 Q1 5

6 EBITDA and EBITDA margin decreased significantly in the quarter because of the impact of lower market volumes on a partly fixed cost base. EBITDA margin** decreased from 14.3% to 8.9%. LFL EBITDA margin** decreased from 14.0% to 8.3%. Q1 EBITDA was 14.7m (down 38%) and LFL was 11.7m (down 49%, or 48% at constant fx). One off costs were 1.0m in the quarter. These include costs that relate to the trial or development of potential new business, pre opening costs of new sites, staff restructuring resulting from the digital roll out and integration costs resulting from acquisitions. Depreciation and amortisation of 17.0m increased by 2.8m principally because of the increased size of the estate following acquisitions and investment in capital expenditure. Interest reported in the profit & loss account contained both cash payable and non cash elements. The cash payable element in the quarter was primarily 10.7m on the senior secured notes and commitment fees, plus local bank charges and finance lease interest. The non cash element was primarily amortisation of capitalised issue costs relating to the senior secured notes and revolving credit facility and the unwinding of discounts on provisions. Interest payable on shareholder debt was 9.2m in 2011 Q1 but nil in 2012 Q1. Following closing on 24 May 2011, Odeon Midco group has no shareholder debt and thus no shareholder interest payable. The tax charge for the quarter was 0.5m. Cashflow Statement (page 8) Total interest paid in the quarter was 23m. A large part of the 2011 senior secured notes interest was accrued in 2011, but only paid in 2012 Q1, because the first Sterling interest payment date was 1 February In addition, one quarter s Euro note floating interest and swap payments were made. 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 17m in the quarter. The cash flow on working capital was negative in the quarter, resulting from the seasonal outflow in the first quarter and lower trading levels. Last year s first quarter working capital benefited from 30m of advance ticket sales for summer performances, which was not repeated this year. Net debt increased by 44m in the quarter. It is normal for net debt to rise in the first quarter because of the seasonal trading patterns. Closing cash was 29m. Digital refunds on capex spent of 18m are expected during Balance Sheet (page 9) The March 2012 balance sheet consolidates the financial position of the acquisitions that completed during 2011, hence the significant year on year increase in fixed assets. The larger size of the group also contributed to the increase in current assets. Debtors due after more than one year decreased by 28m year on year primarily because the group reported at March 2011 (OUCGL) included a 31m receivable from the PropCo group, whereas at March 2012 this receivable is outside the reported (Bond Midco) group. Despite the larger size of the group, current liabilities decreased year on year largely because March 2011 deferred income was higher due to advance ticket sales. ** Constant fx rates. Odeon & UCI Finco plc Group Financial Results for 2012 Q1 6

7 Non current liabilities decreased by 153m year on year for a combination of reasons, principally: shareholder debt was nil at March 2012 (Bond Midco group) compared to 362m reported at March 2011 for the OUCGL group senior secured notes payable at March 2012 were 179m higher than bank debt payable at March 2011, net of capitalised issue costs other non current liabilities increased by 30m, principally in the deferred income category, which includes non cash accounting balances relating to externally funded digital assets, as described in the audited statutory accounts. The Bond Midco group showed a 16m net asset position at March 2012 compared to the net liability position ( 260m) at March 2011 for the OUCGL group, primarily due to the different capital structure established for the Bond Midco group, which contains no shareholder debt. Estate Development Activity Acquisitions were completed in 2010 and 2011 of 26 cinemas and 297 screens, representing growth in estate of 13% and 16% respectively. The aggregate full year EBITDA of these acquisitions is estimated by management to be approximately 17m. Actual EBITDA consolidated in 2011 was 10m and a further 3m was delivered in Q In the first quarter: The Whiteleys cinema in London was closed for redevelopment during late 2011 and reopened in January It now includes The Lounge, our unique, luxury in cinema dining offer with reclining leather seating and at seat service of fine food and drink. The Point, Dublin (6 screens) opened in March Parc Valles, Barcelona (24 screens); Festival Park, Mallorca (20 screens); and Maidstone (8 screens) were refurbished in the quarter, with Greenwich in process. Approximately 97% of our screens were digital by the end of March. Six more of our proprietary isens screens, eight new Costa Coffee locations and further yoghurt, coffee and pick n mix walls were added in the quarter. At the end of March, the group operated 2,140 screens at 230 cinemas. Outlook Management are confident about the group s prospects. The film slate was weaker for Q1 as was expected, but Q2 to date has been strongly ahead of previous year. The Euro 2012 football championship in June and the London Olympics in August will impact phasing, but the film slate for the balance of the year looks strong. The acquisitions of 2010/2011 are well integrated and provide further opportunity for growth in turnover and EBITDA and, in the medium to long term, the underlying strength of the industry and the group s number one position in Europe provide significant opportunities. Estimated at 24 th May Odeon & UCI Finco plc Group Financial Results for 2012 Q1 7

8 Unaudited Condensed Consolidated Profit & Loss Account millions Three months ended 31 Mar Group turnover Cost of sales (58.6) (55.1) Gross profit Operating costs (58.5) (62.8) Rent (b) (28.2) (32.8) EBITDA Strategic one off costs (0.5) (0.3) Depreciation and amortisation (14.2) (17.0) Operating profit/(loss) before exceptional items 9.0 (2.6) Exceptional costs (0.4) (0.7) Operating profit/(loss) 8.5 (3.3) Share of operating profit/(loss) of joint ventures (0.1) (0.2) Profit/(loss) on disposal of properties (0.1) (0.0) Profit/(loss) on ordinary activities before interest and taxation 8.3 (3.5) Interest receivable from related parties 0.3 Interest payable and similar charges (b) (7.2) (13.8) Interest payable on shareholder debt (c) (9.2) Profit/(loss) on ordinary activities before taxation (7.8) (17.3) Taxation (1.7) (0.5) Profit/(loss) on ordinary activities after taxation (9.5) (17.9) (a) (b) (c) (d) 2011 comparative information shown is Odeon & UCI Cinemas Group Ltd, consisent in approach with the notes Offering Memorandum. Included above are P&L charges in relation to PropCo group leases as follows: within Rent (operating leases) within Finance cost (finance leases) Interest on shareholder debt was accrued up to 24 May 2011 by the group acquired by Bond Midco. The Bond Midco group has no shareholder debt or associated interest subsequent to 24 May See further explanation on page 3. Includes defined benefit pension scheme funding. Unaudited Condensed Consolidated Cashflow Statement millions Three months ended 31 Mar EBITDA Movement in working capital, provisions and similar items 24.6 (17.3) Net cash flows from capital expenditure and sale of fixed assets (8.0) (17.2) Acquisitions and disposals (0.1) Net interest paid (d) (6.1) (23.3) Financing fees paid (1.2) (0.7) Taxation paid (0.1) (0.0) (Increase)/decrease in net debt 32.8 (43.9) Borrowing (repayment)/drawdown Net increase/(decrease) in cash 32.8 (43.9) Cash balance, beginning of period Foreign exchange movements 0.7 (0.0) Cash balance, end of period Odeon & UCI Finco plc Group Financial Results for 2012 Q1 8

9 Unaudited Condensed Consolidated Balance Sheet millions At 31 March Note Fixed assets Intangible assets Tangible assets Investments Current assets excluding cash Cash Debtors due after more than one year Current liabilities 2 (167.6) (144.4) Total assets less current liabilities Non current liabilities 3 (748.6) (595.9) Net (liabilities)/assets (260.0) 16.0 Capital and reserves Share capital and premium Reserves (356.4) (533.1) (260.0) 16.0 (a) 2011 comparative information shown is Odeon & UCI Cinemas Group Ltd, consistent in approach with the notes Offering Memorandum. Odeon & UCI Finco plc Group Financial Results for 2012 Q1 9

10 Unaudited Condensed Notes to the Financial Statements millions Note 1 Current assets excluding cash At 31 March Stocks Prepayments and accrued income Other debtors due within one year Note 2 Current liabilities At 31 March Bank loans and overdrafts 6.2 Trade creditors Finance leases Other creditors, accruals and deferred income Note 3 Non current liabilities At 31 March Bank loans and overdrafts Finance leases Loan notes due to shareholders Senior secured notes Other creditors, accruals and deferred income Bank loans and overdrafts are stated net of unamortised issue costs of 8.4m at March Senior secured notes are stated net of unamortised issue costs of 18.4m at March Note 4 Net debt summary At 31 March Bank loans and overdrafts (current liabilities) Note Bank loans and overdrafts (non current liabilities) Note Senior secured notes Note Unamortised issue costs Note Finance leases (current liabilities) Note Finance leases (non current liabilities) Note Cash (69.9) (29.1) Net Debt (a) 2011 comparative information shown is Odeon & UCI Cinemas Group Ltd, consistent in approach with the notes Offering Memorandum. Odeon & UCI Finco plc Group Financial Results for 2012 Q1 10