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2014 Q3 INVESTOR PRESENTATION
26 November 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 Q3 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
Mark Way
Group Chief Financial Officer
Ian Shepherd
Group Chief Commercial Officer
SUMMARY
4
Q3 2014
• Q3 market volumes were more stable (down 3% in aggregate) than the challenging conditions in Q2.
• Despite lower markets, we delivered Q3 EBITDA of £3.8m (Q3 2013: £5.2m).
• Our strategic actions are driving business performance in weak markets:
– Group market share improved.
– Retail per head (RPH) improved 2.5%.
– Strong cost management – indirect costs down.
• Increase in net debt is £10m smaller than last year, benefiting from better working capital and lower finance costs.
YTD increase in net debt better than last year, despite lower EBITDA.
• Liquidity remains comfortable with £38m RCF headroom as at Q3.
Looking forward
• Q4 will be the strongest quarter of the year with a good film slate, but FY2014 will still be a low market volume year
for most of our territories.
• 2015 and 2016 film slate outlook remains strong – we are well placed to benefit from our operational leverage.
• Implementation of strategic change programmes is progressing well.
MARKETS AND FILMS
5
Millions Q3 Vs LY YTD Vs LY
Spain 21.4 - 65.0 +16%
UK 38.2 (6%) 115.0 (8%)
Germany 29.5 +13% 86.0 (4%)
Italy 14.5 (5%) 67.5 (2%)
Average weighted market movement (1) (3%) (3%)
Q3 MARKETS DOWN 3% IN AGGREGATE
(1) Change in group weighted average market attendances (all Odeon & UCI territories).
The start of the quarter was affected by unseasonably good weather and a weak slate, particularly a lack of
family films, as distributors avoided clashes with the final stages of the World Cup.
‐ Germany ahead: The successful French arthouse title, Qu’est-ce Qu’on A Fait Au Bon Dieu, and other strong
titles more than offset the impact of the World Cup football.
‐ Spain flat: Following the Q2 local record breaker, Ocho Apellidos Vascos, Q3 saw the release of another
strong local title, El Niño (market 1st). Together with Dawn Of The Planet Of The Apes (2nd) and box office
promotions, a weaker mid range slate was offset.
‐ UK down: August improved, with The Inbetweeners 2 and other strong titles. However, September saw warm
weather and had no particular stand-out releases.
‐ Italy down: Lack of strong releases, warm weather and weak economy.
6
Q3 MARKET HISTORY BY TERRITORY
• UK -6%
Some strong top titles, but mid-
range films weaker than last
year and unseasonably warm
September.
• Spain flat
Stronger top films, including
local hit El Niño, broadly offset
a less robust mid-range slate.
• Germany +13%
Stronger line-up of films vs
2013.
• Italy -5%
Lowest Q3 since 2001. Quiet
release schedule, particularly
around World Cup, and warm
weather in September. Q3 7 year average 7
51.6 44.750.4 50.5
41.940.5 38.2
0
10
20
30
40
50
60
2008 2009 2010 2011 2012 2013 2014M
arke
t A
tt. (
m)
UK Q3 Markets31.8
26.1 27.325.1 24.1
21.4 21.4
0
5
10
15
20
25
30
35
2008 2009 2010 2011 2012 2013 2014
Mar
ket
Att
. (m
)
Spain Q3 Markets
31.4
38.7
34.035.0
30.2
26.1 29.5
05
1015202530354045
2008 2009 2010 2011 2012 2013 2014
Mar
ket
Att
. (m
)
Germany Q3 Markets18.1 17.2
18.216.9 16.1
15.314.5
02468
101214161820
2008 2009 2010 2011 2012 2013 2014
Mar
ket
Att
. (m
)
Italy Q3 Markets
LONG TERM MARKET STABILITY
8
10 year market history demonstrates that variations over 1 or 2 years are not generally evidence of long term trends
2014E is the estimated full year 2014 position.
60
80
100
120
140
160
180
Mark
et A
ttendance (
m)
UK Spain Germany Italy
• Top 5 films were 45% higher in GBOR terms compared to last year, but the rest of the titles were weaker, leading
to a 1% increase in the overall market GBOR and a 6% fall in attendance.
• The mix of films was quite different, with fewer strong family films than 2013.
BOX OFFICE SAW 45% GROWTH IN UK & IRELAND TOP 5 MOVIES
9
Q3 2013 market GBOR £m Q3 2014 market GBOR £m % change
1 Monsters University 30 1 The Inbetweeners 2 33
2 Despicable Me 2 27 2 Dawn of the Planet of the Apes 33
3 The Wolverine 14 3 Guardians of the Galaxy 28
4 The Smurfs 2 12 4 How to Train Your Dragon 2 21
5 The Conjuring 10 5 Transformers: Age of Extinction 19
Top 5 93 Top 5 135 +45%
Total market (GBOR) 277 Total market (GBOR) 278 +1%
Total market (Attendance m) 40.5 Total market (Attendance m) 38.2 (6%)
Family films highlighted in blue font
WE SAW ANOTHER STRONG LOCAL TITLE IN SPAIN
Q3 2013 market attendance (m) Q3 2014 market attendance (m) % change
1 Despicable Me 2 2.1 1 El Niño 2.3
2 World War Z 1.8 2 Dawn of the Planet of the Apes 2.1
3 The Smurfs 2 1.6 3 How to Train Your Dragon 2 1.6
4 Now You See Me 1.6 4 Lucy 1.6
5 Elysium 1.2 5 Guardians of the Galaxy 1.3
Top 5 8.3 Top 5 8.9 +7%
Total market 21.4 Total market 21.4 -
Local titles in bold 10
• The local film El Nino performed very strongly in Spain.
• The top 5 films were 7% up on last year but overall the market was flat.
A TOUGH QUARTER FOR THE ITALIAN MARKET
Q3 2013 market attendance (m) Q3 2014 market attendance (m) % change
1 Monsters University 1.5 1 How to Train Your Dragon 2 1.4
2 The Wolverine 0.8 2 Transformers: Age of Extinction 1.3
3 Elysium 0.8 3 The Fault In Our Stars 0.9
4 Now You See Me 0.8 4 Dawn of the Planet of the Apes 0.8
5 Turbo 0.8 5 Lucy 0.6
Top 5 4.8 Top 5 4.9 +2%
Total market 15.3 Total market 14.5 (5%)
11 No Top 5 local titles
• Although the Top 5 films were up on last year, similar to other territories there was a lack of strength in the rest of
the slate, leading to an overall drop of 5% compared to last year.
GERMANY SAW STRONG GROWTH IN TOP 5 AND IN OTHER FILMS
Q3 2013 market attendance (m) Q3 2014 market attendance (m) % change
1 Hangover Part III 3.4 1 Qu’est-ce Qu’on A Fait Au Bon Dieu 2.8
2 Fast & Furious 6 2.3 2 How to Train Your Dragon 2 2.5
3 Iron Man 3 1.4 3 Transformers: Age of Extinction 2.4
4 Star Trek: Into Darkness 1.0 4 Lucy 1.6
5 The Great Gatsby 1.0 5 Guardians of the Galaxy 1.6
Top 5 9.1 Top 5 10.8 +20%
Total market 26.1 Total market 29.5 +13%
12
• The market increased 13% compared to last year, with the Top 5 performing particularly strongly (20% up).
INCREASING WEIGHT OF CUSTOMER PROMOTIONS
13
RETAIL OFFERS TO ENCOURAGE SPEND
14
FINANCIAL HIGHLIGHTS
15
FINANCIAL HIGHLIGHTS
(1) At constant fx rate (2) At constant fx rate and constant territory weighting.
• ATP - UK was well ahead, boosted by a more adult slate, stronger IMAX and alternative content. Germany
was particularly strong, benefiting from stronger 3D, price rises and film mix. These factors offset continued
competitive pricing in Spain and increased UK promotional activity.
• RPH - UK and Germany up strongly in the quarter and YTD. Spain remained price sensitive, although Italy
saw an improvement due to favourable film mix.
• Total Revenue - only down 1.0% despite paid attendance falling 1.5%.
16
QUARTER 3 YEAR TO DATE
Q3 vs LY Fav/(Adv)
YTD Q3 vs LY Fav/(Adv)
Paid Attendance (m) 17.6 (1.5%) 55.3 (3.0%)
Average Ticket Price(2)
(£) (ATP) 5.57 +0.1% 5.67 (2.2%)
Retail Revenue per Head (2)
(£) (RPH) 2.12 +2.5% 2.02 2.0%
Total Revenue(1)
(£m) 146.6 (1.0%) 463.8 (5.4%)
FINANCIAL HIGHLIGHTS
• Gross Profit Margin(1) declined slightly - largely due to a higher film hire rate from a higher weighting of big films.
YTD margin slightly up on last year.
• Operating Costs lower - with ongoing benefits from strong cost management (5% FTE reduction year-to-date).
• EBITDA down slightly - with strong cost control mitigating lower Gross Profit.
(1) At constant fx rate 17
QUARTER 3 YEAR TO DATE
2014 2013 2014 2013
Group Revenue(1)
(£m) 146.6 148.0 463.8 490.2
Gross Profit(1)
(£m) 94.2 97.1 300.7 316.9
Gross Profit Margin(1)
(%) 64.2% 65.6% 64.8% 64.7%
Operating Costs (1)
(£m) 90.4 91.7 277.7 280.9
EBITDA (£m) 3.8 5.2 23.0 36.0
CASH FLOW AND NET DEBT MOVEMENT
£m 2014
Q3
2013
Q3
2014
YTD
2013
YTD
EBITDA 3.8 5.2 23.0 36.0
Working capital and other (2.1) (9.6) (33.9) (44.1)
Net capital expenditure (6.8) (7.5) (16.4) (24.0)
Provisions and one offs (3.2) (3.1) (10.5) (9.5)
Finance costs (17.5) (20.9) (43.4) (48.6)
Tax (paid)/received 0.0 (0.2) 0.6 (0.8)
Acquisitions & disposals 0.2 0.0 (0.4) (0.6)
FX and other 3.6 3.7 11.7 (1.7)
(21.9) (32.4) (69.1) (93.3)
Propco 0.0 0.0 16.5 0.0
Change in net debt (21.9) (32.4) (52.6) (93.3)
Memo: RCF Headroom 37.7 17.8
• Seasonal increase in net debt for Q3 was
£10m better than last year.
• YTD net debt increase was significantly
better than last year.
• Working capital movement was better
and capital expenditure was tightly
controlled.
• Finance costs in the quarter and YTD
were better than last year, benefiting from
the new swap rate which began in May.
• Foreign exchange (FX) rate movements
reduced net debt expressed in Sterling.
• YTD position includes £16m additional
cash following Propco group disposals.
18
• LTM EBITDA remained broadly unchanged from Q2.
• Net debt increased in the period following the seasonal outflow in working capital and the payment of both
Sterling and Euro bond interest.
• We expect leverage to improve as a result of stronger market volumes in 2015 and 2016.
• No maintenance covenants in our facilities.
DEBT AND LEVERAGE
19
2013
Q3
2013
Q4
2014
Q1
2014
Q2
2014
Q3
LTM EBITDA £m 90 69 67 57 56
Proforma adjustments(1) £m 2 3 2 2 2
Proforma LTM EBITDA £m 92 72 69 59 58
Net Debt £m 544 436 456 467 489
Net Debt to EBITDA 5.9x 6.1x 6.6x 7.9x 8.4x
Fixed Charge Cover 2.5x 1.9x 1.9x 1.6x 1.6x
(1) Proforma adjustments for 2014 Q3 relate to digital cost savings and new sites.
FUTURE FILM SLATE
20
2013 AND 2014 Q4 FILM RELEASE PHASING – UK
2013 Top 50 2014 Estimated Top 50
Q4 Oct Captain Philips Gone Girl
Cloudy With A Chance Of Meatballs 2 Teenage Mutant Ninja Turtles
Turbo Fury
Maze Runner
Annabelle
Nov Thor: The Dark World The Hunger Games: Mockingjay Part 1
Gravity Interstellar
The Hunger Games: Catching Fire Nativity 3: Dude Where’s My Donkey?
Philomena The Imitation Game
Mr Turner
Dec Frozen The Hobbit: The Battle Of The Five Armies
The Hobbit: The Desolation Of Smaug Paddington
Anchorman 2 Penguins Of Madagascar
Night At The Museum: Secret Of The Tomb
Horrible Bosses 2
Top 5 (potential) films of each year in bold 21
2014 Q4 LOCAL CONTENT LOOKS ENCOURAGING
22
Spain Germany Italy
Oct Torrente 5 Männerhort Il Giovane Fovoloso
Nov Andiamo A Quel Paese
Dec Mortadelo y Filemón Alles Ist Liebe Un Natale Stupefacente
Der Kleine Drache
Kokosnuss Il Ricco, Il Povero e Il Paggiordomo
Honig Im Kopf Il Ragazzo Invisibile
These are our current expectations of the top 5 film releases for each quarter (based on year of release in the UK) – all subject to timing changes, deletions and additions.
Films with expected GBOR greater than £30m highlighted in red.
(1) The Minions Movie is expected to be released in June, but the performances will continue into Q3.
FILM SLATE 2015
23
Q1 Q2 Q3 Q4
Fifty Shades of Grey Avengers: Age of Ultron Ted 2 Bond 24
Big Hero 6 Jurassic World Inside Out Hunger Games
The Best Exotic Marigold Hotel 2 Fast & Furious 7 The Minions Movie(1) Star Wars Episode VII
Shaun the Sheep Movie The Minions Movie(1) Ant-Man The Jungle Book
The Theory of Everything Tomorrowland Pan The Good Dinosaur
FILM SLATE 2016
24
Batman v Superman | How To Train Your Dragon 3 | Finding Dory | Ice Age 5 | Planet of the Apes 3 |
Avatar 2 | Fantastic Beasts And Where To Find Them | Star Wars spinoff | Wicked
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.
CURRENT TRADING
25
• Q4 is very dependent on December, but has started ahead of last year:
• Gone Girl and Teenage Mutant Ninja Turtles played well in the UK
• Local product, Torrente 5, in Spain performed well
• Industry wide promotional event, Fiesta Del Cine (27-29 October) attracted 2.3m attendees compared to 1.9m
in a similar promotion in March
• In the key market of the group, UK gross box office market share improving(1)
• We expect Q4 as a whole to be similar to last year:
• Italy saw a record breaking title last November and #1 film of the year, Sole A Catinelle
• Germany saw stronger top product last November, including the local #1 film of the year, Fack Ju Gohte
• Concerns in Italy over the impact of a sluggish economy
• The recovery in Spanish cinema attendance is encouraging, but competition intense
CURRENT TRADING
26 (1) To mid-November
CINEMA DEVELOPMENT
27
ABACO SITES, SPAIN
28
PALARIVIERA, ITALY
29
MILTON KEYNES, UK
30
31
EDINBURGH, UK
• Pan-European segmentation model embedded in marketing systems
• Segment specific propositions for launch in 2015
• Early promotional initiatives bearing fruit in UK market share
Customer Segmentation
• Operational excellence programme designed
• Acquisition of low capex Spanish sites complete
• Continue review of performance across the estate
Estate Turnaround
• New multi-channel ticketing in retail platform is on track to launch in the UK for Q2.
• Wi-fi rolled out to UK cinemas
• Data and Insights investments underway to drive data capture and utilisation
Digital
• Vision, values and strategy cascaded in all markets
• Comprehensive People Strategy agreed
• Internal communications upgraded
People
• Programmes underway to improve key guest touch points
• New Retail head appointed to drive innovation and sales skills Guest Experience
We are making good progress in our strategic initiatives
32
SUMMARY
33
Q3 2014
• Q3 market volumes were more stable (down 3% in aggregate) than the challenging conditions in Q2.
• Despite lower markets, we delivered Q3 EBITDA of £3.8m (Q3 2013: £5.2m).
• Our strategic actions are driving business performance in weak markets:
– Group market share improved.
– Retail per head (RPH) improved 2.5%.
– Strong cost management – indirect costs down.
• Increase in net debt is £10m smaller than last year, benefiting from better working capital and lower finance costs.
YTD increase in net debt better than last year, despite lower EBITDA.
• Liquidity remains comfortable with £38m RCF headroom as at Q3.
Looking forward
• Q4 will be the strongest quarter of the year with a good film slate, but FY2014 will still be a low market volume year
for most of our territories.
• 2015 and 2016 film slate outlook remains strong – we are well placed to benefit from our operational leverage.
• Implementation of strategic change programmes is progressing well.
