Odeon & UCI Finco plc - Amazon S3 · odeon & uci finco plc 1 q3 2012 investor presentation 27 nov...

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Odeon & UCI Finco plc 1 Q3 2012 Investor Presentation 27 Nov 2012

Transcript of Odeon & UCI Finco plc - Amazon S3 · odeon & uci finco plc 1 q3 2012 investor presentation 27 nov...

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Odeon & UCI Finco plc

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Q3 2012 Investor Presentation 27 Nov 2012

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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.

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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.

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This year, so far

First quarter was soft, due to weak film slate exacerbated by poor cinema-going weather.

Second quarter was our strongest second quarter ever, with strong titles and favourable weather in April and May, but much softer results in June due to the success of the European football championship and weaker slate in all territories.

Third quarter was a very weak market, heavily impacted by the Olympic games, a weak film slate and very warm and dry weather in Mediterranean area.

Fourth quarter is proving much stronger than prior year, with better slate and more favourable weather so far.

– The main film in Q4 2011 was ‘Twilight: Breaking Dawn Part I’

– By contrast, this year, in addition to ‘Twilight: Breaking Dawn Part II’, other major releases are ‘Skyfall’ and ‘The Hobbit’, with some interesting other titles such as ‘Madagascar 3’, ‘Taken 2’, ‘Life of Pi’ and ‘Argo’.

Markets for Oct+Nov (to date) are up 23% on last year for box office.

The phenomenal opening of ‘Skyfall’ has already broken records – especially in the UK, where its opening week box office was an all time record, and for Odeon was an all time record for a cinema chain on a single film in the UK. It is already the biggest grossing 2D film in UK history. Current full run projection for ‘Skyfall’ in UK is over £100m, comfortably the biggest UK box office success ever.

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Q3 was a poor quarter; Q4 has started strongly

Film slate in Q3 2012 was much weaker than previous year, exacerbated by the distraction of the Olympic and Paralympic games and poor cinema-going weather in Italy and Spain, causing market attendance drop.

– No film in 2012 of the scale of ‘Harry Potter 7.2’ in 2011, and no break-out film of the scale of ‘The Inbetweeners’.

– ‘The Dark Knight Rises’ and ‘Ted’ performed quite strongly across our territories, although did not hit the high volumes generated by main films in 2011.

– The timing of the European football championship followed by the Olympics compressed the film scheduling by the studios, who were keen to avoid the sporting events, and thus increased the cannibalisation of the major titles.

– Results impacted by Olympic and Paralympic games, which captured the interest of the public even more than expected, in particular in UK, but also in other European countries.

– Continual warm dry weather in Spain and Italy.

– Extreme heat in Spain in August (warmest August since 2003), averaging 25.4oC, +2.0oC vs. average for the month. July & September 0.5oC warmer than monthly average. Dry weather from July until mid September, with rain at 45% of usual level.

5 (1) Weighted average of all our territories attendance (2) Constant fx rates

Q3 markets(1) down 12%

Our Q3

attendance down 13%

Our Q3 revenue(2) down

14% EBITDA in Q3

was £8.6m

Q4 to date markets up 23% – ‘Madagascar 3’, ‘Skyfall’, ‘Twilight: Breaking Dawn Part II’, all strong.

Q4 to date markets up 23% YoY

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Total Market by Territory

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Market attendance was weaker across all territories, particularly so in UK, Ireland and Germany: In Q3 2011, UK had very strong results with ‘Harry Potter 7.2’, ‘The Inbetweeners’ and ‘Tinker

Tailor Soldier Spy’. 2012 was impacted by Olympics. ‘Harry Potter 7.2’ also performed very well in Germany in 2011 (6.4m attendees).

* Weighted average of all our territories

Q3 2011 Q3 2012 Variance

UK + Ireland Attendance (k) 55,311 46,014 (17%)

Germany Attendance (k) 35,031 30,246 (14%)

Spain Attendance (k) 25,722 24,195 (6%)

Italy Attendance (k) 16,781 16,022 (5%)

Average Market Decrease for group territories* (12%)

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Markets in Q3

In all our major markets, the attendance in Q3 2012 was the lowest of the last 5 years, confirming the exceptionality of the negative results. – Attendance drop in July compared to the very strong results of ‘Harry Potter 7.2’ in the prior year in all our main territories and ‘The

Inbetweeners’ in UK. – Olympic and Paralympic games impacting the admissions in August – In Italy, no major titles being released in July and August and congestion of films in September.

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51.6

31.7 31.4

17.8

44.7

26.1

38.7

17.2

50.4

27.3

34.0

18.3

50.5

25.7

35.0

16.8

41.9

24.2

30.2

16.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0

UK Spain Germany Italy

2008 2009 2010 2011 20122012 Market level

Mar

ket a

ttend

ance

(M)

65 Olympic Medals 29 Gold

28 Olympic Medals 8 Gold

44 Olympic Medals 11 Gold

17 Olympic Medals 3 Gold

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Top Films Q3 - UK & Ireland

Last year, ‘Harry Potter 7.2’ was the break-out film of the quarter, playing very strongly in UK/Ireland (£73m), and ‘The Inbetweeners’ was stronger than expected (£44m).

This year, ‘The Dark Knight Rises’ achieved the 1st rank in the quarter, with strong results (£56m), and ‘Ted’ surprised (£30m), but neither came close to the comparables, leading to a 9% drop in box office revenue for the Top 5 films.

Total UK/Ireland box office was 18% below prior year, with the Olympics impacting strongly in medium and smaller films.

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Top 5 UK & Ireland Titles in Q3 2011 £m Top 5 UK & Ireland

Titles in Q3 2012 £m

Harry Potter and the Deathly Hallows Part 2 73 The Dark Knight Rises 56

The Inbetweeners 44 Ted 30

Transformers 3: Dark of the Moon 24 Ice Age: Continental Drift 29

Rise of the Planet of the Apes 21 Amazing Spider-Man 26

Bridesmaids 17 Brave 21

Total 178 Total 162 Top 5 Variance to Q3 2011 -9% Total Market 346 Total Market 285 Total Market variance -18%

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32%

21%

31%

24%

18%

22%

26%

21%

10%

31%

17%

0%

5%

10%

15%

20%

25%

30%

35%

Q1 Q2 Q3 Q4

2010 2011 2012

3D Quarterly UK Market Performance

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Q1 was a weak quarter for 3D films, but Q2 saw a strong recovery in the penetration of 3D, with ‘The Avengers’ and ‘Titanic’ performing very well.

3D results in Q3 were weaker than previous years, as the main films in the quarter were 2D (‘The Dark Knight Rises’ and ‘Ted’), vs ‘Harry Potter’ in 3D last year. Main 3D films this year were kids’ films (‘Ice Age 4’ and ‘Brave’), which tend to have a lower 3D/2D mix.

There are some good 3D films in Q4 (eg. ‘The Hobbit’ and ‘Life of Pi’), but the other big titles ‘Skyfall’ and ‘Twilight’ are both in 2D.

Avengers Titanic

Toy Story 3 Avatar Alice in Wonderland

Harry Potter 7.2

UK

Mar

ket 3

D G

BO

R a

s %

of t

otal

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Q3 2012 Financial Highlights

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Financial performance was strongly impacted by low market volumes and also by lower 3D mix, but retail revenue, gross margins and operating costs were all good results.

– Paid Attendance: LFL down 14%, Total down 13%.

– Revenue(1): LFL down 16%, Total down 14%.

– ATP(1): LFL down 1% and YTD flat, impacted by lower 3D mix.

– RPH(1): LFL up 7% and YTD up 4%. Retail revenue supported by strong performance from retail initiatives and helped by lower attendance volumes.

– Screen Advertising in Q3 LFL was 34% below 2011 and 29% below in YTD. Particularly weak results in the UK and Italy. Q4 started stronger, in particular with ‘Skyfall’.

– Gross profit margin improved by 1.2% pts, reflecting lower film hire on lower attendance films.

– Operating costs(1): LFL up 0.8%, Total up 1.5%, impacted by inflation on Utilities. Excluding Utilities, Operating costs were 0.7% down LFL and flat Total Estate. YTD, Operating costs were 0.8% down LFL, because of the lower volumes.

– EBITDA Margin(1) decreased from 13.1% to 4.8% LFL, and Total down from 13.1% to 5.3% year on year.

(1) Stated at constant fx rate

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Q3 2012 Margins and Costs

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Q3 2012 gross profit was down on last year, due to lower volume, ticket prices and lower screen advertising, mainly due to slower UK market (worsened in August due to Olympics) and Italy. Recovery expected in Q4, related to stronger film slate. Gross profit margin improved due to lower Film Hire % and better Retail margin.

(1) Variances stated at constant fx rate (2) Stated at historic fx

Operating Costs were managed tightly to mitigate volume impact. High inflation in Utilities caused increase vs prior year. Excluding Utilities, Operating costs LFL were 0.7% below 2011 and flat in Total Estate.

LIKE-FOR-LIKE ESTATE TOTAL ESTATE

Q3 2011

Q3 2012

Variance from Q3 2011

Fav/(Adv)

Q3 2011

Q3 2012

Variance from Q3 2011

Fav/(Adv)

Group Revenue(1) (£m) 186.5 157.4 (15.6%) 189.5 162.3 (14.4%)

Gross Profit(1) (£m) 115.1 99.1 (14.0%) 117.0 102.1 (12.7%)

Gross Profit Margin (1) 61.7% 63.0% 121 bps 61.7% 62.9% 121 bps

Operating Costs(1) (£m) 90.7 91.4 (0.8%) 92.1 93.5 (1.5%)

EBITDA (1) (£m) 24.4 7.6 (68.8%) 24.9 8.6 (65.3%)

EBITDA Margin (1) 13.1% 4.8% (825 bps) 13.1% 5.3% (781 bps)

EBITDA (2) (£m) 25.1 7.6 (69.6%) 25.5 8.6 (66.2%)

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Q3 2012 Abbreviated Cashflow

The cash flow on working capital was negative £5.7m in the quarter, reflecting seasonal weaker mid-year trading.

Capital expenditure of £2m was net of £18m of digital refunds. The high level of capex YTD reflected significant investment in development and growth opportunities.

Net Finance Costs in the quarter was £20m primarily representing one quarter’s Euro note and the half-yearly Sterling note interest payments. Last year, there was no sterling note payment because of a long initial period.

Net debt increased by £24m.

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As at Q3 2011 Q3 2012 YTD Q3 2011 YTD Q3 2012 £m EBITDA 25.5 8.6 61.4 37.2 Working Capital (33.4) (5.7) (17.6) (8.2) Net capital expenditure (18.5) (2.1) (36.2) (29.5) Provisions, one offs & similar items (4.7) (4.0) (15.5) (11.9) Net Finance Costs (6.4) (19.6) (39.6) (49.7) Tax (0.9) (1.1) (1.5) (1.8) Acquisitions and disposals 0.7 (0.5) (87.5) (0.3) Share capital issued 0.1 Change in Net Debt (37.6) (24.4) (136.5) (64.2)

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Debt and Leverage

Leverage increased vs prior quarters because of lower LTM EBITDA and mid-year working capital position.

Q4 is expected to be a stronger quarter and LTM EBITDA to recover accordingly. Capex on development projects this year will lead to increased debt, building future

growth in EBITDA.

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Bond OM Q4 2011 Q1 2012 Q2 2012 Q3 2012

LTM EBITDA £m 82 93 84 86 69

Proforma adjustments £m (eg. new acquisitions, digital)

15 10 9 6 8

Proforma LTM EBITDA £m 97 103 93 92 77 Net Debt £m 398 434 478 467 491 Net Debt / EBITDA 4.1x 4.2x 5.1x 5.1x 6.4x Fixed Charge Cover 2.2x 2.3x 2.2x 2.2x 2.0x

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2012 Activity Highlights to date

Good investment in Capex development projects this year, will grow earnings in the future and consolidate our leadership position in Europe.

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Digital – Completed the digitalisation of all cinemas in July 2012. – Achieving digital benefits: 3D established, staff cost savings half way through, DCM screen advertising

delivery trial, growing alternative content.

4D - trial commenced of a 4D experience (Dbox motion seats) at Liverpool One in July, and second trial to open in mid-November at Metro Centre (Gateshead, UK).

VOD - launch of VOD platform, in partnership with Canal + Yomvi, on November 15th in Spain.

In Q4 we have already opened new sites in Llanelli and Dorchester in the UK, and Zaragoza and Santiago in Spain. One further site is scheduled to open in 2012, Catania in Italy, and another in the UK.

Prior year acquisitions fully integrated, which will provide further opportunity for growth in turnover and EBITDA and will strengthen our leadership position in Europe.

NOTE: In total, we will end 2012 with 25 iSens cinemas, 43 Costa Coffe and 5 Farggi units. Another Croma is expected for next year.

# Initiatives 2012 To date Q2 Q3 Q4 Estimated Total 2012Site Additions 1 2 6 9 Refurbishments 5 1 6 iSens / Big screen cinemas 10 4 8 22 Costa Coffee shops 11 4 6 21 Croma pizza restaurants 1 1 Danone Yogurt shops 2 2 2 6 Farggi coffee shops 1 1 2

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£177

€ 90

€ 124 € 124

£156

£224

€ 116

€ 178

€ 129

£192

0

50

100

150

200

250

UK Spain Germany Italy Average Weightedmarkets

2011 2012

Q4 trading update

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Market box office has increased in Q4 to date, due to strong results for ‘Madagascar’, ‘Skyfall’ and ‘Twilight’.

– Q4 to date to November 22nd up 23% vs LY.

– Stronger local product also in Q4, in particular ‘Lo Imposible’ in Spain, ‘Tutto tutto niente niente’ in Italy and ‘Rubbeldiekatz’ and ‘Der Schutzengel’ in Germany.

Film slate for the remainder of the year looks promising, including the release of some of the year’s most anticipated films, such as ‘The Hobbit’ and ‘Life of Pi’.

Market GBOR Q4 to date m

+23%

+28%

+43%

+4%

+27%

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‘Skyfall’ opening in most of European markets has been a big success, performing significantly ahead of the previous Bond film ‘Quantum of Solace’.

The film broke the all time record in UK: – Biggest 7-day GBOR opening, with £37.3m, breaking ‘Harry Potter 7.2’ previous record

achieved in July 2011 with £35.7m – 2nd biggest 3-day opening, with £20.2m, behind ‘Harry Potter 7.2’ (£23.8m) – Odeon UK achieved £11.4m in the 1st week, the biggest ever 7-day GBOR for a single

cinema chain in the UK on a single film. – It broke Odeon Leicester Square all time record, achieving £530k in 1 week.

Our current full run projection in UK is over £100m, vs £55m of ‘Casino Royale’ and £51m of ‘Quantum of Solace’, which would make it the most successful film in UK box office history.

Our market share in this film has been particularly strong in all markets, ahead of our average market share.

The extraordinary success of Skyfall

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VAT increase

In Spain, VAT on cinema tickets was increased from 8% to 21% on Sep 1st, and VAT on retail products increased from 8% to 10%.

Price strategy of Cinesa/UCI:

– Increase cinema ticket prices in order to cover the VAT rise

– Launch promotions targeted to the most value-sensitive customers, to smooth the impact of the transition.

In general, competition followed the same strategy.

On average, approximately 10% of the 13% rate rise has been passed to customers thus far via price increases.

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Market attendance since VAT rise has been positively impacted by exceptional results of local releases: ‘Las Aventuras de Tadeo Jones’ in September and ‘Lo Imposible’ in October. Also no National League Football broadcast on free TV since August (only on paid TV) has contributed to rise the admissions.

It is too soon to conclude on the impact of VAT rise on market admissions.

The recent months demonstrate the predominant influence of film product. For a good film, the audiences are turning out in large numbers.

Total post rise

Post rise Pre rise

In Italy, the Government has just decided not to increase VAT.

-11.5% -4.8%

41.4%

12.1% 13.2%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

% vs LY

Jan-Aug Nov Oct Sep Avg after

VAT rise

Spain Market attendance drop vs LY

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2012 and estimated 2013 Top 20 Title Phasing

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Product for 2013 seems to be better balanced across the year

UK Slate

2012 Anticipated Top 20* 2013 Anticipated Top 20 Q1 Woman in Black Les Miserables The Best Exotic Marigold Hotel Oz: The Great and Powerful 3D War Horse Wreck-It Ralph 3D The Muppets The Hobbit: An Unexpected Journey 3D Q2 The Hunger Games Iron Man 3 3D Prometheus 3D Star Trek Into Darkness 3D The Avengers 3D The Hangover Part III Men In Black 3 3D Man of Steel 3D The Pirates! In An Adventure With Scientists 3D Fast and Furious 6 American Pie Reunion The Great Gatsby 3D Q3 The Dark Knight Rises Monsters University 3D Ted The Inbetweeners 2 (TBC) Ice Age: Continental Drift 3D Despicable Me 2 3D The Amazing Spiderman 3D The Smurfs 2 3D Brave 3D The World's End The Lone Ranger 3D

Q4 Skyfall (Bond 23) Hunger Games: Catching Fire The Hobbit: An Unexpected Journey 3D The Hobbit: The Desolation of Smaug 3D Twilight Saga: Breaking Dawn Part II Thor: The Dark World 3D Madagascar 3 3D Turbo 3D Taken 2

* Based on actual performance to November 2012 and anticipated performance for the remainder of the year. In Red, the Top 7 films of each year.

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2012-2015 Hollywood Major Film Slate

Current indications of future film line up – all subject to change, deletions, additions, delays and variance in box office estimates. So, plenty of good film titles on the slate

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GBOR Potential in UK £m

2012 2013 2014 2015

£40m + range

Skyfall The Dark Knight Rises The Avengers The Hobbit (Part 1)

Les Miserables The Hobbit (Part 2) Monsters University

Robopocalypse The Hobbit Part 3 Bond 24 Bridget Jones Baby

Avatar 2 Justice League of America The Avengers 2 Batman Reboot Star Wars Episode 7

£25m + range

Twilight Saga: Breaking Dawn Part II Ted Ice Age: Continental Drift The Amazing Spiderman

The Inbetweeners Iron Man 3 Hunger Games: Catching Fire Star Trek Into Darkness

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

Prometheus The Hunger Games Taken 2 Madagascar 3 Brave Men in Black 3 The Woman in Black The Best Exotic Hotel Marigold War Horse American Pie Reunion The Muppets The Pirates! In an adventure with Scientists

The Hangover: Part 3 Man of Steel Fast and Furious 6 Oz: The Great and Powerful Despicable Me 2 The Smurfs 2 The Great Gatsby Wreck it Ralf Turbo Thor: The Dark World

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

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Summary

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Low earnings achieved in the third quarter, reflecting the exceptionally low market volume.

European football championship, Olympics and Paralympics all impacted strongly on market admissions during summer, compared to a good performance of ‘Harry Potter 7.2’ last year.

Initial results of Q4 show strong growth, well ahead of previous year.

Development activity and investment this year will grow earnings for the long term, with 6 refurbishments and 9 site additions in 2012. In Q4 we have already opened new sites in Llanelli and Dorchester in the UK, and Zaragoza and Santiago in Spain. One further site is scheduled to open in 2012 in Catania in Italy and another in the UK.

We are watching closely the economic situation due to current uncertainty in the Eurozone and the resulting austerity measures, as well as the effect of increased VAT on ticket prices in Spain

We are looking forward to 2013 – Film slate appears more balanced across the year. – Good IMAX and 3D titles

– No major sport events to interrupt release schedule.

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Q&A & AOB

Any questions? Further questions can be addressed below:

– Email: [email protected] – PR: [email protected] – Financial PR: Andrew Dowler, Finsbury +44 (0) 20 7251 3801, [email protected] – Telephone: Jonny Mason +44 (0) 20 7321 6221

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