Odeon & UCI Finco plc Financial Results...Odeon & UCI Finco plc Group Financial Results for Q4 and...

for the three months and full year to 31 December 2013

ODEON & UCI CINEMAS GROUP Odeon & UCI Finco plc

Financial Results

Odeon & UCI Finco plc Group Financial Results for Q4 and full year 2013 2

Contents Page

Summary 3

Operating and Financial Review 4

Outlook 8

Condensed Consolidated Financial Statements:

Profit & Loss Account 9

Cashflow Statement 9

Balance Sheet 10

Notes to the Financial Statements 11

Risk Factors and other information 12

Presentation of Financial Data

This report summarises consolidated financial and operating data derived from the 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 December 2013, which are maintained in accordance with UK GAAP.

The 2013 audited consolidated statutory accounts of Odeon Midco are published on the group website (http://www.odeonucicinemas.com). The accounts also contain 2012 comparative information.

The summarised information presented in this report is extracted by management from the same source as the audited accounts, but is presented in a management reporting style, consistent with previous quarterly reporting, which is intended to be more informative for the reader than the statutory accounts format.

We have presented certain non-GAAP information in this 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.

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.

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.

http://www.odeonucicinemas.com/


Summary

Odeon & UCI is pleased to announce its results for the fourth quarter and full year 2013.

Q4 EBITDA(1) was £33.2m, our second highest quarter on record. o There was good local content in Italy and Germany, but overall the slate did not

match the exceptional 2012 Q4 with Skyfall in the UK and Germany and Impossible in Spain.

Strong finish to the year did not fully compensate for weaker quarters mid-year.

Markets(2) down 5% for the year overall, due to: o Very hot summer. o Weaker slate. o Spain.

Good progress made to position the business for volume recovery. o Group market share for the year remained broadly stable. o Gross profit margin improved. o Operating costs LFL were lower year-on-year, with particular progress in Spain.

Strong working capital release of £37m in the quarter. Net Debt was reduced by £108m in Q4, leading to full year end cash of £40m.

PropCo asset disposals progressed well and are expected to be complete by the end of Q1.

2013 full year activity highlights

Portfolio development – additional cinemas

During 2013, five cinemas were added to the group’s portfolio as follows: May Gualtieri, Italy (3 screens) June Chatham, UK (9 screens, previously managed) July West Bromwich, UK (5 screens) October Trowbridge, UK (7 screens) December Villesse, Italy (7 screens)

Portfolio development – refurbishments, retail initiatives and other developments

The Maquinista site in Spain was refurbished with one Dolby big screen replacing two screens. A full lobby refurbishment in Austria at the Vienna SCS site was completed during October. The 9 screen Augusta site in Spain was closed in November.

In the UK, new Costa Coffee operations opened at Hatfield in April and at the Trowbridge new site in October, bringing the UK total to 41. A Coffee Republic at Braehead opened in December.

External digital screens were installed on Odeon Leicester Square, replacing 3 boards that previously held traditional posters and reinforcing the site’s position as Europe’s flagship premiere cinema.

Control over costs

The year included a strong focus on controlling costs and restructuring activities to improve the cost base for the future. Staff cost and rent reductions were particularly successful.

(1) Earnings before interest, tax, depreciation, amortisation and one-off exceptional and strategic items. EBITDA included a £9.1m credit in 2012 to rent with regard to prior years. The results in this report are stated after charging rent payable to Odeon Property Group LLP (“PropCo”). See page 9 for details.

(2) Weighted average of all our major territories’ market attendance.


Excl. Excl.

2012 2013 Group Spain 2012 2013 Group Spain

Total Estate

Paid Attendance (millions) 26.2 23.0 (12%) (11%) 82.3 80.0 (3%) (0%)

Group turnover(3) (£ millions) 236.0 202.3 (14%) (13%) 742.1 706.7 (5%) (2%)

Average ticket price(4) £ 6.11 5.95 (3%) 6.17 6.00 (3%)

Retail revenue per head(4) £ 1.95 1.97 1% 2.00 2.04 2%

EBITDA(1) (£ millions) 53.6 33.2 (38%) (33%) 90.8 69.2 (24%) (9%)

Like-for-like (LFL) comparisons(5)

Paid Attendance LFL (millions) 25.9 22.4 (13%) (13%) 81.5 77.8 (5%) (2%)

Group turnover LFL(3) (£ millions) 231.9 196.7 (15%) (14%) 731.3 685.5 (6%) (3%)

Average ticket price LFL(4) £ 6.07 5.93 (2%) 6.13 5.99 (2%)

Retail revenue per head LFL(4) £ 1.94 1.96 1% 1.99 2.03 2%

EBITDA LFL(1) (£ millions) 52.2 31.9 (39%) (34%) 87.5 66.0 (24%) (10%)

Three months ended 31 Dec Year ended 31 Dec

% change % change

Operating and Financial Review

The results are presented for the quarter and full year, both including and excluding Spain.

Q4 strong but not as high as the exceptional 2012 Q4

Q4 markets(2) overall were 11% lower than last year. Our highest ever quarterly earnings were achieved in 2012 Q4 when the record breaking Skyfall played exceptionally well, particularly in the UK and Germany, The Impossible played strongly in Spain and became its top film of the year, and there was a one-off credit of £9m relating to prior year rent accounting. Q4 2013 was our second highest earnings at £33m.

Turnover(3) was £202 million (down 14%) and LFL £197 million (down 15%). Average ticket price was lower due to strong promotional activity and less 3D in Spain and Italy. Other revenue was also down with screen advertising and booking fees lower than 2012 Q4, which benefited from Skyfall, and 2012 included some digital-related revenue (VPFs).

EBITDA(1) was £33.2 million (down 38%) and LFL £31.9 million (down 39%). Excluding the £9m one-off in 2012, EBITDA was down 25%.

Full year results highlights

Full year markets(2) were 5% lower than 2012 due to an exceptionally hot summer, thinner slate of blockbusters and economic weakness in Spain. Skyfall, The Impossible and Intouchables proved tough comparatives. However, in Italy, the strongest title since Titanic in 1998 played in Q4, Sole A Catinelle, leading to market growth in this territory.

Attendance was 80.0m, down by 3%, less than the market, as our share(6) improved slightly.

Excluding Spain, full year markets were down 2%.

Turnover(3) was £707 million (down 5%). Average ticket price was lower due primarily to promotional activity. Retail revenue per head was ahead of 2012 overall with growth in the UK and Germany.

EBITDA(1) was £69.2m (down 24%) and LFL EBITDA £66.0m (down 24%). The lower revenue and 2012 one-off credit influenced EBITDA comparisons, but were mitigated by cost savings.

Excluding Spain and the 2012 one off credit, EBITDA was down just 2%.

(2) Weighted average of all our major territories’ market attendance. Q4 was 4th October to 31st December 2013 vs. 28th September to 31st December 2012. Full year from 1st January to 31st December both years.

(3) At constant fx rates.

(4) At constant fx rates and constant territory weighting, for major territories.

(5) LFL information excludes any cinemas trading in the group in the period or the comparative period but not in both.

(6) Weighted average of all our territories’ attendance market shares.


Operating and Financial Review (cont)

Spain

Market volume was down on prior year (19% in Q4, 15% full year) with the impact of the September 2012 VAT increase on ticket prices exacerbated by the weak economy, high unemployment and very hot summer. The comparison in Q4 was influenced by strong volumes for The Impossible in 2012.

Competitors’ screens have been closing, further correcting the historic over-screening in the country.

We have been repositioning the business for lower market volumes and to be able to capitalise on the recovery from a position of strength:

We have closed 3 loss-making cinemas in recent years.

We have been renegotiating costs – staff and rent in particular – down respectively 14% and 5% (7) versus prior year on the LFL estate.

We have continued to gain market share to over 21% in 2013, the clear number one in the market, over 8% points ahead of our nearest rival.

In 2014, there are some early signs that the economy may be turning: unemployment has started to fall slightly and retail sales have started to grow.

KPIs – Q4 and full year

Our full year market share(6) was up slightly versus 2012 at 18.4%.

Average ticket price(4) (“ATP”) in Q4 and the full year was below 2012 due to promotional activity and lower 3D in Spain and Italy. Favourable 3D in the UK came from the strength of Gravity, which also boosted IMAX premia, whilst overlength film product and associated premia took Germany’s ATP ahead.

Retail revenue per head(4) (“RPH”) in Q4 was ahead of prior year. The UK and Germany were up from the continuing benefit of initiatives and promotions. Spain and Italy continued to suffer from restrained consumer spend and the strong volume generating promotional activity which attracted more value-conscious guests.

(7) Excludes the impact of the one-off credit to 2012 relating to landlord contribution accounting changes.



The following comments relate to the financial statements set out on pages 9 to 11.

Profit & Loss Account (page 9)

Turnover in Q4 was down 14% and LFL turnover was down 15% at constant fx. Lower attendance and the impact of promotional activity and 3D on ATP were both contributing factors. Other revenues were down mostly because prior year saw strong screen advertising and booking fees around the Skyfall release and some digital-related revenues (VPFs) from before the completion of the external funding.

Excluding Spain, turnover decreased 2% (LFL 3%) in the full year.

Gross profit margin in Q4 was higher than last year, reflecting favourable RPH from initiatives and better film hire, which offset the weaker ATP.

Operating costs were tightly controlled, particularly staff costs and rent. Full year staff cost savings from the digital transition across the group were £5m and full year LFL rent costs in Spain and Italy were €3m below last year, despite inflationary pressures, primarily due to negotiations with landlords.

Q4 EBITDA was £33.2m and LFL was £31.9m.

Full year EBITDA was £69.2m and LFL EBITDA £66.0m. The lower revenue and 2012 one-off credit influenced EBITDA comparisons, but they were mitigated by cost savings.

Excluding Spain and the 2012 one off credit, full year EBITDA was down just 2%.

EBITDA margin decreased in Q4 due to the lower volume on a partly fixed cost base. Full year also decreased, but excluding the prior year one-off credit to rent, EBITDA margin was in line with 2012 because of strong focus on cost savings.

Strategic costs were £0.4m in the quarter and £2.2m for the full year. These costs relate to the development of potential new business. Some of these activities lead to ongoing new business, some are aborted.

Depreciation and amortisation of £59.7m for the full year decreased by £14.2m, reflecting the impact of the landlord contribution accounting review completed during 2012. Of the total, £12.6m was amortisation of goodwill.

Exceptional costs of £2.5m in the quarter and £3.8m for the full year related to staff restructuring, principally resulting from the digital roll-out, and property matters.

Exceptional income of £0.6m in the year related to reductions in the onerous lease provisioning.

Interest reported in the profit & loss account contained both cash and non-cash elements. The cash-payable element was primarily interest on the senior secured notes, commitment and other fees, local bank charges and finance lease interest. The non-cash items (£6.2m) were primarily the amortisation of capitalised loan issue costs and the discount unwind on the onerous lease provision. Certain FX movements were also included.

Tax reflected relatively small current tax charges in Italy and Germany, along with a movement of £0.6m in deferred tax arising from a reduction in pension deficit.



Cash Flow Statement (page 9)

Net debt decreased £108m in the quarter and decreased £14m in the full year from a combination of cash flows, removal of finance lease creditors and foreign exchange movements.

Working capital was positive £37.4m in the quarter, reflecting seasonal stronger year end trading but negative £6.7m for the full year, principally due to the payment of costs in 2013 Q1 from the strong trading in 2012 Q4. Over time, we expect working capital to be close to flat.

Net capital expenditure was £6.2m in the quarter and £30.2m for the full year. This was lower than the previous year , in response to the lower EBITDA.

Finance costs paid in the quarter included one quarter’s interest on the Euro notes. The half-yearly Sterling note interest payments are made in February and August. The full year figure was unusually high in 2012 because of the timing of the first Sterling notes interest payment.

Propco disposals led to share capital injection of £27m and the removal of £29m of finance leases from the balance sheet.

Net debt (including finance leases) finished the quarter at £436.0m with balance sheet cash at £40m.

Balance Sheet (page 10)

Year-on-year, the change in the FX rate has resulted in Euro denominated assets and liabilities being 2.1% higher when expressed in Sterling.

Fixed assets have decreased year-on-year principally due to depreciation and amortisation net of capital expenditure.

Debtors due after more than one year increased year-on-year, mostly in Italy reflecting delays in the recovery of VAT from the Government.

Current liabilities decreased by £6m year-on-year, generally reflecting the lower business levels at the end of December 2013 compared to December 2012.

Net current assets are naturally favourable (negative) in this business, because revenues are collected from customers close to the day of attendance, whereas most direct costs and expenses are paid after a period of credit.

Non-current liabilities decreased by £20m year-on-year, for a combination of reasons, principally:

senior secured notes (gross) increased by £3m, due to the impact of different foreign exchange rates on the Euro senior secured notes.

other non-current liabilities decreased by £23m, principally in the finance lease category, where there have been accounting reclassifications from finance leases to operating leases on properties previously owned by the Odeon PropCo group.


Outlook

2014 has got off to a good start, with the ‘awards season’ films playing well (e.g. 12 Years A Slave, The Wolf Of Wall Street and American Hustle) and, adjusting for Easter, Q1 2014 markets are expected to be comparable to Q1 2013.

Growth in our portfolio continues, with three sites taken over in Italy, for a small amount of capex. We are looking at similar opportunities in Spain.

2014 film slate looks to be well balanced across the year with some good IMAX and 3D titles, as well as local content.

Restructuring our cost base has delivered substantial savings in 2013; there will be incremental run rate benefits in 2014.

Management are confident about the group’s prospects as we are well placed to benefit from market recovery, particularly in Spain, and with a strong film slate to come.


2012 2013 2012 2013

EBITDA 53.6 33.2 90.8 69.2

Movement in working capital and other (c) 21.0 37.4 12.7 (6.7)

Net capital expenditure (12.4) (6.2) (41.9) (30.2)

Provisions and one offs (5.4) (5.1) (15.7) (14.6)

Finance costs (d) (8.8) (7.2) (60.0) (55.8)

Tax (0.8) (0.3) (2.6) (1.1)

Acquisitions and disposals (3.3) (0.5) (3.6) (1.1)

Share capital issued - 26.9 - 26.9

43.9 78.2 (20.3) (13.4)

Borrowing (repayment)/drawdown (7.0) (56.4) - -

Net increase/(decrease) in cash 36.9 21.8 (20.3) (13.4)

Cash balance, beginning of period 14.7 18.1 73.0 52.1


Foreign exchange movements 0.5 (0.0) (0.6) 1.2

Cash balance, end of period 52.1 39.9 52.1 39.9

Net Debt, beginning of period (490.4) (543.5) (434.5) (450.2)


Borrowing repayment/(drawdown) 7.0 56.4 - -

Finance lease reclassifications and foreign exchange (3.7) 29.3 4.6 27.6

Net Debt, end of period (450.2) (436.0) (450.2) (436.0)

(Increase)/decrease in Net Debt 40.2 107.5 (15.7) 14.2

ended 31 December(a) ended 31 December

Three months Year

2012 2013 2012 2013

Group turnover 231.7 202.3 723.9 706.7

Cost of sales (87.1) (71.2) (260.7) (249.7)

Gross profit 144.5 131.1 463.2 457.0

Operating costs (69.7) (65.3) (255.1) (255.5)

Rent (b) (21.2) (32.5) (117.3) (132.3)

EBITDA 53.6 33.2 90.8 69.2

Strategic one-off costs (1.0) (0.4) (2.6) (2.2)

Depreciation and amortisation (22.8) (14.1) (73.9) (59.7)

Operating profit/(loss) before exceptional items 29.9 18.6 14.3 7.3

Exceptional costs - (2.5) (2.3) (3.8)

Exceptional income 1.3 0.6 1.3 0.6

Operating profit/(loss) 31.1 16.7 13.3 4.1

Share of operating profit/(loss) of joint ventures 0.3 0.3 - 0.3

Profit/(loss) on disposal of properties (1.7) (0.2) (1.8) -

Profit/(loss) on ordinary activities before interest and taxation 29.8 16.8 11.5 4.4

Interest payable and similar charges (b) (16.0) (13.7) (58.6) (57.5)

Other finance costs (0.3) (0.1) (0.3) (0.1)

Profit/(loss) on ordinary activities before taxation 13.5 3.0 (47.4) (53.2)

Taxation 3.0 (1.6) 2.4 (2.0)

Profit/(loss) on ordinary activities after taxation 16.5 1.3 (45.0) (55.2)

(a) See description of audited and unaudited information on page 2.

(b) Rent included a £9.1m credit in 2012 with regard to prior years.

Included above are P&L charges in relation to Propco group leases as follows:

- within Rent (operating leases) 2.5 1.6 9.8 9.2

- within Finance cost (finance leases) 0.7 0.5 2.2 2.2

3.1 2.1 12.0 11.4

(c) Includes LT debtors and LT creditors relating to digital and landlord contribution accounting.

(d) Includes refinancing fees and pension deficit reduction costs.

ended 31 December(a) ended 31 December

Three months Year

Condensed Consolidated Profit & Loss Account

£ millions

Condensed Consolidated Cash Flow Statement

£ millions


Condensed Consolidated Balance Sheet

£ millions

December December

Note 2012 2013

Fixed assets

Intangible assets 167.6 157.4

Tangible assets 524.1 488.0

Investments 1.0 1.1

692.7 646.5

Current assets excluding cash 1 75.5 71.8

Cash 52.1 39.9

Debtors due after more than one year 11.7 19.4

Current liabilities 2 (186.3) (180.0)

Total assets less current liabilities 645.7 597.6

Non-current liabilities 3 (660.3) (640.4)

Net (liabilities)/assets (14.6) (42.8)

Capital and reserves

Share capital and premium 547.4 575.8

Reserves (562.0) (618.6)

(14.6) (42.8)


Condensed Notes to the Financial Statements

£ millions

December December

2012 2013

Note 1 - Current assets excluding cash

Stocks 6.7 6.0

Prepayments and accrued income 20.7 22.2

Other debtors due within one year 48.1 43.6

75.5 71.8

December December

2012 2013

Note 2 - Current liabilities

Bank loans and overdrafts - -

Trade creditors 63.3 60.7

Finance leases 3.8 1.8

Other creditors, accruals and deferred income 119.2 117.5

186.3 180.0

December December

2012 2013

Note 3 - Non-current liabilities

Bank loans and overdrafts - -

Finance leases 35.0 7.2

Senior secured notes (net of unamortised issue costs) 446.9 453.5

Other creditors, accruals and deferred income 178.4 179.7

660.3 640.4

December December

2012 2013

Note 4 - Net debt summary

Senior secured notes (net) Note 3 446.9 453.5

Unamortised issue costs Note 3 16.6 13.4

Senior secured notes (gross) 463.5 466.9

Bank loans and overdrafts Note 2 - -

Finance leases (current liabilities) Note 2 3.8 1.8

Finance leases (non-current liabilities) Note 3 35.0 7.2

Cash (52.1) (39.9)

Net Debt 450.2 436.0


Risk Factors and other information

For a description of the following matters, please refer to the Offering Memorandum dated 13 May 2011, which is available on the group website (http://www.odeonucicinemas.com):

discussion of material commitments and contingencies

description of the business, management(i) and shareholders

material affiliate transactions

description of material contractual arrangements, including material debt instruments

description of material risk factors.

Other than as described in this Q4 and full year report, there have been no material changes to these matters up to the date of publication of this report.

Critical accounting policies are described in the 2013 audited consolidated statutory accounts of Odeon & UCI Bond Midco Ltd (“Odeon Midco”), which are published on the group website (http://www.odeonucicinemas.com).

Material recent developments are described earlier in this Q4 and full year report.

(i) Recent changes in management are described in the 2013 audited consolidated accounts of Odeon & UCI Bond Midco Ltd.



Odeon & UCI Finco plc Financial Results...Odeon & UCI Finco plc Group Financial Results for Q4 and...

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