Pinewood Group€¦ · Pinewood Group Presentation of FY 2018/19 results. 1 Important notice This presentation has been prepared by Pinewood Finco plc (the “Issuer) ... 3 Pinewood

Pinewood GroupPresentation of FY 2018/19 results

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Important notice

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Agenda

Barbara Inskip

Chief Financial Officer

Paul Golding

Chairman and Acting CEO

1. Overview of FY 2018/19

2. Financial highlights

3. Outlook

4. Q&A

3

Pinewood GroupWe provide the infrastructure for the production of film and TV content

Pinewood is the global independent leader in its industry

4

Executive summary

◼ Strong financial and operational performance in 2018/19

• Revenue of £86m, +5% growth YoY

• Adjusted EBITDA of £45m (c.52% margin), ahead of budget and previous year on continued strong demand

◼ Considerable progress on key strategic initiatives:

• Long-term contract with Netflix at Shepperton; 40% of the Group’s UK space now under long term contracts

• Outline planning permission granted for Shepperton Masterplan; longer-term investment opportunity

• Pinewood East Phase II progressing on budget and expected to come online in Oct-2019; will increase lettable space by 11%

• Real estate optimisation programme underway with 3 projects in design / procurement phase

• Acquired c. 80 acres of strategic land adjacent to Pinewood Studios

1. Overview of FY 2018/19

6

Industry highlightsPositive industry fundamentals

Production spend in the UK – feature film & high-end television (“HETV”)

Source: BFI

1,437 1,522 1,527

153315 302

1,590

1,836 1,829

2014/15 2017/18 2018/19

Inward investment & co-production Domestic

314775 907350

367318

664

1,142 1,225

2014/15 2017/18 2018/19

Inward investment & co-production Domestic

Production spend in the UK (£m): feature film

Production spend in the UK (£m): HETV

◼ UK spend on HETV productions reached a record £1.2bn; since 2014/15 total spending is up 84% (CAGR 17% p.a.)

◼ Inward investment in HETV is up c.3x vs. 2014/15 levels, with 69 productions contributing £0.9bn in 2018/19, which compares against 35 productions / £0.3bn in 2014/15

◼ UK spend on feature films was £1.8bn; broadly in-line with the previous year; since 2014/15, total spending is up 15% (CAGR 4% p.a.)

◼ Inward investment continues to drive overall spending –bigger budget films are taking space in the UK

• In the 12 month period to March 2019, 68 films contributed £1.5bn, compared to 79 films / £1.5bn in 2017/18

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Operational highlights

FY 2018/19 highlights

£86mrevenue

+5%

52%adjusted EBITDA margin

94%stage occupancy

£45madjusted EBITDA

+6%

Fast & Furious Presents: Hobbs & Shaw

Maleficent Mistress of Evil

Avengers: Endgame

Star Wars: The Rise of Skywalker

Pokémon Detective Pikachu

Downton Abbey

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Shepperton Masterplan

Netflix

Strategy highlightsRecent achievements

Pinewood East Phase II

Real estate optimisation programme

Land acquisitions

1

2

3

4

5

9

84%

16%

Strategic highlightsNetflix – Shepperton multi-year contract

◼ Outstanding achievement is the signing of a multi-year contract with Netflix over 100% of the existing production accommodation at Shepperton

◼ Netflix is a new customer for Pinewood and their commitment is a strong vote of confidence in both the UK and in Pinewood

◼ The long-term contract:

• Increases overall occupancy leading to higher revenue, profitability and margin

• Significantly reduces the risk profile of the business

Overview

1

14sound stages

c. 440k sq fttotal area under contract

60%

40%

% of space under long-term contracts

Under long-term contracts

Sep-17A Current – post Netflix

Pinewood West & Shepperton

Pinewood West & Shepperton(1)

Pinewood East Phase I

Pinewood East Phase I & Netflix

Typical hire agreements

40%Group’s UK space under

long-term contracts

(1) In addition to the space occupied by Netflix, Shepperton will continue to be partly owner occupied and partly leased to Media Hub tenants.

10

Shepperton Studios – existing site Shepperton Studios – illustrative masterplan

Undeveloped land bank: 96 acres(1)

Existing studio site: 26 acres

Expansion –Shepperton

South

Expansion –Shepperton

South

Existing – Shepperton North: Modernisation of

existing facilities

◼ Outline planning consent obtained in July 2019

◼ Enables Pinewood to meet all the demand from film and

HETV production companies, thereby maintaining its

leading position in the industry

◼ The expansion is a long-term project and management

will continue to take a cautious approach to development

that is supported by detailed feasibility studies

Update

96 acresundeveloped land

vs. 26 acres existing studio(3.7x)

630k sq ftstage space

vs. 167k sq ft existing(3.7x)

16new sound stages

vs. 14 existing(2.1x)

1.5m sq ftproduction accommodation

vs. 0.6m existing(2.6x)

Strategic highlightsShepperton Masterplan – planning consent obtained in July 20192

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◼ Expansion of Pinewood East site, which will add a further

c. 200,000 sq ft of lettable space, comprising 4 sound

stages totalling c. 90,000 sq ft and c. 110,000 sq ft of

workshop and office space

◼ Construction works progressing on time and on budget;

practical completion expected in autumn 2019

Overview

Pinewood West

Pinewood East

Alderbourne Farm

P. East Phase II site

P. East Phase I

Indicates land owned by Pinewood Group

Strategic highlightsPinewood East Phase II – development will come online in Q4 20193

11%increase in UK space

c. 204k sq fttotal lettable area

Mar-2019Dec-2018 Jun-2019

Progress of construction

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Strategic highlightsReal estate optimisation programme

◼ Improving the existing studios by redeveloping and refurbishing certain assets to enhance yield

◼ 6 projects currently underway, of which 3 have been completed and a further 3 are in design / procurement phase

◼ Continuing to assess and identify projects on an ongoing basis

Update

Example project – new workshop

◼ Identified an opportunity to develop a new c. 15k sq ft workshop on under utilised land at Pinewood West

◼ Completed in Aug-2018

◼ Total capex of c. £0.9m; ROI of c.40%

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Before After

13

Land acquisitions

Strategic highlightsLand acquisitions – acquired c. 80 acres adjacent to Pinewood Studios

80 acres

Alderbourne Farm(1)

5

210 acres

owned

Pinewood290 acres

current

Note: acres have been rounded.(1) Alderbourne Farm acquired in Feb-19

Extending the group’s total land holding in the UK to 412 acres

Alderbourne Farm

2. Financial highlights

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Group results summaryRevenue growth YoY exceeds 5%

Revenue (incl. MI) is up 5.2% (or £4.3m) in 2018/19 despite close of Media Investment (“MI”) business in 2017/18

Gross profit margin is up 4.9 ppt to 52.3%, benefitting from closure of MI

Atlanta JV witnessed a challenging operating environment in the year, resulting in low occupancy at the facility; marked improvement in occupancy since summer 2019

Increase in finance costs reflects a full year of interest following the refinancing in December 2017

PBT marginally lower than last year even with loss from Atlanta and higher interest, reflecting the strength of core UK business

12 months ended

£m 2018/19 2017/18 % growth

Revenue incl. Media Investment(1) 85.9 81.7 5.2%

Gross Profit 45.0 38.7 16.1%

Gross profit margin % 52.3% 47.4% 4.9 ppt

Operating profit excl. exceptional items 35.9 28.9 23.9%

Operating profit margin % 41.7% 35.4% 6.3 ppt

Income from JVs (1.4) 3.1

Net Finance costs (6.2) (2.3)

Profit before tax and exceptional items 28.3 29.7 (4.9)%

5

4

3

2

1

5

4

3

2

1

(1) 2017/18 revenue includes Media Investment revenue of £1.9m; 2018/19: nil.

16

42.344.7

7.6

(4.5)(0.8)

Adjusted EBITDA progressionUK studios driving growth

◼ Growth in UK studios driven by core leasing business (i) price increases, (ii) improved overall occupancy (including workshops and offices)

◼ Atlanta JV witnessed a challenging operating environment, with an increase in competition

◼ Expiry of a one-off consultancy contract in China

Note: all figures have been rounded to the nearest £100,000(1) Adjusted EBITDA is calculated as profit on ordinary activities before interest receivable and similar income, interest payable and similar charges, tax (credit)/charge on profit on ordinary activities, depreciation of

property, plant and equipment, depreciation of investment property, impairment of long-term assets, amortization of goodwill, amortization of long-term assets, exceptional items, operating loss attributable to Media Investment (ceased) and (gain)/loss on disposal of property, plant and equipment.

3

2

1

Adj. EBITDA 2017/18(1)

UK Studios + Post Production services

Atlanta JV International Adj. EBITDA 2018/19(1)

321

17

Cash flowCash generative business

(1) EBITDA is calculated before the results of joint ventures but including exceptional items.

Change in working capital is impacted by the timing of receipts from some of our leases around the financial year ends. Positive impact this year reflects the unwinding of a negative working capital position shortly after 31 March 2018.

Capital expenditure for the year is principally driven by the Pinewood East Phase II development.

Improved profitability has allowed management to reinvest into the business.

EBITDA(1) vs. capex

21.7 24.3

38.545.2

(48.2)

(29.2)

(6.4)

(42.1)

EBITDA Capex

Cash flow 2018/19 vs. 2017/18

3

2

1

2

1

12 months ended

£m 2018/19 2017/18

EBITDA(1) 45.2 38.5

Working capital 7.5 (14.8)

Cash generated from operations 52.7 23.6

Net interest (9.4) (2.5)

Tax paid (3.7) (2.8)

Net cash flow from operating activities 39.6 18.3

Capital expenditure and other investing activities (42.1) (6.4)

On-loan to parent - (127.5)

Net cash flow from investing activities (42.1) (133.9)

Net cash flow from financing activities (0.6) 130.2

Net cash flow (3.1) 14.6

2015/16 2016/17 2017/18 2018/19 3

(1)

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Capital structure updateStrong liquidity position

Capital structure evolution

◼ Further de-leveraging expected in 2020/21

• Increased profitability of Shepperton with Netflix contract ensuring 100% occupancy(2)

• Pinewood East Phase II providing 11% increase in lettable space

◼ Substantial liquidity position across RCF and cash flow

12 months ended

£m 2018/19 2017/18

xLTM 2018/19

EBITDA

xLTM 2017/18

EBITDA

Adjusted EBITDA(1) 44.7 42.3

Senior Secured Notes due 2023 250.0 250.0 5.6x 5.9x

Revolving Credit Facility (£50m) - - - -

Finance lease obligations 0.2 0.7 0.0x 0.0x

Cash (39.9) (43.0) (0.9x) (1.0x)

Adjusted net debt 210.3 207.7 4.7x 4.9x

(1) Adjusted EBITDA is calculated as profit on ordinary activities before interest receivable and similar income, interest payable and similar charges, tax (credit)/charge on profit on ordinary activities, depreciation of property, plant and equipment, depreciation of investment property, impairment of long-term assets, amortization of goodwill, amortization of long-term assets, exceptional items, operating loss attributable to Media Investment (ceased) and (gain)/loss on disposal of property, plant and equipment.

(2) Occupancy reflects production accommodation facilities to be occupied by Netflix

3. Outlook

20

Looking aheadPositive outlook underpinned by strong industry fundamentals

➢ For several quarters, we have highlighted the growing demand for content and the resulting strength of the UK’s production industry

• Pinewood has successfully capitalised on this by securing a long term partnership with Netflix, a new client of the group

• The agreement:

• Improves occupancy of production accommodation thereby improving profitability;

• Significantly reduces the overall risk of the business; and

• Underlines the attractiveness of both Pinewood and the UK as a production centre

➢ Enquiries and bookings remain strong

• Disney, WarnerMedia and Comcast will launch their own streaming platforms later this year / early next year

• This is generating incremental demand and we are receiving enquiries and taking bookings to house such productions

➢ The outlook is positive

• The 200,000 sq ft expansion at Pinewood is expected to complete in the autumn and is already booked for 9 months

• Our success in securing planning consent at Shepperton enables us to continue to meet the demand for studio space

− Detailed design is underway and we will judiciously analyse the market before committing to further expansion

➢ Finally, many thanks to Chris Naisby who leaves Pinewood later this month after 18 years with the company, 7 of which have been as Finance Director

• We are especially grateful to Chris for having worked alongside Barbara for the last 3 months to facilitate the smooth transition

4. Q&A