Pinewood Group Presentation of Q3 YTD 2020 results Important notice - - PowerPoint PPT Presentation

Pinewood Group

Presentation of Q3 YTD 2020 results

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Important notice

This presentation has been prepared by Pinewood Finco plc (the “Issuer) and Pinewood Group Limited (the “Company” and, collectively with the Issuer and its other subsidiaries, the “Group”) solely for information purposes. For purposes of this notice, the presentation that follows shall mean and include the slides that follow, the oral presentation of the slides by the Group or any person on behalf of the Group, any question-and-answer sessions that follows the oral presentation, hard and electronic copies of this document and any materials distributed at, or in connection with the presentation (collectively, the “Presentation”). This Presentation contains, and any related presentation may contain, financial information regarding the businesses and assets of 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 the Group or any other person as to the accuracy or completeness of such information’s portrayal of the financial condition or results of

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Agenda

Barbara Inskip Chief Financial Officer Paul Golding Chairman and Acting CEO

• 1. Overview of Q3 YTD 2020
• 2. Financial highlights
• 3. Outlook
• 4. Q&A

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Pinewood Group

We provide the infrastructure for the production of film and TV content Pinewood is the global independent leader in its industry

Pinewood Group

We provide the infrastructure for the production of film and TV content

1. Overview of Q3 YTD 2020

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Operational highlights

Q3 YTD 2020 highlights

£71m

revenue +11%

59%

adjusted EBITDA margin +7.6 ppt

99%

stage occupancy

£42m

adjusted EBITDA +27%

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Strategy highlights

Recent achievements

Pinewood East Long-term agreements Expansion projects ➢ Phase II development was completed on time and within budget; one further workshop is expected to be delivered in Q1 FY21 ➢ Submitted planning applications to build c.100,000 sq.ft of stages at Pinewood West. Subject to obtaining planning, the stages are expected to be delivered by end of December 2021 and will be occupied by Disney under the long-term contract ➢ Submitted a planning application to improve and upgrade Sevenhills Road as part of a planning obligation associated with the original consent for Pinewood East ➢ Disney agreement at Pinewood Studios commenced on 1 January 2020, further strengthening the Group’s long-term resilience and profitability ➢ Disney will take occupation of all the stages, backlots and other production accommodation at Pinewood, once existing non-Disney productions have been completed Other restructuring ➢ The closure of Picture Services (announced in Q1 FY20) is now complete ➢ We have recently proposed closing the Creative Audio department. The space currently

• ccupied by the team will be rented to other occupiers

2. Financial highlights

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Group results summary

Core business performing strongly

Revenue is up 10.9% or £6.9m, with increases driven by core UK studio business, which benefitted from 99% stage

• ccupancy, higher other production accommodation revenues through the period and PWE II opening in the quarter

Gross profit margin increased by 6.4ppt to 57.5%, which benefited from increased UK studios revenues as described above and lower costs as a result of the Group’s decision to exit the ancillary Picture Services (post-production) business in Q3 FY20 Operating profit (excl. exceptional items) increased by £8.1m, with a margin improvement of 7.5ppt to 48.8% Adjusted EBITDA is up 27.0% at £41.9m for the 9 months ended Dec-19 and adjusted EBITDA margin is up 7.6ppt to 59.4%; the increase is a result of the factors described above and an improvement in occupancy levels at Pinewood Atlanta Studios before its sale in August 3 2 1 3 2 1

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

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Before Exceptionals 9 months ended £m Dec-19A Dec-18A % growth Revenue 70.5 63.6 10.9% Gross Profit 40.6 32.5 24.8% Gross profit margin % 57.5% 51.1% 6.4 ppt Operating profit excl. exceptional items 34.4 26.2 31.1% Operating profit margin % 48.8% 41.3% 7.5 ppt Income from JVs 0.1 (1.2) Net Finance costs (5.1) (4.3) Profit before tax and exceptional items 29.3 20.6 42.1% Adjusted EBITDA(1) 41.9 32.9 27.0% Adjusted EBITDA margin % 59.4% 51.8% 7.6 ppt

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Exceptional items (P&L)

Q3 2020 includes two new areas of restructuring: ➢ Step-up of equity in PMBS − The Group’s interest in PMBS (provision of lighting services for the studios) increased from 15% to 25% − The investment was reclassified as an associate and £1.7m of previously recognised unrealised fair value gains were reversed ➢ Simplification of the corporate structure − Historically, Shepperton Studios has been held by Pinewood through a complex corporate structure with high maintenance costs − In advance of entering into the long-term contract with Netflix, such structure was simplified, reducing annual operational costs and resulting in a one-off stamp duty land tax cost of £2.6m 2 1 9 months ended £m Dec-19A Dec-18A Administration costs: Restructuring costs (0.1) (0.7) Termination of agreement with Pinewood Iskandar Malaysia 0.7

• Fair value adjustment on PMBS Holdings Limited

(1.7)

• Administration costs

(1.1) (0.7) Other operating costs (2.6)

• Operating Loss

(3.7) (0.7) Loss on disposal of joint ventures (1.8)

• Interest payable and similar charges

Settlement payment due on bond redemption (5.9)

• Loss on extinguishment of loan notes and facilities

(5.9)

• (11.8)
• Tax credit on exceptional items

2.0 0.1 (15.3) (0.6)

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(1) EBITDA is ‘Cash flow from operating activities before changes in working capital”. (2) Cash flow to December 2018 has not been restated to exclude exceptional payments due to their immaterial value

Cash flow from operations is up £37.1m y-o-y, driven by (i) £8.3m increase in EBITDA with improved trading in core UK studios business, and (ii) a £28.7m improvement in working capital due to the timing of receipts from the new long-term contracts As a part of the refinancing in September 2019, the interest payment dates changed from June/December to March/September. Consequently, Q3 YTD 2020 figure of £8.3m only includes a partial period payment, related to the previous notes, as opposed to the full period to December Tax paid increased by £2.3m, due to two additional instalments of tax paid in line with the new HMRC UK payment schedule Capital expenditure principally relates to the Pinewood East Phase II development 2 3 4 1

Cash flow

Exceptional cash flow relates to: i) EBITDA (£2.1m): Early termination receipt from Iskandar Malaysia Studios of £0.7m, less £0.1m restructuring costs paid and £2.6m stamp duty land tax on the restructure of Group’s property portfolio. ii) £5.9m of ‘make-whole’ interest paid relating to the refinancing iii) £12.1m of proceeds from the sale of our 40% stake in Pinewood Atlanta Studios (£0.5m earnout received in Q4 2020) vi) Net financing: Receipt of cash from the issue of £550m loan notes, the net of repayment of £250m loan notes, a £75m dividend and a £175m loan to the parent undertaking, together with arrangement fees paid

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Dec-19A Dec-19A Dec-19A Dec-18A (2) Variance £m As reported Exceptional

• Excl. Exceptional

As reported

• Excl. Exceptional

EBITDA(1) 39.7 (2.1) 41.8 33.4 8.3 Working capital 30.1

• 30.1

1.3 28.7 Cash generated from operations 69.8 (2.1) 71.9 34.8 37.1 Net interest (14.2) (5.9) (8.3) (9.8) 1.6 Tax paid (4.5)

• (4.5)

(2.2) (2.3) Net cash flow from operating activities 51.1 (8.0) 59.1 22.7 36.4 Proceeds from disposal of joint ventures 12.1 12.1

• Capital expenditure and other investing

activities (46.5)

• (46.5)

(21.3) (25.2) Net cash flow from investing activities (34.4) 12.1 (46.5) (21.3) (25.2) Net cash flow from financing activities 43.2 43.4 (0.2) (1.3) 1.1 Net cash flow 59.9 47.5 12.4 0.1 12.3

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Capital structure update

Capital structure

(1) Valuation of £1,110 million, dated September 2019 and undertaken by JLL

Dec-19A £m LTV (%)(1) Senior Secured Notes due 2025 550.0 49.5 Revolving Credit Facility (£50m)

• Finance lease obligations

0.0 0.0 Cash (99.4) (8.9) Adjusted net debt 450.6 40.6

Headroom of £149.4 million, being cash of £99.4 million and the undrawn £50 million RCF (extended to March 2025)

3. Outlook

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Looking ahead

Outlook remains positive

➢ The long-term contracts with Disney and Netflix at Pinewood and Shepperton have commenced − Thereby maximising occupancy of the existing production accommodation, and improving resilience and profitability of the business − The contracts reaffirm the attractiveness of Pinewood’s UK studios and is an endorsement of the group’s operating experience ➢ Demand remains strong for purpose built production accommodation in the UK − UK production spend for film and HETV production was at an all-time high in 2019 − Sky has announced its intention to build a new facility at Elstree − Significant barriers to entry remain for most developers ➢ We will continue with our plans to expand at both Pinewood and Shepperton where we have a strong reputation for development and operational expertise − Pinewood − Subject to planning, the new stages at Pinewood West (c. 100k sq ft) for Disney are expected to be delivered by end of Dec-21 − We will likely submit a planning application this year for Phase 3 of Pinewood East comprising c.75k sq ft − Shepperton − Our success in securing planning consent at Shepperton enables us to continue to meet production demand − We are continuing with the detailed design and assessing the feasibility The next Investor update is scheduled for 24th June 2020.

4. Q&A