I am now pleased to give the floor to Mr Fernando Eiroa, Chief Executive Office; Mr Isidoro Díez, Chief Financial Officer and Mr Juan Barbolla, senior vice president Strategic Planning and Investor Relations. Please go ahead sir, you have the floor.
OK. Thank you very much, good morning everyone and thank you for joining this call today. Let me first summarise for you the 2016 year to date key developments in the company. The results we are presenting today includes the performance of our low season. 57% of our total revenues and about 96% of our EBITDA are still to com. This is based on the last three years’ average. Year to date performance has been affected by external factors – we had a strong Q1 and Q2 performance, under better weather than general conditions and Q3 was affected by poor weather. I am very happy with the achievements on our growth strategy – we signed a licence agreement with Star Trek at Movie Park, in Germany. The board of directors approved three expansion CAPEX projects to be developed in 2017 The Dubai parks – 2 parks – openings are on track and are expected to be open in Q4 2016. We signed a management contract for two parks in Vietnam, as it was announced a few days ago and the Mall Entertainment Center strategy keeps growing – I mean, we have signed five lease agreements already and we expect the centres to be open in 2017 and 2018. These agreements include four Nickelodeon branded Mall Entertainment Centers, one in London; one in Madrid; one in Lisbon, in Portugal and one in Murcia, in Spain and a new aquarium in Madrid, in Spain. Also worth noting that Marineland Park re-opened in March 2016 after, you know, the floodings that affected the region on the news and that we have reached a satisfactory agreement with the insurance company, that will cover damages and loss of profit. Now I hand over to Isidoro Díez, our CFO.
Hello, good morning everybody. Let me guide you through the year to date financial performance. Let’s start with the big favourites – revenue and EBITDA. On the left we have the reported, or the holiday figures – where, as you can see, we are being flattish on the revenue side and we are €4.7 million down on the EBITDA, but to talk about apples to apples, look at on the right of the slide – where we have included the like for like figures, excluding Marineland. Well, these like for like are taking out 2015 Valencia, the contract was finished that year. We have applied the same FX to 16 and 15 – 1.1, regarding Euro/Dollar and finally… sorry, and we have also adjusted last year the Warner lease – because, as you may know, now it has to be considered a financial expense, because it’s a financial operating lease. And finally, we have also excluded Marineland, due to the six months that the park has been closed – during these nine months of the year to end results. So, we have removed Marineland from the like for like figures. In the like for like figures, in terms of revenue, we have been flattish, or -0.3% and in terms of EBITDA, €3.5 million down.
Moving on to the next page – and we will introduce to you the financial performance by region, but we would like to start with the like for like revenue bridge and the like for like EBITDA bridge, just to give you the picture of what has been taken out to make everything comparable. In terms of revenue – up on the slide we start with the reported revenue the year to date June 2015, €245.7 million. The first adjustment to produce the like for like figures is the FX impact. We have also removed, as I said before, the Valencia contract and the Marineland revenues last year. So, we reached €234 million year to date June plus another 15 like for like figures, excluding Marineland. Than the bridge, how we are perform in these nine months of the year. Regarding Spain – we have increased a million, in terms of revenue, which is 1.5% compared to prior year. In the rest of Europe, we have increased €2.1 million or 2.6% and for the USA it’s €3.5 million down, and we will explain later on why we are down. So, we achieved €233.6 million for the first nine months of our exercise – I said before, flattish with the prior year figures. In terms of the like for like EBITDA bridge – well, the same impacts we have in revenue, we have at EBITDA level. The USA Euro – Dollar exchange rate – it has a negative impact of the FX – sorry, on the EBITDA. The Valencia Oceanographic – another three million that has to be removed, the Marineland EBITDA and the Warner Lease that is increasing the EBITDA. So, the year to date 2015 like for like, excluding Marineland, EBITDA – it was, last year, €11.9 million and then the bridge, how we have achieved the year to date 2016 – you have to add the Spain performance – 0.9, or 4.5% increase versus prior year – you can see the outstanding drop-through one million revenue increase, 0.9 EBITDA increase. For the rest of Europe the impact on the EBITDA has been a positive deviation - €1.1 million, or 7.9% over the prior year – again, very good drop-through and the USA impact, as I said before – we will explain it later, when we talk about that segment.
For the headquarters, as expected, and as I explained during the analyst presentation and the road show, we have the direct impact of being a public company and so we achieved €8.4 million EBITDA.
Moving on to the next page – here we have, by quarters, the group figures. Q3 year to date represents 43%, roughly 43%, of the revenue and less than 4% of annual EBITDA, at a group level. The underlying performance has been affected by external factors. We have had a very strong Q1 and Q2 – not so strong the Q3, because it has been affected by worse weather conditions versus prior year. We have also been impacted by a shift on the operating calendar in the US, due to the delay on Memorial Day that this year it has been May 30th, instead of – last year it was May 25th. That day I the US is the starting point of the holidays, let me say. So, we have lost in total nine operating days in the US, this quarter 3 compared to prior year. And, as I said before, we have the impact on the headquarters, regarding the one-off increase of expanses, because of being public. Revenue performance as been almost flat and EBITDA has dropped €3.5 million at year end. The 2016 CAPEX projects are on track.
Now, let me go through the four different segments – the first one is Spain. The Q3 year to date represents 51% of the annual revenues and 29% of the total EBITDA. The performance in the Q3 has been affected by poor weather conditions in April and May – let me recall to you that, in Madrid it’s very important the month of May, because of the bank holiday. The Q3 rainy days increased by 58%, or plus 68 rainy days more than 2015. Of course, affecting the visitors – impacting Q3 10% on the visitor side. We have delivered overall a strong performance, reaching plus 4.5 year to date EBITDA growth. We have benefitted from the ongoing macro-economic recovery in Spain, the successful commercial policies and implementation of dynamic pricing across the entire portfolio in Spain. They have been also very successful the off-season events, like Halloween and Christmas.
In the rest of Europe – and excluding Marineland, to make everything like for like – the Q3 year to date represents 46% of the total revenues and 21% of the total EBITDA. Again, here in Europe we have suffered poor weather during the Q3, where the rainy days have increased by 11%, or 37 more rainy days versus prior year – resulting in a 5.6% drop in attendance in the Q3. Overall a strong performance – we have reached 8% year to date EBITDA growth. Revenue was driven by attendance, Mirabilandia, in Italy, is back to growth. And again, successful of the off-season events: Halloween at Movie Park and Bonbonland, in Denmark.
Our third segment – the USA side. Well, first of all, let me put in context the figures of the USA. Q3 year to date represents only 35% in terms of revenue and we are still negative EBITDA contribution. The year to date performance has been affected by: first, I am sure many of you recall from the Q1 results presentation that we have an impact on the breakage revenue, which was accrued in Q4 15 – negatively affecting Q1 16. The impact – it’s around a million dollars, on the revenue and on the EBITDA side. We have also the impact of the delay – the latest Memorial Day in 2015, reducing the operating calendar, as explained before, negatively impacting the Q3. It has impacted three important parks, which are: Dutch Wonderland, Kennywood and Story Land.
During this period we have achieved a strong performance in the West coast, supported by the good weather compared to prior year. But, at the same time we have weaker results in the East coast; again, here we have suffered poor weather compared to prior year and the reduced tourism in Florida. The underlying performance, is good – we’ve seen robust growth rate in the season passes – Q3 year to date we are plus 6%, compared to prior year in revenue and in booked revenues from groups, which is an important activity in some of the parks in the USA, we have seen a 9% increase, compared to prior year.
To finish with the segments, we have the headquarters. Well, as expected, we have seen a big increase in operating expenses, which is the one-off for this year, for the headquarters.
Now that we’ve finished with the numbers, I will explain to you the below EBITDA and the debt. Talking about the below EBITDA – first of all let me recall to you that this is consolidated numbers or reporting numbers, so these are not like for like. So, we have the FX impact, which is very important in this section. Let me explain to you the three main variances, in my opinion, which are: first, the depreciation and amortisation, where you should expect an increase – due to the FX impact and from the US side, but we have a reduction, because the FX impact was not enough to offset the reduction on the Warner park depreciation, where the impact has been a decrease of 4.7 million, due to the extension on the length of the contract. So, now we have added ten years to the useful life to the depreciation period. So, that’s the reason because we are below prior year. In the other non-recurring expenses, where we have €21.6 million year to date June 16 – well, let me recall to you that we have here all the expenses related to the IPO process. And then to finish with these variations, we have the borrowing costs, again here we have different issues. First, we have the impact in 2016 of the increase on the FX, but the main difference is, in 2015 in these borrowing costs – we have €5.8 million, regarding arrangement fees and in the year 16 that amount is 14.7. Why this increase? Because we have written-off the remaining arrangement fees that were still in play coming from the prior financing. So, when you have a new financing you are obliged to write off the pending arrangement fees coming from the prior financing. So, removing this impact, which is almost, sorry it’s €9 million variant. We have also to take into consideration that year to date June 16 is including a financial cost – the Warner lease, which is anticipate €4.7 million – as I have explained before, we have the €3 million because of the FX. So, all in all, when you make figures comparable, of course, there’s a decrease because of the new financing.
And to finish with the numbers – let me provide you with the June 2016 figures in terms of debt. We have the permanent gross debt - €652 million, which is including the lease agreement of Warner, less our cash and cash equivalents - €82 million. We have a permanent net debt of €570.2 million – which is, again is including the deal Warner – asset, they weren’t a liability. So, the leverage is 2.97% at this stage of the season, net debt. And now I hand over again to Fernando.
OK. So, let me walk through the recent developments of the company now and first I’m going to talk about the current portfolio. As I mentioned before, Marineland re-opened after the flooding and the park was closed since October 4th. We were able to re-open the park in March this year, in 2016, after all the work that we had to do there. The company reached an agreement with the insurance company that will cover damages and loss of profit.
At Movie Park in Germany we’ve reached a ten year agreement to use the Star Trek IP – at the Movie Park, to be running to theme the second largest roller coaster in the park. This will be the first and only Star Trek roller coaster in the world. So, we continue with our strategy of adding strong IP at the parks, to benefit from the brand – the powerful brands we are adding.
Talking about expansion CAPEX – three expansion CAPEX have been identified and approved by the board of directors. One project in Europe and two projects in the US – these are, you know, snorkelling – a lagoon, expansion of lodging facilities and a new aquarium. This represents around €25 million of investment for the year and the projects will be developed in 2017 and we expect to be open at the end of 2017 2018.
Others – we have very good news. We were able to extend the lease agreement of Aquopolis Torrevieja in Spain for another 15 years until February 2032. This, again, reinforced our strong track record to renew administrative concessions and lease agreements in the company.
So, now I want to talk about the management contracts. First, Dubai – as you know in Dubai we signed an agreement for two important parks in Dubai – to operate two important parks. The opening of these parks, of these two parks, are on track – with an expected opening date being Q4 2016. As I mentioned before, we announced a few days ago – we have signed a ten year management contract with the Sun Group in Vietnam, to operate two parks. There is a theme park and a water park. Both parks are expected to open in the first half of 2017 and the parks are first class facilities. They are located in a beautiful area of the country in Halong Bay, with a surface of approximately 2014 hectares. We have a fee structure that has two components. One is a development fee and the second one is a management fee – a variable fee, based on performance. This is linked to revenues and EBITDAR, with an “R” at the end – with a minimum fee warrantied.
Than we have other ongoing conversations – many other ongoing conversations and meetings with multiple players across different regions in the world and we are confident that we will have good news soon.
Now, talking about the mall entertainment centers – what we have achieved in these months – I mean, we have signed five contracts already – one in Murcia, in Spain – this is going to be a Nickelodeon mall entertainment center and is expected to be open in Q4 2017; then we signed an agreement in London – for a mall entertainment center in the UK, in London – also is a Nickelodeon centre – this is expected to be open in Q4 2018. Then recently we have signed three new contracts – one in Portugal – again, it’s going to be a Nickelodeon park – this s expected to be open in Q4 2017 or Q1 2018 and in Madrid in Spain we have two new centres – one is a new aquarium – it’s in Madrid, at the Xanadu mall centre – this is expected to be open in Q4 2017. And the second centre in Madrid, in the same mall, is going to be a Nickelodeon park, expected to be open in Q1 2018.
The pipeline of projects related to the mall entertainment centers is big, it’s very very solid – we have over 20 additional projects that we are discussing them – we are negotiating them and we are very confident that we will be able to accomplish our targets for the period 2017-2020. So, now I hand over the presentation to Juan Barbolla.
Thank you, Fernando. So, now we move to section two, which is the outlook for the year and, before we get into the estimate, let us first explain you, or walk you through the seasonality of the business. As everybody knows, Parques Reunidos is a seasonal business and important thing that we want you to pay attention - the first one is year to date represents the low season – it is just 5%, on average, of our EBITDA, second thing is - a company which is subject to external factors that, on the terms of a quarterly basis for the low season that affects either positively – and we have seen that in the first Q, first two quarters of the year – and sometime, as well, obviously negatively – that has been the Q3, but those things, on a yearly basis – they tend to normalise and the impact should be at least reduced. Second and most important thing is the fourth quarter, which is yet to come, is the most relevant one. Almost 60% of the revenues, 95% of EBITDA is yet to come. With that – in terms of outlook - We maintain our outlook for the year for all the parks and for everything that is our under control – so, there is one exception, which is Marineland. Excluding Marineland we are targeting to grow our EBITDA by mid single digit, and that would heed the broker consensus in terms of EBITDA. When we take into account Marineland – Marineland, as everybody knows, is located in the Cote d’Azur, close to Nice and Nice has been recently affected by the recent attack and the security issues in the region. And, look, that is something that is not intrinsic of the park – the region is being affected and is going to be very affected in terms of tourists and amount of people going to the Cote d’Azur this season, and that will affect us as well. The impact, simple, our mid single digit EBITDA growth will be reduced to low single digit growth. This is important – this is not a permanent issue for Parques Reunidos – this is a one-off. Just to be fair as well, this is going to affect us this season and our experience is, when you get shitted one season it takes us at least two seasons to recover. So, probably the next year we will partially recover, but we will not get to the 2015 figures, but we would expect – and that’s our preliminary analysis - we would expect that for the 2018 season we should be at 2015 levels – so, normalised levels.