01 December 2015
Pinewood Group plc
Interim Results for the six months ended 30 September 2015
Pinewood Group plc ("the Company"), the world leading studio and production services operator, maintained the positive momentum reported at full year and is operating its studios at near capacity as demand continues for its offer to the screen-based industries.
Strategic progress
·Raised £30m through the issue of 8,000,000 new ordinary shares
·New banking facilities of up to £135m
·Phase one of the Pinewood Studios Development Framework ("PSDF") to be completed by June 2016 within budget
·Pinewood Atlanta Studios Phase 2 development completed
·Full ownership of Shepperton Studios with review of existing masterplan underway
·Development of full service production company in the Republic of Ireland
·Completion of Phase One consultancy to Shanghai Film Group
·M T Rainey appointed to the Board
·Search process underway for additional independent Non-Executive Director
Financial highlights
Six months ended30 September
2015 / Six months ended
30 September 2014 / Year
On Year comparison
Group Revenue / £38.2m / £38.5m / -0.7%
Media Services Revenue / £32.5m / £27.0m / +20.4%
Group Operating Profit / £7.0m / £2.5m / +186.9%
Media Services Operating Profit / £8.3m / £6.1m / +36.6%
Profit after tax / £4.3m / £3.8m / +13.2%
Basic EPS* / 7.6p / 7.7p / -1.3%
Normalised EPS* / 9.0p / 7.7p / +16.9%
Dividend per share / 0.8p / 0.7p / +14.3%
Net debt / £55.8m / £31.8m / +75.8%
Media Services ROCE / 10.2% / 9.3% / +9.7%
*Basic and Normalised EPS based on weighted average number of shares of 56.7m for the six month period ended 30 September 2015 (six months ended 30 September 2014: 49.4m)
Commenting on today's results, Ivan Dunleavy, Chief Executive, said:
"The first six months of the year have maintained the positive momentum reported in our full year results in June 2015. Productions based at the studios during the period include the year's biggest filmsSPECTREandStar Wars: Episode VII - The Force Awakens. Media Investment deal flow on behalf of third party clients remains weighted to the balance of the year.
The construction of phase one of the Pinewood expansion, designed to meet strong demand, is on schedule for completion in June 2016 and is within budget. Having taken full ownership of Shepperton Studios in the previous financial year, 100% of these earnings now accrue to the Company and we are able to review the existing masterplan for development of this facility.
The positive results reported today have continued into the second half and we are encouraged by the visibility we have for the remainder of the year and into 2016".
Enquiries
Pinewood Group plc +44 (0)1753 656732
Andrew M. Smith
Corporate Affairs Director and Company Secretary
Peel Hunt LLP +44 (0)207 418 8900
Edward Knight / Euan Brown
Notes to editors
·Pinewood Group plc is Europe's largest provider of stage and studio space
·Pinewood Studios, Shepperton Studios and Pinewood Studio Wales together accommodate 37 stages and three dedicated digital television studios
·Pinewood Studios is home to Europe's leading studio-based underwater filming stage, as well as one of the largest exterior water tanks in Europe
·The Group now offers financing to UK film, television and video game production as part of its growing range of services
·Pinewood Studios and Shepperton Studios have been home to over 2,000 films in more than 80 years
·Pinewood Studios and Shepperton Studios have hosted over 800 TV shows
·There are approximately 260 independent, media related companies based within the Pinewood, Shepperton and Wales Media Hubs
·The Pinewood Group's international network of studios includes Toronto, Canada; Iskandar, Malaysia; the Dominican Republic; Atlanta, Georgia, USA; and activities in China and Ireland
Forward looking statements
This announcement includes forward looking statements that are based on current expectations and assumptions. They involve risks and uncertainties and may differ, possibly materially, from actual results, performance and achievement. Neither the Company, nor any of its Directors, undertakes any obligation to update publicly or revise forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent legally required.
For more information
Neither the content of the Company's website nor the content of any website accessible from hyperlinks on the Company's website, nor any other website, is incorporated into, or forms part of this announcement nor, unless previously published by means of a recognised information service, should any such content be relied upon in reaching a decision as to whether or not to acquire, continue to hold, or dispose of, securities in the Company.
Business model
Pinewood Group plc is a leading provider of studio and related services to the global screen-based industries. Our services support film production, filmed television and studio television recording, digital content services and the provision of facilities to media related business ("Media Hub").
The Group has a powerful set of competitive differentiators: its acknowledged industry leadership in providing these services over an 79 year history; the power of its brand in international markets and the full service offering to its clients.
The Company currently has two reporting segments - Media Services, which provides studio and related services to the screen-based industries; and Media Investment, which provides investment funding and production services to the screen-based industries.
The Media Services segment has principally three complementary operating streams - Film; Television; and Media Hub.
Within Film, operations are further divided into Stage and Ancillary, which provides production facilities to clients, Digital Content Services ("DCS") and International.
DCS offers picture and sound post production, media storage and management and distribution for original English language and internationally re-versioned content.
International operations, which leverage the Pinewood brand, include providing international sales, marketing, studio development and consultancy services in Canada, China, the Dominican Republic and Malaysia and a joint venture in the United States of America.
The Company's television ("TV") business provides a range of TV production facilities, often utilising its stages and DCS offerings to host and service large 'event' television productions. The television offering consists of a comprehensive range of production facilities such as high definition TV studios, film stages and post production services to support all forms of television production.
The Media Hub is currently home to 260 independent businesses representing and providing expertise, equipment and support to the film, television, games, advertising and photographic industries. These companies come together to form a unique cluster and centre of excellence for the entire creative industry.
The Media Investment segment (trading as "Pinewood Pictures") includes an agreement to source and advise on film, high-end television and video game investment opportunities for two media development funds; a £25m fund established by the Isle of Man Treasury and a £30m fund established by the Welsh Government. In addition, the segment involves identification and investment by the Group in British qualifying film and television productions.
Objectives and Strategy
The Group's mission is to:
•Continue to be the leading global destination for the production of film;
•Become the leading UK destination for the production of television, games and digital media;
•Leverage our brand heritage through international operations;
•Leverage our brand heritage through diversified services and markets;
•Exceed our customers' expectations through our commitment to professionalism, quality of service and offering sustainable advantage; and
•Increase value for all our stakeholders.
Targeted strategic plans to achieve this mission include:
•Operational growth:
•Increase capacity through expansion of existing stage and studio facilities and services;
•Investment in digital activities and technology; and
•Increased media and content investment activity.
•Property development:
•Plan to increase overall capacity; and
•Demand-led Media Hub expansion to limit speculative risk.
•Leveraging the brand:
•Selective growth through joint ventures with limited capital commitment;
•Lower risk investment in screen content; and
•Provision of investment advice to third party 'content' funds.
Key Performance Indicators
The Board uses a number of key performance indicators ("KPIs") to monitor the Company's performance, as well as to measure progress against the Company's objectives.
The KPIs used to measure performance, and which are discussed in further detail below for the year, are:
Six months ended30 September
2015 / Six months ended
30 September 2014 / Year
ended
31 March
2015
Media Services
Revenue (including inter-segment) / £32.5m / £27.0m / £57.2m
Operating profit before exceptional items / £8.3m / £6.1m / £11.0m
EBITDA* / £12.6m / £9.2m / £17.5m
Return on capital employed / 10.2% / 9.3% / 10.1%
Stage occupancy / 87% / 86% / 80%
Media Hub occupancy (as a % of net lettable area) / 95% / 97% / 97%
Media Investment
Number of active Film Production Companies during the year / 3 / 7 / 7
Loss after tax / (£0.1m) / (£0.3m) / (£0.1m)
Film finance funding invested by the Group / £1.0m / £1.0m / £1.0m
Film finance funding from third party funds / £3.4m / £6.4m / £6.4m
Group performance
Profit after tax / £4.3m / £3.8m / £8.1m
Earnings per share adjusted for exceptional items and fair value movements ("Normalised EPS") / 9.0p / 7.7p / 13.5p
Unrestricted cash generated from operations (see note 13) / £6.7m / £11.5m / £20.5m
Net debt / £55.8m / £31.8m / £71.9m
* Media Services EBITDA is derived by adding back depreciation and amortisation to operating profit before exceptional items
The Board believes the current suite of KPIs provide an appropriate measure of the Company's performance. However, as the business continues to implement its objectives and strategic plans, the Board recognises the business will become more complex and will continue to assess the adequacy and appropriateness of the KPIs listed above.
Media Services review
Total revenues within this segment were £32.5m for the period (six months ended 30 September 2014: £27.0m), including £0.2m of intersegment revenue (six months ended 30 September 2014: £0.6m).Inter-segment revenues relate to revenue generated from the utilisation of the Company's core services by the Group's wholly owned Film Production Companies.
Film
Film revenues for the period were £26.8m (six months ended 30 September 2014: £22.5m), an increase year on year of 19%.The increase is due to high stage utilisation across existing facilities.
The demand for the Company's facilities throughout the period continued to be strong, as reflected in stage occupancy of 87% (six months ended 30 September 2014: 86%).
The largest film production based at Pinewood Studios during the period was the 24thJames Bond film,SPECTRE(Eon/MGM) and the largest production at Shepperton Studios wasBeauty and the Beast(Disney).
Other major productions which were based at Pinewood and Shepperton during the period include the Star Wars spin off,Rogue One(Lucasfilm),Star Wars Episode VIII(Lucasfilm), The Huntsman(Universal) andMe Before You(MGM).
DCS revenues included within the total film revenue for the period have increased by 33% over the prior period at £4.8m(six months ended 30 September 2014: £3.6m).
Notable sound post production work completed during the period includedSpooks: The Greater Good(Shine Production/Kudos/Pinewood Pictures),Everest(Working Title),Steve Jobs(Universal Pictures) andBrooklyn(Wildgaze Productions).
DCS continues to enhance its offering to the growing number of feature films choosing to shoot with digital camera technology and television productions wishing to work in a digital file based environment at the Studios.
Games audio services include internationally recognised foley recording and editing; custom sound design; localisation in over 40 languages and a casting database of 4000 character voices.
Pinewood Digital have completed works onAvengers: Age of Ultron(Marvel),Ex Machina(DNA) andPride and Prejudice and Zombies(Cross Creek Pictures).
The Company was a finalist in theService Provider - Best Audio Suppliercategory at theTIGA Games Industry Awards2014, reflecting the Group's growing reputation in the gaming content development industry.
Pinewood Creative was launched in September 2014 at Pinewood Studios, and has developed from the original Studio Woodmill to now offer a full range of creative services. As well as an upgraded mill facility these additional services include a full range of 3D design, model making, set building and fit out services.
Pinewood entered into a profit sharing agreement with Jewson in January 2015, to be the preferred supplier of products to Pinewood and Shepperton for an initial period of five years.
Pinewood Group entered into a joint venture with MBS Equipment on 1 January 2015 known as Pinewood MBS Lighting Limited ("PMBS"). PMBS is the exclusive lighting provider to productions based at Pinewood Studios and Shepperton Studios.
The Pinewood Creative, Jewson and PMBS initiatives are examples of the Group expanding its revenue generating capacity and leveraging its brand.
Pinewood Studio Wales
In January 2015, Pinewood Studio Wales opened. In this initial period of operation the Company has worked hard to establish the studio's market position and the Company believes this will allow the studio to become more effective in the longer term. As a result, the studio has only hosted 3 productions to date but is now home to 14 tenant companies and is targeting film and high-end TV drama productions to utilise the facility.
International
International revenues for the period included within film were £1.4m (six months ended 30 September 2014: £1.8m) and relate to sales and marketing agreements in Toronto, Malaysia and Dominican Republic, the Pinewood Atlanta Studios plus consultancy services provided in China.
Pinewood Atlanta Studios
Pinewood Atlanta Studios now has 218,000 sq ft of sound stages and 300,000 sq ft of production facility accommodation and production workshops following the completion of the Phase 2 of development in June 2015. Demand for the studios has been good with productions from Marvel and Sony occupying facilities during the six month period to 30 September 2015.
China
China's box office growth is projected to pull ever nearer to the US and exceed it by 2020. There are 100 new screens being built every week - yet the country remains under-screened. The growth in the market and the recently signed China-UK Co-Production Treaty provides the Company with a number of opportunities which it is actively assessing. Currently, the Company provides consultancy services to a number of leading Chinese film industry companies. During the period, the Company continued to provide advice on the design and construction of the Qingdao Oriental Movie Metropolis, a film facility comprising 45 stages for the Wanda Group. Construction on Phase One commenced in 2015 with the studio complex scheduled to open in 2017. In addition, the Company completed the first phase of consultancy advice to the Shanghai Film Group on its studio facilities in Chidden. Active discussions about co-productions are currently taking place.
Television
Television ("TV") revenues for the periodwere £1.9m (sixmonths ended 30 September 2014:£1.7m). The Group's TVstudios have hosted new productions including the innovative and technically challenging shows,Dino Autopsy(Impossible Factual) andThe Alternative Election(Zeppotron), the latter of which involved an 8 hour live broadcast from the Pinewood TV studios.
Returning productions includingThrough the Keyhole(Talkback),Would I Lie To You?(Zeppotron),15 to 1(Remedy) andDuck Quacks Don't Echo(Magnum) have all utilised the Group's digital HD TV studios during the period.
The Group has also accommodated the BBC DramasW1A,StagandCuckooand the large light entertainment showBring The Noise(Twentythree 06) on Pinewood's multi-use stages.
The Television market remains buoyant. Light entertainment continues to dominate the schedule of traditional Broadcasters. The newer pay-on-demand platforms continue the drive to create high-end television productions, and are motivated to film in the UK by the UK High-End TV tax credit. During the period the Company has not accommodated any high end television productions at its Pinewood and Shepperton sites, as these have focussed on film activity.
Media Hub
Media Hub revenuesinclusive of service, utility and facility chargesfor the period were £3.8m (six months ending 30 September 2014: £2.8m). The increase is predominantly due to Shepperton Media Hub revenues of £0.6m now being consolidated in revenue throughout the period as a result of the Group acquiring 100% ownership of the Shepperton Studios Property Partnership ("SSPP") in December 2014.
The total number of Media Hub companies accommodated at the end of the period was 260 at Pinewood Studios, Shepperton Studios and Pinewood Studio Wales with occupancy of 95% across a net lettable area of 377,000 sq ft (six months ended 30 September 2014: 241 companies, 97% occupancy, 362,000 sq ft).
Gross and operating margins
The Media Services segment gross margin, excluding intersegment revenues, for the six months ended 30 September 2015 is 43.2% (six months ended 30 September 2014: 41.9%). The year on year variance is principally driven by the acquisition of 100% ownership of SSPP.
The Media Services operating margin is 25.8% (six months ended 30 September 2014: 23.1%). The increase in operating margin is again due to the acquisition of SSPP.
Return on capital employed
The Company measures return on capital employed ("ROCE") for the Media Services segment by reference to annualised operating profit before exceptional items, including intersegment profit and share of results of joint ventures, as a percentage of average capital employed, being total equity plus interest bearing loans and borrowings. ROCE for the twelve months ended 30 September 2015 was 10.2% (twelve months ended30 September 2014: 9.3%).
The PSDF is a capital intensive project with significant long-term infrastructure spend front-loaded. Capital employed at 30 September 2015 includes £24.5m of assets in the course of construction and land of £5.3m relating to this project, totalling £29.8m (30 September 2014: £9.5m) which are not yet revenue generating, and are not expected to be so until the year ending 31 March 2017. Excluding these assets from average capital employed gives a ROCE of 11.7% for the 12 months ended 30 September 2015 and 10.9% for the prior period.
Media Investment review
Segment revenue for the period was £6.0m (six months ended 30 September 2014: £12.1m).Due to the timing of deal flow, the Company has only had 3 live FPCs in the period (six months ended 30 September 2014: 7) and as a result revenue from FPCs is £5.0m (six months ended 30 September 2014: £11.6m).