Management Presentation - MZ Group

Management Presentation - MZ Group

Corporate Presentation July 2011 0 Disclaimer The material that follows is a presentation of general background information about T4F Entreteniment...

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Corporate Presentation July 2011

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Disclaimer The material that follows is a presentation of general background information about T4F Entretenimento S.A (“T4F”) as of the date of the presentation. It is information in summary form and does not purport to be complete. This material contains confidential information regarding and may not be reproduced or circulated, partially or completely, without the prior written consent of the T4F. Any statements, projections, expectations, estimates and plans contained in this document that do not describe historical facts, and the factors or trends affecting financial condition, liquidity or results of operations, are forward-looking statements and involve several risks and uncertainties. Such statements are based on assumptions and analyses made by the Company based on its experience and the economic climate and on market conditions and expected future events, many of which are beyond the Company’s control. No investment decision should be based on validity, accuracy or completeness of the information or opinions contained in this presentation. Under no circumstances, neither the Company nor its subsidiaries, directors, officers, agents or employees be liable to third parties (including investors) for any investment decision based on information and statements in this presentation, or for any damages resulting therefrom, corresponding or specific. This presentation does not constitute an offer, or invitation, or solicitation of an offer, to subscribe for or purchase any securities. Neither this presentation nor anything contained herein shall form the basis of any contract or commitment whatsoever.

1

IPO Summary Issuer

 T4F Entretenimento S.A.

Ticker Symbol

 SHOW3

Listing Date

 April 13th 2011

Total Offering Size

 R$503 million (US$310 million1)

# Shares Offered

 31,441,396 ON shares with 100% tag along (Novo Mercado)

Price

 R$16.00

Offering Breakdown

 37% primary / 63% secondary (Green Shoe)

Geographic Allocation

 60% North America; 25% Europe; 15% Brazil

Use of Proceeds

 (i) Acquisition of companies and venues, (ii) construction of venues e (iii) geographic expansion

Bookrunners

1: Assuming the exchange rate of US$1 = R$1.6207 as of May 12th , according to Bacen.

2

Shareholding Structure Shareholding Structure CIE International

Fernando Luiz Alterio

85.0% 15.0%

Gávea Investimentos

8.0%

12.8%

Free-Float

45.4%

FA Comércio e Participações

28.1%

5.6%

Shareholders Fernando Luiz Alterio CIE International

Stake Direct + Indirect 31.9% 9.8%

Gávea Investimentos

12.8%

Shareholders Agreement

55.6%

Free Float

45.4%

3

1. Company Overview 4

Company Overview T4F is the leading live / out-of-home entertainment promoter in South America with a diversified and verticalized business model Leading company in live entertainment in South America

 3rd largest player

Our Presence (Net Revenue 2010)



Brazil

66%

worldwide



 2.8 millions tickets sold / 2010

 

 29 years of experience  Pioneer in naming rights

Argentina

20%

 1.1 thousand shows promoted /2010

Unique Industry Knowledge

model in 1999

 Pioneer in online Chile

Peru

12%

2%

ticketing system in 2000 with Ticketmaster

 Promotion of the most successful events in Brazil, Chile and Argentina

High Growth and Strong Cash Generation

 Net Operation Cash Flow = 99% of EBITDA ( ∑ 05-10)

 Net Revenues CAGR 12% (07-10)

 EBITDA CAGR

Diversified and Verticalized Model

 Promotion of multicontent events

 Venues Operation  Food & Beverage and Merchandising

22% (07-10)

 Sustainable margins

 Ticketing Services

going forward

ONE AND ONLY INVESTMENT OPPORTUNITY IN THE ENTERTAINMENT INDUSTRY IN SOUTH AMERICA

5

Our Business Live Music

Sport Events

Theatrical Production

Performing Arts

U2

Madonna

Stock Car

Marcas

Cats

The Phantom of the Opera

Stomp

Cirque Du Soleil

Aerosmith

AC / DC

Copa Montana

Mini Challenge

Mamma Mia

Miss Saigon

Blue Man Group

Bodies

Verticalization

VENUE OPERATIONS

FOOD & BEVERAGE MERCHANDISING

TICKETING SERVICES

Revenue Sources Box Office

Ticketing Services

Sponsorships and Naming Rights

Suites and Hospitality Centers

Food & Beverage, Merchandising, and Parking

Private Events

6

Leadership Position in Live Entertainment Industry

Guns N’ Roses

Bon Jovi

Promoted 7 out of the 10 largest shows of the tour

Promoted the 2 largest shows of the 2010 world tour

Coldplay

Madonna

Promoted the 1st and 5th largest shows of all tours

3 out of the 5 largest shows of the tour in 2008

AC/DC

Metallica

The largest show of the world tour in 2009

2nd largest out of 75 shows of the tour

7

Leadership Position in Live Entertainment Industry - Almost 1,000 events 2006

Cirque du Soleil

2007/8

- 12 cities visited - More than 1.8 million tickets sold

2009/10

- Performance was Cirque du Soleil’s biggest box office in Sao Paulo and 6th biggest international box office in 2010

2011/13

- Starting in Sep/11 in Sao Paulo

10 different contents

Theatrical Plays

The only player that ever promoted authentic Broadway productions in the region More than 3.1 million tickets sold since 1999

Les Misérables, Beauty and the Beast, Chicago, Mamma Mia, Phantom of the Opera, Miss Saigon, Cabaret, The Sound of Music, Sweet Charity, Cats.

12 races per season in 10 different cities

Sports Events

Third largest touring car series worldwide Broadcasted by TV Globo since 2000 Total Public: 430,000 / year 8

2. Investment Highlights 9

Investment Case

Attractive Macroeconomic Environment and Robust Consumption Growth

 Massive increase in disposable income and expansion of consumer base  Expenditure of entertainment is extremely correlated to consumer spending

Live Entertainment Industry Growth

 Live music: Touring became essential for artists Aggressive growth in South America in terms of ticket sold and average ticket price

Compelling business model and Superior Management and Expertise

 Superior business model: higher return with lower risk  Credibility with international and domestic agents and privileged access to high quality entertainment providers

10

Positive Trends for Expenditures with Entertainment in Emerging Markets… Expenditure with Entertainment as a % of the Disposable Income vs GDP per Capita

2010E-2015E GDP Growth (1) China 61.8%

Cambodia

42.8%

Peru

40.8%

Singapore

33.8%

Chile

32.9%

Brazil

31.1%

Mexico

30.8%

Colombia

28.0%

Israel

24.0%

Argentina

20.0%

New Zeland

18.4%

USA

17.0%

UK

15.1%

Croatia

15.6%

Japan

12.1%

France

12.1%

Italy

7.8%

Spain

7.0%

Portugal

6.0%

Venezuela

5 out of the 11 largest growths in GDP are in South America

Expenditure with entertaiment as a % of disposable income

India

Greece

12.0%

75.0%

R2 = 0.66 R2 (ex Argentina) = 0.81

UK Japan

10.0% Spain Argentina

USA

New Zeland

8.0%

France Portugal Greece

6.0%

Italy

Croatia Israel

4.0%

Brazil Mexico Chile China India Colombia Venezuela Peru

2.0%

0.0% 0

10,000

20,000

30,000

40,000

50,000

GDP per capita in 2009 (US$ '000)

4.2% -0.1%

(1) In local currency real terms. Source: IMF – World Economic Outlook.

Source: Euromonitor.

Expenditures with entertainment are expected to significantly increase in emerging markets 11

…Combined with Changing Demographics in Brazil Demographic Shift

Social Classes Growth in Brazil 2001-08 Aggregate Income Growth (R$ bn) by Social Class TF4’s target public

 Expansion of classes A, B and C is boosting consumption -

Southeast and South regions, the wealthiest of the country, represent high growth potential

-

Under penetrated North and Northeast regions are increasingly perceived as growth opportunities

2001 38%

TF4’s target public = 46%

39.1%

Social Classes

A/B

8%

A/B

C

48.4%

C

2008 TF4’s target public = 59%

49%

10%

A/B Note: Average Monthly Income by Class: A and B (R$4,591+), C (R$1,064-4,591), D (R$768-1,064) and E (R$0-768) Source: IBGE, PNAD 2002, PNAD 2008 and FGV-CPS

C

Source: FGV.

12

Boom of the Live Entertainment Industry Live music has significantly increased importance in the music industry, with touring becoming essential for artists, while recorded music revenues have been shrinking Total Recorded Music Revenues vs. Total Revenues with Tickets Sold in North America (US$ billion)

2009 Top Music Acts – Sales Breakdown (US$ million)

U2

13.6

12%

88%

137

13.1 12.5 Bruce Springsteen

11.0

5%

95%

105

9.0

Album sales Britney Spears

8.0

6%

94%

90

Tour Gross Total

2.8 2004

Source: Pollstar

3.1

2005

3.6

2006

3.9

2007

4.2

2008

AC/ DC

6%

Jonas Brothers

9%

94%

86

4.6

91%

79

2009

Source: Live Nation

13

Attractive Dynamics in South America T4F has uncontested leadership in South America… Leading Position

Tickets Sold

Global Rank

2005

2006

2007

2008

2009

Index 100

500

2010

CAGR: 425

400

3rd

300 200

4th 7th

100

10th

-1%

95

-

21st

2007

2006 1st

44%

Top independent promoter in 2009 and 2010 by Billboard

2008

World

Higher Audience Market per Concert (1)

2010

2009 South America

Significant Pricing Power (1)

(‘000 people)

(Average ticket price – US$ per ticket)

Average Brazil, Argentina and Chile (T4F) +73% T4F Average: 45.0

Global Average 59 53

106

22

Global Average: 26.0

114

22

21

Coldplay

Metallica

Global Average: 82.5

87

86 72

37

+2.7% T4F Average: 84.7

Global Average

58 43

27

Average Brazil, Argentina and Chile (T4F)

69

84 72

77

69

13

Aerosmith

Madonna

AC/ DC

(1) Selection based on concerts promoted by T4F that were part of a global tour, which worldwide statistics were available on Pollstar’s 2009 review; source: Pollstar and T4F.

Aerosmith

Madonna

AC/ DC

Coldplay

Metallica

Source: Pollstar, Billboard and T4F.

South America: a must-go destination for world tours

14

Superior Business Model EBITDA Margin (2010)

Verticalization

Diversification

Ability to generate revenues from multiple sources in each event

Multi-content platform = reduced risk

High Margins

16.7% 1

12.8% 6.5%

High Returns

• 42% ROIC and 32% ROE in 2010 • No revenue concentration

Low Risk

in specific content

• Increased control over the entertainment value chain

Asset Light

Strong Cash Flow

Maintenance capex = 1% of net revenues; PP&E represent <5% of total assets

Low capex and negative working capital (sponsorships + tickets sold in advance)

Strong Cash Conversion

• 99% of EBITDA between 2005 and 2010 was converted to cash

Note(1): Largest entertainment Company in Mexico controlled by CIE

15

Solid Sponsorship Revenues Flow

• Content

sponsorship, priority benefit, naming rights sold in our 5 venues

• Over

100 active clients, including major corporations

• T4F’s

contents attract strong media interest, generating a significant amount of spontaneous media (about R$500 million per year)

Current Backlog

(1)

and Backlog Recognition

(R$ million)

Current Backlog Backlog Recognition 206

101

Largest Corporate Sponsors 71

25

Naming Rights 9

2010

2011E

2012E

2013E

2014E - 2019E

(1) Sum of all sponsorship contracts held by the Company.

16

High Barriers of Entry

Guaranteed access to premium content

 Agreement with Cirque du Soleil valid through 2013  Exclusivity and non-compete agreement with Live Nation valid through August 2015

 Family Entertainment: Disney, Andrew Lloyd Weber, Cameron Mackintosh and

Potential Competitors

Privileged access to highquality entertainment providers

the Blue Man Group

 Sports: Stock Car, Fórmula Montana and Mini Challenge championship  Music Concerts: CAA, William Morris, ITB – International Talent Booking, The Agency Group, among others

Long-term agreements and solid relationships with corporate sponsors

Exclusive long-term access to premium venues

Multi-country operations

Credibility

 Naming Rights: Citibank, Credicard, Abril and Caixa Econômica Federal  Sponsorships: Bradesco, Credicard, Mastercard, American Express, Citibank, Quilmes, General Motors and Pepsi

 Controls 5 of the most important venues in South America

 Possibility to capture economies of scale on the acquisition of content, by operating in four countries

 T4F is the most credible producer and promoter in South America, both in execution capability and financial strength

17

Competitive Landscape T4F has a totally integrated business model…

Latin Music

Anglo Music

T4F Brazil

T4F

Plan Music XYZ Live

Argentina

Chile

T4F Fenix

Fenix

Performing Arts

Venues

T4F

T4F

Dell Arte

HSBC Brasil

Ingresso Fácil

Dançar

Via Funchal

Ingresso Rápido

Ake

Opus

Ingresso.com

T4F Siberia

RGB

Ake

Ake

DG Medios

RGB

T4F Luna Park

Arena Santiago

Ticketing Services

Ticket Portal Top Show

Falabella Puntoticket

…No other company operates in 3 countries, throughout various business lines 18

Seasoned Management and Board of Directors Name/Position

Founder of T4F

Years of Experience

Name/Position Fernando Alterio – Chairman

39

 Founder of T4F  29 years of industry experience

Grace Tourinho CEO - Brazil

3

24

 Previous experiences include Cosan, Palace, Banco Interatlântico and Cruzeiro DTVM

Orlando Viscardi CFO

1

18

Alejandro Soberón – Member

12

26

José Muniz VP T4F USA Alexandre Faria COO

10

16

José Papa Booking Director

1

13

Stephanie Mayorkis Theater and Expositions Director

10

15

Flávio Fernandes Int’l Managing Director

1

Francisco Goni Country head - Chile

9

16

Fernando Moya Artistic Director Argentina

5

27

19

BOARD OF DIRECTORS

MANAGEMENT

Fernando Alterio CEO

Years of T4F

 Founder, CEO and president of the board of directors of CIE  Holds a degree in Business Administration from Universidad Iberoamericana (Mexico) Maurizio Mauro – Member  Former CEO Grupo Abril  Former senior partner at Booz Allen Hamilton  Board member in several Brazilian companies Luciano Nogueira Neto – Member  Co-founder of T4F and 28 years of industry experience  Previous experiences include Palace Promoções, Lojas Pernambucanas and own ventures  Holds degrees in business administration (FGV-EAESP) and law (USP) Piero Minardi – Member  Senior Partner at Gávea Investimentos  Extensive corporate finance and strategic consulting knowledge  Former M&A director at Grupo Bunge

Human Resources Strategy Focused in the Alignment of Interests: Strong variable component, stock options and trainee program

19

3. Growth Strategy 20

T4F’s History Track record of success, growth and regional expansion Foundation

Expansion

Consolidation of the Business Model

 Expansion to other cities

2008:  Agreement with Live Nation in South America 1983:  Brazil – Opening of Palace(1) (São Paulo)

New Expansion Cycle

in Brazil and countries in the region

 Construction of venues  Acquisition of companies

2005:

 Argentina – Acquisition of Ticketek

2001:

2010:  New category Mini Challenge 2006:  Brazil – Acquisition of Vicar  Argentina – Acquisition of Pop Art

 Brazil – Opening of Teatro Abril venue (São Paulo)

1999:  Brazil – Opening of Credicard Hall (São Paulo)  First year of Broadway promotion

 Brazil – Acquisition of Citibank Hall Rio de Janeiro

2007:

 Acquisition of control of T4F by Fernando 2000:  Brazil: Start of operations of Ticketmaster system Note(1): Currently, Citibank Hall São Paulo

Alterio and Gávea Investimentos

 Acquisition of T4F Argentina and T4F Chile

21

T4F’s Drivers for Growth T4F is the natural consolidator of the South American live entertainment industry Total potential amount of approximately R$ 600mm

Strong Financial Profile

Acquisition of Equipment, 5%

Ticketing Service, 7%

Offering Proceeds Acquisition Opportunities, 45%

Strong Cash Generation Construction of Venues, 35%

Leverage Capacity Geographic Expansion, 8%

The IPO will further improve T4F leadership and capture the booming industry prospects 22

T4F Outdoor Venue in São Paulo T4F outdoor venue is expected to be a reference among renowned entertainment venues Project overview

 Designed to fill a gap in high-level entertainment venues in the São Paulo metropolitan area

 Naming rights revenues reaching up to R$ 8 million a year

 Flexible in terms of capacity: events from 15,000 to 60,000 people

 Capex should reach R$100 million with expected IRR of 33%

 Control of the agenda and integrated model translate into a strong barrier of entry

Venue – São Paulo, Brazil

Foro Sol – Mexico City, Mexico

23

Geographic Expansion 80% of T4F’s revenues in Brazil come from SP and RJ which represent only 17% of Brazil’s GDP Main Cities in South America

Main Cities in Brazil New / retrofitted venues to explore

Colombia

Caracas Venezuela Guiana Suriname

Bogota

French Guiana

Ecuador Belém

Fortaleza Natal Recife

Manaus Brazil

Peru Lima

Salvador

Bolivia

Brasília Belo Horizonte Campinas Curitiba

Rio de Janeiro Sao Paulo

Porto Alegre

680 presentations/year and 1.5 mm tickets sold/year in SP and RJ

Potential of 400 presentations/year and 840 thousand tickets sold/year in other cities

Paraguay Chile Mendoza Argentina Cordoba Uruguay Santiago Buenos Aires

300 presentations/year and 1.0 mm tickets sold/year in BA and Santiago

Potential of 200 presentations/year and 700 thousand tickets sold in other cities

Indicates cities in which T4F is currenlty present. Cities to which T4F plans to expand operations.

Still a relevant growth opportunity outside Brazil, representing 40% of South America’s GDP 24

Selected Acquisition Targets Fragmented market presents several consolidation opportunities and T4F has already screened selected acquisition targets which are complementary and synergic.

Venues + 16 venues identified in 9 different states of Brazil

 Average capacity: from 5,000 to 16,000 people

Festivals + 11 festivals in 11 different cities in Brazil

 Complementary in calendar (summer)  Well-established brands, mostly in NE region  Exposure to middle class

Promoters

Marketing

+ 8 companies operating in specific niches, such as: classic music, regional music and dance

Promotional Marketing: below the line and event companies provides strong synergies with production (team and equipments), food & beverage and venues operations

+ 8 sport events companies acting in: car racing, beach volley, beach soccer, tennis and basketball

 11 companies out of 92, aggregate sales of R$770 mm in 2009 25

4. Operational and Financial Highlights 26

Solid Operational Performance Net Revenues (R$ mm) and Gross Margin (%)

EBITDA (R$ mm) and EBITDA Margin (%)

CAGR: 12%

CAGR: 22% 16.7%

16.8% 28.2%

26.7%

29.2%

10.6%

24.4%

596.6

100.4

2008

95.1

569.2 434.6

404.2

2007

12.9%

2009

52.1

2010

Net Income (R$ mm) and Net Margin (%)

46.1

2007

2008

2009

2010

Operational Cash Flow vs. EBITDA CAGR: 15%

7.9%

351.9

7.1%

6.5%

347.7 214.5 188.7

46.9

1.4% 40.3

246.5 256.8

210.7

99%

105.6 110.3

26.3 36.4

58.1

6.0 5.3

2007

2008

2009

2010

2005

2006

2007

EBITDA - Accumulated Note: Summary of 2009 impacts • Global crisis impact of R$16.8 mm • Postponement impact of R$4.7 mm • H1N1 flu impact of R$21.6 mm

2008

2009

2010

Cash Generation - Accumulated

27

Historical Financial Information (cont’d) ROIC, ROE and indebtness metrics ROIC (1)

ROE (2) (%)

(%)

42.0% 38.3%

46.0% 40.6% 31.7%

25.5%

25.0%

4.8%

2007

2008

2009

2010

Net Debt and Net Debt / EBITDA

2007

2008

2009

2010

Net Debt Breakdown (as of Dec 2010)

(R$ million)

(R$ million)

113 92

2.0x

131.3

120.9

29

1.1x

29.4

19 0.3x 2008

2009

2010

Short Term Debt

Long Term Debt

Cash and Equivalents

Net Debt

(1)ROIC calculated as NOPAT / (Net PP&E + current assets non cash) (2)ROE calculated as Net Income/ Average Shareholders’ Equity.

.

28

Why Invest in T4F?

One and only investment opportunity in the entertainment industry in South America, with longstanding track-record and leadership

Strong conversion of EBITDA into cash flow

Asset light model, resulting in high returns and dividend payout capacity

Verticalization and diversification, resulting in high margins and low risk

Unique access to high-quality content

Multi-country operations, creating significant economies of scale and barriers of entry

29