Cie Reports Second Quarter 2004 Results
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Highlights: CIE REPORTS SECOND QUARTER 2004 RESULTS Entertainment, Commercial and Mexico City, July 27, 2004 - Corporación Interamericana de Entretenimiento, Services Division revenues S.A. de C.V. (“CIE”, “the Company” or “the Group” (BMV: CIE B), the leading out- increase 18%, 4% and 12% of-home entertainment company serving the Spanish- and Portuguese-speaking respectively markets in Latin America, Spain, and the U.S. Latin market, today announced its Growth in entertainment revenues consolidated financial and operating results for the second quarter of 2004, was mainly driven by a strong ended on June 30, 2004. local and international live event calendar in Argentina, Brazil and Mexico Quarter vs. Quarter Adjustment in EBITDA margin primarily due to the build-out of 2Q 2004 2Q 2003 VAR % Sports Books & Yaks Revenues 1,933 1,672 15.6% CIE inaugurates new children’s EBITDA 437 388 12.8% outdoor attraction, Granja Las Américas EBITDA Margin 22.6% 23.2% EBITDA / Interest Expense Ratio 3.9x 3.7x Wannado™ “real-play” theme park scheduled to open August 12, Comp. Cost of Financing 115 38 N.A. 2004 Majority Net Result 95 115 (18%) New corporate identity unveiled; CIE to enhance brand recognition First Six Months vs. First Six Months across all markets 1H 2004 1H 2003 VAR % Revenues 3,541 3,107 14.0% EBITDA 797 719 10.9% EBITDA Margin 22.5% 23.1% EBITDA / Interest Expense Ratio 3.6x 3.5x CIE CONTACTS: Jaime J. Zevada Comp. Cost of Financing 219 89 N.A. Director of Finance Majority Net Result 164 178 (8%) Juan Carlos Sotomayor Investor Relations Conrado M. Ramírez NOTE: Figures appearing in this table and throughout the document are expressed in Banking Communications millions of Mexican pesos of purchasing power as of June 30, 2004, unless otherwise specified, and have been prepared in accordance with Mexican Generally Accepted E: [email protected] Accounting Principles (“Mexican GAAP”). Figures may differ due to rounding. T: +52 (55) 5201-9000 EXTERNAL CONTACT: Jesús Martinez IR and PR Communications E: [email protected] T: +52 (55) 5644-1247 Second Quarter 2004 Results Page 2 Discussion of Quarterly Results (“The Period”) REVENUES Consolidated revenues in the second quarter of 2004 increased 15.6% to Ps. 1,933, compared to Ps. 1,672 in the same quarter of 2003. Quarterly Revenue by Division Total: Ps.1,932 2Q 2004 2Q 2003 196 176 10% 10% 240 231 12% 14% 1,497 1,265 78% 76% Entertainment Services Commercial Entertainment Division: Revenue totaled Ps. 1,497 in the quarter, 18% more than the Ps. 1,265 registered in the year ago period. (Operating Highlights contained in this document offer a more detailed understanding of the events impacting quarterly results.) This increase was principally driven by: a. A strong schedule of live events in Argentina, Brazil and Mexico, including sold-out performances of international recording artists such as Michael Bolton, Creedence Clearwater, Blink-182, Creamfields, Festival Vive Latino, Yes, Chayanne South America Tour (in countries such as: Ecuador, Peru and Venezuela) and others (see Operating Highlights). In addition, and when compared with the year ago period, in which numerous concerts were postponed or cancelled due to the war in Iraq resulting in a lower than usual revenue second quarter for 2003; b. Three Broadway-type productions in Spain compared to one in the year ago period. Productions during the quarter included Cats, Cabaret and Phantom of the Opera. The latter ended its 21–month production run in the last week of the second quarter; and, c. The operation of the horse race track and its 28 Sports Books & Yaks1 units, compared to 19 in the second quarter of 2003, in addition to an increase in local and international exhibitions at Centro Banamex, from 13 expos in 2003, to 19 in 2004. 1 Sports Books & Yaks is a network of sites that feature off-track betting and numbers-based games, respectively, and are developed and operated by CIE. Second Quarter 2004 Results Page 3 Commercial Division: Revenue in the second quarter registered an increase of 4%, reaching Ps. 240, compared with Ps. 231 in the same period of 2003. This increase is primarily due to a greater number of billboard advertisements on pedestrian overpasses. In the current quarter, 667 ads were featured, a 43% increase over the 467 in the second quarter of 2003. Higher Commercial performance was partially offset by the lower contribution of revenues from rotational and static advertising at soccer fields in Mexico. The Company is reorganizing its business model on more profitable clients and teams. Services Division: Revenue totaled Ps. 196 in the quarter, in comparison with the Ps. 176 recorded in the same period of 2003. The 11% increase is mainly attributable to a higher number of tickets sold for own live events in Mexico and South America, despite a slight decrease in the volume of tickets sold for third party venues and live events affiliates in Mexico during the quarter, in comparison to the same period of the previous year. GROSS PROFIT Gross profit for the quarter reached Ps. 722, 13% greater than the Ps. 636 recorded in the same period of 2003. The gross margin of 37.4% was 70 basis points lower that 38.0% gross margin registered in the second quarter of 2003, primarily as a result of the recently added Sports Books & Yaks units that have not yet reached full revenue-generating capacity. EBITDA The Group recorded EBITDA (“earnings before interest, taxes, depreciation and amortization”) of Ps. 437, a 12.7% increase over the Ps. 388 of 2003. EBITDA margin for the period was 22.6%, a decline of 57 basis points from the 23.2% margin recorded in 2003. The temporary adjustment in EBITDA margin resulted primarily from the addition of new Sports Books & Yaks units, an effect that shall remain while new units start-up and approach maturity. However, as units reach their full revenue-generating capacity, the proportionate impact of a greater number of mature units should compensate for this short-term temporary affect on EBITDA margin. As of June 30, 2004 CIE had opened 28 of the 45 shops in the country for which it holds licenses. In the next six months, the Company plans to open between five and seven additional units, which will continue to weigh on EBITDA margins as previously expected and stated by the Company. OPERATING INCOME Income from operations was Ps. 311 versus Ps. 273 for the same quarter a year ago, an increase of 14%. Operating margin for the quarter was 16.1%, 21 basis points lower than the 16.3% operating margin recorded in the second quarter of 2003. The decrease in operating margin is due to a greater level of depreciation and amortization, which increased 10% from Ps. 115 in the second quarter of 2003 to Ps. 126 in the current period, reflecting a higher base of fixed assets. EBIT margin was also affected by the lower EBITDA contribution. COMPREHENSIVE COST OF FINANCING (“CCF”) The following table compares the CCF for the three months ended June 30, 2004 with that of the year ago period. Second Quarter 2004 Results Page 4 2Q 2004 2Q 2003 VAR % Interest Expense 111 104 6.9% Interest Income 7 12 (42.4)% Foreign Exchange (Gain) Loss – Net (11) 64 N.A. Monetary Position (Gain) Loss - 10 (101.7)% Total 115 38 205.1% The Company recorded Ps. 115 as CCF in the second quarter of the year, in comparison to the Ps. 38 registered in the same period of 2003. This increase was the combined effect of: a. A Ps. 11 net foreign exchange loss recorded in the 2004 period as a result of the peso devaluation, compared with the Ps. 64 gain in the same period last year; and, b. An increase of 13% or Ps. 12 in net interest expense, from Ps. 92 in the year ago period, to Ps. 104 in the current quarter: • A 42% reduction in interest income, totaling Ps. 7 in the 2004 period, as compared with Ps. 12 in the prior year, explained by a lower level of cash and cash equivalents; and, • Higher interest expense in the current quarter, totaling Ps.111, in comparison to the Ps. 104 in the second quarter of 2003, mainly due to a higher level of debt. However and partially offsetting these increases, the Company recorded a marginal monetary position gain during the period, in comparison with a Ps. 10 monetary loss during the second quarter of 2003. Debt as of June 30, 2004 Total: $4,881 DENOMINATION MATURITIES US Dollars Long Term (3%) Short Term (81%) (19%) UDIs Mexican Pesos (44%) (53%) OTHER EXPENSES During the quarter, the Company recorded a Ps. 40 non-cash charge as other expenses, as it entered into the restructuring of the rotational advertising business model, based on a profitability per-client and per-team analysis conducted after the first football season of 2004. The Company intends to reorganize its strategy in two dimensions (i) its advertising selling process and (ii) the acquisition of future exclusive rights of football teams. PROVISIONS FOR TAXES Second Quarter 2004 Results Page 5 CIE recorded Ps. 62 in tax provisions during the current period, compared to Ps. 91 in the second quarter of 2003. MAJORITY NET RESULT The Company registered a majority net result of Ps. 95 in the second quarter of the year, in comparison to a majority net result of Ps. 115 recorded in the same period of 2003. The majority net result of this period was principally affected by the non-cash charge resulting from the restructuring of the rotational advertising business as previously stated.