Cineworld Update


BUY | 34% upside to TP 270p | UK | Travel & Leisure | 30 November 2011
Year ending strongly

What’s new?

Recent data from the Cinema Exhibitors Association has highlighted that YTD, UK box office admissions are +1.0% higher. The run-rate in October was strong with a 5.2% rise against the same period last year. Our forecasts are based on admissions rising by +2.3% in 2011 which now looks more than achievable with a) a strong film pipeline in the last two months and b) comparatives are easy with a 9.8% and 25.2% decline in admissions in Nov and Dec last year (Fig 2 overleaf)

The Collins Stewart view

We believe that November has been strong with the combination of “Twilight Saga: Breaking Dawn Part 1” (has already grossed £23.3m in only 2 weeks), “Adventures of TinTin”, and “Arthur Christmas”. With the release of “Hugo (3D)”, “Happy Feet Two (3D)”, “Puss in Boots (3D)”, “Sherlock Holmes: A game of shadows” and “Mission: Impossible Ghost Protocol”, in December, we are confident that Cineworld should have a strong end to the year.

Impact on investment case

Cineworld is No.1 at the UK box office with a 26.1% market share. It has a multi-phase investment programme which is supporting market share growth. The roll-out of digital and 3-D projectors should reach c.80% of the estate by the year-end and we expect this to near 100% by mid-2012. This should improve the quality of the group’s revenue, enhance margins and cash flow with receipts from VPF’s rising over the next 12 months. The investment behind its web and digital platforms, in addition to driving greater levels of admissions through its affiliation with Tesco Clubcard and its Unlimited card should result in growing its database and enable the group to target customers more effectively with value led offers. With early signs that the opening programme is to accelerate from 2013 onwards, suggests Cineworld is well placed for further growth across all drivers.


Cineworld is highly cash generative and whilst fixed charge cover of 1.7x is low, it suggests that an increase in admissions, ticket prices and advertising has a high conversion to uplift in earnings. With improving asset utilisation, we forecast a 2011 CFROA of 9.7% (+40bp’s over 2010), some 1.7x WACC. The shares have shown recent strength and are now trading on 10.1x PE, 5.9x EV/EBITDA and 5.6% yield. This compares favourably to the take-out multiple of Vue (7.5x EBITDA), significant discount to its peer group (refer overleaf Fig3) and we continue to believe that CINE remains materially undervalued at its current price.

Share performance catalyst

Jan 2012 update should be positive and we remain Strong Buyers.

Next one.

The bullet points near the start at least are interesting - slightly higher ticket price, slight drop in food spend, and digital conversion due to be finished for Summer, currently at 75%.

8 Mar 2012 07:00 GMT
DJ Cineworld Group plc Final Results
RNS Number : 9261Y

Cineworld Group plc

08 March 2012

8 March 2012 Embargoed for 7am release


Cineworld Group plc (“Cineworld”, the “Company” or “the Group”) is pleased to announce its results for the 52 weeks ended 29 December 2011.

Highlights 2011

A more detailed review is included in the Financial Performance section of this statement.

                            2011                2010 
                            52 weeks            52 weeks 

Group revenue GBP348.0m +1.5% GBP342.8m
EBITDA* GBP63.3m +7.3% GBP59.0m
Profit before tax GBP33.4m +9.9% GBP30.4m
Adjusted pro-forma diluted
EPS 19.2p +6.1% 18.1p
Proposed final dividend 7.4p +4.2% 7.1p
Proposed full year dividend 11.0p +4.8% 10.5p

Other key highlights

– Number 1 cinema operator in UK/Ireland for 2011 with a box office market share of 24.6% (Rentrak/EDI).

– Box office up 2.7% at GBP242.1m against 2010;
– Admissions 2.3% higher than 2010 at 48.3m;
– Average ticket price per admission up 0.4% to GBP5.01 (2010: GBP4.99) with average retail spend per person slightly softer at GBP1.69 (2010: GBP1.73);

– Strong progress on digital conversion with over 75% of the estate now using digital projectors;

– Opening of a new seven screen cinema at Leigh;
– New facility of GBP170m negotiated in March to finance future expansion and other opportunities.

Commenting on these results, Stephen Wiener, Chief Executive Officer of Cineworld Group plc, said :

“In 2011 we once more increased revenues and profits, showing the continuing appeal of cinema even in difficult economic times, and claimed the title of number one operator in the combined UK and Irish market for the first time. I’m delighted that we are able to report an increase in EPS of 6.1% and a proposed full year dividend of 11p. In the year we continued our expansion with a new cinema in Leigh, invested in options for future growth including a new premium concept cinema in Cheltenham, and installed our first IMAX screen in Edinburgh in late 2011.”

“This year’s strong release schedule features many high profile sequels and takes into account the timing of the Olympics. We expect to complete our digital roll-out by the end of the summer, expand further with a new seven screen cinema in Aldershot in the fourth quarter and continue our investment in innovation to improve the customer experience. We will shortly be opening two additional IMAX screens, in Sheffield and Crawley, as well as trialing our first interactive D-Box seats, in Glasgow. These measures will help maintain our market-leading position and underpin growth in 2012 and beyond.”


Cineworld Group plc M:Communications
Stephen Wiener Power Road Studios Elly Williamson 1 Ropemaker St
Chief Executive Officer 114 Power Road London, EC2Y 9AW
London W4 5PY +44 (0) 207 920 2339
Philip Bowcock +44(0) 208 987
Chief Financial Officer 5000

Cautionary note concerning forward looking statements

Certain statements in this announcement are forward looking and so involve risk and uncertainty because they relate to events, and depend upon circumstances that will occur in the future and therefore results and developments can differ materially from those anticipated. The forward looking statements reflect knowledge and information available at the date of preparation of this announcement and the Group undertakes no obligation to update these forward-looking statements. Nothing in this announcement should be construed as a profit forecast.

*EBITDA is defined as operating profit before depreciation, impairments, reversals of impairments and amortisation, onerous lease and other non-recurring or non-cash property charges, transaction, pension, refinancing and reorganisation costs

Chairman’s Statement

I am pleased to report yet another successful year of trading for the Group. For the first time in its history, in 2011 Cineworld became the top cinema operator in the combined UK and Irish market for the year with a gross box office market share of 24.6%, according to Rentrak/EDI. It is a clear demonstration of the success of our efforts to increase the competitiveness of our film and retail offers, our pricing and the comfort and accessibility of our cinemas.

It is also a pleasure to report that the Board has proposed a 4.8% increase in the full year dividend for 2011 to 11.0p, which continues the year on year growth in dividends every year since we became a listed company. This proposal reflects the continued growth in revenues and profits and strong cash generation. Our sound financial position was further reinforced when a new GBP170 million, 5 year facility was put in place in March 2011.

The Group remains committed to expansion and investment and it was a busy year for the business in this respect. We successfully opened a new seven screen cinema in Leigh on 18 November on schedule in addition to the “The Screening Rooms” concept in Cheltenham in June. The expansion of our digital estate continues according to plan and it is anticipated that the final screen in our estate will be converted in the summer of 2012. Our efforts to purchase the Cinesur chain of cinemas in Spain were unsuccessful as the vendors were unable to meet the contractual conditions for completion. Despite this outcome we remain keen to grow our business and continue to look for suitable expansionary opportunities that are in the best interests of our shareholders.

Our focus on the customer experience remains as important as always. We pride ourselves on offering our customers the widest film range of any of the major exhibitors in the UK. We are committed to expanding our Unlimited subscription programme, a unique offering in UK and Ireland. Investment in technology plays an important part in our plans and we have a major IT systems upgrade in progress which is well advanced and will ensure that we have solid foundations for future growth. At the end of the year we also opened our first IMAX screen at our Edinburgh cinema which has initially performed above expectations. Two more screens are planned for other locations in 2012.

Maintaining and expanding the culture of strong governance throughout the whole organisation remains a key responsibility for the Board. We have followed the public debate on Board diversity with interest and continue to encourage the organisation to consider wider society matters, such as the environment, diversity and health and safety matters and constantly review our practices against perceived best practices.

There were some changes to the Board during the year. On 11 May 2011, Matthew Tooth stepped down from the Board to concentrate on his Blackstone activities. On 10 June 2011, Richard Jones resigned from the Board and as Chief Financial Officer. I would like to thank both Matthew and Richard for their significant support and contributions over the years and for leaving Cineworld in a sound financial position. I would also like to welcome to the Board Philip Bowcock, who was appointed Chief Financial Officer on 1 December 2011. Philip brings a wealth of experience and skills relevant to Cineworld’s activities and I look forward to working with him.

We all know that the economic and financial outlook will continue to be challenging and that we face a tough competitive landscape. We have made a sound start to the new financial year and whilst the forthcoming European football championship and London Olympics will present further challenges, there is a strong line up of films to support the rest of the year. I remain positive about the future prospects of the Group.

On behalf of the Board, I would like to thank our management and our employees for their hard work and achievements. Our people are highly motivated and passionate about delivering success and the Group remains in a strong financial and competitive position - the result of a successful business model which continues to prove its resilience and which offers opportunities for growth. I look forward to working with management and staff to move the business forward and reporting continued growth to you, our shareholders.

Anthony Bloom


8 March 2012

Chief Executive and Chief Financial Officers’ Business Review

Performance Overview

52 week period 52 week period
ended ended
29 December 30 December
2011 2010

              Total   Total 

Admissions 48.3m 47.2m
Box office 242.1 235.8
Retail 81.6 81.6
Other Income 24.3 25.4
------ ------
Total revenue 348.0 342.8
------ ------

Cineworld delivered a solid financial performance for the year. Total revenue for 2011 was GBP348.0m an increase of 1.5% on the prior year (2010: GBP342.8m). Cineworld’s box office increased 2.7% to GBP242.1m. Average ticket price per admission increased marginally by 0.4% to GBP5.01 (2010: GBP4.99) whilst total retail revenues were flat (2010: GBP81.6m). Other revenues fell by 4.3% to GBP24.3m (2010: GBP25.4m).

For the first time Cineworld was the number one cinema operator in the combined UK and Irish market, with a box office market share of 24.6% (2010: 24.6%). The Group’s admissions were 1.1m, 2.3% higher than the prior year.

Cineworld also remained the number one cinema operator in the UK in terms of box office (Rentrak/EDI) with a market share of 26.1% in 2011 (2010: 26.2%).

Box Office

Cineworld’s principal income arises from box office revenues. Higher admissions in the year contributed to a 2.7% increase in box office sales to GBP242.1m. This equated to a 4.9% increase on a gross box office basis (inclusive of VAT) and was consistent with the UK and Ireland cinema industry as a whole, with industry gross box office up 4.9% against the previous year (Source: Rentrak/EDI), partially lifted by an increase in the rate of VAT from 17.5% to 20% on 4 January 2011.

Cineworld’s ticket price increases were partially offset by lower 3D business and higher take up of concessionary and discounted tickets, which meant that the average ticket price per admission increased marginally by 0.4% to GBP5.01 (2010: GBP4.99). The average net ticket price (excluding VAT) of 3D of GBP6.32 compared to 2D of GBP4.50. Cineworld nevertheless continues to offer its customers good value with the lowest average ticket price of any of the major UK cinema groups. In the current economic climate there remains a notable proportion of customers taking advantage of our lower mid week ticket prices.

There were strong performances in the year from blockbusters such as “Harry Potter and the Deathly Hallows Part 2” (the highest grossing film in the UK in 2011), “Pirates of the Caribbean: On Stranger Tides”, “The Hangover Part II” and “Twilight Saga: Breaking Dawn - Part 1”, which all performed above or in line with industry expectations. Whilst the exceptional performance of “The King’s Speech” was well publicised, its box office performance was nearly matched by “The Inbetweeners”, which was the third highest grossing film in the UK in 2011. Cineworld maintained its box office market share in the UK in 2011, despite the increased market share of independent cinemas which was at the expense of some of the other large cinema operators. Their gains reflect the fact that they have caught up on conversion to digital projection and the provision of 3D, and they also capitalised on the exceptional successes of a large number of smaller films such as the “King’s Speech”, “Black Swan” and “Tinker Tailor Soldier Spy”, an area in which they tend to outperform.

3D films continued to contribute a sizeable proportion of overall film business with 37 films released in 3D compared with 25 films in 2010. The 3D format continues to remain popular although some value-seeking customers have a preference for the 2D format. Strong comparatives due to the outstanding success of films such as “Avatar”, Alice in Wonderland" and “Toy Story 3” in 2010, meant that the proportion of 3D box office nationally was lower year-on-year at 23% (2010: 30%). The most notable films in 3D in 2011 were “Harry Potter and the Deathly Hallows Part 2”, “Pirates of the Caribbean: On Stranger Tides” and “Transformers: Dark of the Moon”.

We remained true to our strategy of offering customers the broadest range of films on the market. There were a number of smaller and mid range films that performed well during the year including “Limitless”, “No Strings Attached”, “Attack the Block” and “Season of the Witch”, with which we achieved higher individual market shares than our overall market average. We also remained the biggest exhibitor of Bollywood films in the UK. Popularity of this genre remains high with films such as “Ra.One” and “Bodyguard” released during the year. In addition to other specialised and foreign language films played, such as “Senna” and “Biutiful”, we were the exclusive UK exhibitor for the first ever 3D Polish film “Battle of Warsaw”.

Alternative Content

We continued to make good progress during the year in developing our alternative content offering which has been made possible by our digital conversion programme. The most notable events of the year included live music concerts by JLS and the Red Hot Chilli Peppers, Lord of the Dance in 3D and the 25(th) Anniversary show of Phantom of the Opera screened from The Royal Albert Hall. We also screened a number of documentaries such as The Foo Fighters, and Talahina Sky: Kings of Leon. As a one-off event, the men’s and women’s singles finals of the tennis at Wimbledon were shown in 3D and highlighted the improving technical capabilities of screening live action in 3D. In the field of the performing arts, our core live opera and theatre product came from the New York Metropolitan Opera, The National Theatre and The Royal Opera House, all of which were well attended. The scope of alternative content is growing, but currently remains a niche offering and therefore a relatively small contributor to box office revenues.


Food and drink sales to our customers are Cineworld’s second largest source of revenue and represent 23% of total revenues. Total retail revenues were flat at GBP81.6m (2010: GBP81.6m).

Net retail spend per person softened in 2011 to GBP1.69 (2010: GBP1.73) reflecting the competitive offers within our promotions. As expected, our customers remained highly value conscious given the tough consumer environment and we successfully responded with a number of value initiatives. We ran promotions targeted at specific customer groups such as families with “ticket combo” offers and to Unlimited subscribers with money off vouchers.

During the year we focused on the development of offers in order to widen the appeal of bars and help stimulate demand.We also made progress in developing our coffee offer. At the end of the year we commenced work fitting out a new Starbucks coffee franchise trial at our Sheffield cinema to be opened by the end of March. If successful, we have plans to roll out more franchises in the future.

Other Income

Other Income includes all other revenue streams outside box office and retail and represents 7.0% of total revenues. Other Income fell 4.3% to GBP24.3m (2010: GBP25.4m).

The major element of Other Income is screen advertising revenue. Trading at Digital Cinema Media Limited (“DCM”), our joint venture screen advertising business formed in July 2008, was marginally lower than the previous year and reflected the difficult trading environment within the wider advertising industry, especially towards the end of the year. A major success for DCM was winning the account to provide screen advertising to the Vue Cinema circuit with effect from 1 January 2011 which significantly increased DCM’s coverage of UK cinemas. During the year, Martin Bowley, Managing Director of DCM resigned and Simon Rees was subsequently appointed in his place on 3 May 2011 and joined the Board on 31 August 2011.

DCM’s primary function is to sell advertising time on cinema screens on behalf of Cineworld and its other clients. It also engages in related promotional work between advertisers and cinemas. The management team at DCM has been driving operational efficiencies and effectiveness and during the year has been working on repositioning the operations to handle the digital format. We are excited by the opportunities for DCM when the three major circuits, Cineworld, Odeon and Vue become fully digitised by the end of 2012, which will provide greater flexibility in delivering advertising to cinemas and potentially open up a new segment of the market.

Other Income included sales of 3D glasses, ticket bookings and theatre hires. The fall in income was mainly due to a fall in sales of 3D glasses, which reflected the lower 3D admissions compared with the previous year. We have seen more customers re-using their purchased glasses, which demonstrate the success of our initiative to encourage their re-use rather than disposal. In 2011, approximately 55% of customers attending 3D performances were still purchasing 3D glasses, which has not fallen significantly from the 2010 level of over 60%.

Investment in Digital

Since 2009, Cineworld has been replacing its 35mm film projectors with digital projectors, which bring many benefits such as removing the need for film reels, greater availability of product and the 3D format. At the end of December 2011, Cineworld had installed digital projectors at over 75% of its screens. It is expected that the conversion will be completed by the end of the summer of 2012. As film studios benefit in a major way financially, they have offered incentives to cinema exhibitors to help fund the conversion.

In June 2010 Cineworld entered into an agreement with Arts Alliance Media (“AAM”) whereby AAM utilises its Virtual Print Fee (“VPF”) agreements with film distributors to recover financial contributions over a maximum period of ten years, on behalf of Cineworld, from the film studios. Under the AAM deal, Cineworld acquires the digital projectors directly from a third party and retains full control over the timing of their purchase and over their installation and operation. VPFs are expected to cover a substantial proportion of the total acquisition cost over a 7-10 year period. The VPFs are accounted for as a reduction in the cost of film hire thereby benefiting EBITDA. To date the overall VPF process between Cineworld, AAM and the film distributors has operated successfully. We earned over GBP4.0m of VPFs for the year and will continue to earn VPFs over the 7-10 year recovery period.

Unlimited Card Programme

Our unique subscription programme, Unlimited, offers a competitive value proposition to our customers. The programme offers customers the opportunity to pay a fixed monthly (or annual) subscription, which enables them to watch as many 2D films (and 3D films on payment of a supplement fee) at our cinemas as they wish. Cineworld prides itself on being the only cinema operator in the UK and Ireland to offer a subscription programme and, to date, has over 280,000 members. The programme is one of the pillars that underpin our strategy of growing other revenues and admissions. It brings to the Group the financial benefits of regular subscription income reducing the level of fluctuation in our revenues with subscription income contributing over 16% of total box office revenues. It also brings operational benefits by encouraging repeat visits, often at off-peak times. This, in turn, enables us to improve capacity utilisation at our cinemas, provide more retail opportunities and introduce a wider range of films than our competitors. As a result, we continued to enjoy significant market share among the smaller, less mainstream films in 2011.

Initiatives and Developments

We are keen to embrace the opportunities in improving our technology to allow more intelligent and integrated marketing, booking and ticketing using the internet and mobile devices and we are devoting time and resources to exploit the potential this offers and to ensure we remain competitive.

Activity on our consumer website increased in the year, recording over 54m visits, which puts it comfortably in the top 40 most visited websites in the UK (as reported in the IMRG Experian Hitwise Hot Shops List) during the year. In addition, our successful mobile enabled web booking service is now complemented by our applications (“apps”) for both the iPhone and Android phones which together attracted a further 35m visits in the year to the mobile channels.

The ‘MyCineworld’ membership on the website continued its expansion with a total database of over 900,000 members. In the year we ran a trial at selected cinemas to encourage more users to join and book tickets through MyCineworld, by removing on-line booking fees and offering discounted tickets if booked through MyCineworld, which yielded positive results. Compared with the rest of Cineworld’s sites, the rate of joiners of MyCineworld was faster than the rest of the UK whilst the rate of on-line bookings grew significantly compared with the rest of the cinemas.

The growth of MyCineworld is an important part of our strategy to engage further with our customers. It will enable us to improve our customer retention and help us to encourage more frequent visits to our cinemas. Furthermore, by transferring bookings on-line, we aim to improve customer service by reducing queues at the box offices and to convert more space to other activities which will improve the customer experience at our cinemas and help drive incremental revenues.

During the year we commenced projects to upgrade our cinema point of sale system and supporting systems covering finance and customer relationship management. These new systems will increase our transactional capabilities and support better communication with more of our customers. A number of pilot sites were successfully trialled with the new point of sale system and, since the end of the year, the programme to roll out the system to all cinemas has commenced. We anticipate completing all implementations by the end of the summer of 2012.

In addition, we have continued to improve utilisation of cinemas at off peak times particularly through the hire of individual auditoriums. We continue to offer our cinemas as venues for other purposes from corporate conferences and private film hires, through to educational meetings and religious gatherings on Sunday mornings. Recently Cineworld become a preferred partner with De Vere Venues and will utilise De Vere’s sales and call centre capabilities to increase the venue hire business. This is currently being run at a few selected sites as a trial with a view to expand it to cover more sites in the future.

People and Diversity

Our people are core to the success of our business and to make Cineworld a great place to work. We continued to invest in our people throughout the Group with programmes such as TheAcademy programme for high potential cinema managers through to Step Up programmes for multifunctional staff. Also for the first time in 2011, we conducted a values survey amongst our people. The outputs are being used to ensure our people are engaged, motivated and retained.

We are an equal opportunity employer and seek to recruit, retain and promote staff on the basis of their qualifications, skills, aptitude and attitude. A wide range of applicants are encouraged to apply for all roles and we have a wide and diverse workforce. We still believe that the single most important factor is to identify, recruit and retain the people we consider, on merit, to be the best candidates for each particular role.

Key Business Relationships

We have worked hard at developing good working relationships with a wide range of film studios, both major and independent. We work closely on combating film piracy and on simplifying the film buying process. Our focus on driving cinema admissions and on providing our customers with a wide range of films through our film strategy has resulted in many opportunities for us to work with film studios on promoting smaller films to a wider audience.

We continue to work very closely with developers, landlords and council planners to ensure that we maintain a pipeline of new sites for the future. In addition we work closely with our principal suppliers, on promotions that help drive ticket and retail sales. We seek to manage relationships with our suppliers fairly and to work in accordance with our aspirations as set out in our ethical policy, a cornerstone of which is treating others as you expect to be treated yourself.

Our partnership with Tesco through its Clubcard loyalty programme continued to thrive, aided by Tesco advertising to promote the ticket offer, which helped to reinforce Cineworld’s brand profile nationally.

The Environment and Health and Safety

As a multisite business, the Group is conscious of its total energy consumption and the amount of waste material generated and therefore continues to work to reduce both energy usage and the quantity of non-recyclable waste materials produced. During 2011, initiatives taken include reducing the number of deliveries to our sites, reducing packaging and removing non-biodegradable plastic from our retail products, and trialling energy reduction measures.

With over 48 million customer visits, the safety and welfare of Cineworld’s customers, staff and contractors are of prime importance. Annual cinema audits covering Fire, Food and Health and Safety are undertaken on an unannounced basis in order to reflect the true operation of health and safety at each site. Overall, the initiatives implemented in 2011 have shown improvements in site standards compared to last year’s results.


Expansion remains a key strategic priority for the Group over the medium term and we have ensured that we have the financial capability, through a new increased bank facility, to pursue such opportunities. Our strong financial position and our good track record of driving high footfalls through our cinemas make us an attractive partner for property developers.

In November 2011, as scheduled, we opened a seven screen cinema in Leigh, which increased the Group’s estate to 79 cinemas with 811 screens. Work has begun on site for a new seven screen cinema in Aldershot, which is currently planned to open in the fourth quarter of 2012. Whilst the uncertainty over development financing and timing of new projects continues, we have seen improvements in confidence in the property market during the year with renewed interest in existing proposals as well as new plans and ideas being tabled. We have over 10 development sites signed and have a good pipeline of further opportunities.

The addition of sites will facilitate the expansion of our Unlimited and MyCineworld propositions into new locations, thereby growing our business.

In June 2011, we opened a new concept cinema called “The Screening Rooms”, a three screen cinema in Cheltenham. The concept offers higher levels of comfort and service within a premium environment. Results to date have been positive and we are actively looking for new sites to expand the concept.

We were disappointed that the attempt to purchase the Cinesur chain of cinemas in Spain was unsuccessful due to circumstances outside our control, but we continue to look for suitable expansionary opportunities that are in the best interests of our shareholders.

Key Trends and Factors Potentially Affecting the Future

The future success of the Group in 2012 will principally remain dependent on the strength of the film releases during the year. Sequels and franchises will continue to contribute a significant number of the higher profile blockbuster films. Many such films outperform the original film or concept, so the film studios will continue to look to capitalise on proven successful formulae. The film release programme for 2012 includes a strong line-up of potential blockbusters.

Some film studios may seek to maximise their revenues using whatever distribution means available including video on demand. While initial limited trials have been unsuccessful, such initiatives are expected to continue and may put added pressure on the current theatrical release window in which new films are only shown in the cinema before being released via other media.

The importance of non US markets to the US film studios is increasing and the UK remains an important market outside the US. “Harry Potter and the Deathly Hallows Part 2” and “Pirates of the Caribbean: On Stranger Tides” achieved about 75-80% of their worldwide box office revenues outside the US. The UK market also showed more resilience in 2011 than the US, which suffered a fall in box office of 5.4% against 2010. The success of UK films such as “The King’s Speech” and “The Inbetweeners” and the stable level of cinema going in the UK should further encourage Hollywood to support both locally produced product and product that appeals to the UK and Irish market.

It is anticipated that 2012 will see a similar number of 3D films as did 2011 (37 3D films compared with 25 in 2010). Studios have also started to convert some older film titles to 3D, thereby adding to the range of 3D film choice. With completion of our conversion to digital projection in 2012, we will be well placed to capitalise on this product.

The price differential between 3D and 2D films is expected to continue and, with the number of 3D films planned for release similar to last year, should help support the overall revenue levels. Films appealing to an older teenage and young adult audience, such as Transformers, have had the highest take up of 3D (as high as 80%) whilst films which appealed to younger children have so far tended to attract a lower proportion of 3D business.

Within alternative content, plays and opera will continue to provide solid business through established providers such as the New York Metropolitan Opera and the National Theatre. Otherwise the source of alternative content remains fragmented. Stabilisation and consolidation amongst suppliers should increase the range of content, improve the operational delivery and result in financial savings. Revenues from alternative content are anticipated to grow further, albeit from a small base.

The general economic and consumer environment is expected to remain uncertain for the foreseeable future and will continue to present trading challenges. While customers have been prepared to pay higher ticket prices to see 3D films, there are certain segments of the customer base that prefer to see 2D for cost reasons. Demand in the wider advertising industry is anticipated to remain challenging, which would be reflected in cinema screen advertising. However full digital conversion by DCM’s major exhibitor clients (Cineworld, Odeon and Vue) anticipated for late 2012 will improve DCM’s competitive position and support its objective of gaining a larger share of advertisers’ budgets.

We expect that the strong mid week business enjoyed over the last couple of years will continue. The appeal of ‘Bargain Tuesdays’ and ‘Orange Wednesdays’ promotions demonstrate that customers continue to seek value in the current economic climate.

Finance for many continues to be challenging which could delay the development of new cinemas. Nevertheless we remain committed to expanding our business - through opening more cinemas and through the acquisition of other cinema portfolios - facilitated by our strong financial position.

Cineworld will continue to offer a highly compelling choice within the wider range of entertainment and leisure activities. We believe going to the cinema remains one of the best value forms of popular entertainment and will continue to attract audiences who seek quality film product and where the immersive viewing experience remains unmatched by any other media.

Financial Performance

52 week period 52 week period
ended ended
29 December 30 December
2011 2010

                                            Total   Total 

Admissions 48.3m 47.2m
Box office 242.1 235.8
Retail 81.6 81.6
Other 24.3 25.4
------ ------
Total revenue 348.0 342.8
------ ------
EBITDA* 63.3 59.0
Operating profit 42.6 37.1
------ ------
Financial income 1.6 1.6
Financial expenses (9.7) (8.2)
Refinancing interest expense (1.1) -
------ ------
Net financing costs (9.2) (6.6)
------ ------
Share of loss from joint venture - (0.1)
Profit on ordinary activities before tax 33.4 30.4
Tax on profit on ordinary activities (9.5) (9.4)
------ ------
Profit for the period attributable to equity
holders of the Company 23.9 21.0
------ ------

*EBITDA is defined as operating profit before depreciation, impairments, reversals of impairments and amortisation, onerous lease and other non-recurring or non-cash property charges, transaction, pensions, refinancing and reorganisation costs.

EBITDA and Operating Profit

EBITDA was up 7.3% at GBP63.3m (2010 : GBP59.0m) and was achieved through better cost margins as box office takings were spread across a wider range of films compared with last year while virtual print fee income was higher than the previous year, reflecting the first full year of operating the Arts Alliance contracts. These were offset by lower sales of 3D glasses and by higher property costs (reflecting the full year cost of the O2 cinema, acquired in June 2010) and in general increases in operating costs. Nevertheless operating profit at GBP42.6m was 14.8% higher than 2010 of GBP37.1m.

Operating profit included a number of non-recurring and non-trade related costs. The primary charges in the year related to transaction and reorganisation of GBP3.9m. The main component was GBP3.2m of reorganisation costs of which the majority was related to the digital conversion and to harmonise audio/visual work across the whole circuit. The annual labour savings resulting will recover the initial costs within two years. The remainder was GBP0.7m of transaction costs relating to the refinancing and the attempted acquisition of Cinesur. Offsetting these costs was a GBP1.7m credit which was due to the change in the inflation assumption from the Retail Price Index to the Consumer Price Index in valuing the defined benefit pension scheme and GBP0.5m from refinement of a dilapidation provision.

The depreciation and amortisation charge (included in administrative expenses) in the period of GBP18.9m was higher than last year (2010: GBP17.2m), reflecting the higher expenditure on digital projectors to date.

Finance Costs

On 31 March 2011, the Group refinanced its existing debt. The new five year facility consists of a GBP70m term loan with repayments of GBP2.5m every six months commencing June 2011 and a revolving credit facility of GBP100m. This will provide more flexibility for the Group in its expansion activities as well as other growth opportunities. Interest will be charged on the facility at 1.95% above LIBOR. There are two covenants: net debt to EBITDA of 3 times and pre-rent EBITDA to interest plus rent of 1.5 times.

The Group considered its hedging strategy at the time of the refinancing and concluded that it was not economic to close out the existing swap, which at 31 March 2011, was in a liability position of GBP2.2m. In addition, it took out two new interest rate swaps to hedge the remainder of the GBP70m term loan. Under IFRS, there is a requirement for the existing swap to be re-assessed to establish whether it still meets the criteria for hedge accounting. The hedge was considered to be ineffective, and as a result, its fair value on 31 March 2011 of GBP2.2m was recycled to the income statement as an exceptional finance expense. In addition, mark to market movements on the ineffective portion of the hedge from the point of refinancing up until 29 December 2011 of GBP1.1m was also recorded as a credit in the income statement.

The net financing costs of GBP9.2m included the GBP2.2m charge on closing out the hedge upon refinancing and the GBP1.1m credit arising from the mark to market movement, as described above and the ongoing financial expenses of GBP9.7m, offset by financial income of GBP1.6m. The financial expenses comprised of GBP5.3m in relation to interest on the bank loans which was higher than the previous year and reflected the higher margin charged on the facility. The balance of the financial expenses were non cash amounts arising from the amortisation of financing costs, the unwinding of discount on onerous leases, the pension scheme and from the finance lease. The financial income of GBP1.6m was primarily from the actuarial valuation of the returns on the defined benefit pension plan assets and was at a similar level reported for 2010.


Overall profit on ordinary activities before tax was GBP33.4m, 9.9% higher than 2010 of GBP30.4m. Basic diluted earnings per share amounted to 16.7p (2010: 14.7p). Taking account of the one-off, non trade related items described above, totalling GBP1.7m and the charge of GBP1.1m relating to the hedge on the previous bank loan (included in net financing costs), the adjusted pro-forma diluted earnings per share were 19.2p (using a normalised tax rate of 26.0%) compared with 2010 of 18.1p. The weighted average number of shares in issue in 2011 was 142.0m including 607,096 shares issued during the year.


The overall tax charge was GBP9.5m giving an overall effective tax rate of 28.4% for the year (2010: 30.9%). The corporation tax charge in respect of the current year was GBP8.5m. There was a credit of GBP3.3m relating to prior years, which was offset by GBP4.3m of deferred tax charges principally relating to capital allowances (the difference between the tax written down value of the capital allowance and the net book value of the underlying assets).

Cash Flow and Balance Sheet

The Group continued to be strongly cash generative at the operating level. Total cash generated from operations was GBP55.3m compared with GBP50.7m in 2010primarily due to the better trading levels against the weather affected December 2010. Better trading also resulted in higher creditor levels at the end of 2011 compared with 2010.

Net cash spent on capital for the year was GBP25.0m. Included in this cash expenditure was GBP14.8m in relation to the purchase of digital projectors. GBP2.3m (net of reverse premium) was spent on the new sites in Leigh and the new Screening Rooms concept in Cheltenham. The balance of other capital expenditure of GBP7.9m was for equipment replacement, site refurbishments and expenditure on various initiatives such as the replacement of the cinema point of sale and upgrading automated ticket sales points. The high level of internally generated cash has funded our entire capital expenditure whilst repaying term debt of GBP5m and paying dividends of GBP15.2m. Fees of GBP1.8m were paid in respect of the refinancing.

Net debt at the end of December 2011 of GBP101.4m was broadly level with 2010 of GBP100.8m. Net debt included a GBP4.5m liability valuation of the interest rate swap hedge on the bank loan (2010: GBP2.8m liability) which primarily reflected a larger hedged amount of GBP65.0m under the new facility. The liability position arose because the fixed rate of interest payable on the swap was higher than the LIBOR rate receivable on the hedged portion of the loan for the remainder of its five year term.

As in previous years, the Group remained well within its banking covenants on its new facility and achieved financial targets which enabled it to benefit from a low margin on its bank debt of 1.95% above one month LIBOR. The bank loan at the end of the year was comfortably below two times the EBITDA of 2011. The Group enjoys the security of a substantially larger revolving credit facility of up to GBP100.0m (of which GBP32m remained drawn at the end of the year) as part of the overall GBP170.0m bank facility which further enhances the Group’s overall liquidity.


The Directors are recommending to shareholders for approval a final dividend in respect of the period ended 29 December 2011 of 7.4p per share, which taken together with the interim dividend of 3.6p per share paid in October 2011, gives a total dividend in respect of 2011 of 11.0p per share, a 0.5p increase on the level in 2010. Subject to shareholder approval, the final dividend will be paid on 5 July 2012 to shareholders on the register at 8 June 2012.

Board Changes

On 11 May 2011, Matthew Tooth left the Board, having stayed on in an independent capacity, following the divestment by The Blackstone Group (“Blackstone”) of its interest in the Group in November 2010. Blackstone’s and Matthew’s contribution have been of great value. On 10 June 2011, Richard Jones resigned from the Board and as Chief Financial Officer, having started with the business over 15 years ago and having made a significant contribution over that period. On 1 December 2011 Philip Bowcock was appointed to the Board as Chief Financial Officer.

Current Trading and Looking Ahead

The current financial year has started satisfactorily with a reasonable level of business carrying over from the Christmas period with the main films being “Mission Impossible : Ghost Protocol”, “Sherlock Holmes : A Game of Shadows” and “Girl with the Dragon Tattoo”. The performances of films released so far this year such as “The Artist”, “Iron Lady” and “War Horse”, whilst receiving critical acclaim and being in line with internal expectations, have been lower than the same period last year which benefitted from the unexpected success of “The King’s Speech”.

The film release schedule for the remainder of 2012 is strong and takes into account the timing of the European Football Championships and the Olympics. Amongst those films planned for release are “Skyfall” (the next Bond film), The Hobbit, “The Dark Knight Rises” (the latest in the Batman franchise) and “The Amazing Spiderman”. This release schedule for the rest of the year together with the completion of the digital rollout, and the continued expansion of MyCineworld and Unlimited, means the business is well placed to maximise its opportunities.

Stephen Wiener Philip Bowcock

Chief Executive Officer Chief Financial Officer
8 March 2012

Latest update - most interesting thing being that the estate is now 100% digital!

[quote]16 Aug 2012 07:00 BST
DJ Cineworld Group plc Half Yearly Report

RNS Number : 1230K

Cineworld Group plc

16 August 2012

CINEWORLD GROUP plc interim results for 26 week period ended 28 June 2012

Solid progress in the first half and strategic investment in the business

Cineworld Group plc (“Cineworld” or “the Group”) is pleased to announce its interim results for the 26 week period ended 28 June 2012.

                            2012          2011    +/-            2011 
                        26 weeks      26 weeks               52 weeks 

Group revenue (GBP)165.4m (GBP)163.6m +1.1% (GBP)348.0m
EBITDA(1) (GBP)26.3m (GBP)25.7m +2.3% (GBP)63.3m
Operating profit (GBP)15.8m (GBP)13.0m +21.5% (GBP)42.6m
Adjusted pro forma
diluted EPS 7.1p 6.7p +6.0% 19.2p
Basic EPS 6.9p 3.6p +91.7% 16.8p
Interim dividend per
share 3.8p 3.6p +5.6% 11.0p
Net debt (GBP)99.2m (GBP)100.7m -1.5% (GBP)101.4m


– Revenue growth of 1.1% driven by increased Box Office receipts, up 4.1% at (GBP)118.6m (2011: (GBP)113.9m);

– Continued EBITDA growth of 2.3%;
– Maintained leading position as the largest cinema operator in both the UK and the UK & Ireland combined(2) ;

– Interim dividend increased by 5.6%;
– Net debt reduced by (GBP)1.5 million to (GBP)99.2 million;
– Strong growth in Unlimited subscriber base - currently in excess of 300k members;
– 48% increase in MyCineworld registrations to just under 1.5 million in the 3 months since abolition of online booking fees in March;

– Estate fully converted to digital projection since 28 June 2012;
– Investment in Customer Relationship Management system completed, and
– Film releases at the start to the second half of 2012 have performed in line with expectations and we remain confident of delivering growth in line with full year market expectations.

Commenting on these results, Stephen Wiener, Chief Executive Officer of Cineworld Group plc, said:

"We are pleased to announce solid first half results both in revenue and EBITDA growth. Once again our results show that cinema is a resilient investment in challenging economic times. We became the first, and still are the only cinema operator in the UK which does not charge its customers a booking fee and gave the added benefit of a 10% reduction for all on-line bookings made via our innovative MyCineworld portal. As a result we have seen almost 50% growth in the MyCineworld membership base in the 3 months since March 2012. The current trading performance, together with a reduction in net debt, means that the Group remains in a sound financial position to fund continued growth. Against this backdrop, we have again increased the interim dividend to our shareholders.

The films at the start of the second half including the Olympics period have performed in line with expectations, the key titles being “The Amazing Spiderman”, “Ice Age 4”, “The Dark Knight Rises” and “Ted”. The fourth quarter will bring an exciting line up of releases with titles such as “Twilight Saga: Breaking Dawn Part 2”, the next Bond film “Skyfall” and “The Hobbit”.

The strength of the film line up in the second half, coupled with our solid first half performance, underpins our confidence in delivering growth in line with market expectations for the full year."

For further information:

Cineworld Group 020 8987 020 7920
plc 5000 M:Communications 2339
Philip Bowcock Elly Williamson
Matthew Neal

1 EBITDA is defined as operating profit before depreciation and amortisation, impairment charges, adjustments to goodwill, onerous lease and other non-recurring charges, transaction and reorganisation costs and profit on disposal of cinema sites.

(2) Source: Rentrak/EDI


The Group achieved a solid level of trading in the first half with total revenues up 1.1% on the prior year with net box office up 4.1%. Our gross Box Office grew by 3.5%, compared with the UK/Ireland market increase of 4.3% (source: Rentrak/EDI) over the same period. Admissions were marginally lower by 0.8% compared with the equivalent period last year. We remained the largest operator in the UK & Ireland with a market share of 24.7% (2011: 24.9%).

The Box Office revenues were spread across a number of films in the period with the top ten highest grossing films accounting for approximately 40% of Cineworld’s total box office. This was similar to the pattern last year. Film performance in the first half was underpinned by the phenomenal success of “Avengers Assemble”, (grossing nationally in excess of (GBP)51m). This was supported by a number of other good film performances from “Men in Black 3”, “The Hunger Games” and “Prometheus”, as well as a number of mid-range films which produced better than expected performances. Notable films screened included “The Woman in Black”, “Best Exotic Marigold Hotel”, “Warhorse” and “American Pie: Reunion”. We remained the leading exhibitor of Bollywood films with a box office market share of almost 55% in the UK, offering such films as “Housefull 2” and “Agneepath” and we continued to be the leading exhibitor of Tamil films. In line with Cineworld’s strategy, we continue to offer our customers the broadest and most diverse range of films available.

The performance of 3D has been stabilising over the last 12 months. There were 15 3D film releases during the period, compared with 17 last year, representing approximately 15% of Cineworld’s admissions for the first half, a little lower than the 17% in 2011. Film studios are becoming increasingly adept in discerning the genre and target audience of 3D films. The quality of 3D film product remains absolutely critical. There are expected to be around 18 3D film releases in the second half compared with 20 3D films in the same period last year.

The Group’s average ticket price grew by 4.9% to (GBP)5.15 (2011: (GBP)4.91). The proportion of customers attending at non-peak times during the week in order to take advantage of our ‘Bargain Tuesdays’ and ‘Orange Wednesdays’ promotion days remained consistent with the previous year.

Retail revenue was 2.1% lower than the previous year. Retail spend per person fell from (GBP)1.67 in the previous year to (GBP)1.65 during the period, partly due to the film mix, but also reflecting the difficult economic climate and its impact on consumer spending. Our customers continue to seek value for money and accordingly we are committed to working hard to provide new and attractive retail propositions.

During the first half of the year, the Group introduced a number of customer related initiatives in line with our stated strategy. On 16 March 2012, Cineworld was the first major cinema operator in the UK to abolish online booking fees. Research showed the fee to be a barrier to booking in advance and it was unpopular with our customers. This innovation was accompanied by the launch of a 10% reduction in the price of tickets for booking online through MyCineworld. As a result we have seen online bookings increase to 13.0% by June 2012 (June 2011: approximately 8.0%). Registrations to MyCineworld have since grown 48.0% to almost 1.5 million since March. This increase has ensured that our consumer website, which consistently receives over 1.0 million visits per week, has remained in the top 40 most visited websites in the UK (as reported in The IMRG Experian Hitwise Hit Shops List). The growth of the MyCineworld online portal is an important element of our customer strategy. With our recent investment in improved customer relationship management (CRM) capabilities, we are working on ways of engaging further with our customers with the objective of enhancing customer retention and increasing the frequency of their visits. This, in turn, will help us to encourage higher frequency customers to take up paid subscriptions under the Unlimited membership.

Our Unlimited card continued to build its membership with a subscriber base of almost 300,000 members at the end of the first half (December 2011: 280,000), a figure which has since been exceeded. This service is unique in the market and continues to offer excellent value to regular film goers, who can visit Cineworld’s cinemas as many times as they wish, while encouraging visits at off-peak times, thereby improving seat utilisation in our cinemas and reducing revenue volatility. Unlimited is a pillar of our strategy of growing revenues and incremental admissions and we remain committed to its expansion.

We have continued to make significant investment in updating systems covering point of sale, finance and CRM. The new and better systems form the backbone of the infrastructure that will support our business growth and information management capabilities. We are now better placed to engage and transact with our customers across multiple technology platforms including mobile technology, scanning, e-ticketing and ATMs. Film marketing campaigns are being developed utilising data from our CRM systems. We also initiated limited trials using the MyCineworld database and have started personalising all email communications with our Unlimited members.

All of Cineworld’s estate has been converted to digital projection, a milestone we have reached since the end of the first half of the year. Complete digital conversion will enable us to realise operational savings in staff costs fully whilst improving the flexibility of film programming. Over 200 film titles were played in the period compared with around 180 titles in the same period last year. The change will also enable our alternative content programme to be played more widely across all our cinemas. One-off live shows such as the very successful Westlife concert continue to be underpinned by our regular programmes from the New York Metropolitan Opera and the National Theatre. We remain committed to developing and expanding the range of live screenings in order to bring a greater array of entertainment to our customers. Alternative content currently remains a small but developing opportunity. However demand for the right product remains strong and overall ticket prices are more than 50% higher than for regular film screenings. Digital projection enables us to exploit such niche opportunities more economically to produce incremental returns to our core film business.

A reduced performance at Digital Cinema Media (“DCM”), our joint venture screen advertising business, reflects the ongoing challenges in the wider advertising industry. As a result advertising revenues for the Group were 11.7% lower against the previous year. In addition to the inevitable pull of advertising towards the European football championships and the London Olympics, companies continue to defer their advertising spends and divert expenditure more towards ad hoc sales promotions and the internet, both of which are considered short term means to grow sales in a consumer environment where demand remains fragile. However, given the digitalisation of our projection estate and the commitment from Odeon, Vue and other exhibitors to become fully digital in 2012, there is a new opportunity via a much wider digital platform that will allow cinema screen advertising to compete more effectively with other media. From Q4 of this year, DCM will be in a position to offer a greater number and a more diverse range of campaigns, which are more flexible and so are better tailored to advertisers’ requirements. In addition to nationwide campaigns, local and regional sales pipelines are being developed with a target audience that has been largely untapped to date.

In terms of improving the customer experience, Cineworld is expanding the IMAX format across a selection of its cinemas following its successful introduction. At the end of the first half of the year we had three IMAX screens within our portfolio, at Crawley, Edinburgh and Sheffield. There are plans to install five more IMAX screens, of which at least three will be completed during the second half of the year and the balance in 2013. In addition we ran a pilot scheme with the D-Box seating concept which has been very successful at six sites. The D-Box seats provide additional sensory experiences for customers and a premium is charged over the applicable ticket price. These features can be deactivated to enable the seat to be utilised for standard film viewings. Cineworld has first call option rights to install D-Box in certain cinemas which, if exercised, will give exclusivity in those areas and we are working on plans to install D-Box seats in more locations in the first half of 2013.

Work has begun on the fitting out of our new seven screen cinema in Aldershot and we remain on track to open in Q4 of this year. Work has already started on the Wembley development which will include our nine screen cinema and we have plans for a six screen cinema in St Neots and a replacement cinema in Gloucester. All are scheduled to open in 2013. In addition we are targeting two further multiplex cinemas to open in 2013. Our development pipeline for the coming years remains strong and we are on target to open 25 cinemas by the end of 2017. Our financial position and a successful track record of operating profitable cinemas and generating high customer footfalls into the local areas make Cineworld an attractive development partner.


                     26 week        26 week        52 week 
                period ended   Period ended   period ended 
                28 June 2012   30 June 2011    29 December 

Admissions 23.0m 23.2m 48.3m

                      (GBP)m         (GBP)m         (GBP)m 

Box office 118.6 113.9 242.1
Retail 38.0 38.8 81.6
Other 8.8 10.9 24.3
Total revenue 165.4 163.6 348.0

EBITDA(1) 26.3 25.7 63.3

Operating profit 15.8 13.0 42.6


Total revenue for the first half was 1.1% higher at (GBP)165.4m (2011: (GBP)163.6m) due to a stronger than expected trading period during April and May. The growth is encouraging given the unforeseen success of “The King’s Speech” and the lack of sporting disruptions in the same period last year. A small reduction in admissions was offset by higher ticket prices which grew by 4.9% against the same period in the prior year. Average ticket prices of (GBP)5.15 were higher than the prior year ((GBP)4.91) resulting in an increase in box office of 4.1% to (GBP)118.6m against the prior year of (GBP)113.9m.

In March 2012 fees for telephone and online bookings were removed and, at the same time, a 10% discount was offered to all MyCineworld members booking on-line. Both initiatives were designed to encourage online bookings by making them better value and thereby promoting the benefits of MyCineworld membership. As a result, compared to the previous year, box office grew while other income fell.

Our retail sales performance reflects the ongoing economic challenges and their impact on UK consumers. As a result, retail spend per customer was lower than the same period last year at (GBP)1.65 (2011: (GBP)1.67). Combined with lower admissions, total retail sales fell by 2.1% to (GBP)38.0m compared with the prior year (2011: (GBP)38.8m).

Other revenue, which includes screen advertising, screen hires, sponsorships, games machine income, sales of 3D glasses and ticket booking fees prior to their removal in March, was down 19.3% to (GBP)8.8m compared to the first half last year (2011: (GBP)10.9m). Screen advertising revenues were 11.7% lower than the previous year, reflecting the general sentiment across the wider advertising industry, as well as the diversion of advertising budgets to the European football championships. Other revenue, excluding screen advertising, was impacted by lower sales of 3D glasses (due to fewer 3D films and more recycling) and the removal of the booking fee.

EBITDA(1) and Operating profit

EBITDA(1) was 2.3% higher at (GBP)26.3m against 2011 ((GBP)25.7m). The overall film hire margin was slightly higher than last year because a smaller number of successful films generated a larger proportion of box office. Virtual print fee income was higher than last year, reflecting the conversion of screens to digital projection (completed since the end of the half year) and savings in staff costs from digital conversion continue to be realised. Operating profit of (GBP)15.8m was 21.5% higher than last year ((GBP)13.0m) which was affected by non-recurring costs of (GBP)3.3m (included in prior year cost of sales). The current year operating profit figure included (GBP)0.8m of write offs of fixed asset investments at underperforming sites. This charge was included within depreciation. Excluding this, the depreciation charge in the period was a little higher than last year.

(1) EBITDA is defined as operating profit before depreciation and amortisation, impairment charges, adjustments to goodwill, onerous lease and other non-recurring charges, transaction and reorganisation costs and profit on disposal of cinema sites.

Refinancing and financing costs

On 31 March 2011, the Group refinanced its existing debt. The new five year facility consisted of a (GBP)70m term loan with repayments of (GBP)2.5m every six months commencing June 2011 and a revolving credit facility of (GBP)100m. It provides flexibility for the Group in its expansion activities as well as other growth opportunities. Interest is charged on the facility at 1.95% above LIBOR. There are two covenants: net debt to EBITDA of 3 times and pre-rent EBITDA to interest plus rent of 1.5 times.

The expiry of one of the three interest rate swaps in May necessitated a write off of the balance of related mark to market movements in line with IFRS hedge accounting and the write off was recorded in the income statement as a credit of (GBP)1.0m.

The expiry of the swap also resulted in a lower overall interest rate going forward and, together with proactive cash management during the period, produced a reduced interest expense of (GBP)3.3m compared with the prior year ((GBP)3.7m). The balance of the interest expense related to the amortisation of financing costs and the unwinding of discount on onerous leases (the latter being a non cash item).


The overall tax charge of (GBP)3.6m consisted of a current tax charge of (GBP)3.3m and a deferred tax charge of (GBP)0.3m in respect of capital allowances. The total tax charge is based on a forecast effective tax rate for the 2012 full year of 26.9%. The difference compared to the standard tax rate of 24.5% reflects the proportion of disallowable expenditure.


Profit before tax of (GBP)13.4m was higher (2011: (GBP)6.9m). The 2011 result was impacted by the one-off items of (GBP)3.3m and the write off of (GBP)2.2m relating to the hedge on the previous bank loan described above. On an adjusted pro-forma diluted basis, earnings per share were 6.0% higher at 7.1p (2011: 6.7p) and the basic diluted earnings per share were much better at 6.9p (2011: 3.6p). There were 418,344 shares issued in the period to employees, in respect of the Performance Share Plan and the Sharesave Scheme and the number of shares in issue at the end of the period was 142,767,037.

Cash flow and Balance Sheet

The Group continued to be cash generative at the operating level during the first half. Cash generated from operations of (GBP)24.6m increased against the equivalent period last year (2011: (GBP)20.6m). Trade and other payables at the end of June 2012 included (GBP)10.6m in respect of the 2011 final dividend that was paid in July 2012. Details of the interim dividend can be found in note 6 of the interim financial statements.

Net cash expenditure on capital for the first six months was (GBP)15.2m. Included in this figure was (GBP)6.0m in relation to the purchase of digital projectors, (GBP)4.0m on systems implementation, (GBP)1.9m on IMAX and D-Box and the balance on replacements and refurbishments. Approximately (GBP)1.5m of digital costs will be paid in the second half and the balance of (GBP)3.0m payable in 2013 which would bring the total cost of the conversion programme in line with original estimates of approximately (GBP)40.0m.

Net debt continued to fall, from (GBP)100.7m in June 2011 to (GBP)99.2m. Bank debt at the period end represented less than two times the 2011 EBITDA(1) figure. In accordance with the terms of the bank facility, (GBP)2.5m of the term loan was repaid at the end of June leaving a balance of (GBP)62.5m outstanding together with (GBP)32.0m drawn down on the revolving credit facility.

(1) EBITDA is defined as operating profit before depreciation and amortisation, impairment charges, adjustments to goodwill, onerous lease and other non-recurring charges, transaction and reorganisation costs and profit on disposal of cinema sites.


The Board has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Board has an established, structured approach to risk management, which includes continuously assessing and monitoring the key risks and uncertainties of the business. The key business specific risks are set out towards the end of the document in summary form. The only additional significant risk identified since 29 December 2011 is the possible impact of extreme weather conditions.

A more detailed description of the risks existing as at 29 December 2011 and also some factors and actions taken by the Group which mitigate them were set out on pages 24 and 25 of the Group’s Annual Report for 2011, a copy of which is available from our website

Despite the current uncertainty in the economic environment, the risks and uncertainties summarised towards the end of the document are not expected to change materially in the remainder of the year.


Details of related party transactions described in the annual report for the 26 weeks to 30 June 2011 are set out in note 10 of the interim financial statements.


The Group meets its day to day working capital requirements through its bank facilities which currently consists of a (GBP)62.5 million term loan and a (GBP)100.0 million revolver. The facility is for five years, expiring in April 2016. The current economic conditionscontinue tocreate uncertainty particularly over the level of demand for the Group’s products but the Group’s forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current facilities.

After making enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Group continues to adopt the going concern basis in preparing its consolidatedinterim financial statements.


The Board is declaring an interim dividend of 3.8p per share (2011: 3.6p), reflecting the solid performance in the first half of the year. The dividend will be paid on 5 October 2012 to ordinary shareholders on the register at the close of business on 7 September 2012.


The films at the start of the second half including the Olympics period have performed in line with expectations, the key titles being “The Amazing Spiderman”, “Ice Age 4”, “The Dark Knight Rises” and “Ted”.

Later in the second half, a number of films from proven franchises are scheduled for release including Madagascar 3, the next Bond film “Skyfall”, the final installment of the Twilight series “Twilight Saga: Breaking Dawn (Part 2)” and “The Hobbit” (in 3D). The timing of these releases means that trade is expected to be strongest in the last two months of the year. Overall, the strength of the film line up in the second half, coupled with our solid first half performance, gives us confidence in delivering growth in line with market expectations for the year.

Stephen Wiener

Chief Executive