No Summer Blockbuster For Cineworld

Published in Company Comment on 16 August 2012

Steady progress for the cinema chain.

Cineworld Group (LSE: CINE) released its interim results today and revealed a 1.1% growth in group revenue to £165.4 million. This was mainly driven by box office receipts, which were up 4.1% to £118.6 million.

This steady increase led to an EBITDA of £26.3 million, a rise of 2.3% and an operating profit of £15.8 million, up 21.5%.

The group, which maintained its leading position as the largest cinema operator in the United Kingdom, saw its basic eps increase to 6.9p from 3.6p in 2011, and was able to announce an interim dividend per share of 3.8p, up 5.6%.

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."

The group's cinemas run an "Unlimited" scheme, where subscribers can watch as many films as they can handle each month for £14.99 outside Central London and £17.99 inside. This has proved to be extremely popular and now boasts over 300,000 members. Similarly, a 48% increase in MyCineworld registrations, to just under 1.5 million in the three months since the abolition of online booking fees in March shows that the company is prepared to meet its customers on their terms.

All of Cineworld's estate has been converted to digital projection. Complete digital conversion will enable Cineworld to realise operational savings in staff costs fully while 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 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 £5.15 (2011: £4.91). The proportion of customers attending at non-peak times during the week in order to take advantage of the 'Bargain Tuesdays' and 'Orange Wednesdays' promotion days remained consistent with the previous year.

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> Barry does not own shares in Cineworld.

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