Cineworld says no major 3D releases has hit profits this year
AGM and Interim Management Statement
Cineworld Group (LSE: CINE.L – news) plc (“Cineworld” or “The Group”), the UK’s only quoted cinema chain, is today holding its Annual General Meeting (“AGM”) at 11am at the Cineworld in The O2 Centre, Peninsular Square, Greenwich, SE10 0AX and provides the following Interim Management Statement for the period to 12 May 2011.
Trading for the period was, as expected, lower than the prior year due to the film schedule to date which contained no major 3D releases. This contrasts with the comparative period which included “Avatar” and “Alice in Wonderland”, both very successful 3D films which had a major impact on box office, retail and other income. As a consequence, for the cinema industry as a whole UK/Ireland (Berlin: IIK.BE – news) box office was 9.5% lower than the previous year (per Rentrak (Berlin: RK2.BE – news) /EDI (KOSDAQ: 052810.KQ – news) ).
Revenues for the 19 weeks to 12 May 2011 were as follows:
% change vs. prior year
Total Revenues -8.9%
Box Office -7.8%
Retail (Santiago: RETAIL.SN – news) -9.9%
Other Income -16.5%
Cineworld’s box office market share1 rose to 24.8% from 24.1% for the equivalent period last year. Box office was affected by lower admissions (6.1% lower) and by less 3D business. In the previous year, 3D accounted for approximately 31% of box office revenues1. In contrast, the current year so far has yet to see any major 3D film releases, which has meant that 3D has contributed only 18% of box office revenues1. The type of blockbuster films also adversely impacted retail revenues. Films such as “The King’s Speech” and “Black Swan”, while successful films, attracted a higher number of older customers who on average spend less on food and drink.
Screen advertising revenues were 5.3% below the previous year, reflecting the general trading pattern. Other income was also impacted by the lower proportion of 3D admissions.
A stronger line up of films is expected for the remainder of the first half, including “Pirates of the Caribbean: On Stranger Tides (3D)”, which is anticipated to be the first of the year’s 3D blockbusters, “The Hangover part 2”, “X-Men: First Class” and “Kung Fu Panda (3D)”. These film releases coincide with a quieter comparative trading period, as in June 2010 the football world cup took place. Based on the strength and type of anticipated films for the remainder of the second quarter, the Group expects revenues for the half year to be at a similar level to last year.
The Group has continued its ongoing investment in digital equipment and are currently in the process of installing a further 100 digital projectors. This will result in over 60% of Cineworld’s screens having digital capability.
In March the Group successfully negotiated a new five year bank facility of £170m to replace its previous facility which would have expired in May 2012. The new facility provides the Group with more flexibility to finance future expansion plans and growth opportunities.
On 7 April the Group signed an agreement to acquire Cinesur Circuito Sánchez-Ramade, S.L. (‘Cinesur’), a Spanish cinema operator. Cinesur is the fifth largest operator in Spain and the largest in the Andalucia region with 11 multiplexes and a total of 136 screens. The transaction is expected to complete around the half year.
Looking into the second half, there is strong 3D product which includes the finale of the Harry Potter series “Deathly Hallows 2”, together with “Cars 2”, “Transformers: Dark of the Moon”, “Tintin” and “Captain America: First Avenger”. These are further complemented by an exciting range of 2D films including “Twilight Saga: Breaking Dawn (part 1)”, “Mission Impossible 4”, “Cowboys ∓ Aliens” and “Sherlock Holmes 2”. This attractive line up of film releases means that we remain confident of delivering growth for the year as a whole in line with market expectations.
1 Refers to UK/Ireland market by gross box office – data per Rentrak/EDI
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