Cineworld Group plc
18 March 2008
18 March 2008 Embargoed for 7am release
CINEWORLD GROUP plc
Cineworld Group plc ('Cineworld' or 'the Group') is pleased to announce its
maiden results as a public company for the 52 weeks ended 27 December 2007.
HIGHLIGHTS
Financial
•Group revenue up 2.4% to £285.3m (2006: £278.5m) and up 7.8% on a
continuing basis (2006: £264.6m)*;
•EBITDA** up 13.0% to £52.0m (2006: £46.0m) on a continuing basis*;
•Operating profit increased to £30.4m (2006: £18.7m);
•Profit on ordinary activities before tax increased to £12.4m (2006: loss
of £7.7m)
•Operating cash flow before changes in working capital and provisions
increased to £49.4m (2006: £42.9m);
•Net debt reduced to £124.4m following IPO in May 2007 and debt
refinancing (2006: £314.2m);
•Reported EPS***: 24.5p on basic earnings, 17.4p on adjusted pro-forma
earnings;
•EPS based on shares at end of period: 18.1p on basic earnings, 15.7p on
adjusted pro-forma earnings****;
•Total proposed dividend in respect of 2007 of 9.5p per share.
Operational
•Successful IPO on the main market of the London Stock Exchange raising
£120.0m (before expenses) for the Group and selling shareholders;
•Market share increased to 23.7% (2006: 23.5%) (source: EDI Neilsen);
•Admissions up 4.9% at 45.0m on a continuing basis (2006: 42.9m)*;
•Box office up 7.7% at £185.7m on a continuing basis (2006: £172.4m)*;
•Average ticket price per admission up to £4.12 (2006: £4.02 on a
continuing basis)*;
•Average retail spend per person up to £1.67 (2006: £1.62 on a continuing
basis)*;
•Expansion plans on track with Didcot cinema opened on 3 May 2007 and High
Wycombe opened on 14 March 2008;
•Contract signed with REAL-D to bring 3D digital screens to Cineworld's
estate;
•Formation of Digital Cinema Media ('DCM') in March 2008, a 50:50 joint
venture with Odeon to provide screen advertising for both parties.
Commenting on these results, Stephen Wiener, Chief Executive Officer of
Cineworld Group plc, said:
'It has been a transformational year for Cineworld. We listed our shares on the
main market of the London Stock Exchange in May 2007 raising £120m before
expenses for the Group and selling shareholders. We are very encouraged by the
performance of the Group over the year. We remain focused on delivering our
strategy, as stated at the time of the IPO, with increased revenues and
profitability and continue on schedule with our investment plans for new cinema
rollouts and refurbishment of our existing estate.
'The new year for Cineworld has started well and attendances have been strong.
This has been driven by the success of a number of blockbusters and is testament
to the resilient nature of our business model and the enduring appeal of film.
Overall, we anticipate an increase in revenue for 2008 as a whole.
'Looking forward, the ongoing initiatives to improve and expand our estate,
coupled with an exciting film release schedule of proven franchises mean we are
confident we can deliver ongoing value for our shareholders.'
* Continuing basis excludes sites disposed during 2006, see the financial
performance section
** EBITDA is defined as per the financial performance section of the Chief
Financial Officer's review
*** Based on weighted average number of shares in the period of 104.9m. See note
4 for calculation
****Shares in issue at 27 December 2007 are 141.7m and using the 2007 effective
tax rate of 14.5%
Enquiries:
Cineworld Group plc M Communications
Stephen Wiener Power Road Studios Georgina Briscoe 1 Ropemaker St
Chief Executive 114 Power Road London, EC2Y 9HT
Officer London W4 5PY +44 (0) 207 153 1548
Briscoe@MComGroup.com
Richard Jones
Chief Financial
Officer + 44 (0) 208 987 5015
Chief Executive Officer's review of operations
As founder of Cineworld, I am very proud of the business we have built over the
last decade. Today the Group stands at 74 cinemas, with a total of 770 screens,
including five out of the eight highest grossing cinemas in the United Kingdom
and Ireland. When we came to market in May 2007, we set out a clear strategy for
growth, and I am delighted our inaugural preliminary announcement of annual
results as a public company indicates good progress on a number fronts.
KEY PERFORMANCE INDICATORS
Box office revenue increased 7.7% to £185.7m (2006: £172.4m) on a continuing
basis and 2.4% on an actual basis (2006: £181.3m) representing a box office
market share of 23.7%, up from 23.5% in 2006. Admissions were up 4.9% on last
year and the average ticket price per admission increased by 2.5% to £4.12
(2006: £4.02). In addition, we increased retail spend per person by 3.1% from
£1.62 last year to £1.67. These robust performance indicators are testament to
the Group's unparalleled customer offer of quality multiplex cinemas with the
appropriate mix of film and retail offering.
FILM ANALYSIS
2007 was a good year for film. Particular highlights included Harry Potter 5,
Pirates of the Caribbean 3, Shrek The Third and The Simpsons Movie, which all
contributed significantly to admissions across our estate. In addition Spiderman
3, Ratatouille, Transformers and The Golden Compass all performed well,
appealing to the family audience, and further driving sales across our retail
franchise. The UK film industry also turned in good performances and Mr Bean's
Holiday and Hot Fuzz were the ninth and tenth highest grossing films in the UK
in 2007, respectively. Other strong performing UK films included Miss Potter and
The Last King of Scotland, in which the lead actor won an Oscar for best actor.
A key element of our strategy is our commitment to offering customers the
broadest range of films available. To this end we are delighted to have
maintained our strong presence and interest in other, less mainstream, markets.
We remain the biggest exhibitor of Bollywood films in the UK and highlights in
the period included Namastey London, Namesake and Om Shanti. We were also
pleased to secure limited exclusivity over the release of the Tamil film,
Sivaji, which drew a new audience to our cinema franchise and we feel well
placed to capitalise on the exciting opportunities this presents.
In addition, we showcased a series of other successful foreign language films,
which have contributed favourably to our full year results. The most notable
releases were The Lives of Others (2007 Oscar Winner in the foreign language
category from Germany), the French films Tell No One and La Vie En Rose and The
Curse of the Golden Flower from Hong Kong.
RETAIL
Our retail initiatives over the year have improved our customer proposition and
increased retail spend per customer. We have expanded our product offering and
now offer Fanta Frozen at almost all our cinemas. In addition, we have rolled
out Ben & Jerry's kiosks to a total of 25 locations. Other product developments
included new contracts with Carlsberg for the supply of all alcohol at our
cinemas and we are pleased to be in final negotiations for the supply of branded
coffee across our estate. Our retail strategy over the year was focussed on
promotional activity and this will be enhanced in 2008 with increased emphasis
on operational support through expansion of promotions programmes and ongoing
training.
DIGITAL
Cineworld has the largest digital estate of any cinema operator in the UK with
74 digital projectors. All new cinemas are built in anticipation of digital
being the standard format of delivering movie content in the future and almost
every multiplex has digital capability. In October 2007 we announced a deal with
Real-D, the world leader in 3-D technology, to bring 3-D to certain cinemas
across the estate, with the potential to roll out to as many as 100 screens in
the future. This deal coincided with the release of the 3-D version of Beowulf,
which launched in the UK on 16 November 2007 and performed extremely well. The
film industry thrives on technological developments, which can present potential
alternative revenue streams to the Group and we are well placed to capitalise on
these initiatives.
UNLIMITED CARD
Our subscription service, Unlimited, goes from strength to strength and
currently stands at over 185,000 subscribers. This offers a compelling value
proposition to our customers whilst bringing the financial benefits of regular
service subscription income to the Group. In addition, it encourages repeat
visits to our cinemas enabling us to introduce a wider range of films to our
customers, and also helps to attract more serious film-goers.
NEW OPENINGS
At the time of the IPO, we stated our ambition to grow the estate through
selective new openings, expansions and acquisitions. I am delighted to report
that in May 2007 we opened our first new cinema as a public company in Didcot,
Oxfordshire. This is a five-screen cinema, with digital facilities, and is
performing ahead of expectations.
Our national expansion plans remain a key strategic priority for the Group as we
seek to deliver growth for our shareholders. In March 2008 we opened a new
twelve-screen cinema in High Wycombe and towards the end of the year a new
five-screen cinema is scheduled to open at Haverhill, Suffolk. We have also
signed a contract on Witney, Oxon, which is currently scheduled to open in 2009.
DIGITAL CINEMA MEDIA
In December 2007, as we came to the year end, we were approached by Carlton
Screen Advertising ('CSA') with a proposal materially to amend the terms of our
advertising contract. The uncertainty surrounding negotiations was resolved in
March 2008 when we were pleased to announce the formation of Digital Cinema
Media ('DCM'), a 50:50 joint venture in association with Odeon Cinemas Limited
('Odeon') to address cinema advertising. Subject to further negotiations, the
joint venture has agreed in principle to acquire some assets of CSA for £0.5m.
Although this joint venture is subject to competition approval, we are very
excited by the prospects this brings to the Group.
CURRENT TRADING
Cineworld has started the current year well and attendances have been strong.
This has been driven by the success of a number of films including I am Legend
and The Golden Compass and given the more difficult economy is testament to the
resilient nature of our business model and the enduring appeal of film.
We are increasing the use of our digital facilities by showing live, via
satellite, the New York Metropolitan Opera performances and we are one of the
few cinema chains in the UK to show the recently released U2 concert in 3-D,
which premiered at our Dublin cinema. We have also undertaken a successful new
initiative for the Group: a live theatre production of Brief Encounter. This has
received very good reviews and has been playing to full houses in the main
auditorium of our Haymarket cinema. We are co-producers of the play and own
rights in all English-speaking countries around the world.
Looking forward, the ongoing initiatives we are implementing to improve our
offer, expand our estate and enhance our advertising proposition, coupled with a
2008 film release schedule of proven franchises such as The Chronicles of
Narnia, Batman, The Mummy, Harry Potter, Star Trek, James Bond and a new
instalment of Indiana Jones, underpins our confidence in delivering further
growth for our shareholders.
Steven Wiener
Chief Executive Officer
17 March 2008
Chief Financial Officer's review
FINANCIAL PERFORMANCE
52 week period 52 week period
ended ended
27 December 28 December
2007 2006
Total Total*** Continuing*
Admissions 45.0m 45.2m 42.9m
£m £m £m
Box office 185.7 181.3 172.4
Retail 75.4 73.3 69.4
Other 24.2 23.9 22.8
Total revenue 285.3 278.5 264.6
EBITDA** 52.0 48.6 46.0
EBITDA after transaction and 57.5 48.0 42.6
reorganisationcosts and profit on
disposal of cinema sites
Operating profit 30.4 18.7 15.1
Financial income 2.6 14.4
Financial expenses (20.6) (40.8)
Net financing costs (18.0) (26.4)
Profit/(loss) on ordinary activities
before tax 12.4 (7.7)
Tax on profit/(loss) on ordinary
activities 13.3 -
Profit/(loss) for the period
attributable to
equity holders of the Company 25.7 (7.7)
*Continuing operations basis excludes the results of cinemas sold during 2006 -
namely Swindon (Greenbridge Park), Bishop's Stortford, Sunderland, Birmingham
(Great Park, Rubery), Ealing, Wigan (Robin Way) and Slough (Queensmere Centre).
**EBITDA is defined as operating profit before depreciation and amortisation,
impairment charges, onerous lease and other non-recurring and non-cash property
charges, transaction and reorganisation costs and profit on disposal of cinema
sites.
*** Restated, see note 2 to the accounts.
Revenues
Total revenue was £285.3m, a rise of 2.4% on the prior period (2006: £278.5m)
and on a continuing basis was up 7.8% (2006: £264.6m), against weaker than usual
comparatives due to last year's World Cup and the hot weather in the UK.
As a result of strong product and the increase in market share to 23.7% (2006:
23.5%), we have enjoyed very buoyant trade during the year and box office was
7.7% higher at £185.7m on a continuing basis (2006: £172.4m).
Our subscription business, the Unlimited card, continues to expand in line with
our stated strategy and we currently have in excess of 185,000 subscribers at
the end of the period. The benefits of this initiative are twofold; first, it
provides the Group with a constant stream of box office revenue throughout the
year and second, it ensures repeat visits as our customers take advantage of the
benefits on offer to them with this scheme.
Retail sales for the year were in line with expectations given the level of
business and were up 8.6% at £75.4m on a continuing basis (2006: £69.4m) with
the high grossing blockbuster films providing a strong spending customer base. A
number of film tie-in retail promotions were developed for the summer period and
a total of 25 Ben & Jerry's outlets have now been opened, and Fanta Frozen was
rolled out across the majority of sites.
Other revenues, principally from screen advertising, ticket bookings,
sponsorships and games, were up 6.1% to £24.2m (2006: £22.8m) on a continuing
basis.
EBITDA and operating profit
EBITDA on a continuing basis was up 13.0% to £52.0m against 2006 figures of
£46.0m and operating profit increased to £30.4m (2006: £18.7m total, £15.1m on a
continuing basis). Included in the results for the year were rates rebates
received of £1.6m relating to prior years (2006: £1.3m). Transaction and
reorganisation costs of £2.6m were incurred during the period, relating mainly
to costs in connection with the IPO. The profit on disposal of £8.1m in the
first half of the year related to the sale and leaseback of on our Swindon and
Southampton cinemas. The Group has reviewed its accounting treatment with
respect to operating leases. The impact of this change in treatment (which is
all non-cash) is disclosed in note 2 to the financial statements.
Earnings
Overall profit on ordinary activities before tax was £12.4m against a loss of
£7.7m in 2006. Basic earnings per share amounted to 24.5p and adjusted pro-forma
earnings per share were 17.4p based on a weighted average number of shares over
the period of 104.9m. Based on the total number of shares in issue at the end of
the period of 141.7m, the basic earnings per share was 18.1p and adjusted
earnings per share (using the 2007 effective tax rate of 14.5%) was 15.7p. There
were no share dilutions at the end of the period.
Financing costs
The interest expense in the year relates to interest on the pre-IPO financing
arrangements on debt and bonds and to interest on post-IPO debt. Also included
was the write-off of £1.0m financing fees previously capitalised in the pre-IPO
debt financing. On a pro-forma basis, assuming the post-IPO debt structure had
been in place from 29 December 2006, net financing costs for the year would be
approximately £10.2m.
Taxation
The overall tax credit of £13.3m results from the recognition of a deferred tax
asset on the basis that the unclaimed capital allowances, being the difference
between the tax written down value of the capital allowance and the net book
value of the underlying assets, are now forecast to be utilised against future
profits. A tax asset has also been recognised for other temporary differences
forecast to reverse in future periods. There is a £1.8m corporation tax charge
for the year, giving an effective tax rate of 14.5% for the year.
Cashflow and balance sheet
The Group continued to be cash generative at the operating level during the
year. Total cash inflow from operations before changes in working capital and
provisions increased to £49.4m (2006: £42.9m). This reflects the healthy
conversion rate of our profits into cash flow. The cash outflow from the
reduction in working capital is due to payment of creditors, normally at its
highest level at the end of December, reflecting the highest trading period in
the year.
Capital expenditure for the year amounted to £9.9m, of which £4.8m represented
replacement and refurbishment expenditure, £2.1m being the cost of opening the
new five-screen cinema at Didcot on 3 May 2007 and expenditure of £3.0m on the
new twelve-cinema at High Wycombe. We are making good progress with our capital
expenditure programme with various refurbishments completed at ten sites.
The radical change from a net liability to a net asset position is the result of
the share issue and deleveraging of the business, the combination of which now
allows us more flexibility to meet future business challenges and opportunities.
Dividends
The Board continues to apply a dividend policy reflecting the long-term earnings
and cash flow potential of Cineworld. In line with the above policy, the
Directors recommend payment of a final dividend in respect of the year to 27
December 2007 of 6.5p per share, which taken together with the interim dividend
of 3.0p per share paid in October 2007, gives a total dividend in respect of
2007 of 9.5p per share. Subject to shareholder approval, the final dividend will
be paid on 18 June 2008 to shareholders on the register on 23 May 2008.
Richard Jones
Chief Financial Officer
17 March 2008
Consolidated income statement
for the period ended 27 December 2007
Note 52 week period 52 week period
ended ended
27 December 28 December
2007 2006
(restated*)
£m £m
Revenue 285.3 278.5
Cost of sales (220.6) (213.1)
Gross profit 64.7 65.4
Other operating income 8.3 3.1
Administrative expenses (42.6) (49.8)
Operating profit 30.4 18.7
Analysed between:
Operating profit before
depreciation and amortisation,
impairment charges, onerous lease
and other non-recurring,or non-cash
property charges and transaction and
reorganisation costs and profit on
disposal of cinema sites 52.0 48.6
- Depreciation and
amortisation (18.3) (23.0)
- Adjustments to goodwill
and fixed asset
impairment charges (7.7) (2.2)
- Onerous leases and
other non-recurring or
non-cash property charges (1.1) (4.1)
- Profit on disposal of
cinema sites 8.1 2.8
- Transaction and
reorganisation costs (2.6) (3.4)
Financial income 5 2.6 14.4
Financial expenses 5 (20.6) (40.8)
Net financing costs (18.0) (26.4)
Profit/(loss) on ordinary
activities before tax 12.4 (7.7)
Tax on profit/(loss) on
ordinary activities 6 13.3 -
Profit/(loss) for the
period attributable to
equity holders
of the Company 25.7 (7.7)
Basic and diluted
earnings/(loss) per share 24.5p (22.3)p
See note 2
Consolidated balance sheet
at 27 December 2007
27 December 28 December
Note 2007 2006 (restated*)
£m £m £m £m
Non current assets
Property, plant and equipment 110.9 119.9
Goodwill 216.1 223.8
Intangible assets 0.8 3.0
Other receivables 0.9 0.9
Deferred tax assets 19.8 5.3
Total non-current assets 348.5 352.9
Current assets
Inventories 1.5 1.6
Trade and other receivables 17.8 18.1
Cash and cash equivalents 10.4 27.7
Total current assets 29.7 47.4
Total assets 378.2 400.3
Current liabilities
Interest-bearing loans, borrowings
and other 8 (9.2) (1.0)
financial
liabilities
Trade and other payables (40.2) (51.0)
Current taxes payable (1.8) -
Provisions (1.5) (2.1)
Total current liabilities (52.7) (54.1)
Non-current liabilities
Interest-bearing loans, borrowings
and other 8 (125.6) (340.9)
financial
liabilities
Trade and other payables (48.0) (44.3)
Employee benefits (2.4) (4.6)
Provisions (13.4) (16.2)
Deferred tax liabilities (3.5) (3.9)
Total non-current liabilities (192.9) (409.9)
Total liabilities (245.6) (464.0)
Net assets/(liabilities) 132.6 (63.7)
Equity attributable to equity
holders of the Company
Share capital 9 1.4 -
Share premium 9 171.4 -
Translation reserves 9 0.4 0.4
Hedging reserves 9 (0.2) -
Retained deficit 9 (40.4) (64.1)
Total equity 132.6 (63.7)
See note 2
Consolidated cash flow statement
for the period ended 27 December 2007
Note 52 week period 52 week period
ended ended
27 December 28 December
2007 2006
(restated*)
£m £m
Cash flow from operating activities
Profit/(loss) for the
period 25.7 (7.7)
Adjustments for:
Financial income (2.6) (14.4)
Financial expense 20.6 40.8
Taxation (13.3) -
Operating profit 30.4 18.7
Depreciation and
amortisation 26.0 23.0
Impairment charges - 2.2
Non-cash property charges 1.1 1.8
Profit on disposal of
cinema sites and
refurbishment items (8.1) (2.8)
Operating cash flow
before changes in working
capital 49.4 42.9
and provisions
Decrease/(increase) in
trade and other
receivables 0.2 (0.7)
Decrease/(increase) in
inventories 0.1 (0.1)
Decrease in trade and
other payables (12.4) (2.3)
Decrease in provisions
and employee benefit
obligations (2.8) (0.5)
Cash generated from
operations 34.5 39.3
Tax paid (0.2) -
Net cash flows from
operating activities 34.3 39.3
Cash flows from investing activities
Proceeds from the
disposal of cinema sites 12.3 25.1
Interest received 1.2 0.6
Acquisition of property,
plant and equipment (9.9) (6.4)
Surplus of pension
contributions over
current service cost (1.8) (0.4)
Net cash flows from
investing activities 1.8 18.9
Cash flows from financing activities
Share issue proceeds 104.3 -
Proceeds from new loan 8 135.0 226.0
Dividends paid to
shareholders 9 (4.3) -
Interest paid (10.2) (18.8)
Repayment of bank loans 8 (214.0) (253.0)
Repayment of subordinated
bonds 8 (54.3) -
Share issuance costs (7.8) -
Payment of finance lease
liabilities 8 (0.5) (0.5)
Debt issuance costs (1.6) (3.8)
Net cash from financing
activities (53.4) (50.1)
Net increase/(decrease)
in cash and cash
equivalents (17.3) 8.1
Cash and cash equivalents
at start of period 27.7 19.6
Cash and cash equivalents
at end of period 10.4 27.7
*See note 2
Consolidated statement of recognised income and expense
for the period ended 27 December 2007
Note 52 week period 52 week period
ended ended
27 December 28 December
2007 2006
(restated*)
£m £m
Actuarial gains on
defined benefit pension
schemes 0.7 2.7
Tax recognised on income
and expenses recognised
directly in equity (0.2) (0.7)
Movement in fair value of
cash-flow hedge (0.2) -
Net income recognised
directly in equity 0.3 2.0
Profit/(loss) for the
period (as originally
reported) 25.7 (7.7)
Total recognised income
and expense for the period
attributable to equity holders of the
company 26.0 (5.7)
Impact of prior year
adjustment on retained
earnings at
29 December 2006 2 (4.9) -
* See note 2
Notes to the consolidated financial statements
1. Basis of preparation
This financial information has been prepared applying the accounting policies
and presentation that were applied in the preparation of the Company's published
consolidated financial statements for the 52 week period ended 28 December 2006,
and are not the Company's statutory accounts.
The comparative figures for the 52 week period ended 28 December 2006 are not
the Company's statutory accounts for that financial period. Those accounts have
been reported on by the Company's auditors and delivered to the registrar of
companies. The report of the auditors was (i) unqualified, (ii) did not include
a reference to any matters to which the auditors drew attention by way of
emphasis without qualifying their report, and (iii) did not contain a statement
under section 237(2) or (3) of the Companies Act 1985.
The Group's key accounting policies are as follows:
Measurement convention
The financial statements are prepared on the historical cost basis except that
the following assets and liabilities are stated at their fair value: derivative
financial instruments and financial instruments classified as fair value through
the income statement or as available-for-sale. Non-current assets and disposal
groups held for sale are stated at the lower of previous carrying amount and
fair value less costs to sell.
Basis of consolidation
Subsidiaries are entities controlled by the Group. Control exists when the Group
has the power, directly or indirectly, to govern the financial and operating
policies of an entity so as to obtain benefits from its activities. In assessing
control, potential voting rights that are currently exercisable or convertible
are taken into account. The financial information of subsidiaries is included in
the consolidated financial information from the date that control commences
until the date that control ceases.
Derivative financial instruments and hedging
Derivative financial instruments are recognised at fair value. The gain or loss
on remeasurement to fair value is recognised immediately in the income statement
except where derivatives qualify for hedge accounting when recognition of any
resultant gain or loss depends on the nature of the item being hedged.
The fair value of interest rate swaps is the estimated amount that the Group
would receive or pay to terminate the swap at the balance sheet date, taking
into account current interest rates and the current creditworthiness of the swap
counterparties. The fair value of forward exchange contracts is their quoted
market price at the balance sheet date, being the present value of the quoted
forward price.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation
and impairment losses.
Where parts of an item of property, plant and equipment have different useful
lives, they are accounted for as separate items of property, plant and
equipment.
Leases in which the Group assumes substantially all the risks and rewards of
ownership of the leased asset are classified as finance leases. Where land and
buildings are held under leases the accounting treatment of the land is
considered separately from that of the buildings. Leased assets acquired by way
of finance lease are stated at an amount equal to the lower of their fair value
and the present value of the minimum lease payments at inception of the lease,
less accumulated depreciation and impairment losses.
Other leases are operating leases. These leased assets are not recognised in the
Group's balance sheet.
Depreciation is charged to the income statement to write assets down to their
residual values on a straight-line basis over the estimated useful lives of each
part of an item of property, plant and equipment. The estimated useful lives are
as follows:
• Freehold buildings and long leasehold 30 years or life of lease if
properties shorter
• Leasehold improvements life of lease
• Plant and equipment 5 to 10 years
• Fixtures and fittings 4 to 10 years
No depreciation is provided on freehold land, assets held for sale or on assets
in the course of construction. Depreciation methods, residual values and the
useful lives of all assets are re-assessed annually.
Intangible assets and goodwill
All business combinations are accounted for by applying the acquisition method.
Goodwill represents amounts arising on acquisition of subsidiaries. In respect
of business acquisitions that have occurred since incorporation, goodwill
represents the difference between the cost of the acquisition and the Group's
interest in the fair value of the identifiable assets, liabilities and
contingent liabilities acquired. Identifiable intangibles are those which can be
sold separately or which arise from legal rights regardless of whether those
rights are separable.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is
allocated to cash-generating units and is not amortised but is tested annually
for impairment.
Negative goodwill arising on an acquisition is recognised immediately in the
income statement.
Other intangible assets that are acquired by the Group are stated at cost less
accumulated amortisation and impairment losses. Identifiable intangibles are
those which can be sold separately or which arise from legal rights regardless
of whether those rights are separable.
Amortisation is charged to the income statement on a straight-line basis over
the estimated useful lives of intangible assets unless such lives are
indefinite. Intangible assets with an indefinite useful life and goodwill are
tested annually for impairment at each balance sheet date. Other intangible
assets are amortised from the date they are available for use. The estimated
useful lives are as follows:
• Brands 10 years
• Customer relationships 3 years
Trade and other receivables
Trade and other receivables are recorded at fair value less amortised cost,
using the effective interest rate method, less impairment losses.
Inventories
Inventories are stated at the lower of cost and net realisable value. The cost
of inventories is based on the FIFO principle. Cost comprises expenditure
incurred in acquiring the inventories and bringing them to their existing
location and condition, and net realisable value is the estimated selling price
in the ordinary course of business, less the estimated selling costs.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. Bank
overdrafts that are repayable on demand and form an integral part of the Group's
cash management are included as a component of cash and cash equivalents for the
purpose only of the statement of cash flows.
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less
attributable transaction costs. Subsequent to initial recognition,
interest-bearing borrowings are stated at amortised cost with any difference
between cost and redemption value being recognised in the income statement over
the period of the borrowings on an effective interest basis.
Provisions
A provision is recognised in the balance sheet when the Group has a present
legal or constructive obligation as a result of a past event, and it is probable
that an outflow of economic benefits will be required to settle the obligation.
If the effect is material, provisions are determined by discounting the expected
future cash flows at a pre-tax rate that reflects current market assessments of
the time value of money and, where appropriate, the risks specific to the
liability.
Revenue
Revenue represents the total amount receivable for services rendered or goods
sold, excluding sales related taxes and intra group transactions. Revenue is
recognised in the income statement at the point of sale for ticket and
refreshment sales. Income from other related activities is recognised in the
period to which they relate.
Expenses
Operating lease payments
Payments made under operating leases are recognised in the income statement on a
straight-line basis over the term of the lease. Lease incentives received are
recognised in the income statement as an integral part of the total lease
expense. Where the Group has operating leases that contain minimum guaranteed
rental uplifts over the life of the lease, the Group recognises the guaranteed
minimum lease payment on a straight line basis over the lease term.
Finance lease payments
Minimum lease payments are apportioned between the finance charge and the
reduction of the outstanding liability. The finance charge is allocated to each
period during the lease term so as to produce a constant periodic rate of
interest on the remaining balance of the liability.
Net financing costs
Net financing costs comprise interest payable, amortisation of financing costs,
unwind of discount on onerous lease provisions, finance lease interest, net gain
/loss on re-measurement of interest rate swaps, interest receivable on funds
invested, foreign exchange gains and losses and finance costs for defined
benefit pension schemes.
Sale and leaseback
Where the Group enters into a sale and leaseback transaction whereby the risks
and rewards of ownership of the assets concerned have not been substantially
transferred to the lessor, any excess of sales proceeds over the previous
carrying amount are deferred and recognised in the income statement over the
lease term. At the date of the transaction the assets and the associated finance
lease liabilities on the Group's balance sheet are stated at the lower of fair
value of the leased assets and the present value of the minimum lease payments.
Where the Group enters into a sale and leaseback transaction whereby the risks
and rewards of ownership of the assets concerned have been substantially
transferred to the lessor, any excess of sales proceeds over the previous
carrying amount is recognised in the income statement on completion of the
transaction, when the sale and subsequent lease back has been completed at fair
value.
Taxation
Tax on the profit or loss for the period comprises current and deferred tax. Tax
is recognised in the income statement except to the extent that it relates to
items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the period,
using tax rates enacted or substantively enacted at the balance sheet date, and
any adjustment to tax payable in respect of previous periods.
Deferred tax is provided on temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts used
for taxation purposes. The following temporary differences are not provided for:
the initial recognition of goodwill; the initial recognition of assets or
liabilities that affect neither accounting nor taxable profit other than in a
business combination, and differences relating to investments in subsidiaries to
the extent that they will probably not reverse in the foreseeable future. The
amount of deferred tax provided is based on the expected manner of realisation
or settlement of the carrying amount of assets and liabilities, using tax rates
enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that
future taxable profits will be available against which the asset can be
utilised.
2. Prior year adjustment
The Directors have undertaken a review of the Group's accounting treatment with
respect to operating leases and have concluded that, where the Group as lessee
has entered into rental agreements with guaranteed minimum uplifts, it is
appropriate to recognise the total minimum lease payments, including the
uplifts, on a straight line basis over the period of the operating lease. In
prior years, the uplifts were recognised as an expense only when paid. A prior
period adjustment has been recorded to reflect this adjustment.
As a number of the operating leases that contain minimum uplifts were acquired
in prior periods in business combinations, the recognition, by prior year
adjustment, of the minimum lease payment on a straight line basis has resulted
in an additional accrual being recognised at the date of the business
combination. This has resulted in an increase to goodwill arising on those
business combinations as at 30 December 2005 and 28 December 2006 of £19.5m. The
impact on the previously reported results for 2006, the opening balance sheet at
29 December 2005 and the balance sheet at 28 December 2006 is set out below:
Prior period adjustment 2006 (as Impact of prior 2006 (as
originally period restated)
reported) adjustment
£m £m £m
Goodwill 204.3 19.5 223.8
Current trade
and other
payables (51.5) 0.5 (51.0)
Non-current
trade and
other payables (19.4) (24.9) (44.3)
Retained deficit (59.2) (4.9) (64.1)
Net liabilities (58.8) (4.9) (63.7)
Cost of sales (211.3) (1.8) (213.1)
Operating profit 20.5 (1.8) 18.7
Profit before
and after tax (5.9) (1.8) (7.7)
Prior period adjustments (continued) 2006 2005
£m £m
Retained deficit at end of period (as (59.2) (55.3)
originally reported)
Impact of prior period adjustment (4.9) (3.1)
---------------- ---------------
Retained deficit at end of period (as restated) (64.1) (58.4)
================ ===============
Basic and diluted loss per share as originally reported was 17.1p and is 22.3p
as restated. There was no impact on current or deferred tax as recovery of the
resulting deferred tax asset was not probable in the prior period. The net tax
asset increased by £7.5m as at 27 December 2007 (2006: £nil).
3. Segmental information
Geographic sector analysis
Revenue by destination and by origin from countries other than the UK in all
financial periods was not material.
Business sector analysis
The Group has operated in one business sector in all financial periods, being
cinema operations.
4. Earnings/(loss) per share
Basic earnings/(loss) per share is calculated by dividing the profit/(loss) for
the period attributable to ordinary shareholders by the weighted average number
of ordinary shares outstanding during the period, after excluding the weighted
average number of non-vested ordinary shares held by the employee ownership
trust. Adjusted earnings/(loss) per share is calculated in the same way except
that the profit for the period attributable to ordinary shareholders is adjusted
by adding back the amortisation of intangible assets, the cost of share-based
payments and other one-off income or expense remaining. Adjusted pro-forma
earnings/(loss) per share is calculated by applying a pro-forma interest charge
on the new debt structure, and a tax charge at 30%, to the adjusted profit/
(loss).
Diluted earnings/(loss) per share is calculated by dividing the profit for the
period attributable to ordinary shareholders by the weighted average number of
ordinary shares outstanding during the period, after excluding the weighted
average number of non-vested ordinary shares held by the employee share
ownership trust and after adjusting for the effects of dilutive options.
52 week period 52 week period
ended ended
27 December 28 December
2007 2006
(restated*)
£m £m
Profit/(loss) for the period
attributable to ordinary
shareholders 25.7 (7.7)
Adjustments :
Amortisation of intangible
assets 9.8 3.1
Share based payments 0.5 0.9
Transaction and
reorganisation costs 2.6 3.4
Profit on disposal (8.1) (2.8)
Impact of straight lining
operating leases 1.1 1.8
Adjusted earnings 31.6 (1.3)
Add back net financing costs
(see note 5) 18.0 -
Less normalised interest (10.2) -
Less tax credit (13.3) -
Adjusted pro-forma
profit/(loss) before tax 26.1 (1.3)
Less tax at 30% (7.8) 0.4
Adjusted pro-forma
profit/(loss) after tax 18.3 (0.9)
52 week period 52 week period
ended ended
27 December 28 December
2007 2006
(restated*)
Number of Number of
shares (m) shares (m)
Weighted average number of shares
in issue 104.9 34.6
Basic and adjusted
earnings/(loss) per share
denominator 104.9 34.6
Dilutive options - -
Diluted earnings/(loss) per share
denominator 104.9 34.6
Pence Pence
Basic and diluted
earnings/(loss)per share 24.5 (22.3)
Adjusted basic and diluted
earnings/(loss) per share 30.1 (3.8)
Adjusted pro-forma basic and
diluted earnings/(loss) per share 17.4 (2.6)
* See note 2
5. Finance income and expense
52 week 52 week
period ended period ended
27 December 28 December
2007 2006
£m £m
Net gain on remeasurement of interest
rate swap to fair value 0.3 12.8
Interest income 1.2 0.6
Expected return on defined benefit
pension plan assets 1.1 1.0
Financial income 2.6 14.4
Interest expense on bank loans and
overdrafts 12.3 18.4
Interest accrued on deep discount bonds 4.2 11.6
Write off of financing fees on
redemption of loans 1.0 3.1
Amortisation of financing costs 0.5 3.7
Unwind of discount on onerous lease
provision 0.8 0.6
Finance cost for defined benefit pension
scheme 1.3 1.3
Recognition of expense relating to cash
settled shares - 0.9
Other financial costs 0.5 1.2
Financial expense 20.6 40.8
Net financing costs 18.0 26.4
Amortisation of financing costs in 2006 includes £2.0m of accelerated
amortisation as a result of revising the amortisation period due to planned
refinancing
On 27 April 2007 a new swap was taken out to hedge a portion of the Group's bank
debt. Hedge accounting has been applied to this swap from inception. A movement
of £0.2m has been recognised directly in equity in relation to this cash flow
hedge.
6. Taxation
Recognised in the income statement
52 week 52 week
period ended period ended
27 December 28 December
2007 2006
(restated*)
£m £m
Current tax expense
Current year 1.8 -
Deferred tax expense
Origination and reversal of
temporary differences (15.1) 4.6
Benefit of tax losses
recognised - (4.6)
Total tax credit in income
statement (13.3) -
During the period there was a deferred tax credit of £0.2m (2006: credit of
£0.8m) recognised directly in equity.
Factors that may affect future tax charges
As at 27 December 2007 the Group had the potential tax assets relating to the
following:
- other non-trading and capital losses of approximately £36.8m (2006 :£36.8m)
- other temporary differences of £nil (2006: £36.8m)
No deferred tax asset has been recognised in respect of non-trading and capital
losses as the Group has no expectation that it will be able to use its other
losses in the foreseeable future except against a capital gain on future
property disposals.
The net tax benefit of utilising any of the above losses is expected to amount
to approximately 28% of the losses utilised.
To the extent that such potential deferred tax assets crystallise or are
recognised in future, a tax credit will arise. Where such potential tax assets
relate to Cineworld Group plc's acquisitions of Cine UK or UGC an equivalent
reduction in goodwill will also be made via an additional amortisation charge
within administrative expenses.
* See note 2
7. Dividends
An interim dividend of 3p per share, amounting to £4.3m, was paid on 26 October
2007 to ordinary shareholders on the register at the close of business on 28
September 2007. The Directors propose a final dividend of 6.5p per share, taking
the total dividend for the year to 9.5p per share, payable on 18 June 2008 to
ordinary shareholders on the register at the close of business on 23 May 2008.
8. Other interest-bearing loans and borrowings and other financial
liabilities
This note provides information about the contractual terms of the Group's
interest-bearing loans and borrowings.
27 December 28 December
2007 2006
£m £m
Non-current liabilities
Deep discounted bonds - 126.6
10% interest bearing unsecured bonds - 1.2
Secured bank loans, less issue costs of debt to be
amortised 119.2 206.7
Liabilities under finance leases 6.4 6.4
125.6 340.9
Current liabilities
Interest rate swaps 0.2 0.3
Liabilities under finance leases 0.5 0.5
Secured bank loans, less issue costs of debt to be
amortised 8.5 0.2
9.2 1.0
At 27 December 2007, the Group had the following borrowings:
On 26 April 2007 the bank loans in existence at 28 December 2006 were refinanced
with a new loan of £165m of which £135m was drawn down for a term of 5 years and
interest charged at 1.35% above LIBOR. The balance of the loan at 27 December
2007 was £129m.
At 28 December 2006, the Group had the following borrowings:
Deep discounted bonds
The bonds were zero coupon and unsecured and bear an effective interest rate of
10% per annum which is payable on redemption of the bonds. The amounts
redeemable were: £152.8m on 7 October 2014 (book value on 28 December 2006:
£105.7m) and £103.9m on 1 December 2014 (book value £116.2m). The bonds were
measured at amortised cost.
Subject to having given no less than 30 days and not more than 60 days notice in
writing to the bondholders the Group may, at any time, with the consent of the
bondholders having the majority of the bonds, redeem the whole or any part of
the bonds.
10% interest bearing unsecured bonds
The 10% interest bearing unsecured bonds have a redemption date of 7 October
2014. Interest is payable on repayment or redemption of the bonds.
On IPO the deep discounted bonds and interest bearing bonds were either repaid
or converted to equity.
Group's assets and undertakings.
Secured bank loans (2006)
On 22 June 2006 the bank loans were refinanced on new terms, comprising:
Term A: £45m drawn down at 28 December 2006, repayable over the term to 22 June
2013 at 2.25% above LIBOR.
Term B: £81.5m drawn down at 28 December 2006, repayable in full on 22 June 2014
at 2.5% above LIBOR.
Term C: £81.5m drawn down at 28 December 2006, repayable in full on 22 June 2015
at 3.0% above LIBOR.
Term D: undrawn, repayable in full on 22 December 2016 at 2.75% above LIBOR.
The bank loans are secured by fixed and floating charges on the assets of the
Group. On 25 August 2006 the loans were syndicated.
As at 28 December 2006, the Group had drawn down a total of £208m on the
available £246m facility.
Analysis of net debt
Cash at bank Bank loans Deep discounted Finance leases Interest rate Net debt
and in hand bonds swap
£m £m £m £m £m £m
At 29
December 2005 19.6 (230.9) (116.2) (6.1) (13.1) (346.7)
Cash flows 8.1 30.8 - 0.5 - 39.4
Non cash movement - (6.8) (11.6) (1.3) 12.8 (6.9)
At 28
December 2006 27.7 (206.9) (127.8) (6.9) (0.3) (314.2)
Cash flows (17.3) 79.0 54.3 0.5 - 116.5
Non cash movement - 0.2 73.5 (0.5) 0.1 73.3
At 27
December 2007 10.4 (127.7) - (6.9) (0.2) (124.4)
The non-cash movements relating to bank loans represent the write-off or
amortisation of bank fees previously capitalised, and those on bonds to interest
accrued but not payable until the redemption of the bonds.
9. Capital and reserves
Reconciliation of movement in capital and reserves
52 weeks ended 28 December 2006 and 52 weeks ended 27 December 2007:
Share Share premium Translation Hedging reserve Retained Total
capital reserve deficit
£m £m £m £m £m £m
At 29 December
2005
(restated*) - - 0.4 - (58.4) (58.0)
Loss for the
period (restated*) - - - - (7.7) (7.7)
Actuarial gain
on defined benefit
pension scheme - - - - 2.7 2.7
Tax recognised
on income and
expenses recognised
directly in equity - - - - (0.7) (0.7)
At 28 December 2006
(restated*) - - 0.4 - (64.1) (63.7)
Profit for
the period - - - - 25.7 25.7
Actuarial gain
on defined benefit
pension scheme - - - - 0.7 0.7
Tax recognised
on income and
expenses recognised
directly in equity - - - - (0.2) (0.2)
Dividends
paid for period - - - - (4.3) (4.3)
Shares issued,
net of related costs 0.6 93.5 - - - 94.1
Bonds converted
to shares 0.5 77.9 - - - 78.4
Bonus share issue 0.3 - - - - 0.3
Reversal
of accrual
relating to cash
settled shares - - - - 1.8 1.8
Movement in
fair value of
cash flow hedge - - - (0.2) - (0.2)
At 27 December 2007 1.4 171.4 0.4 (0.2) (40.4) 132.6
* See note 2
Share Premium is stated net of capitalised transaction costs in association with
the IPO.
Share capital
27 December 28 December
2007 2006
£m £m
Cineworld Group plc
Authorised
200,000,000 ordinary shares of £0.01 each (2006:
173,515 ordinary shares of £0.01 each) 2.0 -
Nil redeemable preference shares of £1 each (2006:
48,272 redeemable preference shares of £1 each) - -
Allotted, called up and fully paid
141,721,509 ordinary shares of £0.01 each (2006:
172,815 ordinary shares of £0.01 each) 1.4 -
Nil redeemable preference shares of £1 each (2006:
48,272 redeemable preference shares of £1 each) - -
On 26 April 2007 the authorised share capital was increased from £50,017.15 to
£2,048,272 by the creation of 199,826,485 shares.
On admission to the London Stock Exchange on 2 May 2007, the Company made the
following share issues:
61,381,075 shares in connection with the Global offer.
45,777,434 shares in connection with the conversion of outstanding bonds.
34,390,185 bonus shares on the existing shares.
48,272 redeemable reference shares of £1 each were redeemed and cancelled from
the Company's authorised share capital on 2 May 2007.
Translation reserve
The translation reserve comprises all foreign exchange differences arising from
the translation of the financial statements of foreign operations, as well as
from the translation of liabilities that hedge the Company's net investment in a
foreign subsidiary.
Hedging reserve
The hedging reserve comprises the liability in relation to the interest rate
swap entered into to hedge against variable interest payments on £67.5m of the
new debt taken out on 2 May 2007. As hedge accounting has been adopted the gains
/losses are recorded through equity until such time as the swap matures, when
they are recycled to the income statement.
Dividends
An interim dividend of 3p per share was paid on 26 October 2007 to ordinary
shareholders (2006: £nil). The Board has proposed a final dividend of 6.5p per
share payable on 18 June 2008.
This information is provided by RNS
The company news service from the London Stock Exchange
