Interim Results
Cineworld Group plc
20 September 2007
20 September 2007 Embargoed for 7am release
CINEWORLD GROUP plc
Cineworld Group plc ('Cineworld' or 'the Group') is pleased to announce its
maiden interim results as a public company for the 26 weeks ended 28 June 2007.
HIGHLIGHTS
Financial
•Group revenue up 4.1% to £135.7m (2006: £130.4m) and up 11.2% on a
continuing basis (2006: £122.0m)(1);
•EBITDA(2) up 24.7% to £21.7m (2006: £17.4m on a continuing basis)(1);
•Operating profit increased to £18.0m (2006: £3.7m);
•Operating cash flow before changes in working capital and provisions
increased to £19.8m (2006: £15.9m);
•Net debt reduced to £129.6m following IPO in May 2007 and debt
refinancing (2006: £330.0m);
•Reported EPS(3): 21.7p on basic earnings, 9.2p on adjusted pro-forma
earnings (EPS based on shares at end of period: 10.4p on basic earnings,
4.4p on adjusted pro-forma earnings)(4);
•Proposed interim dividend of 3p 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 23.9% (2006: 23.4%) (source: EDI Neilsen);
•Box office up 12.0% at £88.7m on a continuing basis (2006: £79.2m)(1);
•Admissions up 8% at 21.7m on a continuing basis (2006: 20.1m)(1);
•Average ticket price per admission up 3.5% to £4.09 (2006: £3.95 on a
continuing basis)(1);
•Average retail spend per person up 3.1% to £1.64 (2006: £1.59 on a
continuing basis)(1);
•New cinema opened at Didcot on 3 May 2007 and performing ahead of
expectations.
Commenting on these results, Stephen Wiener, Chief Executive Officer of
Cineworld Group plc, said:
'The first half of 2007 was transformational for the Group as we listed our
shares on the main market of the London Stock Exchange in May raising £120.0m
before expenses for the Group and selling shareholders. It has been a strong
first half performance for the Group and we're making good progress in growing
sales and profitability across all fronts. This is a reflection of the strength
of our business proposition in delivering real value for money for our customers
combined with a quality cinematic experience.
'We are successfully delivering the strategy outlined at IPO and remain on
schedule with our investment plans to update our existing estate and roll out
new cinemas across the United Kingdom. The second half has started well for the
Group and we have some exciting new releases ahead of us in the remainder of the
year and beyond. This, combined with the quality of our estate, means we look
forward with confidence to delivering further growth and increased value to our
shareholders.'
Enquiries:
Cineworld Group plc
Stephen Wiener Power Road Studios
Chief Executive Officer 114 Power Road
Richard Jones London W4 5PY
Chief Financial Officer + 44 (0) 208 987 5000
M Communications 1 Ropemaker St
Georgina Briscoe London, EC2Y 9HT
+44 (0) 207 153 1548
Briscoe@MComGroup.com
--------------------------
(1) Continuing basis excludes sites disposed during 2006, see the financial
performance section
(2) EBITDA is defined as per the financial performance section
(3) Based on weighted average number of shares in the period of 68.1m. See note
5 for calculation
(4) Shares at 28 June 2007 is 141.7m
CHIEF EXECUTIVE'S STATEMENT
THE OPERATING ENVIRONMENT
The first half of 2007 was transformational for the Group, as we listed our
shares on the main market of the London Stock Exchange in May, raising £120.0m
before expenses for the Group and selling shareholders. At this time we set out
a clear strategy for growth and I am delighted our maiden interim results
indicate robust progress across all fronts.
Market share grew to 23.9% from 23.4% in the same period last year and box
office increased 12% to £88.7m (2006: £79.2m) on a continuing basis. Admissions
were up 8% on the same period last year and the average ticket price per
admission increased by 3.5% to £4.09 (2006: £3.95). In addition, we drove retail
spend per person by 3.1% from £1.59 to £1.64 in the same period. These results
are testament to Cineworld's customer proposition with a national franchise of
quality mulitplex cinemas and a compelling mix of film and retail offering.
The new financial period started well with a carryover of strong films from the
2006 Christmas trading period, which continued well into the first half. These
included A Night At The Museum and Casino Royale - the latter, though released
in mid November 2006, continued to play through to February of this year and was
the top performing film released in 2006 in the UK, grossing £54m in total. The
period's blockbuster sequels have all performed well, commencing with Spiderman
3 in early May, followed by Pirates of the Caribbean 3 in June, Ocean's
Thirteen, Fantastic Four and Shrek The Third, with the latter contributing three
days' box office for the period.
In addition to Hollywood-based blockbuster successes, the UK film industry
turned in good performances and Mr Bean's Holiday and Hot Fuzz were the third
and fourth highest grossing films in the UK to June 2007, respectively. We
should also note the contribution of other films to our overall box office
which, whilst not blockbusters, have nonetheless been significant drivers of box
office takings. The most notable of these was 300, which was the sixth highest
grossing film in the UK over the period. Other films include Charlotte's Web,
The Pursuit of Happyness, Music And Lyrics, 28 Weeks Later and Zodiac. Rocky
Balboa and Die Hard 4.0 were big success stories too and should give the film
studios confidence to resurrect further titles.
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 have been able to achieve a more constant and regular offering of Bollywood
films in the first half of the year than in previous years and a series of
successful foreign language films have contributed favourably to our results.
The most notable releases were The Lives of Others (2007 Oscar Winner in the
foreign language category from Germany) and the French films Tell No One and La
Vie En Rose. The release of the Tamil film Sivaji, over which we had limited
exclusivity, has opened up further exciting possibilities in this new and
growing market.
Our proposition is to offer our customers the most enjoyable cinematic
experience in the country. Almost all of our multiplex cinemas have a digital
projection facility and as the film industry thrives on technological
developments, we feel well placed to capitalise on these initiatives. Moreover,
our retail and marketing initiatives, including the Unlimited card and
enhancements to the product offering such as Ben and Jerrys and Fanta Frozen,
have helped us to maintain footfall whilst increasing retail spend per customer.
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 and performing ahead of expectations.
FINANCIAL PERFORMANCE
26 week period 26 week period 52 week period
ended ended ended
28 June 2007 29 June 2006 28 December
2006
Total Total Continuing* Total Continuing*
Admissions 21.7m 21.5m 20.1m 45.2m 42.9m
£m £m £m £m £m
Box Office 88.7 84.6 79.2 181.3 172.4
Retail 35.5 34.2 31.9 73.3 69.4
Other 11.5 11.6 10.9 23.9 22.8
_______________________________________________________
Total revenue 135.7 130.4 122.0 278.5 264.6
_______________________________________________________
EBITDA** 21.7 19.2 17.4 48.6 46.0
EBITDA after
transaction and
reorganisation
costs and
profit on
disposal of
cinema sites 27.8 15.5 14.1 48.0 42.6
Operating
profit 18.0 3.7 2.9 20.5 15.1
_______________________________________________________
*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 property charges,
transaction and reorganisation costs and profit on disposal of cinema sites.
Revenues
Total revenue was £135.7m, a rise of 4.1% on the prior period (2006: £130.4m).
Revenue on a continuing basis was up 11.2% (2006: £122.0m), against weaker than
usual comparatives due to last year's World Cup and the very hot weather in the
UK.
As a result of strong product and the increase in market share described above,
we have enjoyed very buoyant trade during the first half and box office was
12.0% higher at £88.7m on a continuing basis (2006: £79.2m).
Our subscription business, the Unlimited pass, continues to expand in line with
our stated strategy and we currently have in excess of 160,000 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 first half of the year were in line with expectations given
the level of business and were up 11.3% at £35.5m on a continuing basis (2006:
£31.9m) with the high grossing blockbuster films of May and June providing a
strong spending customer base. A number of film tie-in retail promotions were
developed for the summer period and in the first half, a further twelve Ben &
Jerrys outlets were opened, and Fanta Frozen was rolled out across the majority
of sites.
Other revenues from screen advertising, ticket bookings, sponsorships, games and
other machines etc, were up 5.5% to £11.5m (2006: £10.9m) on a continuing basis.
EBITDA and Operating profit
EBITDA on a continuing basis was up 24.7% to £21.7m against 2006 figures of
£17.4m and operating profit increased to £18.0m (2006: £3.7m total, £2.9m on a
continuing basis). Included in the results for the first six months of 2007 were
rates rebates received of £1.4m relating to prior years (2006: £0.3m), of which
approximately £1.0m relates to the financial year 2006 (£0.5m to the first half)
and £0.4m to 2005. Transaction and reorganisation costs of £1.9m were incurred
during the period, relating mainly to costs in connection with the IPO. The
profit on disposal of £8.0 million in the first half results relates to the sale
and leaseback transactions on our Swindon and Southampton cinemas.
Financing costs
The interest expense in the first half relates to interest on the pre-IPO
financing arrangements on debt and bonds and to interest on post-IPO debt. Also
included in the first half costs 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 first half would be approximately £4.8m.
Taxation
The overall tax credit of £9.7m is due to 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. There is a £0.4m corporation tax charge for the first half of the year,
which is based on a forecast effective tax rate for the 2007 full year of 8.0%.
Earnings
Overall profit before tax was £5.1m against a loss of £6.0m in 2006.
Basic earnings per share amounted to 21.7p and adjusted pro-forma earnings per
share were 9.2p based on a weighted average number of shares over the period of
68.1m, whereas the total number of shares in issue at the end of the period was
141.7m, which would otherwise give a basic earnings per share of 10.4p and
adjusted earnings per share of 4.4p. There were no share dilutions at the end of
the period.
CASHFLOW AND BALANCE SHEET
The Group continued to be cash generative at the operating level during the
first half. Total cash inflow from operations before changes in working capital
increasing to £19.8m (2006: £15.9m). 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 first six months amounted to £3.4m, of which £2.8m
represented replacement and refurbishment expenditure and £0.6m being the cost
of opening the new five screen cinema at Didcot on 3 May 2007. 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 de-leveraging of the business, the combination of which now
allows us more flexibility to meet future business challenges and opportunities.
DIVIDENDS
The Board is declaring an interim dividend of 3 pence per share, reflecting the
Board's confident outlook as well as the strong performance in the first half of
the year. The dividend will be paid on 26 October 2007 to ordinary shareholders
on the register at the close of business on 28 September 2007.
CURRENT TRADING AND OUTLOOK
Since the half-year end, attendances have continued to be strong, driven by the
success of a number of summer blockbusters. This, in combination with our strong
first half performance, underpins our increased confidence in the outlook for
the year - although noting that year on year figures will reflect the strong
closing months of 2006.
Looking forward to 2008, the ongoing initiatives to improve and expand our
estate, coupled with a film release schedule that includes blockbuster
franchises such as James Bond, Harry Potter, Batman and Chronicles of Narnia,
make us confident in our continuing ability to grow the business and create
value for our shareholders.
-Ends-
Stephen Wiener
Chief Executive Officer
20 September 2007
Consolidated income statement
for the period ended 28 June 2007
26 week period 26 week period 52 week period
ended ended ended
28 June 29 June 28 December
2007 2006 2006
(unaudited) (unaudited) (audited)
£m £m £m
Revenue 135.7 130.4 278.5
Cost of sales (102.3) (101.0) (211.3)
_______________________________________________
Gross profit 33.4 29.4 67.2
Other
operating
income 8.3 1.2 3.1
Administrative
expenses (23.7) (26.9) (49.8)
_______________________________________________
Operating
profit 18.0 3.7 20.5
Analysed between:
_______________________________________________
Operating
profit before
depreciation
and
amortisation, 21.7 19.2 48.6
impairment charges, onerous lease
and other non-recurring
property charges and transaction
and reorganisation costs
and profit on disposal of cinema
sites
- Depreciation and
amortisation (9.8) (11.8) (23.0)
- Goodwill and
impairment charges - - (2.2)
- Onerous leases and
other non-recurring
property charges - - (2.3)
- Profit/(loss)
on disposal of
cinema sites 8.0 (0.4) 2.8
- Transaction and
reorganisation
costs (1.9) (3.3) (3.4)
________________________________________________
Financial
income 0.9 11.2 14.4
Financial
expenses (13.8) (20.9) (40.8)
________________________________________________
Net financing
costs (12.9) (9.7) (26.4)
________________________________________________
Profit/(loss)
before tax 5.1 (6.0) (5.9)
Taxation 9.7 - -
________________________________________________
Profit/(loss)
for the period
attributable
to equity
holders 14.8 (6.0) (5.9)
of the Company
________________________________________________
Basic and
diluted
earnings/(loss) per share 21.7 p (17.4) p (17.1) p
Consolidated balance sheet
at 28 June 2007
28 June 2007 29 June 2006 (unaudited) 28 December 2006
(unaudited) (audited)
£m £m £m £m £m £m
Non-current
assets
Property,
plant and
equipment 110.8 128.5 119.9
Goodwill 204.3 204.3 204.3
Other
intangible
assets 1.4 4.5 3.0
Other
receivables 0.9 0.9 0.9
Deferred tax
assets 15.4 8.4 5.3
__________________________________________________________________
Total
non-current
assets 332.8 346.6 333.4
Current assets
Inventories 1.4 1.6 1.6
Other
financial
assets 2.0 - -
Trade and
other
receivables 19.5 17.6 18.1
Cash and cash
equivalents 8.8 5.3 27.7
Assets
classified as
held for sale - 13.5 -
__________________________________________________________________
Total current
assets 31.7 38.0 47.4
__________________________________________________________________
Total assets 364.5 384.6 380.8
Current
liabilities
Interest-beari
ng loans,
borrowings and
other
financial
liabilities (6.5) (2.2) (1.0)
Trade and
other payables (45.1) (60.7) (51.5)
Current taxes
payable (0.4) - -
Provisions (2.9) (2.4) (2.1)
__________________________________________________________________
Total current
liabilities (54.9) (65.3) (54.6)
Non-current
liabilities
Interest-beari
ng loans,
borrowings and (133.9) (333.1) (340.9)
other
financial
liabilities
Trade and
other payables (19.0) (19.2) (19.4)
Employee
benefits (4.6) (5.9) (4.6)
Provisions (14.2) (14.9) (16.2)
Deferred tax
liabilities (4.4) (6.7) (3.9)
__________________________________________________________________
Total
non-current
liabilities (176.1) (379.8) (385.0)
__________________________________________________________________
Total
liabilities (231.0) (445.1) (439.6)
__________________________________________________________________
Net
assets/(liabil
ities) 133.5 (60.5) (58.8)
__________________________________________________________________
Equity
attributable
to equity
holders of the
company
Share capital 1.4 - -
Share premium 173.0 - -
Translation
reserve 0.4 0.4 0.4
Hedging 1.4 - -
reserve
Retained
deficit (42.7) (60.9) (59.2)
__________________________________________________________________
Total equity 133.5 (60.5) (58.8)
__________________________________________________________________
Consolidated cash flow statement
for the period ended 28 June 2007
26 week period 26 week period 52 week period
ended ended ended
28 June 29 June 28 December
2007 2006 2006
(unaudited) (unaudited) (audited)
£m £m £m
Cash flow from operating
activities
Profit/(loss) for the
period 5.1 (6.0) (5.9)
Adjustments for:
Financial income (0.9) (11.2) (14.4)
Financial expense 13.8 20.9 40.8
Taxation - - -
_____________________________________________________
Operating profit 18.0 3.7 20.5
Depreciation and
amortisation 9.8 11.8 23.0
Impairment charges - - 2.2
Profit on disposal of
cinema sites (8.0) 0.4 (2.8)
_____________________________________________________
Operating cash flow before
changes in working capital
and 19.8 15.9 42.9
provisions
(Increase) in trade and
other receivables (1.1) (2.6) (0.7)
Decrease/(increase) in
inventories 0.2 - (0.1)
(Decrease) in trade and
other payables (6.4) (8.2) (2.3)
(Decrease) in provisions
and employee benefits (0.9) (1.1) (0.5)
_____________________________________________________
Cash generated from
operations 11.6 4.0 39.3
Tax paid - - -
_____________________________________________________
Net cash flows from
operating activities 11.6 4.0 39.3
_____________________________________________________
Cash flows from investing
activities
Proceeds from the disposal
of cinema sites 12.2 8.0 25.1
Interest received 0.6 0.3 0.6
Acquisition of property,
plant and equipment (3.4) (4.1) (6.4)
Surplus of pension
contributions over current
service cost (0.2) (0.2) (0.4)
_____________________________________________________
Net cash flows from
investing activities 9.2 4.0 18.9
_____________________________________________________
Cash flows from financing
activities
Proceeds from new loan 135.0 226.0 226.0
Share issue proceeds 104.3 - -
Interest paid (7.0) (9.7) (18.8)
Repayment of bank loans (208.0) (235.0) (253.0)
Repayment of bonds (54.3) - -
Payment of finance lease
liabilities (0.5) (0.2) (0.5)
Share issuance costs (7.8) -
Debt issuance costs (1.4) (3.4) (3.8)
_____________________________________________________
Net cash from financing
activities (39.7) (22.3) (50.1)
_____________________________________________________
Net (decrease)/increase in
cash and cash equivalents (18.9) (14.3) 8.1
Cash and cash equivalents
at start of period 27.7 19.6 19.6
_____________________________________________________
Cash and cash equivalents
at end of period 8.8 5.3 27.7
_____________________________________________________
Consolidated statement of recognised income and expense
for the period ended 28 June 2007
26 week period 26 week period 52 week period
ended ended ended
28 June 29 June 28 December
2007 2006 2006
(unaudited) (unaudited) (audited)
£m £m £m
Foreign exchange translation - - -
gain
Actuarial gains and losses
on defined benefit pension
schemes - 0.6 2.7
Tax recognised on income
and expenses recognised
directly (0.6) (0.2) (0.7)
in equity
Movement in fair value of
cash-flow hedge 2.0 - -
_____________________________________________________
Net income/(expense)
recognised directly in
equity 1.4 0.4 2.0
Profit/(loss) for the
period 14.8 (6.0) (5.9)
_____________________________________________________
Total recognised income and
expense for the period 16.2 (5.6) (3.9)
attributable to equity holders
of the company
_____________________________________________________
Notes to the Interim Consolidated Financial Statements
1. Basis of preparation
This interim 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.
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.
Lease payments are accounted for as described below.
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 properties 30 years or life of lease if
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.
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.
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. 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.
3. Taxation
The taxation charge has been calculated by reference to the expected effective
corporation tax rates for the full financial year to end on 27 December 2007
applied against the profit before tax for the period ended 28 June 2007. The
underlying effective full year corporation tax charge is 8% (2006: nil%) for the
year.
Recognised in the income statement
26 week period 26 week period 52 week period
ended ended ended
28 June 29 June 28 December
2007 2006 2006
(unaudited) (unaudited) (audited)
£m £m £m
Current tax expense
Current year 0.4 - -
Deferred tax (credit) (10.1) - -
Origination and reversal of
temporary differences - - 4.6
Benefit of tax losses
recognised - - (4.6)
_____________________________________________________
Total tax (credit) in
income statement (9.7) - -
_____________________________________________________
The deferred tax credit is due to the recognition of a deferred tax asset
principally relating to unclaimed capital allowances, being the excess of the
tax written down value of the capital allowance over the net book value of the
underlying assets, which are forecast to be utilised against future profits.
Following the IPO in May 2007, the Group's debt was refinanced. The lower
interest payments forecast from May 2007 and beyond mean that it is now likely
that these unclaimed capital allowances will be utilised.
4. Finance income and expense
26 week period 26 week period 52 week period
ended ended ended
28 June 29 June 28 December
2007 2006 2006
(unaudited) (unaudited) (audited)
£m £m £m
Interest income 0.6 0.3 0.6
Net gain on
swap 0.3 10.9 12.8
Return on
defined
benefit
pension plan
assets - - 1.0
_____________________________________________________
Financial
income 0.9 11.2 14.4
_____________________________________________________
Interest expense on
bank loans and
overdrafts 7.3 9.3 18.4
Interest accrued on
deep discount
bonds 4.2 5.7 11.6
Write off of financing
fees on redemption
of loans 1.0 3.3 3.1
Amortisation
of financing
costs 0.3 0.9 3.7
Unwind of
discount on
onerous lease 0.3 0.3 0.6
Finance cost for
defined benefit
pension scheme 0.1 0.2 1.3
Recognition of
expense relating to
cash settled
shares - 0.2 0.9
Other financial
costs 0.6 1.0 1.2
_____________________________________________________
Financial
expense 13.8 20.9 40.8
_____________________________________________________
5. Earnings/(loss) per share
Basic earnings/(loss), adjusted earnings/(loss) and diluted 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, applying a pro-forma interest charge on the new debt structure, other
one-off income or expense and the actual tax charge/(credit) and subtracting a
tax charge calculated at 30% of normalised earnings for the period.
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.
26 week period 26 week period 52 week period
ended ended ended
28 June 29 June 28 December
2007 2006 2006
£m £m £m
Profit/(loss) for the
period attributable to
ordinary 14.8 (6.0) (5.9)
shareholders
Adjustments:
Amortisation of intangible
assets 1.6 1.5 3.1
Share based payments 0.4 0.4 0.9
Transaction and
reorganisation costs 1.9 3.3 3.4
Profit on disposal (8.0) 0.4 (2.8)
_____________________________________________________
Adjusted earnings 10.7 (0.4) (1.3)
Normalised interest 8.0 - -
Less tax credit (9.7) - -
_____________________________________________________
Adjusted pro-forma profit /
(loss) before tax 9.0 (0.4) (1.3)
Less tax at 30% (2.7) 0.1 0.4
_____________________________________________________
Adjusted pro-forma profit
/(loss) after tax 6.3 (0.3) (0.9)
_____________________________________________________
Number of Number of Number of
shares shares shares
M M M
Weighted average
number of shares in
issue 68.1 34.6 34.6
_____________________________________________________
Basic and adjusted
earnings/(loss) per
share 68.1 34.6 34.6
denominator
Dilutive options - - -
_____________________________________________________
Diluted
earnings/(loss) per
share denominator 68.1 34.6 34.6
_____________________________________________________
Pence Pence Pence
Basic and diluted
earnings/(loss) per
share 21.7 (17.4) (17.1)
Adjusted basic and
diluted
earnings/(loss) per
share 15.7 (1.2) (3.8)
Adjusted pro-forma
basic and diluted
earnings/(loss) 9.2 (0.8) (2.6)
per share
6. Dividends
The Directors have declared an interim dividend of 3 pence per share, amounting
to £4.3 million, which will be paid on 26 October 2007 to ordinary shareholders
on the register at the close of business on 28 September 2007. In accordance
with IAS 10, this will be recognised in the reserves of the group when the
dividend is paid.
7. Other interest bearing loans and borrowings and other
financial liabilities
28 June 29 June 28 December
2007 2006 2006
(unaudited) (unaudited) (audited)
£m £m £m
Non- current liabilities
Deep discounted bonds - 120.7 126.6
10% interest bearing unsecured bonds - 1.1 1.2
Secured bank loans less issue costs 127.5 204.9 206.7
Liabilities under finance leases 6.4 6.4 6.4
___________________________________________
133.9 333.1 340.9
___________________________________________
Current liabilities
Interest rate swap - - 0.3
Liabilities under finance leases 0.5 0.5 0.5
Secured bank loans less issue costs 6.0 1.7 0.2
___________________________________________
6.5 2.2 1.0
___________________________________________
On 26 April 2007 the bank loans were refinanced with a new loan of £135 million
for a term of 5 years and interest charged at 1.35% above LIBOR. £6 million is
repayable on 31 December 2007, followed by repayments of £4.5 million every half
year thereafter to 31December 2011, with the balance then to be fully repaid.
The deep discounted bonds and unsecured bonds were repaid through £54 million
cash from the proceeds of the Global offer and the balance converted to shares
on admission.
Analysis of net debt
Cash at bank Bank loans Deep discount Finance leases Interest Net debt
and in hand bonds rate
swap
£m £m £m £m £m £m
Balance
at 28
December
2006 27.7 (206.9) (127.8) (6.9) (0.3) (314.2)
Cash (18.9) 73.4 54.3 - - 108.8
flows
Non cash
movement - - 73.5 - 2.3 75.8
__________________________________________________________________________
Balance
at 28
June 2007 8.8 (133.5) - (6.9) 2.0 129.6
__________________________________________________________________________
8. Capital and reserves
Reconciliation of movements in equity for the six months ended 28 June 2007
Issued capital Share premium Translation Hedging reserve Retained Total
reserve deficit
£m £m £m £m £m £m
Balance at
29 December 2006 - - 0.4 - (59.2) (58.8)
Profit for
the period - - - - 14.8 14.8
Shares issued,
net of related
costs 0.6 95.1 - - - 95.7
Bonds converted
to shares 0.5 77.9 - - - 78.4
Bonus share
issue 0.3 - - - - 0.3
Share based
payments - - - - 1.7 1.7
Movement in
fair value
of cash-flow hedge - - - 2.0 - 2.0
Deferred tax
on swap
revaluation - - - (0.6) - (0.6)
__________________________________________________________________________
Balance at
28 June 2007 1.4 173.0 0.4 1.4 (42.7) 133.5
__________________________________________________________________________
Share capital
Cineworld Group plc 28 June 29 June 28 December
2007 2006 2006
(unaudited) (unaudited) (audited)
£m £m £m
Authorised
173,515 ordinary shares of £0.01 each - - -
200,000,000 ordinary shares of £0.01
each 2.0 - -
48,272 redeemable preference shares - - -
of £1 each
___________________________________
Allotted, called up and fully paid
172,815 ordinary shares of £0.01 each - - -
141,721,509 ordinary shares of £0.01
each 1.4 - -
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 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
The redeemable shares were redeemed and cancelled from the Company's authorised
share capital on 2 May 2007.
Independent review report to Cineworld Group plc
Introduction
We have been engaged by the company to review the financial statements and the
financial information for the twenty-six week period ended 28 June 2007 which
comprises the Consolidated income statement, Consolidated balance sheet,
Consolidated cash flow statement, Consolidated statement of recognised income
and expense and the related notes. We have read the other information contained
in the interim report and considered whether it contains any apparent
misstatements or material inconsistencies with the financial information
This report is made solely to the company in accordance with the terms of our
engagement to assist the company in meeting the requirements of the Listing
Rules of the Financial Services Authority. Our review has been undertaken so
that we might state to the company those matters we are required to state to it
in this report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the company for
our review work, for this report, or for the conclusions we have reached
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of and has been approved by the directors. The directors are
responsible for preparing the interim report in accordance with the Listing
Rules which require that the accounting policies and presentation applied to the
interim figures should be consistent with those applied in preparing the
preceding annual financial statements except where any changes, and the reasons
for them, are disclosed
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
Review of interim financial information issued by the Auditing Practices Board
for use in the United Kingdom. A review consists principally of making enquiries
of group management and applying analytical procedures to the financial
information and underlying financial data and, based thereon, assessing whether
the accounting policies and presentation have been consistently applied unless
otherwise disclosed. A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit performed in accordance with
International Standards on Auditing (UK and Ireland) and therefore provides a
lower level of assurance than an audit. Accordingly, we do not express an audit
opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the twenty-six week
period ended 28 June 2007.
KPMG Audit Plc
Chartered Accountants
8 Salisbury Square
London EC4Y 8BB
20 September 2007
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