BULL POINTS
• Impressive list of films slated for release
• Attractive dividend policy
• Shares trade at a discount to the leisure sector
BEAR POINTS
• Weakening consumer conditions could hit performance
• Big advertising contract terminated
This month's impressive maiden results from the UK's only listed cinema operator, Cineworld, support the impression that people are willing to spend on a cinema trip, regardless of cloudier economic conditions and grim weather conditions.
In fact, it is releases of big ticket movies that drive performance. So with the final Harry Potter book to be divided into two movies, and new James Bond, Star Trek and Indiana Jones films all slated for release this year, things look bright. Management also expects 3D movies, such as Beowolf, to take off in 2009, which should further fuel growth, helped along by the release of more high-profile movies such as Angels and Demons, based on Dan Brown's novel.
Performance is also being boosted from non-ticket sales, such as Carlsberg beer, Frozen Fanta and Ben & Jerry's ice cream, while negotiations are in the final stages for selling branded coffee.
| ORD PRICE: | 130p | MARKET VALUE: | £184.2m | |
| TOUCH: | 129-130p | 12M HIGH / LOW: | 227p | 93p |
| DIVIDEND YIELD: | 7.3% | PE RATIO: | 9 | |
| NET ASSET VALUE: | 94p** | NET DEBT: | 94% | |
| Year to end-Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2006 | 279 | -7.70 | -22.3 | nil |
| 2007 | 285 | 12.4 | 24.5 | 9.5 |
| 2008* | 284 | 24.5 | 11.7 | 9.5 |
| 2009* | 296 | 29.4 | 14.0 | 9.5 |
| % change | +4 | +20 | +20 | - |
Normal market size:2,500 Matched bargain trading Beta: -0.1 *Altium Securities estimates (adjusted figures) **Includes intangible assets of £217m, or 153p a share | ||||
Click for a guide to the terms used in IC results tables.
And despite the chunky £124m debt pile - Cineworld had a £16.5m interest bill in 2007 - the group's impressive cashflow should leave it able to support its attractive dividend payouts. Indeed, 2007's dividend equates to a 60 per cent payout ratio and chief executive Stephen Wiener has confirmed that this generous policy will be maintained.
Management is also working on rebuilding advertising revenues after the Carlton Screen Advertising agreement was terminated - Cineworld is now putting together a 50:50 advertising joint venture with market leaders, Odeon Cinemas. In fact, with 9 per cent of revenues stemming from advertising, it's imperative that this arrangement works. Mr Wiener says advertising will be "very much a core focus" for Cineworld as it offers high margins - although the details of the joint venture have yet to be released.
