Upgrades in technology and expansion plans are likely to sustain the standing ovation that greeted better than expected half-year numbers from Cineworld (CINE). Admissions growth for the six months was solid in the UK and Ireland in spite of strong comparables in 2014, leading to box-office revenue rising 10.5 per cent on a pro-forma basis to £150m. Its Central & Eastern Europe and Israel business - which it bought in 2014 and which arguably brings the stronger growth engine - saw box-office revenue rise 11.7 per cent on a pro-forma basis to £67m.
Interim chief financial officer Israel Greidinger said the results were "not a surprise" given the clear potential for the CEE and Israel region and the steady expansion of the UK business, which includes Picturehouse Cinemas. Nine cinemas were opened in the first six months, with 10 more planned for the second half, taking the group total to more than 2,000 screens. Further out, there are 11 sites in the UK, including two Picturehouses, contracted for 2016.
This growth will be key if the group is to keep up such robust dividend growth. These rose nearly 32 per cent for the period to 5p a share. Mr Greidinger said he was "trying to keep the dividend in line with profits, meaning it will probably increase".
Besides adding new cinemas, Mr Greidinger said refurbishments were also key to improving the customer experience and ensuring the latest technology was available. Milton Keynes now boasts the UK's first 4DX screen, a sensory cinema experience popular in Europe, and a Superscreen - the group's large screen format. Overhauls like this will help the Cineworld compete against the likes of theatres and restaurants, which Mr Greidinger sees as its main competition, while also enabling it to raise ticket prices. A bigger share of IMAX-friendly blockbusters such as Jurassic World pushed the average ticket price up 7.9 per cent in the UK and Ireland to £6.02.
Analysts at broker N+1 Singer expect pre-tax profit of £92m for the 2015 financial year, leading to adjusted EPS of 27.9p, up from £75m and 25.1p in full-year 2014.
| CINEWORLD (CINE) | ||||
|---|---|---|---|---|
| ORD PRICE: | 567p | MARKET VALUE: | £1.5bn | |
| TOUCH: | 566.5-568p | 12-MONTH HIGH: | 577p | LOW: 298p |
| DIVIDEND YIELD: | 2.6% | PE RATIO: | 18 | |
| NET ASSET VALUE: | 195p* | NET DEBT: | 52% | |
| Half-year to 2 Jul | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 269 | 13.9 | 5.2 | 3.8 |
| 2015 | 329 | 46.8 | 14.0 | 5.0 |
| % change | +22 | +237 | +169 | +32 |
Ex-div: 3 Sep Payment: 2 Oct *Includes intangible assets of £585m, or 221p a share | ||||
