Cineworld (CINE) is diversifying its business with the £47.3m acquisition of Picturehouse, which will bring it a higher-value, older, more independent film audience to sit alongside its strong position in mass-market movies.
The deal is being funded by debt and the proposed placing of 6.85m shares to raise a shade less than £16m, £1m of which will come from the chief executive of Picturehouse. The art-house cinema chain has a presence in 21 cities and has 60 screens. The plan is for it to be run as a separate entity following the takeover.
Cineworld appears to have struck a good deal given that Picturehouse made revenues of £30.3m in 2011 and is expected to record earnings of £5m in the current year. Cineworld believes it can generate a further £1m of benefits through integration initiatives and the full effect of new Picturehouse openings completed this year such as the Brighton site which opens today. Picturehouse boasts freehold property worth £9m too.
Meanwhile, Cineworld says trading is in line with expectations and broker Investec is forecasting full-year pre-tax profits of £40.3m, EPS of 20.9p and an 11.6p full-year dividend (2011: £36.4m/18.8p/11p).
