Cineworld Cinemas continued to attract moviegoers to its screens in the first half of the year to the continued comfort of its shareholders. The group, […]
Cineworld Cinemas continued to attract moviegoers to its screens in the first half of the year to the continued comfort of its shareholders. The group, however, faces tougher comparatives going forward.
Cineworld Group reported a 24.1% increase in profits before tax of £16.5mn whilst group revenues rose 21.9% to £201.6mn. Two key factors behind this jump is weighted within attracting more people to the group’s 80+ sites and an increase in the average ticket sale price thanks to the large increase in 3D movies, which typically sells at a higher ticket price. In the second half of last year the average ticket sales price rose by 7%.
The result was broadly in line with market expectations but provides a sense of earnings consistency that will continue to comfort the group’s shareholders at a time when Cineworld’s shares price has vastly outperformed (see below chart). The success of the ‘Unlimited’ scheme and ‘MyCineworld’ memberships remains positive and continues to grow. The number of Unlimited card holders is now more than 350,000 from close to 335,000 in Q1 of this year and just 280,000 a year ago whilst MyCineworld members have grown to over 3mn in total.
Blockbuster films within the first half of the year including Iron Man 3, Man of Steel and Star Trek Into Darkness have influenced consumer habits.
Tough comparatives ahead
That said, investors must be mindful of the challenges the cinema group faces for the second half of the year. Whilst the third quarter is expected to be stronger than last year given the fact that it compares to a period whereby the London Olympic Games was in progress and as such reduced cinema footfall, fourth quarter comparatives are extremely challenging given the strong slate of films released for that period. Films released in Q4 2012 included the biggest film of 2012, Skyfall starring Daniel Craig, alongside the Hobbit and the final Twilight film, which all contributed to a big boost for Cineworld.
It is hoped that Q3 will be able to hedge much of the tough comparatives given the fact that the Group will benefit from the release of Monsters University and Despicable Me 2, which are amongst the top 4 grossing films this year so far on IMDB.
Shareholders continue to be pleased
Nevertheless, shareholders continue to be delighted with Cineworld’s progress and this is emphasised within the share price gains enjoyed over the past two years. Shares have more than doubled since 2011 and now trade at an all-time high level of 399p. An expected boost to the Group’s performance in Q3 may keep share price momentum strong but given the pressure it faces in Q4, this could open up the potential for profit taking. That said, investors have used any share price weakness as a buying opportunity and so any weakness in the near term could be short lived at current share price habits.
