Weak Box Office Performance To Dent Cineworld's Bottomline

(Alliance News) - Cineworld Group PLC on Tuesday warned that 2019 trading will be "slightly" below management's expectations due to a weak box office performance, partially offset by "strong execution of synergies and revenue initiatives".

The cinema chain, based in Brentford, west London, said box office performance for the period from January 1 to December 1 was slower than the comparative period due to the timing of major releases and postponement of some highly anticipated movies to 2020.

The second half of the year started strongly with the release of The Lion King, Spider-Man: Far from Home, Joker and Frozen 2, Cineworld said, adding that there are still two major blockbusters to be released in 2019, Jumanji: The Next Level and Star Wars: The Rise of Skywalker in December.

For the 11 months to December 1, the company reported a 9.7% year-on-year drop in total revenue. The UK & Ireland unit posted a 9.7% fall and US business recorded a 10.9% drop.

Group box office revenue fell 13% year-on-year, with UK & Ireland similarly seeing a 13% decline and US a 14% drop.

Cineworld said that integration benefits from the Regal Entertainment Group acquisition have been better than anticipated. The FTSE 250-listed company in December 2017 reached an agreement to purchase Regal in a USD3.60 billion reverse takeover deal, funded by a rights issue and debt.

Cineworld explained: "Management is pleased to announce an increase in achievable synergies from USD150 million to USD190 million following significant improvements in contractual terms and the elimination of excess costs. Further, the group has achieved better than anticipated results from revenue initiatives. The full impact of all these additional initiatives and cost savings will be realised in 2020."

The company also said that its ongoing refurbishment programme in the US remained on track with 10 sites under refurbishment. Another 70 agreements have been signed for other strategic sites to be refurbished in the US in the near term, it added.

Cineworld opened five new sites, or 45 screens, during the second half of the year, two in the UK, two in the US and one in Poland. The company also closed five loss-making sites in the second half, three of those in the US, one in the UK and one in Czech Republic.

At December 1, Cineworld operated 786 sites with 9,498 screens. It further intends to open three new sites before end of 2019, two in the UK and one in Hungary.

Mooky Greidinger, chief executive of Cineworld, said: "There is an impressive selection of movies to come, which coupled with our extensive premium technology-led offering and exciting food and beverage offerings, will contribute strongly to our operating results and underpin our mission to be "the best place to watch a movie". I am confident both about the future of the theatrical business as a whole and most importantly our ability to be a leader in it."

Cineworld shares in London were up 4.8% at 215.72 pence each on Tuesday morning.

By Tapan Panchal; tapanpanchal@alliancenews.com

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