CINE.L Regulatory News (CINE)

18 Mar 2008 07:02

Cineworld Group plc18 March 2008 18 March 2008 Embargoed for 7am release CINEWORLD GROUP plc Cineworld Group plc ("Cineworld" or "the Group") is pleased to announce itsmaiden results as a public company for the 52 weeks ended 27 December 2007. HIGHLIGHTS Financial •Group revenue up 2.4% to £285.3m (2006: £278.5m) and up 7.8% on a continuing basis (2006: £264.6m)*; •EBITDA** up 13.0% to £52.0m (2006: £46.0m) on a continuing basis*; •Operating profit increased to £30.4m (2006: £18.7m); •Profit on ordinary activities before tax increased to £12.4m (2006: loss of £7.7m) •Operating cash flow before changes in working capital and provisions increased to £49.4m (2006: £42.9m); •Net debt reduced to £124.4m following IPO in May 2007 and debt refinancing (2006: £314.2m); •Reported EPS***: 24.5p on basic earnings, 17.4p on adjusted pro-forma earnings; •EPS based on shares at end of period: 18.1p on basic earnings, 15.7p on adjusted pro-forma earnings****; •Total proposed dividend in respect of 2007 of 9.5p per share. Operational •Successful IPO on the main market of the London Stock Exchange raising £120.0m (before expenses) for the Group and selling shareholders; •Market share increased to 23.7% (2006: 23.5%) (source: EDI Neilsen); •Admissions up 4.9% at 45.0m on a continuing basis (2006: 42.9m)*; •Box office up 7.7% at £185.7m on a continuing basis (2006: £172.4m)*; •Average ticket price per admission up to £4.12 (2006: £4.02 on a continuing basis)*; •Average retail spend per person up to £1.67 (2006: £1.62 on a continuing basis)*; •Expansion plans on track with Didcot cinema opened on 3 May 2007 and High Wycombe opened on 14 March 2008; •Contract signed with REAL-D to bring 3D digital screens to Cineworld's estate; •Formation of Digital Cinema Media ("DCM") in March 2008, a 50:50 joint venture with Odeon to provide screen advertising for both parties. Commenting on these results, Stephen Wiener, Chief Executive Officer ofCineworld Group plc, said: "It has been a transformational year for Cineworld. We listed our shares on themain market of the London Stock Exchange in May 2007 raising £120m beforeexpenses for the Group and selling shareholders. We are very encouraged by theperformance of the Group over the year. We remain focused on delivering ourstrategy, as stated at the time of the IPO, with increased revenues andprofitability and continue on schedule with our investment plans for new cinemarollouts and refurbishment of our existing estate. "The new year for Cineworld has started well and attendances have been strong.This has been driven by the success of a number of blockbusters and is testamentto the resilient nature of our business model and the enduring appeal of film.Overall, we anticipate an increase in revenue for 2008 as a whole. "Looking forward, the ongoing initiatives to improve and expand our estate,coupled with an exciting film release schedule of proven franchises mean we areconfident we can deliver ongoing value for our shareholders." * Continuing basis excludes sites disposed during 2006, see the financial performance section** EBITDA is defined as per the financial performance section of the Chief Financial Officer's review*** Based on weighted average number of shares in the period of 104.9m. See note 4 for calculation****Shares in issue at 27 December 2007 are 141.7m and using the 2007 effective tax rate of 14.5% Enquiries: Cineworld Group plc M Communications Stephen Wiener Power Road Studios Georgina Briscoe 1 Ropemaker StChief Executive 114 Power Road London, EC2Y 9HTOfficer London W4 5PY +44 (0) 207 153 1548 Briscoe@MComGroup.comRichard Jones Chief FinancialOfficer + 44 (0) 208 987 5015 Chief Executive Officer's review of operations As founder of Cineworld, I am very proud of the business we have built over thelast decade. Today the Group stands at 74 cinemas, with a total of 770 screens,including five out of the eight highest grossing cinemas in the United Kingdomand Ireland. When we came to market in May 2007, we set out a clear strategy forgrowth, and I am delighted our inaugural preliminary announcement of annualresults as a public company indicates good progress on a number fronts. KEY PERFORMANCE INDICATORS Box office revenue increased 7.7% to £185.7m (2006: £172.4m) on a continuingbasis and 2.4% on an actual basis (2006: £181.3m) representing a box officemarket share of 23.7%, up from 23.5% in 2006. Admissions were up 4.9% on lastyear and the average ticket price per admission increased by 2.5% to £4.12(2006: £4.02). In addition, we increased retail spend per person by 3.1% from£1.62 last year to £1.67. These robust performance indicators are testament tothe Group's unparalleled customer offer of quality multiplex cinemas with theappropriate mix of film and retail offering. FILM ANALYSIS 2007 was a good year for film. Particular highlights included Harry Potter 5,Pirates of the Caribbean 3, Shrek The Third and The Simpsons Movie, which allcontributed significantly to admissions across our estate. In addition Spiderman3, Ratatouille, Transformers and The Golden Compass all performed well,appealing to the family audience, and further driving sales across our retailfranchise. The UK film industry also turned in good performances and Mr Bean'sHoliday and Hot Fuzz were the ninth and tenth highest grossing films in the UKin 2007, respectively. Other strong performing UK films included Miss Potter andThe Last King of Scotland, in which the lead actor won an Oscar for best actor. A key element of our strategy is our commitment to offering customers thebroadest range of films available. To this end we are delighted to havemaintained our strong presence and interest in other, less mainstream, markets.We remain the biggest exhibitor of Bollywood films in the UK and highlights inthe period included Namastey London, Namesake and Om Shanti. We were alsopleased to secure limited exclusivity over the release of the Tamil film,Sivaji, which drew a new audience to our cinema franchise and we feel wellplaced to capitalise on the exciting opportunities this presents. In addition, we showcased a series of other successful foreign language films,which have contributed favourably to our full year results. The most notablereleases were The Lives of Others (2007 Oscar Winner in the foreign languagecategory from Germany), the French films Tell No One and La Vie En Rose and TheCurse of the Golden Flower from Hong Kong. RETAIL Our retail initiatives over the year have improved our customer proposition andincreased retail spend per customer. We have expanded our product offering andnow offer Fanta Frozen at almost all our cinemas. In addition, we have rolledout Ben & Jerry's kiosks to a total of 25 locations. Other product developmentsincluded new contracts with Carlsberg for the supply of all alcohol at ourcinemas and we are pleased to be in final negotiations for the supply of brandedcoffee across our estate. Our retail strategy over the year was focussed onpromotional activity and this will be enhanced in 2008 with increased emphasison operational support through expansion of promotions programmes and ongoingtraining. DIGITAL Cineworld has the largest digital estate of any cinema operator in the UK with74 digital projectors. All new cinemas are built in anticipation of digitalbeing the standard format of delivering movie content in the future and almostevery multiplex has digital capability. In October 2007 we announced a deal withReal-D, the world leader in 3-D technology, to bring 3-D to certain cinemasacross the estate, with the potential to roll out to as many as 100 screens inthe future. This deal coincided with the release of the 3-D version of Beowulf,which launched in the UK on 16 November 2007 and performed extremely well. Thefilm industry thrives on technological developments, which can present potentialalternative revenue streams to the Group and we are well placed to capitalise onthese initiatives. UNLIMITED CARD Our subscription service, Unlimited, goes from strength to strength andcurrently stands at over 185,000 subscribers. This offers a compelling valueproposition to our customers whilst bringing the financial benefits of regularservice subscription income to the Group. In addition, it encourages repeatvisits to our cinemas enabling us to introduce a wider range of films to ourcustomers, and also helps to attract more serious film-goers. NEW OPENINGS At the time of the IPO, we stated our ambition to grow the estate throughselective new openings, expansions and acquisitions. I am delighted to reportthat in May 2007 we opened our first new cinema as a public company in Didcot,Oxfordshire. This is a five-screen cinema, with digital facilities, and isperforming ahead of expectations. Our national expansion plans remain a key strategic priority for the Group as weseek to deliver growth for our shareholders. In March 2008 we opened a newtwelve-screen cinema in High Wycombe and towards the end of the year a newfive-screen cinema is scheduled to open at Haverhill, Suffolk. We have alsosigned a contract on Witney, Oxon, which is currently scheduled to open in 2009. DIGITAL CINEMA MEDIA In December 2007, as we came to the year end, we were approached by CarltonScreen Advertising ("CSA") with a proposal materially to amend the terms of ouradvertising contract. The uncertainty surrounding negotiations was resolved inMarch 2008 when we were pleased to announce the formation of Digital CinemaMedia ("DCM"), a 50:50 joint venture in association with Odeon Cinemas Limited("Odeon") to address cinema advertising. Subject to further negotiations, thejoint venture has agreed in principle to acquire some assets of CSA for £0.5m.Although this joint venture is subject to competition approval, we are veryexcited by the prospects this brings to the Group. CURRENT TRADING Cineworld has started the current year well and attendances have been strong.This has been driven by the success of a number of films including I am Legendand The Golden Compass and given the more difficult economy is testament to theresilient nature of our business model and the enduring appeal of film. We are increasing the use of our digital facilities by showing live, viasatellite, the New York Metropolitan Opera performances and we are one of thefew cinema chains in the UK to show the recently released U2 concert in 3-D,which premiered at our Dublin cinema. We have also undertaken a successful newinitiative for the Group: a live theatre production of Brief Encounter. This hasreceived very good reviews and has been playing to full houses in the mainauditorium of our Haymarket cinema. We are co-producers of the play and ownrights in all English-speaking countries around the world. Looking forward, the ongoing initiatives we are implementing to improve ouroffer, expand our estate and enhance our advertising proposition, coupled with a2008 film release schedule of proven franchises such as The Chronicles ofNarnia, Batman, The Mummy, Harry Potter, Star Trek, James Bond and a newinstalment of Indiana Jones, underpins our confidence in delivering furthergrowth for our shareholders. Steven Wiener Chief Executive Officer 17 March 2008 Chief Financial Officer's review FINANCIAL PERFORMANCE 52 week period 52 week period ended ended 27 December 28 December 2007 2006 Total Total*** Continuing*Admissions 45.0m 45.2m 42.9m £m £m £mBox office 185.7 181.3 172.4Retail 75.4 73.3 69.4Other 24.2 23.9 22.8 Total revenue 285.3 278.5 264.6 EBITDA** 52.0 48.6 46.0EBITDA after transaction and 57.5 48.0 42.6reorganisationcosts and profit on disposal of cinema sitesOperating profit 30.4 18.7 15.1 Financial income 2.6 14.4Financial expenses (20.6) (40.8) Net financing costs (18.0) (26.4) Profit/(loss) on ordinary activitiesbefore tax 12.4 (7.7)Tax on profit/(loss) on ordinary activities 13.3 - Profit/(loss) for the periodattributable toequity holders of the Company 25.7 (7.7) *Continuing operations basis excludes the results of cinemas sold during 2006 -namely Swindon (Greenbridge Park), Bishop's Stortford, Sunderland, Birmingham(Great Park, Rubery), Ealing, Wigan (Robin Way) and Slough (Queensmere Centre). **EBITDA is defined as operating profit before depreciation and amortisation,impairment charges, onerous lease and other non-recurring and non-cash propertycharges, transaction and reorganisation costs and profit on disposal of cinemasites. *** Restated, see note 2 to the accounts. Revenues Total revenue was £285.3m, a rise of 2.4% on the prior period (2006: £278.5m)and on a continuing basis was up 7.8% (2006: £264.6m), against weaker than usualcomparatives due to last year's World Cup and the hot weather in the UK. As a result of strong product and the increase in market share to 23.7% (2006:23.5%), we have enjoyed very buoyant trade during the year and box office was7.7% higher at £185.7m on a continuing basis (2006: £172.4m). Our subscription business, the Unlimited card, continues to expand in line withour stated strategy and we currently have in excess of 185,000 subscribers atthe end of the period. The benefits of this initiative are twofold; first, itprovides the Group with a constant stream of box office revenue throughout theyear and second, it ensures repeat visits as our customers take advantage of thebenefits on offer to them with this scheme. Retail sales for the year were in line with expectations given the level ofbusiness and were up 8.6% at £75.4m on a continuing basis (2006: £69.4m) withthe high grossing blockbuster films providing a strong spending customer base. Anumber of film tie-in retail promotions were developed for the summer period anda total of 25 Ben & Jerry's outlets have now been opened, and Fanta Frozen wasrolled out across the majority of sites. Other revenues, principally from screen advertising, ticket bookings,sponsorships and games, were up 6.1% to £24.2m (2006: £22.8m) on a continuingbasis. EBITDA and operating profit EBITDA on a continuing basis was up 13.0% to £52.0m against 2006 figures of£46.0m and operating profit increased to £30.4m (2006: £18.7m total, £15.1m on acontinuing basis). Included in the results for the year were rates rebatesreceived of £1.6m relating to prior years (2006: £1.3m). Transaction andreorganisation costs of £2.6m were incurred during the period, relating mainlyto costs in connection with the IPO. The profit on disposal of £8.1m in thefirst half of the year related to the sale and leaseback of on our Swindon andSouthampton cinemas. The Group has reviewed its accounting treatment withrespect to operating leases. The impact of this change in treatment (which isall non-cash) is disclosed in note 2 to the financial statements. Earnings Overall profit on ordinary activities before tax was £12.4m against a loss of£7.7m in 2006. Basic earnings per share amounted to 24.5p and adjusted pro-formaearnings per share were 17.4p based on a weighted average number of shares overthe period of 104.9m. Based on the total number of shares in issue at the end ofthe period of 141.7m, the basic earnings per share was 18.1p and adjustedearnings per share (using the 2007 effective tax rate of 14.5%) was 15.7p. Therewere no share dilutions at the end of the period. Financing costs The interest expense in the year relates to interest on the pre-IPO financingarrangements on debt and bonds and to interest on post-IPO debt. Also includedwas the write-off of £1.0m financing fees previously capitalised in the pre-IPOdebt financing. On a pro-forma basis, assuming the post-IPO debt structure hadbeen in place from 29 December 2006, net financing costs for the year would beapproximately £10.2m. Taxation The overall tax credit of £13.3m results from the recognition of a deferred taxasset on the basis that the unclaimed capital allowances, being the differencebetween the tax written down value of the capital allowance and the net bookvalue of the underlying assets, are now forecast to be utilised against futureprofits. A tax asset has also been recognised for other temporary differencesforecast to reverse in future periods. There is a £1.8m corporation tax chargefor the year, giving an effective tax rate of 14.5% for the year. Cashflow and balance sheet The Group continued to be cash generative at the operating level during theyear. Total cash inflow from operations before changes in working capital andprovisions increased to £49.4m (2006: £42.9m). This reflects the healthyconversion rate of our profits into cash flow. The cash outflow from thereduction in working capital is due to payment of creditors, normally at itshighest level at the end of December, reflecting the highest trading period inthe year. Capital expenditure for the year amounted to £9.9m, of which £4.8m representedreplacement and refurbishment expenditure, £2.1m being the cost of opening thenew five-screen cinema at Didcot on 3 May 2007 and expenditure of £3.0m on thenew twelve-cinema at High Wycombe. We are making good progress with our capitalexpenditure programme with various refurbishments completed at ten sites. The radical change from a net liability to a net asset position is the result ofthe share issue and deleveraging of the business, the combination of which nowallows us more flexibility to meet future business challenges and opportunities. Dividends The Board continues to apply a dividend policy reflecting the long-term earningsand cash flow potential of Cineworld. In line with the above policy, theDirectors recommend payment of a final dividend in respect of the year to 27December 2007 of 6.5p per share, which taken together with the interim dividendof 3.0p per share paid in October 2007, gives a total dividend in respect of2007 of 9.5p per share. Subject to shareholder approval, the final dividend willbe paid on 18 June 2008 to shareholders on the register on 23 May 2008. Richard Jones Chief Financial Officer 17 March 2008 Consolidated income statement for the period ended 27 December 2007 Note 52 week period 52 week period ended ended 27 December 28 December 2007 2006 (restated*) £m £mRevenue 285.3 278.5Cost of sales (220.6) (213.1) Gross profit 64.7 65.4Other operating income 8.3 3.1Administrative expenses (42.6) (49.8) Operating profit 30.4 18.7Analysed between: Operating profit beforedepreciation and amortisation, impairment charges, onerous lease and other non-recurring,or non-cash property charges and transaction andreorganisation costs and profit ondisposal of cinema sites 52.0 48.6 - Depreciation and amortisation (18.3) (23.0) - Adjustments to goodwill and fixed asset impairment charges (7.7) (2.2) - Onerous leases and other non-recurring or non-cash property charges (1.1) (4.1) - Profit on disposal of cinema sites 8.1 2.8 - Transaction and reorganisation costs (2.6) (3.4) Financial income 5 2.6 14.4Financial expenses 5 (20.6) (40.8) Net financing costs (18.0) (26.4) Profit/(loss) on ordinaryactivities before tax 12.4 (7.7)Tax on profit/(loss) onordinary activities 6 13.3 - Profit/(loss) for theperiod attributable toequity holders of the Company 25.7 (7.7) Basic and dilutedearnings/(loss) per share 24.5p (22.3)p See note 2 Consolidated balance sheetat 27 December 2007 27 December 28 December Note 2007 2006 (restated*) £m £m £m £mNon current assetsProperty, plant and equipment 110.9 119.9Goodwill 216.1 223.8Intangible assets 0.8 3.0Other receivables 0.9 0.9Deferred tax assets 19.8 5.3 Total non-current assets 348.5 352.9Current assetsInventories 1.5 1.6Trade and other receivables 17.8 18.1Cash and cash equivalents 10.4 27.7 Total current assets 29.7 47.4 Total assets 378.2 400.3Current liabilitiesInterest-bearing loans, borrowingsand other 8 (9.2) (1.0)financialliabilitiesTrade and other payables (40.2) (51.0)Current taxes payable (1.8) -Provisions (1.5) (2.1) Total current liabilities (52.7) (54.1)Non-current liabilitiesInterest-bearing loans, borrowingsand other 8 (125.6) (340.9)financialliabilitiesTrade and other payables (48.0) (44.3)Employee benefits (2.4) (4.6)Provisions (13.4) (16.2)Deferred tax liabilities (3.5) (3.9) Total non-current liabilities (192.9) (409.9) Total liabilities (245.6) (464.0) Net assets/(liabilities) 132.6 (63.7) Equity attributable to equityholders of the CompanyShare capital 9 1.4 -Share premium 9 171.4 -Translation reserves 9 0.4 0.4Hedging reserves 9 (0.2) -Retained deficit 9 (40.4) (64.1) Total equity 132.6 (63.7) See note 2 Consolidated cash flow statement for the period ended 27 December 2007 Note 52 week period 52 week period ended ended 27 December 28 December 2007 2006 (restated*) £m £mCash flow from operating activitiesProfit/(loss) for theperiod 25.7 (7.7)Adjustments for:Financial income (2.6) (14.4)Financial expense 20.6 40.8Taxation (13.3) - Operating profit 30.4 18.7Depreciation andamortisation 26.0 23.0Impairment charges - 2.2Non-cash property charges 1.1 1.8Profit on disposal ofcinema sites andrefurbishment items (8.1) (2.8) Operating cash flowbefore changes in workingcapital 49.4 42.9and provisionsDecrease/(increase) intrade and otherreceivables 0.2 (0.7)Decrease/(increase) ininventories 0.1 (0.1)Decrease in trade andother payables (12.4) (2.3)Decrease in provisionsand employee benefitobligations (2.8) (0.5) Cash generated fromoperations 34.5 39.3Tax paid (0.2) - Net cash flows fromoperating activities 34.3 39.3 Cash flows from investing activitiesProceeds from thedisposal of cinema sites 12.3 25.1Interest received 1.2 0.6Acquisition of property,plant and equipment (9.9) (6.4)Surplus of pensioncontributions overcurrent service cost (1.8) (0.4) Net cash flows frominvesting activities 1.8 18.9 Cash flows from financing activitiesShare issue proceeds 104.3 -Proceeds from new loan 8 135.0 226.0Dividends paid toshareholders 9 (4.3) -Interest paid (10.2) (18.8)Repayment of bank loans 8 (214.0) (253.0)Repayment of subordinatedbonds 8 (54.3) -Share issuance costs (7.8) -Payment of finance leaseliabilities 8 (0.5) (0.5)Debt issuance costs (1.6) (3.8) Net cash from financingactivities (53.4) (50.1) Net increase/(decrease)in cash and cashequivalents (17.3) 8.1Cash and cash equivalentsat start of period 27.7 19.6 Cash and cash equivalentsat end of period 10.4 27.7 *See note 2 Consolidated statement of recognised income and expense for the period ended 27 December 2007 Note 52 week period 52 week period ended ended 27 December 28 December 2007 2006 (restated*) £m £m Actuarial gains ondefined benefit pensionschemes 0.7 2.7Tax recognised on incomeand expenses recogniseddirectly in equity (0.2) (0.7)Movement in fair value ofcash-flow hedge (0.2) - Net income recogniseddirectly in equity 0.3 2.0Profit/(loss) for theperiod (as originallyreported) 25.7 (7.7) Total recognised incomeand expense for the period attributable to equity holders of thecompany 26.0 (5.7) Impact of prior yearadjustment on retainedearnings at29 December 2006 2 (4.9) - * See note 2 Notes to the consolidated financial statements 1. Basis of preparation This financial information has been prepared applying the accounting policiesand presentation that were applied in the preparation of the Company's publishedconsolidated financial statements for the 52 week period ended 28 December 2006,and are not the Company's statutory accounts. The comparative figures for the 52 week period ended 28 December 2006 are notthe Company's statutory accounts for that financial period. Those accounts havebeen reported on by the Company's auditors and delivered to the registrar ofcompanies. The report of the auditors was (i) unqualified, (ii) did not includea reference to any matters to which the auditors drew attention by way ofemphasis without qualifying their report, and (iii) did not contain a statementunder section 237(2) or (3) of the Companies Act 1985. The Group's key accounting policies are as follows: Measurement convention The financial statements are prepared on the historical cost basis except thatthe following assets and liabilities are stated at their fair value: derivativefinancial instruments and financial instruments classified as fair value throughthe income statement or as available-for-sale. Non-current assets and disposalgroups held for sale are stated at the lower of previous carrying amount andfair value less costs to sell. Basis of consolidation Subsidiaries are entities controlled by the Group. Control exists when the Grouphas the power, directly or indirectly, to govern the financial and operatingpolicies of an entity so as to obtain benefits from its activities. In assessingcontrol, potential voting rights that are currently exercisable or convertibleare taken into account. The financial information of subsidiaries is included inthe consolidated financial information from the date that control commencesuntil the date that control ceases. Derivative financial instruments and hedging Derivative financial instruments are recognised at fair value. The gain or losson remeasurement to fair value is recognised immediately in the income statementexcept where derivatives qualify for hedge accounting when recognition of anyresultant gain or loss depends on the nature of the item being hedged. The fair value of interest rate swaps is the estimated amount that the Groupwould receive or pay to terminate the swap at the balance sheet date, takinginto account current interest rates and the current creditworthiness of the swapcounterparties. The fair value of forward exchange contracts is their quotedmarket price at the balance sheet date, being the present value of the quotedforward price. Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciationand impairment losses. Where parts of an item of property, plant and equipment have different usefullives, they are accounted for as separate items of property, plant andequipment. Leases in which the Group assumes substantially all the risks and rewards ofownership of the leased asset are classified as finance leases. Where land andbuildings are held under leases the accounting treatment of the land isconsidered separately from that of the buildings. Leased assets acquired by wayof finance lease are stated at an amount equal to the lower of their fair valueand the present value of the minimum lease payments at inception of the lease,less accumulated depreciation and impairment losses. Other leases are operating leases. These leased assets are not recognised in theGroup's balance sheet. Depreciation is charged to the income statement to write assets down to theirresidual values on a straight-line basis over the estimated useful lives of eachpart of an item of property, plant and equipment. The estimated useful lives areas follows: • Freehold buildings and long leasehold 30 years or life of lease if properties shorter• Leasehold improvements life of lease• Plant and equipment 5 to 10 years• Fixtures and fittings 4 to 10 years No depreciation is provided on freehold land, assets held for sale or on assetsin the course of construction. Depreciation methods, residual values and theuseful lives of all assets are re-assessed annually. Intangible assets and goodwill All business combinations are accounted for by applying the acquisition method.Goodwill represents amounts arising on acquisition of subsidiaries. In respectof business acquisitions that have occurred since incorporation, goodwillrepresents the difference between the cost of the acquisition and the Group'sinterest in the fair value of the identifiable assets, liabilities andcontingent liabilities acquired. Identifiable intangibles are those which can besold separately or which arise from legal rights regardless of whether thoserights are separable. Goodwill is stated at cost less any accumulated impairment losses. Goodwill isallocated to cash-generating units and is not amortised but is tested annuallyfor impairment. Negative goodwill arising on an acquisition is recognised immediately in theincome statement. Other intangible assets that are acquired by the Group are stated at cost lessaccumulated amortisation and impairment losses. Identifiable intangibles arethose which can be sold separately or which arise from legal rights regardlessof whether those rights are separable. Amortisation is charged to the income statement on a straight-line basis overthe estimated useful lives of intangible assets unless such lives areindefinite. Intangible assets with an indefinite useful life and goodwill aretested annually for impairment at each balance sheet date. Other intangibleassets are amortised from the date they are available for use. The estimateduseful lives are as follows: • Brands 10 years• Customer relationships 3 years Trade and other receivables Trade and other receivables are recorded at fair value less amortised cost,using the effective interest rate method, less impairment losses. Inventories Inventories are stated at the lower of cost and net realisable value. The costof inventories is based on the FIFO principle. Cost comprises expenditureincurred in acquiring the inventories and bringing them to their existinglocation and condition, and net realisable value is the estimated selling pricein the ordinary course of business, less the estimated selling costs. Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits. Bankoverdrafts that are repayable on demand and form an integral part of the Group'scash management are included as a component of cash and cash equivalents for thepurpose only of the statement of cash flows. Interest-bearing borrowings Interest-bearing borrowings are recognised initially at fair value lessattributable transaction costs. Subsequent to initial recognition,interest-bearing borrowings are stated at amortised cost with any differencebetween cost and redemption value being recognised in the income statement overthe period of the borrowings on an effective interest basis. Provisions A provision is recognised in the balance sheet when the Group has a presentlegal or constructive obligation as a result of a past event, and it is probablethat an outflow of economic benefits will be required to settle the obligation.If the effect is material, provisions are determined by discounting the expectedfuture cash flows at a pre-tax rate that reflects current market assessments ofthe time value of money and, where appropriate, the risks specific to theliability. Revenue Revenue represents the total amount receivable for services rendered or goodssold, excluding sales related taxes and intra group transactions. Revenue isrecognised in the income statement at the point of sale for ticket andrefreshment sales. Income from other related activities is recognised in theperiod to which they relate. Expenses Operating lease payments Payments made under operating leases are recognised in the income statement on astraight-line basis over the term of the lease. Lease incentives received arerecognised in the income statement as an integral part of the total leaseexpense. Where the Group has operating leases that contain minimum guaranteedrental uplifts over the life of the lease, the Group recognises the guaranteedminimum lease payment on a straight line basis over the lease term. Finance lease payments Minimum lease payments are apportioned between the finance charge and thereduction of the outstanding liability. The finance charge is allocated to eachperiod during the lease term so as to produce a constant periodic rate ofinterest on the remaining balance of the liability. Net financing costs Net financing costs comprise interest payable, amortisation of financing costs,unwind of discount on onerous lease provisions, finance lease interest, net gain/loss on re-measurement of interest rate swaps, interest receivable on fundsinvested, foreign exchange gains and losses and finance costs for definedbenefit pension schemes. Sale and leaseback Where the Group enters into a sale and leaseback transaction whereby the risksand rewards of ownership of the assets concerned have not been substantiallytransferred to the lessor, any excess of sales proceeds over the previouscarrying amount are deferred and recognised in the income statement over thelease term. At the date of the transaction the assets and the associated financelease liabilities on the Group's balance sheet are stated at the lower of fairvalue of the leased assets and the present value of the minimum lease payments. Where the Group enters into a sale and leaseback transaction whereby the risksand rewards of ownership of the assets concerned have been substantiallytransferred to the lessor, any excess of sales proceeds over the previouscarrying amount is recognised in the income statement on completion of thetransaction, when the sale and subsequent lease back has been completed at fairvalue. Taxation Tax on the profit or loss for the period comprises current and deferred tax. Taxis recognised in the income statement except to the extent that it relates toitems recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the period,using tax rates enacted or substantively enacted at the balance sheet date, andany adjustment to tax payable in respect of previous periods. Deferred tax is provided on temporary differences between the carrying amountsof assets and liabilities for financial reporting purposes and the amounts usedfor taxation purposes. The following temporary differences are not provided for:the initial recognition of goodwill; the initial recognition of assets orliabilities that affect neither accounting nor taxable profit other than in abusiness combination, and differences relating to investments in subsidiaries tothe extent that they will probably not reverse in the foreseeable future. Theamount of deferred tax provided is based on the expected manner of realisationor settlement of the carrying amount of assets and liabilities, using tax ratesenacted or substantively enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable thatfuture taxable profits will be available against which the asset can beutilised. 2. Prior year adjustment The Directors have undertaken a review of the Group's accounting treatment withrespect to operating leases and have concluded that, where the Group as lesseehas entered into rental agreements with guaranteed minimum uplifts, it isappropriate to recognise the total minimum lease payments, including theuplifts, on a straight line basis over the period of the operating lease. Inprior years, the uplifts were recognised as an expense only when paid. A priorperiod adjustment has been recorded to reflect this adjustment. As a number of the operating leases that contain minimum uplifts were acquiredin prior periods in business combinations, the recognition, by prior yearadjustment, of the minimum lease payment on a straight line basis has resultedin an additional accrual being recognised at the date of the businesscombination. This has resulted in an increase to goodwill arising on thosebusiness combinations as at 30 December 2005 and 28 December 2006 of £19.5m. Theimpact on the previously reported results for 2006, the opening balance sheet at29 December 2005 and the balance sheet at 28 December 2006 is set out below: Prior period adjustment 2006 (as Impact of prior 2006 (as originally period restated) reported) adjustment £m £m £mGoodwill 204.3 19.5 223.8Current tradeand otherpayables (51.5) 0.5 (51.0)Non-currenttrade andother payables (19.4) (24.9) (44.3)Retained deficit (59.2) (4.9) (64.1)Net liabilities (58.8) (4.9) (63.7) Cost of sales (211.3) (1.8) (213.1)Operating profit 20.5 (1.8) 18.7Profit beforeand after tax (5.9) (1.8) (7.7) Prior period adjustments (continued) 2006 2005 £m £m Retained deficit at end of period (as (59.2) (55.3)originally reported)Impact of prior period adjustment (4.9) (3.1) ---------------- ---------------Retained deficit at end of period (as restated) (64.1) (58.4) ================ =============== Basic and diluted loss per share as originally reported was 17.1p and is 22.3pas restated. There was no impact on current or deferred tax as recovery of theresulting deferred tax asset was not probable in the prior period. The net taxasset increased by £7.5m as at 27 December 2007 (2006: £nil). 3. Segmental information Geographic sector analysis Revenue by destination and by origin from countries other than the UK in allfinancial periods was not material. Business sector analysis The Group has operated in one business sector in all financial periods, beingcinema operations. 4. Earnings/(loss) per share Basic earnings/(loss) per share is calculated by dividing the profit/(loss) forthe period attributable to ordinary shareholders by the weighted average numberof ordinary shares outstanding during the period, after excluding the weightedaverage number of non-vested ordinary shares held by the employee ownershiptrust. Adjusted earnings/(loss) per share is calculated in the same way exceptthat the profit for the period attributable to ordinary shareholders is adjustedby adding back the amortisation of intangible assets, the cost of share-basedpayments and other one-off income or expense remaining. Adjusted pro-formaearnings/(loss) per share is calculated by applying a pro-forma interest chargeon the new debt structure, and a tax charge at 30%, to the adjusted profit/(loss). Diluted earnings/(loss) per share is calculated by dividing the profit for theperiod attributable to ordinary shareholders by the weighted average number ofordinary shares outstanding during the period, after excluding the weightedaverage number of non-vested ordinary shares held by the employee shareownership trust and after adjusting for the effects of dilutive options. 52 week period 52 week period ended ended 27 December 28 December 2007 2006 (restated*) £m £m Profit/(loss) for the periodattributable to ordinaryshareholders 25.7 (7.7)Adjustments : Amortisation of intangibleassets 9.8 3.1Share based payments 0.5 0.9Transaction andreorganisation costs 2.6 3.4Profit on disposal (8.1) (2.8)Impact of straight liningoperating leases 1.1 1.8 Adjusted earnings 31.6 (1.3)Add back net financing costs(see note 5) 18.0 -Less normalised interest (10.2) -Less tax credit (13.3) - Adjusted pro-formaprofit/(loss) before tax 26.1 (1.3)Less tax at 30% (7.8) 0.4 Adjusted pro-formaprofit/(loss) after tax 18.3 (0.9) 52 week period 52 week period ended ended 27 December 28 December 2007 2006 (restated*) Number of Number of shares (m) shares (m) Weighted average number of sharesin issue 104.9 34.6 Basic and adjustedearnings/(loss) per sharedenominator 104.9 34.6Dilutive options - - Diluted earnings/(loss) per sharedenominator 104.9 34.6 Pence PenceBasic and dilutedearnings/(loss)per share 24.5 (22.3)Adjusted basic and dilutedearnings/(loss) per share 30.1 (3.8)Adjusted pro-forma basic anddiluted earnings/(loss) per share 17.4 (2.6)* See note 2 5. Finance income and expense 52 week 52 week period ended period ended 27 December 28 December 2007 2006 £m £m Net gain on remeasurement of interestrate swap to fair value 0.3 12.8Interest income 1.2 0.6Expected return on defined benefitpension plan assets 1.1 1.0 Financial income 2.6 14.4 Interest expense on bank loans andoverdrafts 12.3 18.4Interest accrued on deep discount bonds 4.2 11.6Write off of financing fees onredemption of loans 1.0 3.1Amortisation of financing costs 0.5 3.7Unwind of discount on onerous leaseprovision 0.8 0.6Finance cost for defined benefit pensionscheme 1.3 1.3Recognition of expense relating to cashsettled shares - 0.9Other financial costs 0.5 1.2 Financial expense 20.6 40.8 Net financing costs 18.0 26.4 Amortisation of financing costs in 2006 includes £2.0m of acceleratedamortisation as a result of revising the amortisation period due to plannedrefinancing On 27 April 2007 a new swap was taken out to hedge a portion of the Group's bankdebt. Hedge accounting has been applied to this swap from inception. A movementof £0.2m has been recognised directly in equity in relation to this cash flowhedge. 6. Taxation Recognised in the income statement 52 week 52 week period ended period ended 27 December 28 December 2007 2006 (restated*) £m £mCurrent tax expenseCurrent year 1.8 -Deferred tax expenseOrigination and reversal oftemporary differences (15.1) 4.6Benefit of tax lossesrecognised - (4.6) Total tax credit in incomestatement (13.3) - During the period there was a deferred tax credit of £0.2m (2006: credit of£0.8m) recognised directly in equity. Factors that may affect future tax charges As at 27 December 2007 the Group had the potential tax assets relating to thefollowing: - other non-trading and capital losses of approximately £36.8m (2006 :£36.8m) - other temporary differences of £nil (2006: £36.8m) No deferred tax asset has been recognised in respect of non-trading and capitallosses as the Group has no expectation that it will be able to use its otherlosses in the foreseeable future except against a capital gain on futureproperty disposals. The net tax benefit of utilising any of the above losses is expected to amountto approximately 28% of the losses utilised. To the extent that such potential deferred tax assets crystallise or arerecognised in future, a tax credit will arise. Where such potential tax assetsrelate to Cineworld Group plc's acquisitions of Cine UK or UGC an equivalentreduction in goodwill will also be made via an additional amortisation chargewithin administrative expenses. * See note 2 7. Dividends An interim dividend of 3p per share, amounting to £4.3m, was paid on 26 October2007 to ordinary shareholders on the register at the close of business on 28September 2007. The Directors propose a final dividend of 6.5p per share, takingthe total dividend for the year to 9.5p per share, payable on 18 June 2008 toordinary shareholders on the register at the close of business on 23 May 2008. 8. Other interest-bearing loans and borrowings and other financialliabilities This note provides information about the contractual terms of the Group'sinterest-bearing loans and borrowings. 27 December 28 December 2007 2006 £m £mNon-current liabilitiesDeep discounted bonds - 126.610% interest bearing unsecured bonds - 1.2Secured bank loans, less issue costs of debt to beamortised 119.2 206.7Liabilities under finance leases 6.4 6.4 125.6 340.9 Current liabilitiesInterest rate swaps 0.2 0.3Liabilities under finance leases 0.5 0.5Secured bank loans, less issue costs of debt to beamortised 8.5 0.2 9.2 1.0 At 27 December 2007, the Group had the following borrowings: On 26 April 2007 the bank loans in existence at 28 December 2006 were refinancedwith a new loan of £165m of which £135m was drawn down for a term of 5 years andinterest charged at 1.35% above LIBOR. The balance of the loan at 27 December2007 was £129m. At 28 December 2006, the Group had the following borrowings: Deep discounted bonds The bonds were zero coupon and unsecured and bear an effective interest rate of10% per annum which is payable on redemption of the bonds. The amountsredeemable were: £152.8m on 7 October 2014 (book value on 28 December 2006:£105.7m) and £103.9m on 1 December 2014 (book value £116.2m). The bonds weremeasured at amortised cost. Subject to having given no less than 30 days and not more than 60 days notice inwriting to the bondholders the Group may, at any time, with the consent of thebondholders having the majority of the bonds, redeem the whole or any part ofthe bonds. 10% interest bearing unsecured bonds The 10% interest bearing unsecured bonds have a redemption date of 7 October2014. Interest is payable on repayment or redemption of the bonds. On IPO the deep discounted bonds and interest bearing bonds were either repaidor converted to equity. Group's assets and undertakings. Secured bank loans (2006) On 22 June 2006 the bank loans were refinanced on new terms, comprising: Term A: £45m drawn down at 28 December 2006, repayable over the term to 22 June2013 at 2.25% above LIBOR. Term B: £81.5m drawn down at 28 December 2006, repayable in full on 22 June 2014at 2.5% above LIBOR. Term C: £81.5m drawn down at 28 December 2006, repayable in full on 22 June 2015at 3.0% above LIBOR. Term D: undrawn, repayable in full on 22 December 2016 at 2.75% above LIBOR. The bank loans are secured by fixed and floating charges on the assets of theGroup. On 25 August 2006 the loans were syndicated. As at 28 December 2006, the Group had drawn down a total of £208m on theavailable £246m facility. Analysis of net debt Cash at bank Bank loans Deep discounted Finance leases Interest rate Net debt and in hand bonds swap £m £m £m £m £m £mAt 29December 2005 19.6 (230.9) (116.2) (6.1) (13.1) (346.7)Cash flows 8.1 30.8 - 0.5 - 39.4Non cash movement - (6.8) (11.6) (1.3) 12.8 (6.9) At 28December 2006 27.7 (206.9) (127.8) (6.9) (0.3) (314.2)Cash flows (17.3) 79.0 54.3 0.5 - 116.5Non cash movement - 0.2 73.5 (0.5) 0.1 73.3 At 27December 2007 10.4 (127.7) - (6.9) (0.2) (124.4) The non-cash movements relating to bank loans represent the write-off oramortisation of bank fees previously capitalised, and those on bonds to interestaccrued but not payable until the redemption of the bonds. 9. Capital and reserves Reconciliation of movement in capital and reserves 52 weeks ended 28 December 2006 and 52 weeks ended 27 December 2007: Share Share premium Translation Hedging reserve Retained Total capital reserve deficit £m £m £m £m £m £m At 29 December2005 (restated*) - - 0.4 - (58.4) (58.0)Loss for the period (restated*) - - - - (7.7) (7.7)Actuarial gainon defined benefitpension scheme - - - - 2.7 2.7Tax recognised on income andexpenses recogniseddirectly in equity - - - - (0.7) (0.7) At 28 December 2006 (restated*) - - 0.4 - (64.1) (63.7)Profit forthe period - - - - 25.7 25.7Actuarial gainon defined benefitpension scheme - - - - 0.7 0.7Tax recognised on income andexpenses recogniseddirectly in equity - - - - (0.2) (0.2)Dividendspaid for period - - - - (4.3) (4.3)Shares issued,net of related costs 0.6 93.5 - - - 94.1Bonds convertedto shares 0.5 77.9 - - - 78.4Bonus share issue 0.3 - - - - 0.3Reversalof accrualrelating to cashsettled shares - - - - 1.8 1.8Movement infair value ofcash flow hedge - - - (0.2) - (0.2) At 27 December 2007 1.4 171.4 0.4 (0.2) (40.4) 132.6 * See note 2 Share Premium is stated net of capitalised transaction costs in association withthe IPO. Share capital 27 December 28 December 2007 2006 £m £mCineworld Group plcAuthorised200,000,000 ordinary shares of £0.01 each (2006:173,515 ordinary shares of £0.01 each) 2.0 - Nil redeemable preference shares of £1 each (2006: 48,272 redeemable preference shares of £1 each) - - Allotted, called up and fully paid 141,721,509 ordinary shares of £0.01 each (2006:172,815 ordinary shares of £0.01 each) 1.4 - Nil redeemable preference shares of £1 each (2006: 48,272 redeemable preference shares of £1 each) - - On 26 April 2007 the authorised share capital was increased from £50,017.15 to£2,048,272 by the creation of 199,826,485 shares. On admission to the London Stock Exchange on 2 May 2007, the Company made thefollowing share issues: 61,381,075 shares in connection with the Global offer. 45,777,434 shares in connection with the conversion of outstanding bonds. 34,390,185 bonus shares on the existing shares. 48,272 redeemable reference shares of £1 each were redeemed and cancelled fromthe Company's authorised share capital on 2 May 2007. Translation reserve The translation reserve comprises all foreign exchange differences arising fromthe translation of the financial statements of foreign operations, as well asfrom the translation of liabilities that hedge the Company's net investment in aforeign subsidiary. Hedging reserve The hedging reserve comprises the liability in relation to the interest rateswap entered into to hedge against variable interest payments on £67.5m of thenew debt taken out on 2 May 2007. As hedge accounting has been adopted the gains/losses are recorded through equity until such time as the swap matures, whenthey are recycled to the income statement. Dividends An interim dividend of 3p per share was paid on 26 October 2007 to ordinaryshareholders (2006: £nil). The Board has proposed a final dividend of 6.5p pershare payable on 18 June 2008. This information is provided by RNS The company news service from the London Stock Exchange