Cineworld profits rise to monster levels thanks to Jurassic World and Fifty Shades
Shares in Cineworld rallied this morning after the UK’s largest cinema operator revealed an 11.5 per cent jump in revenues, saying it was performing ahead of plans thanks to box office hits including Fifty Shades of Grey and Jurassic Park.
Total revenues, when factoring in the European chain Cinema City it acquired last year, reached £329.1m in the 26 weeks to 2 July while profits more than tripled to £46.8m from £13.9m last time.
The success of films including Avengers: The Age of Ultron, Fast and Furious 7 and Fifty Shades of Grey helped boost admissions and box office revenues by by 2.5 per cent and 10.5 per cent respectively in the UK and Ireland.
The average ticket price also jumped 7.9 per cent to £6.02 as cinema-goers paid more to watch blockbusters such as Jurassic World on larger screens or in 3D at its IMAX theatres.
Total UK revenues including the drinks and snacks it sold grew by 11 per cent on a pro-forma basis.
Historically, the second half is bigger than the first half for the cinema industry, with the strongest performance typically in the fourth quarter.
However chief executive Mooky Greindinger said this year the company was allowing itself to be "more optimistic than normal" thanks a strong slate of movies set to be released, including Star Wars: Episode VII and the next James Bond film, Spectre
“Overall, with the anticipated strength of the film line up in the second half, coupled with our solid first half performance, we are marginally ahead of our plans for the year as a whole," he said.
However, he told Morning Wire Cineworld’s “biggest and most important achievement” this year will be its expansion.
“Our expansion shows our confidence in the industry. We have already opened nine sites in the UK and abroad and we will open 10 more by the end of the year, increasing our estate by 10 per cent,” Greidinger.
In February last year, Cineworld bought a Cinema City, a Polish-listed chain of 100 multiplexes, for around £500m. The company said the deal provided a huge opportunity to gain exposure to a still relatively new market.
“The cinema market in central eastern Europe is underdeveloped. In the UK, the average person goes three times a year to see a movie whereas in central eastern europe it is around one time. When we open cinemas there, the key performance indicators always grow but there is a lack of multiplexes. We see big potential in countries like Romania and Poland. But there is also potential in the UK,” Greidinger said.
Sales in central and eastern Europe and Israel rose 11.8 per cent.
Shares jumped more than four per cent on the bullish statement as analysts upgraded their forecasts. Cannacord Genuity, which reiterated its "buy" rating, said: "We are hiking our target price to 620p from 540p. Cineworld has recovered from its recent share price wobble and is set for another surge in performance, we believe."