Avengers: Age of Ultron and Fifty Shades of Grey have boosted business at Cineworld so far this year, and the group has high hopes for the rest of 2015 with Jurassic World, the final Hunger Games outing and the James Bond film Spectre all due out.
Cineword’s first quarter update showed total revenues up 26.8%, including a contribution from Cinema City which was taken over in February 2014.
UK box office revenues rose 7.9%, slightly lower than overall admissions because - analysts say - of its broader breadth of films rather than merely blockbusters. During the quarter it opened two new Cinewords in the UK at Swindon and Broughton and one Picturehouse in East Dulwich. It expects to open another eight cinemas in the UK and eight in Europe and Israel.
All in all, Cineword said it expected its full year would be in line with market expectations, helping to push its shares 11.5p higher to 512.5. Analysts at Canaccord Genuity said:
Cineworld’s first quarter statement revealed that it has enjoyed a great start to the year... The combination of a good film slate and soft comparatives bode well for the rest of the year.
Second quarter comparatives are particularly soft due to the World Cup last year. As importantly, the new build programme is on track with four cinemas opened in the period with another 16 contracted for the remainder of the year. We leave our forecasts unchanged and retain our buy recommendation and 540p target price.
Nick Batram at Peel Hunt was also positive:
2015 has had a strong start to the year, with the group making full use of the film slate flowing down from the box office through to retail and other income. The group is trading strongly, and while it may be too soon to change forecasts materially, we believe the business has a strong foundation from the integration of Cinema City and cost-cutting deliver full year numbers ahead of current expectations.
At Numis, analyst Douglas Jack said:
UK box office increased by 7.9% over the first 19 weeks of which almost all was like- for-like. We believe approximately one-third of this growth was admissions, with two-thirds price. Average spend was boosted by the mix benefit of stronger weekend and adult custom (driven by the adult-orientated Fifty Shades of Grey and the Avengers outperforming).
As expected, Cineworld is now under-performing the market in relation to admissions, due to its broader film range acting as a disadvantage in a year with numerous potential blockbusters.
We are holding our 2015 forecasts (pretax profit of £90.0m; consensus £90.5m) even though the company is trading ahead of our forecast of 7% growth in like for like box office for the UK and 3% for mainland Europe/Israel. We also assume currency movements take 11% off European profits this year. Aided by £5m of forecast acquisition synergies (of which £2m was achieved in 2014), strong self-financed expansion and attractive like for like admission prospects, we forecast double-digit earnings growth in 2015 and 2016. Our add recommendation reflects the risk of further upgrades.
