Cineworld Group plc
Power Road Studios
114 Power Road
Chiswick
London W4 5PY
020 8987 5000
www.cineworld.com
www.cineworldplc.com
Cineworld Group plc
Annual Report and Accounts 2009
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Business Review
Highlights 2009
A Real Cinema Experience
Chairman’s Statement
Strategy and Market Overview
Chief Executive and Chief Financial
Officers’ Review
Risks and Uncertainties
Corporate Responsibility
Governance
Board of Directors
Directors’ Report
Corporate Governance Statement
Directors’ Remuneration Report
Statement of Directors’ Responsibilities in
respect of the Annual Report and the
Financial Statements
Independent Auditors’ Report to the
Members of Cineworld Group plc
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02
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06
08
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18
22
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29
34
39
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Financial Statements
Consolidated Statement of
Comprehensive Income
Consolidated Statement of
Financial Position
Consolidated Statement of Changes
in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated
Financial Statements
Company Balance Sheet
Company Reconciliation of Movements in
Shareholders’ Funds
78
Notes to the Company Financial Statements 79
83
Shareholder Information
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Highlights
2009
Financial
•
* up 5.1% to £55.7m (2008: £53.0m);
Group revenue up 11.5% to £333.4m, up 9.4% on a pro rated
52 week basis (2008: £298.9m);
EBITDA
Operating profit increased to £39.6m
Profit on ordinary activities before tax up 11.6% to £30.8m
Cash generated from operations increased to £54.6m
Net debt reduced to £104.3m
Reported EPS
on 52 week adjusted pro forma earnings) (2008: 14.6p);
Proposed final dividend of 6.8p per share increases proposed full year
dividend to 10.0p per share (2008: 9.5p per share).
†: 14.4p (2008: 14.3p); adjusted pro forma EPS 16.2p (based
(2008: £48.4m);
(2008: £38.3m);
(2008: £117.4m);
(2008: £27.6m);
Operational
•
Box office up 16.9% at £230.9m, up 14.7% on a pro rated
52 week basis (2008: £197.5m);
Admissions increased by 8.9% to 49.1m, 6.9% on a pro rated
52 week basis (2008: 45.1m);
Average ticket price per admission up 7.5% to £4.71
Average retail spend per person held firm at £1.72
Market share at 23.9%
New cinema openings at Aberdeen (10 screens) and Witney
(five screens);
Digital Cinema Media (“DCM”) had a challenging year, in line with the
wider advertising industry.
(2008: 23.3%) (source: EDI Neilsen);
(2008: £4.38);
(2008: £1.71);
•
•
•
•
•
•
•
•
•
•
•
•
•
Key Performance Indicators (“KPIs”)
Admissions
Millions
+8.9%
Box office revenue
£m
+16.9%
07
08
09
09
45.0
45.1
48.2
49.1
+6.9%
+8.9%
07
08
09
09
185.7
197.5
226.5
230.9
+14.7%
+16.9%
Average ticket price
£
+7.5%
Retail spend per customer
£
+0.5%
07
08
09
09
EBITDA
£m
07
08
09
09
4.12
4.38
4.71
4.71
+7.5%
+7.5%
07
08
09
09
1.67
1.71
1.72
1.72
+0.5%
+0.5%
+5.1%
52 week period
53 week period
52.0
53.0
54.6
55.7
+3.0%
+5.1%
* EBITDA is defined as per the financial performance section of the Chief Executive and Chief Financial Officers’ Review.
† Based on weighted average number of shares in the period of 141.7m. See Note 5 to the financial statements
for calculations.
Cineworld Group plc
Annual Report and Accounts 2009
01
A Real Cinema Experience
tHE bIg
PICtuRE
02
Cineworld Group plc
Annual Report and Accounts 2009
2009 was another good year
for Cineworld...
Cineworld Group was founded in 1995
and is now one of the leading cinema
groups in the UK and Ireland. We are
dedicated to ensuring that all aspects of
every visit are memorable – unparalleled
quality of service, great shows,
comfortable seating and tempting
retail offers.
With 77 cinemas, Cineworld offers a range
of exceptional venues for corporate or
private events. Our state-of-the-art digital
projection facilities can display any type of
media, from PowerPoint presentations to
feature films. With stadium seating and
capacity ranging from 15 to over 500
seats, Cineworld can offer the perfect
size venue for every audience.
We continue to lead the way in digital and
3D technology. Cineworld currently has
one of the largest number of digital
projectors across the UK – showcasing
3D, live sport, live opera, interactive
gaming or corporate presentations.
All our theatres offer excellent facilities
and have full disabled access.
790screens
77cinemas
Cineworld Group plc
Annual Report and Accounts 2009
03
Chairman’s
Statement
Anthony bloom
Chairman
the strong performance in
2009 confirmed the robust cash
generative nature of our business.
I am pleased to report that Cineworld has
delivered another successful year with strong
growth in revenue and profitability and an
increase in box office market share, even though
2009 was an extremely challenging year from an
economic point of view. The strong performance
in 2009 confirmed the robust cash generative
nature of our business, resulted in record
figures and is enabling us to propose an
increased dividend.
Total revenues increased by 11.5% to £333.4m
and Adjusted pro forma Earnings Per Share grew
to 16.2p, an increase of 11.0% compared to the
previous year. As our Balance Sheet is strong
and with borrowings under control, the Board is
pleased to be proposing an increase in the full
year dividend to a record 10.0p per share
(2008: 9.5p).
2009 was also an important year for the
cinema industry in the UK which saw a major
step forward in the use of digital media,
evidenced by the well publicised success of
3D films. Current 3D technology, which has
advanced immeasurably since the much derided
technology of past, was quickly accepted by
cinema goers and, I believe, has ushered in a
new era for the cinema industry. Thirteen 3D
films were released in 2009, compared to only
four in 2008 and the expectation is that there
will be at least eighteen 3D films in 2010.
Underpinning this trend is the fact that “Avatar”
has become the most successful film at the box
office in the history of cinema.
The success of 3D during the year was enabled
by the major conversion to digital projection
within the industry. Here, Cineworld has led the
way, investing in digital equipment in the early
part of the year. Digital projection has also
facilitated the screening of alternative content
such as opera and live theatre productions.
Our other key area of expansion was the
opening, in the latter part of 2009, of a 10
screen cinema in Aberdeen and a five screen
cinema, in Witney, both with digital projection
facilities in all auditoria. At the end of the
year we operated 77 cinemas with a total
of 790 screens.
The continued downturn in the wider advertising
market has been well publicised, but it was
nevertheless disappointing to report a significant
fall in screen advertising revenues. We remain
optimistic about the longer term prospects for
screen advertising, in light of the opportunities
afforded by our digital expansion and also from
the advertising industry as a whole once demand
picks up.
04
Cineworld Group plc
Annual Report and Accounts 2009
At the end of the
year we operated 77
cinemas with a total
of 790 screens.
Lawrence Guffey retired from the Board in
November 2009, having served as a Non-
Executive Director since December 2004 and
as Deputy Chairman since April 2007. I would
like to take this opportunity to thank him for his
valuable contribution to the business, and to
welcome Alan Roux (who was previously
Lawrence Guffey’s Alternate Director) to the
Board. Cineworld’s people are at the heart of our
business and, on behalf of the Board, I would
like to thank all our management and our
employees for their achievements, hard work
and commitment to the Company.
There is general consensus that the economic,
financial and competitive environment will
again be challenging during the year ahead.
Nevertheless thanks to the strength of our
business which we have built over the last
15 years and the continued hard work of
our management and employees, we continue
to look forward to the future with confidence.
Anthony bloom
Chairman
11 March 2010
Cineworld Group plc
Annual Report and Accounts 2009
05
Our Strategy The Group’s primary objective is to consolidate
its position as one of the leading cinema
businesses in the UK and Ireland in terms
of sites, screens and admissions and to
improve its operating margins, thereby growing
shareholder value. In order to achieve this,
the Group will continue to:
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Improve its offer to its customers;
Grow box office revenues;
Increase retail spend per customer;
Increase other revenue streams;
Grow the estate through selective new
openings, expansions and acquisitions;
Look to expand into complementary
markets; and
Use technology to improve our customers’
experience.
The key driver of our business, admissions, is
derived by showing feature films in our multiplex
cinemas. This, in turn, drives box office and the
two other main income sources which are retail
sales and third party advertising shown on our
screens prior to feature presentations. The
principal costs to the business are film rental
and those of operating our cinemas.
the business
Model
Our other key area of
expansion was the
opening, in the latter
part of 2009, of a 10
screen cinema in
Aberdeen and a five
screen cinema in
Witney, both with digital
projection facilities in
all auditoria.
06
Cineworld Group plc
Annual Report and Accounts 2009
Market
Overview
The UK and Ireland cinema market continues to
be dominated by three major exhibitors; Odeon
UCI, Cineworld and Vue. In total they account for
over 70% of the total market box office. The rest
of the market is represented by smaller multiplex
chains and independents which tend to operate
non-multiplex cinemas (less than five screens).
This situation has remained largely constant
because of the significant barriers to entry, both
through acquisition and organically. The rate of
new cinema openings has been falling in recent
years, partly due to the limited number of new
retail and leisure development opportunities
and the long time it takes to bring developments
to fruition. This has been exacerbated more
recently due to reduced funding for developers
in the present financial climate.
In 2009, box office revenue in UK and Ireland
increased 11% to £1.05bn (EDI Neilsen) whilst
UK admissions increased 5.5% to over 173m
(CEA). This demonstrated the resilience
of cinema in the economic and consumer
environment, the low price of going to the
cinema compared to other forms of leisure and
the desire for escapism. However, underpinning
the overall success was the strong line up of
films and the successful introduction of films
in the 3D format.
At the end of December
2009, Cineworld had
one of the largest
digital estates of any
cinema operator in
the UK.
Cineworld Group plc
Annual Report and Accounts 2009
07
Chief
Executive
and Chief
Financial
Officers’
Review
Stephen Wiener
Chief Executive Officer
Richard Jones
Chief Financial Officer
Cineworld’s success in 2009 was
underpinned by the excellent film
slate as well as the successful
introduction of 3D films.
Performance Overview
In the 53 week financial year box office revenue
increased 16.9% to £230.9m (2008: £197.5m)
or 14.7% on a 52 week basis, representing a
box office market share of 23.9% (2008: 23.3%).
The Group’s admissions increased by an
impressive 4.0m on the prior year (8.9% on
a reported basis or 6.9% on a 52 week basis).
Average ticket price per admission increased
by 7.5% to £4.71 (2008: £4.38) largely reflecting
an improved mix and the higher ticket prices
charged on 3D films. Retail spend per person
held firm at £1.72 (2008: £1.71).
Cineworld’s success in 2009 was underpinned
by the excellent film slate as well as the
successful introduction of 3D films. Overall
prices were higher, reflected by the higher box
office revenues, due to modest general price
increases and also the benefit of the price uplift
from 3D admissions. Approximately 12% of
market box office was from 3D for the full year, up
from approximately 10% in the first half of 2009.
box Office
A combination of strong price and admissions
growth in the year enabled Cineworld’s box office
to increase 16.9% to £230.9m (2008: £197.5m)
and achieve a box office market share of 23.9%
(2008: 23.3%). On a 52 week pro rated basis
for 2009, box office increased by 14.7%. By this
measure, Cineworld is the number two cinema
operator in the UK and Ireland, according to EDI
Neilsen (“EDI” an organisation which collects,
reports and analyses information on the UK
and Irish cinema industry). Admissions of 49.1m
08
Cineworld Group plc
Annual Report and Accounts 2009
Cineworld delivered
a strong financial
performance for
the year.
Admissions
Box office
Retail
Other
Total revenue
53 week period ended
31 December 2009
49.1m
£m
230.9
84.4
18.1
333.4
Pro rated 52 week period
ended 31 December 2009
48.2m
£m
226.5
82.8
17.8
327.1
52 week period ended
25 December 2008
45.1m
£m
197.5
77.0
24.4
298.9
We played a series
of operas transmitted
live via satellite from
the New York
Metropolitan Opera,
opera and ballet
from The Royal Opera
House and theatre
productions from the
National Theatre.
gave Cineworld a UK market share in admissions
of 26.8% (up from 26.5% in 2008), making us
the leading operator in the UK and Irish market
on this basis (source: EDI). Average ticket price
per admission increased 7.5% to £4.71 (2008:
£4.38). The increase was partly aided by the
premium pricing on 3D performances and by a
larger adult audience mix during the year. The
average ticket price excluding VAT of 3D was
almost £5.90 compared to 2D of almost £4.54.
Cineworld nevertheless continues to offer its
customers compelling value with the lowest
average ticket price of any of the major UK
cinema groups.
There were strong performances in the year
from a number of core blockbusters which
included “Harry Potter and the Half Blood
Prince”, “Transformers: Revenge of the Fallen”,
“The Hangover”, “Twilight Saga: New Moon” and
“Star Trek”. All these films performed in line with
industry expectations. The 2009 film highlight of
the year was “Slumdog Millionaire”, a relatively
unknown film released in the UK at the beginning
of the year, quickly catching the attention of the
film industry and cinema-going public and
receiving much critical acclaim. It exceeded
expectations by grossing over £30m in national
box office and collected eight Oscar awards.
The year also saw 13 major films released in
3D, the most notable being “Avatar”, the highest
grossing film of all time with strong support from
“Bolt”, “Monsters Versus Aliens”, “Ice Age 3:
Dawn of the Dinosaurs”, “UP” and “A Christmas
Carol”. Overall Cineworld achieved a market
share of 35% in 3D films. The success of
these films has helped to raise the profile of this
format, which in turn has supported cinema
admissions and increased box office revenues.
It is particularly pleasing to see the establishment
of the 3D format in mainstream cinema
entertainment and, given our strong position in
the provision of digital facilities, enables us to
give further choice to our customers.
In line with our strategy, we have continued to
offer customers the broadest range of films on
the market. There were a number of small and
mid range films which performed well during the
year including “District 9”, “Paranormal Activity”
and “The Time Traveller’s Wife” where we
achieved higher individual market shares than
our competitors. Whilst we remain the biggest
exhibitor of Bollywood films in the UK with a 62%
share of the UK market, the supply of product
during the first half of 2009 was disrupted due
to the Bollywood strike which resulted in our box
office for Bollywood product falling 8% against
2008. We remain the only major chain to screen
Tamil language films. In addition, we showcased
a series of other successful foreign language
films such as “Coco before Chanel” and “Let the
Right One In” which contributed favourably to our
full year results.
We made steady progress during the year in
developing our alternative content offering and
played a series of operas transmitted live via
satellite from the New York Metropolitan Opera,
opera and ballet from The Royal Opera House
and theatre productions from the National
Theatre. Since the year end, we have also
successfully screened international rugby in 3D,
further widening the choice which we are able to
offer our customers.
Retail
Despite the tough consumer environment,
retail spend per person has held firm in 2009
at £1.72 (2008: £1.71). This is a reflection of
the competitive offers and strength of our
promotions. As expected, our customers have
become more value conscious given the tough
economic backdrop, and we have responded
with a number of value initiatives which have
been successful.
During 2009, we refreshed and replaced a
number of ice cream and general retail areas,
adding 13 new Ben & Jerry’s scoop shops and
refurbished a number of other retail stands. We
are also pleased to report that we have renewed
long-term arrangements with Coca Cola and
Candyking, continuing our partnership with these
recognised brands, which will help to maintain
the value of our overall offer.
We also began targeting retail promotions at
specific customer groups who typically spend
less on retail products. Amongst the more
successful initiatives were the high value “Buy
One Get One Free” Coke promotion for Orange
Wednesday customers and the high value
Combo packages for our Unlimited customers.
The results from these and other initiatives
will be used to develop our offers further
during 2010.
As reported at the last set of results, we
have seen increased costs on key commodities,
but the business has a number of long-term
fixed price agreements in place which have
afforded us a degree of protection. We have
also continued to develop new social and
environmental initiatives and have reduced the
paper used in the production of our popcorn
bags, as well as sourcing healthier cooking oil.
Cineworld Group plc
Annual Report and Accounts 2009
09
Chief
Executive
and Chief
Financial
Officers’
Review
continued
Advertising
Digital Cinema Media Limited (“DCM”), our joint
venture screen advertising business formed in
July 2008, had a challenging year in line with the
rest of the advertising industry. Screen
advertising revenues fell 38.8% against the
previous year which had benefitted from two
months’ worth of revenue from the old Carlton
Screen Advertising minimum guarantee,
representing an additional £1.0m of revenue.
DCM’s primary function is to sell advertising
time on cinema screens on behalf of Cineworld
and its other clients. It also engages in related
promotional work between advertisers and
cinemas. The fall in revenues generated for
Cineworld against the previous year largely
reflected the state of the wider advertising
industry, with reduced levels of demand.
A new management team at DCM, formed during
the end of 2008 and early 2009, has been
driving operational efficiencies and effectiveness
so that the business is well positioned to
capitalise on the increased flexibility offered to
advertisers via the digital format, as well as any
improvements to the overall advertising market.
Cineworld believes that DCM remains an exciting
prospect for us to drive future growth in revenue
and profitability.
Investment in Digital
At the end of December 2009, Cineworld had
one of the largest digital estates of any cinema
operator in the UK. Digital projection is an
important part of our strategy, which enables the
screening of films (2D and 3D) and other content
using digital media. During the first quarter of
2009, the Group installed a further 74 digital
projectors, thereby consolidating its leading
position in digital. A number of existing digital
projectors were also redeployed to larger
auditoria, to satisfy customer demand while also
maximising the financial benefits from screening
3D films. Cineworld is currently installing a
further 102 digital screens bringing the total
number of digital screens in the estate to 265.
The film industry thrives on technological
advances and the swift adoption of 3D, with
thirteen 3D films shown in 2009 and at least 18
scheduled for 2010, means the industry appears
set to enjoy further growth from 3D and digital
content in 2010 and beyond, with Cineworld well
placed to capitalise on this trend.
unlimited Card Programme
Our unique subscription service, Unlimited,
offers a competitive value proposition to our
customers. The service offers customers the
opportunity to pay a fixed monthly (or annual)
subscription which enables them to watch
standard films at our cinemas as many times
as they wish. Cineworld prides itself on being
the only cinema operator in the UK and Ireland
to offer this service which currently has
approximately 240,000 subscribers. The service
is one of the pillars which underpin our strategy
of growing other revenues and admissions.
It brings to the Group the financial benefits of
regular subscription income and reduces the
level of fluctuations in our revenues. It also
brings operational benefits by encouraging
repeat visits, often at off peak times. This, in
turn, enables us to improve capacity utilisation
at our cinemas, provide more retail opportunities
and introduce a wider range of films than our
competitors. As a result, we have delivered
significant growth in market share amongst the
smaller, less mainstream films in 2009.
Initiatives and Developments
The investment made in our consumer website
in late 2008 has generated on-line sales up 13%
on the previous year and recorded over 48m
visits in 2009. We also launched a mobile
enabled web booking service in the year to
capitalise on increased use of handheld devices
by our customers and their preference to book
via the web rather than by telephone.
Progress continued to be made in growing the
“My Cineworld” membership on our consumer
website which stood at 200,000 at the end of
the year, a 100% increase over the year. This
is an important tool for us in engaging with our
customers and in understanding how we can
improve our offer to them, thereby improving
customer retention and increasing visits to our
cinemas. Our partnership with Tesco continues
to flourish and over 200,000 admissions in
2009 were achieved through their Clubcard
programme. Tesco has also invested in TV
advertising to promote the ticket offer, raising
Cineworld’s brand profile. Our new gift card
proposition was rolled out in the year and is
being sold at many well known retail outlets. It
replaces our existing paper based gift vouchers
and will improve operational efficiencies on
redemption at the tills as well as facilitate
payment for our customers. Since the year end,
we have expanded our marketing team to
increase focus on digital related opportunities
in screenings of alternative content and
opportunities in the Business 2 Business sector.
Our People
Attracting, developing and retaining talented
staff is important for our business. It is vital for
our continued success that we encourage our
employees’ personal development and career
progression. A new performance management
framework was implemented during the year.
It involved all senior and line managers with
the aim of providing meaningful employees’
objective setting and structured performance
reviews. By using this framework, we aim to
increase further the high proportion of
management and supervisory positions which
are held by internally promoted employees,
thereby bringing operational and financial
benefits to the Group. As part of the drive to
increase the efficiency and effectiveness of staff
recruitment, a new recruitment website was
launched in the year. It provides cinema
managers with a tool to select candidates
efficiently and then to process the selections
quickly and effectively.
10
Cineworld Group plc
Annual Report and Accounts 2009
“My Cineworld”
membership on our
consumer website
which stood at 200,000
at the end of the year,
a 100% increase over
the year.
Cineworld Group plc
Annual Report and Accounts 2009
11
Chief
Executive
and Chief
Financial
Officers’
Review
continued
New Openings
In line with our strategy for growing our estate,
we successfully opened a 10-screen cinema in
Aberdeen and a five screen cinema in Witney in
October 2009, both with full digital projection
facilities. Looking further ahead to 2010 and
beyond, our cinema opening programme is likely
to be impacted by the availability of finance for
developers and therefore uncertainty over the
timing of projects. Nevertheless, our national
expansion remains a key strategic priority for the
Group over the medium term as we seek to
deliver growth for our shareholders and we
continue to pursue such opportunities.
Key trends and Factors Potentially Affecting
the Future
The future success of the Group in 2010 will
remain principally dependent on the strength
of the film releases during the year. Sequels
and franchises will continue to contribute
a significant number of the higher profile
blockbuster films. Many such films outperform
the original film or concept, so the film studios
will continue to look to capitalise on proven
successful formulae. The overall film release
programme for 2010 is known and there is a
strong line up of potential blockbuster films
which include a range of sequels and new films.
The enormous success of “Avatar” has further
elevated the profile of 3D films and has given
the 3D format and digital technology greater
impetus. More films are planned for release in
3D together with conversion of older films to 3D.
To date, most 3D films have tended to be of the
animated, computer generated imagery variety,
though as 3D technology and film making and
production improve, we expect to see more
live films in 3D. In addition, we have already
Financial Performance
successfully started to screen certain high-
profile rugby events in 3D in the early part of
2010 and would anticipate further opportunities
to show similar alternative content.
The major product for the cinema industry will
remain 2D films, though 3D and other content
will continue to gain in popularity as more
content is provided digitally. Our plans for digital
mirror these trends and we will continue to
convert our existing estate to digital.
As previously reported, we enjoyed more
mid week business in 2009, particularly in
conjunction with our “Bargain Tuesdays”
promotion and “Orange Wednesdays”. The two
days combined now contribute over 27% of
weekly admissions for the year, up from a little
over 25.5% for 2008 and demonstrates that
customers have been seeking greater value in
the current economic climate.
An improving economy will be good all round
for the business and aid the recovery of the
advertising market and of our screen advertising
revenues in particular. However, plans for new
cinemas will remain less certain until finance for
developers becomes more available. We will
continue to identify and sign agreements with
developers for new cinemas in anticipation of
when the fiscal situation eases.
Cineworld will continue to offer a highly
compelling choice within the wider range of
entertainment and leisure activities. Going to the
cinema will remain one of the best value forms
of popular entertainment and will continue to
attract audiences because of the film product
and the immersive viewing experience that
cannot be matched by any other media.
53 week period ended
31 December 2009
total
49.1m
Pro rated 52 week period
ended 31 December 2009
total
48.2m
52 week period ended
25 December 2008
Total
45.1m
Admissions
Box office
Retail
Other
Total revenue
EBITDA*
£m
230.9
84.4
18.1
333.4
55.7
39.6
1.2
(9.9)
(8.7)
(0.1)
30.8
(10.4)
Operating profit
Financial income
Financial expenses
Net financing costs
Share of profit from joint venture
Profit on ordinary activities
before tax
Tax on profit on ordinary
activities
Profit for the period attributable
to equity holders of the Company
20.4
£m
226.5
82.8
17.8
327.1
54.6
38.9
1.2
(9.7)
(8.5)
(0.1)
30.3
(10.2)
20.1
£m
197.5
77.0
24.4
298.9
53.0
38.1
1.9
(12.5)
(10.6)
0.1
27.6
(7.4)
20.2
* EBITDA is defined as operating profit before depreciation and amortisation, onerous lease and other non-recurring and
non-cash property charges, transaction and reorganisation costs.
12
Cineworld Group plc
Annual Report and Accounts 2009
As a result of strong
film product and
maintenance of our
market share, we have
enjoyed very buoyant
trade during the year.
Revenues
Total revenue for 2009 was £333.4m, a rise
of 11.5% on the prior period (2008: £298.9m)
or a 9.4% rise on a pro rated 52 week basis.
As a result of strong film product and
maintenance of our market share, we have
enjoyed very buoyant trade during the year
and box office was 16.9% higher at £230.9m
(2008: £197.5m). On a pro rated 52 week basis
for 2009, box office was 14.7% higher than
2008 on 6.9% more admissions.
Retail sales for the year were up 9.6% at
£84.4m (2008: £77.0m) or 7.5% higher on a pro
rated 52 week basis. The percentage increase is
less than that of box office and is reflective of
the challenging consumer environment.
Other revenues were down 25.8% to £18.1m
(2008: £24.4m). Excluding the additional week in
2009, the adverse variance increases to 27.0%.
Income from non-screen advertising such as
ticket bookings, theatre hires, sponsorships and
games were up 20.0% against the previous year,
but their performance was overshadowed by a
38.8% fall during the year in screen advertising
revenue. The previous year also benefitted from
two months’ worth of revenue from the old
Carlton Screen Advertising minimum guarantee,
being an additional £1.0m of revenue.
EbItDA* and Operating Profit
EBITDA was up 5.1% at £55.7m against the
2008 figure of £53.0m and was achieved
through better spend levels and cost margins
and continued management of operating costs.
These were partly offset by rising energy costs
during the year and the shortfall in screen
advertising revenue. The EBITDA margin was
adversely impacted by the change in the sales
mix from reduced screen advertising revenue,
nearly all of which feeds directly into EBITDA.
Operating profit increased to £39.6m (2008:
£38.1m). The estimated contribution to
EBITDA from the additional week in 2009 was
approximately £1.1m and approximately
£0.6m to operating profit.
Earnings
Overall profit on ordinary activities before tax
was £30.8m compared with £27.6m in 2008.
Basic earnings per share amounted to 14.4p
and adjusted pro forma earnings per share were
16.2p (using a normalised tax rate of 28.0%).
This compares favourably with the 2008
adjusted pro forma earnings per share of 14.6p.
The weighted average number of shares during
2009 was 141.7m and no shares were issued
during the period.
Finance Costs
The falls in interest rates during the later part of
2008 benefited the Group during 2009 and the
early part of 2010. The interest expense in the
year relates primarily to interest on bank debt.
The majority of the remaining interest charge
is non-cash interest on onerous leases and the
pension scheme.
taxation
The overall tax charge was £10.4m giving an
overall effective tax rate of 33.8% for the year
(2008: 26.8%). The corporation tax charge
consisted of the charge in respect of the current
year of £7.1m and a charge of £1.7m relating
to prior years. The balance of the tax charge
of £1.6m resulted from the utilisation of a
deferred tax asset principally relating to capital
allowances (the difference between the tax
written down value of the capital allowance and
the net book value of the underlying assets).
Cash Flow and balance Sheet
The Group continued to be strongly cash
generative at the operating level during the year.
Total cash generated from operations increased
to £54.6m (2008: £48.4m). This reflects the
healthy conversion rate of our profits into cash
flow that is the nature of our business. There
was a working capital cash inflow for the year
arising from an increase in the level of creditors
at the end of December, which reflects the
higher level of trade during the Christmas period.
The high level of internally generated cash has
funded our entire capital expenditure whilst
repaying debt of £9.0m and paying dividends
of £13.5m. Furthermore, the Group enjoys
the security of a revolving credit facility of up
to £30.0m (undrawn at the end of the year), as
part of the overall bank facility which further
enhances the Group’s overall liquidity.
Net cash spent on capital for the year of £15.6m
consisted of gross expenditure of £18.3m
against which contributions of £2.7m were
received from the landlords. Of the gross
amount, £4.4m related to new digital projectors
and £6.5m represented equipment replacement,
site refurbishments and expenditure on various
initiatives such as website enhancements and
upgrading of automated ticket sales points. The
balance of capital expenditure of £7.4m related
to the cost of opening the new 10 screen cinema
at Aberdeen and the new five screen cinema
at Witney. The contributions received from
the landlords have been treated as reverse
premiums and will be amortised to the profit
and loss account over the terms of the
respective leases.
Cineworld Group plc
Annual Report and Accounts 2009
13
Chief
Executive
and Chief
Financial
Officers’
Review
continued
The enormous success
of “Avatar” has further
elevated the profile of
3D films and has given
the 3D format and
digital technology
greater impetus.
14
Cineworld Group plc
Annual Report and Accounts 2009
Net debt at the end of December 2009 fell
to £104.3m (2008: £117.4m), due to the
repayment of £9.0m of the bank loan and the
maintenance of a healthy cash balance. Net
debt included a £3.9m liability valuation of
the interest rate swap hedge on the bank loan
(2008: £4.2m liability). The liability position
arose because the fixed rate of interest payable
on the swap was higher than the three month
LIBOR rate receivable on the hedged portion
of the loan for the remainder of its term.
Like the previous year, the Group remained well
within its banking covenants and continued to
achieve the financial targets which enabled it to
benefit from a low margin on its bank debt of
0.95% above three month LIBOR. By reducing
net debt and improving EBITDA during the year
ahead, the Group will increase scope to reduce
the margin on its bank debt further to 0.7%
above three month LIBOR.
Dividends
The Board continues to apply a dividend policy
reflecting the long-term earnings and cash flow
potential of Cineworld. In line with the above
policy, the Directors are recommending to
shareholders for approval a final dividend in
respect of the year ended 31 December 2009
of 6.8p per share, which taken together with
the interim dividend of 3.2p per share paid in
October 2009, gives a total dividend in respect
of 2009 of 10.0p per share, a 0.5p increase
from the level in 2008. Subject to shareholder
approval, the final dividend will be paid on
7 July 2010 to shareholders on the register
on 11 June 2010. Going forward, subject
to business performance and the Group’s
investment requirements, in accordance with our
desire to provide shareholders with an attractive
level of cash distribution, the Board expects to
increase the dividend taking account growth in
adjusted pro forma earnings per share and our
existing target payout ratio of 60% of underlying
net income.
Current trading and Looking Ahead
2010 has started well in view of the adverse
weather conditions across the UK in January.
We have enjoyed some carry over of business
from the Christmas blockbuster films, in
particular “Avatar” which has exceeded
industry expectations to become the biggest
film of all time (in world box office terms),
overtaking Titanic.
However, we are not complacent and will
continue to work hard to improve our competitive
position across the United Kingdom. We remain
committed to offering our customers the
broadest range of films in the most modern
and comfortable of cinema multiplexes. We
constantly seek to update and invest in our
customer offer with a clear focus on achieving
operational and financial targets.
Given the sound financial standing of the Group,
we feel well positioned to take advantage of
business opportunities which may arise in the
future. With an exciting film release schedule in
2010, we are confident of the prospects for the
business in the forthcoming year.
Stephen Wiener
Chief Executive Officer
Richard Jones
Chief Financial Officer
11 March 2010
We enjoyed more
mid week business
in 2009, particularly in
conjunction with our
“Bargain Tuesdays”
promotion and
“Orange Wednesdays”.
Cineworld Group plc
Annual Report and Accounts 2009
15
Risks and
uncertainties
The continuing
development of existing
and new technology
(such as 3D television)
may introduce new
competitive forces
for the film going
audience.
The following is a summary of the principal
risks and uncertainties to the business. If
any of these risks or other unforeseen risks
materialise, they could have a serious adverse
effect on the Group’s business and its financial
condition, in turn impacting upon the value of its
securities in issue. Where possible and
appropriate, the Group seeks to mitigate these
risks and uncertainties. Some factors which may
mitigate particular risks and uncertainties are
also set out below.
Availability of Film Content
Cinema-going in the UK is driven primarily
by output from Hollywood, which is dominated
by six film studios. There is a risk that these
studios may seek to negotiate film hire terms
less favourable to Cineworld. Such a move could
be countered in part by Cineworld’s negotiating
position due to its market share in the UK and
Irish markets.
During periods where there are fewer or no major
films to drive cinema attendance, our box office
revenues may decline. Cineworld’s Unlimited
Card subscription service generates regular
subscription revenues which helps to offset
lower box office receipts during quieter trading
periods. It is also part of Cineworld’s wider
strategy to promote interest in a range of films
beyond the traditional Hollywood blockbuster in
such areas as Bollywood, other foreign language
and small and mid-range films.
Poor Film Scheduling
After release, the commercial success of a film
can easily be measured by the level of box office
revenues. There are however inherent risks
in trying to forecast the success of a film due
to the subjective qualities of the product and
preferences of the customer. Cineworld employs
a specialist team which focuses specifically on
such matters and is experienced in film booking
and scheduling.
Digital Conversion
The majority of Cineworld’s projection facility
remains in 35mm rather than digital format,
as is the case with the whole UK cinema
industry. The slow conversion to digital within
the UK cinema industry is mainly due to the high
costs of new equipment. The film studios stand
to make significant savings from producing
digital prints due to lower film distribution and
production costs and there is a risk that the
film studios will be encouraged to reduce the
supply of new films in 35mm. This, in turn, could
make 35mm prints more difficult to obtain and
more costly to hire, thereby forcing cinemas to
either convert to digital or, potentially, go out
of business.
Cineworld currently has one of the largest digital
and 3D estate in the UK and is financially better
placed than many other exhibitors in the UK to
address the digital conversion issue.
Alternative Media
Film studios may choose to release their films
through other channels instead of primarily
through exhibition at cinemas. The box office
success of a film is often, however, an important
factor in establishing its value in subsequent
film distribution channels such as DVD, cable
and pay television and the internet.
Also the film studios may seek to reduce the
DVD release window (the period between the
film being released at the cinema and on DVD).
The window is currently agreed at approximately
16 weeks to capitalise on box office awareness
and success. Cinema exhibitors have historically
mitigated this threat by refusing to screen films
which has minimised reductions in the release
window to date.
The existence of DVD (and video before that)
has proven the ability of cinema to co-exist
with alternative media. Additionally, the increase
in use of digital and 3D technology in cinemas
should encourage the film studios to continue
to use cinemas as the primary release channel.
Advancement of technology
The continuing development of existing and
new technology (such as 3D television) may
introduce new competitive forces for the film
going audience. The cinema does, however,
provide a unique social experience that to date
cannot be matched by watching films at home.
Film Piracy
Film piracy (aided by technological advances)
has long-term implications for the business and
industry, as it may eventually force film studios
to invest less in films, resulting in the release
of fewer films and/or an increase in the use of
other channels for releasing films. So far, the
impact of piracy has been higher on alternative
media (especially on DVD) than on cinema.
Furthermore, it is currently not possible to
produce a 3D pirated version of the original
film from a portable recording device used
in a cinema.
Screen Advertising Revenue
Screen advertising accounts for a significant
proportion of the Group’s profits and the level
of revenues earned will be affected by the
overall demand for advertising and the
competitive pressures for that advertising
spend. The formation of Digital Cinema Media
Limited in 2008, with a joint venture partner,
was a positive step towards taking closer control
of future screen advertising revenues. The
advantages of screening advertisements to a
captive audience in cinemas and the potential
of digital media to deliver more and varied
advertising are potential opportunities to
attract more advertisers and to generate
higher revenues.
16
Cineworld Group plc
Annual Report and Accounts 2009
Loss of Key Management (or failure to attract
or retain the talent required for its business)
The policy of the Board is to attract, retain
and motivate executives of the calibre and
experience required, through competitive
remuneration packages which may have a cost
implication. Cineworld aspires to be a quality
employer, seeking to provide the conditions
to enable all employees to progress in their
employment and develop their skills and abilities
and to promote internally where possible.
Failure of It Systems and Suppliers
The failure of the Group’s IT systems, including
its website, telephone booking service and
Unlimited Card scheme administration, could
seriously impact its continued success. The
Group’s website, telephone booking service
and Unlimited Card scheme administration
are hosted by different specialist companies.
Suppliers are monitored and the Group employs
an appropriately qualified team to maintain its
in-house systems.
government Regulations and Actions
Cineworld’s business and operations are
affected by central and local regulations in
such areas as planning, environmental and
health and safety matters, licensing, food and
drink retailing, and the minimum wage. Failure to
comply with this type of legislation may result
in fines and/or suspension of the activity or
entire business operation. In addition, changes
to pension legislation and regulation relating to
the Group’s defined benefit schemes, could
result in additional costs from funding the
schemes’ deficits or from changes in the way
they are administered.
terrorism
Terrorist attacks, civil unrest, or other
geopolitical uncertainty could adversely impact
cinema attendances and the efficient operation
of the Group’s business.
Poor Location Selection
The selection of the wrong location for the
development of new cinemas could result in
lower than expected returns and a series of poor
decisions on location could seriously impact the
Group. Each potential site is reviewed carefully
and the management team are experienced in
the choice of location for, and development of,
new sites.
uK and global Economy
The main driver of cinema-going is the film
though it is recognised that macro-economic
influences may affect cinema-going and the
level of retail spend per customer on each visit.
With cinema being a less expensive form of
entertainment and leisure, economic downturns
may benefit cinemas at the expense of other
entertainment and leisure activities.
Any reduced consumer demand may impact
the level of advertising spend which may lead
to reduced screen advertising revenues.
In addition, the price of energy and foodstuffs
has a direct impact on costs which we may not
be able to pass on to customers.
The failure of one of the banks used by the
Group could result in the loss of deposits and/or
banking facilities. Banks are monitored and
reviewed and deposits spread between a
number of institutions to reduce the risk.
Availability of Capital
The cost and availability of finance, both debt
and equity, will affect the Group’s ability to
undertake investment and expansion. This has
been highlighted by the recent developments in
the financial world which have caused severe
reductions in lending and in reduced investor
confidence. Lack of available capital has
impacted property developers who have not
been able to proceed with developments which
would have included new cinemas. Reduced
lending may also affect the financing of film
productions which could reduce the supply of
films and/or delay their production and releases
in cinemas.
Existing and New Competitors
Existing competitors could change their
strategies or a new competitor could enter the
market at a local or national level reducing trade.
The cost of developing new sites or acquiring
existing cinemas are barriers to entry as is the
lack of readily available cinemas for acquisition.
Cineworld Group plc
Annual Report and Accounts 2009
17
Corporate
Responsibility
On Saturday mornings
it is possible for children
to see films for £1 which
is a price that has not
been increased for
over 13 years.
The Board is committed to ensuring that an
appropriate standard of corporate governance
is maintained throughout the Group. This
commitment includes recognition by the
Group of the importance of taking into account
its corporate social responsibilities (“CSR”)
in operating the business. In this context,
Cineworld seeks to integrate CSR considerations
relating particularly to social, ethical, health and
safety, and environment issues in its day-to-day
operations. The Board acknowledges its duty
to ensure the Group conducts its activities
responsibly and with proper regard for all its
stakeholders including employees, shareholders,
business partners, suppliers and the local
communities. Further information in respect of
the Group’s activities is set out below together
with illustrative examples.
Community
Cineworld observes the British Board of Film
Classification’s guidelines for film classification
unless the local authority specifies otherwise;
within this, however, it seeks to show as wide
a range and other screen content as possible.
It often uses the demands of local communities
to help direct what sort of product it shows
Cineworld was once again the leading exhibitor
of Bollywood product with a 62% box office
share of the 51 Bollywood films released during
the year (a lower number than usual due to the
widely publicised strike which lasted from April
until June). It also shows more foreign language
films, American independent productions and
smaller British releases than its principal
multiplex competitors. In addition to film,
Cineworld has continued to branch out into
alternative content and has exhibited live opera
from the Metropolitan Opera in New York, ballet
from the Royal Opera House and theatre from
the National Theatre which has all helped attract
wider audiences to our cinemas.
Cineworld works with, and supports, charities,
local government and community groups
on local and national events and initiatives.
In anticipation of the opening of a new multiplex
in Aberdeen in December 2009, the Group
sponsored another Cineworld branded Variety
Club Sunshine coach which was given to
Woodlands School, based in Aberdeen catering
for 29 children aged 5 to 19 with severe and
complex needs. Local churches have also
started to hire our cinemas for services on
Sunday morning more, a time when they are
traditionally quiet, giving them a further and
different role, in the community.
During the year, Cineworld also started to
sponsor two MA scholarships at the National
Film and Television School. It was once again
the major venue partner for the Edinburgh
International Film Festival as well as the
Jameson Dublin International Film Festival and
a number of other smaller film festivals across
the UK. Recently Cineworld has teamed up with
Global Radio to start off 2010 with a charity
screening programme, raising money for “Have
a Heart”, the charity associated with Heart FM.
While being pleased to support all these
worthwhile causes, these activities help to
establish and maintain the profile of the
Cineworld brand.
Access for All
The Group has been keen to promote a “Movies
for All” policy. Increasing accessibility results
in local cinemas playing a fuller role in the
communities in which they operate and
offer larger potential audiences. On Saturday
mornings it is possible for children to see
films for £1 which is a price that has not been
increased for over 13 years. Senior citizens and
students also receive discounts at certain times.
Free tickets are offered to helpers of wheelchair
users registered with the Cinema Exhibitor
Association (“CEA”).
All new cinemas are designed to exceed current
statutory requirements to provide buildings
which are technically advanced, yet meet high
operational standards in terms of public service,
safety and accessibility. They are designed to
remove physical features which can hinder the
use of the facility by the less physically able, so
that certain auditoriums are as accessible as
possible given the restrictions of any particular
location. The opportunity is also taken to
enhance access within cinemas when they
undergo major refurbishment as part of an
on-going programme of improvements.
The business has a Disability Focus Group
which meets regularly to review all aspects of
access for the disabled and the improvement
in the services provided in this area which
include regular screenings of subtitled and
audio descriptive films, the installation of
infrared systems in all new build cinemas
and a programme of replacing induction loop
systems in older cinemas during refurbishments.
All these changes have helped to improve
overall coverage for the hard of hearing within
the cinemas and are linked to digital projection
becoming more widespread. With an ongoing
programme being implemented for the
installation of digital projection to existing
cinemas and full digital projection being
installed in new cinemas, it will be possible
to provide further improvements in our facilities
for the hard of hearing and the partially sighted.
By 31 December 2009, 155 screens with digital
projections had been upgraded in this way
(including both new cinemas opened in 2009
which offer disabled facilities in every screen).
Film Piracy
One of the major threats to the cinema industry
is still film piracy. Without a strong and wide
range of films for exhibition, Cineworld’s offering
would be much less attractive to audiences. Film
piracy reduces or negates the returns that many
film studios and their backers receive and which,
if unchecked, will discourage the production of
so many varied films for general release. All
cinemas are exposed to the illegal and covert
recording of recently released films which is one
aspect of film piracy.
During 2009 with the simultaneous release of
movies worldwide and the increase in UK first
releases, there was an increased risk of film
18
Cineworld Group plc
Annual Report and Accounts 2009
The new popcorn
bags use 39% less raw
material which will save
over 24 tonnes of paper
per year.
piracy within the industry. Cineworld continued to
work closely with the CEA, Federation Against
Copyright Theft (“FACT”) and INFA©T Ireland in
order to help reduce and prevent film piracy.
In line with the operational strategy of the
Group, each cinema management team has a
responsibility to ensure that they do everything
reasonably practicable to protect the intellectual
property rights of films and alternative content
exhibited within our cinemas.
Increased vigilance around high-profile releases
and the use of night vision technology has
proved to be extremely effective this year and,
as a result, there has been no proven camcorded
films or forensic traces linked back to Cineworld
in the past year and resulted in one notable
success. During the year staff at Cineworld’s
cinema on the Isle of Wight successfully
disrupted the camcording of a film and reported
it to the police which resulted in a significant
legal test case. The offender was detained by
police and subsequently successfully prosecuted
under Section 6 of the Fraud Act 2006. Prior to
this case it was not clear that such a prosecution
could be brought under this section.
With the ever changing threat of evolving
technologies, Cineworld continues to review and
develop its training programme, policies and
procedures to ensure its staff are able to help
combat film piracy.
Environment
Cineworld seeks to comply with all relevant
environmental legislation and to operate in an
environmentally sensitive manner. The Directors
acknowledge the impact that the business has
on the environment and is operating a number
of processes to reduce the quantity of paper
and packaging that is used in the business.
Employees are encouraged to eliminate
unnecessary travel and use other methods of
communication in its place. Computer and other
office equipment that has reached the end of its
working life is resold, recycled or donated to
local organisations, as appropriate.
Being a multi-site business, the Group is
conscious of its total energy consumption and
the amount of waste materials generated and
is actively working to reduce both energy usage
and the quantity of waste materials produced
that cannot be recycled. The Group continues to
run pilot projects to evaluate possible measures
to reduce its environmental impact. For instance
at its multiplex in Didcot, a “grey water” system
was installed which reused rainwater to flush the
toilets and the results monitored. The system
did save water, however, upon evaluation the
life span carbon footprint of installing and
maintaining the system was greater than what
could be saved, therefore other systems are now
being investigated.
The Group is preparing for inclusion in the
Environment Agency’s Carbon Reduction
Commitment Energy Efficiency Scheme (“CRC”)
which will track carbon usage of the Group as of
April 2010. In February 2009, external
consultants were appointed to undertake energy
efficiency surveys at a sample of locations
focusing on electricity usage. These surveys
identified areas for improvement in equipment
and also operational practices. All cinemas
in the Group undertook a review of their own
operational procedures to ensure best practice
was being followed to minimise energy waste.
A benchmarking report was also produced that
ranked cinemas electricity consumption both
by area and by footfall. The benchmarking
report was used to identify 20 cinemas that
were representative of the estate where
improvements could be made. These 20
cinemas were provided with detailed
consumption data in a graphical form on a
monthly basis from May 2009 that allowed them
to compare their electricity usage against
previous months and also the pattern of daily
usage by half hourly intervals. For the period May
to November 2009, these 20 cinemas have
saved over 3.5% in electricity usage compared to
the same period in 2008.
The conversion to digital technology, which
commenced in earnest during the year, will
further reduce Cineworld’s environmental
impact. The move away from 35mm celluloid
prints represents a direct reduction in the use
of raw materials for the production of these
bulky prints, but also the amount of waste
that is ultimately produced as these prints are
shredded and are unable to be recycled at the
end of their relatively short life. In addition, the
distribution of digital content through small hard
drives is greatly reducing the delivery costs and
associated carbon footprint. Ultimately cable or
satellite delivery should remove the carbon
impact almost completely.
The conversion to digital, and 3D technology
in particular, has brought its own challenges.
Throughout the UK, the use of special
disposable 3D glasses to enable this format has
been the norm (as it was with Cineworld through
the choice of RealD as our technology partner).
In early 2009, Cineworld led the way in the UK
by starting to recycle these glasses and this had
a significant impact on the amount of wastage.
In November 2009, it took a much more positive
step. From 6 November, it altered its pricing
structure from a premium for 3D films with
“free” glasses to a smaller premium but with
customers being required to purchase glasses
separately. This change has significantly
encouraged customers to retain their glasses for
future use and develops potential opportunities
such as the marketing of special 3D glasses
including protective cases which, in turn, should
help the level of re-use accelerate significantly.
Retail
Cineworld takes a proactive stance on how
it markets food and drink in its cinemas and
continually looks to respond to the challenges
of marketing responsibly through offering more
healthy options and reducing its impact on the
environment, whilst maintaining the wide overall
choice that customers demand.
Following extensive trials of soya oil to replace
traditional coconut oil in our popcorn recipes,
Cineworld Group plc
Annual Report and Accounts 2009
19
Corporate
Responsibility
continued
Cineworld will be rolling out the recipe change to
all cinemas in early 2010. Soya oil is significantly
lower in saturated fat and calories. In addition,
all our pick’n’mix is now free of artificial flavours
and colours. These changes will not only bring
potential health benefits, but also commercial
benefits in the region of £80k per annum.
We continue to explore possible recyclable,
biodegradable and compostable replacements
for all of our packaging and have recently
commenced the roll out of a new specification
of popcorn bag. The new popcorn bags use 39%
less raw material which will save over 24 tonnes
of paper per year. We have been looking at the
viability of switching some of our key product
lines to UK sourced and recently moved to a new
nacho chip, which was previously being produced
in Spain. Our new nacho chip is manufactured
in the UK, contains 12% less salt and we have
reduced the packaging used by more than 8%.
In partnership with Ben & Jerry’s, we have also
rolled out an initiative which will save up to 78%
of the water used through our scoop shop
dipping wells.
We are continually reviewing the number of
suppliers that deliver direct to our cinemas
with a view to minimising the number of
vehicles and deliveries needed to operate our
concessions stands. We are also working with
our key supply partners to understand their
CSR credentials and looking to develop ways of
sharing practices and improving our own impact
on the environment. In addition, in determining
suppliers, consideration is given to the ethical
policies adopted by companies particularly with
regard to child labour and environmental issues.
Our People
Our people are the core to our success.
Cineworld’s Human Resources strategy is to
ensure we have the right people, in the right
place, at the right time and these people are
motivated, engaged and fulfilled so that they
drive the business forward. Ultimately only
motivated, engaged and fulfilled people will
deliver a great cinema-going experience to
our customers.
As part of the strategy, Cineworld is committed
to attracting, developing, engaging and retaining
talent. In 2009, Cineworld introduced a web
based recruitment management system which
enables the Company to treat all candidates
fairly and consistently. Once the selection
criteria has been consistently applied, both
suitable and unsuitable candidates are quickly
advised of status with their applications.
Successful candidates are then moved
through the recruitment process effectively
and efficiently. Recruiting managers have
been extremely pleased with the new system,
recognising that the calibre of candidates,
who are better suited to their roles, has
improved since its implementation.
In 2009, Cineworld
introduced a web
based recruitment
management system
which enables the
Company to treat all
candidates fairly and
consistently.
As part of the Cineworld commitment to
development, every single employee has
an induction programme and a number of
training and development programmes are
run on an annual basis. Key to an outstanding
workforce are well trained managers. During
2009, every General Manager attended a
bespoke development session called “People
Management”. This course focused on recruit,
train, motivate and retain and explored the
theory behind this strap-line along with a number
of practical workshops to up-skill managers.
Additionally, all managers attended a “Managing
Misconduct” course in 2009 to ensure they
had the skills and legal knowledge to manage
their teams effectively. A further development
programme is now underway to ensure all site
managers have the practical skills to interview
and train Cineworld site employees to help
them reach their full potential.
Cineworld’s policy is to promote from within
and it is notable that a significant proportion
of management and supervisory positions are
held by employees who have started within the
organisation at lower levels. To ensure staff
are developed to their full potential, there is
a performance management framework. Every
member of the senior management team and
all head office line managers have attended
workshops to ensure they have the skills to
set meaningful objectives and to appraise their
teams effectively which helps enable employees
to achieve their potential by having open
conversations about their performance and
career aspirations.
The Cineworld Human Resources team ensures
policies and procedures are up-to-date and
legally compliant which again enables fair and
consistent treatment of all employees. Quarterly
“health checks” are held with every general
manager to ensure Cineworld policies and
practices are being adhered to and Human
Resources coaching and guidance is provided
where needed.
All employees participate in the success
of Cineworld through bonus schemes and
Cineworld is proud that for the 15th consecutive
year bonuses were paid to all staff in 2009.
Cineworld is also committed to increasing the
number of employees who hold shares in the
Group. It has so far issued two invitations to
staff to participate in its SAYE Share Option
Scheme which provides employees with a further
opportunity to share in the Group’s success.
Employees are encouraged to share their views
and make suggestions to management in a
number of ways including via a dedicated email
address and good ideas are then acted upon.
In addition, to increase employee engagement
throughout 2010, focus groups are being held
with a cross section of staff to take their views
on working at Cineworld. Again, good ideas will
be captured and incorporated into ways of
working going forward for the benefit of all.
20
Cineworld Group plc
Annual Report and Accounts 2009
Unlike the audits in 2008/09, this year’s audits
are all being undertaken on an unannounced
basis in order to reflect the true operation of
health and safety at each site.
A review of documented health and safety
policies and procedures was carried out
in the latter part of the year to ensure that they
reflected changing legislative standards as well
as recommended good practices. Also, following
the completion of the IOSH Managing Safely
course by all senior field managers in April 2009,
further health and safety courses have been
arranged for the Learning and Development
team in 2010. This in-house team will then be
responsible for cascading accredited safety
training to site managers and other selected
personnel alike, maintaining and further
increasing the safety knowledge within
the Group.
Safety
The ongoing management of day-to-day health,
safety and welfare of Cineworld’s customers,
staff and contractors is of prime concern.
Further steps have been taken this year to
ensure that each cinema management team
has the knowledge, understanding and tools
necessary to effectively manage health and
safety to a high standard within its site to keep
all our staff, customers and other visitors as
safe as possible.
During the 2008/09 year, all cinemas were
subject to a Fire, Food and Health and Safety
audit and overall achieved an average mark of
81% (with 70% being considered the acceptable
level of performance). The process was overseen
and verified by external consultants. Follow-up
audits were undertaken at sites where standards
were not found to be at the level expected
by the Group and regular monthly compliance
monitoring was completed for all remaining
sites by way of reviewing monthly audit
update submissions.
To ensure the highest possible standards were
achieved, the acceptable pass mark for the next
round of Fire, Food and Health and Safety audits
has been increased to 85%. Early indications for
the 2009/10 year are that site standards have
significantly improved on last year’s results with
an average pass mark in excess of this figure.
The ongoing
management of health,
safety and welfare of
Cineworld’s customers,
staff and contractors is
of prime concern.
Cineworld Group plc
Annual Report and Accounts 2009
21
board of
Directors
Anthony Herbert bloom
Chairman
Stephen Wiener
Chief Executive Officer
Richard David Jones
Chief Financial Officer
thomas berard Mcgrath
Non‑Executive Director
Matthew David tooth
Non‑Executive Director
David Ossian Maloney
Non‑Executive Director
Peter Wodehouse Williams
Non‑Executive Director
Alan David Roux
Non‑Executive Director
22
Cineworld Group plc
Annual Report and Accounts 2009
Anthony Herbert bloom
Chairman – Age 71
Anthony Bloom joined the Board in October 2004
as Chairman and has served as Chairman of
Cine-UK Limited since the business was founded
in 1995. He was previously Chairman and Chief
Executive of The Premier Group Limited (South
Africa) and a Director of Barclays Bank (South
Africa). Mr Bloom holds Bachelor of Commerce
and Bachelor of Law degrees from the University
of Witwatersrand in South Africa and a Masters of
Law degree from Harvard Law School. He was a
Sloan Fellow at the Stanford Graduate School of
Business. In 2002, Mr Bloom was awarded the
degree of Doctor of Law (H.C.) by the University of
Witwatersrand in recognition of his contribution
towards the establishment of a non-racial society
in South Africa.
Richard David Jones
Chief Financial Officer – Age 48
Richard Jones was appointed to the Board
in March 2006. Mr Jones joined Touche Ross
in 1984 where he qualified as a chartered
accountant and worked in the audit and corporate
finance teams. In 1993, Mr Jones moved to the
corporate finance division at Clark Whitehill and,
in November 1995, he joined the team at Cine-UK
Limited. He was appointed Chief Financial Officer
in 2005. He has responsibility for all aspects of
finance for the Group including accounting,
taxation, treasury and business planning. He is
also responsible for IT. Mr Jones holds a degree
in mathematics from the University of Warwick.
Matthew David tooth
Non-Executive Director – Age 34
Matthew Tooth joined the Board in August 2004.
Mr Tooth is a Managing Director in the Private
Equity group at The Blackstone Group
International Limited and is responsible for
Blackstone’s investments in the European leisure
and consumer sectors. Prior to joining Blackstone
in 2003, Mr Tooth worked in the M&A and
leveraged finance teams at CSFB. Mr Tooth was
previously a Director of Orangina-Schweppes,
Southern Cross and Merlin Entertainments.
Mr Tooth holds a first class honours degree
in economics from Exeter University.
Peter Wodehouse Williams
Non-Executive Director – Age 56
Peter Williams joined the Board in May 2006.
He is Chairman of the Remuneration Committee
and a member of the Audit and Nomination
Committees. Peter joined EMI Group in February
2010 as an Executive Director of Maltby
Investment Limited. He is a Non-Executive
Director of Asos plc, Silverstone Holdings Limited
and is a member of the Design Council. From
December 2008 to May 2009, he was an
Executive Director of JJB Sports Plc, responsible
for the turnaround strategy and business
restructuring. Previously he was Chief Executive
at Alpha Group plc and, prior to that, Chief
Executive of Selfridges plc where he also acted
as Chief Financial Officer for over 10 years. Mr
Williams has also held senior finance positions in
Freemans plc, Bandive Limited and Aiwa Limited.
Mr Williams has a degree in mathematics from
Bristol University and is a chartered accountant.
Stephen Mark Wiener
Chief Executive Officer – Age 58
Stephen Wiener joined the Cineworld Board in
October 2004. He has 40 years’ experience in
the cinema industry, starting in the US as an
usher whilst a full time student, and rising through
various roles culminating in Vice President for
Cineplex Odeon in New York City. He then moved
to Warner Bros Europe in 1991 to become
Managing Director. In 1995, he left to found
Cine-UK Limited and developed the business
into a chain of 34 cinemas before it was acquired
by Blackstone in October 2004. At the time of
the UGC acquisition, he was appointed Chief
Executive Officer of the combined Group.
He is also a Director of the Cinema Exhibitors
Association and Chairman of Digital Cinema
Media Limited (“DCM”), the screen advertising
company 50% owned by Cineworld.
thomas berard Mcgrath
Non-Executive Director – Age 54
Thomas McGrath joined the Board in May 2005
and is Chairman of the Nomination Committee.
Previously he was Chief Operating Officer of
Viacom Entertainment Group and President
of Time Warner International Broadcasting,
prior to which he worked for Columbia Pictures.
Mr McGrath is currently a Senior Managing
Director of Crossroads Media Inc. and serves
on the board of directors of BUG Music,
Movie Gallery and Key Brand Entertainment.
Mr. McGrath holds a BA and an MBA from
Harvard University.
David Ossian Maloney
Non-Executive Director – Age 54
David Maloney joined the Board in May 2006. He
is the Senior Independent Director, Chairman of
the Audit Committee and a member of the
Nomination and Remuneration Committees. Mr.
Maloney is currently the Chairman of Hoseasons
Holdings Ltd, a Non-Executive Director of Carillion
plc, Enterprise Inns plc, Micro Focus International
plc and Ludorum plc and the Chairman of the
Board of Trustees of Make A Wish Foundation
(UK). Previously, he was a Director of Virgin Mobile
Holdings (UK) plc and held a number of senior
positions, including Chief Financial Officer for Le
Meridien Hotels & Resorts, Thomson Travel Group
plc and Avis Europe plc. Mr. Maloney holds a
degree in Economics from Heriot Watt University,
Edinburgh and is a fellow of the Chartered
Institute of Management Accountants.
Alan David Roux
Non-Executive Director – Age 40
Alan Roux was appointed a Director in November
2009 having acted as an Alternate Director since
September 2008. Mr Roux is an Executive
Director of The Blackstone Group International
Limited where he is responsible for monitoring
and advising Blackstone’s private equity portfolio
of companies in Europe. Previously he was the
Director of Operations Development at Tesco
Stores. His earlier career was with Procter &
Gamble and the Boston Consulting Group.
Mr Roux is also a Director of Tragus Limited and
United Biscuits Limited. An electronic engineer
by training, Mr Roux holds a MBA from Columbia
Business School.
Cineworld Group plc
Annual Report and Accounts 2009
23
Directors’ Report
The Directors present their Annual Report and the audited
financial statements for the 53 week period ended 31 December
2009. The comparative period is for the 52 week period ended
25 December 2008.
Box Office Revenue
This measure represents the principal revenue stream of the
Group and is used generally within the cinema industry as the
measure of market share (as reported by EDI Neilsen).
Principal Activity
The Company acts as an investment holding company for a group
of companies whose principal activity is the operation of cinemas
in the UK and Ireland for the exhibition of films and related retail
activity. The Directors do not expect any change in the principal
activity during the next financial period.
Strategy and Business Review
The strategy of the Group is set out on page 6 and a review of its
business and operations, including the main trends and factors
likely to affect its future development and performance, is set out
in the Chief Executive and Chief Financial Officers’ Review on
pages 8 to 15.
Key performance indicators are set out below and the principal
risks and uncertainties are set out on pages 16 to 17. Information
about environmental, employee and community issues is set out
in part below and also in the Corporate Responsibility (“CR”)
section on pages 18 to 21.
The Strategy, Chief Executive and Chief Financial Officers’
Review, Risks and Uncertainties and CR sections are incorporated
by reference into this Directors’ Report. Certain statements in
these sections are forward looking and so involve risk and
uncertainty because they relate to events, and depend upon
circumstances, that will occur in the future and therefore results
and developments can differ materially from those anticipated.
The forward looking statements reflect knowledge and information
available at the date of preparation of this Annual Report and the
Company undertakes no obligation to update these forward-
looking statements. Nothing in this Annual Report should be
construed as a profit forecast.
To the extent it is material, the Group’s approach to the use of
financial instruments in respect of its financial risk management
objectives and its exposure to price, liquidity and cash flow risk is
set out in Note 20 to the financial statements on page 72 to 75
and are also incorporated in this report by reference.
Key Performance Indicators (“KPI’s”)
53 week
period ended
31 December
2009
49.1m
£230.9m
£4.71
£1.72
£55.7m
52 week
period ended
25 December
2008
45.1m
£197.5m
£4.38
£1.71
£53.0m
Admissions
Box Office Revenue
Average ticket price
Retail spend per customer
EBITDA
The Board of Directors and executive management receive a wide
range of management information. The following are the principal
measures of achievement that are reviewed on a regular basis to
monitor the development of the Group:
Admissions
This measure is the ultimate driver of the business and primary
indicator of business volume.
Average Ticket Price and Retail Spend per Customer
Average ticket price is calculated by dividing total net box office
revenue by total admissions. It is a composite of the various
pricing structures operated during the day and for different
promotions for each cinema. Together with admissions this gives
box office, which is the primary economic measurement for the
industry. Retail spend per head is a measure of the value of the
retail activity and our ability to generate other revenues directly
from our customers. Both box office and retail measures are
stated excluding VAT.
EBITDA
EBITDA (as defined on Note 1 to the financial statements) serves
as a useful proxy for cash flows generated by operations and
of the Group’s ability to finance its capital expenditure and
pay dividends.
Results and Dividends
The results for the Group for the 53 week period ended
31 December 2009 are presented under International Financial
Reporting Standards (“IFRS”) as adopted by the EU. The results
for the period are set out in the Group Consolidated Statement of
Comprehensive Income on page 41. The results for the parent
company are drawn up under UK GAAP.
An interim dividend of 3.2p per share was paid on 2 October
2009. The Directors are recommending a final dividend of 6.8p
which, if approved by the shareholders at the Annual General
Meeting (“AGM”), will be paid on 7 July 2010 to shareholders on
the register on 11 June 2010.
Financial Risk Management
The Board regularly reviews the financial requirements of the
Group and the risks associated therewith. The Group does not
use complicated financial instruments, and where financial
instruments are used it is for reducing interest rate risk. The
Group does not use derivative financial instruments for trading
purposes. Group operations are primarily financed from retained
earnings and bank borrowings (including an overdraft facility). In
addition to the primary financial instruments, the Group also has
other financial instruments such as debtors and trade creditors
that arise directly from the Group’s operations.
The Group considers the currency risk on consolidation of the
assets and liabilities of its Irish subsidiary, Adelphi-Carlton
Limited, to be of low materiality and no hedging is provided.
The Group’s trade and operations are otherwise based in the UK.
On 26 April 2007, as part of the IPO, the Group refinanced its
bank loan and entered into a new five year facility agreement
consisting of £135m loan and £30m revolving credit and
overdraft facility to replace its previous facility of £246m. Half of
the loan, an amount of £67.5m, was hedged in accordance with
the terms of the facility agreement on a fixed rate of 5.35% whilst
the remaining loan attracted interest at LIBOR. The whole loan
attracted a margin of 0.95% during the year (originally 1.35%).
The Group has taken steps to ensure that the swap is accounted
for as a hedge and that changes in its valuation are recognised
through reserves. Further information is provided in Note 20 to
the financial statements.
24
Cineworld Group plc
Annual Report and Accounts 2009
Directors and Directors’ Interests
Short biographical details of the Directors of the Company, whom
held office at the end of the period under review, are given on
pages 22 and 23. During the year, Lawrence Guffey, a Blackstone
Director (as defined below), was replaced as a Director by Alan
Roux, another Blackstone Director. Alan Roux had previously
acted as Lawrence Guffey’s Alternate Director since 23 November
2008. No compensation was paid for the loss of office on this
change of Directors.
In accordance with the Articles of Association (the “Articles”),
one third of the Directors are retiring by rotation at the AGM and,
being eligible, are offering themselves for re-election. The
Directors retiring by rotation, are David Maloney, Thomas McGrath
and Stephen Wiener. In addition under the Articles, any Director
appointed during the year must resign and stand for re-election
at the next AGM and so Alan Roux will also be offering himself
for election. Following the Board evaluation process undertaken
in September 2009, the Board is satisfied that each Director
standing for election continues to show the necessary
commitment and to be an effective member of the Board
due to their skills, expertise and business acumen.
For so long as the Blackstone Shareholders (as defined below in
the Major Shareholder Voting Arrangements section) together hold
(i) at least 20% of the voting rights, they are entitled to appoint
(and remove and reappoint) two Non-Executive Directors to the
Board (each a “Blackstone Director”), one of whom shall be the
Deputy Chairman of the Board and (ii) at least 10% of the voting
rights, they are entitled to appoint (and remove and reappoint) one
Non-Executive Director. Currently The Blackstone Group has not
elected to exercise their right to appoint a Blackstone Director as
the Deputy Chairman of the Board, but has reserved their right to
do so in the future.
Mr Tooth is a Managing Director at The Blackstone Group and Mr
Roux is an Executive Director of The Blackstone Group. The
Blackstone Shareholders are affiliates of The Blackstone Group.
Mr Tooth and Mr Roux are the current Blackstone Directors under
these arrangements.
Details of the Directors’ interests in the issued share capital of
the Company at the beginning and end of the year under review
are set out below. Details of the Directors’ remuneration and
information on their service contracts are set out in the
Remuneration Report on pages 34 to 38.
Details of the Directors’ interests in the ordinary shares of the
Company arising under the Group’s Share and Option Schemes
are set out in the Directors’ Remuneration Report on page 38.
No rights to subscribe for shares in or debentures of Group
companies were granted to any of the Directors or their immediate
families, or exercised by them, during the financial period.
None of the other Directors had any disclosable interest in the
shares of Group companies and there have been no changes to
Directors’ share interests between 31 December 2009 and the
date of this report.
None of the Directors has a material interest in any contract of
significance to which the parent company or a subsidiary was a
party during the financial year, other than as disclosed above, in
their service contracts or letters of appointment described on
page 36 and in Note 24, related parties.
The Directors who held office at the end of the financial period had the following interests in the ordinary shares of the Company:
Director
Anthony Bloom
Stephen Wiener
Richard Jones
Thomas McGrath
David Maloney
Peter Williams
Ordinary shares held directly
|||||
31 December
2009
–
1,593,800
247,939
131,000
10,000
10,000
25 December
2008
–
1,593,800
247,939
131,000
10,000
10,000
Ordinary shares held by
companies in which a Director
has a beneficial interest
31 December
2009
25 December
2008
1,723,224* 1,723,224*
–
–
–
–
–
–
–
–
–
–
* Shares are held by a nominee for a Jersey based discretional trust, of which Mr Bloom is one of the potential beneficiaries.
Cineworld Group plc
Annual Report and Accounts 2009
25
Directors’ Report continued
Conflicts of Interest
The Articles were amended at the 2008 AGM to permit the Board
to consider, and if it sees fit, to authorise situations where a
Director has an interest that conflicts, or may possibly conflict,
with the interests of the Company. There is in place a formal
system for the Board to consider authorising such conflicts
whereby the Directors who have no interest in the matter decide
whether to authorise the conflict and any conditions to be
attached to such authorisations.
Share Capital and Control
The Company has only one class of share capital formed of
ordinary shares. All shares forming part of the ordinary share
capital have the same rights and each carries one vote. Details of
the share capital, and changes in it over the period, are shown in
Note 19 to the financial statements. There has been no change to
the share capital between 31 December 2009 and the date of
this report.
The holders of ordinary shares are entitled to receive Company
reports and accounts, to attend and speak at general meetings of
the Company, to appoint proxies and to exercise voting rights.
There are no restrictions on transfers of, or limitations on the
holding of, ordinary shares and there is also no requirement of
any prior approval of any transfers other than those which may be
applicable from time to time under existing laws or regulation. No
ordinary shares carry any special rights with regard to control of
the Company. There are no restrictions on voting rights attaching
to the ordinary shares. The Company is not aware of any known
agreements between shareholders that restrict the transfer of
voting rights attached to ordinary shares. Details of an
arrangement in respect of how voting rights are to be exercised
by the largest shareholder are set out below in the Major
Shareholder Voting Arrangements section.
The Company’s Articles set out the rules governing the
appointment and replacement of Directors. In addition the
Articles, together with English law, define the Board’s powers.
Changes to the Articles must be approved by shareholders in
accordance with the Articles themselves and legislation in force
at the relevant time. New Articles were adopted at the Company’s
AGM in May 2008 mainly to take account of the changes
brought about by the implementation of certain provisions of the
Companies Act 2006. Further amendments to the Articles will be
proposed at the AGM this year principally to reflect the
implementation of the final provisions of the Companies Act
2006. Details of the proposed changes are set out in the Notice
of AGM dispatched to shareholders with the Annual Report and
Accounts (the “AGM circular”).
Major Shareholder Voting Arrangements
As set out under Substantial Shareholdings below, Blackstone
Capital Partners (Cayman) IV L.P., Blackstone Capital Partners
(Cayman) IV-A L.P. and Blackstone Family Investment Partnership
(Cayman) IV-A L.P. (together the “Blackstone Shareholders”)
in aggregate control the exercise of 20.09% of the rights to
vote at general meetings of the Company. The Company and the
Blackstone Shareholders entered into a Relationship Agreement
dated 26 April 2007 to regulate the relationship between them.
The Blackstone Shareholders have undertaken to exercise their
voting powers to ensure that the Company is capable of carrying
on its business for the benefit of shareholders of the Company as
a whole and independently of the Blackstone Shareholders and
have further agreed not to exercise their voting rights in favour of
any amendment to the Memorandum and Articles of Association
of the Company in a manner which would be contrary with the
principle of independence of the Company. The Relationship
Agreement will terminate if the Blackstone Shareholders and
their affiliates collectively hold less than 10% of the voting rights
of the Company.
Essential Contracts and Arrangements
The Group has a number of contractual agreements with its
suppliers in support of its business. While the loss of some of
these arrangements may cause temporary disruption, none on
their own are considered essential to the business of the Group.
Change of Control
There are no significant agreements which take effect, alter or
terminate in the event of a change of control of the Company,
except that under its current banking arrangements a change of
control may trigger a right for lenders to require early repayment of
all sums outstanding.
No Director or employee is contractually entitled to compensation
for loss of office or employment as a result of a change in control;
however, provisions in the Company’s share schemes may cause
options or awards granted to employees to vest on a change
of control.
Substantial Shareholdings
At 11 March 2010, the Group had been notified, pursuant to the Disclosure and Transparency Rules of the following interests in the
voting rights of the Company:
Blackstone Shareholders:
Blackstone Capital Partners (Cayman) IV L.P.
Blackstone Capital Partners (Cayman) IV-A L.P.
Blackstone Family Investment Partnership (Cayman) IV-A L.P.
Artemis Investment Management Limited
HSBC Holdings plc
Parvus Asset Management (UK) LLP
Legal & General Group Plc
AXA S.A.
Rathbone Brothers PLC
Tosca Fund Asset Management LLP
Voting rights
% of total
voting rights
Nature of holding
20,993,954
638,250
6,846,645
22,535,349
14,163,717
13,999,627
7,525,879
7,456,655
7,443,449
7,077,557
14.81 Direct interest
0.45 Direct interest
4.83 Direct interest
15.90 Direct interest
10.00 Direct and indirect interest
9.87 See below*
5.31 Direct and indirect interest
5.26 Direct and indirect interest
5.25
4.99 See below†
Indirect interest
* Disclosed as an equity swap being a financial instrument with similar economic effect to a Qualifying Financial Instrument.
† Disclosed as a CFD being a financial instrument with similar economic effect to a Qualifying Financial Instrument.
26
Cineworld Group plc
Annual Report and Accounts 2009
Issue of New Shares and Purchase of Own Shares
At the AGM held on 21 May 2009, shareholders gave authority for
the allotment of shares up to an aggregate nominal value of up to
£944,810 subject to certain conditions. This authority will expire
on the earlier of the 2010 AGM and 20 August 2010. No shares
have been issued under this authority.
Also at the AGM held on 21 May 2009, shareholders gave
authority for the purchase of up to 21,244,054 ordinary shares in
the Company for cancellation or placing into treasury. No shares
have been acquired under this authority.
The Board proposes to seek shareholder approval at the AGM to
renew both the Company’s authority to issue new shares and its
authority to purchase its own ordinary shares for cancellation or
placing in treasury. Details of the proposed resolutions are set out
in the AGM circular.
Annual General Meeting
The Notice convening the AGM, to be held at The Cineworld
Cinema, Southside Shopping Centre, Wandsworth High Street,
London SW18 4TF at 11.00 am on 12 May 2010, is contained in
the AGM circular. Details of all the resolutions to be proposed are
set out in the AGM circular.
Introduction of a New Share Option Plan
As explained in the Directors’ Remuneration Report on pages 34
to 38, approval is being sought from shareholders at the AGM for
the introduction of a new Company Share Option Plan. Further
details are set out in the AGM circular.
Directors’ and Officers’ Insurance and Indemnities
The Company maintains insurance cover for all Directors and
officers of Group companies against liabilities which may be
incurred by them whilst acting as Directors and officers. As
at the date of this report, indemnities are in force under which
the Company has agreed to indemnify the Directors as permitted
by law and by the Articles against liabilities they may incur in the
execution of their duties as Directors of the Company.
Political and Charitable Contributions
The Group’s policy, which it has followed, is to make no donations
to political parties. During the year, the Group made charitable
donations of £45,686 (2008: £37,500) to a variety of local and
national charities in the UK. In addition the Group supported over
35 film screenings on behalf of various charities in the year and
responded to over 1,400 requests from charities for free tickets.
Payment of Suppliers
Cineworld Group plc, which holds the investments in the Group’s
companies, does not trade itself and does not have suppliers
as defined by the Companies Act 2006. The Directors believe,
however, it would be helpful to give the disclosures on a
consolidated basis. The Group seeks the best possible terms
from suppliers appropriate to its business and in placing orders
gives consideration to quality, delivery, price and terms of
payment. The Group does not follow a specific payment code but
has a policy to pay its suppliers in accordance with the specific
terms agreed with each supplier. The average number of days
payments to suppliers were outstanding at 31 December 2009
for the Group was 32 days (2008: 36 days).
Employees
The policy is to recruit, employ and develop staff on the basis of
the suitability of their qualifications and experience, regardless of
sex, marital status, race, nationality, age, sexual orientation or
religion. It is Company policy to give full and fair consideration to
applications for employment from disabled people, having regard
to their particular abilities and aptitudes. Full consideration is
given to continuing the employment of staff who become disabled,
including considering them for other reasonable positions.
The health, welfare and development of the Group’s employees
remain a priority. With the intent of attracting, recruiting,
developing and retaining key employees, Cineworld maintains
a number of policies and procedures for the benefit of its
employees, which can be accessed by employees via the Human
Resources department and via the Human Resources manual on
the Company intranet. Continuing education, training and
development are important to ensure the future success of the
Group and employee development is encouraged through
appropriate training. The Group supports individuals who wish to
obtain appropriate further education qualifications and
reimburses tuition fees up to a specified level.
Regular and open communication between management and
employees is essential for motivating the workforce. Briefings
are held regularly to provide updates on Group business and to
provide opportunity for questions and feedback. There is regular
consultation with the Broadcasting Entertainment Cinematograph
and Theatre Union (“BECTU”). The Company also maintains both
an internet website which is freely accessible and an intranet site
accessible to all head office employees and at all cinemas.
Corporate Governance
Details of the Group’s Corporate Governance arrangements are
set out in the Corporate Governance Statement on pages 29 to
33 which together with the Directors’ Remuneration Report and
the Directors' Responsibilities Statement form part of this report
together with any other parts cross referenced from it.
Corporate Responsibility
Cineworld recognises its responsibilities to the communities
in which it operates and to operate in a way that respects the
environment and people within those communities. Further details
on its approach to such matters are set out in the Corporate
Responsibility section on pages 18 to 21.
Significant Events since the Year End
There were no significant events.
Disclosure of Information to Auditors
The Directors who held office at the date of approval of this
Directors’ Report confirm that, so far as they are each aware,
there is no relevant audit information of which the Company’s
auditors are unaware; and each Director has taken all the steps
that he ought to have taken as a Director to make himself aware
of any relevant audit information and to establish that the
Company’s auditors are aware of that information.
Auditors
KPMG Audit Plc have confirmed that they are willing to continue in
office and a resolution proposing their reappointment, at a fee to
be agreed by the Directors, will be proposed at the AGM.
Funding and Liquidity
Information regarding the Group’s business activities,
together with the factors likely to affect its future development,
performance and position is set out in the Chief Executive and
Chief Financial Officers’ Review and the Risks and Uncertainties
section on pages 8 to 17. The financial position of the Group, its
cash flows, liquidity position and borrowing facilities are described
Cineworld Group plc
Annual Report and Accounts 2009
27
Directors’ Report continued
in the Chief Executive and Chief Financial Officers’ Review on
pages 8 to 15. In addition Note 20 to the financial statements
includes the Group’s objectives, policies and processes for
managing its capital; its financial risk management objectives;
details of its financial instruments and hedging activities; and its
exposures to credit risk and liquidity risk.
As highlighted in Note 15 to the financial statements, the Group
meets its day-to-day working capital requirements through
its bank facilities which consist of a £111m term loan plus £30m
revolver which matures in 2012. The current economic conditions
create uncertainty particularly over: (a) the level of demand for the
Group’s products; and (b) the availability of bank finance in the
foreseeable future.
The bank facility is subject to two covenants: the ratio of EBITDA to
net debt and the ratio of EBITDAR (pre-rent EBITDA) to net finance
charges. The Group’s forecasts and projections, taking account of
reasonably possible changes in trading performance, show that
the Group should be able to operate within the level of its current
facility, including compliance with the bank facility covenants.
The Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
foreseeable future. Thus they continue to adopt the going concern
basis in preparing the annual financial statements.
By order of the Board
Richard Ray
Company Secretary
Cineworld Group plc
11 March 2010
Registered office:
Power Road Studios
114 Power Road
Chiswick
London W4 5PY
Registered: England
No: 5212407
28
Cineworld Group plc
Annual Report and Accounts 2009
Corporate Governance Statement
Compliance with the Combined Code
The Board is committed to ensuring that an appropriate standard
of corporate governance is maintained throughout the Group. The
principal governance rules applying to UK companies listed on the
London Stock Exchange are contained in the Combined Code on
Corporate Governance published by the Financial Reporting
Council in June 2008 (“the Combined Code”) and which are
available on its website www.frc.org.uk. For the year ended
31 December 2009, the Board considers that the Company was
compliant with the provisions of the Combined Code except that
the Chairman did not meet the independence criteria on his
appointment (Code Provision A2.2). Further details are set out
below under the heading “Directors and Directors’ Independence”,
otherwise this report explains how the Company has complied
with the provisions of the Combined Code. The information
required to be disclosed by the Disclosure and Transparency
Rules (“DTR”) 7.1 and 7.2 is set out in this statement except that
information required by DTR 7.2.6 which is set out in the
Directors’ Report on pages 24 to 28 and is incorporated in this
statement by reference.
The Board
The Group is ultimately controlled by the Board of Directors of
the Company. The Board is responsible for the overall leadership
of the Group and for determining its long-term objectives and
commercial strategy to create and deliver strong and sustainable
financial performance to maintain and enhance shareholder value.
In fulfilling its role, the Board ensures that necessary financial
and other resources are available to enable the Group’s objectives
to be met.
The Board meets regularly six times a year and also once for a
strategy day. The meetings follow a formal agenda which includes
matters specifically reserved for decision by the Board. The Board
also meets as and when necessary to discuss and approve
specific issues and all Directors receive notice of such meetings
and are given the opportunity to comment on the issues being
discussed if they are unable to attend the meeting.
A schedule of matters specifically reserved for decision by the
Board has been agreed and adopted. These matters include:
setting Group strategy; approving an annual budget and medium-
term forecasts; reviewing operational and financial performance;
approving major acquisitions, divestments and capital
expenditure; succession planning; approving appointments to
the Board and of the Company Secretary; and approving policies
relating to Directors’ remuneration and contracts.
The Board is supplied on a monthly basis with detailed
management accounts and an overview of Group financial and
operational performance.
Directors and Directors’ Independence
The Board throughout the year has been composed of eight
members, consisting of two Executive Directors and six Non-
Executive Directors, three of whom are independent. Under
provision A2.2 and A3.1 of the Combined Code, Anthony Bloom,
a Non-Executive Director and Chairman of the Company, was not
considered by the Board to be independent as at the time of his
appointment as Chairman of the Company he also served as
chairman on the board of another company, Cine-UK Limited,
within the Group and had held this position since its foundation in
1995. The Board considers that, although Anthony Bloom was not
viewed as independent on appointment, his knowledge and
understanding of the business are such as to justify him retaining
the role as Chairman. Alan Roux (who replaced Lawrence Guffey
during the year) and Matthew Tooth, both Non-Executive Directors,
are also considered by the Board not to be independent (as was
Lawrence Guffey) by virtue of their positions at The Blackstone
Group, with whom the Blackstone Shareholders are affiliated.
The Blackstone Shareholders are significant shareholders in
the Company. The names of the Directors together with their
biographical details are set out on pages 22 and 23.
The terms and conditions of appointment of Non-Executive
Directors are set out in letters of appointment and are made
available for inspection by any person at the Company’s registered
office during normal business hours and will be available at the
Annual General Meeting (“AGM”). Further details of the letters of
appointment of the Non-Executive Directors and the service
contracts of the Executive Directors can be found in the Directors’
Remuneration Report on pages 34 to 38.
The Roles of the Chairman and Chief Executive Officer
The posts of Chairman and Chief Executive Officer are separate.
The division of responsibility between the Chairman of the Board,
Anthony Bloom, and the Chief Executive Officer, Stephen Wiener,
is clearly defined in writing.
The Chairman, together with the Chief Executive Officer, leads the
Board in determination of its strategy having regard to the Group’s
responsibilities to its shareholders, customers, employees and
other stakeholders. The Chairman is responsible for organising the
business of the Board ensuring its effectiveness and setting its
agenda. The Chairman facilitates the effective contribution of
Non-Executive Directors and oversees the performance evaluation
of the Board and he regularly discusses matters with the Non-
Executive Directors without the Executive Directors being present.
The Chairman performs a number of external roles but the Board
is satisfied that these are not such as to interfere with the
performance of the Chairman’s duties to the Group.
The Chief Executive Officer has direct charge of the Group on a
day-to-day basis and is accountable to the Board for the financial
and operational performance of the Group. He holds regular
meetings with his senior management team consisting of senior
executives who assist him in this task.
Independent Directors and the Company Secretary
The Combined Code recommends that, in the case of smaller
companies incorporated in England which are below the FTSE
350, at least two non-executive members of the Board of
Directors should be independent in character and judgement and
free from relationships or circumstances which are likely to affect,
or could appear to affect, their judgement.
The Board considers that David Maloney, Thomas McGrath and
Peter Williams are all Independent Non-Executive Directors being
independent of management and have no business relationship or
other relationship which could interfere materially with the
exercise of their judgement.
David Maloney has been appointed as the Senior Independent
Non-Executive Director and he, together with Peter Williams, is
available to shareholders if they have concerns which contact
through the normal channels of Chairman, Chief Executive Officer
or Chief Financial Officer has failed to resolve or for which contact
is inappropriate.
Cineworld Group plc
Annual Report and Accounts 2009
29
Corporate Governance Statement continued
The Independent Non-Executive Directors bring an objective view
point and range of experience to the Company and ensure that no
individual or group of individuals is able to dominate the Board’s
decision making. All the Non-Executive Directors also have access
to independent legal advice subject to consulting with the Board
and following the agreed procedure.
The Company Secretary is responsible for advising and
supporting the Chairman and the Board on corporate governance
matters, ensuring Board procedures are followed and facilitating
the good information flow within the Board and the Board
appointed Committees.
Professional Development and Performance Evaluation
Under the direction of the Chairman, the Board’s responsibilities
include facilitating induction and professional development.
Any new Director receives a comprehensive, formal and tailored
induction into the Company’s operations. Appropriate training is
provided to new Directors and is also available to other Directors
as required.
During the year, a performance evaluation was carried out in
respect of the Board, the Audit, Remuneration and Nomination
Committees and each individual Director including the Chairman.
The process involved the completion of assessment
questionnaires by each of the Directors and Committee Members.
The results were then collated by the Company Secretary and
a summary presented to the relevant Committee and the Board.
The evaluation confirmed that overall the Board and Committee
processes were working appropriately and the Directors including
the Chairman were performing satisfactorily, however there were a
few matters identified where the Directors felt that the time
allocated to them needed to be increased in the future and steps
have been and are being taken to address these concerns.
Board Committees
In accordance with best practice, the Board has appointed a
number of Committees, as set out below, to which certain Board
functions have been delegated. Each of these Committees
has formal written terms of reference which clearly define their
responsibilities. During the year, each Committee reviewed its
own terms of reference and recommended changes to the Board
which it adopted. The terms of reference of each of the Board’s
three Committees are available on the website or from the
Company Secretary.
Audit Committee
The Company’s Audit Committee comprises two Independent
Non-Executive Directors (namely David Maloney and Peter
Williams) and it met five times during the financial year. Both
members of the Committee are considered by the Board to have
recent and relevant financial experience. The Company considers
that it complies with the Combined Code which recommends that
the Audit Committee of a smaller company which is below the
FTSE 350 should comprise of at least two members who should
both be independent Non-Executive Directors, and at least one
member should have recent and relevant financial experience.
The Audit Committee assists the Board in discharging its
responsibility with regard to financial reporting, external and
internal audits and controls, including monitoring the financial
reporting process, reviewing the Company’s annual financial
statements, reviewing and monitoring the extent of the non-audit
work undertaken by external auditors, advising on the appointment
of external auditors and reviewing the effectiveness of the
Company’s internal audit activities, internal controls and risk
management systems. The ultimate responsibility for reviewing
and approving the Annual Report and Accounts and half-yearly
reports remains with the Board.
The Chairman, the Chief Executive Officer, the Chief Financial
Officer, other senior executives, the internal auditors and the
external auditors may be invited to attend meetings, but are not
members. During the period, the main activities of the Audit
Committee were:
y
y
y
y
y
y
y
y
Monitoring the financial reporting process and reviewing the
half-year and annual financial statements with particular
reference to accounting policies, together with significant
estimates and financial reporting judgements and the
disclosures made therein;
Reviewing the management representations made to the
external auditors and the Company’s procedures to ensure
all relevant information has been disclosed;
Discussing any issues arising out of the interim review and
full year audit with the external auditors (in the absence of
management where appropriate);
Reviewing the risk register and the measures implemented
to mitigate the principal risks facing the Group;
Monitoring and reviewing the effectiveness of the internal
audit function and the Group’s internal financial controls
together with its broader internal controls and risk
management systems;
Considering the reports of Grant Thornton UK LLP review
of specific areas of risk (following their appointment in
November 2008 to help implement a three year internal
audit plan to assist in ensuring ongoing compliance with
the Combined Code);
Making recommendations to the Board with regard to
continuing the appointment and remuneration of the
external auditor; overseeing the Company’s relations with
the external auditor and monitoring the effectiveness of the
audit process; and
Reviewing its terms of reference and recommending changes
to the Board.
The Committee also considers on an ongoing basis the
independence of the external auditors and has established
policies to consider the appropriateness or otherwise of
appointing the external auditors to perform non-audit services.
As detailed on page 27 the external auditors are KPMG, who have
provided certain non-audit services to the Company, principally
in respect of advice on taxation and corporate finance matters.
The Committee is satisfied that such work was best undertaken
by KPMG and their objectivity has not been impaired by reason
of this further work. The Committee also reviewed and continues
to oversee the whistleblowing arrangements which enable
employees to raise concerns about improprieties in financial
reporting and other matters on a confidential basis.
Nomination Committee
The Company’s Nomination Committee is comprised of three
members, all of whom are Independent Non-Executive Directors
(namely Thomas McGrath, David Maloney and Peter Williams) and
it met two times during the financial year. The Company considers
that it complies with the Combined Code, which provides that a
majority of the members of the Nomination Committee should be
Independent non-executive directors. Due to the importance that
the Directors play in the success of the Group, the Chairman is
invited to attend meetings and does so except when his own
position is being discussed.
30
Cineworld Group plc
Annual Report and Accounts 2009
The Nomination Committee assists the Board in discharging its
responsibilities relating to the composition of the Board. It is
responsible for evaluating the balance of skills, knowledge and
experience on the Board, the size, structure and composition
of the Board, retirements and appointments of additional and
replacement Directors and makes appropriate recommendations
to the Board on such matters.
Remuneration Committee
The Company’s Remuneration Committee comprises two
Non-Executive Directors (namely David Maloney and Peter
Williams) and it met five times during the financial year. The
Company considers that it complies with the Combined Code,
which provides that the Remuneration Committee of a smaller
company which is below the FTSE 350 should consist of at least
two members who are both independent non-executive directors.
The Remuneration Committee assists the Board in fulfilling
its responsibilities in relation to remuneration, including making
recommendations to the Board on the Company’s policy on
executive remuneration, determining the individual remuneration
and benefits package of each of the Executive Directors and
monitoring and approving the remuneration of senior management
below Board level.
The Remuneration Committee appointed Watson Wyatt (now
Towers Watson) as an external advisor in November 2008 and
took advice from them during the year. Watson Wyatt have no
other connection with the Group except as the actuary to the
pension scheme of Adelphi-Carlton Limited, the Group’s operating
company in Ireland.
The Chief Executive Officer is consulted on the remuneration
packages of the other senior executives and attends discussions
by invitation except when his own position is being discussed.
Given the essential part remuneration plays in the success of
the Group, the Chairman is also invited to attend meetings of the
Committee and does so except when his own remuneration is
being considered. The Committee does not deal with the fees
paid to the Non-Executive Directors. The report of the
Remuneration Committee is set out on pages 34 to 38.
Re-election
Under the Company’s Articles of Association, at the AGM each
year one third of the Directors (or if their number is not three or a
multiple of three, the nearest number to, but not less than one
third) must retire by rotation and being eligible may stand for
re-election. A Director must retire (and will be counted in the one
third to retire) if he was last appointed or re-appointed three years
or more prior to the AGM or has served more than eight years as
a Non-Executive Director (excluding as Chairman of the Board).
Investor Relations
The Directors value contact with the Company’s institutional and
private investors. An Interim and Annual Report and Accounts are
sent to all shareholders. Presentations are given to shareholders
and analysts following the announcement of the interim results
and the preliminary announcement of the full year results. Interim
management statements are issued twice each year in respect of
the first and third quarters and in addition trading updates are
issued in early January and late June immediately before the
Company enters into its close period leading up to the interim and
preliminary results announcement.
Separate announcements of all material events are made as
necessary. In addition to the Chief Executive Officer and Chief
Financial Officer, who have regular contact with investors over
such matters, Anthony Bloom (the Chairman), David Maloney
(Senior Independent Director), and Peter Williams (an Independent
Non-Executive Director) are available to meet with shareholders
as, and when, required. Additionally, the Chief Executive Officer
and Chief Financial Officer provide focal points for shareholders’
enquiries and dialogue throughout the year. The whole Board
is kept up to date at its regular meetings with the views of
shareholders and analysts and it receives reports on changes
in the Company’s share register and market movements.
Attendance at Meetings
The number of scheduled Board meetings and Committee meetings attended by each Director during the year was as follows:
Board
(including
strategy day)
Audit Remuneration Nomination
Committee
Committee
Committee
Number of meetings in year
Director
Anthony Bloom
Lawrence Guffey††
Stephen Wiener
Richard Jones
Thomas McGrath
Alan Roux††
Matthew Tooth
David Maloney
Peter Williams
7
5
5
2
Attended
Attended
Attended
Attended
7* 5
6**
7
7
6
1
7
7
6
† 5
n/a
n/a
n/a
n/a
n/a
n/a
5*
5
†
n/a
n/a
n/a
n/a
n/a
n/a
5
5* 2
2†
n/a
n/a
n/a
2*
n/a
n/a
2
* Chairman of Board/Committee.
† Anthony Bloom attended these meetings by invitation.
** Number includes meeting attended by Alan Roux as Lawrence Guffey’s alternate.
†† Lawrence Guffey resigned and Alan Roux was appointed as a Director on 23 November 2009. There was only one meeting between 23 November 2009 and
31 December 2009.
Cineworld Group plc
Annual Report and Accounts 2009
31
Corporate Governance Statement continued
The Board uses the AGM to communicate with private and
institutional investors and welcomes their participation.
The Chairman aims to ensure that the Chairmen of the Audit
Committee, Remuneration Committee and Nomination Committee
are available at the AGM to answer questions, and that all
Directors attend.
The Company’s website (www.cineworldplc.com) provides an
overview of the business. Major Group announcements are
available on the website and new announcements are published
without delay. All major announcements are approved by the
Chairman and Executive Directors and circulated to the Board
prior to issue. The Group also has internal and external checks to
guard against unauthorised release of information.
Internal Controls
The Board is responsible for maintaining an effective system of
internal control that provides reasonable assurance that the Group’s
assets are safeguarded and that material financial errors and
irregularities are prevented or detected with a minimum of delay.
The Group has in place internal control and risk management
arrangements in relation to the Group’s financial reporting
processes and the preparation of its consolidated accounts.
The arrangements include policies and procedures to ensure
the maintenance of records which accurately and fairly reflect
transactions to enable the preparation of financial statements
in accordance with International Financial Reporting Standards
or UK Generally Accepted Accounting Principles, as appropriate,
with reasonable assurance.
More generally the Directors are committed to implementing
measures to ensure that there is an ongoing review of the
effectiveness of the internal control system with procedures to
capture and evaluate failings and weaknesses, and in the case
of those categorised by the Board as significant, that procedures
exist to ensure that necessary action is taken to remedy
the failings.
The Board is satisfied that during the financial period in question
such measures were in place throughout the Group and the
Company fully complies with the requirements of the Combined
Code in this regard.
The system of internal control manages rather than eliminates
the risks to business objectives. In pursuing these objectives,
internal controls can only provide reasonable and not absolute
assurance against material loss or misstatement of the
financial statements.
Reflecting the Board’s commitment to the ongoing development
of the Group’s system of risk management and internal control,
Grant Thornton UK LLP, continued its appointment during the
year, undertaking a number of specific reviews and reporting back
to the Committee in the process making recommendations to
help strengthen the risk management framework and internal
control processes within the Group.
Under the Audit Committee’s terms of reference, it is tasked with
reviewing the Company’s financial reporting and internal control
procedures and to make recommendations to the Board in this
area. Key elements of the Group’s risk management and internal
control framework during 2009 were:
y
y
y
y
y
y
y
y
The day-to-day involvement of executive members of the Board
in all aspects of the business and their attendance at regular
meetings with senior management, at which operational and
financial performance and operational matters were reviewed.
Financial performance was monitored and action taken
through regular reporting to the Executive Directors and
monthly reporting to the Board against annual budgets
approved by the Board.
Small groups of members of the senior management team
met to review existing and future risks in their particular areas
of responsibility and expertise and to confirm the current
measures in place to mitigate those risks.
An established organisational structure with clear lines of
responsibility and reporting requirements. Capital investment
and all revenue expenditure being regulated by a budgetary
process and authorisation levels (manual and systems), with
appraisals and post-investment and period end reviews. Policy
manuals setting out agreed standards and control procedures
which included human resources related policies, information
technology and health and safety.
An established internal audit function headed by an
experienced internal auditor who had access to all areas of the
cinema operations and prepared reports which were available
to the Board and reported regularly to senior management and
the Audit Committee.
Reports from Grant Thornton following their reviews of specific
areas of risk as part of their ongoing assistance with the
Internal Audit programme.
The external auditors providing a supplementary, independent
and autonomous perspective on those areas of the internal
control system, which they assess in the course of their work.
Their findings were reported to both the Audit Committee and
the Board.
The Audit Committee reviewing the risk register, receiving
reports on risk management and internal controls and
monitoring the overall position and reviewing actions taken to
address areas of weakness.
A whistleblowing policy being in place ensuring that members
of staff who were concerned about impropriety, financial or
otherwise, could raise such matters without fear of
victimisation or reprisal.
32
Cineworld Group plc
Annual Report and Accounts 2009
Accountability, Audit and Financial
The Board is responsible for the preparation of financial
statements that present a balanced assessment of the Group’s
financial position and prospects. Responsibility is administered
primarily by the Audit Committee, of which the terms of reference
are referred to above.
A comprehensive budgeting system allows managers to submit
detailed budgets which are reviewed and amended by the
Executive Directors prior to submission to the Board for approval.
Human Resources
The Group endeavours to appoint employees with appropriate
skills, knowledge and experience for the roles they undertake.
The Group has a range of policies which are aimed at retaining
and providing incentives for key staff. Objectives are set for
departments and employees that are derived from the Group’s
business objectives. The Group has a clear and well-understood
organisational structure and each employee knows his or her line
of accountability.
Insurance
It is not practical or possible to insure against every risk to the
fullest extent. The Group has in place an insurance programme to
help protect it against certain insurable risks. The portfolio of
insurance policies is kept under regular review with its insurance
broker to ensure that the policies are appropriate to the Group’s
activities and exposures in light of cost, and the likelihood and
magnitude of the risks involved.
By order of the Board
Anthony Bloom
Chairman
11 March 2010
Cineworld Group plc
Annual Report and Accounts 2009
33
Directors’ Remuneration Report
Introduction
This report has been prepared by the Remuneration Committee
and has been approved by the Board. It complies with Regulation
11 and Schedule 8 of the Large and Medium-sized Companies
and Groups (Accounts and Reports) Regulations 2008 and also
with the Combined Code. The report will be put to shareholders
for approval at the forthcoming Annual General Meeting ("AGM").
The Companies Act 2006 (the "Act") requires the auditors to
report on certain parts of the report and to state whether, in their
opinion, those parts of the report have been properly prepared in
accordance with the Act. The report has therefore been divided
into separate sections for audited and unaudited information.
Unaudited Information
Remuneration Committee
The Company’s Remuneration Committee comprises two Non-
Executive Directors (namely David Maloney and Peter Williams) and
both are deemed to be independent. The Chairman of the
Remuneration Committee is Peter Williams and the Secretary of
the Committee is the Company Secretary. The Committee met five
times in the financial period. The Committee’s terms of reference,
which were reviewed during the year and updated, are available for
inspection on the Company’s website (www.cineworldplc.com) or
on request from the Company Secretary.
The Remuneration Committee monitors and recommends to the
Board for approval the structure and level of remuneration for
each member of the Senior Management Team (“SMT”) including
the Executive Directors. The Committee received advice from
Watson Wyatt (now Towers Watson) during the year in relation
to the Company’s remuneration policy and its implementation.
Watson Wyatt was appointed by the Remuneration Committee
in November 2008. Watson Wyatt has no other connections with
the Company except as the actuary to the pension scheme of
Adelphi-Carlton Limited, the Group’s operating company in
Ireland. The Committee also received assistance from the
Chairman of the Company, the Chief Executive Officer, the Chief
Financial Officer and the Company Secretary, however they do
not participate in discussions relating to the setting of their
own remuneration.
The objective of the Group’s remuneration policies is that all
employees, including Executive Directors, should receive
appropriate remuneration for their performance, responsibility,
skills and experience. Remuneration packages are designed to
enable the Group to attract and retain key employees by ensuring
they are remunerated appropriately and competitively and that they
are motivated to achieve the highest level of Group performance in
line with the best interests of shareholders. To determine the
elements and level of remuneration appropriate for each member
of the SMT, the Committee considers benchmark remuneration
data for selected comparable companies and seeks to ensure that
fixed costs are no higher than market median, that an appropriately
significant proportion of potential pay is performance-related and
that total pay is consistent with appropriately competitive levels of
pay for superior performance. Currently the expected value of the
performance related element of the Executive Directors’ packages
is around 50% at the target performance level. The arrangements
are reviewed on a regular basis.
Remuneration Package
Executive Directors’ remuneration currently comprises an annual
salary, a performance-related bonus, a share-based long-term
incentive scheme, pension contributions and other benefits.
Following a review in late 2009, the Remuneration Committee has
decided that, with effect from the 2011 financial year, bonus
arrangements should be more heavily weighted towards longer
term performance and, accordingly, it proposes to re-calibrate the
performance related bonus to shift payouts to more stretching
performance levels while increasing awards under the long-term
incentive arrangements.
Annual Salary
Salaries are reviewed annually by the Remuneration Committee.
The Board approves the overall budget for employee salary
increases and the Committee agrees the specific increases for
the SMT. For members of the SMT below Board level, the
Committee receives a recommendation from the Chief Executive
Officer which it reviews and approves as appropriate. In
determining appropriate salary levels for each Executive Director,
the Committee considers both the nature and the status of the
Company’s operations and the responsibilities, skills, experience
and performance of the Executive Director. The Committee
compares the Group’s remuneration packages for its Executive
Directors and employees with those for directors and employees
of similar seniority in companies whose activities are comparable
with the Group. It also takes into account salary increases across
the rest of the Group which for the year were generally in the
range of 1% to 4.5%.
Performance Related Bonus
The Executive Directors and all other employees participate in a
performance related bonus scheme. The level of bonus is based
on overall Group performance in meeting its primary financial
objectives in earnings before interest, tax, depreciation and
amortisation (“EBITDA”). The Committee ensures that challenging
and clearly-assessable targets are set for Executive Directors.
Details of bonuses paid to Executive Directors in the year to
31 December 2009 are included in the remuneration tables set
out on page 37. Bonuses are awarded wholly in cash.
Stephen Wiener is eligible for a bonus payable in the range of 0%
to 100% of salary on achievement by the Group of 95% to 120%
of full year budgeted EBITDA. Richard Jones is eligible for a bonus
payable in the range of 0% to 95% of salary on achievement by
the Group of 95% to 120% of full year budgeted EBITDA.
The Cineworld Group Performance Share Plan (“PSP”)
The PSP was implemented at IPO and the first grant of awards
was made in March 2008 after the announcement of the
Company’s results for the financial year ended 27 December
2007. A further grant of awards was made in March 2009 after
the announcement of the Company’s results for the financial
year ended 25 December 2008. Only the Executive Directors
and members of the SMT, decided at the discretion of the
Remuneration Committee, participated in each grant. Details of
the awards to the Executive Directors are set out below. Non-
Executive Directors, including the Chairman, are not eligible to
participate in the PSP.
34
Cineworld Group plc
Annual Report and Accounts 2009
A share retention policy exists under which each Executive
Director will be expected to retain 50% of all shares that he
acquires under his PSP awards or following the exercise of
options, after allowing for sales of shares to pay tax, until such
time as he has built up a shareholding equal in value to 100%
of his salary.
The Cineworld Group Sharesave Scheme (the
“Sharesave Scheme”)
Executive Directors are eligible to participate in the Sharesave
Scheme, which is an HMRC approved scheme open to all
employees of nominated companies who have a minimum
of three month’s service at the date of invitation. Under the
Sharesave Scheme, employees are eligible to acquire shares in
the Company at a discount of up to 20% of the market value at
grant if they agree to enter into a savings contract for a three-year
period. Consistent with the relevant legislation, no performance
conditions apply. No options were granted under the Sharesave
Scheme during the year as no fresh invitation was made to
eligible participants. Details of the interests of the Executive
Directors in the Sharesave Scheme are set out below.
Pension Contributions
All employees, including Executive Directors, are invited to
participate in a Group Personal Pension Plan. All the major
schemes operated by the Group are money purchase in nature
and have no defined benefits. Two defined benefit schemes are
operated in the UK and in Ireland and both have been closed to
new members for a number of years. Details of these schemes
are shown in Note 17 of the financial statements. The Group has
no obligation to the pension scheme beyond the payment of
contributions. The Company contributions for the Executive
Directors are 20% of salary. Bonuses are not pensionable.
Other Benefits
Benefits in kind for Executive Directors include the provision of
a company car or car allowance, fuel, life insurance, permanent
health insurance and private medical cover and, in the case of
the Chief Executive Officer, a driver as well.
Introduction of a new Company Share Option Plan (“CSOP”)
Shareholders are being asked to approve the introduction
of a CSOP at the AGM. The CSOP is being introduced not with
the intention of increasing the overall potential awards of the
Executive Directors or any other member of the SMT, but to
provide the Remuneration Committee with flexibility to award
long-term incentives in different forms and to pass benefits
in a more tax efficient manner to recipients. Full details of the
proposal are set out in the AGM circular.
Under the PSP, awards of conditional shares are made that
vest after three years subject to continued employment and
the achievement of specified performance conditions. The
performance conditions applying to all awards granted to
the Executive Directors in 2008 and 2009 were that:
y
y
y
30% of the shares under the award will vest if the average
annual growth in earnings per share (“EPS”)* (calculated by
comparing the EPS for the last financial year prior to the date
of grant and the EPS for the financial year ending three years
later) is not less than 3.2%.
100% of the shares under the award will vest if the average
annual growth in EPS (calculated by comparing the EPS for the
last financial year prior to the date of grant and the EPS for the
financial year ending three years later) is at least 9.2%.
Where the average annual growth in EPS (calculated by
comparing the EPS for the last financial year prior to the date
of grant and the EPS for the financial year ending three years
later) is between the two limits above, the award shall vest on
a straight-line basis between 30% and 100%.
* EPS for the 2008 grant is defined as the normalised undiluted earnings per share
excluding any deferred tax charge relating to tax assets in existence on listing and
exceptional items and for the 2009 grant is defined as the adjusted pro forma
diluted earnings per share as calculated in Note 5 to the financial statements.
Total Shareholder Return has been considered as an alternative
or additional performance measure, but difficulties in identifying
appropriate comparator companies has resulted in the
Committee deciding to use EPS as the sole performance
measure. The Remuneration Committee will review the
performance conditions for future grants regularly to ensure they
are appropriate for the Company and the prevailing internal and
external expectations. The conditions may be varied in
exceptional circumstances following the grant of an award so as
to achieve their original purpose, but not so as to make their
achievement any more or less difficult to satisfy.
The maximum number of shares subject to an award to an
individual in any financial year is 100% of annual base salary as
at the award date, unless the Remuneration Committee decides
that exceptional circumstances exist in relation to the recruitment
or retention of an employee, in which case the limit is 150% of
annual base salary. On vesting, participants will also receive
additional shares or a cash sum equivalent to the dividends that
would have been paid on the vested shares in respect of dividend
record dates occurring between grant and vesting.
Awards under the PSP can be satisfied using either new issue
shares or shares purchased in the market in conjunction with the
Cineworld Group Employee Benefit Trust (“the Trust”), established
by the Company on 24 March 2006 with independent trustees
based in Jersey. However, if new issue shares are used, the PSP
is subject to the following limits:
y
y
In any 10 year period, the number of shares which may be
issued under the PSP and under any other executive share
scheme established by the Company may not exceed 5% of
the issued ordinary share capital of the Company from time
to time
In any 10 year period, the number of shares which may be
issued under the PSP and under any employees’ share
scheme established by the Company may not exceed 10%
of the issued ordinary share capital of the Company from
time to time.
Cineworld Group plc
Annual Report and Accounts 2009
35
Directors’ Remuneration Report continued
Performance Graph
The graph below compares the Company’s Total Shareholder Return performance against the FTSE 250 and FTSE All Share Travel and
Leisure indices since IPO in April 2007*. The Remuneration Committee believes these indices to be the most appropriate comparators
because the Group looks to benchmark itself against smaller companies within the FTSE 250 and is a member of the FTSE All Share
Travel and Leisure sector.
Cineworld
FTSE all share travel & leisure
FTSE 250
250
200
150
100
50
0
26/04/2007
13/09/2007
31/01/2008
19/06/2008
06/11/2008
26/03/2009
13/08/2009
31/12/2009
* Rebased to 170p
The shares of the Company commenced trading on the London Stock Exchange on 26 April 2007 at an offer price of 170p per share.
Admission became effective and unconditional dealings in the shares commenced on the London Stock Exchange on 2 May 2007.
The mid-market closing price on 31 December 2009 was 150p and the range during the period 26 December 2008 to 31 December
2009 was 101.5p to 179p.
Executive Directors’ Contracts
The Group’s policy in entering into service contracts with Executive Directors is to enable the recruitment of high-quality executives and
to obtain protection from their sudden departure whether or not to competitor companies. In addition, service contracts are an important
element in maintaining maximum protection for the Group’s intellectual property rights and other commercially sensitive information.
The details of the Executive Directors’ contracts are summarised in the table below:
Director
Stephen Wiener
Richard Jones
Date of contract
Notice period from company
Notice period from employee
23 April 2007
23 April 2007
12 months
12 months
12 months
6 months
The Company may in lieu of giving notice terminate an Executive Director’s service contract by making a payment equivalent to 95% of
base salary and contractual benefits for the notice period. In this event the Director would not be entitled to any bonus for his notice
period but would be eligible for a pro rata bonus for the period up to the date of the termination of his contract.
The Company’s policy is to endeavour to minimise any payment on early termination by insisting on mitigation of any loss where possible.
Non-Executive Directors’ Letters of Appointment
The Non-Executive Directors, including the Chairman, do not have service contracts with the Company. The terms and conditions of
their appointment as Non-Executive Directors are set out in letters of appointment, which are subject to the provisions of the Articles
of Association.
Non-Executive Directors receive fees for services as members of the Board and its Committees. The level of fees is determined by the
Board (except in the case of the Chairman whose level of fee is determined by the Remuneration Committee) after taking into account
appropriate advice, and no Director participates in discussions relating to the setting of his own remuneration. Non-Executive Directors
do not participate in the Group’s share incentives or otherwise receive performance-related pay. Where a Non-Executive Director does
not serve until the end of his term, the policy is to pay the fees due pro rata to the date of cessation.
36
Cineworld Group plc
Annual Report and Accounts 2009
The appointment of each Non-Executive Director is terminable on the notice period stated below, unless their appointment is
terminated by a resolution of the shareholders in general meeting or if they fail to be re-elected by shareholders in general meeting, in
which case no notice is necessary.
Their appointments were made as follows:
Director
Anthony Bloom
David Maloney
Thomas McGrath
Alan Roux
Matthew Tooth
Peter Williams
Audited Information
Aggregated Directors’ Remuneration
The total amounts for Directors’ remuneration were as follows:
Date of appointment
Notice period
7 October 2004
22 May 2006
16 May 2005
23 November 2009
24 August 2004
22 May 2006
1 month
1 month
1 month
1 month
1 month
1 month
Emoluments
(i) Executive
2009
Fees/
Basic
salary
£’000
400*
235*
Name of Director
Stephen Wiener
Richard Jones
2008
Fees/
2008
2009
Basic Performance Performance
bonus
salary
£’000
£’000
2008
2009
bonus Benefits Benefits
£’000†
£’000
2008
2009
Total
Total
£’000† £’000 £’000
2008
Company
2009
Total
including
2008
Total
2009
including
Company
contributions contributions contributions contributions
to money
purchase
pension
scheme
£’000
to money
purchase
pension
schemes
£’000
to money
purchase
pension
scheme
£’000
to money
purchase
pension
schemes
£’000
380
223
635
603
341
189
530
304
167
471
37
18
55
33
16
778 717
442 406
80
47
76
45
858
489
793
451
49 1220 1123
127
121
1347
1244
* With effect from 1 July 2009, Stephen Wiener and Richard Jones basic salaries were increased by 5% and 4.5% respectively.
† Other benefits include a company car or car allowance, fuel, life assurance, permanent health insurance and private medical cover and in the case of Stephen Wiener a
driver as well.
(ii) Non-Executive
Name of Director
Anthony Bloom
Lawrence Guffey*
David Maloney
Thomas McGrath
Alan Roux*
Matthew Tooth*
Peter Williams
2008
2009
Fees/Basic
Fees/Basic
salary £’000 salary £’000
100
30
48
38
3 –
33
48
300
77
30
45
35
30
45
262
* Lawrence Guffey, Alan Roux and Matthew Tooth are Directors appointed by The Blackstone Group and their respective Director’s fees are payable to The Blackstone Group.
Alan Roux was appointed a Director on 23 November 2009 in place of Lawrence Guffey.
During the year, there was no increase in the fees paid to the Chairman or the Non-Executive Directors. The basic fee for a Non-
Executive Director was £33,000 p.a. An additional fee of £5,000 p.a is paid for being a member of a particular committee.
The Non-Executive Directors do not receive any share options, bonuses or other performance related payments nor do they receive any
pension entitlement or other benefits.
Cineworld Group plc
Annual Report and Accounts 2009
37
Directors’ Remuneration Report continued
Directors’ Share and Share Option Scheme Interests
Details of share options of those Directors who served during the period are as follows:
(a) Cineworld Group Sharesave Scheme
Name of Director
Stephen Wiener
Richard Jones
At
25 Dec
2008
10,322
10,322
Granted
during
year
Exercised
during
year
Lapsed
during
year
At
31 Dec
2009
–
–
–
–
–
–
10,322
10,322
(b) Cineworld Group Performance Share Plan
Name of Director
Stephen Wiener
Richard Jones
At
25 Dec
2008
Awarded
during
year
Vested
during
year
Lapsed
during
year
At
31 Dec
2009
142,308*
–
82,692*
–
–
152,343†
–
89,843†
–
–
–
–
– 142,308
– 152,343
82,692
–
89,843
–
Exercise
price
£0.93
£0.93
Exercise
price
£nil
£nil
£nil
£nil
Earliest
date of
exercise
Expiry
date
01/12/2011
01/12/2011
01/05/12
01/05/12
Market
value at
date of
vesting
Vesting
Date**
–
–
–
–
20/03/11
26/03/12
20/03/11
26/03/12
* Mid-market price of a Cineworld Group plc share the day before grant was £1.30.
† Mid-market price of a Cineworld Group plc share the day before grant was £1.28.
** Subject to satisfaction of the relevant performance conditions details of which are set on page 35.
By order of the Board
Peter Williams
Chairman of the Remuneration Committee
11 March 2009
38
38
Cineworld Group plc
Cineworld Group plc
Annual Report and Accounts 2009
Annual Report and Accounts 2009
Statement of Directors’ Responsibilities
in respect of the Annual Report and the Financial Statements
The Directors are responsible for preparing the Annual Report and the Group and parent company financial statements in accordance
with applicable law and regulations.
Company law requires the Directors to prepare Group and parent company financial statements for each financial year. Under that law
they are required to prepare the Group financial statements in accordance with IFRSs as adopted by the EU and applicable law and
have elected to prepare the parent company financial statements in accordance with UK Accounting Standards and applicable law
(UK Generally Accepted Accounting Practice).
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view
of the state of affairs of the Group and parent company and of their profit or loss for that period. In preparing each of the Group and
parent company financial statements, the Directors are required to:
y
y
y
y
y
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
for the Group financial statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU;
for the parent company financial statements, state whether applicable UK Accounting Standards have been followed, subject to any
material departures disclosed and explained in the parent company financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the parent
company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company’s
transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to
ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps
as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Directors’ Report, Directors’ Remuneration
Report and Corporate Governance Statement that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s
website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in
other jurisdictions.
The Directors confirm that to the best of our knowledge:
1. the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a
whole; and
2. the Chief Executive and Chief Financial Officers’ Review together with the Risks and Uncertainties section, which are incorporated in
the Directors’ Report, includes a fair review of the development and performance of the business and the position of the Company
and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and
uncertainties that they face.
On behalf of the Board
Richard Jones
Chief Financial Officer
11 March 2010
Cineworld Group plc
Annual Report and Accounts 2009
39
Independent Auditors’ Report
to the Members of Cineworld Group plc
We have audited the financial statements of Cineworld Group plc for the year ended 31 December 2009 set out on pages 41 to 82.
The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and
International Financial Reporting Standards ("IFRSs") as adopted by the EU. The financial reporting framework that has been applied in
the preparation of the parent company financial statements is applicable law and UK Accounting Standards (UK Generally Accepted
Accounting Practice).
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in
an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the company and the company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.
Respective Responsibilities of Directors and Auditors
As explained more fully in the Directors’ Responsibilities Statement set out on page 39, the Directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the
financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards
require us to comply with the Auditing Practices Board’s ("APB’s") Ethical Standards for Auditors.
Scope of the Audit of the Financial Statements
A description of the scope of an audit of financial statements is provided on the APB’s website at www.frc.org.uk/apb/scope/UKP.
Opinion on Financial Statements
In our opinion:
y
y
y
y
y
y
the financial statements give a true and fair view of the state of the Group’s and of the parent company’s affairs as at 31 December
2009 and of the Group’s profit for the year then ended;
the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the EU;
the parent company financial statements have been properly prepared in accordance with UK Generally Accepted
Accounting Practice;
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006; and, as regards the
Group financial statements, Article 4 of the IAS Regulation.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
y
the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act
2006;
the information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent with
the financial statements; and
the information given in the Corporate Governance Statement set out on pages 29 to 33 with respect to internal control and risk
management systems in relation to financial reporting processes and about share capital structures is consistent with the
financial statements.
Matters on which we are required to Report by Exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our opinion:
y
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received
from branches not visited by us; or
the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement
with the accounting records and returns; or
certain disclosures of Directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit; or
a Corporate Governance Statement has not been prepared by the company.
y
y
y
y
Under the Listing Rules we are required to review:
y
y
the Directors’ statement, set out on pages 27 to 28, in relation to going concern; and
the part of the Corporate Governance Statement on pages 29 to 33 relating to the company’s compliance with the nine provisions
of the June 2008 Combined Code specified for our review.
Mark Summerfield (Senior Statutory Auditor)
for and on behalf of KPMG Audit Plc, Statutory Auditor
Chartered Accountants
PO Box 695
8 Salisbury Square
London
EC4Y 8BB
11 March 2010
40
Cineworld Group plc
Annual Report and Accounts 2009
Consolidated Statement of Comprehensive Income
for the Period Ended 31 December 2009
Revenue
Cost of sales
Gross profit
Other operating income
Administrative expenses
Operating profit
Analysed between:
Operating profit before depreciation and amortisation, onerous lease and
other non-recurring or non-cash property charges, transaction and reorganisation costs
– Depreciation and amortisation
– Onerous leases and other non-recurring or non-cash property charges
– Transaction and reorganisation costs
Finance income
Finance expenses
Net finance costs
Share of (loss)/profit of jointly controlled entities using equity accounting method, net of tax
Profit on ordinary activities before tax
Tax charge on profit on ordinary activities
Note
53 week
period ended
31 December
2009
£m
52 week
period ended
25 December
2008
£m
333.4
(253.8)
298.9
(224.6)
3
4
4
4
4
7
7
8
79.6
0.7
(40.7)
74.3
0.6
(36.8)
39.6
38.1
55.7
53.0
(15.3)
(0.4)
(0.4)
1.2
(9.9)
(8.7)
(0.1)
30.8
(10.4)
(14.0)
(1.1)
0.2
1.9
(12.5)
(10.6)
0.1
27.6
(7.4)
Profit for the period attributable to equity holders of the Company
20.4
20.2
Other comprehensive income
Movement in fair value of cash flow hedge
Foreign exchange translation (loss)/gain
Actuarial gains/(losses) on defined benefit pension schemes
Income tax on other comprehensive income
Other comprehensive income for the period, net of income tax
0.3
(0.5)
0.8
(0.3)
0.3
(4.0)
1.7
(1.5)
1.5
(2.3)
Total comprehensive income for the period attributable to equity holders of the Company
20.7
17.9
Basic and diluted earnings per share
5
14.4p
14.3p
The Notes on pages 45 to 76 are an integral part of these consolidated financial statements.
Cineworld Group plc
Annual Report and Accounts 2009
41
Consolidated Statement of Financial Position
at 31 December 2009
Non-current assets
Property, plant and equipment
Goodwill
Intangible assets
Investments in equity-accounted investee
Other receivables
Deferred tax assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Interest-bearing loans, borrowings and other financial liabilities
Trade and other payables
Current taxes payable
Provisions
Total current liabilities
Non-current liabilities
Interest-bearing loans, borrowings and other financial liabilities
Other payables
Employee benefits
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity attributable to equity holders of the Company
Share capital
Share premium
Translation reserves
Hedging reserves
Retained deficit
Total equity
31 December
2009
|
25 December
2008
Note
£m
£m
£m
£m
9
10
10
11
14
12
13
14
15
16
18
15
16
17
18
12
19
19
19
1.9
19.9
16.9
(11.9)
(46.5)
(8.9)
(1.2)
(109.3)
(53.5)
(0.7)
(10.6)
(1.8)
114.6
216.1
0.6
0.9
1.4
16.6
350.2
38.7
388.9
112.6
216.1
0.7
1.0
0.9
18.6
349.9
36.4
386.3
1.7
21.9
12.8
(10.6)
(46.4)
(5.3)
(2.1)
(68.5)
(64.4)
(119.6)
(50.5)
(2.6)
(10.4)
(1.9)
(175.9)
(244.4)
144.5
1.4
171.4
1.6
(3.9)
(26.0)
144.5
(185.0)
(249.4)
136.9
1.4
171.4
2.1
(4.2)
(33.8)
136.9
These financial statements were approved by the Board of Directors on 11 March 2010 and were signed on its behalf by:
Stephen Wiener
Director
Richard Jones
Director
42
Cineworld Group plc
Annual Report and Accounts 2009
Consolidated Statement of Changes in Equity
for the Period Ended 31 December 2009
Balance at 27 December 2007
Profit for the period
Other comprehensive income
Actuarial loss on defined benefit scheme
Tax recognised on income and expenses recognised directly
in equity
Movement in fair value of cash flow hedge
Retranslation of foreign denominated subsidiaries
Contributions by and distributions to owners
Dividends paid in period
Movements due to share-based compensation
Balance at 25 December 2008
Profit for the period
Other comprehensive income
Movement in fair value of cash flow hedge
Retranslation of foreign currency denominated subsidiaries
Actuarial gain on defined benefit scheme
Tax recognised on income and expenses recognised directly in equity
Contributions by and distributions to owners
Dividends paid in period
Movements due to share-based compensation
Issued
capital
£m
1.4
–
Share
premium
£m
171.4
–
Translation
reserve
£m
Hedging
reserve
£m
Retained
deficit
£m
Total
£m
0.4
–
(0.2)
–
(40.4)
20.2
132.6
20.2
–
–
–
–
–
–
–
–
–
–
–
–
1.4
–
171.4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1.5)
(1.5)
–
–
1.7
–
–
2.1
–
–
(0.5)
–
–
–
–
–
(4.0)
–
1.5
–
–
1.5
(4.0)
1.7
–
–
(13.7)
0.1
(13.7)
0.1
(4.2)
–
(33.8)
20.4
136.9
20.4
0.3
–
–
–
–
–
0.8
(0.3)
0.3
(0.5)
0.8
(0.3)
–
–
(13.5)
0.4
(13.5)
0.4
Balance at 31 December 2009
1.4
171.4
1.6
(3.9)
(26.0)
144.5
Cineworld Group plc
Annual Report and Accounts 2009
43
Note
7
7
8
4
4
22
22
53 week
period ended
31 December
2009
£m
52 week
period ended
25 December
2008
£m
20.4
(1.2)
9.9
10.4
0.1
39.6
15.3
0.4
(1.6)
1.5
(0.2)
2.1
(2.5)
54.6
(4.8)
20.2
(1.9)
12.5
7.4
(0.1)
38.1
14.0
1.1
(1.6)
(3.3)
(0.2)
3.3
(3.0)
48.4
(2.8)
49.8
45.6
0.1
(15.6)
–
–
0.7
(10.9)
(0.3)
(0.5)
(15.5)
(11.0)
(13.5)
(7.2)
(9.0)
(0.5)
(13.7)
(9.4)
(9.0)
(0.5)
(30.2)
(32.6)
4.1
–
12.8
16.9
2.0
0.4
10.4
12.8
Consolidated Statement of Cash Flows
for the Period Ended 31 December 2009
Cash flow from operating activities
Profit for the period
Adjustments for:
Financial income
Financial expense
Taxation
Share of loss/(profit) of equity-accounted investee
Operating profit
Depreciation and amortisation
Non-cash property charges
Surplus of pension contributions over current service cost
Decrease/(increase) in trade and other receivables
Increase in inventories
Increase in trade and other payables
Decrease in provisions and employee benefit obligations
Cash generated from operations
Tax paid
Net cash flows from operating activities
Cash flows from investing activities
Interest received
Acquisition of property, plant and equipment
Investment in jointly controlled entity
Loan to jointly controlled entity
Net cash flows from investing activities
Cash flows from financing activities
Dividends paid to shareholders
Interest paid
Repayment of bank loans
Payment of finance lease liabilities
Net cash from financing activities
Net increase in cash and cash equivalents
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at start of period
Cash and cash equivalents at end of period
44
Cineworld Group plc
Annual Report and Accounts 2009
Notes to the Consolidated Financial Statements
(Forming Part of the Financial Statements)
1 Accounting Policies
Basis of Preparation
Cineworld Group plc (“the Company”) is a company incorporated in the UK.
The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as “the Group”) and equity
account the Group’s interest in jointly controlled entities. The parent company financial statements present information about the
Company as a separate entity and not about its Group.
The Group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting
Standards as adopted by the EU ("Adopted IFRSs"). The Company has elected to prepare its parent company financial statements in
accordance with UK GAAP; these are presented on pages 77 to 82.
The accounting policies set out below have been applied consistently to all periods presented in these Group financial statements,
except as described on page 51.
Judgements made by the Directors in the application of these accounting policies that have significant effect on the financial
statements and estimates with a significant risk of material adjustment in the next financial period are set out below.
Information regarding the Group’s business activities, together with the factors likely to affect its future development, performance and
position is set out in the Chief Executive and Chief Financial Officers’ Review and the Risks and Uncertainties section on pages 8 to 17.
The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Chief Executive and
Chief Financial Officers’ Review on pages 8 to 15. In addition Note 20 to the financial statements includes the Group’s objectives,
policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and
hedging activities; and its exposures to credit risk and liquidity risk.
As highlighted in Note 15 to the financial statements, the Group meets its day-to-day working capital requirements through its bank
facilities which consist of a £111m term loan plus £30m revolver which matures in 2012. The current economic conditions create
uncertainty particularly over: (a) the level of demand for the Group’s products; and (b) the availability of bank finance in the
foreseeable future.
The bank facility is subject to two covenants: the ratio of EBITDA to net debt and the ratio of EBITDAR (pre-rent EBITDA) to net finance
charges. The Group’s forecasts and projections, taking account of reasonably possible changes in trading performance, show that the
Group should be able to operate within the level of its current facility, including compliance with the bank facility covenants.
The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the
foreseeable future. Thus they continue to adopt the going concern basis in preparing the annual financial statements.
Measurement Convention
The financial statements are prepared on the historical cost basis except that the following assets and liabilities are stated at their fair
value: derivative financial instruments and financial instruments classified as fair value through the income statement or as available-
for-sale.
Basis of Consolidation
Subsidiaries
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the
financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that
are currently exercisable or convertible are taken into account. The financial information of subsidiaries is included in the consolidated
financial information from the date that control commences until the date that control ceases.
Jointly Controlled Entities (Equity Accounted Investees)
Jointly controlled entities are those entities over whose activities the Group has joint control, established by contractual agreement and
requiring the venturers’ unanimous consent for strategic financial and operating decisions. Jointly controlled entities are accounted for
using the equity method (equity accounted investees) and are initially recognised at cost. The Group’s investment includes goodwill
identified on acquisition, net of any accumulated impairment losses. The consolidated financial statements include the Group’s share
of the total recognised income and expense and equity movements of equity accounted investees, from the date that joint control
commences until the date that joint control ceases. When the Group’s share of losses exceeds its interest in an equity accounted
investee, the Group’s carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the
Group has incurred legal or constructive obligations or made payments on behalf of an investee.
Transactions Eliminated on Consolidation
Intra-Group balances and transactions, and any unrealised income and expenses arising from intra-Group transactions, are eliminated
in preparing the consolidated financial statements.
Cineworld Group plc
Annual Report and Accounts 2009
45
Notes to the Consolidated Financial Statements continued
(Forming Part of the Financial Statements)
1 Accounting Policies continued
Use of non-GAAP profit and loss measures
The Group believes that along with operating profit, the following measures:
y
y
y
EBITDA
Adjusted earnings
Net debt
provide additional guidance to the statutory measures of the performance of the business during the financial period.
EBITDA comprises of earnings before interest, tax, depreciation and amortisation, onerous lease and other non-recurring or non-cash
property charges, transaction and reorganisation costs. Items are included within non-recurring if they are regarded as being material
and unlikely to recur in future periods.
Adjusted earnings comprises profit after tax adjusted for certain non-recurring and non-cash items as set out in Note 5.
Net debt represents net borrowings including finance leases and financial liabilities offset by cash.
Foreign Currency
Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies at the balance sheet date are translated at the foreign exchange rate ruling at that
date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities
that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.
Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated at foreign exchange
rates ruling at the dates the fair value was determined.
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated at
foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated at an average
rate for the period where this rate approximates to the foreign exchange rates ruling at the dates of the transactions.
Exchange differences arising from this translation of foreign operations after 23 August 2004 (the date of incorporation) are taken
directly to the translation reserve. They are released into the income statement upon disposal.
Derivative Financial Instruments and Hedging
Cash Flow Hedges and Interest Swap Policy
Derivative financial instruments are recognised at fair value. The gain or loss on remeasurement to fair value is recognised immediately
in the income statement except where derivatives qualify for hedge accounting when recognition of any resultant 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 Group would receive or pay to terminate the swap at the balance
sheet date, taking into account current interest rates and the current creditworthiness of the swap counterparties. The fair value of
forward exchange contracts is their quoted market price at the balance sheet date, being the present value of the quoted forward price.
Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or a
highly probable forecast transaction, the effective part of any gain or loss on the derivative financial instrument is recognised directly
in the hedging reserve. Any ineffective portion of the hedge is recognised immediately in the statement of comprehensive income.
For cash flow hedges, the associated cumulative gain or loss is removed from equity and recognised in the income statement in the
same period or periods during which the hedged forecast transaction affects profit or loss.
When a hedging instrument expires or is sold, terminated or exercised, or the entity revokes designation of the hedge relationship but
the hedged forecast transaction is still expected to occur, the cumulative gain or loss at that point remains in equity and is recognised
in accordance with the above policy when the transaction occurs. If the hedged transaction is no longer expected to take place, the
cumulative unrealised gain or loss recognised in equity is recognised in the statement of comprehensive income immediately.
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.
Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of
property, plant and equipment.
Leases in which the Group assumes substantially all the risks and rewards of ownership of the leased asset are classified as finance
leases. Where land and buildings are held under finance leases the accounting treatment of the land is considered separately from
that of the buildings. Leased assets acquired by way of finance lease are stated at an amount equal to the lower of their fair value and
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 the Group’s balance sheet.
46
Cineworld Group plc
Annual Report and Accounts 2009
1 Accounting Policies continued
Depreciation is charged to the statement of comprehensive income to write assets down to their residual values on a straight-line
basis over the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives are
as follows:
y
y
y
Land and buildings: short leasehold properties including leasehold improvements
Plant and machinery
Fixtures and fittings
30 years or life of lease if shorter
3 to 10 years
4 to 10 years
No depreciation is provided on assets held for sale or on assets in the course of construction.
Depreciation methods, residual values and the useful lives of all assets are re-assessed annually.
In respect of borrowing costs relating to qualifying assets, the Group capitalises borrowing costs directly attributable to the acquisition,
construction or production of qualifying assets as part of the cost of that asset. Previously the Group recognised all borrowing costs as
an expense in the period in which they were incurred. The Group has capitalised borrowing costs with respect to the construction of
new sites. IAS 23 Revised was adopted for the first time in the period and in accordance with the transitional provisions of the
standard, comparative figures have not been restated.
Intangible Assets and Goodwill
All business combinations are accounted for by applying the acquisition method. Goodwill represents amounts arising on acquisition
of subsidiaries. In respect of business acquisitions that have occurred since incorporation, goodwill represents the difference between
the cost of the acquisition and the Group’s interest in the fair value of the net identifiable assets acquired. Identifiable intangibles are
those which can be sold separately or which arise from legal rights regardless of whether those rights are separable.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is not amortised
but is tested annually for impairment.
Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and impairment losses.
Identifiable intangibles are those which can be sold separately or which arise from legal rights regardless of whether those rights
are separable.
Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets unless
such lives are indefinite. Intangible assets with an indefinite useful life and goodwill are systematically tested for impairment at each
balance sheet date. Other intangible assets are amortised from the date they are available for use. The estimated useful lives are
as follows:
y
Brands – 10 years
Trade and Other Receivables
Trade and other receivables were initially measured on the basis of their fair value. Subsequently they are carried at amortised cost
using the effective interest method.
Inventories
Inventories are stated at the lower of cost and net realisable value. The cost of inventories is based on the First-In, First-Out (FIFO)
principle. Cost comprises expenditure incurred in acquiring the inventories and bringing them to their existing location and condition,
and net realisable value is the estimated selling price in the ordinary course of business, less the estimated selling costs.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an
integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose only of the
statement of cash flows.
Impairment
The carrying amounts of the Group’s assets other than inventories and deferred tax assets are reviewed at each balance sheet date
to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated.
For goodwill and intangible assets that have an indefinite useful economic life, the recoverable amount is estimated at each balance
sheet date.
An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable
amount. Impairment losses are recognised in the income statement.
Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill
allocated to cash-generating units and then to reduce the carrying amount of the other assets in the unit on a pro rata basis. A
cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash
inflows from other assets or groups of assets.
Cineworld Group plc
Annual Report and Accounts 2009
47
Notes to the Consolidated Financial Statements continued
(Forming Part of the Financial Statements)
1 Accounting Policies continued
Calculation of Recoverable Amount
The recoverable amount is the greater of the asset’s fair value less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent
cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
Reversals of Impairment
An impairment loss in respect of goodwill is not reversed.
In respect of other assets, an impairment is reversed when there is an indication that the impairment loss may no longer exist as a
result of a change in the estimates used to determine the recoverable amount, including a change in fair value less costs to sell.
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would
have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
Interest-Bearing Borrowings
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition,
interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in
the income statement over the period of the borrowings on an effective interest basis.
Employee Benefits
Defined Contribution Pension Plans
Obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement
as incurred.
Defined Benefit Pension Plans
The Group’s net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount
of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to
determine its present value, and the fair value of any plan assets (at bid price) is deducted. The liability discount rate is the yield at the
balance sheet date on AA credit rated bonds that have maturity dates approximating to the terms of the Group’s obligations. The
calculation is performed by a qualified actuary using the projected unit credit method.
When the calculation results in a benefit to the Group, the asset recognised is limited to the present value of benefits available in the
form of any future refunds from the plan, reductions in future contributions to the plan or settlement of the plan and takes into account
the adverse effect of any minimum funding requirements.
When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognised
as an expense in the statement of comprehensive income on a straight-line basis over the average period until the benefits
become vested. To the extent that the benefits vest immediately, the expense is recognised immediately in the statement of
comprehensive income.
The increase in the present value of the liabilities expected to arise from the employees’ services in the accounting period is charged
to the income statement. The expected return on the schemes’ assets and the interest on the present value of the schemes’ liabilities
during the accounting period are shown as finance income and finance expense respectively. Actuarial gains and losses are recognised
immediately in equity.
Share‑Based Payment Transactions
The share option programme allows Group employees to acquire shares of the Company. The fair value of options granted is
recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date using the
Black-Scholes Model and spread over the period during which the employees become unconditionally entitled to the options. The
amount recognised as an expense is adjusted to reflect the actual number of share options that vest except where forfeiture is due
only to share prices not achieving the threshold for vesting.
Share appreciation rights are also granted by the Company to employees. The fair value of the amount payable to the employee is
recognised as an expense with a corresponding increase in liabilities. The fair value is initially measured at grant date and spread over
the period during which the employees become unconditionally entitled to payment. The fair value of the share appreciation rights is
measured taking into account the terms and conditions upon which the instruments were granted. The liability is remeasured at each
balance sheet date and at settlement date and any changes in fair value in the income statement.
Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past
event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material,
provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments
of the time value of money and, where appropriate, the risks specific to the liability.
48
Cineworld Group plc
Annual Report and Accounts 2009
1 Accounting Policies continued
Own shares held by Employee Benefit Trust (“EBT”)
Transactions of the Group sponsored EBT are included in the Group financial information. In particular, the trust’s purchase of shares
in the Company are debited directly to equity.
Revenue
Revenue represents the total amount receivable for goods sold, excluding sales related taxes and intra-Group transactions. All the
Group’s revenue is received from the sale of goods.
y
y
y
y
y
Box office revenue is recognised on the date of the showing of the film it relates to.
Concessions revenue is recognised at point of sale.
Advertising revenue is recognised when the advertisement is shown.
Unlimited card revenue is received annually or monthly in advance. When revenue from the Unlimited card is received annually in
advance it is recognised on a straight-line basis over the year. Monthly Unlimited card revenue is recognised in the period to which
it relates.
Other revenue is recognised in the period to which it relates.
Expenses
Operating Lease Payments
Payments made under operating leases are recognised in the statement of comprehensive income on a straight-line basis over the
term of the lease. Lease incentives received are recognised in the income statement as an integral part of the total lease expense.
Where the Group has operating leases that contain minimum guaranteed rental uplifts over the life of the lease, the Group recognises
the guaranteed minimum lease payment on a straight-line basis over the lease term.
Finance Lease Payments
Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance
charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest 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 remeasurement of interest rate swaps, interest receivable on funds invested, foreign exchange
gains and losses and finance costs for defined benefit pension schemes.
Sale and Leaseback
Where the Group enters into a sale and leaseback transaction whereby the risks and rewards of ownership of the assets concerned
have not been substantially transferred to the lessor, any excess of sales proceeds over the previous carrying amount are deferred and
recognised in the income statement over the lease term. At the date of the transaction the assets and the associated finance lease
liabilities on the Group’s balance sheet are stated at the lower of fair value 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 risks and rewards of ownership of the assets concerned
have been substantially transferred to the lessor, any excess of sales proceeds over the previous carrying amount is recognised in
the income statement on completion of the transaction, when the sale and subsequent lease back has been completed at fair value.
Taxation
Tax on the profit or loss for the period comprises current and deferred tax. Tax is recognised in the statement of comprehensive
income except to the extent that it relates to items 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, and any adjustment to tax payable in respect of previous periods.
Deferred tax is recognised using the balance sheet method, providing temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not
provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable
profit other than in a business combination; and differences relating to investments in subsidiaries to the extent that they will probably
not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or
settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the
asset can be utilised.
Cineworld Group plc
Annual Report and Accounts 2009
49
Notes to the Consolidated Financial Statements continued
(Forming Part of the Financial Statements)
1 Accounting Policies continued
Operating Segments
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur
expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. An operating
segment’s operating results are reviewed regularly by the Board of Directors to make decisions about resources to be allocated to the
segment and assess its performance, and for which discrete financial information is available. IFRS 8 was adopted for the first time in
the current period.
Significant Accounting Judgements and Estimates
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from
these estimates.
Estimates
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised and in any future periods affected.
In applying the Group’s accounting policies described above the Directors have identified that the following areas are the key estimates
that have a significant impact on the amounts recognised in the financial statements.
Onerous Leases
Provision is made for onerous leases where it is considered that the unavoidable costs of the lease obligations are in excess of the
economic benefits expected to be received from operating it. The unavoidable costs of the lease reflect the least net cost of exiting
from the contract and are measured as the lower of the net cost of continuing to operating the lease and any penalties or other costs
from exiting it.
When calculating the provision for onerous leases the Group is required to make certain assumptions about the future cash flows to be
generated from that cinema site. It is also required to discount these cash flows using an appropriate discount rate. The resulting
provision is therefore very sensitive to these assumptions however, the Directors consider that the assumptions made represent their
best estimate of the future cash flows generated by onerous cinema sites, and that the discount rate used is appropriate given the
risks associated with these cash flows.
Impairment of Goodwill
The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimate of the value in use of the
cash-generating units to which the goodwill is allocated. Estimating the value in use requires the Group to make an estimate of the
expected future cash flows from the cash-generating unit that holds the goodwill at a determined discount rate to calculate the present
value of those cash flows.
Forecasting expected cash flows, and selecting an appropriate discount rate inherently requires estimation, however management has
also applied sensitivity analysis to the estimates which does not affect the outcome (see Note 10).
Impairment of Tangible Fixed Assets
The Group determines whether tangible fixed assets are impaired when indicators of impairments exist. This requires an estimate of
the value in use of the cash-generating units to which the tangible fixed assets are allocated. Estimating the value in use requires the
Group to make an estimate of the expected future cash flows from the cash-generating units that holds the tangible fixed assets at a
determined discount rate to calculate the present value of those cash flows.
When reviewing fixed assets for impairment, the Group is required to make certain assumptions about the future cash flows to be
generated from the individual cinema sites. It is also required to discount these cash flows using an appropriate discount rate. The
resulting calculation is therefore very sensitive to these assumptions however, the Directors consider that the assumptions made
represent their best estimate of the future cash flows generated by the cinema sites, and that the discount rate used is appropriate
given the risks associated with these cash flows.
Employee Post Retirement Benefit Obligations
The Group has two defined benefit pension plans. The obligations under these plans are recognised in the balance sheet and
represent the present value of the obligations calculated by independent actuaries, with input from management. These actuarial
valuations include assumptions such as discount rates, return on assets, salary progression and mortality rates. These assumptions
vary from time to time according to prevailing economic and social conditions. Details of the assumptions used are provided in Note 17.
Management consider that the assumptions used are the most appropriate but recognise that the resulting pension liability is very
sensitive to these assumptions.
Deferred Tax Assets
The Group recognises deferred tax assets for temporary differences arising at the balance sheet date. The Group applies estimates
when calculating the carrying value of these assets and considering whether future taxable profits are sufficient to ensure
their recoverability.
50
Cineworld Group plc
Annual Report and Accounts 2009
1 Accounting Policies continued
Judgements
In addition, the Directors are required to make certain judgements when applying the Group’s accounting policies described above.
The key judgements are:
Finance and Operating Leases
When the Group enters into a new lease it is required to consider whether it bears substantially all the risks and rewards of the asset.
The Group considers the requirements of IAS 17 "Leases" when determining whether it has an operating or finance lease, and in most
cases the outcome is clear.
Hedging Arrangements
The Group enters into interest rate swaps to fix a portion of its exposure to variable interest rates on its loan arrangements. In order to
apply the hedge accounting provisions of IAS 39 "Financial Instruments", the Group must consider the effectiveness of its hedging
arrangements when deciding whether they can hedge account.
New Standards and Interpretations
With effect from 26 December 2008 the Group adopted the following pronouncements:
Amendment to IAS 23 “Borrowing Costs”, which requires capitalisation of borrowing costs that relate to assets that take a substantial
period of time to get ready for use or sale. As a result, interest has been capitalised on certain assets in development in the period,
see Note 9.
IFRIC 14 “IAS 19 – The limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction”, which clarifies when
refunds or reductions in future contributions in relation to defined benefit assets should be regarded as available and provides
guidance on the impact of the minimum funding requirements on such assets. There has been no effect on the consolidated financial
statements from the adoption of this standard.
IAS 1 (Revised) “Presentation of financial statements”; As a result, the primary statements have been renamed in accordance with the
standard, and the Group has elected to present single consolidated statement of comprehensive income.
IFRS 7 (Amendment) “Improving disclosures on financial instruments”; The effect of adopting the revision to IFRS 7 is to provide
additional disclosures around the fair value hierarchy of financial instruments.
IFRS 8 “Operating Segments”; The Group has presented information on its operating segments in accordance with the requirements of
this standard and IFRS 8 (Amendment) “Operating Segments – Disclosure of information about segment assets”. As the Group only
has one operating segment, there is no effect on the consolidated financial statements from the adoption of this standard.
The revised IFRS 3 “Business Combinations” (effective for annual reporting periods beginning on or after 1 July 2009), which contains
new requirements for how business combinations are recorded in the financial statements. This accounting standard has been
early adopted.
IFRS and interpretations with effective dates after 31 December 2009 relevant to the Group will be implemented in the financial year
where the standards become effective. The Group has not early adopted the following pronouncements that are not yet effective:
The IASB has issued the following standards, amendments to standards and interpretations that will be effective for the Group as from
1 January 2010 or after. The Group does not expect any significant impact of these amendments on its consolidated financial statements.
y
y
y
y
y
y
y
y
y
y
y
IFRS 2 (Amendment) “Share-based Payment – Scope of IFRS 2 and revised IFRS 3 Business Combinations”;
IFRS 5 (Amendment) “Non-current Assets Held for Sale and Discontinued Operations – Disclosures of non-current assets (or
disposal groups) classified as held”;
IAS 1 (Amendment) “Presentation of financial statements – Current/non-current classification of convertible instruments”;
IAS 7 (Amendment) “Statement of Cash flows – Classification of expenditures on unrecognised assets”;
IAS 17 (Amendment) “Leases – Classification of leases of land and buildings”;
IAS 18 (Amendment) “Revenue – Determining whether an entity is acting as a principal or as an agent”;
IAS 36 (Amendment) “Impairments of Assets – Unit of accounting for goodwill impairment test”;
IAS 38 (Amendment) “Intangible Assets – Additional consequential amendments arising from revised IFRS 3” and “Measuring the
fair value of an intangible asset acquired in a business combination”;
IAS 39 “Financial Instruments: Recognition and Measurement – Treating loan prepayment penalties as closely related embedded
derivatives”, “Scope exemption for business combination contracts” and “Cash flow hedge accounting”;
IFRIC 9, “Reassessment of Embedded Derivatives – Scope of IFRIC 9 and revised IFRS 3”; and
IFRIC 16, “Hedges of a Net Investment in a Foreign Operation – Amendment to the restriction on the entity that can hold hedging
instruments”.
Cineworld Group plc
Annual Report and Accounts 2009
51
Notes to the Consolidated Financial Statements continued
(Forming Part of the Financial Statements)
2 Operating Segments
Determination and presentation of operating segments:
Further to the adoption of IFRS 8, the Group has determined that it has one operating segment and therefore one reportable segment
being cinema operations. All the disclosable operating segment information required by IFRS8 can be found in the primary statements.
Revenue by destination and by origin from countries other than the UK in all financial periods was not material. Likewise non-current
assets located in other countries other than the UK in all financial periods are not material.
Entity wide disclosures:
Revenue by product and service provided
Box office
Retail
Other
Total revenue
53 week
period ended
31 December
2009
Total
£m
52 week
period ended
25 December
2008
Total
£m
230.9
84.4
18.1
197.5
77.0
24.4
333.4
298.9
All revenue streams are driven by admissions. The Group's internal management reporting and operations are not separated into
these categories.
3 Other Operating Income
Rental income
4 Operating Profit
Included in operating profit for the period are the following:
Depreciation (Note 9)
Amortisation of intangibles (Note 10)
Onerous lease and other non-recurring or non-cash property charges
Transaction and reorganisation costs
Hire of other assets – operating leases
* Included in costs of sales.
† Included in administrative expenses.
** £1.0m included in administrative costs. The balance is included in cost of sales.
53 week
period ended
31 December
2009
Total
£m
52 week
period ended
25 December
2008
Total
£m
0.7
0.7
0.6
0.6
53 week
period ended
31 December
2009
£m
52 week
period ended
25 December
2008
£m
15.2†
0.1†
0.4*
0.4†
46.0**
13.9†
0.1†
1.1*
(0.2)†
44.2**
In 2009 there was a credit on onerous leases following changes in trading assumptions of £0.5m (2008: £0.3m) and non-cash
property charges of £0.9m (2008: £1.4m).
In 2009, transaction and reorganisation costs relate to professional fees incurred in connection with an aborted acquisition. In 2008,
there was a £0.2m release of surplus provisions relating to the sale of cinema sites in 2006.
52
Cineworld Group plc
Annual Report and Accounts 2009
4 Operating Profit continued
The total remuneration of the Group auditor’s, KPMG Audit Plc, and its affiliates for the services to the Group is analysed below.
Auditors’ remuneration:
Group – audit
Company – audit
Amounts received by auditors and their associates in respect of:
– Audit of financial statements pursuant to legislation
– Audit related regulatory reporting
– Other services relating to taxation
– Valuation and actuarial services
– Services relating to corporate finance transactions entered into by or on behalf
of the Company or the Group
– Services relating to recruitment and remuneration
53 week
period ended
31 December
2009
£'000
52 week
period ended
25 December
2008
£'000
208
213
41
254
174
28
190
5 5
195
45
240
197
20
49 –
– 5
5 Earnings Per Share
Basic earnings per share (“EPS”) is calculated by dividing the profit for the period attributable to ordinary shareholders by the weighted
average number of ordinary shares outstanding during the period, after excluding the weighted average number of non-vested ordinary
shares held by the employee ownership trust. Adjusted earnings per share is calculated in the same way except that the profit for the
period attributable to ordinary shareholders is adjusted by adding back the amortisation of intangible assets, the cost of share-based
payments and other one-off income or expense. Adjusted pro forma earnings per share is calculated by applying a tax charge at the
statutory rate, to the adjusted profit.
Diluted earnings per share is calculated by dividing the profit for the period attributable to ordinary shareholders by the weighted
average number of ordinary shares outstanding during the period, after excluding the weighted average number of non-vested ordinary
shares held by the employee share ownership trust and after adjusting for the effects of dilutive options, which in 2009 and 2008
was £nil.
Earnings attributable to ordinary shareholders
Adjustments:
Amortisation of intangible assets
Share based-payments
Transaction and reorganisation costs
Impact of straight lining of operating leases
Adjusted earnings
Add back tax charge
Adjusted pro forma profit before tax
Less estimated impact of 53rd week in period
Less tax at 28% (2008: 28.5%)
53 week
period ended
31 December
2009
£m
20.4
0.1
0.4
0.4
0.9
52 week
period ended
25 December
2008
£m
20.2
0.1
0.1
(0.2)
1.4
(53 weeks) 22.2
10.4
(52 weeks) 21.6
7.4
(53 weeks) 32.6
(0.6) –
(9.0)
(52 weeks) 29.0
(8.3)
Adjusted pro forma profit after tax
(52 weeks) 23.0
(52 weeks) 20.7
Cineworld Group plc
Annual Report and Accounts 2009
53
Notes to the Consolidated Financial Statements continued
(Forming Part of the Financial Statements)
5 Earnings Per Share continued
Weighted average number of shares in issue
Basic and adjusted earnings per share denominator
Dilutive options
Diluted earnings per share denominator
Shares in issue at period end
Basic and diluted earnings per share
Adjusted basic and diluted earnings per share
Adjusted pro forma basic and diluted earnings per share
53 week
period ended
31 December
2009
Number of
shares (m)
52 week
period ended
25 December
2008
Number of
shares (m)
141.7
141.7
– –
141.7
141.7
Pence
141.7
141.7
141.7
141.7
Pence
(53 weeks) 14.4
(53 weeks) 15.7
(52 weeks) 16.2
(52 weeks) 14.3
(52 weeks) 15.2
(52 weeks) 14.6
6 Staff Numbers and Costs
The average number of persons employed by the Group (including Directors) during the period, analysed by category, was as follows:
Head office
Cinemas
Number of staff
2009
131
4,350
2008
129
4,223
4,481
4,352
Included in the average number of persons employed by the Group are part-time employees. No distinction is made between full-time
and part-time employees in the analysis above.
The aggregate payroll costs of these persons were as follows:
Wages and salaries
Social security costs
Other pension costs – defined benefit
Share-based payments (see Note 17)
– defined contribution
See pages 34 to 38 for Directors’ remuneration.
53 week
period ended
31 December
2009
£m
52 week
period ended
25 December
2008
£m
46.8
3.1
–
0.4
0.4
50.7
42.1
2.8
0.1
0.3
0.1
45.4
54
Cineworld Group plc
Annual Report and Accounts 2009
7 Finance Income and Expense
Interest income
Expected return on defined benefit pension plan assets (Note 17)
Finance income
Interest expense on bank loans and overdrafts
Amortisation of financing costs
Unwind of discount on onerous lease provision
Finance cost for defined benefit pension scheme (Note 17)
Interest charge as a result of change in discount rate relating to onerous lease provisions
Other financial costs
Finance expense
Net finance costs
Recognised within other Comprehensive Income:
Movement in fair value of interest rate swap
Foreign exchange translation (loss)/gain
Finance income
53 week
period ended
31 December
2009
£m
52 week
period ended
25 December
2008
£m
0.2
1.0
1.2
5.3
0.3
1.1
1.5
1.2 –
0.5
9.9
8.7
0.7
1.2
1.9
8.8
0.4
0.6
1.5
1.2
12.5
10.6
53 week
period ended
31 December
2009
£m
52 week
period ended
25 December
2008
£m
0.3
(0.5)
(0.2)
(4.0)
1.7
(2.3)
As a result of the change in accounting policy with respect to the treatment of borrowing costs (see Note 1), capitalised borrowing
costs amounted to £0.1m at 31 December 2009.
8 Taxation
Recognised in the Income Statement
Current tax expense
Current year
Adjustments in respect of prior years
Total current tax expense
Deferred tax expense
Origination and reversal of temporary differences
Total tax charge in income statement
53 week
period ended
31 December
2009
£m
52 week
period ended
25 December
2008
£m
7.1
1.7
8.8
1.6
10.4
6.4
(0.1)
6.3
1.1
7.4
Cineworld Group plc
Annual Report and Accounts 2009
55
Notes to the Consolidated Financial Statements continued
(Forming Part of the Financial Statements)
8 Taxation continued
Reconciliation of Effective Tax Rate
Profit before tax
Tax using the UK corporation tax rate of 28% (2008: 28.5%)
Non-deductible expenses
Differences in overseas tax rates
Accelerated capital allowances in excess of depreciation
Adjustments in respect of prior years
53 week
period ended
31 December
2009
£m
52 week
period ended
25 December
2008
£m
30.8
8.6
–
(0.2)
0.3
1.7
27.6
7.9
0.8
(0.3)
(0.9)
(0.1)
Total tax charge/(credit) in income statement
10.4
7.4
During the period there was a deferred tax charge of £0.3m (2008: tax credit £1.5m) recognised directly in equity. See Note 12.
Factors that may affect future tax charges
As at 31 December 2009 the Group had potential tax assets relating to the following:
y
y
other non-trading losses of approximately £2.6m (2008: £2.6m); and
capital losses of approximately £7.6m (2008: £5.8m)
A deferred tax asset has not been recognised in respect of non-trading and capital losses carried forward as it is unclear whether
non-trading income or capital gains against which the losses may be offset will arise in the Group for the foreseeable future. The net
tax benefit of utilising any of the above losses is expected to amount to approximately 28% of the losses utilised.
Deferred tax is not provided on unremitted earnings of subsidiaries and joint ventures where the Group controls the timing of
remittance and it is probable that the temporary difference will not reverse in the foreseeable future.
The tax rate in 2008 was 28.5% since the change from 30% to 28% occurred on 6 April 2008.
56
Cineworld Group plc
Annual Report and Accounts 2009
9 Property, Plant and Equipment
Cost
Balance at 27 December 2007
Additions
Disposals
Transfers
Effects of movement in foreign exchange
Balance at 25 December 2008
Additions
Disposals
Transfers
Effects of movement in foreign exchange
Land and
buildings
£m
Plant and
machinery
£m
Fixtures and
fittings
£m
Assets in the
course of
construction
£m
76.2
1.8
–
4.2
1.1
83.3
0.8
–
4.6
(0.2)
33.3
–
–
–
0.3
33.6
4.9
(0.2)
–
(0.1)
33.1
9.9
(4.3)
–
3.3
42.0
7.5
(2.0)
–
(0.7)
2.6
1.9
–
(4.2)
–
0.3
4.3
–
(4.6)
–
Total
£m
145.2
13.6
(4.3)
–
4.7
159.2
17.5
(2.2)
–
(1.0)
Balance at 31 December 2009
88.5
38.2
46.8
–
173.5
Accumulated depreciation and impairment
Balance at 27 December 2007
Charge for the period
Disposals
Effects of movement in foreign exchange
Balance at 25 December 2008
Charge for the period
Disposals
Effects of movement in foreign exchange
4.1
4.3
–
–
8.9
4.8
–
(0.1)
12.4
0.5
–
–
13.2
4.7
(0.2)
(0.1)
17.8
9.1
(4.3)
–
24.5
5.7
(2.0)
(0.5)
Balance at 31 December 2009
13.6
17.6
27.7
–
–
–
–
–
–
–
–
–
34.3
13.9
(4.3)
–
46.6
15.2
(2.2)
(0.7)
58.9
Net book value
At 27 December 2007
At 25 December 2008
At 31 December 2009
72.1
74.4
74.9
20.9
20.4
20.6
15.3
17.5
19.1
2.6
0.3
–
110.9
112.6
114.6
Land and buildings represents short leasehold properties encompassing leasehold improvements.
Security
The secured bank loans (see Note 15) are secured by fixed and floating charges on the assets of the Group.
The net book value of assets under a finance lease is:
Opening net book value
Depreciation charge
Closing net book value
31 December
2009
£m
25 December
2008
£m
5.4
(0.3)
5.1
5.7
(0.3)
5.4
The above assets held under finance leases relate to a finance lease held on one cinema site which is included within land and buildings.
Interest of £0.1m (2008: £nil) has been capitalised during the period in relation to the construction of new sites at a rate of 3.9%.
Cineworld Group plc
Annual Report and Accounts 2009
57
Notes to the Consolidated Financial Statements continued
(Forming Part of the Financial Statements)
10 Intangible Assets
Cost
Balance at 27 December 2007
Balance at 25 December 2008
Balance at 31 December 2009
Accumulated amortisation and impairment
Balance at 27 December 2007
Amortisation
Balance at 25 December 2008
Amortisation
Balance at 31 December 2009
Net book value
At 27 December 2007
At 25 December 2008
At 31 December 2009
Impairment testing
Goodwill is allocated as follows:
Group of CGUs
Cineworld Group
Ex-Cine-UK sites
Ex-UGC sites excluding Dublin
Dublin
Goodwill
£m
223.8
223.8
223.8
7.7
–
7.7
–
7.7
216.1
216.1
216.1
Brand
£m
Customer
relationships
£m
1.2
1.2
1.2
0.4
0.1
0.5
0.1
0.6
0.8
0.7
0.6
8.4
8.4
8.4
8.4
–
8.4
–
8.4
–
–
–
Total
£m
233.4
233.4
233.4
16.5
0.1
16.6
0.1
16.7
216.9
216.8
216.7
31 December
2009
£m
25 December
2008
£m
216.1
n/a
n/a
n/a
n/a
71.6
142.3
2.2
216.1
216.1
Each individual cinema is considered to be a CGU. However, for the purpose of testing goodwill for impairment, it is acceptable under
IAS 36 to group CGUs. On adoption during the period of IFRS 8 “Operating Segments”, the Directors have concluded that the Group
now has one segment, being cinema operations. Furthermore, the ex-Cine-UK and ex-UGC (including Dublin) businesses are now fully
integrated, meaning that goodwill is now monitored on a Group wide level.
The recoverable amount of Cineworld has been determined based on a value in use calculation. That calculation uses cash flow
projections based on financial budgets approved by management covering a one-year period. Cash flows beyond that the first year
period have been extrapolated using the below assumptions. This growth rate does not exceed the long-term average growth rate for
the market in which Cineworld operates.
The key assumptions behind the impairment review are as follows:
2010 forecast earnings before interest, tax, depreciation, and amortisation (“EBITDA”) was used as the basis of the future cash flow
calculation. This is adjusted to add back rent (“EBITDAR”) and essential capex on existing sites. In line with long-term industry growth
rates, EBITDAR is assumed to grow at 3% per annum for the first five years. Thereafter for the purposes of the annual impairment
review, it is assumed that the growth rate will decline over the remaining 15 years of cash flows, and EBITDA will decline over the final
five years.
Property costs are factored into the model, but are assumed to grow at 2.5% per annum over the life of the model. Cash flows are not
assumed in perpetuity.
The Group has discounted forecast flows using a pre-tax discount rate of 10.1% being a market participant’s discount rate. This is
considered to reflect the risks associated with the relevant cash flows.
Management have sensitised the key assumptions including the discount rate and under base case and sensitised case no indicators
of impairment exist. Management believes that any reasonably possible change in the key assumptions on which Cineworld’s
recoverable amount is based would not cause Cineworld’s carrying amount to exceed its recoverable amount.
58
Cineworld Group plc
Annual Report and Accounts 2009
10 Intangible Assets continued
Amortisation Charge
The amortisation of intangible assets is recognised in the following line items in the income statement:
Administrative expenses
11 Investment in equity accounted investee
The Group has the following investment in a jointly controlled entity:
Digital Cinema Media Limited
53 week
period ended
31 December
2009
£m
52 week
period ended
25 December
2008
£m
0.1
0.1
Country of
Incorporation
England
and Wales
Class of
shares held
Ordinary
Ownership
50%
On 8 February 2008 the Group jointly formed Digital Cinema Media Limited (“DCM”) with Odeon Cinemas Holdings Limited (“Odeon”).
On 10 July 2008 DCM acquired certain trade and assets (substantially employees, computer systems, leasehold office and existing
contracts) from Carlton Screen Advertising Limited, the Group’s former advertising supplier.
Under the terms of the shareholder agreement between the Group and Odeon, key business decisions in respect of DCM require the
unanimous approval of the shareholders. As a consequence, the Directors of the Group do not have total management control of DCM,
therefore the Group’s investment is accounted for as a joint venture.
Cost
Share of post acquisition reserves
Share of post tax (loss)/profit
Carrying value
Summary aggregated financial information on jointly controlled entities – 100 per cent:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Income
Expenses
Net (loss)/profit
2009
£m
0.9
0.1 –
1.0
(0.1)
0.9
2009
£m
14.7
1.8
(10.5)
(6.0)
–
41.9
(42.1)
(0.2)
2008
£m
0.9
0.9
0.1
1.0
2008
£m
16.4
0.7
(15.8)
(1.1)
0.2
28.2
(28.0)
0.2
Cineworld Group plc
Annual Report and Accounts 2009
59
Notes to the Consolidated Financial Statements continued
(Forming Part of the Financial Statements)
12 Deferred Tax Assets and Liabilities
Deferred tax assets and liabilities are attributable to the following:
31 December
2009
£m
Assets
|
25 December
2008
£m
Property, plant and equipment
Intangible assets
Employee benefits
Reverse premiums
Effect of straight-lining operating lease accruals
Interest rate swap
5.7
–
0.4
2.9
8.1
1.0
7.3
–
0.9
3.1
7.8
1.1
Tax assets/(liabilities)
Set off tax
18.1
(1.5)
20.2
(1.6)
31 December
2009
£m
(3.1)
(0.2)
–
–
–
–
(3.3)
1.5
Liabilities
|
25 December
2008
£m
Net
31 December
2009
£m
25 December
2008
£m
(3.3)
(0.2)
–
–
–
–
(3.5)
1.6
2.6
(0.2)
0.4
2.9
8.1
1.0
14.8
– –
4.0
(0.2)
0.9
3.1
7.8
1.1
16.7
Net tax assets/(liabilities)
16.6
18.6
(1.8)
(1.9)
14.8
16.7
See Note 8 for details of unrecognised tax assets.
Deferred taxation provided for in the financial statements at the year end represents provision at 28% (2008: 28%) on the above items.
A review of the deferred tax is performed at each balance sheet date and adjustments made in the event of a change in assumptions.
Deferred tax assets and liabilities have been recognised as follows:
Property, plant and equipment
Intangible assets
Employee benefits
Reverse premiums
Effect of straight-lining operating lease accruals
Interest rate swap
25 December
2008
£m
Recognised
in income
£m
Recognised
in equity
£m
31 December
2009
£m
4.0
(0.2)
0.9
3.1
7.8
1.1
(1.4)
–
(0.3)
(0.2)
0.3
–
–
–
(0.2)
–
–
(0.1)
2.6
(0.2)
0.4
2.9
8.1
1.0
Tax assets/(liabilities)
16.7
(1.6)
(0.3)
14.8
Property, plant and equipment
Intangible assets
Employee benefits
Reverse premiums
Effect of straight-lining operating lease accruals
Interest rate swap
Tax assets/(liabilities)
13 Inventories
Goods for resale
27 December
2007
£m
Recognised
in income
£m
Recognised
in equity
£m
25 December
2008
£m
5.4
(0.2)
0.7
2.9
7.5
–
16.3
(1.4)
–
(0.2)
0.2
0.3
–
(1.1)
–
–
0.4
–
–
1.1
1.5
4.0
(0.2)
0.9
3.1
7.8
1.1
16.7
31 December
2009
£m
25 December
2008
£m
1.9
1.9
1.7
1.7
Goods for resale recognised in cost of sales in the period amounted to £17.0m (2008: £15.5m).
60
Cineworld Group plc
Annual Report and Accounts 2009
14 Trade and Other Receivables
Current
Trade receivables
Other receivables
Loan to jointly controlled entity
Prepayments and accrued income
Non-current
Land lease premiums
Loan to jointly controlled entity
31 December
2009
£m
25 December
2008
£m
1.2
0.3
–
18.4
19.9
2.2
0.7
0.5
18.5
21.9
31 December
2009
£m
25 December
2008
£m
0.9
0.5 –
1.4
0.9
0.9
15 Interest-Bearing Loans and Borrowings and Other Financial Liabilities
This Note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings.
Non-current liabilities
Interest rate swaps
Secured bank loans, less issue costs of debt to be amortised
Liabilities under finance leases
Current liabilities
Interest rate swaps
Secured bank loans, less issue costs of debt to be amortised
Liabilities under finance leases
31 December
2009
£m
25 December
2008
£m
1.3
101.7
6.3
2.7
110.5
6.4
109.3
119.6
2.6
8.7
0.6
1.5
8.6
0.5
11.9
10.6
The terms and conditions of outstanding loans were as follows:
Secured bank loan
Finance lease liability
Currency
Nominal
interest rate
GBP
GBP
LIBOR + 0.95%
7.2%
Year of
maturity
2012
2029
31 December 2009
|
25 December 2008
Face
value
111.0
6.9
Carrying
amount
110.4
6.9
Face
value
120.0
6.9
Carrying
amount
119.1
6.9
Total interest bearing liabilities
117.9
117.3
126.9
126.0
On 26 April 2007 the bank loans were refinanced with a new term loan of £135m for a term of five years and interest charged at
0.95% (2008: 0.95%) above LIBOR based on the current position with respect to the covenants. The range payable above LIBOR is
0.7%–1.35% depending on the covenant headroom. The bank loans are secured by fixed and floating charges on the assets of the
Group. The balance of the loan at 25 December 2009 was £111m. In addition to the term loan, the Group has a £30m revolver which
has not been drawn down.
See Note 20 for bank loan maturity analysis.
Cineworld Group plc
Annual Report and Accounts 2009
61
Notes to the Consolidated Financial Statements continued
(Forming Part of the Financial Statements)
15 Interest-Bearing Loans and Borrowings and Other Financial Liabilities continued
Finance lease liabilities
The maturity of obligations under finance leases is as follows:
Within one year
Between one and two years
In the second to fifth years
Over five years
Less future finance charges
Analysis of net debt
31 December
2009
£m
25 December
2008
£m
0.6
0.6
1.7
10.4
13.3
(6.4)
0.5
0.5
1.7
11.1
13.8
(6.9)
6.9
6.9
At 27 December 2007
Cash flows
Non-cash movement
Effect of movement in foreign exchange rates
At 25 December 2008
Cash flows
Non-cash movement
Cash at bank
and in hand
£m
10.4
2.0
–
0.4
12.8
4.1
–
Bank
loans
£m
(127.7)
9.0
(0.4)
–
(119.1)
9.0
(0.3)
Finance
leases
£m
(6.9)
0.5
(0.5)
–
(6.9)
0.5
(0.5)
Interest
rate swap
£m
(0.2)
–
(4.0)
–
(4.2)
–
0.3
Net debt
£m
(124.4)
11.5
(4.9)
0.4
(117.4)
13.6
(0.5)
At 31 December 2009
16.9
(110.4)
(6.9)
(3.9)
(104.3)
The non-cash movements relating to bank loans represent the amortisation of debt issuance costs.
16 Trade and other payables
Current
Trade payables
Other payables
Accruals and deferred income
Non-current
Accruals and deferred income
31 December
2009
£m
25 December
2008
£m
21.8
4.7
20.0
46.5
23.2
3.9
19.3
46.4
31 December
2009
£m
25 December
2008
£m
53.5
50.5
Non-current accruals and deferred income include reverse-lease premiums and an accrual for straight lining operating leases.
62
Cineworld Group plc
Annual Report and Accounts 2009
17 Employee Benefits
Pension Plans
The Group operates two externally funded defined benefit pension schemes, one in the United Kingdom, the MGM Pension Scheme,
and one in Ireland, the Adelphi-Carlton Limited Contributory Pension Plan.
The Company made contributions of £1.6m during 2009 (2008: £1.7m).
The latest actuarial valuation of the MGM Pension Scheme took place on 5 April 2009 albeit still in draft form. The principal
assumptions used by the independent qualified actuaries in updating the latest valuation of the scheme for IAS 19 are stated
further below.
The scheme closed to new accrual during the year and the remaining active members became deferred on 31 May 2009. Full details
have been given to the relevant members.
The Adelphi-Carlton Limited Contributory Pension Plan is closed to new entrants and therefore the current service cost is £nil.
The trustees of the Adelphi-Carlton Contributory Pension Plan have not agreed that any surplus on the plan can be refunded to
the Company. Accordingly the surplus has not been recognised.
Actuaries for Adelphi-Carlton Limited carried out the last actuarial valuation of the scheme as at 1 April 2007. Based on this
assessment, the actuarial value of the assets of the scheme was more than sufficient to cover 100% of the benefits that had accrued
to members. In view of this, a suspension of Company contributions was in force from 1 April 2001 to 31 December 2009. Total
contributions for the 52 weeks ended 25 December 2008 and 31 December 2009 were £nil and £nil, respectively. No surplus is
recognised in respect of the Adelphi-Carlton Scheme because the Company is not able to assess the surplus.
Actuarial gains and losses are recognised immediately in equity.
The net deficit in the pension scheme is:
MGM Pension Scheme
Adelphi-Carlton Limited Contributory Pension
Net deficit
MGM Pension Scheme
Present value of funded defined benefit obligations
Fair value of plan assets
Deficit in scheme
Movements in present value of defined benefit obligation:
At beginning of period
Current service cost
Interest cost
Contributions by scheme participants
Actuarial (loss)/gain
Benefits paid
At end of period
31 December
2009
£m
25 December
2008
£m
(0.7)
– –
(2.6)
(0.7)
(2.6)
31 December
2009
£m
25 December
2008
£m
(26.6)
25.9
(24.4)
21.8
(0.7)
(2.6)
53 week
period ended
31 December
2009
£m
52 week
period ended
25 December
2008
£m
(24.4)
–
(1.5)
(0.1)
(1.7)
1.1
(26.6)
(0.1)
(1.5)
(0.1)
2.9
1.0
(26.6)
(24.4)
Cineworld Group plc
Annual Report and Accounts 2009
63
Notes to the Consolidated Financial Statements continued
(Forming Part of the Financial Statements)
17 Employee Benefits continued
Movements in fair value of plan assets:
At start of period
Expected return on plan assets
Actuarial gains/(losses)
Contributions by employer
Contributions by members
Benefits paid
At end of period
Income/(expense) recognised in the consolidated statement of comprehensive income:
Current service cost
Interest on defined benefit pension plan obligation
Expected return on defined benefit pension plan assets
Total
53 week
period ended
31 December
2009
£m
52 week
period ended
25 December
2008
£m
21.8
1.0
2.5
1.6
0.1
(1.1)
24.2
1.2
(4.4)
1.7
0.1
(1.0)
25.9
21.8
53 week
period ended
31 December
2009
£m
52 week
period ended
25 December
2008
£m
–
(1.5)
1.0
(0.5)
(0.1)
(1.5)
1.2
(0.4)
The income/(expense) is recognised in the following line items in the consolidated statement of comprehensive income:
Administrative expenses
Financial expenses
Financial income
Total
Actuarial gains/(losses) recognised in the consolidated statement of comprehensive income:
Actuarial gains/(losses) recognised in the period
Cumulative amount at start of period
Cumulative amount at end of period
53 week
period ended
31 December
2009
£m
52 week
period ended
25 December
2008
£m
–
(1.5)
1.0
(0.5)
(0.1)
(1.5)
1.2
(0.4)
53 week
period ended
31 December
2009
£m
52 week
period ended
25 December
2008
£m
0.8
0.5
1.3
(1.5)
2.0
0.5
64
Cineworld Group plc
Annual Report and Accounts 2009
17 Employee Benefits continued
The fair value of the plan assets and the return on those assets were as follows:
Equities
Fixed interest bonds
Index linked bonds
Corporate bonds
Other
Long-term
rate of return
expected at
31 December
2009
53 week
period ended
31 December
2009
£m
Long-term
rate of return
expected at
25 December
2008
52 week
period ended
25 December
2008
£m
8.00%
4.50%
4.25%
5.50%
1.00%
7.50%
4.00%
3.75%
–
2.50%
11.6
–
5.1
8.0
1.2
25.9
10.2
3.6
7.8
–
0.2
21.8
Cineworld Cinemas Ltd employs a building block approach in determining the long-term rate of return on pension plan assets. Historical
markets are studied and assets with higher volatility are assumed to generate higher returns consistent with widely accepted capital
market principles. The assumed long-term rate of return on each asset class is set out within this Note. The overall expected rate of
return on assets is then derived by aggregating the expected return for each asset class over the actual asset allocation for the
Scheme at the accounting date.
Expected return on scheme assets
Actuarial gain/(loss)
Actual return on plan assets
Principal actuarial assumptions (expressed as weighted averages):
Inflation
Rate of general long-term increase in salaries
Rate of increase to pensions in payment
Discount rate for scheme liabilities
53 week
period ended
31 December
2009
£m
52 week
period ended
25 December
2008
£m
1.0
2.5
3.5
1.2
(4.4)
(3.2)
53 week
period ended
31 December
2009
% %
52 week
period ended
25 December
2008
3.9
4.9
2.7–4.0
5.7
2.9
3.9
2.3–3.6
6.3
The mortality assumptions are based on standard mortality tables which allow for future mortality improvements. The assumptions are
that a member currently aged 65 will live on average for a further 21.0 years if they are male and for a further 23.8 years if they are
female. For a member who retires in 2019 at age 65 the assumptions are that they will live on average for a further 21.6 years after
retirement if they are male and for a 24.4 years after retirement if they are female.
History of Plans
The history of the plans for the current and prior periods is as follows:
Balance Sheet
53 week
period ended
31 December
2009
£m
52 week
period ended
25 December
2008
£m
52 week
period ended
27 December
2007
£m
52 week
period ended
28 December
2006
£m
52 week
period ended
29 December
2005
£m
Present value of defined benefit obligation
Fair value of plan assets
(26.6)
25.9
(24.4)
21.8
(26.6)
24.2
(26.4)
21.8
(28.2)
20.9
Deficit
(0.7)
(2.6)
(2.4)
(4.6)
(7.3)
Cineworld Group plc
Annual Report and Accounts 2009
65
Notes to the Consolidated Financial Statements continued
(Forming Part of the Financial Statements)
17 Employee Benefits continued
Experience adjustments
53 week
period ended
31 December
2009
£m
52 week
period ended
25 December
2008
£m
52 week
period ended
27 December
2007
£m
52 week
period ended
28 December
2006
£m
52 week
period ended
29 December
2005
£m
Experience gain/(loss) on plan assets
Experience gain/(loss) on plan liabilities
2.5
2.7
(4.4)
–
0.3
–
0.3
0.1
1.9
(0.1)
The Group expects to contribute approximately £1.6m to its defined benefit plans in the next financial period.
Adelphi-Carlton Limited Contributory Pension
31 December
2009
£m
25 December
2008
£m
(1.3)
1.9
0.6
(0.6)
(1.2)
1.9
0.7
(0.7)
– –
53 week
period ended
31 December
2009
£m
52 week
period ended
25 December
2008
£m
(1.3)
–
0.1
–
(1.2)
(1.0)
(0.1)
0.1
(0.3)
(1.3)
53 week
period ended
31 December
2009
£m
52 week
period ended
25 December
2008
£m
1.9
0.1
0.1
(0.1)
(0.1)
1.9
1.7
0.1
(0.4)
(0.1)
0.6
1.9
Present value of funded defined benefit obligations
Fair value of plan assets
Surplus in scheme
Irrecoverable surplus
Movements in present value of defined benefit obligation:
At beginning of period
Interest
Benefits paid
Exchange rate movement
At end of period
Movements in fair value of plan assets:
At start of period
Expected return on plan assets
Actuarial gain/(loss)
Benefits paid
Exchange rate adjustments
At end of period
66
Cineworld Group plc
Annual Report and Accounts 2009
17 Employee Benefits continued
Expense recognised in the consolidated statement of comprehensive income:
Expected return on defined benefit pension plan assets
Total
The income is recognised in the following line items in the consolidated income statement:
Financial income
Actuarial gains recognised directly in the consolidated statement of comprehensive income:
Actuarial gains recognised in the period
Cumulative amount at start of period
Cumulative amount at end of period
The fair value of the plan assets and the return on those assets were as follows:
53 week
period ended
31 December
2009
£m
52 week
period ended
25 December
2008
£m
– –
– –
53 week
period ended
31 December
2009
£m
52 week
period ended
25 December
2008
£m
– –
– –
53 week
period ended
31 December
2009
£m
52 week
period ended
25 December
2008
£m
– –
0.1
0.1
0.1
0.1
Equities
Property
Corporate bonds
Other
Actual return on plan assets:
Expected return on scheme assets
Actuarial gain/(loss)
Actual return on plan assets
Expected
rate of
return
7.00%
6.50%
4.10%
3.10%
53 week
period ended
31 December
2009
£m
0.4
–
1.4
0.1
1.9
Expected
rate of
return
7.70%
6.00%
5.00%
3.00%
52 week
period ended
25 December
2008
£m
0.4
0.1
1.4
–
1.9
53 week
period ended
31 December
2009
£m
52 week
period ended
25 December
2008
£m
0.1
0.1
0.2
0.1
(0.4)
(0.3)
Cineworld Group plc
Annual Report and Accounts 2009
67
Notes to the Consolidated Financial Statements continued
(Forming Part of the Financial Statements)
17 Employee Benefits continued
Principal actuarial assumptions (expressed as weighted averages):
53 week
period ended
31 December
2009
% %
52 week
period ended
25 December
2008
Inflation rate
Discount rate
Expected rate of return on plan assets
Rate of pension increases in payment
Rate of pension increases in deferment
Material demographic assumptions
2.00
5.00
4.76
3.00
2.00
110%
PNFA00 and
110%
1.75
5.00
5.54
3.00
1.75
110%
PNFA00 and
110%
PNMA00 with PNMA00 with
1.25% pa
future
mortality
improvements improvements
1.25% pa
future
mortality
History of Plans
The history of the plans for the current and prior periods is as follows:
Balance Sheet
Present value of defined benefit obligation
Fair value of plan assets
Surplus
Irrecoverable surplus
Experience Adjustments
53 week
period ended
31 December
2009
£m
52 week
period ended
25 December
2008
£m
52 week
period ended
27 December
2007
£m
52 week
period ended
28 December
2006
£m
52 week
period ended
29 December
2005
£m
(1.2)
1.9
0.7
(0.7)
(1.3)
1.9
0.6
(0.6)
(1.0)
1.7
0.7
(0.7)
(1.0)
1.7
0.7
(0.7)
–
–
–
–
(1.1)
1.7
0.6
(0.6)
–
53 week
period ended
31 December
2009
£m
52 week
period ended
25 December
2008
£m
52 week
period ended
27 December
2007
£m
52 week
period ended
28 December
2006
£m
52 week
period ended
29 December
2005
£m
Experience gain/(loss) on plan assets
Experience gain/(loss) on plan liabilities
0.1
–
(0.4)
–
–
–
–
–
0.2
–
The Group expects to contribute approximately £nil to the Adelphi-Carlton defined benefit plans in the next financial year.
Defined Contribution Plans
The Group operates a number of defined contribution pension plans.
The total expense relating to these plans in the current year was £0.4m (2008: £0.3m).
Share-Based Payments
Employee Sharesave Scheme – Period Ended 25 December 2008
A grant was made under the Sharesave Scheme in 2008. Options were granted to 143 employees over 559,011 shares on
31 October 2008.
The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the
options. The shares were valued using the Black-Scholes Model. A charge of £35,000 was recorded in the income statement for the
period in respect of both the 2007 and 2008 Sharesave Scheme grants.
68
Cineworld Group plc
Annual Report and Accounts 2009
17 Employee Benefits continued
Employee Sharesave Scheme – Period Ended 31 December 2009
A charge of £62,000 was recorded in the income statement for the period in respect of both the 2007 and 2008 Sharesave
Scheme grants.
The Cineworld Group Performance Share Plan (“PSP”) – Period Ended 25 December 2008
Under the PSP, awards of conditional shares can be made that vest after three years subject to continued employment and the
achievement of specified performance conditions as follows:
y
y
y
30% of the shares under the award will vest if the average annual growth in earnings per share (“EPS”) (calculated by comparing the
EPS for the financial year ended 27 December 2007 and the EPS for the financial year ending 30 December 2010) is not less
than 3.2%
100% of the shares under the award will vest if the average annual growth in EPS (calculated by comparing the EPS for the financial
year ended 27 December 2007 and the EPS for the financial year ending 30 December 2010) is at least 9.2%
Where the average annual growth in EPS (calculated by comparing the EPS for the financial year ended 27 December 2007 and the
EPS for the financial year ending 30 December 2010) is between the two limits above, the award shall vest on a straight-line basis
between 30% and 100%.
EPS for the 2008 grants was defined as the normalised undiluted EPS excluding any differed tax charge relating to tax assets in
existence on listing and exceptional items.
On 20 March 2008 awards were granted over 401,000 shares under the PSP. The shares were valued using the Black-Scholes Model.
A charge of £66,000 was recorded in the income statement in respect of shares granted under the PSP.
The Cineworld Group Performance Share Plan (“PSP”) – Period Ended 31 December 2009
Further grants were made under the PSP scheme on 26 March 2009. Under these grants, awards over 242,186 shares were made
with the same conditions as the 2008 grant, but with reference to the financial years 25 December 2008 to 30 December 2011.
Further awards over 137,451 shares were made which will vest after three years subject to continued employment only, with no
specified performance conditions attached.
EPS for the 2009 grant was defined as adjusted pro forma diluted EPS as calculated in Note 5 to the financial statements.
A charge of £387,000 was recorded in the income statement in respect of both the 2008 and 2009 PSP schemes.
The number and weighted average exercise prices of share options in equity settled schemes are as follows:
Outstanding at the beginning of the year
Exercised during the year
Granted during the year
Lapsed during the year
Weighted average
exercise price
2009
Equity-settled
Number Weighted average
exercise price
2008
Equity-settled
of options
2009
Equity-settled
0.67
–
–
1.27
1,085,819
379,637
(86,570)
1.63
–
0.54
1.63
Number
of options
2008
Equity-settled
348,168
–
960,011
(222,360)
Outstanding at the end of the year
0.44
1,378,886
0.67
1,085,819
Exercisable at the end of the year
–
–
–
–
The average share price during 2009 was £1.40 (2008: £1.18).
Assumptions relating to grants of share options in 2007 were:
Scheme name
Date of grant
Share price
at grant (£)
Exercise
price (£)
Expected
volatility (%)
Expected
life (years)
Dividend
yield (%)
Risk free
rate (%)
Fair
value (£)
Sharesave Scheme
26 October 2007
2.00
1.63
53
3.25
6.5
0.61
0.60
Cineworld Group plc
Annual Report and Accounts 2009
69
Notes to the Consolidated Financial Statements continued
(Forming Part of the Financial Statements)
17 Employee Benefits continued
From the 2007 issue, 81,497 were outstanding at 31 December 2009. The number of share options that lapsed from this issue in
2009 was 45,216.
Assumptions relating to grants of share options in 2008 were:
Scheme name
Sharesave Scheme
PSP
Date of grant
Share price
at grant (£)
Exercise
price (£)
Expected
volatility (%)
Expected
life (years)
Dividend
yield (%)
Risk free
rate (%)
Fair
value (£)
31 October 2008
20 March 2008
1.04
1.30
0.93
Nil
53
53
3.25
3.0
6.5
6.5
0.61
0.61
0.29
1.07
Assumptions relating to grants of share options in 2009 were:
Scheme name
PSP
Date of grant
Share price
at grant (£)
Exercise
price (£)
Expected
volatility (%)
Expected
life (years)
Dividend
yield (%)
Risk free
rate (%)
Fair
value (£)
26 March 2009
1.28
Nil
53
3.0
6.5
0.61
1.05
The total expenses recognised for the period arising from share-based payments are as follows:
53 week
period ended
31 December
2009
£m
52 week
period ended
25 December
2008
£m
0.4
0.4
0.1
0.1
Property
provisions
£m
12.5
10.4
2.1
12.5
12.5
(0.5)
1.2
(2.5)
1.1
11.8
10.6
1.2
11.8
Equity-settled share-based payment expense
Share-based payments expenses
18 Provisions
Balance at 25 December 2008
Non-current
Current
Total
Balance at 25 December 2008
Provisions made (released) during the period
Effect of change in discount rate during the period
Utilised against rent during the period
Utilised against interest during the period
Balance at 31 December 2009
Non-current
Current
Total
70
Cineworld Group plc
Annual Report and Accounts 2009
18 Provisions continued
Property provisions relate to onerous leases, dilapidations and other property liabilities. The majority of the property provision relates
to onerous leases being the rent payable on particular cinema sites that is in excess of the economic benefits expected to be derived
from their operation on a discounted basis. The remaining provision will be utilised over the period to the next rent review date or the
remaining lease life depending on the term of the lease. This is between two and 30 years (see further analysis below). The discount
rate used in the period was 10.1%.
Expected timing for utilisation of property provisions
Analysed as:
Within one year
Between one and two years
In the second to fifth years
Over five years
19 Capital and Reserves
Share Capital
Cineworld Group plc
Authorised
250,000,000 ordinary shares of £0.01 each
Allotted, called up and fully paid
141,721,509 ordinary shares of £0.01 each
31 December
2009
25 December
2008
1.2
1.5
2.9
6.2
2.1
1.2
3.3
5.9
11.8
12.5
31 December
2009
£m
25 December
2008
£m
2.5
1.4
2.0
1.4
Translation Reserve
The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign
operations, as well as from the translation of liabilities that hedge the Company’s net investment in a foreign subsidiary.
Hedging Reserve
The hedging reserve comprises the liability in relation to the interest rate swap entered into to hedge against variable interest
payments on £57.8m (2008: £62.5m) of the total £111.0m (2008: £120.0m) of bank debt. As hedge accounting has been adopted
the gains/losses are recorded through equity until such time as the cash flows being hedged occur, when they are recycled to the
income statement.
Dividends
The following dividends were recognised during the period:
Interim
Final (for the preceding period)
2009
£m
4.5
9.0
2008
£m
4.5
9.2
13.5
13.7
An interim dividend of 3.2p per share was paid on 2 October 2009 to ordinary shareholders (2008: 3.2p). The Board has proposed
a final dividend of 6.8p per share, which will result in total cash payable of £9.6m on 7 July 2010 (2008: final dividend £9.0m).
In accordance with IAS 10 this had not been recognised as a liability at 31 December 2009.
Cineworld Group plc
Annual Report and Accounts 2009
71
Notes to the Consolidated Financial Statements continued
(Forming Part of the Financial Statements)
20 Financial Instruments
Overview
The Group has exposure to the following risks from its use of financial instruments:
y
y
y
Credit risk
Liquidity risk
Market risk
This Note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes
for measuring and managing risk, and the Group’s management of capital.
The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The
Board has established the Risk Management Committee, which is responsible for developing and monitoring the Group’s risk
management policies. The Committee reports regularly to the Board of Directors on its activities.
The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk
limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to
reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and
procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles
and obligations.
The Group’s Audit Committee oversees how management monitors compliance with the Group’s risk management policies and
procedures and reviews the adequacy of the risk management framework in relation to the risks by the Group. The Group’s Audit
Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of certain risk
management controls and procedures, the results of which are reported to the Audit Committee.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Group’s receivables from customers and investment securities.
The Group’s credit risk is primarily attributable to its trade receivables. However due to the nature of the Group’s business trade
receivables are not significant which limits the related credit risk. The Group’s trade receivables are disclosed in Note 14. Of the total
balance of £1.2m (2008: £2.2m) due 50% (2008: 78.6%) are within credit terms. A further 24% outside credit terms cleared after
2009 period end and before signing of the financial statements. The bad debt provision as at 2009 is £0.1m (2008: £nil), with a bad
debt expense in the period of £0.1m. (2008: credit of £0.3m as a provision for doubtful debts made in 2007 was released). Based on
past experience the Group believes that no additional impairment allowance is necessary in respect of trade receivables that are past
due. The credit risk on liquid funds and derivative financial instruments is also limited because the counterparties are banks with high
credit-ratings.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to
managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both
normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
In addition to the financial liabilities set out in the table below, the Group has a £30m revolver facility with Barclays Bank available to
May 2012, which to date has not been drawn on.
The following are the contractual maturities of financial liabilities, including interest payments and excluding the impact of netting
agreements. The amounts disclosed in the table are contractual undiscounted cash flows, including interest payments calculated using
interest rates in force at each balance sheet date, so will not always reconcile with the amounts disclosed on the balance sheet.
31 December 2009
Non-derivative financial liabilities
Secured bank loans
Finance lease liabilities
Trade and other payables
Derivative financial liabilities
Interest rate swaps used for hedging
Carrying Contractual
cash flows
amount
£m
£m
6 months
or less
£m
6–12
months
£m
1–2
years
£m
2–5 More than
5 years
£m
years
£m
110.4
6.9
21.8
(114.8)
(13.3)
(21.8)
(5.4)
(0.3)
(21.8)
(5.3)
(0.3)
–
(10.6)
(0.6)
–
(93.5)
(1.7)
–
–
(10.4)
–
3.9
(6.0)
(1.3)
(1.3)
(2.6)
(0.8)
–
143.0
(155.9)
(28.8)
(6.9)
(13.8)
(96.0)
(10.4)
72
Cineworld Group plc
Annual Report and Accounts 2009
20 Financial Instruments continued
The secured bank loan is subject to two covenants: the ratio of EBITDA to net debt and the ratio of EBITDAR (pre-rent EBITDA) to net
finance charges.
25 December 2008
Non-derivative financial liabilities
Secured bank loans
Finance lease liabilities
Trade and other payables
Derivative financial liabilities
Interest rate swaps used for hedging
Carrying Contractual
cash flows
amount
£m
£m
6 months
or less
£m
6–12
months
£m
1–2
years
£m
2–5
years
£m
More than
5 years
£m
119.1
6.9
23.2
(133.3)
(13.8)
(23.2)
(6.7)
(0.2)
(23.2)
(6.7)
(0.3)
–
(13.1)
(0.5)
–
(106.8)
(1.7)
–
–
(11.1)
–
4.2
(5.3)
(0.7)
(0.8)
(1.5)
(2.3)
–
153.4
(175.6)
(30.8)
(7.8)
(15.1)
(110.8)
(11.1)
Cash Flow Hedges
The following table indicates the periods in which the discounted cash flows associated with derivatives that are cash flow hedges are
expected to occur.
2009
Interest rate swaps:
Liabilities
2008
Interest rate swaps:
Liabilities
Carrying
amount
£m
Expected
cash flows
£m
6 months
or less
£m
6–12
months
£m
1–2
years
£m
2–5 More than
5 years
£m
years
£m
(3.9)
(3.9)
(1.3)
(1.3)
(1.1)
(0.2)
–
Carrying
amount
£m
Expected
cash flows
£m
6 months
or less
£m
6–12
months
£m
1–2
years
£m
2–5
years
£m
More than
5 years
£m
(4.2)
(4.2)
(0.7)
(0.8)
(1.5)
(1.2)
–
It is expected that the expected cash flows will impact profit and loss when the cash flows occur.
Market Risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the
Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control
market risk exposures within acceptable parameters, while optimising the return on risk.
Foreign Currency Risk
The majority of the Group’s operations are in the United Kingdom and hence for these operations there is no exposure to foreign
currency risk other than in respect of certain purchases that may be denominated in currencies other than sterling. In addition there
is an operation in Ireland where non-sterling revenues, purchases, financial assets and liabilities and cash flows can be affected by
movements in euro rates. However, the exposure is limited as euro operations are not significant. A 10% increase/(decrease) in the
value of €1 against sterling would increase/decrease the profit before tax for 2009 by approximately £107,000 (2008: £205,000.)
A 10% increase/(decrease) in the value of €1 against sterling would increase/decrease equity in 2009 by approximately £139,000
(2008: £375,000).
Interest Rate Risk
The Group’s policy is to manage its cost of borrowing by securing fixed interest rates on a portion of its term loan.
Whilst fixed rate interest bearing debt is not exposed to cash flow interest rate risk, there is no opportunity for the Group to enjoy
a reduction in borrowing costs in markets where rates are falling.
In addition, the fair value risk inherent in fixed rate borrowing means that the Group is exposed to unplanned costs should debt be
restructured or repaid early as part of the liquidity management process.
The Group uses interest rate swaps agreed with other parties to hedge a portion of its bank loans that have variable interest rates.
Interest rate swaps are measured at fair value, which have been calculated by discounting the expected future cash flows at prevailing
interest rates.
Cineworld Group plc
Annual Report and Accounts 2009
73
Notes to the Consolidated Financial Statements continued
(Forming Part of the Financial Statements)
20 Financial Instruments continued
At the period end the Group had one interest rate swap which hedged 52.1% (2008: 51.9%) of the Group’s variable rate secured
bank debt. As a result, there is no impact on the income statement relating to the hedged bank debt as a result of any changes in
interest rates.
At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was:
Fixed rate instruments
Financial liabilities (interest rate swap)
Financial liabilities (secured bank loans – hedged portion)
Variable rate instruments
Financial liabilities (secured bank loans – unhedged portion)
Carrying amount
2009
2008
(3.9)
(57.8)
(4.2)
(62.3)
(61.7)
(66.5)
(53.2)
(57.7)
£57.8m (2008: £62.3m) of the variable rate financial liability is hedged via the interest rate swap with the balance attracting a variable
interest rate.
Fair Value Sensitivity Analysis for Fixed Rate Instruments
The Group accounts for fixed rate derivative financial instruments (interest rate swaps) at fair value. The gain or loss on
remeasurement to fair value is recognised immediately in the income statement except where derivatives qualify for hedge accounting
when recognition of any resultant gain or loss depends on the nature of the item being hedged. Hedge accounting was adopted from
the year ended 27 December 2007 on the swap taken out in May 2007.
A change of 100 basis points in interest rates would have increased equity by £1.1m or decreased equity by £1.1m (2008: increase
£1.8m, decrease £1.8m) and would have increased or decreased profit or loss by £nil (2008: £nil).
Cash Flow Sensitivity Analysis for Variable Rate Instruments
A change of 100 basis points in interest rates at the reporting date would have increased/(decreased) equity and profit or loss
by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.
The analysis is performed on the same basis for 2008.
Effect in GBP thousands
31 December 2009
Variable rate instruments
Interest rate swap
Cash flow sensitivity (net)
25 December 2008
Variable rate instruments
Interest rate swap
Cash flow sensitivity (net)
Profit or loss
|
Equity
100 bp
increase
100 bp
decrease
100 bp
increase
100 bp
decrease
(1,191)
595
1,191
(595)
(1,191)
595
1,191
(595)
(596)
596
(596)
596
(1,287)
643
1,287
(643)
(1,287)
643
1,287
(643)
(644)
644
(644)
644
74
Cineworld Group plc
Annual Report and Accounts 2009
20 Financial Instruments continued
Fair Values
Set out below is a comparison by category of carrying amounts and fair values of the Group’s financial instruments that are carried in
the financial statements.
Short-term debtors and creditors have been excluded from the following disclosures on the basis that their carrying amount is a
reasonable approximation to fair value.
Cash and cash equivalents
Secured bank loans
Finance lease liabilities
Interest rate swaps
Carrying
amount
31 December
2009
£m
Fair value
31 December
2009
£m
Carrying
amount
25 December
2008
£m
(16.9)
110.4
6.9
3.9
(16.9)
106.5
6.9
3.9
(12.8)
119.1
6.9
4.2
Fair value
25 December
2008
£m
(12.8)
120.0
6.9
4.2
104.3
100.4
117.4
118.3
The fair value of derivatives and borrowings has been calculated by discounting the expected future cash flows at prevailing interest
rates. The carrying amount of secured bank loans is stated net of debt issuance costs and the fair value is stated gross of debt
issuance costs and is calculated using the market interest rates.
The difference between net carrying amount and estimated fair value reflects unrealised gains or losses inherent in the instruments
based on valuations at 31 December 2009 and 25 December 2008. The volatile nature of the markets means that values at any
subsequent date could be significantly different from the values reported above.
Fair value hierarchy
The table below analyses financial instruments carried at fair value by valuation method. The different levels have been defined
as follows:
y
y
y
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the assets or liability that are not based on observable market data (unobservable inputs).
31 December 2009
Derivative financial instruments
Level 1
£m
Level 2
£m
Level 3
£m
–
3.9
–
Total
£m
3.9
There have been no transfers between levels in 2009. No other financial instruments are held at fair value.
Capital Management
The capital structure of the Group consists of cash and cash equivalents and equity attributable to equity holders of the parent
company, being £205.1m. The Board of Directors constantly monitor the ongoing capital requirements of the business and have
reviewed the current gearing ratio, being the ratio of bank debt to equity and consider it appropriate for the Group’s current
circumstances. In addition the Group has a £30m revolver, which has not been drawn down. The Group’s objective when managing
capital is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future
development of the business, to provide returns for shareholders and to optimise the capital structure to reduce the cost of capital.
The Board of Directors monitors both the demographic spread of shareholders, as well as the return on capital, which the Group
defines as total shareholders’ equity and the level of dividends to ordinary shareholders. The Group’s target dividend payout ratio is
60% of underlying net income.
Cineworld Group plc
Annual Report and Accounts 2009
75
Notes to the Consolidated Financial Statements continued
(Forming Part of the Financial Statements)
21 Operating Leases
Non-cancellable operating lease rentals commitments are as follows:
Less than one year
Between one and five years
More than five years
Land and
buildings
£m
45.0
181.3
593.8
Other
£m
0.4
1.3
–
31 December
2009
£m
45.4
182.6
593.8
Land and
buildings
£m
41.8
169.7
587.4
Other
£m
0.4
1.8
–
25 December
2008
£m
42.2
171.5
587.4
820.1
1.7
821.8
798.9
2.2
801.1
22 Statement of Cash Flows
The Group has represented its cash flow statement during the period, to better represent the nature of the cash flows. The effect of
this is to include the surplus of pension contributions over the current service cost within cash generated from operations, and to
include the investment in jointly controlled entity within investing activities. The comparative period has been represented. The impact
is to reduce cash generated from operations in the prior period by £1.6m with a corresponding increase in investing activities
and to reduce cash flows from investing activities by £0.5m with a corresponding increase in cash flows from financing activities. The
overall net increase in cash and cash equivalents in the comparative period is unaffected.
23 Capital Commitments
Capital commitments at the end of the financial period for which no provision has been made:
Contracted
31 December
2009
£m
25 December
2008
£m
2.9
4.0
Additional capital commitments of £3.2m were made between the end of the financial period and the approval of the Financial
Statements on 11 March 2010
24 Related parties
The compensation of key management personnel (including the Directors) is as follows:
53 weeks ended 31 December 2009
Total compensation for key management
Personnel (including the Directors)
52 weeks ended 25 December 2008
Total compensation for key management
Personnel (including the Directors)
Salary
and fees
including bonus
£'000
Compensation
for loss
of office
£'000
Pension
contributions
£'000
Total
£'000
1,841
–
147
1,988
Salary
and fees
including bonus
£'000
Compensation
for loss
of office
£'000
Pension
contributions
£'000
Total
£'000
1,688
–
142
1,830
During 2009, M Tooth, L Guffey and A Roux served as Directors appointed by Blackstone, a major shareholder. Their Directors’ fees of
£33,000, £29,700 and £3,300 respectively (2008: £30,250, £30,250 and £nil) are payable to Blackstone. L Guffey resigned in
November 2009 and A Roux was appointed in his place.
Share-based compensation benefit charges for key management personnel (including Directors) was £0.2m in 2009 (2008: £0.1m).
Other related party transactions
Digital Cinema Media (“DCM”) is a joint venture between the Group and Odeon Cinemas Holdings Limited set up on 10 July 2008.
Revenue receivable from DCM in the 53 week period ending 31 December 2009 totalled £11.3m (2008: £7.4m) and as at
31 December 2009 £1.2m (2008: £2.2m) was due from DCM in respect of receivables. In addition the Group has a working capital
loan outstanding from DCM of £0.5m (2008: £0.5m). The Group has guaranteed £2.75m of DCM’s bank debt payable to Royal Bank
of Scotland. The Group does not consider it is probable that it will be called on under the terms of the guarantee.
76
Cineworld Group plc
Annual Report and Accounts 2009
Company Balance Sheet
at 31 December 2009
Fixed assets
Investments
Current assets
Debtors
Cash at bank
Creditors: amount falling due within one year
Net current assets
Net assets
Capital and reserves
Called up share capital
Share premium account
Profit and loss account
Shareholders’ funds – equity
Note
27
28
29
30
30
30
31 December
2009
£.000
31 December
2009
£.000
25 December
2008
£.000
25 December
2008
£.000
131,798
131,349
105,667
5,003
110,670
(54,211)
93,667
3,006
96,673
(37,514)
56,459
188,257
1,417
171,354
15,486
188,257
59,159
190,508
1,417
171,354
17,737
190,508
These financial statements were approved by the Board of Directors on 11 March 2010 and were signed on its behalf by:
Stephen Wiener
Director
Richard Jones
Director
Cineworld Group plc
Annual Report and Accounts 2009
77
Company Reconciliation of Movements in Shareholders’ Funds
for the Period Ended 31 December 2009
Profit for the period
Dividends paid during the year
Equity instruments granted
Net (decrease)/increase in shareholders’ funds
Opening shareholders’ funds
Closing shareholders’ funds
53 week
period ended
31 December
2009
£'000
10,763
(13,463)
449
52 week
period ended
25 December
2008
£'000
20,052
(13,747)
101
Note
30
30
(2,251)
190,508
6,406
184,102
188,257
190,508
78
Cineworld Group plc
Annual Report and Accounts 2009
Notes to the Company Financial Statements
25 Accounting Policies
The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the
Company’s financial statements.
Basis of Preparation
The financial statements have been prepared in accordance with applicable accounting standards and under the historical cost
accounting rules.
Information regarding the Group’s business activities, together with the factors likely to affect its future development, performance and
position is set out in the Chief Executive and Chief Financial Officers' Review and the Risks and Uncertainties section on pages 8 to 17.
The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Chief Executive and
Chief Financial Officers’ Report on pages 8 to 15. In addition Note 20 to the financial statements includes the Group’s objectives,
policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and
hedging activities; and its exposures to credit risk and liquidity risk.
As highlighted in Note 15 to the financial statements, the Group meets its day to day working capital requirements through its bank
facilities which consist of a £111m term loan plus £30m revolver which matures in 2012. The current economic conditions create
uncertainty particularly over: (a) the level of demand for the Group’s products; and (b) the availability of bank finance in the
foreseeable future.
The bank facility is subject to two covenants: the ratio of EBITDA to net debt and the ratio of EBITDAR (pre-rent EBITDA) to net finance
charges. The Group’s forecasts and projections, taking account of reasonably possible changes in trading performance, show that the
Group should be able to operate within the level of its current facility, including compliance with the bank facility covenants.
The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the
foreseeable future. Thus they continue to adopt the going concern basis in preparing the annual financial statements.
Under Section 408 of the Companies Act 2006 the Company is exempt from the requirement to present its own profit and loss account.
Under Financial Reporting Standard 1 the Company is exempt from the requirement to prepare a cash flow statement on the grounds
that its cash flows are included within the consolidated financial statements of Cineworld Group plc.
The Company has taken advantage of the exemption contained in FRS 8 and has therefore not disclosed transactions or balances with
entities which form part of the Cineworld Group where the Group controls 90% or more of the voting rights.
Investments
In the Company’s financial statements, investments in subsidiary undertakings are stated at cost less provision for any impairment
in value.
Impairment
The Group evaluates its investments for financial impairment where events or circumstances indicate that the carrying amount of such
assets may not be fully recoverable. When such evaluations indicate that the carrying value of an asset exceeds its recoverable value,
an impairment in value is recorded.
Deferred taxation
The charge for taxation based on the profit for the year and takes into account taxation deferred because of timing differences between
the treatment of certain items for taxation and accounting purposes.
Deferred tax is recognised, without discounting, in respect of all timing differences between the treatment of certain items for taxation
and accounting purposes which have arisen but not reversed by the balance sheet date, except as otherwise required by FRS 19.
Classification of financial instruments issued by the Company
Following the adoption of FRS 25, financial instruments issued by the Company are treated as equity (i.e. forming part of shareholders’
funds) only to the extent that they meet the following two conditions:
a) they include no contractual obligations upon the Company to deliver cash or other financial assets or to exchange financial assets
or financial liabilities with another party under conditions that are potentially unfavourable to the Company; and
b) where the instrument will or may be settled in the Company’s own equity instruments, it is either a non-derivative that includes no
obligation to deliver a variable number of the Company’s own equity instruments or is a derivative that will be settled by the
Company’s exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.
Cineworld Group plc
Annual Report and Accounts 2009
79
Notes to the Company Financial Statements continued
25 Accounting Policies continued
To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so
classified takes the legal form of the Company’s own shares, the amounts presented in these financial statements for called up share
capital and share premium account exclude amounts in relation to those shares.
Share-Based Payment Transactions
The share options programme allows Group employees to acquire shares of the Company. The fair value of options granted is
recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread
over the period during which the employees become unconditionally entitled to the options. The fair value of the options granted is
measured using an evaluation model, taking into account the terms and conditions upon which the options were granted. The amount
recognised as an expense is adjusted to reflect the actual number of shares options that vest except where forfeiture is due only to
share prices not achieving the threshold for vesting.
Shares appreciation rights are also granted by the Company to employees. The fair value of the amount payable to the employee is
recognised as an expense with a corresponding increase in liabilities. The fair value is initially measured at grant date and spread over
the period during which the employees become unconditionally entitled to payment. The fair value of the share appreciation rights is
measured based on an option valuation model, taking into account the terms and conditions upon which the instruments were granted.
The liability is remeasured at each balance sheet date and at settlement date and any changes in fair value recognised in profit and
loss spread equally over the vesting period.
Where the Company grants options over its own shares to the employees of its subsidiaries it recognises an increase in the cost of
investment in its subsidiaries equivalent to the equity-settled share-based payment charge recognised in its subsidiary’s financial
statements with the corresponding credit being recognised directly in equity. Amounts recharged to or reimbursed by the subsidiary are
recognised as a reduction in the cost of investment in subsidiary.
Own Shares Held by Employee Benefit Trust (“EBT”)
Transactions of the Group sponsored EBT are included in the Group financial information. In particular, the trust’s purchase of shares
in the Company are debited directly to equity.
26 Staff Number and Costs
The Company has no employees, however it bears total Non-Executive Directors fees of £300,000 (2008: £278,000). See pages 34 to
38 for details of Directors emoluments.
27 Fixed Asset Investments
Company
Balance at 25 December 2008
Additions
Balance at 31 December 2009
Net book value
At 25 December 2008
At 31 December 2009
For details of £449,000 addition to investment see Note 30.
Share in Group
undertaking
£000
131,349
449
131,798
131,349
131,798
80
Cineworld Group plc
Annual Report and Accounts 2009
27 Fixed Asset Investments continued
Subsidiary undertakings
Directly Held
Augustus 1 Limited
Indirectly Held
Augustus 2 Limited
Cineworld Holdings Limited
Cine-UK Limited
Cineworld Cinemas Holdings Limited
Cineworld Cinemas Limited
Cineworld Finance Limited
Cineworld Estates Limited
Cineworld South East Cinemas Limited
Cineworld Exhibition Limited
Gallery Holdings Limited
Gallery Cinemas Limited
Slough Movie Centre Limited
Adelphi-Carlton Limited
Cineworld Cinema Properties Limited
Cineworld Elite Pictures Theatre
(Nottingham) Limited
Classic Cinemas Limited
Computicket Limited
Digital Cinema Media Limited
28 Debtors
Amounts due from subsidiary undertakings
29 Creditors: Amount Falling Due Within One Year
Amounts due to subsidiary undertakings
Corporation tax payable
Country of incorporation
Principal activity
Class % of shares held
England and Wales
Holding company
Ordinary
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
Holding company
Holding company
Cinema operation
Holding company
Holding company
and cinema operation
Dormant
Cinema property leasing
Holding company
Dormant
Holding company
England and Wales
England and Wales
Eire
England and Wales
Dormant
Dormant
Cinema operation
Property company
England and Wales
Non-trading
England and Wales
England and Wales
England and Wales
Retail services company
Dormant
Screen advertising
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
“A” Ordinary
Preference
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Cum 5% Pref
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
98.2
99.6
100
100
50
31 December
2009
£'000
25 December
2008
£'000
105,667
93,667
105,667
93,667
31 December
2009
£'000
25 December
2008
£'000
(54,174)
(37)
(37,296)
(218)
(54,211)
(37,514)
Cineworld Group plc
Annual Report and Accounts 2009
81
Notes to the Company Financial Statements continued
30 Share Capital and Reserves
At 25 December 2008
Profit for the period
Dividends paid during the year
Equity instruments granted
Share
capital
£'000
1,417
–
–
–
Share
premium
account
£'000
171,354
–
–
–
Profit and
loss account
£'000
17,737
10,763
(13,463)
449
Total
£'000
190,508
10,763
(13,463)
449
At 31 December 2009
1,417
171,354
15,486
188,257
Share premium is stated net of share issue costs.
Equity instruments granted of £449,000 represents the fair value of share options granted to employees of subsidiary undertakings.
There is a corresponding increase in investments, see Note 27.
This element of the profit and loss reserve is not distributable.
31 Share-Based Payments
See Note 17 of the Group financial statements.
82
Cineworld Group plc
Annual Report and Accounts 2009
Shareholder Information
(Non-Executive Director and Chairman)
(Chief Executive Officer)
(Chief Financial Officer)
(Non-Executive Director and Senior Independent Director)
(Non-Executive Director)
(Non-Executive Director)
(Non-Executive Director)
(Non-Executive Director)
Directors
Anthony Bloom
Stephen Wiener
Richard Jones
David Maloney
Thomas McGrath
Alan Roux
Matthew Tooth
Peter Williams
Head Office
Power Road Studios
114 Power Road
Chiswick
London W4 5PY
Telephone Number
020 8987 5000
Website
www.cineworld.co.uk
www.cineworldplc.com
Place of Incorporation
England and Wales
Company Number
Registered Number: 5212407
Registrar
Capita Registrars Limited
Northern House
Woodsome Park
Fenay Bridge
Huddersfield HD8 0GA
Auditors
KPMG Audit Plc
8 Salisbury Square
London EC4Y 8BB
Final Dividend – 2009
Announcement
Ex dividend
Record date
Payment date
11 March 2010
9 June 2010
11 June 2010
7 July 2010
Joint Brokers
JP Morgan Cazenove Ltd
20 Moorgate
London EC2R 6DA
Evolution Securities Limited
100 Wood Street
London EC2V 7AN
Legal Advisors to the Company
Olswang
90 High Holborn
London WC1V 6XX
Public Relations Advisors
M: Communications
1 Ropemaker Street
Ninth Floor
London EC2Y 9HT
Registered Office
Power Road Studios
114 Power Road
Chiswick
London W4 5PY
Cineworld Group plc
Annual Report and Accounts 2009
83
Notes
84
Cineworld Group plc
Annual Report and Accounts 2009
Business Review
Highlights 2009
A Real Cinema Experience
Chairman’s Statement
Strategy and Market Overview
Chief Executive and Chief Financial
Officers’ Review
Risks and Uncertainties
Corporate Responsibility
Governance
Board of Directors
Directors’ Report
Corporate Governance Statement
Directors’ Remuneration Report
Statement of Directors’ Responsibilities in
respect of the Annual Report and the
Financial Statements
Independent Auditors’ Report to the
Members of Cineworld Group plc
01
02
04
06
08
16
18
22
24
29
34
39
40
41
42
Financial Statements
Consolidated Statement of
Comprehensive Income
Consolidated Statement of
Financial Position
Consolidated Statement of Changes
in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated
Financial Statements
Company Balance Sheet
Company Reconciliation of Movements in
Shareholders’ Funds
78
Notes to the Company Financial Statements 79
83
Shareholder Information
43
44
45
77
Cineworld Group plc
Power Road Studios
114 Power Road
Chiswick
London W4 5PY
020 8987 5000
www.cineworld.com
www.cineworldplc.com
Cineworld Group plc
Annual Report and Accounts 2009
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