The best place to
watch a movie
A NNUAL REPORT AND ACCOUNTS 2016
STR ATEGIC REPORT
1
2
4
6
Highlights 2016
At a Glance
Chairman’s Statement
Chief Executive Officer’s
Statement
8 Market Overview
10 Business Model
12 Strategy and KPIs
18 Resources and Relationships
22
Principal Risks and
Uncertainties
28 Financial Review
GOVERNANCE
33 Directors’ Biographies
37
Corporate Governance
Statement
37 Chairman’s Introduction
38 Compliance Statement
40 Leadership
42 Effectiveness
43
Nomination Committee
Report
45 Accountability
48 Audit Committee Report
53
53
54
Insurance
Relations with Shareholders
Directors’ Remuneration
Report
55 Remuneration Policy
64
Annual Report on
Remuneration
Directors’ Report
Statement of Directors’
Responsibilities
Independent Auditor’s
Report
73
78
79
FINANCIAL STATEMENTS
82
Consolidated Statement
of Profit or Loss
Consolidated Statement of
Other Comprehensive
Income
Consolidated Statement
of Financial Position
Consolidated Statement
of Changes in Equity
Consolidated Statement
of Cash Flows
Notes to the Consolidated
Financial Statements
83
84
85
86
87
129 Company Statement of
Financial Position
130 Company Statement of
Changes in Equity
Notes to the Company
Financial Statements
138 Shareholder Information
131
For more information visit:
www.cineworldplc.com/investors
We are a
business with a
simple strategy
Our Vision…
To be the best place to watch a movie
Our Strategy is to:
1. Deliver a great cinema experience
for all cinemagoers, every time.
2. Continue to expand our estate and
look for profitable opportunities
to grow.
3. Ensure that we enhance our existing
estate so we deliver a consistent level
of quality across the Group.
4. Be leaders in the industry by offering
customers the latest audio and visual
technology.
5. Drive value for shareholders by
delivering our growth plans in an
efficient and effective way.
Highlights 2016
Key Financial Highlights
GROUP REVENUE (£m)
EBITDA (1)
(£m)
+13.0%
705.8
797.8
+13.2%
PROFIT
AFTER TAX (5)
(£m)
+0.9%
ADJUSTED PROFIT (£m)
AFTER TAX (4)
+18.3%
79.3
93.8
155.3
175.8
81.3
82.0
2015
2016
2015
2016
2015
2016
2015
2016
(p)
TOTAL SHAREHOLDER RETURN
ADJUSTED
DILUTED EPS (4)
(p)
DIVIDEND
PER SHARE
+16.8%
29.7p
34.7p
+8.6%
17.5p
19.0p
2015
2016
2015
2016
)
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900
800
700
600
500
400
300
200
100
0
Dec 2008 Dec 2009 Dec 2010 Dec 2011 Dec 2012 Dec 2013
Dec 2014
Dec 2015
Dec 2016
Cineworld
FTSE 250
FTSE All Share Travel and Leisure
Other Financial Highlights
Operational Highlights
uu Group revenue growth of 13.0%
on a statutory basis and 8.7% on
a constant currency basis(2);
• Solid UK and Ireland revenue
uu Statutory profit before tax
decreased 1.5% to £98.2m;
uu Diluted EPS remained constant
at 30.4p;
growth of 6.0%;
uu Final dividend increased by 8.6%
• Strong ROW(3) revenue growth of
26.6% on a statutory basis and
13.3% on a constant currency basis
with record performances in
Poland, Romania, Hungary and
Czech Republic;
uu EBITDA double digit growth of
13.2%, 8.4% on a constant currency
basis;
uu Adjusted profit before tax(4)
increased by 12.5% to £111.4m;
to 19.0p;
uu Net cash generated from operating
activities of £150.1m; and
uu Net debt increased to £282.3m due
to the acquisition of five Empire
cinemas compared to £245.2m at
31 December 2015 with EBITDA to
net debt ratio remaining at 1.6 times.
uu Reached the milestone of over 100
million customers coming through
our doors to watch a movie;
uu Acquisition of five Empire cinemas,
64 screens, including the iconic
Empire Leicester Square;
uu Eight new site openings, four in the
UK and four in the ROW, adding 78
screens, bringing the total number of
screens to 2,115 at 31 December 2016;
uu Nine major refurbishments
completed in 2016, six in the UK
and three in the ROW;
uu Leading technological innovation
with five new IMAX screens and
13 new 4DX screens, including the
first 4DX screen in London; and
uu CEO, Moshe Greidinger awarded
the Global Achievement Award in
Exhibition at Cinemacon 2016.
1 EBITDA is defined as profit before interest, tax, depreciation and amortisation, onerous leases and other non-recurring charges, impairments and reversals of
impairments, transaction and reorganisation costs, profit on disposals of assets and the settlement of the defined benefit pension liability.
2 To provide information on a comparable basis, where % change vs. prior year information includes performance generated in currencies other than sterling,
the % is presented on a constant currency basis. Constant currency movements have been calculated by applying the 2016 average exchange rates to 2015
performance.
3 ROW is defined as Rest of the World and includes Poland, Israel, Romania, Hungary, Czech Republic, Bulgaria and Slovakia.
4 Adjusted profit before tax is calculated by adding back amortisation of intangible assets (excluding acquired movie distribution rights), and certain non-
recurring, non-cash items and foreign exchange as set out in Note 5. Adjusted profit before tax is an internal measure used by management, as they believe it
better reflects the underlying performance of the Group and therefore a more meaningful comparison of performance from period to period. Adjusted profit
after tax is arrived at by applying an effective tax rate to taxable adjustments and deducting the total from adjusted profit before tax.
5 Statutory profit after tax was impacted by the following items: a one-off cost of £4.8m in relation to the buy-out of the defined benefit pension scheme,
removing all risks in relation to the scheme; adverse currency movements of £6.1m compared to an exchange rate gain of £7.7m in the prior year due to the
translation of the Euro Term loan at the Balance Sheet date; and no one-off gains, such as the gain on the disposal of Cambridge for £6.4m in 2015.
1
STRATEGIC REPORT uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORT u
At a Glance
We are an international cinema chain operating in nine different
territories with 226 sites and 2,115 screens. We are focused
on providing our customers with the best possible cinema
experience, offering a variety of movies, as well as different
formats using the latest technologies. Our vision is always to
be “The Best Place to Watch a Movie”.
UK&I REVE NUE (£m)
ROW REVE NUE (£m)
UK&I ADMISSIONS (£m)
ROW ADMISSIONS (£m)
+6.0%
+26.6%
+1.8%
494.0
303.8
465.9
239.9
50.9
51.8
+13.6%
42.7
48.5
2015
2016
2015
2016
2015
2016
2015
2016
Our brands: UK and Ireland
971 Screens | 96 Sites
71 Screens | 22 Sites
Cineworld is one of the UK’s leading cinema chains by admissions
and box office revenues. The cinemas are modern, well designed
multiplexes offering great customer service with high quality
technology, stadium seating, and online ticketing services. The
sites are situated mostly in leisure and retail parks. Cineworld
shows a broad range of films to a large number of customers with
a wide demographic and offers the highly successful “Unlimited”
card which allows customers access to an unlimited number of
films for a monthly subscription. Refurbishment of older sites,
investment in new technologies and diversification of retail
offerings are a key focus for Cineworld. During 2016 six sites were
refurbished, four new cinema sites were opened and five Empire
sites were acquired, including the iconic Empire Leicester Square.
Cineworld is the only exhibitor in the UK to offer the highly
successful 4DX experience, which includes motion seats, and
several environmental effects such as water splash, wind, smell
and more. These are built into an increasing number of movies to
make the audience feel they are part of the action. At the end of
2016, Cineworld operated nine 4DX screens including the first
4DX in London which opened in December in Wandsworth.
Cineworld also has 20 IMAX screens and its own Superscreen
format. Two sites have VIP auditoriums which include a full movie
and dining experience. Cineworld currently has 24 Starbucks
coffee outlets within its circuit.
2
Picturehouse is an arthouse chain which has a cosier
atmosphere. It offers freshly-cooked food, bars and special
events, which provides an alternative experience to the
multiplexes. The sites generally have five screens or fewer and
provide unique, local and intimate film viewing in cinemas that
are both of high quality and of architectural merit. The flagship
cinema is Picturehouse Central, located in Piccadilly which was
fully renovated two years ago. It reopened as one of the most
beautiful and special cinemas in London’s West End, and is
equipped with the most advanced technology. It also has two
unique restaurants and an exclusive Members Bar. Picturehouse
operates in 13 towns and cities, with eight located in London
‘villages’, and focuses on cinemagoers looking for art house
movies and events side by side with mainstream commercial
movies. Picturehouse has its own membership scheme which
includes a range of benefits such as discounts on tickets and
concession items, access to exclusive previews and special
events, and more. The Picturehouse team works closely with
independent movie creators and hosts movie festivals, and
many other events.
STRATEGIC REPORT uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT u Theatre Operations
Theatre Operations
UK, Ireland, Central and Eastern Europe and Israel
In 2016, there were over 100 million customer
admissions across all our cinemas.
COUNTRY
NO. OF CINEMAS
SCREENS
1. UK & Ireland
118
1,042
1
2. Poland
3. Romania
4. Hungary
5. Czech Republic
6. Israel
7. Bulgaria
8. Slovakia
Total
33
24
19
13
10
6
3
354
223
163
115
124
65
29
226
2,115
Our Brands: Rest of the World
5
2
8
4
3
7
6
949 Screens | 98 Sites
124 Screens | 10 Sites
Cinema City operates in six Central and Eastern European
territories, and is either the number one or two chain in each
of the markets in which it operates. The cinemas are modern,
well-designed multiplexes offering a high quality cinema
experience, showing a variety of movies, and providing great
customer service. In each of the markets, Cinema City work
closely with the local communities to provide its customers with
a great tailored viewing experience for both international and
local productions. The cinemas have large screens (among the
highest screen/hall ratio in the world), significant stadium
seating and market leading technologies such as IMAX, 4DX
and VIP auditoriums. In order to maintain Cinema City’s position
as the leading chain, both in number of screens and the quality
of the experience, constant renovation of the circuit takes place,
and new sites are developed. While Cinema City opened new
cinemas in a number of the territories, Romania was the most
important market for expansion in 2016 with three new cinema
sites opened. In 2017 there are two sites planned to be opened
in Poland, one in Romania and one in Czech Republic.
Yes Planet and Rav-Chen are the two brands which the Group
operates in Israel. Yes Planet is the market leader, operating
cinemas which, include IMAX, 4DX and VIP screens. The
Rav-Chen cinemas are a smaller version of the multiplexes.
As in the other territories, all the cinemas in Israel provide a
high level of quality and service. The styles and designs of the
cinemas are modern and all have stadium seating, large screens
and the latest digital technology. The cinemas show a range
of popular films from both international and local producers.
During 2016 a state-of-the art 18 screen cinema was opened
in Beer Sheva with IMAX, 4DX, and VIP screens, and another
modern 12 screen multiplex site is due to be opened in Zichron
during 2017.
3
STRATEGIC REPORT uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORT u
Chairman’s Statement
Anthony Bloom
Chairman (right)
Moshe (Mooky) Greidinger
Chief Executive Officer (left)
Overview
I am pleased to report that 2016 was another record year
for the Cineworld Group (the “Group”) and its shareholders.
We achieved an important milestone – over 100 million
people came through our doors to watch a movie. I would
have found this inconceivable when we started the
Company with one multiplex in Stevenage in 1996!
Group EBITDA for the year increased by 13.2% to £175.8m
(2015: £155.3m), on revenue which improved by 13.0% to
£797.8m (2015: £705.8m). Statutory profit after tax
increased by 0.9% to £82.0m (2015: £81.3m).
We achieved this strong growth in EBITDA as a result of the
full impact of our new cinemas which opened in 2015, the
completed refurbishments of a number of our important
cinemas, the acquisition of five Empire cinemas and the
ongoing operating efficiencies which are constantly sought
and implemented across the Group. All of these factors
resulted in increased admissions, particularly in the ROW
territories. Operating in nine different countries provides
geographic diversification and a range of opportunities in
both mature and growth markets.
The Group’s Balance Sheet remains strong. Although there
was a slight rise in net debt to £282.3m (due to the Empire
acquisition and impact of foreign exchange movements on
the Euro Term loans), the EBITDA to net debt ratio at the
year end remained at 1.6 times. This Balance Sheet strength,
together with the gratifying operating performance of the
Group enabled the Board to declare an increased full year
dividend of 19.0p per share, which represents 8.6% growth.
The Group has increased its dividend in seven out of the
10 years since it was listed, an achievement of which I am
particularly proud.
In 2016 we successfully completed the acquisition of five
Empire cinemas, including the iconic Empire Leicester
Square. Pleasingly we were able to fulfil our long-held
objective of obtaining a prestigious West End site. Together
the five Empire sites added 64 additional screens to our
circuit. Along with expansion, renovation and modernisation
of the existing circuit is of equal importance to us, ensuring
that we have high quality, well-designed, modern cinemas
across the whole estate. During 2016 we completed nine
major refurbishments and the improvement in operating
performance at those sites is already evident.
Shareholders will be pleased to know that we lead the way
in offering the latest technology. We are the only operators
of 4DX in the UK, a format proving increasingly popular
with our customers. The first one opened in London at our
Wandsworth site in December, and as part of the planned
refurbishment of the Empire Leicester Square we intend to
introduce 4DX. At the end of 2016 we had 27 4DX screens,
33 IMAX screens and six of our own Superscreen formats.
4
STRATEGIC REPORT uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT u In 2016, over 100 million
people came through
our doors to watch a
movie – a fantastic
milestone for the
Group.”
Anthony Bloom
Chairman
The wellbeing of our staff is fundamental to the efficient
operation of the business. Without them we would not be
able operate 2,115 screens in 226 sites, as we did at the end
of 2016. This is not a trivial task – we show over 10,000
movies every day, every week across nine different
territories. The logistics involved are formidable and rely on
highly motivated and dedicated staff. Accordingly, internal
promotion and succession planning is a key part of our
people strategy.
We are currently scheduled to open a further 441 screens
over the next four years – 264 of which are in the ROW
territories and 177 in the UK. This expansion will be financed
from internally generated funds and will provide excellent
growth potential in the future.
In summary, we went from strength to strength in 2016 and
I believe we will continue to do so in 2017 and provide
significant value to our shareholders.
Board
There were no changes to the Board during 2016; however
on 11 January 2017, after the year end three changes
took place.
Martina King, Non-Executive Director, Chair of the
Remuneration Committee and member of the Audit
Committee, stepped down following six years of service to
focus on her other business interests. I would like to thank
Martina for the energy and rigour that she brought to the
Board during a period which has seen the Group expand
considerably, both in the UK and internationally. Martina
made a significant contribution to our affairs, and I wish
her every success in her other ventures.
Nisan Cohen was appointed as CFO and joined the Board as
an Executive Director. Nisan is a member of the Institute of
Certified Public Accountants in Israel and has been part of
the Cineworld Group, and formerly the Cinema City Group
for 16 years. As Vice President of Finance, he led the
integration of the finance teams in the Group across nine
territories after the combination between Cineworld and
Cinema City International N.V. Lately, he served as Deputy
CFO, working closely with the then interim CFO, Dean
Moore. I have had the pleasure of working with Nisan since
the combination with Cinema City in 2014 and have no
doubt that his extensive experience, both commercial and
financial, will continue to be an asset to the Group.
Dean Moore, the previous interim CFO, was appointed to
the Board as an independent Non-Executive Director,
Chair of the Remuneration Committee and a member of the
Audit Committee. Dean brings over 20 years of experience
as a plc executive Director. The Board is satisfied that
Dean meets the requisite criteria to be considered as
independent, notwithstanding his brief ten month interim
employment with the Group, during which his mandate was
to focus primarily on the CFO succession planning process.
I look forward to continuing to work with Nisan and Dean in
their new roles.
As a Board we take corporate governance standards
extremely seriously and we always strive to attain the
highest standards possible. We periodically review areas
such as gender, diversity, health and safety and the
environment and where appropriate improve our practices
in those areas.
On behalf of myself and the Board I would like to express
my sincere appreciation to the Group’s executive
management and all its employees for their continued hard
work, competence, professionalism and their gratifying
achievements during 2016.
Outlook
As we go into 2017, I look forward with confidence. There is
a strong film release programme planned for the year. We
have an excellent estate which will continue to grow (with a
further 13 cinemas due to open this year), and number of
major refurbishments planned. We have a strong Balance
Sheet and can undertake our strategic objectives without
financial strain. We are at the forefront of providing the
latest technology to our customers and most importantly of
all we have an excellent management team with extensive
experience which is focused on ensuring Cineworld is
always “The Best Place to Watch a Movie”.
Anthony Bloom
Chairman
9 March 2017
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STRATEGIC REPORT uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORT u
Chief Executive Officer’s Statement
We want to provide our
customers with choice –
the choice of which movie
to watch, the choice of how
to watch a movie and the
choice of retail offerings
whilst always receiving
great customer service.”
Moshe (Mooky) Greidinger
Chief Executive Officer
can enjoy unlimited buffet food, popcorn and soft drinks
before watching the movie in a dedicated auditorium with
luxurious reclining seats. Three new VIP sites were opened
during the year in Glasgow Renfrew Street (UK), Beer Sheva
(Israel) and Bucharest Titan (Romania). At 31 December
2016 we had nine VIP auditoriums in the Group.
Our membership schemes, the most significant being the
Cineworld Unlimited programme, continue to provide our
customers with a range of benefits, and are one of the pillars
of our strategy for growing revenues and admissions. The
schemes also bring operational benefits by encouraging
repeat visits, often at off-peak times. The Unlimited
programme was launched in Poland at the end of 2015
and has performed in line with expectations during 2016.
We also focused attention on our wider communities – the
Group undertakes a range of activities and initiatives with
charities, schools, and community groups. As an example,
part of our schools’ programme, included holding over 400
education screenings on weekday mornings with a total of
over 32,000 students attending from 450 different schools
across the UK. Similar activities are also undertaken in each
of our ROW territories. In 2016 for the first time we were a
partner with BBC’s Children In Need fundraising initiative
where we raised over £400,000.
Cinema Expansion
Following the record number of 18 openings in 2015, we
opened a further eight cinemas during 2016, four in the UK,
(Yate, Loughborough, Dalton Park and Harlow) and four in
the ROW, (Beer Sheva - Israel, Timisoara Nepi, Bucharest
Titan and Piatra Neamt - Romania). We have a further 441
screens scheduled to open in the next four years, 132 which
are scheduled to open in 2017. New sites will be opened in
both our growth markets in the ROW as well as in the more
mature markets of the UK and Israel. Our growth markets
still hold significant potential for the Group, as the culture
of going to the cinema becomes more established and
attendance increases with the rising standard of living.
Our Strategy
During 2016, we have made great progress in delivering our
strategy and vision to be “The Best Place to Watch a Movie”.
We served over 100 million customers who came through our
doors, and provided them with the choice of which movie to
watch, the choice of format and the choice of an expanded
range of retail offerings - all with great customer service.
Our strategy is to:
• Above all deliver a great cinema experience for all
cinemagoers, every time;
• Expand our estate and look for profitable opportunities
to grow – through consistent cash generation and our
debt facility we have the financial strength to take
advantage of opportunities which present themselves;
• Enhance our existing estate and new sites, ensuring we
deliver a consistently high quality offering across the
Group – our refurbishment and construction programme
is at the heart of achieving this;
• Be leaders in the industry by offering customers the
latest audio and visual technology – expanding the
premium formats such as IMAX, 3D, 4DX, Superscreen
and VIP auditoriums and ensuring we invest in the latest
innovative technology; and
• Drive value for shareholders by delivering our growth
plans in an efficient and effective way.
Our main achievements in 2016 are summarised below.
Customer Experience
Our cinemas now offer up to six different formats of how to
watch movies; regular screens, 3D, 4DX, IMAX, Superscreen
and VIP auditoriums. Through both our expansion and
refurbishment programme, we are focused on ensuring as
many of our sites as possible have a range of these choices
for our customers.
As well as developing our exhibition offerings and capacity,
we continue to pay particular attention to our retail products
and services. Our on-site concessions aim to be best in class,
providing a variety of food, drink and snack options. During
2016, the Group has increased the number of Starbucks coffee
outlets in our cinemas in the UK, taking the total number to
24 at 31 December 2016 with further outlets planned for 2017.
We have expanded the number of VIP auditoriums where
customers experience a premium offering from the moment
they walk through the door. A VIP ticket includes access to a
private lounge ahead of the movie screening where customers
6
STRATEGIC REPORT uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT u During the year we announced the acquisition of the five
Empire sites which has enabled the Group to increase
its London presence, an area of the UK where we have
previously been underrepresented. The Hemel Hempstead
cinema was recently refurbished and is in line with our
“new generation” style sites. In the near future we plan to
also refurbish the Basildon and Poole sites. As the Bromley
site is smaller, with four screens, we feel it is more
appropriate to form part of the Picturehouse circuit.
As we proactively focus on the management of our estate
this may occasionally include closing specific sites where
lease terms expire and it is not commercially beneficial
or feasible to renew the lease. During 2016 we closed five
sites, three in the UK, (Staples Corner, Hammersmith and
Liverpool), one in Hungary, (Mammut), and one in Romania,
(Arad GTC).
Refurbishments
Our refurbishment programme was a key focus for 2016,
with nine major refurbishments completed, six in the UK,
(Stevenage, Glasgow Renfrew Street, Crawley, Cardiff,
Wandsworth and Birmingham Broad Street) and three in
the ROW (Polus and Au Park - Slovakia and Campona -
Hungary). As previously highlighted, the UK estate is
generally older than in the ROW and we will continue
to renovate the estate further in 2017 to ensure all our
cinemas are of the highest quality and equipped with the
latest technology.
Digital Film and Technological Innovation
We continued to expand the IMAX and 4DX formats across
a selection of our sites. IMAX and 4DX are both extremely
popular, especially for major releases such as “Star Wars:
Rogue One” and “Fantastic Beasts and Where To Find
Them”. In 2017 “Fast and Furious 8”, “Pirates of the
Caribbean: Dead Men Tell No Tales”, “Transformers: The Last
Knight” and “Guardians of the Galaxy Vol. 2” are expected to
do well in both the IMAX and 4DX formats. We opened two
IMAX screens during the year in Timisoara Nepi (Romania)
and Beer Sheva (Israel) and also acquired three as part of
the Empire acquisition in Basildon, Hemel Hempstead and
Leicester Square. By the end of 2016, the Group was
operating 33 IMAX screens in total and 27 4DX screens.
Towards the end of 2016 new mobile applications were
soft-launched to our customers across both Android and
iOS platforms. The key features, as well as a new look and
feel, were the ability to sign-up for Unlimited membership,
and easier navigation to find tickets for performances
across all of our formats.
Our People
Once again, 2016 saw considerable investment in people
initiatives across the Group as we recognise that motivated
and engaged people are pivotal to delivering our vision to
be the “Best Place to Watch a Movie”.
Nurturing internal talent is a key part of our people strategy,
and we are proud that over the last 12 months over 50% of
cinema management positions have been filled by internal
applicants. This success rate is underpinned by our regular
training programmes and talent development reviews,
which link directly to our learning and development offering.
We are also proud that many amongst our current Senior
Management team have worked their way up into those
positions after having started as trainees.
Another key part of our people strategy is our fair wage
policy – we are amongst the highest payers in the industry
and we pay more than our statutory obligations, across all
age groups and in all territories.
Value for Shareholders
The cash generative nature of our business underpins our
business model. Our priorities for the use of our cash have
remained consistent; to invest in the business to support
organic growth in revenue and earnings, for selective
merger and acquisition opportunities and to grow the
dividend. During 2016 we have been able to reward
shareholders with growth in both the dividend and adjusted
diluted earnings per share, 8.6% and 16.8% respectively. The
total full year dividend declared for 2016 is 19.0p
(2015:17.5p).
Future Outlook
As a management team we will continue to devote time and
energy to assessing new site opportunities and potential
acquisitions, identifying key sites for renovation and
ensuring we provide the latest innovative technology to our
customers.
Looking forward, we are well positioned to continue
delivering on our strategy in 2017. We have an excellent
estate which is growing and constantly being upgraded
where necessary to ensure the cinemas remain
contemporary and of a high quality. We have a dedicated
team who are focused on providing the best customer
service and we are investing in the latest technology to
maintain our position as leaders in the industry. In addition,
there is an exciting film slate for 2017, which includes a
number of sequels such as “Star Wars: Episode VIII”,
“Despicable Me 3”, “Justice League”, “Paddington 2”, “Fast
and Furious 8”, “Pirates of the Caribbean: Dead Men Tell No
Tales”, “Transformers: The Last Knight” as well as new titles
such as “Beauty and the Beast”, “Wonder Woman”,
“Dunkirk”, “Coco” and many more.
Whilst we remain cautious, we do not believe the expected
exit of the UK from the European Union will have a
significant impact on the underlying trading performance
of the Group going forward based on the nature of our
business which has a proven consumer appeal throughout
all economic cycles.
As I have said before, teamwork is the secret of our success
and the key to our future. Without our people we would not
able to be “The Best Place to Watch a Movie”. I would like to
take this opportunity to thank the whole Cineworld team for
their continued hard work and dedication during 2016 and I
look forward to working alongside them in 2017.
Moshe Greidinger
Chief Executive Officer
9 March 2017
7
STRATEGIC REPORT uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORT u
Market Overview
The geographic spread of the Group provides us with
diversification and opportunities across both mature
and growth markets.
Characteristics of the Cinema Market
The Group operates in nine territories and, as measured by
number of screens, is either the number one or two
operator in each. The nine territories are a blend of mature
and growth markets which provides the Group with varying
opportunities, including expansion and modernisation.
Mature markets such as the UK and Israel tend to be
characterised by higher admissions per capita, higher
average ticket prices and a lower population per screen
ratio. Growth markets have the opposite characteristics and
provide great investment potential for the Group. Romania
is an example of such a growth market where the Group
invested significantly during 2015 and 2016 and will continue
to do so in 2017.
Structure of the Market and Competitive Landscape
There are four significant cinema chains in Europe, the
Middle East and Africa, with over 1,000 screens. The cinema
industry globally has recently seen an increase in acquisition
activity, with AMC Entertainment acquiring Odeon during
2016 and subsequently they also recently announced the
proposed acquisition of the Nordic Cinema Group. Outside
of the top four chains, the rest of the market is represented
by smaller multiplex operators, which only operate in one or
two territories, and independent operators which are
specific to local markets.
European Cinema Industry(1)
RANK
COMPANY
NO. OF SCREENS
1.
2.
3.
4.
5.
6.
7.
8.
9.
AMC Entertainment
Cineworld
Vue Cinemas
Les Cinemas Gaumont Pathe
CJCGV
Nordic Cinema Group
CGR
Ster-Kinekor
UGC
10.
Kinepolis
(1) Source: Dodana – information compiled across 2016
2,261
2,201
1,841
1,043
761
666
466
460
459
446
External Factors
The cinema industry is dependent upon the customer
choosing to spend disposable income on watching a movie.
Value for money remains an important factor and cinema
has tended to be a less expensive form of entertainment in
the wider leisure market in which the Group competes.
Historical trends and patterns show that cinema attendance
is most closely related to the quality of the movies rather
than the gross domestic product (GDP) of a country.
Although there continue to be developments in the online
video sector, superior experiences offered by technologies
such as IMAX and 4DX are ensuring that watching a movie
in the cinema is a unique experience which cannot be
replicated at home or on a portable electronic device. Going
to the cinema has also become more that just watching a
movie, with the expansion of the retail offerings including
coffee shops and bars.
The customer experience has also been assisted by
developments in technology, such as the ability to book
online and through mobile applications. In addition, the
digitalisation of cinemas has resulted in both a greater
range of films being offered, and the streaming of live
events such as opera, theatre and ballet.
Market Performance
The industry is largely dependent on the quality of films and
therefore the appeal of such films to the cinemagoing
public. Box office revenue is driven by admissions and
average ticket price. Admissions depend on the number,
timing and popularity of films. The average ticket price is
driven by film mix, format of the film i.e. IMAX, 3D,
Superscreen or 4DX, the demographics of admissions and
local economic factors such as local levels of disposable
income and competition.
Following the strong film slate of 2015 with a number of
global blockbusters including “Spectre”, “Star Wars: The
Force Awakens” and “Jurassic World”, 2016 demonstrated
that there was still an undiminished appetite for cinema
attendance. The top performing movies for 2016 globally
were “Captain America: Civil War” with global revenues of
$1,153.3m, “Rogue One: A Star Wars Story” which managed
to gross revenues of $1,034.0m in the last two weeks of
December, “Finding Dory” with global revenues of $1,028.1m
and “Zootopia”, which generated $1,023.8m (Source:
Boxofficemojo.com). However, in certain territories,
especially Poland and the Czech Republic, local films proved
to be extremely popular and accounted for a greater
percentage of annual admissions. In 2016 the top three films
in Poland were all local movies.
8
STRATEGIC REPORT uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT u COUNTRY
TOP 3 FILMS FOR THE TERRITORY
UK & Ireland
1. Star Wars: Rogue One
Poland
2.
Fantastic Beasts and Where
To Find Them
3. Bridget Jones’s Baby
1.
Pitbull.
Niebezpieczne kobiety
2. Planeta singli
3. Pitbull. Nowe porządki
Romania
1. Suicide Squad
2. The Jungle Book
3. Doctor Strange
Israel
1. The Secret Life of Pets
2. Zootopia
3. Trolls
Czech Republic 1. Deadpool
2. The Revenant
3. Lida Bacrova
Slovakia
1. Finding Dory
2. The Secret Life of Pets
3. Deadpool
Bulgaria
1.
Ice Age: Collision Course
2. Zootopia
3. Star Wars: Rogue One
ORIGIN
US
UK/US
UK
Poland
Poland
Poland
US
UK/US
US
US
US
US
US
US
Czech
US
US
US
US
US
US
Property Market and Development
The rate of new cinema openings is dependent upon
local market conditions. Planning laws, the economic
environment, and the ability of developers to finance their
projects are factors which impact on cinema location. These
characteristics differ by territory. In more mature markets
(such as the UK and Israel), the rate of new cinema
openings has been slower in recent years, partly due to the
limited number and long lead time of new retail and leisure
developments. Despite this, the Group has been successful
in opening 16 new sites over the past two years in the
mature UK and Israel markets. As the estate is generally
older in the mature markets, refurbishment of existing
cinemas, in particular in the UK, is vitally important and
accordingly six major refurbishments were completed in the
UK during 2016 by the Group. The opposite can be seen in
developing markets (such as Romania) where the number of
development opportunities tends to be greater. As a Group,
we have opened 12 new sites in less mature markets over
the last two years. Where there are site closures, especially
of older sites in the UK, this also provides further
opportunities for new investments.
Other Income
Retail and screen advertising revenues are significant
additional sources of income for cinema chains. Popcorn
and soft drinks remain the most popular retail items. There
is, however, a growing demand for cinemas to offer a wider
range of products, including healthier variants of traditional
offerings. There is also an increase in supplementary
products including branded coffee outlets such as
Starbucks in the UK.
Screen advertising revenue varies depending on the type
of films screened, the number of minutes and value of
advertising sold, the volume of attendees who view the film,
and the placement of advertisements close to the start of
the film. The strength of the film slate in 2015 and the
success of major films in the current year had a positive
impact on the screen advertising revenues in 2016,
especially in the Group’s ROW territories.
Distribution income is generated in certain territories in the
ROW. The revenue is generated by acquiring rights to a
specific title, or acting as a local country distributor for a
main Hollywood studio. Where rights are directly acquired,
the revenue is earned through royalties from cinema
exhibition and also from Video on Demand, DVDs and TV
screenings.
Future Market Trends
Although streaming and downloading of films at home is
increasingly popular, a multiplex cinema provides a unique
experience which cannot be replicated at home. A trip to
the cinema is a social occasion and watching a movie on
a large screen with superb sound is attractive to all age
groups. Cinema auditoriums are also increasingly being
used for purposes other than just exhibiting feature movies,
such as the streaming of live events, for example, opera and
ballet and for corporate events.
The cinema industry continues to believe that the interests
of the film industry and the customer are generally best
served by the existence of the cinematic window, the period
between the release of a film in a cinema and on any other
platform. There is no expectation that the current cinema
window will significantly change in the near future.
9
STRATEGIC REPORT uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORT u
Business Model
We create value for shareholders through our focus on
continually aiming to enhance the experience for our customers.
We share the value we generate by reinvesting in the business
and expanding our offer to customers, rewarding our employees
and paying dividends to our shareholders.
Our primary customers are the cinemagoing public
who rely on us to provide the best entertainment
experience. We aim to give our customers, not just the
choice of cinema, but also the choice of how to watch
movies. In many cinemas, we have up to six different
offerings of how to watch movies: regular screens,
3D, 4DX, IMAX, Superscreen and VIP theatres.
We provide the films our customers want to see in the
most appropriate venues and locations, using the best
technology, with the right retail offerings and great
customer service. Our ticket price represents the various
offerings of how to watch a movie. Our major source
of revenue is driven by admissions, and our ability to
maximise this income is dependent on the quality of
the film slate and on the experience we can offer. Our
admissions also have a direct effect on screen advertising
revenues, and on retail sales, primarily of food and drink.
Trusted Commercial Relationships
Delivering a high quality film slate is one of the key external
drivers of our business. Whilst we do not have control over
what is produced, our close and long-standing relationships
with the film distributors are fundamental to providing the
best and most varied selection for our customers at the
right time. Our brands are important to our commercial
partners, helping to deepen our relationships with the film
distributors, retail suppliers, advertisers and landlords.
Risk Management and Governance
Monitoring and maintaining an effective system of risk
management and internal control ensures that the Group’s
assets are safeguarded and that material financial errors
and irregularities are prevented or detected with a
minimum delay.
Outputs
Our business model is underpinned by the
following:
People and Culture
Our people underpin the whole of our operations as
they are the face of our cinemas. They are focused on
ensuring that our customers enjoy the best possible
experience during their visit. A well-established training and
development programme is used to maintain standards as
well as support the Group focus on internal succession.
Customer Experience
Our customers experience is fundamental to our success.
By delivering our vision to be “The Best Place to Watch a
Movie”, we are ensuring that our customers have a positive
experience and increase the likelihood of their repeat visits.
Motivated Team
The investment we make and the way we operate is key to
maintaining a happy and motivated workforce. For more on
our people refer to Resources and Relationships on page 18.
Financial Strength
By continuing to achieve healthy margins and
maintaining a strong Balance Sheet we can continue
to invest in our business, expanding and modernising
the estate. Our continued investment in technology
is a pivotal part of evolving the viewer experience
we offer, but it also plays a role in ensuring we
have flexibility in the use of our auditoriums.
Group Financial Performance
and KPIs
The Group’s financial results and our progress against
our KPIs are the key measurable outcomes of what
we achieve. These are outlined in detail in our KPIs
on page 12 and the Financial Review on page 28.
Shareholder Returns
To be able to reward our shareholders we remain
focused on driving revenues, increasing earnings
and prudently managing our cash position, to
ultimately provide returns to shareholders.
10
STRATEGIC REPORT uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT u Our Vision: To be the best place to watch a movie
Our Purpose: To provide the films our customers want to see in the
most appropriate venues and locations, using the best technology
with the right retail offerings and great customer service
Our Market & Brands
Outputs
u UK & Ireland
Cineworld,
Picture House
u Rest of World
Cinema City,
Yes Planet
u Customer
Experience
Our Portfolio of Locations
u High Street
u Shopping Centres
u Motivated
Teams
u Retail &
Leisure Parks
u Stand Alone
t
n
e
m
t
s
e
v
n
e
R
t
fi
o
r
P
i
Our Operations
u Cinema Operations
u Group Support
Functions
Our Offering
u Property &
Construction
u Film buying,
programming and
distribution
u Group
Financial
Performance
and KPI Delivery
u Box Office
4DX, 3D IMAX,
VIP, Unlimited,
Superscreen
u Distribution
u Advertising
u Retail
Starbucks, Candy King,
Baskin Robbins
UNLIMITED
u Shareholder
Returns
People
& Culture
Financial
Strength
Trusted
Commercial
Relationships
Risk Management
& Governance
i
P
r
o
fi
t
R
e
n
v
e
s
t
m
e
n
t
11
STRATEGIC REPORT uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Strategy and Key Performance Indicators (“KPIs”)
In order to implement and measure the Group’s strategic performance, we monitor the
following Key Performance Indicators in addition to the Group’s overall financial performance.
3.
Ensuring that we enhance our
existing estate so we deliver a
consistent level of quality across
the Group.
Providing our customers with high
quality cinemas throughout the estate
is of upmost importance. As the UK
estate is generally older than in the
ROW, refurbishments are key to
ensuring the cinemas remain
contemporary and include the
latest technology, stadium seating,
and retail offerings.
What we achieved in 2016
A record nine major refurbishments
were completed, six in the UK and three
in the ROW.
UK&I
uu Stevenage
uu Glasgow Renfrew Street
uu Crawley
uu Cardiff
uu Wandsworth
uu Birmingham Broad Street
ROW
uu Polus (Slovakia)
uu Au Park (Slovakia)
uu Compania (Hungary)
NUMBER OF REFURBISHMENTS
COMPLETED
9
2015: 3
1.
Delivering a great cinema
experience for all cinemagoers,
every time.
2.
Expanding our estate and
looking for profitable
opportunities to grow.
Our people are the face of our
business. They are key to delivering a
great customer experience to all of our
customers. It is therefore important
to us that we recruit high quality
employees and invest in them.
We want to ensure our customers have
choice – this includes the movies they
can watch, how they watch the movies,
the type of venue they watch a movie
in and a variety of retail offerings
provided to cater for all demographics.
What we achieved in 2016
Achieved record customer admissions,
reaching the fantastic milestone of
over 100m admissions across the
Group.
Employee engagement levels
increased to 75% from 70% in 2015
with an outstanding response rate
of 98%.
Our “BeMore” programme, which
supports our top talent displaying
potential and fulfils our internal
succession requirements, saw the
graduation of 24 junior managers.
ADMISSIONS
(£m)
+7.2%
120
100
80
60
40
20
0
93.6
100.3
2015
2016
12
When selecting new sites for
development we consider the location,
accessibility, competition, and other
local economic factors.
What we achieved in 2016
Completed the acquisition of five
Empire sites including the iconic
Empire Leicester Square which
increases our London presence.
The five cinemas comprised:
uu Basildon – 18 screens
uu Bromley – 4 screens
uu Hemel Hempstead – 17 screens
uu Leicester Square – 9 screens
uu Poole – 16 screens
Built on the previous record number of
18 openings in 2015 with an additional
eight openings, four in the UK&I and
four in the ROW.
UK&I
uu Yate – 6 screens
uu Loughborough – 8 screens
uu Dalton Park – 7 screens
uu Harlow – 6 screens
ROW
uu Timisoara Nepi (Romania) –
13 screens
uu Beer Sheva (Israel) – 18 screens
uu Bucharest Tital (Romania) –
14 screens
uu Piatra Neamt – 6 screens
We have a pipeline of 441 new screens
which are contracted to come on-
stream over the next four years.
NO. OF NEW SITES:
13
2015: 18
TOTAL NO. OF SCREENS
2,115
2015: 2,011
Being leaders in the industry
Driving shareholder value by delivering our growth plans
in an efficient and effective way.
4.
5.
by offering our customers
the latest audio and visual
technology.
We want to continue the roll-out of
To be able to reward our shareholders we remain focused on driving revenues,
the latest technology across the
increasing earnings and prudently managing our cash position.
What we achieved in 2016
EPS and dividends.
Delivered growth in underlying profitability, with an increase in EBITDA, adjusted
Continued to focus on driving efficiencies across the Group for example by the
extension of the shared service centre in Poland. Having successfully established
the customer service call centre in 2015, during 2016 our tier 1 IT and UK
purchasing functions were transitioned to Poland to unlock further efficiencies
across the Group.
Group, by continuing to strengthen
our partnership and relationships
with IMAX and 4DX.
What we achieved in 2016
The first 4DX was opened in London
at our Wandsworth site in December.
There were thirteen 4DX screens
opened across the Group in total
during 2016, bringing the total
number of 4DX screens to 27 as at
31 December 2016.
Two new IMAX screens were opened,
in addition to the three IMAX screens
acquired from Empire. We are now
currently the largest IMAX exhibitor in
the UK and have a total of 33 screens
across the Group as at 31 December
NUMBER OF PREMIUM FORMATS
2016.
4DX
27
2015: 14
IMAX
33
2015: 28
STRATEGIC REPORT uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT u
1.
2.
Delivering a great cinema
Expanding our estate and
experience for all cinemagoers,
looking for profitable
every time.
opportunities to grow.
3.
Ensuring that we enhance our
existing estate so we deliver a
consistent level of quality across
the Group.
Our people are the face of our
When selecting new sites for
Providing our customers with high
business. They are key to delivering a
development we consider the location,
quality cinemas throughout the estate
great customer experience to all of our
accessibility, competition, and other
is of upmost importance. As the UK
customers. It is therefore important
local economic factors.
to us that we recruit high quality
employees and invest in them.
We want to ensure our customers have
choice – this includes the movies they
can watch, how they watch the movies,
the type of venue they watch a movie
in and a variety of retail offerings
provided to cater for all demographics.
What we achieved in 2016
What we achieved in 2016
Completed the acquisition of five
Empire sites including the iconic
Empire Leicester Square which
increases our London presence.
The five cinemas comprised:
uu Basildon – 18 screens
uu Bromley – 4 screens
uu Hemel Hempstead – 17 screens
Achieved record customer admissions,
uu Leicester Square – 9 screens
reaching the fantastic milestone of
uu Poole – 16 screens
over 100m admissions across the
estate is generally older than in the
ROW, refurbishments are key to
ensuring the cinemas remain
contemporary and include the
latest technology, stadium seating,
and retail offerings.
What we achieved in 2016
A record nine major refurbishments
were completed, six in the UK and three
in the ROW.
Employee engagement levels
Built on the previous record number of
18 openings in 2015 with an additional
uu Glasgow Renfrew Street
increased to 75% from 70% in 2015
eight openings, four in the UK&I and
with an outstanding response rate
four in the ROW.
Group.
of 98%.
UK&I
uu Stevenage
uu Crawley
uu Cardiff
uu Wandsworth
Our “BeMore” programme, which
supports our top talent displaying
potential and fulfils our internal
succession requirements, saw the
graduation of 24 junior managers.
4.
Being leaders in the industry
by offering our customers
the latest audio and visual
technology.
We want to continue the roll-out of
the latest technology across the
Group, by continuing to strengthen
our partnership and relationships
with IMAX and 4DX.
What we achieved in 2016
The first 4DX was opened in London
at our Wandsworth site in December.
There were thirteen 4DX screens
opened across the Group in total
during 2016, bringing the total
number of 4DX screens to 27 as at
31 December 2016.
Two new IMAX screens were opened,
in addition to the three IMAX screens
acquired from Empire. We are now
currently the largest IMAX exhibitor in
the UK and have a total of 33 screens
across the Group as at 31 December
2016.
uu Yate – 6 screens
uu Loughborough – 8 screens
uu Dalton Park – 7 screens
uu Harlow – 6 screens
UK&I
ROW
uu Timisoara Nepi (Romania) –
13 screens
uu Beer Sheva (Israel) – 18 screens
uu Bucharest Tital (Romania) –
14 screens
uu Piatra Neamt – 6 screens
We have a pipeline of 441 new screens
which are contracted to come on-
stream over the next four years.
NO. OF NEW SITES:
13
2015: 18
TOTAL NO. OF SCREENS
2,115
2015: 2,011
uu Birmingham Broad Street
NUMBER OF PREMIUM FORMATS
ROW
uu Polus (Slovakia)
uu Au Park (Slovakia)
uu Compania (Hungary)
NUMBER OF REFURBISHMENTS
COMPLETED
9
2015: 3
4DX
27
2015: 14
IMAX
33
2015: 28
200
150
100
50
0
35
30
25
20
15
10
5
0
5.
Driving shareholder value by delivering our growth plans
in an efficient and effective way.
To be able to reward our shareholders we remain focused on driving revenues,
increasing earnings and prudently managing our cash position.
What we achieved in 2016
Delivered growth in underlying profitability, with an increase in EBITDA, adjusted
EPS and dividends.
Continued to focus on driving efficiencies across the Group for example by the
extension of the shared service centre in Poland. Having successfully established
the customer service call centre in 2015, during 2016 our tier 1 IT and UK
purchasing functions were transitioned to Poland to unlock further efficiencies
across the Group.
EBITDA
(£m)
+13.2%
155.3
175.8
2015
2016
DIVIDEND PER SHARE
(p)
+8.6%
17.5p
19.0p
2015
2016
ADJUSTED DILUTED EPS
(p)
+16.8%
29.7p
34.7p
2015
2016
AVERAGE TICKET PRICE
(£m)
£4.82
£4.99
2015
2016
RETAIL SPEND PER PERSON
(£m)
£1.74
£1.90
2015
2016
5
4
3
2
1
0
2.0
1.5
1.0
0.5
0.0
13
STRATEGIC REPORT uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORT u
The best customer experience
Cinema just keeps
getting better
We are transforming our customers’ experiences through
continued investment in refurbishments, new technologies
and customer service.
IMAX
The ultimate in ‘big screen’
experience, IMAX is the most
immersive cinematic experience.
33LOCATIONS
1 UK & Ireland
2 Poland
3 Israel
4 Romania
5 Bulgaria
6 Czech Republic
7 Hungary
SCRE E NS
20
5
3
2
1
1
1
4DX
Customers travel from far and wide
to enjoy the hugely-exhilarating
multi-sensory 4DX experience.
27LOCATIONS
1 UK & Ireland
2 Poland
3 Israel
4 Romania
5 Hungary
6 Czech Republic
7 Bulgaria
8 Slovakia
SCRE E NS
9
5
4
3
1
2
2
1
VIP
A premium cinema experience which
includes access to a private lounge
ahead of the movie screening where
customers can enjoy unlimited buffet
food, popcorn and soft drinks before
watching the movie in a dedicated
auditorium with luxurious reclining
seats.
9LOCATIONS
1
Israel
2 Poland
3 UK & Ireland
4 Hungary
5 Romania
14
SCRE E NS
3
2
2
1
1
STRATEGIC REPORT uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 Foyer Experience
Customers are wowed entering
our fully digital foyers with huge
LED screens that make the
trailers come alive.
Starbucks
Cineworld opened its 24th
Starbucks at Cineworld
Wandsworth.
IMAX Laser
Crystal clear laser projection
from IMAX provides the
sharpest on-screen experience.
Number of screens
2,115
Superscreen
Our in-house big screen
experience has jaw-dropping
Dolby Atmos sound and
comfortable designer
Italian seats.
Number of cinemas
226LOCATIONS
CINE MAS
1 UK & Ireland
2 Poland
3 Romania
4 Hungary
5 Czech Republic
6 Israel
7 Bulgaria
8 Slovakia
118
33
24
19
13
10
6
3
SCRE E NS
1,042
354
223
163
115
124
65
29
15
STRATEGIC REPORT uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Employee engagement
Investing in
our people
Our teams are trained to enhance
the excitement of going to the
movies by making the experience
as effortless as possible.
TRAINING COURSES
We offer a range of courses, including
our BeReady, BeMore and BeGreat
programmes which are tailored for
employees at varying levels of their career.
APPRENTICE PROGRAMME
We now have 64 apprentices in our
programme, providing opportunities
for young people to learn straight from
school as well as offering an exciting
career into the cinema industry.
64
NEW EMPLOYEES
Staff retention is at an all time high.
16
STRATEGIC REPORT uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 Cineworld Group events in 2016
Company Conference
Over 300 management team
members, suppliers and partners
attend our annual conference, held
in 2016 at both Cineworld Wembley
and the famous Wembley Stadium.
Children in Need
Cineworld teams raised over
£400,000 in support of BBC’s
Children in Need – the first time
Cineworld has supported such a
major national campaign. Multiple
events were hosted across cinemas
and all box office income from our
Movies for Juniors programme
was donated during Children in
Need week.
Awards
The highlight of the year is the awards
dinner at the company conference,
with the Department of the year
award in 2016 won by the Learning
and Development team.
Training Programmes
Our BeMore training programme
ensures that we prepare the
managers of tomorrow; as we
continue to grow our estate we
invest in the people who will be
the future General Managers of
our cinemas.
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
17
STRATEGIC REPORT uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Resources and Relationships
Our business model and strategy are underpinned by key
resources and relationships.
Introduction
Our key relationships for the Group are with our customers,
our people, our commercial partners and our wider
communities. How we behave and interact with each of
these parties reflects on our reputation, which is a key asset
underpinning the successful delivery of our strategy.
Our Group policy on ethics seeks to guide the behaviour
of our people by specifying 12 principles which establish
common values through which we do business. We strive
to ensure that we act in appropriate ways to maintain and
enhance our reputation. The Group seeks to act with
honesty and integrity in its dealings with customers,
employees, shareholders, regulators, suppliers and
our wider community.
Health and safety is of major importance to us when
considering the day-to-day health, safety and welfare of
our customers, employees and contractors. With over 100
million customer visits a year and over 9,000 employees,
the Group seeks to maintain the highest standards in the
effective management of our health and safety obligations,
and our duty of care to our customers and staff.
e r s
ur Custo m
O
K
e
y
C
o
m
m
e
r
H e a l t h and Safety
O
u
r
Our Ethical Principles
1 We will act truthfully
2 We will act with integrity
3 We will respect our customers
4 We will treat individuals properly
5 We compete fairly
6 We will treat our suppliers properly
7 We will manage relations with
shareholders effectively
8 We will maintain high standards of
financial record keeping and
reporting
9 We will comply with the rules on
inside information and share dealing
10 We will maintain high standards of
health and safety
11 We will respect the environment
12 We will seek to contribute
to the community
P
e
o
p
l
e
m unities
m
o
O u r C
c
i
a
l
R
elationships
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STRATEGIC REPORT uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT u
Each year, every cinema in the Group is subject to health
and safety assessments (including aspects of fire, food
and occupational) self-assessments and audits. Results
are compared year-on-year and any significant issues
are followed up with the assistance of specialist external
consultants where needed. Overall, the results have shown
that standards remain high. All incidents are logged,
investigated and action taken, where appropriate, to ensure
that the chances of a reoccurrence are reduced as far as
reasonably possible.
Our Customers
Our customers are fundamental to our success. We focus
on ensuring that they have a positive experience every time
to increase the likelihood of repeat visits. We aim to deliver
a broad range of films, in high quality venues with retail
offerings to suit our customers’ tastes all of which
contribute to achieving our vision.
We also have initiatives which aim to extend the relationship
with the customer beyond a single visit. In the UK, and from
the end of 2015 in Poland, we have our Unlimited subscription
service which is a fixed monthly (or annual) subscription
enabling customers to watch as many 2D films as they wish.
We also have a number of other membership schemes across
the UK and other territories which offer discounts and allow
us to interact frequently with our customer base.
Event cinema screenings bring a wider range of content to
our customers, enabling our audiences to see live shows
taking place around the world. Operating in this way supports
such productions, making them more commercially viable,
accessible to more people and, in turn, brings more people to
the cinema and, frequently, a different type of customer.
As many of our customers still associate going to the
cinema as a treat or special occasion, they expect traditional
cinema snacks as part of their experience. However, we offer
a range of products to our customers, and we work closely
with our partners to provide healthier alternatives where
appropriate. We ensure that we provide good nutrition and
allergen advice to enable our customers to make informed
choices, with the latter now being available on our website.
At our Picturehouse circuit, the food and drink proposition is
more akin to that found in restaurants and closely tailored
to the audience profile to which it caters. A wide range of
snacks and meals are available, many of which include
ingredients sourced from local producers and suppliers.
The Group actively promotes a philosophy of access for all
by offering accessible cinemas for the handicapped that
show a wide range of films and event cinema. Employees
receive disability awareness training and specific advice
on welcoming disabled customers. Many of our cinemas
offer audio-descriptive, autism-friendly and subtitled
performances, and in some territories, the Group allows
customers with disabilities to be accompanied by a carer,
free of charge. All new cinemas are designed to exceed
current statutory requirements and to provide buildings
which are technically advanced, accessible and safe.
When cinemas undergo major refurbishment as part of
an ongoing programme of improvements and renovations,
the opportunity is taken to enhance access within cinemas
where practicable to do so.
The Group actively encourages our future film-going
audience by specifically tailoring film schedules to attract
families and young people. Where necessary, these
performances are dubbed into the native language to ensure
that all customers can enjoy the full cinema experience.
Concessionary rates are offered for senior citizens and
students at certain times of the day. Throughout the Group,
all national regulators’ film classification guidelines are
followed, unless the local regulators require otherwise. In
some of our territories, there are no classification guidelines,
and in such cases we provide information to customers
about films so they can make informed choices about the
type of film being shown. We also ensure that all trailers are
complementary in terms of suitability to the main feature.
Our People
Once again, 2016 saw considerable investment in people
initiatives across the Group as we recognise that motivated
and engaged teams are pivotal to delivering our vision to be
the ‘Best Place to Watch a Movie’.
Nurturing talent is a key part of our people strategy and,
in support of our growth strategy, we are proud that over
the last 12 months more than 50% of cinema management
positions were filled by internal applicants. This success rate
is underpinned by our regularly held talent development
reviews which directly link to our learning and development
offering. The talent review process allows us to identify high
performing and high potential talent from across the estate
and invest in their development so they can achieve their
full potential. Much of our learning and development focus
in 2016 has been on developing content for our various and
extensive programmes.
There are three core parts to our learning and development
offering:
• BeReady - trains people who are ‘New to Role’ to enable
them to feel part of our family and to develop their
competence and confidence, whilst they learn on the job.
• BeGreat - supports people with their performance and
capability; employees are up-skilled in the technical and
soft skill aspects of their role. All training is delivered in a
workshop format, where learnings are embedded and
transferred back into the workplace.
• BeMore – supports the top talent displaying potential and
fulfils our internal succession requirements. 2016 saw the
graduation of 24 junior managers who took part in our
12 month residential management ‘BeMore’ programme.
Since graduation, 17 of these managers have either
progressed to a higher management position or moved
into a new, larger complexity cinema. This year’s
programme also offers an opportunity to complete a
qualification (accredited by the Institute of Leadership and
Management “ILM”). Additionally, we extended the
opportunity of completing an optional NVQ qualification
to our Team Members and Supervisors on our ‘BeMore’
programme. We have around 250 Team Members and
Supervisors being supported in the programme in order
to prepare them for their next role and a number are now
completing an NVQ in Customer Service or an NVQ in
Team Leading.
19
STRATEGIC REPORT uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORT u
Resources and Relationships continued
We also have a 24 month apprenticeship programme,
attendance in which has trebled during 2016. We now have
64 apprentices in our programme, providing opportunities
for young people to learn straight from school by offering
an exciting career path into the cinema industry. Many
apprentices go on to become Cinema Supervisors.
We are also very proud of our online Learning Management
System ‘CineLearn’ – CineLearn has grown to become the
foundation of our learning and development offering, with
over 4500 employees now having access to the platform,
which supports their personal and professional development.
The system is now being accessed 90 times per day across
the estate, demonstrating the ease and accessibility of the
platform as well as the culture of learning within the Group.
Another key part of our people strategy is our fair wage
policy, across all age groups and in all territories. In addition,
we update and improve bonus schemes, rewarding people
across a range of measures from Group performance to
personal performance, to driving sales and more. We also
offer an extensive range of benefits including unlimited free
cinema tickets, guest tickets, discounts on food and drinks,
bike to work schemes, childcare vouchers and many other
benefits which suit our people’s needs.
Our Commercial Relationships
We work hard at developing good relationships with a range
of film studios and distributors, both major and independent.
Our focus on driving cinema admissions and on providing
our customers with a wide range of movies has resulted in
many opportunities for us to work with film studios on
simplifying the film buying process and on promoting
smaller films to a wider audience. We also work closely with
industry bodies, including the Film Content Protection
Agency (FCPA), to combat film piracy. During 2016 the
Group were awarded a total of 22 awards out of a possible
32 awards from the FCPA, demonstrating our dedication to
the UK’s theatrical protection programme.
The Group is committed to protecting the intellectual
property rights of films and Event Cinema. Policies and
procedures are constantly reviewed and developed to
ensure cinema management are able to effectively monitor
and prevent film piracy. Night-vision technology is utilised
and there is an increased vigilance around high profile titles
which are particularly vulnerable.
The Group will continue to work closely with relevant
industry and law enforcement organisations in order to help
reduce and prevent film piracy.
We are enormously proud of our employee engagement
scores. For the fourth consecutive year, engagement levels
have increased and in 2016 we achieved an engagement
score of 75% (up from 70% in 2015) and a truly outstanding
participation rate of 98%. These scores have been achieved
by continuing to listen to our people through our surveys
then implementing initiatives which are important to them
and their needs, such as increased levels of pay, succession
planning and promotions, and learning and development
opportunities.
Diversity and Human Rights
The Group is an equal opportunity employer and seeks
to recruit, retain and promote staff on the basis of their
qualifications, skills, aptitude and attitude. A wide range
of applicants are encouraged to apply for all roles. In
employment-related decisions, the business complies with
all relevant legislation, including that specifically targeted
at preventing discrimination, and such principles are
embedded through the business by requisite policies.
Gender Breakdown of Cineworld People
Male
Female
BOARD OF
DIRECTORS
SENIOR
TOTAL
MANAGERS(1)
EMPLOYEES
6
3
6
3
5,094
4,852
(1) Senior managers are those people who report directly to an Executive
Director. Data is based on the average headcount for 2016.
We build relationships with developers, landlords and local
planners to ensure that we maintain a pipeline of new sites
for the future. We also work closely with suppliers of
technological enhancements, for instance IMAX and 4DX,
which enables us to ensure that we are delivering the best
possible experience to our customers, as well as looking to
maximise box office revenues.
Strong relationships with our principal retail suppliers, such
as Coca-Cola, Baskin Robbins, Candy King, Starbucks and
Pepsi enable us to work together on promotions that help
drive retail sales. We seek to manage relationships with our
suppliers fairly, and to work in accordance with our
aspirations as set out in our ethical policy.
The Group also works as a venue partner for numerous film
festivals. While many are well known and high profile, in
certain territories the Group sponsors festivals showcasing
local film producers’ work and runs short film competitions
for students encouraging the development of future talent.
This involvement once again helps to promote the Group’s
brands through the wider film industry.
20
STRATEGIC REPORT uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT u Our Communities
Our work with charities, schools, and community groups
across all our territories is very important to us. We are
involved with a wide range of activities including working
with distributors on charity screenings, providing free shows
for organisations and working closely with local schools and
organisations.
Our cinema websites enable e-tickets to be purchased
and used, avoiding the need to print tickets. In new and
refurbished cinemas, poster cases are now digital reducing
the need to deliver, install, and ultimately throw away large
paper posters. All these efforts help to reduce our use of
resources and carbon footprint.
In 2016, for the first time, Cineworld partnered with the
BBC’s Children In Need initiative, where as a team we raised
over £400,000. Our Picturehouse cinemas work very
closely with their charity of choice, Plan International UK,
and host regular awareness-raising and fundraising
activities in venues, including free preview screenings and
interactive activities for audiences. In 2016, Picturehouse
Cinemas also donated 10p from every bottle of water sold
in their cinemas to Plan International UK.
For 2017, Picturehouse Cinemas have now changed bottled
water supplier to Life Water. Life donated a significant
amount of their proceeds to charity and the plastic bottles
used by it are amongst the most environmentally-friendly in
the market.
Our schools’ programme saw us working with a variety of
partners to deliver a wide range of educational screenings
for primary and secondary schools, including the Holocaust
Memorial Day Trust, London International Film Festival,
World Book Day and the National Literacy Trust.
We worked with our distributors to create special schools
promotions and programmes for films such as Macbeth,
Suffragette and The Stanford Prison Experiment. We ran
talks and screenings for Black History Month, Anti Bullying
Week, Science and Engineering Week, Refugee Week,
Roald Dahl’s Centenary, World Book Day and Holocaust
Memorial Day.
Across the last academic year, our key achievements
included:
• We held over 400 education screenings on weekday
mornings with a total of over 32,000 students attending
from 450 different schools across the UK.
• We showed 942 Saturday morning Kids’ Club screenings,
with an audience of circa 55,000.
• We showed 1,246 weekday morning Toddler Time
screenings, with an audience of circa 27,500.
• We held 224 Autism Friendly screenings with a total of
circa 3,764 total admissions.
• Dementia Friendly Screenings - Picturehouse launched
this strand at Hackney and Liverpool, with 11 screenings
taking place and a total of 380 admissions.
We seek 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 seek to mitigate it.
Often changes which help to mitigate our environmental
impact also reduce our operating costs.
Being a multisite business, the Group is conscious of its
total energy consumption and amount of waste materials
generated and is actively working on reducing both. The
Group’s mandatory greenhouse gas report can be found
in the Directors’ Report on pages 76 to 77.
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STRATEGIC REPORT uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORT u
Principal Risks and Uncertainties
Operating as a cinema chain across nine different territories
presents a number of risks and uncertainties that continue
to be the focus of the Board’s ongoing attention.
Principal Risks Summary
Strategic
Relevance
Risk
Trend
1. Technology and Data
1 / 2 / 3 / 4 / 5
2. Availability and Performance
1 / 4 / 5
of Film Content
3. Expansion and Growth of
2 / 3 / 4 / 5
Our Cinema Estate
4. Viewer Experience and
1 / 3 / 4 / 5
Competition
5. Revenue from Retail/
Concession Offerings
6. Cinema Operations
7. Regulatory Breach
1 / 5
1 / 5
1 / 2 / 3 / 5
8. Strategy and Performance
1 / 2 / 3 / 4 / 5
9. Retention and Attraction of
1 / 2 / 3 / 4 / 5
Senior Management and Key
Employees
10. Governance and Internal
1 / 2 / 3 / 4 / 5
Control
11. Terrorism and Civil Unrest
1 / 5
Key
Increase
Decrease
No significant change
The Group’s principal risks are set out on the following
pages together with:
• a description of the risk and its potential impact;
• examples of the current controls and mitigation;
• a summary of developments in the year;
• an indication of the direction of travel of the risk
exposure; and
• an indication of the link to the Group’s strategic
objectives as set out on pages 12 and 13.
Cineworld’s approach to risk management and internal
control is designed to manage risk at all levels, of the
business, recognising that although we can take mitigating
actions on all risks the mitigation is not guaranteed to
address the full impact of any risk. Therefore, where
possible, the Group has implements appropriate mitigation
strategies to reduce the overall risk exposure in line with
the Board’s risk appetite.
During the year the Group further strengthened the
components of the Risk Management Framework through
its programme of ongoing monitoring and reporting. This
ensured that the risk profile remained up-to-date and
accurately reflected the Group’s risk exposure.
The Board undertook a formal annual review of risk
appetite, ensuring that the view it has established for each
of the principal risks reflects its current perspective and
its willingness to accept risk in pursuit of the strategic
objectives of the Group. Full details of the Group approach
to risk management are set out on page 45.
In addition, the Directors’ viability assessment has taken into
consideration the potential impact of the principal risks in
the business model, future performance, solvency and
liquidity over the period, including principal mitigating
actions such as reducing capital expenditure. More details
about the viability assessment may be found on pages 49
to 50.
The Board has undertaken a robust assessment of the
principal risks facing the Group during the year, including
those that would threaten its business model, future
performance, solvency and liquidity. The time-frame horizon
for consideration of the principal risks is aligned to the three
year period used when considering the future viability of
the Group (please see the Group’s viability statement on
page 38).
The specific impact of Brexit on our principal risks has been
considered by the Board and Senior Management. Whilst
we remain vigilant, we do not believe the result of the EU
referendum will have a significant impact on the underlying
trading performance of the Group going forward based on
our business, which has a proven consumer appeal through
all economic cycles.
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STRATEGIC REPORT uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT u
Technology and Data Control
1
Owner: Deputy CEO
Controls and Mitigation Activity
The Group IT function monitors,
manages and optimises our systems,
including ensuring their resilience
through regular back-ups and the
implementation of security measures.
Additional external experts are
employed where necessary to oversee,
and help manage, major projects
involving the upgrading or replacement
of key systems. The Group continually
reviews its approach to information
security, specifically controlling the
sensitive data it holds through
restricted access.
Description and Impact
The Group continues to grow its
reliance on IT systems and data.
From online ticket sales to managing
financial information and everything
in between, the Group is reliant on its
IT systems remaining operational and
secure. Therefore, any critical system
interruption for a sustained period
could have a significant impact on the
Group’s performance. In addition, any
breach (cyber or otherwise) of data
protection rules or security measures
surrounding the storage of confidential
and proprietary information (including
movie content) could result in
unauthorised access, loss or disclosure
of this information. This could lead to
claims, regulatory penalties, disruption
of operations of the Group and
ultimately reputational damage.
Risk Trend
Strategic Relevance:
1 / 2 / 3 / 4 / 5
Commentary and Rationale for Trend
The continual increase in global criminal
cyber activity and the ongoing
implementation of a number of new IT
systems in the Group has necessitated
that the Board specifically focus on this
area continues to remain high. An
enhancement in the resilience of Group
systems has occurred during the year.
All IT systems and Data have now been
transitioned to an outsourced data
centre that is then backed up by a
secondary centre at a different location.
2 Availability and Performance of Film Content
Risk Trend
Owner: CCO
Description and Impact
Underpinning the overall success of
the Group is the quality of the film
slate, the timeliness of release and the
appeal of such films to our customers.
Where the film studios do not produce
sufficiently attractive films, or films
underperform, this has a direct impact
on cinema attendance and, therefore,
the principal box office revenue for the
Group may decline.
Strategic Relevance:
1 / 4 / 5
Commentary and Rationale for Trend
In part due to significant global sporting
events, there were fewer blockbusters
released in 2016 compared to 2015.
However, the level of admissions
demonstrated there remains an
undiminished appetite for cinema
attendance, especially for family titles in
the ROW territories. In addition, locally
produced movies continue to be popular,
with the top three films in Poland for
2016 all being produced locally. (For
further information see Market Overview
on page 8 and 9). There is a strong film
release programme for 2017 and,
therefore, we expect these to drive
continued growth in admissions.
Controls and Mitigation Activity
We work closely with film distributors
to acquaint ourselves, as early as
possible, with the upcoming film
slate in order to forecast likely film
performance. Although access to
the latest film slate is reliant on our
relationship with the film distributors,
the Cineworld Group strategy is to
show a wide range of films over and
above the traditional Hollywood
blockbusters. This allows us to reduce
the exposure to reduced attendance
by meeting specific local area demand
for type and content of films shown.
The operating flexibility of having
digital projection technology available
in all our cinemas has enhanced the
capacity utilisation of the Group, as
digital film content can be easily
moved to and from auditoriums to
maximise admissions.
23
STRATEGIC REPORT uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORT u
Principal Risks and Uncertainties continued
3
Expansion and Growth of Our Cinema Estate
Owner: CEO
Description and Impact
Growth in the estate is dependent
on the development of new sites or
the acquisition of existing cinemas.
Planning laws, the economic
environment, availability of capital for
developers and location choice are
some of the factors that may impact
the Group’s development and growth
plans.
Controls and Mitigation Activity
The Group devotes a considerable
amount of time to assessing new site
opportunities and this, along with
further acquisitions, is a key part of
our future growth strategy. We also
maintain good relationships with
potential key development partners.
This allows us to be aware of
the availability of space in new
developments and to ensure factors
such as local planning laws and
demographic changes are understood
and monitored. Board approval is
obtained for all new sites and
significant refurbishments.
Risk Trend
Strategic Relevance:
2 / 3 / 4 / 5
Commentary and Rationale for Trend
The Group grew the state as a further
eight new cinemas (four in the UK and
four in ROW) opened during the year.
A further 441 screens are scheduled to
open across the next four years, with 132
scheduled to open in 2017. (For further
details see CEO’s statement on pages 6
and 7).
4 Viewer Experience and Competition
Risk Trend
Owner: COO
Description and Impact
Although cinema admissions are
predominantly driven by the quality
and availability of films, ensuring that
the Group continually enhances the
viewer experience is crucial. Any
decrease in the quality of the services
we offer, from the ease of booking,
the technology we use, to a friendly
farewell on departure, could result
in loss of customers to competitors
and/or other leisure/entertainment
attractions. Furthermore, the
development of existing and new
technology (such as 3D television
and internet streaming) has also
introduced competitive forces as they
offer alternative ways to view films.
Controls and Mitigation Activity
Our strategy is focused on continually
improving the quality of services we
offer to customers. This includes
increasing the efficiency of online
booking, removing clutter from the
foyers, investing in technical
innovation and premium offerings
(4DX and other large screen formats),
upgrading seating options (further
roll-out of the VIP offering) and
improving retail offers. Customer
interaction with the Group outside of
the cinema environment is also
important. We have enhanced
subscription and membership
programmes to offer added value
through offers and information.
Strategic Relevance:
1 / 3 / 4 / 5
Commentary and Rationale for Trend
As many as six different formats
(regular screens, 3D, 4DX, IMAX,
Superscreen and VIP auditoriums) are
available, to give our customers the
widest viewing choice.
We reinforced our market-leading
position in technology by introducing
4DX into a further 13 sites and IMAX into
a further five sites (for further details see
CEO’s statement on pages 6 and 7).
24
STRATEGIC REPORT uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT u 5 Revenue from Retail/Concession Offerings
Risk Trend
Owner: CCO
Description and Impact
Retail/concession sales generally
fluctuate in line with admissions and
the type of film on show. Therefore, if
admissions were to fall, revenue from
retail sales could decrease. Retail
spend may also decrease due to
changes in customer preferences,
decreased disposable income or other
economic and cultural factors. In
addition, the price of items such as
energy and foodstuffs has a direct
impact on costs. The ability of the
Group to understand and react quickly
to the changing customer need is a
key part to maintaining and increasing
revenue.
6 Cinema Operations
Owner: COO
Description and Impact
Operating cinemas well is pivotal to
the overall success of the Group. Key
to this is to ensure that management
understand the local market (film
scheduling, pricing and retail offerings),
effectively manage their employees,
maintain service standards, and are
able to react to incidents should they
occur. A reduction in performance in
any area can have a direct effect on the
overall viewer experience, reputation of
the cinemas and ultimately the Group’s
financial performance.
Controls and Mitigation Activity
A key strategy for the Group is to
maintain a strong relationship with the
principal retail suppliers. We run
targeted promotions, as well as bring
in different ranges of products to meet
changing customer demand. The
introduction of franchising models for
some of the key suppliers has also
been an important way of enhancing
the range of offerings.
Controls and Mitigation Activity
Cinema management continually
monitor their staffing requirements,
making adjustments to scheduling
based on customer demand, forecasts
and film scheduling. On a monthly
basis, detailed operational and
financial reviews are undertaken by
cinema management teams to ensure
performance matches expected
targets.
Strategic Relevance:
1 / 5
Commentary and Rationale for Trend
The retail spend per customer increased
with a 5.1% rise in 2016. The retail
offering continued to expand and
diversify with a further seven Starbucks
outlets opened during the year, taking
the total circuit to 24 at 31 December
2016, with a number of further openings
scheduled for 2017. The second UK VIP
site was opened in the UK (Glasgow
Renfrew Street) and there are plans to
open additional sites where there is the
appropriate market opportunity (for
further details see CEO’s statement on
pages 6 and 7 and Financial Review on
pages 28 to 32).
Risk Trend
Strategic Relevance:
1 / 5
Commentary and Rationale for Trend
There is continual improvement in the
operational and financial performance
of the Cinemas in the Group driven by
a combination of ongoing process
evolution and underpinned by continual
investment in learning and development
programmes (please see Resources and
Relationships on pages 18 to 21). A key
focus in the later part of 2016 was,
and continues to be, the alignment of
operational processes and procedures
of the five cinemas acquired from Empire
with those of Cineworld.
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STRATEGIC REPORT uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORT u
Principal Risks and Uncertainties continued
7
Regulatory Breach
Owner: Deputy CEO
Description and Impact
The Group’s business and operations
are affected by regulations covering
such matters as planning, the
environment, health and safety
(cinemas and construction sites),
licensing, food and drink retailing, data
protection and the minimum wage.
Failure to ensure ongoing compliance
with regulation/legislation could result
in fines and/or suspension of activity.
Controls and Mitigation Activity
Management operates an ongoing
cinema compliance programme,
supplemented by independent
compliance assurance reviews by
external advisers where appropriate.
Group support functions use a
combination of ongoing staff
development as well as updates from
professional advisers to ensure
management are aware of the latest
regulations in key areas.
8
Strategy and Performance
Owner: Deputy CEO
Description and Impact
Delivery of our long-term objectives
requires the effective setting,
communicating, monitoring and
executing of a clear strategy.
Controls and Mitigation Activity
A structure is in place to support
effective strategy development, as
well as ongoing reporting and
monitoring of business performance
on a daily, weekly, monthly, quarterly
and annual basis. Monitoring Senior
Management performance against
their agreed personal objectives is an
ongoing exercise.
There are various communication
strategies (e-mails, meetings and
conferences) used to ensure the
strategic goals of the Group are clearly
understood and executed by Senior
Management.
9 Retention and Attraction of Senior
Management and Key Employees
Owner: Deputy CEO
Risk Trend
Strategic Relevance:
1 / 2 / 3 / 5
Commentary and Rationale for Trend
The results of our cinema compliance
programmes, health and safety
assessments, and wider assurance
activity continue to indicate no
significant increase in risk exposure,
with standards of compliance
in all areas remaining high (for
further details see Resources and
Relationships on pages 18 to 21).
Risk Trend
Strategic Relevance:
1 / 2 / 3 / 4 / 5
Commentary and Rationale for Trend
The 2016 annual management
conference provided the platform
to reconfirm the Group’s strategy
with Senior Management and ensure
a clear understanding of execution
requirements. There have been changes
at a Senior Executive level with Nisan
Cohen (CFO), Renana Teperberg (CCO)
and Matt Eyre (COO) all now holding
Group-wide roles and joining the CEO
and Deputy CEO for an expanded
Executive Management Team. They are
supported by Senior Vice Presidents
who lead on specific functional areas
and support them in monitoring
current business performance and
looking at future strategic direction.
Risk Trend
Strategic Relevance:
1 / 2 / 3 / 4 / 5
Description and Impact
The Group’s performance and its
ability to mitigate significant risks
within its control depends on its
employees and senior management
teams. Therefore, reliance is placed on
the Group’s ability to recruit, develop
and retain Senior Management and
other key employees. If the Group
loses key people this could have an
impact on its ability to deliver business
objectives.
Controls and Mitigation Activity
To ensure the long-term success of the
Group, it uses a variety of techniques
to attract, retain and motivate its staff,
with particular attention to those in
key roles. These techniques include
the regular review of remuneration
packages, share incentive schemes,
training, regular communication with
staff and an annual performance
review process. As an overall approach
internal promotion is preferred where
possible.
Commentary and Rationale for Trend
Nurturing talent across the Group
is a key part of our strategy and, in
support of that, internal succession
plays a key part with more than 50% of
cinema management positions filled by
internal applicants. This success rate is
underpinned by regularly-held talent
development reviews which directly
link to the learning and development
programmes (please see Resources
and Relationships on pages 18 to 21).
26
STRATEGIC REPORT uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT u 10 Governance and Internal Control
Owner: CFO
Description and Impact
Maintaining corporate governance
standards and an effective and
efficient risk management and internal
control system proportionate to the
needs of the Group is a key part of
short and long-term success. Any
failure and/or weakness in this area
(financial and non-financial) could
have an impact on the efficient and
effective operations of the Group.
Controls and Mitigation Activity
The Group uses various mechanisms
to support the implementation and
effectiveness of controls. These
include:
•
Implementation of the Group Risk
Management Framework;
• Ongoing self-assessment process
for monitoring cinema compliance
and financial control standards;
• Work of Internal Auditors;
• Regular consultation and advice
from external advisers;
• A risk based cinema compliance
and financial control audit
programme;
• The delivery of targeted risk based
internal audit reviews; and
• The use of technology for live
forensic monitoring.
Terrorism and Civil Unrest
11
Owner: CEO
Description and Impact
Cinema businesses could be affected
by civil unrest or terrorist acts/threats,
resulting in the public avoiding going
to the cinemas. This could be due to
incidents in the locations in which the
Group operates that increase general
unease. The Group may be subject to
an increased risk of boycott, targeted
civil unrest or terrorist action/threat as
a result of operating in and being
linked to certain countries or types of
film. This could adversely impact the
financial performance of the Group.
Controls and Mitigation Activity
We receive communications from
relevant government authorities and
law enforcement agencies which keep
us informed and allow us, when
needed, to monitor any potential
impact external events could have on
the security of our cinema estate.
Business continuity and disaster
recovery plans are in place to ensure
that management can react
appropriately should an incident occur
at a Group site. Appropriate insurance
is in place to mitigate the financial
consequences.
Risk Trend
Strategic Relevance:
1 / 2 / 3 / 4 / 5
Commentary and Rationale for Trend
Continued evolution of the Group’s
risk management programme, and the
delivery of supporting assurance activity,
is providing ongoing improvements to
the overall system of internal control
(please see Corporate Governance
report pages 46 to 47). The creation
of a new role within the Group of
Head of Risk and Assurance in August
2016 is a further step by the Group to
ensure ongoing compliance with its
governance standards, risk management
assessment and internal controls.
Risk Trend
Strategic Relevance:
1 / 5
Commentary and Rationale for Trend
Incidents of terrorism across the globe
means the Group continues to focus on
this as part of its ongoing cinema
operations.
27
STRATEGIC REPORT uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORT u
Financial Review
Performance Overview
Admissions
Box office
Retail
Other income
Total revenue
YEAR ENDED 31 DECEMBER 2016
YEAR ENDED
31 DECEMBER
2015
UK &
IRELAND
REST OF THE
WORLD
TOTAL
GROUP
TOTAL GROUP
STATUTORY
MOVEMENT
CONSTANT
CURRENCY
MOVEMENT
51.8m
£M
324.0
117.5
52.5
494.0
48.5m 100.3m
£M
£M
176.9
73.3
53.6
303.8
500.9
190.8
106.1
797.8
93.6m
£M
451.6
162.7
91.5
705.8
7.2%
7.2%
10.9%
17.3%
16.0%
13.0%
7.0%
12.6%
9.8%
8.7%
Cineworld Group plc results are presented for the year
ended 31 December 2016 and reflect the trading and
financial position of the UK and Ireland and the Rest of the
World (‘ROW’) operating segments (the ‘Group’). The five
Empire cinemas acquired from Cinema Holdings Limited
became part of the Group on 11 August 2016 and their
results since acquisition have been included within the UK
and Ireland segment.
Unless explicitly referenced, all percentage movements
which are given reflect performance on a constant
currency basis to allow a year-on-year assessment of
the performance of the business without the impact
of fluctuations in exchange rates over time. Constant
currency movements have been calculated by applying
the 2016 average exchange rates to 2015 performance.
UK and Ireland
YEAR ENDED
31 DECEMBER
2016
YEAR ENDED
31 DECEMBER
2015
STATUTORY
MOVEMENT
CONSTANT
CURRENCY
MOVEMENT
Admissions
Box office
Retail
Other income
Total revenue
51.8m
£M
324.0
117.5
52.5
494.0
50.9m
£M
311.9
107.2
46.8
465.9
1.8%
1.8%
3.9%
9.6%
12.2%
6.0%
3.9%
9.6%
12.2%
6.0%
The results for the UK and Ireland include the two cinema
chain brands in the UK, Cineworld and Picturehouse, and for
the first time also include the five Empire cinemas acquired
on 11 August 2016.
Total revenue for the year ended 31 December 2016 was
£797.8m, an increase of 13.0% on a statutory basis, and 8.7%
on a constant currency basis. Overall admissions increased
by 7.2%, whilst average ticket pricing remained broadly flat
on a constant currency basis at £4.99, giving an overall
increase in total box office revenues of 7.0%. Spend per
person increased by 5.1% to £1.90 resulting in retail revenue
growth of 12.6%. Other revenues increased by 9.8%.
Box Office
Box office revenue represented 65.6% (2015: 66.9%) of total
revenues for the UK and Ireland. Admissions in the year
increased by 1.8% and combined with an increase in the
average ticket price of 2.1% this resulted in revenue growth
of 3.9%. This is a pleasing result as admissions in the UK and
Ireland cinema industry as a whole were down 2.1% during
the same period (Source: UK Cinema Association).
The principal income for the Group is box office revenue.
Box office revenue is a function of the number of
admissions and the ticket price per admission, less VAT.
In addition, the Group operates membership schemes
which provide customers with access to screening in
exchange for subscriptions fees, and this revenue is also
reported as part of box office. Admissions (one of our key
performance indicators), depend on the number, timing and
popularity of the films we are able to show in our cinemas.
The overall box office performance was underpinned
by a solid film slate in 2016, despite 2015 being a strong
comparative. In 2016, in the UK overall, the top three films
grossed £149.4m (“Star Wars: Rogue One” - £50.7m,
“Fantastic Beasts and Where To Find Them” - £50.6m and
“Bridget Jones’s Baby” - £48.1m) compared to the top three
films in 2015 which grossed £245.4m (“Spectre” – £93.8m,
“Star Wars: The Force Awakens” – £87.3m and “Jurassic
World” – £64.3m).
Admissions are also a key driver for the two other main
revenues for the Group. These are retail revenue, the sale
of food and drink for consumption within our cinemas
and screen advertising income, from advertisements
shown on our screens prior to feature presentations.
The average ticket price achieved in the UK and Ireland
grew by 2.0% to £6.25 (2015: £6.13). The increase in average
ticket price was in part due to price rises during the period,
but is mainly reflective of the continued expansion and
popularity of premium offerings. The most popular IMAX
and 4DX films during the year were “Star Wars: Rogue One”,
“Fantastic Beasts and Where To Find Them” and “Star Wars:
The Force Awakens”.
28
STRATEGIC REPORT uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT u Retail
Food and drink sales are the second most important source
of revenue and represented 23.8% (2015: 23.1%) of total
revenues for the UK and Ireland. Total retail revenues in
the UK and Ireland were £117.5m (2015: £107.2m) increasing
by 9.6%.
Net retail spend per admission increased by 7.6% in the year
to £2.27 (2015: £2.11). This was partly due to the film mix, but
predominantly reflects the expansion of our cinemas’ retail
offerings, strong promotions, growth in the Unlimited
customer base and operational improvements. In addition,
a further seven Starbucks outlets were opened during the
year taking the total to 24 at 31 December 2016, with a
number of further openings scheduled for 2017. The second
VIP site offering food, drink and snacks as part of the entry
price was opened in Glasgow Renfrew Street and there are
plans to open additional sites where there is the appropriate
market opportunity.
Other Income
Other Income includes all revenue streams other than box
office and retail and represents 10.6% (2015: 10.0%) of total
revenue. It increased to £52.5m (2015: £46.8m) and grew
by 12.2%.
The largest single element of Other Income is screen
advertising revenue. Screen advertising revenue is earned
through our shareholding in Digital Cinema Media Limited
(“DCM”), our joint venture screen advertising business.
DCM’s primary function is to sell advertising time on cinema
screens on behalf of the UK cinema industry. It also engages
in related promotional work between advertisers and
cinemas. Screen advertising revenue varies depending on
the type of films screened, the number of minutes and value
of advertising sold, the number of attendees who view the
film and the placement of advertisements in relation to the
start of the film. As a result of the nature of the film slate
and the admissions levels in 2016 the advertising revenues
were broadly in line with 2015. Also included within Other
Income is the online booking fee. The trend towards
booking online continues which is supported by our
investment in online and mobile booking facilities. Revenue
from event hire has also continued to increase during
the year.
Rest of the World (“ROW”)
YEAR ENDED
31 DECEMBER
2016
YEAR ENDED
31 DECEMBER
2015
STATUTORY
MOVEMENT
CONSTANT
CURRENCY
MOVEMENT
Admissions
Box office
Retail
Other Income
Total revenue
48.5m
£M
176.9
73.3
53.6
303.8
42.7m
£M
139.7
55.5
44.7
239.9
13.6%
13.6%
26.6%
32.1%
19.9%
26.6%
13.2%
17.9%
7.6%
13.3%
The results for the ROW include the cinema chain brands -
Cinema City in the Central and Eastern Europe territories
and Yes Planet and Rav-Chen in Israel. The information
is presented on a constant currency basis to provide
information on a comparable basis unless otherwise stated.
Box Office
Box office revenue represented 58.2% (2015: 58.2%) of total
revenues for the ROW. Admissions in the year increased by
13.6%, while average ticket prices remained broadly flat on
a constant currency basis at £3.65, resulting in an overall
increase in box office revenues of 13.2%. Double digit
admissions growth was seen in four of the ROW territories,
Romania, Czech Republic, Poland and Hungary. These levels
of growth are partly due to improvements in the local
economies but largely due to significant expansion, with 33
new screens opened during the year in Romania, in addition
to the 44 screens opened there in 2015 and the 15 screens
opened in Poland in 2015. Growth was achieved in all
other territories apart from in Bulgaria where there was a
marginal decrease.
The average ticket price was impacted primarily by the
nature of the film slate in 2016, which included a number of
family movies. In the ROW, family films with generally lower
ticket prices, account for a higher proportion of total
admissions and, with the strong family film slate in 2016 this
had an impact on the overall average ticket price achieved
and offset increases from the continued expansion of
premium offerings where a further seven 4DX screens
and two IMAX screens were opened. In addition, locally
produced movies continued to be popular particularly in
Poland and Czech Republic, with the top three movies in
Poland for the year all being produced locally.
Retail
Food and drink sales are the second most important
source of revenue and represent 24.1% (2015: 23.1%) of
total revenues for the ROW. Total retail revenues were
£73.3m (2015: £55.5m) increasing by 17.9%.
Retail spend per admission increased by 3.9% to £1.51 (2015:
£1.30) during the year with the greatest increases achieved
in Romania and the Czech Republic, which saw increases of
11.1% and 7.2% respectively. The increase was predominantly
driven by the film mix but also the expansion of offerings,
with two new VIP sites, one in Beer Sheva (Israel) and
Bucharest Titan (Romania), as well as ongoing operational
improvements.
Other income
Other income includes distribution, advertising and other
revenues and represents 17.7% (2015: 18.7%) of the total
revenues. Forum Film is the Group’s film distribution
business for ROW. Forum Film operates across the ROW
region and distributes films on behalf of major Hollywood
studios as well as owning the distribution rights to certain
independent movies. New Age Media is the Group’s
advertising and sponsorship arm for the ROW. The main
driver for the overall increase in other income was the
advertising revenue which performed very strongly in 2016,
predominantly as a result of the increase in admissions. The
distribution revenues decreased year-on-year largely due to
the strong comparative in 2015, when Forum Film had
the distribution rights for three blockbusters, “Spectre”,
“Hunger Games: Mockingjay Part 2” and “Star Wars: The
Force Awakens”.
29
STRATEGIC REPORT uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORT u
Financial Review continued
Financial Performance
Admissions
Box office
Retail
Other Income
Total revenue
EBITDA(1)
Operating profit
Financial income
Financial expense
Net financing costs
Share from joint venture
Profit on ordinary activities before tax
Tax on profit on ordinary activities
Profit for the year attributable to equity holders of the Group
YEAR ENDED 31 DECEMBER 2016
YEAR ENDED
31 DECEMBER
2015
UK & IRELAND
ROW
TOTAL GROUP
TOTAL GROUP
51.8m
£M
324.0
117.5
52.5
494.0
97.1
60.2
2.4
(15.8)
(13.4)
–
46.8
(10.1)
36.7
48.5m
£M
100.3m
£M
176.9
73.3
53.6
303.8
78.7
52.6
0.6
(1.8)
(1.2)
–
51.4
(6.1)
45.3
500.9
190.8
106.1
797.8
175.8
112.8
3.0
(17.6)
(14.6)
–
98.2
(16.2)
82.0
93.6m
£M
451.6
162.7
91.5
705.8
155.3
103.1
8.7
(12.1)
(3.4)
–
99.7
(18.4)
81.3
The following commentary focuses on Group profitability,
cash flow and the Balance Sheet except where stated.
EBITDA and Operating Profit
Overall, the Group’s EBITDA increased by 13.2% to £175.8m
(2015: £155.3m). EBITDA margin remained consistent with
the prior year at 22.0%.
EBITDA generated by the UK and Ireland increased by 1.5%
during the year to £97.1m (2015: £95.7m). The EBITDA
margin of 19.7% represented a 0.8 percentage point decline
from 2015, largely as a result of the cessation of VPF income
during the year and the slight decrease in admissions on a
like-for-like basis, which is consistent with the overall UK
market. EBITDA generated by the ROW increased by 32.0%
to £78.7m (2015: £59.6m). The EBITDA margin of 25.9%
represented a 1.1 percentage point improvement from 2015,
predominantly driven from the increase in admissions,
increase in spend per person as well as a savings across a
number of direct cost lines.
As the Group operates in nine territories, it is exposed to
exchange rate fluctuations. Wherever possible, cash income
and expenditure are settled in local currency to mitigate
exchange losses. However, there are translation exchange
differences arising when presenting the year-on-year
performance of the ROW in the reporting currency of
the Group.
During 2016, the EU referendum in the UK had a significant
impact on the value of the British pound, causing it to
depreciate against other foreign currencies. Whilst this had
a positive benefit to the Group when translating the results
of the overseas operations it had a negative impact on
translation of the Euro Term loan at 31 December 2016.
During the year EBITDA of £175.8m was £8.1m higher than
it would have been had it been translated by applying the
exchange rates at the start of the year, and £8.2m higher
based on the average rate for the comparable 2015 period.
Operating profit of £112.8m was 9.4% higher than the prior
year (2015: £103.1m). Operating profit included a number of
non-recurring and non-trade related items that have a net
negative impact of £4.4m (2015: £2.8m). These primarily
related to:
• The one-off cost related to the MGM defined benefit
pension scheme buy-out of £4.8m (2015: nil);
• Transaction and reorganisation net costs of £1.5m (2015:
£1.9m), £0.8m of costs related to the integration and
relocation of head office functions and redundancy
costs, £0.5m of costs incurred on the acquisition of five
Empire cinemas, £1.0m incurred on the early termination
of contracts and a credit of £0.8m for VAT recovered on
previously incurred transactions;
• A net credit of £1.5m (2015: £1.7m) of which £1.7m
primarily was the release of specific onerous lease
provisions due to improvements in future trading
assumptions, a further release of £1.0m due to the
closure of a site with an onerous lease provision in place,
a gain on property provisions of £0.1m and the write-off
of £1.3m lease-related assets no longer considered
recoverable,
• A net credit in relation to impairments of £0.4m (2015:
cost of £9.0m) - £1.7m related to the write-back of capital
expenditure for sites previously impaired which are now
performing and £1.3m related to the write off of capital
expenditure for sites which were not performing
satisfactorily, and
• There are no one off gains or losses from disposals
during the year (2015: £6.4m).
The total depreciation and amortisation charge (included
in administrative expenses) in the year totalled £58.6m
(2015: £49.4m). Of this, £28.9m related to depreciation
and amortisation in the UK and Ireland (2015: £25.6m)
and £29.7m related to depreciation and amortisation
in the ROW (2015: £23.8m). The increase year-on-year
is predominantly due to the additional number of sites
in the Group.
(1) The Group defines EBITDA as reported in the Consolidated Statement of Profit and Loss as Operating profit before depreciation and amortisation, onerous
leases and other non-recurring charges, impairments and reversals of impairments, transaction and reorganisation costs, profit on disposals of assets and the
settlement of the defined benefit pension liability. EBITDA is considered an accurate and consistent measure of the Groups trading performance, and items
adjusted to arrive at EBITDA are considered to be outside the Groups ongoing trading activities.
30
STRATEGIC REPORT uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT u Finance Costs
The Group entered into a five-year facility in January 2014
which was used to part-finance the combination with
Cinema City, repay the pre-combination facilities of both
Cineworld and Cinema City and fund the general working
capital requirements of the Group. The facility included
term loans of £165.0m and €132.0m and revolving credit
facilities of £75.0m and €60.0m.
On 29 July 2015 the Group signed an amendment and
extension to its existing banking facility which was effective
immediately upon signing and extends the facility to June
2020. As a result, the term loans were reduced from
£157.5m and €126.0m to £130.0m and €63.0m. In August
2016 the Group extended the single currency revolving
credit facility of £190.0m to £215.0m to partly fund the
empire acquisition.
The facility remains subject to the existing two covenants:
the ratio of EBITDA (as defined in Note 1) to net debt and
the ratio of EBITDAR (pre-rent EBITDA) to net finance
charges. A margin, determined by the results of the
covenant tests at a given date is added to LIBOR or
EURIBOR. The margins currently applicable to Group are
1.40% on the term loans and 1.15% on the revolving credit
facility.
The Group has hedging arrangements in place to mitigate
the potential risk of a material impact arising from interest
rate fluctuations. At 31 December 2016, the Group had
seven (2015: six) interest rate swaps, four GBP denominated
swaps which hedged 82% (2015: 59%) of the Group’s
variable rate GBP unsecured term loan and, three Euro
denominated swaps hedging 100% (2015:100%) of the Euro
denominated unsecured loan.
Net financing costs totalled £14.6m during the year (2015:
£3.4m) which is a net increase of £11.2m. The main reason
for the increase is the net movement of exchange rates
during the year which gave rise to a loss on the translation
of the Euro Term loan at the Balance Sheet date of £6.1m
(2015:foreign exchange gain of £7.7m).
Finance income of £3.0m (2015: £8.7m) included a gain of
£1.9m (2015: £nil) primarily from hedging arrangements
which have ceased during the year, £0.7m (2015: £0.3m)
related to interest income and £0.4m (2015: £0.4m) related
to finance income on assets held by defined benefit pension
schemes.
Finance expense of £17.6m (2015: £12.1m) included £7.8m in
respect of interest on bank loans and overdrafts (2015:
£9.3m), with the decrease being the result of the reduction
of the term loans and £6.7m primarily due to foreign
currency losses on the Euro Term loan (2015:gain £8.0m).
Other net finance costs of £3.1m (2015: £2.8m) included
amortisation of prepaid finance costs of £1.4m (2015: £1.3m)
and £1.7m (2015: £1.2m) in respect of the unwind of discount
and interest charges on property-related leases.
Taxation
The overall tax charge during the year was £16.2m giving an
overall effective tax rate of 16.5% (2015:18.5%).The reduction
from the prior year largely results from the Group’s
geographical mix of profits. The corporation tax charge in
respect of the current year was £12.4m (2015: £11.2m) and
the deferred tax charge was £3.8m (2015: £7.2m), resulting
in a current year effective tax rate of 18.1% (2015: 18.5%). The
deferred tax charge principally related to temporary
differences on the movements of fixed assets. In the
medium-term future we expect our effective tax rate to
remain at a similar level.
The Group takes a responsible attitude to tax, recognising
that it affects all of our stakeholders. The Group seeks at
all times to comply with the law in each of the jurisdictions
in which we operate, and to build open and transparent
relationships with those jurisdictions’ tax authorities. The
Group’s tax strategy is aligned with commercial activities of
the business, and within our overall governance structure
the governance of tax and tax risk is given a high priority by
the Board.
Earnings
Profit on ordinary activities after tax for the year was
£82.0m, (2015: £81.3m). The profit after tax has remained
broadly flat as a result of the one off items in the year; the
loss incurred on the Euro Term loan of £6.1m compared to a
gain of £7.7m in 2015, the one-off cost of £4.8m relating to
the buy-out of the MGM defined benefit pension scheme
and no significant one-off gains in the year, such as the
Cineworld Cambridge disposal in the prior year for £6.4m.
Basic earnings per share amounted to 30.8p (2015: 30.7p).
Eliminating the one-off, non-trade related items described
above (totalling £4.4m within operating profit), amortisation
of intangibles of £4.6m, exceptional finance credits of £1.9m
and net foreign exchange losses of £6.1m, adjusted diluted
earnings per share were 34.7p (2015: 29.7p).
Acquisition of Empire cinemas
On 28 July 2016 the Group announced the acquisition
of five cinemas from Cinema Holdings Limited by means
of an acquisition of 100% of the shares. The acquisition
was completed on 11 August 2016, at which point the
consideration equated to £94.5m which would be settled
equally in cash, and in Cineworld Group plc ordinary shares
in addition to the transfer of the trade and assets of the
Group’s Haymarket cinema to Cinema Holdings Limited.
The shares will be issued in five instalments during a 12
month period, based on an issue price reflecting 20 days’
average trading price prior to the date of each issuance.
The first issue of shares took place on 18 November 2016.
The fair value of net assets acquired with the five Empire
cinemas totalled £33.9m. We have attributed the fair value
to the acquired assets and liabilities and as a result the
acquired net assets were increased by £2.4m. The residual
goodwill of £60.6m represents a number of factors
including the strategic location of the sites acquired, the
established benefit of the sites being established sites, the
value the acquired sites can add to Cineworld’s existing
brand and products as well as synergies expected to be
realised post-acquisition.
31
STRATEGIC REPORT uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORT u
Financial Review continued
Balance Sheet
Overall, net assets have increased by £128.7m, to £663.4m
since 31 December 2015. This is due to the acquisition of the
five Empire cinemas, £57.5m, movements in non-current
assets of £99.5m, which predominantly relates to the
foreign currency gains on translation of £86.3m and the
opening of new sites, refurbishments completed during the
year and movements in other net liabilities of £29.3m.
MGM Pension Scheme Buy-out
On 15 December 2016 the MGM defined benefit
pension scheme was bought out by Aviva Annuity UK
Limited, with all risks in relation to the scheme passing
to Aviva Annuity UK Limited as of the buy-out date.
This transition was treated as a settlement occurring
on 15 December 2016 (the inception date). Following
this transaction, all members of the Scheme have had
their benefits secured with Aviva Annuity UK Limited.
The past service liabilities at 31 December 2016 are
therefore shown as nil (2015: net asset of £10.5m).
Cash Flow and Net Debt
The Group continued to be cash generative at the operating
level. Total net cash generated from operations in the year
was £150.1m (2015: £165.9m). Net cash spent on investing
activities during the year was £130.3m (2015: £80.3m),
£47.0m for the acquisition of the five Empire cinemas,
£83.7m on the development of new sites, refurbishments
and technology and £0.7m related to interest received.
Net debt increased by £37.1m to £282.3m at 31 December
2016 (2015: £245.2m). The main movements were due to the
net drawdown on the revolving credit facility of £28.0m
during the year, offset by repayments during the year on
the term loans (net of foreign exchange movements) of
£6.4m, an additional finance lease liability of £8.2m and fair
value gains in respect of financial instruments of £0.5m. Net
debt at the year-end represented 1.6 times the rolling
12 month EBITDA figure for the Group.
Dividends
The Directors are recommending to shareholders for
approval a final dividend in respect of the year ended
31 December 2016 of 13.8p per share, which taken together
with the interim dividend of 5.2p per share paid in
September 2016 equates to a total dividend in respect of
2016 of 19.0p per share (2015: 17.5p per share). The record
date for the dividend is 26 May 2017 and the payment date
is 22 June 2017.
Post Balance Sheet Events
On 7 February 2017 the Group disposed of it 100% interest
in Picturehouse Entertainment Limited for £2.3m. No
significant impact is expected on the Group’s Statement
of Profit or Loss or Statement of Financial Position.
By order of the Board
The Strategic Report is set out on Pages 1 to 32.
Nisan Cohen
Chief Financial Officer
9 March 2017
32
By order of the Board
Moshe Greidinger
Chief Executive Officer
9 March 2017
Israel Greidinger
Deputy Chief Executive Officer
STRATEGIC REPORT uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT u Directors’ Biographies
As at 31 December 2016
Anthony Bloom
Chairman
Age 77
Israel Greidinger
Deputy Chief Executive Officer
Age 55
Date appointed as Chairman:
October 2004
Date appointed to Board:
February 2014
Tenure on Board:
12 years 2 months
Independent:
No
Tenure on Board:
2 years 10 months
Independent:
No
Moshe (Mooky) Greidinger
Chief Executive Officer
Age 64
Date appointed to Board:
February 2014
Tenure on Board:
2 years 10 months
Independent:
No
Committee memberships:
No formal memberships, but has
attended all meetings by invitation
Relevant skills, qualifications,
and experience:
• Extensive Board-level and Chairman
experience in a range of companies,
sectors and jurisdictions
• Bachelor of Commerce and Bachelor
of Law, University of Witwatersrand,
South Africa (cum laude)
• Master of Law, Harvard Law School
• Sloan Fellow, Graduate School of
Business, Stanford University
• Doctor of Law (H.C.), University
of Witwatersrand, awarded in
recognition of his contribution
towards establishment of a non-racial
society in South Africa
Previous Directorships
• Chairman and Chief Executive of The
Premier Group Limited (South Africa)
• Director of Barclays Bank (South
Africa)
• Director of South African Breweries
• Director of Liberty Holdings (South
Africa)
• Director of RIT Capital Partners PLC
• Deputy Chairman of Sketchley PLC
Principal external appointments:
• Non-Executive Director of London
Symphony Orchestra
• Non-Executive Director of
TechnoServe, Inc.
Committee memberships:
None
Committee memberships:
None
Relevant skills, qualifications,
and experience:
• Over 20 years’ senior executive
•
•
•
experience in the cinema industry in
central and eastern Europe, and Israel
1994–2014 Cinema City International
N.V. (“CCI”), appointed Chief
Financial Officer 1995
1985–1992 Managing Director of
C.A.T.S. Limited (Computerised
Automatic Ticket Sales)
1992 to 1994 President and Chief
Executive Officer of Pacer C.A.T.S.
Inc
Principal external appointments:
• Director of Israel Theatres Limited
since 1994
Israel is the brother of Moshe Greidinger.
Relevant skills, qualifications,
and experience:
• Over 40 years’ senior executive
experience in the cinema industry in
central and eastern Europe, and Israel
1994–2014 Cinema City International
N.V. (“CCI”)
•
• Cinema City Group, various executive
positions since 1984
• “Exhibitor of the Year Award” at
ShoWest in Las Vegas in 2004
• “International Exhibitor of the Year
Award” at CineEurope, in Amsterdam
in 2011, with special recognition for
having developed new markets in
central and eastern Europe
• “Global Achievement in Exhibition
Award” at CinemaCon in Las Vegas
in 2016
Principal external appointments:
• Director of Israel Theatres Limited
since 1983
• Co-Chairman of the Cinema Owners
Association in Israel since August
1996
• Head of the Board of Trustees of the
Hebrew Reali School of Haifa
Moshe is the brother of Israel Greidinger.
33
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Directors’ Biographies continued
As at 31 December 2016
Alicja Kornasiewicz
Non-Executive Director
Age 65
Date appointed to Board:
May 2015
Tenure on Board:
1 year 7 months
Independent:
Yes
Scott S. Rosenblum
Non-Executive Director
Age 67
Date appointed to Board:
February 2014
Tenure on Board:
2 years 10 months
Independent:
No
Arni Samuelsson
Non-Executive Director
Age 74
Date appointed to Board:
February 2014
Tenure on Board:
2 years 10 months
Independent:
Yes
Committee memberships:
• Audit Committee
Committee memberships:
• Nomination Committee
Committee memberships:
• Nomination Committee
Relevant skills, qualifications,
and experience:
• Extensive central and eastern Europe
financial and political experience
• 2011–2012 Chairwoman of the
Supervisory Board of Bank Pekao
S.A.
• 2010–2011 President of the
Management Board of Bank Pekao
S.A.
• 2000–2010 Executive management
•
roles at UniCredit Bank
1997–2000 Secretary of State for the
Ministry of the State Treasury of the
Republic of Poland
Principal external appointments:
• Managing Director and Head of
CEE for Morgan Stanley & Co,
International PLC since 2012
Relevant skills, qualifications,
and experience:
• Over 40 years of cinema exhibition
and film distribution experience,
principally through SAMfélagið
(Samfilm) – a cinema exhibitor and
film distributor in Iceland, of which
he has been joint owner and Chief
Executive Officer since it was formed
in 1975
1972–1982 Director and owner of
Vikurbaer, a supermarket business in
Keflavik
•
Principal external appointments:
• Chief Executive Officer of Samfilm
EHF (SAMfélagið’s distribution arm)
since 1975
• Chief Executive Officer of
SAMcinema (SAMfélagið’s cinema
arm) since 1975
Relevant skills, qualifications,
and experience:
• Extensive experience of management
of an international law firm, and of
corporate governance and disclosure
matters
• Extensive experience and expertise
in areas of general corporate and
securities law, corporate finance,
mergers and acquisitions, and joint
ventures
• 2004–2014 member of the
Supervisory Board of Cinema City
International N.V. (“CCI”), appointed
Chairman of the Supervisory Board
of CCI in 2011. Also Chairman of the
CCI Remuneration Committee and
the CCI Appointment Committee
from November 2006 and was a
member of the CCI Audit Committee
• Licensed as a lawyer and admitted to
the New York Bar Association
Principal external appointments:
• Partner, Executive Committee
and Co-Chairman of Corporate
Department in the law firm of
Kramer Levin Naftalis & Frankel LLP,
New York since 1991, and Managing
Partner 1994–2000
• Serves, and has served, as a director
and advisor to the boards of various
public and private companies
34
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 Eric (Rick) Senat
Non-Executive Director and Senior
Independent Director
Age 67
Date appointed to Board:
July 2010
Tenure on Board:
6 years 5 months
Independent:
Yes
Committee memberships:
• Nomination Committee (Chairman)
• Remuneration Committee
Relevant skills, qualifications,
and experience:
• Over 40 years’ experience in the
•
film industry
1976–2001 Warner Bros, becoming
Senior Vice President for Business
Affairs in Europe. Closely associated
with the “Harry Potter” films,
“Greystoke”, “Batman”, “Superman”
and many others
• 2001 – 2007 Director of Hammer
•
Film Productions
1999 – 2003 Deputy Chair of the
British Film Institute
• Solicitor and Bachelor of Law,
University College London
Principal external appointments:
• Non-Executive Chairman of the
Julie Southern
Non-Executive Director
Age 57
Date appointed to Board:
May 2015
Tenure on Board:
1 year 7 months
Independent:
Yes
Committee memberships:
• Audit Committee (Chair)
• Remuneration Committee
Relevant skills, qualifications,
and experience:
• Experience as a Chief Financial
Officer and Chief Commercial
Officer, driving strategy, revenue and
commercial planning, and working
across multiple industry sectors and
sizes of organisations
• 2010–2013 Chief Commercial Officer
of Virgin Atlantic Airways
• 2000–2010 Chief Financial Officer of
•
•
Virgin Atlantic Airways
1996–2000 Group Financial Director
of Porsche Cars GB Ltd
1988–1995 Finance Director of
H J Chapman & Co
• Chartered Accountant (ICAEW) and
graduate of Cambridge University
(Economics B.S)
London Film Museum since 2009
• Non-Executive Chairman of Mad Dog
Principal external appointments:
• Non-Executive Director and Chair
Casting Limited since 2016
of the Audit Committee at Rentokil-
Initial Plc since 2014
• Non-Executive Director and Chair
of the Audit Committee at DFS
Furniture Plc since 2015
• Non-Executive Director at NXP
Semiconductors N.V. since 2013
• Non-Executive Director and Chair
of Remuneration Committee of
Stagecoach Group Plc since 2016
35
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Directors’ Biographies continued
As at 31 December 2016
Changes since the year-end
Appointment
Nisan Cohen
Chief Financial Officer
Age 44
Date appointed to Board:
January 2017
Independent:
No
Committee memberships:
None
Appointment
Dean Moore
Non-Executive Director
Age 59
Date appointed to Board:
January 2017
Independent:
Yes
Committee memberships:
• Remuneration Committee
(Chairman)
• Audit Committee
Relevant skills, qualifications,
and experience:
• Part of the Cineworld Group for
sixteen years. Previously, as Vice
President of Finance, he led the
integration of the finance teams in
the Group across nine countries after
the combination of Cineworld with
Cinema City International N.V. More
recently he served as Deputy Chief
Financial Officer
• Member of The Institute of Certified
Public Accountants in Israel
Relevant skills, qualifications,
and experience:
• Chief Financial Officer of N Brown
Group plc (2004-2015)
• Chief Financial Officer of T&S
Stores plc
• Chief Financial Officer of Graham
Group plc (1996 to 1999)
Chartered Accountant
•
Martina King stepped down from
the Board on 11 January 2017.
Martina King
Non-Executive Director
Age 55
Date appointed to Board:
July 2010
Tenure on Board:
6 years 5 months
Independent:
Yes
Committee memberships:
• Audit Committee
• Remuneration Committee (Chair)
Relevant skills, qualifications,
and experience:
• Extensive experience in company
turnaround, management, marketing,
online media, and data analytics.
• 2011–2012 Managing Director
of Aurasma
• 2005–2014 Non-Executive Director
•
•
Capita plc
1999–2004 Managing Director
of Yahoo! UK and Europe
1993–1999 Managing Director
of Capital Radio plc
Principal external appointments:
• CEO of Featurespace since 2012
• Non-Executive Director of
Debenhams Plc since 2009
36
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 Corporate Governance Statement
In March 2016, we also announced the promotion of Renana
Teperberg and Matthew Eyre to the roles of Chief Commercial
Officer and Chief Operations Officer respectively. Renana
and Matthew are long-standing members of the executive
team, and their promotions underline again the Company’s
commitment to nurturing the internal pipeline of talent,
and, in the case of Renana, the objective of cultivating and
expanding opportunities for talented women to progress
within Cineworld.
In addition, I am delighted to welcome Dean Moore to the
Board. Dean was appointed as an Independent Non-Executive
Director in January 2017, following the stepping down of
Martina King. He also became Chairman of the Remuneration
Committee and a member of the Audit Committee.
The Board is satisfied that Dean meets the requisite criteria to
be considered independent, notwithstanding his brief interim
employment of ten months from March 2016 by Cineworld,
during which his mandate was to focus on the Chief Financial
Officer succession planning process. I believe that Dean’s
extensive experience, both financial and commercial, will be a
great asset to the Group, and his contribution will strengthen
the rich combination of skills, culture and independence that
already exists on our Board.
The Remuneration Committee had a full agenda this year,
updating the Company’s Remuneration Policy and developing
a new Long Term Incentive Plan, both of which are due to
be voted on at this year’s AGM. As part of the process the
views of the investment community were taken into account
to ensure that future targets for our Executive Directors
are stretching and appropriate. Details of the work of the
Remuneration Committee in this area are set out in the
Directors’ Remuneration Report on pages 54 to 72.
The Audit Committee was also been fully occupied in 2016.
In the early part of 2016 it oversaw an audit tender process,
which resulted in the reappointment of KPMG as our External
Auditor. Full details of the process and its outcome may be
found on pages 51 to 52. The Committee has continued work
on its key agenda items of oversight of the External Audit, and
a robust evaluation of risk management policies. Information
on these and other areas of focus for the Committee are
outlined in the Audit Committee Report on pages 51 to 52.
The Board’s evaluation this year was carried out by an
external facilitator, as required by the Code. The process was
constructive, and I am pleased to report that the evaluation
supported the view that the Board and its Committees are
operating efficiently and productively.
Lastly, I would like to extend my thanks to Martina King,
who stepped down from the Board in January 2017. Martina’s
contribution over her six years on the Board was of significant
value to the Group, the Board and me, in particular in her role
as Remuneration Committee Chair.
Anthony Bloom
Chairman
37
I am pleased to present the Corporate
Governance Statement for 2016, which
has been a busy year for the Board
and its Committees.
Introduction
Dear Shareholders
I am pleased to present the Corporate Governance Statement
for 2016, which has been a busy year for the Board and its
Committees.
As ever, the Board remains committed to ensuring that a high
standard of corporate governance is continuously maintained
throughout the Group, and that we meet all the standards
expected of a FTSE 250 company. We believe that good
governance is the bedrock of the Group’s strategy, and is
essential to the way the business operates on a daily basis.
During the year, significant initiatives undertaken include
working on the appointment of the new Chief Financial Officer,
reviewing the Company’s Remuneration Policy (which is due
to be voted on at our 2017 AGM), continuing to develop our
system of risk management and internal control as part of the
culture of the Group, and undertaking an external audit tender
process at the beginning of the year.
We announced the appointment of the new Chief Financial
Officer, Nisan Cohen, at the beginning of 2017. Nisan has been
with the Group for over 15 years, latterly as Deputy Chief
Financial Officer. It has always been important to Cineworld to
develop internal talent at all levels, and Nisan’s promotion to the
Board is an endorsement of these principles. The Nomination
Committee provided substantial support in this process.
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Corporate Governance Statement continued
Directors’ Statements
Compliance with the UK Corporate Governance Code
The principal governance rules applying to UK companies
listed on the London Stock Exchange for the year covered
by this statement are contained in the 2014 UK Corporate
Governance Code (the “Code”) published by the UK Financial
Reporting Council in September 2014, and a copy is available
on its website www.frc.org.uk. For the year ended 31
December 2016, the Board considers that the Company was
compliant with the provisions of the Code.
Going Concern
The Directors consider that the Group has adequate resources
to continue in operational existence for 12 months from the
date of signing these accounts. Thus they continue to adopt
the going concern basis in preparing the annual financial
statements. In adopting the going concern basis for preparing
the financial statements, the Directors have considered the
business activities as set out on pages 1 to 32 and the Principal
Risks and Uncertainties on pages 22 to 27. The financial
position of the Group, its cash flows, liquidity position and
borrowing facilities, as well as the Group’s objectives, policies
and processes for managing capital, are described on pages
28 to 32. Financial risk management objectives, details of
financial instruments and hedging activities, and exposure
to credit risk and liquidity risk are described in Note 21 of the
financial statements.
Viability
The Directors have assessed the viability of the Group over
a three year period, taking into account the Group’s current
position and the potential impact of the Principal Risks
and Uncertainties set out on pages 22 to 27. Based on this
assessment, and having considered the established controls
for the risks, and the available mitigating actions, the Directors
confirm that they have a reasonable expectation that the
Group will be able to continue in operation and meet its
liabilities as they fall due over the three year period to 2019.
For more information on the viability assessment, please see
pages 49 to 50 of the Audit Committee Report.
Robust Assessment of Principal Risks
The Directors consider they have undertaken a robust
assessment of the principal risks facing the Group, including
those that would threaten its business model, future
performance, solvency and liquidity. Please refer to pages
22 to 27 for further information on the Company’s Principal
Risks and Uncertainties, and their impact on the prospects of
the Company.
Review of Internal Control and Risk Management
The Directors have carried out a review of internal control and
risk management. Please refer to pages 45 to 47 for further
information.
Fair, Balanced and Understandable
The Directors consider the Annual Report and Accounts,
taken as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to assess
the Group’s position and performance, business model and
strategy. Please refer to page 49.
38
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 Application of Code Principles
The information below explains how the Company has applied
the main principles of the Code. The information required to
be disclosed by the Disclosure and Transparency Rule (“DTR”)
7.2.6 is set out in the Directors’ Report on pages 73 to 77 and
is incorporated into this statement by reference.
A. Leadership
A.1 The Role of the Board
The Board met formally seven times during the year (including
a strategy day) and held other meetings on an ad hoc basis
as required. There is a clear schedule of matters reserved for
the Board, together with delegated authorities throughout the
Group.
A.2 Division of Responsibilities
The roles of the Chairman and Chief Executive are clearly
defined. The Chairman is responsible for the leadership and
effectiveness of the Board and for overseeing the Board’s
setting of strategy. The Chief Executive Officer is responsible
for leading the day-to-day management of the Group and the
implementation of the strategy.
A.3 The Chairman
The Chairman sets the agendas for the meetings, manages
the meeting timetable (in conjunction with the Company
Secretary) and facilitates open and constructive dialogue
during the meetings.
A.4 The Role of the Non-Executive Directors
The Chairman promotes an open and constructive
environment in Board meetings and actively invites the Non-
Executive Directors’ views. The Non-Executive Directors
provide objective, rigorous and constructive challenge to
management and meet during the year in the absence of the
Executive Directors.
B. Effectiveness
B.1 The Composition of the Board
The Nomination Committee is responsible for regularly
reviewing the composition of the Board. In making
appointments to the Board, the Nomination Committee
considers the wide range of skills, knowledge, independence
and experience required in order to maintain an effective
Board.
B.2 Appointments to the Board
The appointment of new Directors to the Board is led by the
Nomination Committee. Further details of the activities of the
Nomination Committee can be found on pages 43 and 44.
B.3 Time Commitment
On appointment, Directors are notified of the time
commitment expected from them and details are set out in
their letter of appointment. External directorships of Executive
Directors, which may impact existing time commitments, are
discussed and cleared by the Chairman.
B.4 Development
All Directors receive induction training on joining the Board
and, as part of the annual effectiveness evaluation, the
development needs of each Director are checked.
B.5 Information and Support
The Chairman, in conjunction with the Company Secretary,
ensures that all Board members receive accurate and timely
information.
B.6 Board and Committee Performance Evaluation
The Board and its Committees have this year undertaken
an external evaluation of their respective performances, in
accordance with the Code. Details of the evaluation can be
found on page 42.
B.7 Re-election of Directors
All Directors are subject to shareholder election or re-election
at the Annual General Meeting.
C. Accountability
C.1 Financial and Business Reporting
The Strategic Report is set out on pages 1 to 32 and provides
information about the performance of the Group, the business
model, strategy and the principal risks and uncertainties
relating to the Group’s future prospects.
C.2 Risk Management and Internal Control
The Board decides the Group’s risk appetite and annually
reviews the effectiveness of the Group’s risk management and
internal control systems. The activities of the Audit Committee,
which assists the Board with its responsibilities in relation to
the management of risk, are summarised on page 49.
C.3 Audit Committee and Auditors
The Board has delegated a number of responsibilities to the
Audit Committee, which is responsible for overseeing the
Group’s financial reporting processes, internal control and risk
management framework, the work undertaken by the External
Auditor, and the internal audit work of PwC and the Risk and
Assurance Team. The Chair of the Audit Committee provides
regular updates to the Board.
D. Remuneration
D.1 Level and Components of Remuneration
The Remuneration Committee sets levels of remuneration
appropriately with a view to ensuring the long-term success
of the Company, and structures remuneration so as to link it to
both corporate and individual performance, thereby aligning
management’s interests with those of the shareholders.
Benchmarking exercises are carried out as appropriate
by external advisers to ensure remuneration levels are
appropriate.
D.2 Procedure for Development of Remuneration Policy and
Setting Remuneration Packages
Details of the work of the Remuneration Committee and the
approach to setting the remuneration policy and packages
can be found in the Directors’ Remuneration Report on pages
54 to 72.
E. Relations with Shareholders
E.1 Shareholder Engagement and Dialogue
The Board takes an active role in engaging with shareholders.
The Board particularly values opportunities to meet with
shareholders and the Chairman ensures that the Board is kept
informed of shareholder views.
E.2 Constructive Use of the Annual General Meeting
The AGM provides the Board with an important opportunity to
meet with shareholders, who are invited to meet the members
of the Board informally following the formal business of the
meeting.
39
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Corporate Governance Statement continued
Leadership
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 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 basis on which the Board seeks to preserve value over the
longer term and the strategy for delivering the objectives is set out in the Strategic Report on pages 1 to 32.
The Board meets regularly at least six times a year and also once for a strategy day. Ad hoc meetings of the Board take place as
required. 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, if appropriate, specific issues. 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; approval of site selection; 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 information. Regular briefings by the management team are given to the Board, to deepen the collective
understanding of the business, leading in turn to more effective debate.
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, Moshe Greidinger, 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. He is responsible for organising the
business of the Board, ensuring its effectiveness and setting its agenda. The Chairman also facilitates the effective contribution
of Non-Executive Directors and oversees the performance evaluation of the Board and he, when appropriate, discusses matters
with the Non-Executive Directors without the Executive Directors being present.
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 executive team.
Board Committees
In accordance with best practice, the Board has appointed three Committees, an Audit Committee, a Nomination Committee,
and a Remuneration Committee, to which certain Board functions have been delegated. Each of these Committees has formal
written terms of reference which clearly define their responsibilities. The terms of reference of each of the Board’s three
Committees are available on the Company’s website (www.cineworldplc.com/about-us/corporate-governance).
Membership of the Audit, Nomination and Remuneration Committees
During the financial year, there were no changes to the membership of the Audit, Nomination and Remuneration Committees.
Membership was as follows:
Audit Committee
Nomination Committee
Remuneration Committee
Chair
Member
Member
Julie Southern
Martina King
Alicja Kornasiewicz
Rick Senat
Scott Rosenblum
Arni Samuelsson
Martina King
Rick Senat
Julie Southern
All the Committees remained compliant with the Governance Code as regards their membership during the year.
Changes to Membership of the Audit and Remuneration Committees since the Year End
On 11 January 2017, Martina King stepped down as a Director on the Board, including as Chair of the Remuneration Committee,
and as a member of the Audit Committee. Dean Moore, who was appointed to the Board as an Independent Non-Executive
Director on 11 January 2017, took over as Chair of the Remuneration Committee and also became a member of the
Audit Committee.
40
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 Attendance at Meetings
The number of scheduled Board meetings and Committee meetings attended by each Director during the year was as follows:
Number of meetings in year
Directors for the whole year
Anthony Bloom
Israel Greidinger
Moshe Greidinger
Martina King
Alicja Kornasiewicz
Scott Rosenblum
Arni Samuelsson
Rick Senat
Julie Southern
(1) Chairman of Board/Board Committee.
(2) Anthony Bloom, the Chairman of the Company, attended these meetings by invitation.
Board
(including
strategy day)
Audit
Committee
Remuneration
Committee
Nomination
Committee
7
5
4
2
Attended
Attended
Attended
Attended
7/7(1)
5/5(2)
7/7
7/7
7/7
7/7
7/7
7/7
7/7
7/7
N/A
N/A
4/5
4/5
N/A
N/A
N/A
5/5(1)
4/4(2)
N/A
N/A
4/4(1)
N/A
N/A
N/A
4/4
4/4
2/2(2)
N/A
N/A
N/A
N/A
2/2
2/2
2/2(1)
N/A
41
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Corporate Governance Statement continued
Effectiveness
Directors and Directors’ Independence
For the duration of the year, the Board was composed of
nine members, five of whom were considered independent.
Scott Rosenblum is not viewed as independent because of his
previous business dealings with the Greidinger family and its
interests. The names of the Directors at the year-end, together
with their biographical details, are set out on pages 33 to 36.
Performance Evaluation
The Board evaluation for 2016 was undertaken by an
external facilitator, Edis-Bates Associates. As they have no
other connections with the Company, they were therefore
considered independent in accordance with the Code. The
process, which was initiated in July 2016, was constructive and
confirmed that the Board and its Committees are operating
effectively.
Re-election and Election
All the Directors will be retiring and will be offering themselves
for re-election or election at this year’s AGM, reflecting current
best practice under the Code. Biographical details of all the
current Directors are set out on pages 33 to 36. In view of
the performance evaluation, the Board is satisfied that each
Director standing for re-election or election continues to show
the necessary commitment and continues to be an effective
member of the Board due to his or her skills, expertise and
business acumen.
The Board believes that the re-election of Anthony Bloom as
Chairman of the Board is in the best interests of shareholders.
Anthony has a comprehensive understanding of the Company’s
business and operations and played a key role in the Company’s
combination with Cinema City in 2014. He also brings to the role
extensive board-level and chairman experience in a range of
companies, sectors and jurisdictions.
Chairman’s Commitments
The Chairman performs a limited 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 terms and conditions of appointment of the 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 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 54 to 72.
For a FTSE 250 company, the Code recommends that a
majority of 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 Martina King, Arni Samuelsson, Rick Senat,
Julie Southern and Alicja Kornasiewicz were, for the year,
Independent Non-Executive Directors.
Dean Moore, who was appointed a Non-Executive Director
on 11 January 2017, following Martina King’s stepping down
from the Board at the same time, is considered by the Board
to be independent. The Board is satisfied that Mr Moore
meets the requisite criteria to be considered independent,
notwithstanding his previous interim employment within
the Group, given the nature of the role he performed in the
ten-month period from March 2016, where his mandate was
to focus on the Chief Financial Officer succession planning
process.
The Independent Non-Executive Directors bring an objective
viewpoint 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. They play a key role
in reviewing proposals and providing constructive challenge
generally and in particular in respect of strategy. They also
ensure that appropriate standards are maintained. All the Non-
Executive Directors have access to independent legal advice
subject to consulting with the Board and following the agreed
procedure.
Rick Senat, the Senior Independent Director, is available to
shareholders if they have concerns which contact through the
normal channels of Chairman, Chief Executive Officer, Deputy
Chief Executive Officer or Chief Financial Officer has failed to
resolve or for which contact is inappropriate.
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.
42
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 It has been another busy period for
the Nomination Committee in terms of
succession planning, culminating in the
announcement of the appointment of
the new Chief Financial Officer.
Chairman
Rick Senat
Scott Rosenblum, Arni Samuelsson
Committee
members
Number of
meetings held
in 2016
The Company Secretary acts as Secretary
to the Committee.
2
Nomination Committee Report
Chairman’s Introduction
Dear Shareholders
I am pleased to present our report on the Nomination
Committee and its activities during the year.
It has been another busy year for the Committee in terms of
Board succession planning, culminating in the announcement
in January 2017 of the appointment of Nisan Cohen as the new
Chief Financial Officer (CFO).
Working in conjunction with the Chair of the Audit Committee
and the acting CFO at the time, Israel Greidinger, the
Committee played a key role in the planning process for this
nomination. Following a formal recruitment process, and with
the assistance of executive search firm, Norman Broadbent,
Dean Moore was recruited to act as interim CFO in March
2016. At the same time, internal candidate Nisan Cohen was
promoted to the role of Deputy CFO.
As reported at the time, it was anticipated that Nisan would
ultimately be appointed to the CFO position on a full-
time basis, subject to his performance developing to the
satisfaction of the Board.
Following a period of ten months, where Dean worked closely
with Nisan on the development and strengthening of key
skills and expertise in anticipation of a future promotion to
the senior role, the Board considered and supported the
promotion of Nisan to the role of CFO. Further details of the
Committee’s work in relation to the appointments of Dean
Moore and Nisan Cohen are set out in the report below on
page 44.
In January 2017, we also considered and recommended
the appointment of Dean Moore as an independent Non-
Executive Director, in place of Martina King, who stepped
down from the Board at that time. Part of our ongoing work
as a Committee is to review the effectiveness of the Board
and its Committees, mindful of the contributing factors to
effectiveness such as diversity, independence, and the right
mix of skills and experience. Dean Moore brings with him a
wealth of financial and commercial experience and skills, which
the Committee believes will be of tremendous benefit to the
Board and the Group.
Last year I was pleased to report that we had attained
significant female representation on the Board, with a
proportion of over 30% being female. This was indeed the
case for 2016, too; however, following Martina King’s departure
in January 2017, and the appointments of Dean and Nisan, this
proportion has decreased. This is a reflection of our policy to
appoint the best candidate for each role, but we are mindful of
current recommendations, and give due regard to these when
considering both external appointments and internal talent
development.
Rick Senat
Chairman of the Nomination Committee
43
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Corporate Governance Statement continued
Recruitment Process for Board Directors
As part of the CFO succession planning process, the
Nomination Committee, working in conjunction with the
Audit Committee Chair, Julie Southern, and acting CFO
at the time Israel Greidinger, engaged external search
consultancy Norman Broadbent to assist with the search for
a candidate to fill the role. Further to a formal selection and
interview process, during which several candidates were
short-listed, Dean Moore was appointed as interim CFO in
March 2016. At the same time, it was announced that internal
candidate, Nisan Cohen, would become Deputy CFO, and
would work closely with Dean in preparation for a potential
promotion to the role of CFO which, subject to the Board
being satisfied with Nisan’s development, would take place
in around a year’s time.
Following a ten-month period, it was announced on
11 January 2017 that Nisan Cohen had been appointed to
the position of CFO and that he would join the Board as
an Executive Director. It was also announced that Dean
Moore had been appointed to the Board as an Independent
Non-Executive Director, and would become Chair of the
Remuneration Committee and a member of the Audit
Committee. Given the process undertaken at the time of
Dean’s appointment as interim CFO, an external search
consultancy was not engaged in connection with his
appointment as an Independent Non-Executive Director.
The Board is satisfied that Mr Moore meets the requisite
criteria to be considered independent, notwithstanding his
previous interim employment within the Group, given the
nature of the role he performed in the ten-month period
from March 2016, where his mandate was to focus on the
CFO succession planning process.
Norman Broadbent, the external search consultancy used
for the search conducted in 2016, has no connections
with the Group or any of its Directors, and was chosen
following a consideration of a number of prospective search
consultancies.
Composition
During the year, the Committee comprised three Non-
Executive Directors (namely Scott Rosenblum, Arni
Samuelsson and Rick Senat). While Rick Senat and Arni
Samuelsson are considered to be independent, Scott
Rosenblum is not. The majority of the Committee are
independent as required by the Code.
The Role, Responsibilities and Activities of the
Nomination Committee
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, the independence
of Directors, and it makes appropriate recommendations to
the Board on such matters. It is also responsible for ensuring
that Directors have sufficient time to discharge their duties
on appointment, and thereafter, with such matters being
specifically addressed in the letters of appointment of the
Non-Executive Directors. The terms of reference of the
Committee are available on the Company’s website
(www.cineworldplc.com/about-us/corporate-governance).
The Committee met for two scheduled meetings during
the financial year and for other meetings as required on an
adhoc basis. Due to the important role 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 or his
successor is being discussed.
During the year, the Committee reviewed its own
performance, reviewed the structure of the Board and the
three Committees, and discussed succession and diversity
issues.
Board Diversity
While the Committee considers diversity to be important
when reviewing the composition of the Board and possible
new appointees, it believes that the single most important
factor is to identify, recruit and retain the people it considers,
on merit, to be the best candidates for each particular role. It
is not currently in favour of setting specific targets for Board
representation to be achieved by particular dates. As part
of the process of recruiting new Directors, it has agreed that
candidates from a wide variety of backgrounds should be
considered and, where reasonably possible, shortlists should
comprise of candidates of both sexes. During the year, there
was over thirty percent female representation on the Board.
However, this percentage has lowered following Martina
King’s stepping down in January 2017 and the appointments
of Nisan Cohen and Dean Moore.
44
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 Accountability
Accountability, Audit and Financial
The Board is responsible for the preparation of the Annual
Report and ensuring that the financial statements present a
fair, balanced and understandable assessment of the Group’s
financial position and prospects. The detailed work to ensure
this, and to substantiate the fair, balanced and understandable
statement, is undertaken by the Audit Committee.
Risk Management and Internal Control
The Board has overall responsibility for establishing, monitoring
and maintaining an effective system of risk management and
internal control. These systems provide 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 approach has been developed
using the principles of the Three Lines of Defence model (a
simple but well-established governance and internal control
model. Please see diagram below).
The Board confirms that, in accordance with the Code:
• there is an ongoing and robust process for identifying,
evaluating and managing the principal risks faced by the
Group (for more details please see Principal Risks and
Uncertainties on pages 22 to 27);
• the systems have been in place for the year under review;
• the systems are regularly reviewed by the Executive
Directors and the Board and are deemed to be effective
with no significant weaknesses identified; and
• the systems comply with the FRC guidance on risk
management, internal control and related financial business
reporting.
During the year, the Board has directly, and through delegated
authority to the executive management team and the Audit
Committee, overseen and reviewed the performance and
evolution of the approach to risk management and internal
control.
As part of the continued focus on, and investment in, risk
management and internal control, the Group recruited a Head
of Risk and Assurance who took up the post in August 2016.
The key responsibilities are to lead on:
• Risk Management
Internal Audit
•
• Fraud Detection and Loss Prevention
•
Insurance
Board and Committees
Executive Directors
Operations
– Cineworld
– Picturehouse
– Cinema City
– Yes Planet
Group
Support
Functions
First Line
Second Line
Third Line
Process and control implementation
and development at cinemas
Operationalise:
— Cinema operating manuals (policies
and process)
— Regional/District Manager oversight
— Training and development
— Regulatory and compliance
requirements
Group and Territory oversight/
monitoring and strategy/policy
setting
Support and review:
— Operational performance reviews
— Executive Directors’ oversight
and challenge
— Group Board and Committee’s
oversight and challenge
— Financial oversight and review
— Risk Management Framework
design and implementation
— Assistance in process
and control development
— Management self-assessments
— Customer satisfaction surveys
Independent challenge to the levels of
assurance provided by management on
the effectiveness of governance, risk
management and internal controls
Challenge and Assure:
— Risk-based audits (provided by PwC)
— Cinema compliance audit programme
— Cinema self–assessments
— Annual health and safety audits
— Insurance inspections
— Fraud and loss prevention monitoring
— Mystery shopper visits
E
x
t
e
r
n
a
l
A
u
d
i
t
(
p
r
o
v
i
d
e
d
b
y
K
P
M
G
)
R
e
g
u
l
a
t
o
r
s
45
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Corporate Governance Statement continued
Risk Management
The Board, supported by the Audit Committee and the
executive management team, has overall responsibility
for implementing an effective risk management approach.
The Group approach is governed by its Risk Management
Framework that sets out the policy, oversight structure,
accountability, monitoring and reporting of risk within the Group,
and facilitates the following objectives for risk management:
•
identify, measure, control and report on business risk that
will undermine the achievement of the Group strategic
objectives, both strategically and operationally, through
appropriate analysis and assessment criteria;
• better allocate effort and resources for the management of
key and emerging risks;
• drive business improvements and improved intelligence for
key decision-making; and
• support and develop the Company’s reputation as a well
governed and trusted organisation.
The application of the key components of the Risk
Management Framework have been:
Oversight Structure and Accountability – the implementation
of a risk management oversight and accountability structure
has ensured that risk consideration is undertaken from both a
‘top-down’ and ‘bottom-up’ perspective. The Group maintains
a Group Strategic Risk Register as well as operational risk
registers for Group support functions and cinema operations.
Ongoing Process – the approach taken is focused on risk
identification (using cause and effect analysis), inherent and
residual risk assessment, key controls identification, and
the development and implementation of further mitigation
strategies where required. As part of this process, risk appetite
is considered for each of the principal risks, allowing the Board
to clearly set out the nature and extent of the risk the Group is
willing to accept in pursuit of the Group’s strategic objectives.
Escalation, Monitoring and Reporting – a clear escalation policy
is in place to ensure changes to risk exposure are notified up
through the governance structure as required. Risk leads are
identified for all risks and have the responsibility for ongoing
monitoring of the effectiveness of current controls and the
progress against the implementation of further mitigating
actions.
Internal Control
Whilst the Board has overall responsibility for the Group’s
system of internal control and for reviewing its effectiveness,
it has delegated responsibility for the operation of the system
of internal control to the executive management team. The
detailed review of internal control has been delegated to
the Audit Committee. Senior Management within each part
of the Group are responsible for internal control and risk
management within its own area and for ensuring compliance
with the Group’s policies and procedures.
The Audit Committee has oversight of the programme of
assurance activities to allow for its ongoing review of the
effectiveness of internal control. The delivery of this assurance
programme in the first half of the year was led and delivered
by PricewaterhouseCoopers LLP (“PwC”) with the support
of the in-house Internal Audit team and then from August
was led by the new Head of Risk and Assurance with PwC
providing specialist support where needed. Details of the
activities that the Audit Committee has been involved in
during 2016 are set out on pages 48 to 53.
Internal Audit – the Internal Audit Plan is a combination of
Group-wide risk based reviews (providing assurance over
the key controls relied upon for the principal risks) as well as
additional specific reviews requested by management.
Cinema Compliance – the Cinema Compliance Plan is a
combination of one and three day reviews that are delivered
across the Group. Each cinema in the Group is risk-assessed
based on financial, operational and management information
to determine which cinemas would be included in the audit
programme for the year.
In addition to the programme of on-site reviews conducted by
the Risk and Assurance team, an annual self-assessment audit
is undertaken by each cinema.
Fraud Detection and Loss Prevention – to support the Group
in fraud detection and loss prevention, a software tool is used
for ongoing analysis of our key data sources to swiftly identify
any irregular transaction activity that could indicate instances
of fraud, loss or failure of procedural compliance. In addition,
a programme of anonymous site visits are undertaken to
review the customer journey (from ticket purchase to cinema
departure).
There is a cycle of ongoing monitoring and reporting activities
in place with risk information being presented to the Board,
Audit Committee, and the executive management team.
External Audit – the External Auditor provides 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 are reported to the Audit Committee.
Culture – to support embedding the application of the Risk
Management Framework into the culture and behaviours of
the Group, ongoing training and communication has been
delivered by the Risk and Assurance team. Details of the
Group’s principal risks and how they are being managed or
mitigated are provided on pages 22 to 27.
46
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 Operational Controls – the Executive Directors, on a day-to-
day basis, are involved in reviewing the key operations of the
business through their interaction with Senior Management
across the Group and their discussions on operational
performance and delivery.
Financial Control – the Group has 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 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 as adopted by the EU or FRS 101, as appropriate,
with reasonable assurance and that require reported data
to be reviewed and reconciled, with appropriate monitoring
internally and by the Audit Committee.
Ongoing financial performance is monitored through regular
reporting to Executive Directors and monthly reporting to
the Board. Capital investment and all revenue expenditure is
regulated by a budgetary process and authorisation levels,
with post-investment and period end reviews as required. 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.
Across all territories, a financial controls checklist is in place for
all Finance Directors. On an annual basis they are required to
undertake a self-assessment sign-off of these controls which
is then followed up by Internal Audit reviews for compliance
validation.
Other Assurance Activities – a programme of Health and
Safety audits (delivered by our outsourced provider, NSF, for
the UK) take place throughout the year across the Group.
Customer surveys and mystery shopper visits also take place
to ensure customers receive the optimum viewer experience.
Policies and Procedures – the Group has in place a range of
governance-related policies which are regularly reviewed and
communicated to employees. These include Whistleblowing,
Gifts and Hospitality, and Health and Safety.
47
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Corporate Governance Statement continued
As I reported last year, the Committee instigated an audit
tender process in February 2016. The audit had not been
tendered since the Group listed in 2007 and, following
the completion of the integration with Cinema City, it was
considered to be an appropriate time to proceed with
the tender.
Led by the Committee, a tender document was distributed
in February 2016 to four firms. Our assessment criteria
included capability, understanding of key issues pertinent
to the business, experience, independence , cultural fit, and
an assessment of the overall audit approach and quality.
After careful consideration and discussion, the Committee
decided to recommend to the Board that KPMG should be
reappointed.
During the year, the Committee continued to review the
effectiveness of the Group’s system of risk management and
internal controls. As in 2015, the Group has been supported in
the delivery of the internal audit programme by PwC, who have
led on all aspects of the programme, including internal audit,
cinema compliance, risk management and financial controls. In
August, we were pleased to welcome Cineworld’s new Head
of Risk and Assurance. This entailed a change in approach so
that PwC’s role became that of a supporting co-source provider
with their focus directed towards risk based internal audits and
financial controls reviews. This strengthening of the in-house
team was further bolstered by the appointment of a new Head
of Tax, a Group role that will further enhance the structure of
the international finance team.
I am pleased to present this Report
on the activities of the Audit Committee
for the year.
Chair
Julie Southern
Committee
members
Dean Moore, Alicja Kornasiewicz
(Martina King left the Committee in
January 2017 but served for the whole of
the financial period)
Number of
meetings held
in 2016
The Company Secretary acts as Secretary
to the Committee.
5
Throughout the year and supported by the Risk and Assurance
team, we have reviewed our Principal Risks, including a
review of the potential impact on our business model, future
performance, solvency and liquidity. We have also reviewed
and assessed management’s proposals in relation to the Going
Concern and Viability Statements. More details of our work on
these areas may be found on page 49.
Audit Committee Report
Chair’s Introduction
Dear Shareholders
I am pleased to present this report on the activities of the
Audit Committee for 2016. The report sets out details of the
work undertaken by the Committee during the year to support
the Board in its oversight and monitoring of the robustness
and integrity of financial reporting, providing assurance on
the effectiveness of the Group’s risk management and internal
control systems, and in the appointment and supervision of
the external auditor.
A key focus for the Committee is the consideration of the
significant risks, issues and areas of judgement in relation
to the financial statements. We have worked closely with
management and the External Auditor to ensure that we
have a firm understanding of these issues, so that we can
develop clear views on how they should be addressed. Areas
of significance for 2016 include accounting for the acquisition
of five Empire cinemas, the valuation of property, plant and
equipment, and onerous lease provisions. Further details of
our formal position on these areas may be found on page
50 to 51.
Our Committee evaluation was conducted by an external
facilitator this year, in accordance with the Code, and I am
pleased to note that the evaluation confirmed that the
Committee is considered to be performing well, and providing
strong support to the Board.
Lastly, I would like to take this opportunity to thank Martina
King for her significant contribution to the Audit Committee
over the years, and to welcome Dean Moore, who became a
member of the Committee in January 2017. With his extensive
experience and strong financial background, I am sure Dean
will be a great asset.
Julie Southern
Chair of the Audit Committee
48
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 Composition
For the duration of the year, the Committee comprised
three independent Non-Executive Directors (namely Julie
Southern (Chair), Martina King, and Alicja Kornasiewicz). Julie
is a Chartered Accountant and is considered by the Board to
have recent and relevant financial experience. On 11 January
2017, Non-Executive Director Dean Moore took up a place on
the Committee, following the stepping down of Martina King.
Dean Moore is considered by the Board to have recent and
relevant financial experience, and is also considered to be
independent.
The Chairman, the Chief Executive Officer, the Deputy Chief
Executive Officer, the Chief Financial Officer, other senior
executives, other Directors, the Head of Risk and Assurance,
the Internal Auditor, and the External Auditor may be invited
to attend meetings, but are not members.
Roles and Responsibilities
The Committee has a clear set of responsibilities that are
set out in its Terms of Reference, which are available on
the Company’s website (www.cineworldplc.com/about-us/
corporate-governance). The Committee assists the Board
in discharging its responsibility with regard to financial
reporting, the control environment, the work of the External
and Internal Auditors, and the Risk and Assurance Team,
including:
• monitoring the financial reporting process;
• reviewing the integrity of the Annual and Interim Reports,
including reviewing significant financial judgements
therein;
• reviewing the Group’s risk assessment process, the output
of that assessment and the associated risk management
systems;
• received and discussed (in the absence of management,
where appropriate) reports from the External Auditor
in respect of their review of the interim results, the audit
plan for the year and the results of the annual audit.
These reports included the scope for the interim review
and annual audit, the approach to be adopted by the
External Auditor to evaluate and conclude on key areas
of the audit, their assessment of materiality, the terms of
engagement and raising awareness to the Committee
of the likely impact of future changes to regulation and
accounting standards;
• monitored the performance of PwC as the Internal
Auditor and, from August 2016, the work of the Risk
and Assurance team, reviewed the effectiveness of
the Group’s internal financial controls together with its
broader internal control and risk management framework,
to ensure consistent and appropriate financial controls
across the Group;
• monitored the implementation of the Group’s internal
audit plan for 2016, including further embedding the risk
management framework, the risk based assurance plan
for our financial control environment and our Group-wide
cinema compliance programme;
• reviewed the results of non-financial audits (including
food hygiene and fire safety) and where applicable agreed
enhancements to procedures and reviewed remedial
actions;
• made recommendations to the Board with regard to
continuing the appointment and remuneration of the
External Auditor, and as part of the external audit tender
process in the early part of 2016, oversaw the Group’s
relations with the External Auditor, determined their
independence and monitored the effectiveness of the
audit process;
• reviewing the effectiveness of the Group’s internal
• discussed the requirements for a longer-term viability
controls;
• considering the scope of both the Internal and External
Auditors’ activities, their reports and their effectiveness;
statement and the related assessment work to enable the
Board to make such a statement;
• continued to monitor the ongoing requirements regarding
• reviewing and monitoring the extent of the non-audit
audit tender; and
work undertaken by the External Auditor; and
• reviewed the Committee’s terms of reference.
• advising on the appointment of the External Auditor.
The ultimate responsibility for reviewing and approving the
Annual and Interim Reports remains with the Board.
What the Committee did in 2016
The Audit Committee met five times during the year, during
which time it:
• monitored the financial reporting process and reviewed
the interim and annual financial statements (including
the preliminary announcement) with particular reference
to accounting policies, principal risks and uncertainties,
together with significant estimates and financial reporting
judgements and the disclosures made therein;
• considered the interim results and the Annual Report and
Accounts in the context of the requirement that they are
fair, balanced and understandable, by reviewing papers
prepared by management with regard to this principle.
This included reviewing the documents to ensure that
the description of the business agrees with its own
understanding, the risks reflect the issues that concern
the Group, the discussion of performance properly
reflects the relevant period and that there is a clear link
between all the areas of disclosures;
Going Concern
In recommending the adoption of the going concern basis
for preparing the financial statements, the Audit Committee
considered the business activities, as well as the Group’s
principal risks and uncertainties, as set out on pages 22
to 27, the financial position of the Group, its cash flows,
liquidity position, and borrowing facilities, as well as the
Group’s objectives, policies and processes for managing
capital, as described on pages 28 to 32 and the financial risk
management objectives, details of financial instruments and
hedging activities, and exposures to credit risk and liquidity
risk as set out in Note 21 of the financial statements.
Viability
Part of the Audit Committee’s work in the year has been to
discuss and consider the requirement under the Code for a
longer-term viability statement, and the related assessment
work needed in order to enable the Directors to make such a
statement.
Following work overseen by the Audit Committee, in
accordance with the Code, the Directors have assessed the
viability of the Group over a period longer than one year,
taking into account the Group’s current position and the
49
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Corporate Governance Statement continued
potential impact of the Principal Risks and Uncertainties set
out on pages 22 to 27.
The Directors have determined that a three year period
constitutes an appropriate period over which to provide its
viability statement based on the Group’s strategic forecast
period which is driven by the visibility of the future film
slate, the Group’s property expansion and renovation plans,
investment in technology and relationships with the film
distributors.
The Group’s business model and strategy are central to an
understanding of its prospects, and details can be found on
pages 1 to 32. The nature of the Group’s activities is long-
term, and the business model is open-ended. The Group’s
current overall strategy has been in place for several years,
subject to the ongoing monitoring and development.
The Directors’ viability assessment has taken into
consideration the potential impacts of the principal risks
in the business model, future performance, solvency and
liquidity over the period, including principal mitigating
actions such as reducing capital expenditure and dividend
payments.
For the purpose of assessing the Group’s viability, the
Directors identified that, of the principal risks detailed on
pages 22 to 27, the following are the most important to the
assessment of the viability of the Group:
• Availability and performance of film content;
• Viewer experience and competition; and
• Expansion and growth of our cinema estate.
reducing capital expenditure, reducing dividend payments
and reducing variable costs as well as the Group’s ability to
change its capital structure if necessary through refinancing
existing debt facilities and/or raising equity finance.
The Directors’ Viability Statement is set out on page 38.
Significant Issues Considered in Relation to the
Financial Statements
During the year the Committee, management and the
External Auditor considered and concluded on what the
significant risks and issues were in relation to the financial
statements and how these would be addressed.
(i) Accounting for the Acquisition of Five Empire Cinemas
On 11 August 2016, the Group completed the acquisition of five
Empire cinemas from Cinema Holdings Limited. Full details
of the acquisition are disclosed in Note 15. The provisional
goodwill determined in respect of the acquisition is £60.6m.
Given the complex and judgemental nature of the valuation
exercise, and relating assumptions, the Committee believe
the acquisition accounting should be identified as a
significant accounting issue for the 2016 financial statements.
Based on the Committee’s enquiries of management and the
review of work performed by external valuation experts, the
Committee satisfied themselves that:
• the fair value of the acquired total identifiable net assets
(with particular reference to intangible assets, property,
plant and equipment and acquired leases) was consistent
with the advice received from external experts and the
terms of the sale and purchase agreement;
Based on the principal risks identified above, scenario-based
assessments were performed for the Group. The scenarios
applied included:
• the fair value exercise was thorough and included all
categories of assets and liabilities (including all lease
contracts);
• Reducing both admissions, average ticket price, and retail
spend as a result of lack of film content, and/or increased
competition through the emergence of new technology
or alternative formats to watch films;
• Reducing margins through increased film costs, or
increased labour costs;
• No further expansion of the cinema estate; and
• A combination of the above.
In performing the scenario assessments, with a decrease
in revenues and increase in costs at far greater levels than
previously experienced by the Group and no further expansion,
the Group would still be able to continue to meet its day-to-day
liabilities as they fall due over the three year period.
Whilst this review does not consider all of the risks that the
Group may face, the Directors consider that the scenario-
based assessment prepared of the Group’s prospects is
reasonable in the circumstances of the inherent uncertainty
involved.
The Directors believe the risk management and internal
control systems in place allow them to monitor the key
variables that have the ability to impact the liquidity and
solvency of the Group and are confident that management
are able to sufficiently mitigate any situations should
they arise. Mitigating actions that could be taken include
• management have performed detailed Balance Sheet
reviews and are satisfied that classification of balances is
correct and that recognition is appropriate and in line with
the Group’s accounting policies; and
• the subjectivity of the valuation process, including the
extent of fair value adjustments, was appropriately
disclosed in the annual financial statements.
(ii) Valuation of Property, Plant and Equipment (“PPE”)
As detailed in Note 9 to the financial statements, there
is a significant inherent risk that elements of the Group’s
considerable PPE balances may prove to be irrecoverable,
due to fluctuations in the underlying performance of cinemas
or one-off events. Given the number of factors involved
in predicting the performance of cinema sites operated
by the Group, in multiple territories, this gives rise to an
element of judgement being applied to the potential level
of impairments to be recognised on a cash generating units
(CGU) basis, predominantly at cinema site level.
At each Balance Sheet date, management prepares
an assessment which estimates the value in use of the
cash generating units to which the tangible fixed assets
are allocated. Where individual sites cash flows are not
considered independent from one another, mainly due to
strategic or managerial decisions being made across more
than one site, they may be combined into a single cash
generating unit.
50
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016
The resulting calculation is sensitive to the assumptions in
respect of future cash flows and the discount rate applied.
The main assumptions over growth rates, the impact of
one-off events, expected cost increases and discount
rates are updated to reflect management’s best estimate.
When considering the appropriateness of the discount rate,
management assess the territory specific discount rate, and
ensure that they are updated for current market information
and the Group’s current leverage.
At the year end management prepared their valuation
models for the Committee’s consideration, together with
their proposed site impairments and drew the Committee’s
attention to any specific judgements taken within the
models. Management confirmed to the Committee that they
have applied a consistent Group-wide methodology, in the
preparation of the valuation models. The Committee satisfied
itself that the approach was appropriate, the assumptions
reasonable and that the impairments proposed were
complete and accurate. The Committee also satisfied itself
through enquiry of management and review of the Board
papers that all significant events which may have impacted
on the valuation of PPE had been appropriately captured in
management’s assumptions and reflected in the valuation
models and that appropriate disclosures, including in relation
to sensitivities, had been included in the financial statements.
(iii) Onerous Lease Provisions
Provisions are made for onerous leases in the Group 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 the site. As detailed in Note 1
to the financial statements, the approach to estimating the
onerous lease provision has remained consistent with the
prior year.
The number of onerous lease sites within the Group has
continued to decrease each year and the balance has also
reduced to £2.4m as at 31 December 2016. Consideration
was given to whether this remains a significant risk by the
Committee. As the balance remains material, and the models
used by management are sensitive to the inputs including
changes in performance of individual sites, it was concluded
this should remain as a significant accounting issue for the
current year.
Management evaluate the appropriateness of the provision
on at least an annual basis. The exercise involves reviewing
forecast future cash flows on a site-by-site basis and
ensuring that the provision in place remains at an appropriate
level for any sites identified as having an onerous lease. As
well as considering site performance, management also
consider the appropriateness of the discount rates applied,
the territory specific discount rate, and ensure that they are
updated for current market information and the Group’s
current leverage.
Management confirmed to the Audit Committee that the
methodology had been applied consistently year-on-year.
Management confirmed that they have monitored the
adequacy of the provision historically and concluded that
there have been no material unprovided costs or unrequired
provision identified.
In the prior year, Virtual Print Fee (“VPF”) recognition was
included as a significant issue for the UK and Ireland due
to the complexity of the contract, however as the revenue
ceased during the year and as the final amount received
in the year is not material to the 2016 financial statements
the Committee determined this is no longer considered a
significant issue for the Group.
External Audit
The Committee reviews the appointment of the External
Auditor each year before the cycle of audit commences and
in deciding whether to renew the appointment takes note
of the quality of the service received, the proposed fees and
the Auditor’s independence. Management and all members
of the Committee are consulted during the process. Further
details of these processes are set out below.
Effectiveness
During the year, the Committee evaluated the performance
and objectivity of KPMG and reviewed their effectiveness
as External Auditor. The effectiveness of the 2015 audit was
assessed by reference to the following:
• the effectiveness of the lead audit engagement partner,
including the support provided to the Audit Committee;
• the planning and scope of the audit including
identification of areas of audit risk and communication of
any changes to the plan, and changes in perceived audit
risks;
• the quality of communication with the Audit Committee,
including the regular reports on accounting matters,
governance and control;
• the competence with which the External Auditor handled
key accounting and audit judgements and communication
of those to management and the Committee;
• their reputation and standing, including their
independence and objectivity and their internal quality
procedures; and
• the quality of the formal report to shareholders.
Further, at the conclusion of each year’s audit, the Committee
discusses the performance of the External Auditor with the
Executive Directors and relevant senior finance managers
considering areas such as the quality of audit team, business
understanding, audit approach and management. Where
appropriate, actions are agreed against points raised
and subsequently monitored for progress. There were no
significant findings from the evaluation this year.
After taking into account all of the above factors, the
Committee concluded that the External Auditor was effective.
In addition, the Committee is satisfied that it has sufficient
oversight of the External Auditor and its independence and
objectivity is not compromised due to the safeguards in place.
Independence, Appointment and Tender
The Audit Committee instigated a tender process in
February 2016. The audit had not been tendered since the
Group listed in 2007 and, following the completion of the
integration with Cinema City, it was considered to be an
appropriate time to proceed with the tender.
Led by the Audit Committee, a tender document was
distributed in February 2016 to four firms, being Deloitte,
Ernst & Young, KPMG and BDO, in respect of the 2016 audit.
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GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Corporate Governance Statement continued
Assessment criteria included capability, understanding of key
issues pertinent to the business, experience, independence,
cultural fit of the proposed teams (including the proposed
teams in key locations), and an assessment of the overall
audit approach and quality. After careful consideration and
discussion, the Committee decided to recommend to the
Board that KPMG be reappointed.
In addition, following the conclusion of the 2015 audit, the
Company’s lead audit partner, Mark Summerfield, was due to
rotate off the audit of the Group and be replaced as Senior
Statutory Auditor by Hugh Green. The rotation of the Senior
Statutory Auditor occurred as planned and the Committee
considers Hugh Green to have the requisite substantial,
relevant experience.
The Company will continue to comply with the relevant
tendering and auditor rotation requirements applicable
under UK and EU regulations, which require the next
external audit tender to occur by 2026. In addition, the
External Auditor will be required to rotate the audit partner
responsible for the Group audit every five years and, as
a result, the current lead audit partner will be required to
change in 2021. The Committee continues to review the
auditor appointment and the need to tender the audit.
The External Auditor is also required to periodically assess
whether, in their professional opinion, they are independent
and confirm this to the Committee. KPMG has provided
this confirmation. In addition, the Company considers it has
complied with the Competition and Markets Authority’s
Statutory Audit Services Order.
Non-Audit Services
The Committee considers the independence of the External
Auditor on an ongoing basis and has established policies to
consider the appropriateness or otherwise of appointing the
External Auditor to perform non-audit services. In particular,
under its terms of reference, all non-audit fee work needs
to be approved by the Committee if the value of such work
is likely to be greater than £30,000. KPMG have provided
certain non-audit services to the Group, principally in respect
of advice on tax compliance and advisory services (£0.2m)
and pensions advisory services (£0.2m). 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. More information on the Non-Audit Services
may be found in Note 4 of the financial statements.
52
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016
Relations with Shareholders
The Directors value contact with the Company’s institutional
and private investors. An Annual Report is sent to all new
shareholders and is otherwise made available to shareholders
via the Company’s website unless they have specifically
requested that a copy is sent to them. Presentations are given
to shareholders and analysts following the announcement
of the interim results and the preliminary announcement of
the full year results. Trading updates are typically issued in
advance of the full year end results in March and the interim
results in August.
Separate announcements of all material events are made as
necessary. In addition to the Chief Executive Officer, Deputy
Chief Executive Officer, and the Chief Financial Officer, who
have regular contact with investors over such matters, the
Chairman and the Senior Independent Director are available to
meet with shareholders as, and when, required. Additionally,
the Chief Executive Officer, Deputy 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.
The Board uses the AGM to communicate with private and
institutional investors and welcomes their participation.
The Chairman aims to ensure that the Chairs 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.
By order of the Board
Anthony Bloom
Chairman
9 March 2017
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 taking into account cost,
and the likelihood and magnitude of the risks involved.
Remuneration Committee
Composition
For the duration of the year, the Company’s Remuneration
Committee comprised three Non-Executive Directors (Martina
King (Chair), Rick Senat, and Julie Southern). The Committee
met four times during the year and, in addition, a number of
ad hoc times to deal with specific issues. On 11 January 2017,
Martina King stepped down from her role as a Non-Executive
Director and as Chair of the Remuneration Committee. Dean
Moore was appointed in her place and is the new Chair of the
Committee.
Roles and Responsibilities
The activities of the Remuneration Committee are covered in
the Directors’ Remuneration Report on pages 54 to 72, and
are incorporated into this Corporate Governance Statement
by reference.
The Remuneration Committee assists the Board in
determining its responsibilities in relation to remuneration,
including making recommendations to the Board on the
Group’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 Willis Towers
Watson as an external adviser in November 2008 and again
took advice from them during the year. Willis Towers Watson
have no other connection with the Group except as the
actuary to the pension schemes 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 of the Board 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 54 to 72.
The terms of reference of the Committee are available on
the Company’s website (www.cineworldplc.com/about-us/
corporate-governance).
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GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Directors’ Remuneration Report
Activities over the Year
The main focus of the year has been the review of the
Company’s Remuneration Policy, and the development of a
new long-term incentive (‘LTI’) plan, both of which we will be
putting forward for shareholder approval at our AGM this year.
Over the past few months, led by my predecessor Martina
King, the Remuneration Committee has carried out a detailed
review of our executive remuneration arrangements, taking
into account the experience of operating our Remuneration
Policy over the last three years, developing market practice,
the feedback we have received from shareholders, and in light
of our ongoing business strategy.
Overall, the revised Policy is similar to the version approved by
shareholders in 2014. This reflects the Committee’s view that
the current straightforward remuneration arrangements have
worked well, and continue to align with our business priorities.
In addition, our Performance Share Plan (the ‘2007 PSP’) is
coming to the end of its ten-year lifespan. The Committee has
therefore decided to introduce a new plan in the form of an
‘omnibus plan’.
2017 Remuneration Policy
When considering the Remuneration Policy, the Committee
has taken account of the fact that Cineworld is relatively
unusual in that our CEO and Deputy CEO have an indirect
interest in just under 30% of the Company’s issued capital
through their interest in Global City Holdings N.V.(1). This means
that we believe that some aspects of executive remuneration
arrangements which are typically used to align the interests
of executives with shareholders, such as bonus deferral and
shareholding guidelines, have less direct relevance for them.
We do recognise that our newly-appointed CFO should
also be aligned with shareholders, and he will be required to
retain some of the shares from vested LTI awards until he has
reached the required shareholding level outlined below.
Changes to our Policy
Having carefully reviewed our bonus and long-term incentive
arrangements, the Committee has decided to make no
major changes to their structure / performance metrics /
opportunity levels. Note, however:
• Future LTI awards will be made under the new ‘omnibus’
plan described in the following section – but no change in
terms of award vehicle / individual limits / performance
conditions / clawback provisions will be made, except that
the level of vesting for threshold performance will reduce
from 30% to 25% of an award.
• There will be an increased shareholding requirement of
150% of salary, with expectation of retention of 50% of
vested LTI awards (net of tax) until the level is met.
I am pleased to present the Directors’
Remuneration Report. The focus of the
Committee this year has been on
reviewing our Policy to ensure it continues
to support our business strategy.
Annual Statement
Dear Shareholders
As the new Chairman of Cineworld’s Remuneration Committee
(the “Committee”), I am pleased to present our Remuneration
Report for 2016, for which we will be seeking your approval at
our Annual General Meeting (“AGM”) in May 2017.
I would like to also take this opportunity to thank outgoing
Chair, Martina King, for her significant contribution to the
Remuneration Committee during 2016.
2016 Performance and Remuneration
The Group delivered a successful year of trading in 2016 with
total revenue increasing 13% to £797.8m (2015: £705.8m),
and EBITDA up 13.2% at £175.8m (2015: £155.3m). This
performance enabled an 8.6% increase in the full year dividend
per share. The decisions in relation to executive remuneration
outcomes made by the Committee were taken in the context
of this performance.
Annual bonuses for the Executive Directors, which are based
on a matrix of Group EBITDA performance against budget,
and the achievement of stretching individual objectives, paid
out at the level of 78.6% of base salary for each of the CEO
and Deputy CEO (equivalent to the same percentages of
maximum opportunity). As EPS performance targets for the
PSP were reached in full over the three-year period 2014–2016,
there was 100% vesting of the awards made in 2014.
54
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 New Long Term Incentive Plan
We will be putting a separate AGM resolution to shareholders
to approve the rules of a new LTI plan to replace the
current 2007 PSP which expires on 22 April 2017. The plan
is proposed to be in the form of an ‘omnibus’ plan in order
to give the Company flexibility to make different kinds of
award (e.g. conditional shares, phantom shares and cash
awards) in order to address legislation / tax issues which
have been encountered in some jurisdictions in which the
Group operates. Note that awards to Executive Directors
will continue to be determined by the shareholder-approved
Remuneration Policy and we are making no substantial
changes in our approach to LTI awards at this level.
Summary
The Committee has carefully considered our remuneration
arrangements and we believe that they currently work well,
so the changes we are proposing are relatively minor. We
believe that the new Remuneration Policy and the new long-
term incentive plan are in the best interests of the business
and will support the continued successful delivery of our
strategy over the coming years. We hope you will support
the relevant resolutions at our 2017 AGM.
The Remuneration Report
Regarding the full report on our activities below, you will
see that there are two other sections. The first part, the
Directors’ Remuneration Policy on pages 55 to 63, sets
out our proposed Remuneration Policy, which is being
put to the vote at this year’s AGM. The second part, the
Annual Report on Remuneration, describes how the
Committee implemented the 2014 Policy with regard to the
remuneration of Directors in 2016.
The Committee has always aimed to be clear and transparent
in matters of remuneration and we hope that this report
continues this approach and is easy to understand and
informative.
Dean Moore
Chairman of the Remuneration Committee
(1) Shares are held by Global City Holdings N.V.(GCH). Shares in GCH are
held in trust for the benefit of the children of Moshe Greidinger and Israel
Greidinger.
Remuneration Policy
Policy Effective Date
This section describes the Committee’s Policy on the
remuneration of Directors. The Policy will be put to
shareholders for approval at the AGM in May 2017 and will
come into effect from the date of the AGM. The Committee
intends that this Policy will remain in effect for a period of
three years unless there are changes requiring shareholder
approval. Following approval at the AGM, remuneration
payments and payment for loss of office to Directors can only
be made if they are consistent with this Policy or otherwise
approved by an ordinary resolution of the shareholders.
Current Policy on Remuneration
The objective of the Group’s Remuneration Policy is that
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.
This is balanced with the need to mitigate risk and accordingly
incentives are structured to ensure that no Director is
encouraged to take inappropriate risks because of the level of
potential variable rewards.
To determine the elements and level of remuneration
appropriate for each Executive Director, the Committee
considers, when appropriate, benchmark remuneration data
for selected comparable companies and seeks to ensure
that an appropriately significant proportion of potential pay
is performance-related and that total pay opportunity is
consistent with appropriate superior levels of pay for superior
performance.
The policy of the Committee is to set performance conditions
for annual bonuses and long-term incentives which are
appropriately stretching but fair given the environment in
which the Group operates, taking into account internal and
external expectations.
While the Board’s normal practice is to operate within
the above parameters, it will take account of individual
circumstances and tailor remuneration packages accordingly.
In cases of material variance, it would seek to take account of
major shareholders’ views.
Executive Directors’ remuneration currently comprises an
annual salary, a performance-related bonus, a share based
long-term incentive scheme, pension contributions and other
benefits as explained below.
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GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Directors’ Remuneration Report continued
The table summarises the Policy for each element of pay:
Element and Link to Strategy Maximum
Operation
Basic Salary
To provide a core level of
remuneration to enable the
Company to attract and retain
skilled, high-calibre executives
to deliver its strategy.
Executive Directors’ salary levels are agreed on joining and
thereafter reviewed annually, generally on 1 July each year.
The Committee considers both the nature and the status
of the Company’s operations and the responsibilities, skills,
experience and performance of each Executive Director.
The Committee compares the Group’s remuneration
packages for its Executive Directors and employees with
those of Directors and employees of similar seniority
in companies whose activities are comparable with the
Group. The Committee also takes into account the progress
made by the Group, contractual considerations and salary
increases across the rest of the Group.
Salaries may be adjusted and
any increase will ordinarily be
(in percentage terms) in line
with those across the Group,
in aggregate, allowing for
location.
Percentage increases beyond
those granted to the wider
workforce may be awarded
in certain circumstances such
as where there is a change
in responsibility, progression
in the role, experience or a
significant increase in the
scale of the role and/or size
value and/or complexity of
the Group.
Pension
To provide market-
competitive retirement
benefits.
Monthly employer
contribution up to 20% of
basic salary or in the form of a
cash pension allowance.
All employees, including Executive Directors, are invited
to participate in a Group Personal Pension Plan which is a
money purchase plan. Bonuses are not pensionable.
Executive Directors may choose to opt out of the Group
scheme and instead receive a cash pension allowance
equivalent to employer pension contribution (i.e. currently
up to 20% of base salary).
The Company’s pension contribution may be conditional
on the Executive Director contributing a percentage of
their base salary to the pension scheme in line with general
scheme requirements. Executives may make pension
contributions under “salary sacrifice” arrangements.
Savings as a result of such an arrangement may be shared
with the Executive Director in the form of an additional
pension contribution.
Other Benefits
To provide market-
competitive benefits and
support the health and safety
of individuals.
The cost to the Group of
providing such benefits will
vary from year to year in
accordance with the cost of
insuring such benefits.
Benefits in kind for Executive Directors currently include
the provision of a company car or car allowance, private
mileage, life insurance, permanent health insurance, private
medical cover and, for the Chief Executive Officer and
Deputy Chief Executive Officer, a disturbance allowance.
Benefits are tailored to the individual circumstances of
Directors to ensure that overall packages are attractive and
additional benefits may be introduced where appropriate.
A limited flexible benefits scheme operates for all
employees (including Directors) and the intention is to
expand it over a period of time.
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GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 Element and Link to Strategy Maximum
Operation
Annual Bonus
To incentivise the annual
delivery of financial and
operational targets.
Maximum opportunity for
Executive Directors of 100%
of salary.
The level of bonus is based primarily on overall Group
performance in meeting its primary financial objectives
in EBITDA for the financial period. The level of bonus is
determined by a matrix of budgeted EBITDA and personal
performance levels. The weighting of measures is circa 80%
budgeted EBITDA and 20% personal performance.
The Committee seeks to ensure that the budget is
challenging and so there is a clear link between the
short-term Group performance and payout under the
arrangements.
• No bonus is payable if a minimum threshold of 90%
of budgeted EBITDA is not achieved. At this level
(assuming “good” performance against individual
objectives), a bonus of 30% of maximum opportunity
would be payable.
• The maximum bonus level is only payable if both 110% of
budgeted EBITDA and exceptional performance against
individual objectives is achieved.
The personal element is determined by the achievement of
individual strategic objectives, which vary year from year to
ensure that objectives are aligned with the business plan.
The choice of these measures reflects the Committee’s
belief that any incentive compensation should be tied both
to the overall performance of the Group and to those areas
of the business that the relevant individual can directly
influence.
The performance measures and targets are reviewed
annually to ensure alignment to strategy.
Bonuses are paid in cash following the approval of the
Group Annual Report.
Where a Director leaves and is considered a good leaver,
he/she will be paid on the usual payment date a proportion
of any bonus entitlement, which would have otherwise
accrued, reflecting that part of the bonus period which was
actually worked.
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Directors’ Remuneration Report continued
Element and Link to Strategy Maximum
Operation
Performance Share Awards
To encourage sustainable
profitability over a period of
time aligned to the overall
objective of achieving
sustainable growth.
The maximum award to an
individual in any year under
the rules of the subsisting
share schemes is 200% of
base salary.
However, the Remuneration
Committee does not currently
intend that awards to
Executive Directors should
exceed 150% of their base
salary.
If it is considering changing
this approach, it will consult
with key shareholders before
doing so.
Annual awards of conditional shares or nil cost options are
made to Executive Directors and members of the Senior
Management Team at the discretion of the Committee.
From the AGM in 2017, awards will be made under The
Cineworld Group plc 2017 Long Term Incentive Plan, subject
to shareholder approval of the plan. Prior to this, awards
were made under The Cineworld Group Performance Share
Plan (‘PSP’).
Awards may vest after three years, subject to continuing
employment and the achievement of stretching three-year
EPS growth performance conditions which are aligned with
the Group’s strategy of delivering long-term growth.
The Committee will review and calibrate the EPS growth
targets on an annual basis for each award to ensure they
are sufficiently stretching in light of both internal and
external performance expectations. Threshold performance
is generally intended to align to the performance of the
relevant market and/or of competitors. If the stretch
performance level is achieved, we would expect to have
significantly outperformed the relevant market and/or our
competitors.
At the threshold performance level, 25% of an award will
vest. At the stretch level of performance, 100% of an award
will vest. Between these levels, vesting will be determined
on a straight-line basis.
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.
At the discretion of the Committee, each participant may
have a proportional part of their Performance Share award
replaced by an HMRC approved share option granted
under the CSOP schedule to The Cineworld Group plc
2017 Long Term Incentive Plan (“CSOP Plan”), up to
the maximum value of options permitted by legislation
(currently £30,000). Such awards are subject to identical
performance vesting conditions as the Performance Shares
they replace.
The conditions applicable to awards 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.
Awards may also be adjusted to reflect corporate events,
such as rights issues, to maintain a holder’s position, but not
so as to enhance it.
It is the Committee’s intention to settle awards in shares,
but the plan rules allow for flexibility to settle in cash if
required.
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GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 Element and Link to Strategy Maximum
Operation
The Cineworld Group
Sharesave Scheme
To enable Group employees
to become Cineworld
shareholders, encouraging
alignment and rewarding for
Group performance.
The maximum saving level
is aligned with that for all
employees and the limit under
legislation (currently £500
per month).
Executive Directors are eligible to participate in the
Sharesave Scheme, which is an HM Revenue and Customs-
approved scheme open to all employees of nominated
Group companies.
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.
Awards may also be adjusted to reflect corporate events,
such as rights issues, to maintain a holder’s position, but not
so as to enhance it.
This Policy also provides the ability for Executive Directors
to participate in any other all-employee plan which may be
introduced in future up to the limits which apply to other
employees.
Each Executive Director is expected to build up, over a
period of time, a holding in shares equal to 150% of their
base salary.
In order to achieve this level of shareholding, Executive
Directors are expected to retain 50% of any shares they
acquire under the PSP or on the exercise of options,
after allowing for the sale of shares to pay tax and other
deductions, until such time as they have built up such
a holding. For the purposes of these guidelines, only
beneficially owned shares will generally count towards the
holding – however, the Remuneration Committee retains
discretion to determine whether the requirement has been
met in specific circumstances.
In these circumstances, the Committee may make reductions
(up to the value of the Excessive Award) to other Awards
held by the Award Holder in question which would otherwise
vest under the LTIP (including cash awards) and/or require
the Award holder in question to pay an amount equal to the
value of the Excessive Award which has not otherwise been
recovered (after taking into account any income tax and
social security paid by the Award holder in relation to the
Excessive Award).
Satisfaction of Share Options and Share Awards
Awards under the Cineworld Group PLC 2017 Long Term
Incentive Plan (subject to shareholder approval of the plan),
the PSP, the Sharesave Scheme and the CSOP adopted
by the Company in 2010 (“2010 CSOP”) can be satisfied
using new issue shares, shares held in treasury 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.
59
Share Ownership Guidelines
To provide alignment
between Executive Directors
and shareholders.
N/A
Clawback and Malus
The Remuneration Committee reserves the discretion to
apply ‘malus’ by reducing or withholding annual bonus
payments from the formulaic outcome based on EBITDA
performance (for example, in the event of misconduct or
misstatement of financial results). Following payment, the
Committee will retain the discretion to ‘claw back’ bonuses in
the case of misconduct or misstatement of financial results.
The rules of the Cineworld Group PLC 2017 Long Term
Incentive Plan include ‘claw-back’ provisions that will apply
to Awards granted to Executive Directors and may, if the
Committee determines, apply to any other Award other than
an option granted pursuant to the CSOP Plan. The provisions
apply where it is discovered (within two years of the vesting
of an Award) that there has been a material misstatement in
the financial results of the Company and/or an act of gross
misconduct on the part of the Award Holder (that takes
place before the vesting date of the Award but only comes to
light after the Award vests) and such misstatement or gross
misconduct has resulted in an Award vesting to a greater
extent than it otherwise should have done (“Excessive
Award”).
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Directors’ Remuneration Report continued
If new issue shares are used, the following limits will be followed:
•
•
In any ten-year period, the number of shares which may be issued under the Cineworld Group PLC 2017 Long-Term
Incentive Plan, the PSP and under any other executive share or option scheme established by the Company, and operated
on a discretionary basis, may not exceed 5% of the issued ordinary share capital of the Company from time to time.
In any ten-year period, the number of shares which may be issued under any employees’ share or option scheme
established by the Company may not exceed 10% of the issued ordinary share capital of the Company from time to time.
Resulting Total Pay Levels Under Different Scenarios
The chart below illustrates how the potential future compensation of the Executive Directors may vary at different levels of
performance and the percentage each element may form together with the possible total value.
For the purpose of this chart, the following assumptions have been made:
• The base salary levels are those in effect as at 1 January 2017 (or on appointment for the CFO). Bonus opportunity and
Performance Share award levels are as set out in the Policy Table above.
• Fixed elements comprise base salary, pension and other benefits.
• Benefits levels are assumed to be the same as in 2016 for the CEO and Deputy CEO, and estimated for the CFO.
• For target performance, assumptions of bonus payout of 67% of maximum and threshold vesting (25%) for Performance
Shares have been made.
• No share price increase has been assumed.
£2.5m
£2.0m
£1.5m
£1.0m
£0.5m
£0m
£2,169,923
39%
£1,347,788
16%
28%
26%
£760,548
100%
56%
35%
£1,499,360
38%
£938,813
15%
27%
57%
26%
36%
£538,422
100%
£349,157
£497,057
9%
21%
100%
70%
£679,757
26%
23%
51%
Minimum
Target
Maximum
Minimum
Target
Maximum
Minimum
Target
Maximum
CEO
Deputy CEO
CFO
Fixed Elements
Short-Term Variable Element
Long-Term Variable Element
Recruitment Remuneration Policy
New Executive Directors will generally be appointed on remuneration packages with the same structure and elements as
described in the Policy Table above. On appointment, base salary level will be set taking into account a range of factors
including market levels, experience, internal relativities and cost. Annual bonus opportunity will be no greater than 100% of
salary and the maximum performance share award will be 150% of salary.
For external appointments, although we have no plans to offer additional benefits, cash and/or share-based elements on
recruitment, the Committee reserves the right to do so when it considers this to be in the best interests of the Company and
shareholders. Such payments will take account of remuneration relinquished when leaving the former employer and, to the
extent possible, would reflect the nature, time horizons and performance requirements attaching to that remuneration.
If it is necessary in the circumstances, the Committee reserves the right to offer a longer initial notice period than one year. In
such a circumstance, this would reduce to a notice period of at most 12 months.
Shareholders will be informed of any Director appointment and the individual’s remuneration arrangements as soon as
practicable following the appointment via an announcement to the regulatory news services and on the Group’s website.
For an internal appointment, any variable pay element awarded in respect of the prior role may be allowed to pay out
according to its terms, adjusted as relevant to take into account the appointment. In addition, any other ongoing remuneration
obligations existing prior to appointment may continue.
Service 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.
60
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 In addition, service contracts are an important element
in maintaining protection for the Group’s business and its
commercially sensitive information.
A summary of the key terms of the Executive Directors’
service contracts is set out below:
Moshe Greidinger
Israel Greidinger
Nisan Cohen
Effective Date of Contract 27 February 2014
27 February 2014
11 January 2017
Notice Period(1)
12 months
6 months
6 months
Remuneration
Termination
• Base salary
• Pension contribution
• Company car or car
allowance
• Base salary
• Pension contribution
• Company car or car
allowance
• Base salary
• Pension contribution
• Company car or car
allowance
• Entitlement to participate in
• Entitlement to participate in
• Entitlement to participate in
annual bonus scheme
• Disturbance allowance
• Life assurance cover
• Medical insurance
•
Permanent health insurance
annual bonus scheme
• Disturbance allowance
• Life assurance cover
• Medical insurance
• Permanent health insurance
annual bonus scheme
• Life assurance cover
• Medical insurance
• Permanent health insurance
Company has right to
terminate on payment on pre-
agreed basis
Company has right to
terminate on payment on pre-
agreed basis
Company has right to
terminate on payment on pre-
agreed basis
Non-Competition
During employment and for
12 months thereafter
During employment and for
6 months thereafter
During employment and for
6 months thereafter
(1) The Group’s policy is to have notice periods for Executive Directors which are between 6 and 12 months.
The Executive Directors are, under the terms of their service
contracts, entitled to an annual review of their base salary
each year.
Loss of Office Policy
The Company’s policy is to endeavour to minimise any
payment on early termination by insisting on mitigation of
any loss where possible. To allow the Company to terminate
an Executive Director’s employment contract legally so it
would not face a claim for wrongful termination (although a
claim for unfair dismissal could still exist), its policy is to pre-
agree arrangements which would apply on termination. Only
the Company has the right to trigger such arrangements and
it has complete discretion as to whether it does.
Under the terms of their contracts, the Company may, in lieu
of giving notice, terminate an Executive Director’s service
contract by making a payment equivalent to 100% of base
salary and contractual benefits for the notice period. In this
event, the Executive Director would not be entitled to any
bonus for the unworked portion of 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.
Where an Executive Director works their notice, pension,
benefits and bonus will continue to accrue as normal up until
the date of the termination. Any bonus entitlement will be
paid as normal on a pro-rated basis.
Leaving arrangements under the Share and Share Option
Schemes vary:
A. Under the Cineworld Group PLC 2017 Long Term
Incentive Plan:
An award will normally lapse upon a participant leaving the
employment of the Group unless the participant is a ‘good
leaver’ (including death, injury, ill-health or disability and
redundancy) or the Remuneration Committee in its absolute
discretion otherwise determines. Any such discretion would
only be applied by the Committee where it considers that
continued participation is justified by reference to past
performance to the date of leaving or because of the
prevailing circumstances. In such cases, the award would
generally become exercisable on the original vesting date
on a reduced basis taking into account only that part of
the three-year performance period which has elapsed
and subject to the satisfaction of performance conditions
unless the Remuneration Committee determines other
arrangements are justified. In the case of death, options will
remain exercisable for a period of 12 months following the
date of death. Options that have already vested before an
Award holder ceases to be employed by the Company or by
one of its subsidiaries but which has not yet been exercised
at the time that the Award holder ceases to be so employed
(for whatever reason), will remain capable of exercise in
accordance with the rules of the LTIP.
In the event of a change of control, scheme of arrangement
or winding-up of the Company all awards will vest to the
extent that any performance targets have, in the opinion of
the Remuneration Committee, been satisfied at that time,
on a reduced basis taking into account only that part of the
three-year performance period which has elapsed unless
the Remuneration Committee in its absolute discretion
otherwise determines. Alternatively, with the agreement
of the acquiring company, the participants may exchange
their awards for equivalent options to acquire shares in the
acquiring company or its parent company.
61
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Directors’ Remuneration Report continued
B. Under the PSP:
An award will normally lapse upon a participant leaving the
employment of the Group due to resignation or ‘for cause’.
If a participant leaves employment for any other reason, the
award would generally become exercisable on the original
vesting date on a reduced basis taking into account only that
part of the three-year performance period which has elapsed
and subject to the satisfaction of performance conditions
unless the Remuneration Committee determines other
arrangements are justified.
In the event of a change of control, scheme of arrangement
or winding-up of the Company all awards will vest to the
extent that any performance targets have, in the opinion of
the Remuneration Committee, been satisfied at that time,
on a reduced basis taking into account only that part of the
three-year performance period which has elapsed unless the
Remuneration Committee in its absolute discretion otherwise
determines. An award, to the extent it becomes exercisable,
may be exercised during the period of one month after which,
to the extent unexercised, the award will lapse. Alternatively,
with the agreement of the acquiring company, the participants
may exchange their awards for equivalent options to acquire
shares in the acquiring company or its parent company.
C. Under the CSOP:
An option will normally lapse upon a participant leaving the
employment of the Group. However, if a participant leaves
the Group by reason of death, injury, ill health, disability,
redundancy, retirement or any other reason as determined
by the Remuneration Committee or if the company or
business for which he works ceases to be part of the Group,
then unless the Remuneration Committee in its absolute
discretion otherwise determines, his option will become
exercisable on the original vesting date on a reduced
basis taking into account only that part of the three-year
performance period which has elapsed. An option, to the
extent it becomes exercisable, may be exercised during the
period of six months after which, to the extent unexercised,
the option shall lapse automatically.
In the event of a change of control, scheme of arrangement
or winding-up of the Company all options will vest to the
extent that any performance targets have, in the opinion of
the Remuneration Committee, been satisfied at that time,
on a reduced basis taking into account only that part of the
three-year performance period which has elapsed unless the
Remuneration Committee in its absolute discretion otherwise
determines. Such options become exercisable for a limited
period of time. Alternatively, in the case of a takeover, with
the agreement of the acquiring company, the participants
may exchange their options for equivalent options to acquire
shares in the acquiring company or its parent company.
In the event of a change of control, scheme of arrangement
or winding-up of the Company all options will vest to the
extent that any performance targets have, in the opinion of
the Remuneration Committee, been satisfied at that time,
on a reduced basis taking into account only that part of the
three-year performance period which has elapsed unless the
Remuneration Committee in its absolute discretion otherwise
determines. Such options become exercisable for a limited
period of time. Alternatively, in the case of a takeover, with
the agreement of the acquiring company, the participants
may exchange their options for equivalent options to acquire
shares in the acquiring company or its parent company.
D. Under the Sharesave Scheme:
An option granted may normally not be exercised until the
option holder has completed their savings contract and then
not more than six months thereafter. However, if a participant
leaves the Group by reason of death, injury, ill health,
disability, redundancy, retirement (on reaching 60 years or
any other contractual retirement age), or if the company or
business for which he works ceases to be part of the Group,
the option will become exercisable. An option, to the extent
it becomes exercisable, may be exercised during the period
of six months (12 months in the case of death) after which, to
the extent unexercised, the option will lapse automatically.
In the event of a change of control, scheme of arrangement
and/or a winding-up of the Company, options may be
exercised for a limited period of time. Alternatively, in the
case of a takeover, with the agreement of the acquiring
company, the participants may exchange their options
for equivalent options to acquire shares in the acquiring
company or its parent company.
Date of appointment
Notice period
7 October 2004
26 May 2015
11 January 2017
27 February 2014
27 February 2014
2 July 2010
26 May 2015
1 month
1 month
1 month
1 month
1 month
1 month
1 month
Director
Anthony Bloom (Chairman)
Alicja Kornasiewicz
Dean Moore
Scott Rosenblum
Arni Samuelsson
Rick Senat
Julie Southern
62
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 Non-Executive Directors
Letters of Appointment
The dates of appointment of the Non-Executive Directors
and their notice periods are as follows:
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.
It is the Board’s policy that the appointment of each Non-
Executive Director is terminable on a short notice 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 when it aims to
ensure no notice is necessary.
The Company’s policy is that Non-Executive Directors
receive a fixed fee for their services as members of the
Board and its Committees. Non-Executive Directors
do not participate in the Company’s share incentives or
otherwise receive performance-related pay but may receive
reimbursement for travel and incidental costs incurred in
furtherance of Company business.
The level of fees is determined by the Board after taking
into account appropriate advice (except in the case of
the Chairman whose level of fee is determined by the
Remuneration Committee), in line with prevailing market
conditions and at a level that will attract individuals with
the necessary experience and ability to make a significant
contribution to the Company’s affairs. No Director
participates in discussions relating to the setting of his or her
own remuneration. Fee levels are reviewed on an annual basis.
Where a Non-Executive Director does not serve until the end
of his or her term, the policy is to pay the fees due pro rata to
the date of cessation.
Consideration of Employment Conditions Elsewhere in
the Company
When considering salary increases for the Executive
Directors, the Committee takes into account average
levels of increase awarded to employees generally. Salary
increases will normally be broadly in line with those for other
employees.
The Committee does not formally consult employees
in relation to the Remuneration Policy for the Executive
Directors. However, the Company regularly carries out
engagement surveys which enable employees to share their
views with management.
Consideration of Shareholder Views in Developing Policy
The Committee is grateful that shareholders have been
supportive of its Policy in the past. As appropriate, the
Committee will continue to engage and communicate with
shareholders regarding Cineworld’s Remuneration Policy and
take suitable action when required.
In reviewing this Policy, the Remuneration Committee
has taken into account feedback received from some
shareholders. We have also consulted with major
shareholders on the proposed changes from the Policy
introduced in 2014.
63
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Directors’ Remuneration Report continued
Remuneration Committee Advisers
The Committee once again received advice from Willis Towers
Watson during the year in relation to the Company’s Policy
and its implementation in respect of the Chairman, Executive
Directors, Company Secretary and Senior Management.
Willis Towers Watson was appointed by the Remuneration
Committee in November 2008 following a selection process
involving a number of remuneration consultants. Their terms
of engagement are available on request from the Company
Secretary. They attended four scheduled meetings during
the year at the request of the Committee. Willis Towers
Watson’s fees for advice to the Committee were £80,428
(2015: £37,159). Willis Towers Watson is a member of the
Remuneration Consultants’ Group and, as such, voluntarily
operates under the code of conduct in relation to executive
remuneration consulting in the UK.
Willis Towers Watson 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 Remuneration Committee is satisfied that the
advice provided on executive remuneration is objective and
independent and that no conflict of interest arises as a result
of these other services.
The Committee also received assistance from the Chairman
of the Company (Anthony Bloom), the Chief Executive Officer
(Moshe Greidinger), the Deputy Chief Executive Officer (Israel
Greidinger), Senior Vice President of Human Resources (Tara
Rooney) and the Company Secretary (Fiona Smith), although
they did not participate in discussions relating to the setting of
their own remuneration. The Committee also consulted with
the Chief Executive Officer and received recommendations
from him in respect of changes to remuneration packages for
Senior Management.
Board Changes in 2016
There were no Board changes in 2016. On 11 January 2017,
Martina King stepped down from the Board, and Nisan Cohen
and Dean Moore were appointed. Nisan Cohen became
Chief Financial Officer and Dean Moore was appointed as an
Independent Non-Executive Director.
Annual Report on Remuneration
The Remuneration Committee and its Role
For the duration of the year, the Company’s Remuneration
Committee comprised three Non-Executive Directors, Martina
King, Julie Southern and Rick Senat, who are all considered
to be independent. The Chair of the Committee was Martina
King and the Secretary of the Committee was the Company
Secretary. On 11 January 2017, Non-Executive Director Dean
Moore took over from Martina King as Chair of the Committee.
Dean Moore is considered by the Board to be independent.
The Remuneration Committee’s principal responsibilities are
to:
• make recommendations to the Board for approval of the
Group’s broad policy for the remuneration of the Chairman,
the Executive Directors, the Company Secretary and the
Company’s Senior Management;
• determine the specific remuneration packages of the
Chairman, the Executive Directors, the Company Secretary
and Senior Management;
• approve the terms of the service agreements of the
Executive Directors, the Company Secretary and Senior
Management; and
• approve the design of, and determine the targets for, any
performance-related pay schemes and long-term incentive
plans.
The full terms of reference of the Remuneration Committee
are available on the Company’s website (www.cineworldplc.
com/about-us/corporate-governance). The terms are
reviewed annually.
The Committee met for four scheduled meetings during
the period and details of the members’ attendance record
is set out on page 41. In addition to its scheduled meetings, the
Committee met a number of times ad hoc to deal with specific
issues.
A summary of the Committee’s agenda over the period is
detailed below:
• reviewing the Chairman’s fees and the salaries of the
Executive Directors;
• setting the salary of the Company Secretary and reviewing
the salaries of Senior Management;
• deciding the targets for the annual bonus scheme;
• making awards under the Performance Share Plan (“PSP”)
and the 2010 CSOP, including consideration of target
calibration and award levels;
• reviewing the 2016 AGM voting figures and considering the
views of shareholders;
• reviewing the Remuneration Policy and the design of the
Cineworld Group plc 2017 Long Term Incentive Plan;
• preparation of this report; and
• considering the remuneration arrangements across the
Group.
64
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 Remuneration for 2016
This section covers the reporting period from 1 January 2016 to 31 December 2016 and provides details of the implementation of
the Company’s Policy during the period. Those sections of the report which are subject to audit are marked as such.
Single Total Figure Table (audited information)
The table below gives a single figure for the total remuneration for each Director for the period.
Financial
Year
Base salary
and fees
(£000)
Benefits(1)
(£000)
Annual
bonus
(£000)
Sharesave(2)
(£000)
PSP
(£000)
CSOP
(£000)
Total LTI
(£000)
Pension
(£000)
Total
(£000)
Executive
Directors
Moshe Greidinger
Israel Greidinger
Philip Bowcock(4)
Stephen Wiener(4)
Non–Executive
Directors
Anthony Bloom
Martina King
Alicja
Kornasiewicz
David Maloney(4)
Scott Rosenblum
Arni Samuelsson
Rick Senat
Julie Southern
Peter Williams(4)
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
557
550
380
375
–
84
77
77
74
1
375(6)
20(7)
437
476
298
325
–
248
–
–
175
175
60
56
50
30
–
30
50
50
50
50
65
61(9)
70
39
–
24
–
1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,419(3)
–
968(3)
–
451(3)
492(5)
–
356(5)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
15
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,419
–
968
–
451
507
–
356
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
91
110
60
75
–
2,588
1,213
1,783
849
452
75(8)
1,229.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
357
175
175
60
56
50
30
–
30
50
50
50
50
65
61(9)
70
39
–
24
(1) See page 66 for details of the other benefits provided to the Executive Directors.
(2) Under the ShareSave Scheme, employees are able to acquire shares in the Company at a discount of up to 20% of the market value at grant. The figures in this table
relate to the value of this discount at the date of grant.
(3) The gain on PSP shares vesting in respect of the period has been calculated using a share price of £5.525, being the average price for the last three months of the
period (as PSP will not vest until 6 June 2017), and includes payment of 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. Currently, the dividend equivalent payment to Moshe Greidinger would amount to £101,604,
the dividend equivalent payment to Israel Greidinger would amount to £69,276, and the dividend equivalent payment to Philip Bowcock would amount to £32,256.
(4) Philip Bowcock left the Company on 31 October 2015, Stephen Wiener left the Company on 31 March 2014, Peter Williams left the Company on 26 May 2015, and
David Maloney left the Company on 26 May 2015.
(5) Details of the actual gain made are set out on page 71. The actual figures set out in the table above differ from those included in the 2015 Annual Report figures as last
year an estimated value of £5.58 a share was used to calculate the theoretical gain, as the awards had not yet vested. The figures above reflect the share price of £5.10
on the date of vesting, 15 March 2016.
(6) Philip Bowcock left the Company on 31 October 2015 and this figure includes two months’ salary paid in lieu of notice amounting to £62,500.
(7) Philip Bowcock left the Company on 31 October 2015 and this figure includes two months’ benefits paid in lieu of notice amounting to £3,066.
(8) Philip Bowcock left the Company on 31 October 2015 and this figure includes two months’ pensions allowance paid in lieu of notice amounting to £12,500.
(9) Figure includes a payment of £5,800 to Rick Senat for the portion of 2015 for which he served as Senior Independent Director.
65
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Directors’ Remuneration Report continued
Base Salary (audited information)
The base salaries of the Executive Directors are usually reviewed on an annual basis. As described in the Policy, 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 broadly comparable with the Group. It also takes into account the progress
made by the Group, contractual considerations and salary increases across the rest of the Group.
The salaries of the CEO and Deputy CEO were increased by 2.5% with effect from 1 July 2016. Average salaries across the Group
were increased 2.5%.
Salary levels as at the end of the financial period were:
Moshe Greidinger:
Israel Greidinger:
£563,750 p.a.(1)
£384,375 p.a.(1)
(1) Part of Moshe Greidinger’s and Israel Greidinger’s salaries are paid in Israel to enable social security and government healthcare deductions to be made.
Pension (audited information)
Executive Directors are invited to participate in a Group Personal Pension Plan, which is a money purchase plan, or alternatively
may receive a pension allowance in cash. The Company contribution to this pension scheme for the Chief Executive Officer and
the Deputy Chief Executive Officer is 20% of salary. The Executive Directors have elected not to participate in this scheme and
instead receive a cash pension allowance of 20% of salary.
Company pension contributions/allowances for the period were:
Moshe Greidinger:
Israel Greidinger:
(£000)
£91
£60
Other Benefits (audited information)
Benefits in kind for Executive Directors comprised the provision of a company car or car allowance, private mileage, life
insurance, permanent health insurance, and private medical cover.
Benefit
Car/car allowance
Permanent health insurance/ private medical
Life assurance
Disturbance allowance
Israel
Greidinger
Moshe
Greidinger
£14,000
£14,000
£1,676
£1,676
£21,496
£28,372
£40,000 £40,000
Israel Greidinger and Moshe Greidinger both received a Disturbance Allowance of £40,000 for the period as, under the terms of
their employment contracts, they are required to spend a sufficient and proportionate amount of time at the Company’s head
office in Brentford, Greater London.
Annual Bonus (audited information)
Annual bonus opportunity for the Executive Directors in the year was a maximum of 100% of base salary. As described in the
Policy section, the annual bonus for the year was determined by a matrix of EBITDA compared to budget, and the achievement
of specified individual objectives. The choice of these measures reflect the Committee’s belief that any incentive compensation
should be tied both to the overall performance of the Group and to those areas of the business that the relevant individual can
directly influence. The weighting between the Group’s financial performance and personal performance was 80%:20%. The
Committee retains the absolute discretion to apply ‘malus’ by reducing or withholding annual bonus payments from the formulaic
outcome based on EBITDA performance (for example, in the event of misconduct or misstatement of financial results).
The individual performance element for the CEO and the Deputy CEO for 2016 focused on the strategic growth agenda of the
Group. Emphasis was placed on successful openings of new cinemas on time and on budget, and the subsequent management
of those new sites from an operational point of view. Other factors considered in assessing performance included the
identification and development of acquisition targets, successfully delivering results from the Group’s renovation programme,
the effectiveness of steps taken to improve the customer experience, the introduction of the latest technology, and the
implementation of the Group’s IT strategy.
The Committee judged the individual objectives to have been achieved at the top level out of five for both the CEO and the
Deputy CEO. In making this assessment, the Committee considered a number of factors including the continued profitable
growth of the Company, the eight new sites that were opened during 2016, as well the acquisition of five Empire sites in August.
66
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 Positive factors that were also considered included nine major refurbishments which were completed during the year, the
introduction of the latest technology which saw the Group end 2016 with 27 4DX screens, 33 IMAX screens and 6 Superscreens,
and the progress made in implementing the Group’s IT roadmap.
The table below shows the EBITDA targets and performance achieved against them in 2016.
Moshe Greidinger
Israel Greidinger
EBITDA performance
102% of budgeted
EBITDA achieved
102% of budgeted
EBITDA achieved
Individual
objective
performance
Threshold bonus
opportunity
(£000)
Maximum bonus
opportunity
(£000)
Bonus paid
Bonus paid
(% of maximum)
(% of base salary)
Bonus paid
(£000)
Above and
Beyond
Above and
Beyond
98.5
67.1
557
380
78.6
78.6
78.6
78.6
437
298
The Committee judged the individual objectives have been achieved at the top level out of five for both the CEO and the Deputy CEO.
On the basis of the EBITDA and individual performance achieved, the CEO was awarded a bonus of 78.6% of salary and the
Deputy CEO was awarded a bonus of 78.6% of salary.
The Cineworld Group Performance Share Plan (“PSP”) (audited information)
(a) Awards Vesting Following the End of the Performance Period Ending in December 2016
Awards under the PSP made in June 2014 are due to vest on 6 June 2017. The performance condition applicable to these awards
is summarised below:
EPS growth performance
Less than 10% p.a.
10% p.a.
18% p.a.
Between 10% and 18% p.a.
Vesting level
Nil
30%
100%
Straight-line basis
The adjusted diluted EPS figure for the year represented compound average annual growth of 23.2% on a pro forma basis,
compared to the base year, with the result that the level of vesting for this award was 100%. The number and value of shares that
will vest to each of the Executive Directors is set out on page 71 of this report.
(b) Awards Made in the Year
Awards were made to the Executive Directors under the PSP in April 2016. The vesting of these awards will be based on
Cineworld’s three-year EPS growth performance, as summarised in the table below. Following the combination with Cinema
City, the Committee discussed the performance condition at some length and decided for awards in June 2014 to increase
significantly the thresholds for lower and upper end vesting from those used for previous awards, and to express targets as
absolute growth figures given the significantly increased international nature of the Group following the Combination, making
UK RPI a less directly relevant factor. The same approach was taken in 2016. However, to reflect the prevailing circumstances and
expectations, the thresholds for minimum and maximum vesting were slightly reduced.
EPS growth performance
Less than 6% p.a.
6% p.a.
12% p.a.
Between 6% and 12% p.a.
Vesting level
Nil
30%
100%
Straight-line basis
In the past, 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 reviews the operation of the PSP each year and the performance conditions for each
grant to ensure they are appropriate for the Company and the prevailing internal and external expectations.
The number and value of share options under the PSP which were awarded to the Executive Directors and vested during the
period are set out on page 71 of this report.
67
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Directors’ Remuneration Report continued
Non-Executive Directors’ Fees (audited information)
The fees for the Non-Executive Directors were reviewed following completion of the combination with Cinema City in February
2014 in light of the significant increase in the size and complexity of the Group. The adjusted fee levels were set in order to be
comparable with equivalent fees in companies of broadly similar size and complexity. The fee for the position of Audit Committee
Chair was increased from £15,000 p.a. to £20,000 p.a. with effect from 1 January 2016. The other Non-Executive fees were not
increased during 2016.
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 apart from expenses in relation to travel costs to attend Cineworld Board
meetings, including related sustenance and accommodation.
Position held
Chairman
Senior Independent Director
Non-Executive Director
Audit Committee Chair
Remuneration Committee Chair
Nomination Committee Chair
Committee Member
Fees as at 1 January 2016
and at 31 December 2016
£175,000 p.a.
£10,000 p.a.
£50,000 p.a.(2)
£20,000 p.a.(1)
£10,000 p.a.
£5,000 p.a.
Nil
(1) The fee for Audit Committee Chair was increased by £5,000 p.a. to £20,000 p.a. with effect from 1 January 2016.
(2) Base fee.
Loss of Office Payments (audited information)
There were no loss of office payments during the financial year.
Payments to Past Directors
There were no payments to past Directors during the financial year, other than the continuation of private health insurance for
Philip Bowcock until June 2016, as disclosed in last year’s Annual Report.
External Appointments
Moshe and Israel Greidinger are both directors of Israel Theatres Limited. In relation to these roles, they did not receive any fees.
Directors’ Shareholdings at 31 December 2016 (audited information)
Executive Directors
Israel Greidinger
Moshe Greidinger
Non-Executive Directors
Anthony Bloom
Martina King
Alicja Kornasiewicz
Scott Rosenblum
Arni Samuelsson
Rick Senat
Julie Southern
Share options
subject to
performance
conditions(1)
Ordinary shares
76,626,344(2)
382,329
76,626,344(2)
560,751
2,208,006(3)
2,563
–
16,877
–
53,874
–
–
–
–
–
–
–
–
(1) Relates to unvested awards under the PSP. This figure includes awards made in 2014, 2015 and 2016 as the vesting of the 2014 awards described above will not happen
until June 2017.
(2) Shares are held by Global City Holdings N.V. (“GCH”). Shares in GCH are held in trust for the benefit of the children of Moshe Greidinger and Israel Greidinger (Israel
Greidinger’s entire interest in GCH was transferred to a trust for the benefit of his children on 6 September 2015 and Moshe Greidinger’s entire interest in GCH was
transferred to a trust for the benefit of his children on 13 October 2016).
(3) Shares are held by a nominee for a Jersey-based discretionary trust, of which Anthony Bloom is one of the potential beneficiaries.
68
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 The interests of Directors and their connected persons in ordinary shares as at 31 December 2016 and 9 March 2017, including any
interests in shares and share options provisionally granted under the PSP and 2010 CSOP, are presented above.
Nisan Cohen became a Director on 11 January 2017 and has unvested awards under the PSP in relation to 19,792 shares. This
figure includes awards made in 2014, 2015 and 2016. Dean Moore, who also became a Director on 11 January 2017, does not have
any interests in shares or share options.
As described in the Policy Table on page 59, each Executive Director is expected to build up, over a period of time, a holding in
shares equal to 150% of their base salary (this was 100% under the 2014 Policy).
Shares in GCH are held in trust for the benefit of the children of Moshe Greidinger and Israel Greidinger (Israel Greidinger’s entire
interest in GCH was transferred to a trust for the benefit of his children on 6 September 2015 and Moshe Greidinger’s entire
interest in GCH was transferred to a trust for the benefit of his children on 13 October 2016). Following the transfers, Moshe and
Israel Greidinger ceased to be beneficially interested in ordinary shares in the Company. However, given the family connection
described above, the Remuneration Committee has determined that they will both be considered as meeting the above
shareholding requirement.
Eight-Year Total Shareholder Return Performance and CEO Pay
The graph below compares the Company’s total shareholder return performance against the FTSE 250 and FTSE All Share Travel
and Leisure indices over the past eight financial years. The Remuneration Committee believes these to be the most appropriate
comparators as Cineworld is a member of both indices.
900
800
700
600
500
400
300
200
100
)
0
0
1
o
t
d
e
s
a
b
e
r
(
n
r
u
t
e
r
l
r
e
d
o
h
e
r
a
h
s
l
a
t
o
T
0
Dec 2008
Dec 2009
Dec 2010
Dec 2011
Dec 2012
Dec 2013
Dec 2014
Dec 2015
Dec 2016
Cineworld
FTSE 250
FTSE All Share Travel and Leisure
69
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Directors’ Remuneration Report continued
Financial year
2016
2015
2014
2013
2012
2011
2010
2009
CEO single
figure of total
remuneration
(£000)(2)
£2,588(1)
£1,213
£1,440
£1,326
£1,258
£1,252
£1,212
£858
Bonus as
proportion
of maximum
opportunity
LTI
vesting as
proportion
of maximum
opportunity
79%
87%
76%
41%
60%
68%
82%
85%
100%
–(3)
100%
81%
99%
100%
100%
–
(1) The increase in the CEO single figure between 2015 and 2016 primarily relates to the first vesting of a PSP award to the CEO since appointment. The value of this
award vesting has increased due to the significant increase in the Company’s share price over the vesting period.
(2) Up to 2013 these figures solely relate to Stephen Wiener who was CEO up to and including 27 February 2014. For 2014, it represents a combination of two months of
Stephen Wiener and ten months of Moshe Greidinger who both held the office of CEO during 2014.
(3) Moshe Greidinger, CEO, did not have an LTI which vested in the year. For those who did, the proportion was 100%.
Percentage Increase in CEO remuneration
The percentage changes in the value of salary, non-pension benefits and bonus between 2015 and 2016 for the CEO and
employees generally are set out in the table below:
Salary
Non-pension benefits
Annual bonus
Employees
CEO(1)
generally(2)
1.27%
9.1%
2.5%
0.3%
(8.2)%
(8.3)%
(1) Moshe Greidinger’s salary increased by 2.5% with effect from 1 July 2016.
(2) The figures reflect increases for UK-based monthly salaried employees excluding the senior management group. This group has been selected as the UK is the
country in which the CEO spends a significant proportion of his time.
Relative Importance of Pay Spend
The table below shows figures for people costs, shareholder dividends and a number of other significant distributions of turnover
that the Committee considers to be relevant in order to provide context to the relevant importance of pay spend.
Staff and Employee Costs
Of which, Directors’ remuneration costs
Corporation tax paid
Dividends paid
Retained earnings
2016
2015
% change
£112.9m £98.8m
£5.2m
£9.8m
£4.2m
£10.4m
£47.0m £39.0m
£110.5m £96.3m
14.2%
23.8%
(0.6)%
20.5%
14.7%
Shareholder Voting Results from 2016 AGM
At the Annual General Meeting (“AGM”) of the Company held on 19 May 2016, the resolution to approve the Directors’
Remuneration Report was approved on a show of hands. The proxy vote was as set out below. The Directors’ Remuneration
Policy was not put to the vote as it was approved at the AGM held on 8 May 2014.
For
Discretionary
Against
Total votes cast
Votes withheld(1)
(1) A vote withheld is not counted as a vote in law.
70
Number of votes
% of votes
cast
211,980,121
98.30%
33,603
0.02%
3,631,619
215,645,343
11,276,607
1.68%
100%
–
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 Share and Share Option Awards Granted and Vesting During the Year (audited information)
Awards or grants were made under the Company’s Share and Share Options Schemes as follows:
PSP: Awards consisting of nil cost options over shares were granted to the Chief Executive Officer and the Deputy Chief
Executive Officer equivalent in value to 150% of their base salary on 18 April 2016 which will become exercisable after three years.
Details of the awards are set out below. Awards are subject to continued employment and the achievement of the performance
conditions specified on page 71.
CSOP: A number of recipients of a PSP had a proportional part of their PSP award replaced by an HMRC-approved share option
granted under the CSOP. There was no such substitution in respect of the PSP awards granted to any of the Executive Directors
during the year.
Awards granted or vesting during the year:
(a) Cineworld Group Performance Share Plan
Details of awards made and vesting during the period are:
Name of Director
At
1 January 2016
Awarded
during year
Vested
during year
Exercised
during year
Lapsed
during year
At
31 December
2016
Exercise
Price
Market
value at
date of
exercise(3)
Exercise
period(2)
Gain(4)
Current
Directors
Israel
Greidinger
Moshe
Greidinger
Past Directors
Philip
Bowcock
Stephen
Wiener
–
–
102,645(1)
150,547(1)
–
–
–
–
90,176(5)(8)
65,287(5)(6)
–
–
90,176(8) 90,176(7)
65,287 65,287(7)
–
–
–
–
102,645
£Nil
150,547
£Nil
–
–
18/04/19–
17/10/19
18/04/19–
17/10/19
–
–
–
–
£Nil
£Nil
£5.24 15/03/16–
14/09/16
£5.24 15/03/16–
14/09/16
£504,800.80
£365,473.40
(1) Mid-market closing price of a Cineworld Group plc share on 15 April 2016, the last business day before grant, was £5.48. The face value of the awards to Israel Greidinger
and Moshe Greidinger were £562,500 and £825,000 respectively. All awards were granted as nil cost options.
(2) Subject to satisfaction of the relevant performance conditions (details of which for the awards made in 2016 are set on page 67).
(3) This was the price per share received in respect of those shares which were sold.
(4) The gain has been calculated using the realised share price on the date of exercising and includes payment of 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. The dividend equivalent payments amounted to £23,369.52 for
Stephen Wiener and £32,278.56 for Philip Bowcock.
(5) The entitlement was increased for the Rights Issue in February 2014.
(6) The entitlement was reduced to take account of the fact that Stephen Wiener left on 31 March 2014 so the performance period had not been completed in full.
(7) The performance condition attaching to the grants was satisfied in full.
(8) The entitlement was reduced to take account of the fact that Philip Bowcock left on 31 October 2015 so the performance period will not be completed in full.
Details of the awards vesting in June 2017
Name of Director
Current Directors
Israel Greidinger
Date
awarded
Number
awarded
Vesting
date
Number
vesting
Number
lapsing
Exercise
price
Exercise
period
06/06/14
162,619 06/06/17
162,619
–
–
£Nil 06/06/17-
05/12/17
£Nil 06/06/17-
05/12/17
Moshe Greidinger
06/06/14
238,508 06/06/17
238,508
Past Directors
Philip Bowcock
06/06/14
162,083 06/06/17
75,718
86,365(1)
£Nil 06/06/17-
05/12/17
(1) The performance condition has been satisfied in full so there was no reduction in the shares vesting, but there is a reduction to take account of the fact that Philip Bowcock left on
31 October 2015 so the performance period had not been completed in full.
71
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Directors’ Remuneration Report continued
(b) Cineworld Group Company Share Option Plan
No Director was granted an option during the period and no options vested during the period.
No Director, past or present, holds a CSOP option which will vest in 2017 financial year.
(c) Cineworld Group Sharesave Scheme
No Directors currently participate in the Company’s Sharesave Scheme.
Implementation of Policy in 2017
For the 2017 financial period, the salaries and other benefits of the Executive Directors will be reviewed in the usual manner,
with any salary increases being effective from 1 July 2017. From his appointment as Chief Financial Officer on 11 January 2017,
the annual salary of Nisan Cohen was £290,000 and he will receive a pension cash allowance of 14.8% of salary.
The maximum annual bonus opportunity will be 100% of salary for the CEO and Deputy CEO and 54% of salary for the CFO.
Bonus payments in relation to 2017 will be subject to Committee discretion to apply ‘malus’ as described on page 59. Following
payment, the Committee will retain the discretion to ‘claw back’ bonuses in the case of misconduct or misstatement of financial
results.
The face value of awards under the PSP in 2017 will be 150% of salary for the CEO and Deputy CEO and 60% of salary for
the CFO. The calibration targets for these awards is set out in the table below. Note that the level of vesting for threshold
performance has been reduced to 25% of the award compared to 30% in previous years.
EPS growth performance
Less than 5% p.a.
5% p.a.
11% p.a.
Between 5% and 11% p.a.
Vesting level
Nil
25%
100%
Straight-line basis
In considering the appropriate calibration of targets, the Committee has taken into account both the internal business plan and
external analyst estimates. The absolute ranges are lower than in the last couple of years but we would note that the enlarged
Group is now fully included in both the base and end years, as well as highlighting that the targets for 2014-2016 awards included
significant integration synergies, which have now largely been successfully achieved. The Committee believes that the growth
targets are stretching and, if they are achieved, a significant amount of value will have been created for shareholders. Given
the international nature of the Group, the Committee continues to believe that UK RPI is a less directly relevant factor and will
therefore express the targets as absolute growth levels.
As for 2016 awards, in addition to the EPS performance condition, the Committee, in its absolute discretion, will need to be
satisfied that an award holder has performed their duties at a satisfactory level over the three years from date of grant in order
for awards to vest. The Committee, therefore, will retain the absolute discretion to apply ‘malus’ to unvested awards, by reducing
or withholding vesting. Following vesting, the Committee will also retain the discretion to claw back PSP shares in the case of
misconduct or misstatement of financial result.
Incorporation by Reference
The sections “The Remuneration Committee and its Role” and “Remuneration Committee Advisers” also form part of the
Corporate Governance Statement, and are incorporated into that statement by reference.
By order of the Board
Dean Moore
Chairman of the Remuneration Committee
9 March 2017
72
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 Directors’ Report
The Directors present their Annual Report and the audited
financial statements for the year ended 31 December 2016.
The comparative period is the year ended 31 December 2015.
Management Report
This Directors’ Report, together with the Strategic Report on
pages 1 to 32, form the Management Report for the purposes
of rule 4.1.8R of the Disclosure and Transparency Rules.
Information Contained Elsewhere in the Annual Report
Information required to be part of this Directors’ Report
and certain other information can be found elsewhere in
the Annual Report as indicated in the table below, and is
incorporated into this Report by reference:
Information
Audit Tendering
Location in Annual Report
Pages 51 to 52
Corporate Governance Statement
Pages 37 to 53
Diversity, Human Rights and
Our People
Directors’ Biographies
Financial instruments:
Information on the Group’s financial
risk management objectives and
policies, and its exposure to credit
risk, liquidity risk, interest rate risk
and foreign currency risk
Pages 18 to 21
(Resources and
Relationships)
Pages 33 to 36
Note 21, Page 123
Going Concern Statement
Page 38
Key Performance Indicators
Pages 12 to 13
An Indication of Likely Future
Developments in the Business
Affecting the Company
Statement of Directors’
Responsibilities in respect of the
Annual Report and Financial
Statements
Pages 1 to 32
(Strategic Report)
Page 78
Viability Statement
Page 38
Forward-Looking Statements
Certain statements in this Annual Report are forward-looking
and so involve risk and uncertainty because they relate to
events, and depend upon circumstances, that will occur in
the future. 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.
Results and Dividends
The results for the Group for the year ended 31 December
2016 are presented under International Financial Reporting
Standards (“IFRS”) as adopted by the EU and applicable law.
However, the Company has elected to prepare its financial
statements in accordance with UK Accounting Standards,
including the FRS 101 Reduced Disclosure Framework. The
results for the year are set out in the Group Consolidated
Statement of Profit or Loss on page 82.
An interim dividend of 5.2p per share was paid on 9 September
2016. The Directors are recommending a final dividend of 13.8p
per share which, if approved by the shareholders at the Annual
General Meeting (“AGM”), will be paid on 22 June 2017 to
shareholders on the register on 26 May 2017.
Events Affecting the Company Since Year End
On 7 February 2017 the Group disposed of its 100% interest in
Picturehouse Entertainment Limited for £2.3m. No significant
impact is expected on the Group’s Statement of Profit or Loss
or Statement of Financial Position.
Financial Risk Management
The Board regularly reviews the financial requirements of
the Group and the risks associated therewith. Full details
are set out at Note 21 to the financial statements, and are
incorporated into this Directors’ Report by reference.
Funding and Liquidity
The financial position of the Group, its cash flows, liquidity
position and borrowing facilities are described in the
Financial Review on pages 28 to 32. In addition, Note 21 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. Such sections are incorporated into this Directors’
Report by reference.
International Operations and Branches
At the year end, the Group had operations in the UK, Jersey,
Ireland, Poland, Israel, Hungary, Czech Republic, Bulgaria,
Romania and Slovakia.
73
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Directors’ Report continued
Substantial Shareholdings
At 31 December 2016, the Group had been notified, pursuant to the Disclosure and Transparency Rules, of the following interests
in the voting rights of the Company. Notifications confirming a party’s interest has gone below the threshold notification level
have not been included:
Shareholder
Global City Holdings N.V.(2)
BlackRock, Inc.
Mawer Investment Management Ltd.
Aviva plc
Royal London Asset Management Limited
Voting rights
76,626,344
18,383,284(3)
13,350,543
12,912,432
10,578, 562
% of total
voting rights(1)
Nature of holding
29.0
6.91(3)
4.98
4.86
3.98
Direct
Indirect
Direct
Direct and Indirect
Direct
(1) Percentages are stated as at the time of notification. The total number of voting rights at 31 December 2016 was 267,581,189.
(2) Shares are held by Global City Holdings N.V.(GCH). Shares in GCH are held in trust for the benefit of the children of Moshe Greidinger and Israel Greidinger (Israel
Greidinger’s entire interest in GCH was transferred to a trust for the benefit of his children on 6 September 2015 and Moshe Greidinger’s entire interest in GCH was
transferred to a trust for the benefit of his children on 13 October 2016).
(3) 3,321,045 (1.24%) of this figure represents qualifying financial instruments and financial instruments with similar economic effect to qualifying financial instruments.
The following notifications were received in the period from
1 January 2017 up to the date of this report:
Shareholder
Voting rights
% of total
voting rights(1)
Nature of
holding
BlackRock, Inc
17,496,138(3)
6.53(2)
Indirect
Aviva plc
7,853,267
2.94
Direct and
Indirect
(1) Percentages are stated as at the time of notification and show the latest
notification details.
(2) 4,127,267 (1.53%) of this figure represents qualifying financial instruments
and financial instruments with similar economic effect to qualifying financial
instruments.
Major Shareholder Voting Arrangements
Global City Holdings N.V. (“GCH”) is interested in aggregate
in 29% of the rights to vote at general meetings of the
Company. The Company and GCH entered into a relationship
agreement dated 10 January 2014 to regulate the relationship
between them. Under the relationship agreement, the parties
acknowledge that the Group is capable of carrying on
business independently, and that all arrangements between
the Company and GCH will be on arm’s length terms. The
restriction on the disposal of ordinary shares in the Company
by GCH has now expired, but there is a requirement (where
reasonably practical) to consult with and consider the
reasonable views of the Chairman or Senior Independent
Director of the Company prior to a disposal of ordinary shares
in the Company.
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 year, are shown
in Note 20 to the financial statements.
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 (i) those which
may be applicable from time to time under existing laws or
74
regulation or (ii) if a person with an interest in 0.25% of the
issued share capital held in certificated form has been served
with a disclosure notice and fails to respond with the required
information concerning interests in that share capital, and (iii)
in respect of shares issued as consideration in respect of the
Empire acquisition which are subject to a lock-up of 12 months
from 12 August 2016.
No ordinary shares carry any special rights with regard
to control of the Company. Except as set out in the Major
Shareholder Voting Arrangements or Share Capital and
Control sections above, there are no restrictions on voting
rights attaching to the ordinary shares and the Company is
not aware of any known agreements between shareholders
that restrict the transfer of voting rights attached to ordinary
shares. No treasury shares are held by the Company and no
shares are held by any trustee in connection with any Share
Scheme operated by the Group.
Articles of Association
The Company’s Articles of Association (“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.
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.
Issue of New Shares and Authority to Purchase Shares
At the AGM held on 19 May 2016, shareholders gave authority
for the allotment of shares up to an aggregate nominal value
of £884,100 subject to certain conditions. This authority will
expire at the 2017 AGM of the Company or on 18 August 2017,
whichever is earlier.
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 Between 1 January 2016 and 31 December 2016, a total of
2,348,868 shares were issued. Further details of the 2,348,868
ordinary shares issued in the period in this respect including
in relation to the acquisition of 5 Empire cinemas are set out in
Note 20 and Note 15 to the financial statements.
At the AGM held on 19 May 2016, shareholders gave authority
for the purchase of up to 26,520,000 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 Notice of AGM (the “AGM
circular”) dispatched or made available to shareholders with
the Annual Report and Accounts (or on notification of its
availability).
Directors’ Interests
Director
Anthony Bloom
Israel Greidinger
Moshe Greidinger
Martina King
Alicja Kornasiewicz
Scott Rosenblum
Arni Samuelsson
Rick Senat
Julie Southern
Ordinary shares held directly
Ordinary shares held by companies in
which a Director has a beneficial interest
or is connected
31 December
31 December
2015 31 December 2016
2015 31 December 2016
–
–
–
–
–
–
2,208,006(1)
2,208,006(1)
76,626,344(2)
76,626,344(2)
76,626,344(2)
76,626,344(2)
2,563(3)
2,563(3)
–
10,377
–
53,874
–
–
16,877
–
53,874
–
–
–
–
–
–
–
–
–
–
–
–
–
(1) Shares are held by a nominee for a Jersey-based discretionary trust, of which Mr Bloom is one of the potential beneficiaries.
(2) Shares are held by Global City Holdings N.V.(GCH). Shares in GCH are held in trust for the benefit of the children of Moshe Greidinger and Israel Greidinger (Israel
Greidinger’s entire interest in GCH was transferred to a trust for the benefit of his children on 6 September 2015 and Moshe Greidinger’s entire interest in GCH was
transferred to a trust for the benefit of his children on 13 October 2016).
(3) Martina King stepped down from the Board on 11 January 2017.
The Directors who held office at the end of the financial year
had interests in the ordinary shares of the Company at the
beginning and end of the year under review as set out above.
Details of the interests in the ordinary shares of the Company
arising under the Group’s Share and Option Schemes are
set out in the Remuneration Report on pages 68 and 69.
No rights to subscribe for shares in or debentures of other
Group companies were granted to any of the Directors or
their immediate families, or exercised by them, during the
year. None of the Directors had any disclosable interest in the
shares of Group companies other than the Company and there
have been no changes to Directors’ share interests between 31
December 2016 and the date of this report.
Appointment and Replacement of Directors
The Company’s Articles of Association (“Articles”) set out
the rules governing the appointment and replacement of
Directors. Under the Articles, one-third of the Directors
must retire by rotation at the AGM and, being eligible, offer
themselves for re-election each year. A Director (excluding
as Chairman of the Board) must retire (and will be counted in
the one-third to retire) if he was last appointed or reappointed
three years or more prior to the AGM or has served more
than eight years as a Non-Executive Director. In addition
any Director appointed during the year must stand for
election as well. In accordance with best practice, however,
all the Directors are retiring and are offering themselves for
re-election or election this year at the AGM.
Following the Board evaluation process undertaken in
2016, the Board is satisfied that each Director standing for
re-election or election continues to show the necessary
commitment and to be an effective member of the Board due
to their skills, expertise and business acumen.
Under the terms of the relationship agreement between
the Company and GCH (described further in the Major
Shareholder Voting Arrangements section above), GCH
has the right to appoint one Non-Executive Director (but
only if none of Moshe Greidinger, Israel Greidinger and
Scott Rosenblum are on the Board) for so long as it holds
at least 10% of the voting rights in the Company.
Details of the Directors’ remuneration, and information on their
service contracts, are set out in the Directors’ Remuneration
Report on pages 54 to 72.
Conflicts of Interest
The Articles 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. In deciding whether to authorise the conflict,
the non-conflicted Directors are required to act in the way
which they consider would be most likely to promote the
success of the Company for the benefit of all shareholders and
they may, and do, impose conditions to be attached to such
authorisations. The Board believes that the arrangements for
reporting and considering such conflicts operate effectively.
75
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Directors’ Report continued
Directors’ Interests in Contracts
The Group has a number of property lease agreements
in place with Global City Holdings N.V. (“GCH”) (and or its
subsidiary undertakings). Further details of the amounts
paid under these agreements can be found in Note 24 to
the financial statements. Shares in GCH are held in trust for
the benefit of the children of Moshe Greidinger and Israel
Greidinger.
None of the Directors has a material interest in any contract of
significance to which the 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 in the
Directors’ Remuneration Report and in Note 24 to the financial
statements, Related Parties.
Directors’ and Officers’ Insurance and Indemnity
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 Donations
The Group’s policy, which it has followed, is to make no
donations to political parties.
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 and arranging appropriate training.
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 in the UK via the Human
Resources manual on the Company’s intranet. Continuing
education, training and development are important to ensure
Table 1: Reporting Requirements
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 the Group’s business
and to provide opportunity for questions and feedback. 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 in the UK.
The Group encourages the involvement of employees in its
performance through the operation of a Sharesave Scheme in
the UK and bonus schemes throughout the Group.
Environmental Matters and Greenhouse Gas Emissions
Information on the Group’s environmental policies are
summarised in the Resources and Relationships section on
pages 18 to 21. This section provides the greenhouse gas
(“GHG”) emission data and supporting information required
by the Companies Act 2006 (Strategic Report and Directors’
Report) Regulations 2013.
Organisational Boundary
The organisational boundary used for the Company’s GHG
reporting is operational control.
Reporting Scope
The Company is reporting on emissions covered by scopes
1 and 2 (comprising electricity, gas, and fugitive F-gas
emissions) from global operations.
As well as scope 1 and 2 emissions figures, additional “outside
of scope” emissions are included for owned transport to
account for biofuel additions. Scope 3 well-to-tank (for all
fuels) and transmission and distribution (from electricity)
emissions are also included.
Emissions Included
Mandatory emissions sources as specified by the
Environmental Reporting Guidelines published by the
Department for Environment, Food and Rural Affairs (“Defra”)
have been included in this report (see also ‘Estimates and
Exclusions’ below).
Table 1 shows Defra’s stated mandatory areas for reporting
and how the stated categories apply to the Group.
Ref
A1
A2
B
B
C
Defra requirement
Relevance
Fuel combustion (stationary)
Natural gas (heating)
Fuel combustion (mobile)
Owned transport (fleet)
Facility operation: process emissions
N/A
Facility operation: fugitive emissions
F-gases: refrigeration and air conditioning
Purchased electricity, heat, steam, cooling
Electricity only
GHG Emissions Data
The GHG emissions for the Group for the calendar year to 31 December 2016 are shown in Table 2 below in tonnes of carbon
dioxide equivalent (tCO2e).
76
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 Table 2: 2016 GHG Emissions
Ref
A1
A2
B
C
Total
Category
Fuel combustion (stationary)
Fuel combustion (mobile)
Facility operation
Purchased electricity
tCO2e 2015
tCO2e 2016
18,330
922
3,242
132,798
155,292
22,855
1,150
1,849*
132,181
158,035
*Our ‘facility operation’ emissions are entirely made up of refrigerant gas emissions from our air conditioning units. Changes in these emission levels are primarily driven
by our maintenance regimes. The more servicing and replacement of air conditioning units is undertaken in a particular year, the higher this figure is. Therefore, from a
carbon management perspective, minimal significance should be placed on fluctuations to this figure, which represents 1% of total emissions.
Estimates and Exclusions
A minimal amount of estimated data was used for electricity
and gas emissions for some UK meters for December 2016.
This affects under 0.1% of total emissions.
Data on fugitive emissions from ROW jurisdictions other
than Czech Republic and Poland were not available and are
excluded from the emissions figures given above. Also, Polish
gas data was captured in local currency and converted into
kWh. This affects less than 4% of total group emissions.
Emissions Intensity
The chosen carbon intensity measure is financial turnover. This
was chosen due to ready availability of the data. The value for
the year was 198.1 tonnes CO2e per £m turnover.
For comparison, 2015’s emissions were 155,292 tonnes CO2e at
an intensity of 220.0 tonnes CO2e per £m turnover.
Methodology and Emissions Factors
This report was calculated using the methodology set out
in Defra’s updated greenhouse gas reporting guidance,
Environmental Reporting Guidelines (ref. PB 13944), issued by
Defra in June 2013. Emissions factors are taken from DECC/
Defra 2015 update.
Emissions factors for fuels use scope 3 well-to-tank upstream
additions to account for emissions from sourcing and
processing fuel. Owned transport emissions include outside-
of-scope additions for biogenic additions. Electricity emissions
include transmission and distribution losses.
Annual General Meeting
The Notice convening the AGM, to be held at the Cineworld
Cinema in Wandsworth, Southside Shopping Centre,
Wandsworth High Street, London SW18 4TF at 10.30am on
18 May 2017 is contained in the AGM circular. Details of all the
resolutions to be proposed are set out in the AGM circular.
Auditor and Tender
Following the audit tender process in 2016, KPMG LLP was
reappointed as External Auditor. The Company will continue
to comply with the relevant tendering and auditor rotation
requirements applicable under UK and EU regulations. Further
details of the tender process may be found in the Audit
Committee Report.
Disclosure of Information to Auditor
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
auditor is unaware; and each Director has taken all 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 auditor is aware of that information.
By order of the Board
F Smith
Company Secretary
Cineworld Group plc
9 March 2017
Registered Office:
8th Floor
Vantage London
Great West Road
Brentford
TW8 9AG
Registered: England No: 5212407
77
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Statement of Directors’ Responsibilities
In respect of the Annual Report and the Financial Statements
Responsibility statement of the directors in respect of the
annual financial report
We confirm that to the best of our knowledge:
• 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
• the directors’ report includes a fair review of the
development and performance of the business and the
position of the issuer and the undertakings included in the
consolidation taken as a whole, together with a description
of the principal risks and uncertainties that they face.
We consider the annual report and accounts, taken as a
whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group’s
position and performance, business model and strategy.
Moshe Greidinger
Chief Executive Office
9 March 2017
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, including FRS 101 Reduced Disclosure
Framework.
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:
• 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 Strategic Report, 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.
78
GOVERNANCE uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 Independent Auditor’s Report
to the Members of Cineworld Group plc only
Opinions and conclusions arising from our audit
1 Our opinion on the financial statements is unmodified
We have audited the financial statements of Cineworld Group
plc (“Cineworld” or “Group”) for the year ended 31 December
2016 set out on pages 82 to 137. In our opinion:
• 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 2016 and of the Group’s profit for the year
then ended;
• the Group financial statements have been properly
prepared in accordance with International Financial
Reporting Standards as adopted by the European Union;
• the Parent Company financial statements have been
properly prepared in accordance with UK Accounting
Standards, including FRS 101 Reduced Disclosure
Framework; and
• 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.
2 Our assessment of risks of material misstatement
In arriving at our audit opinion above on the financial
statements the risks of material misstatement that had the
greatest effect on our audit, in decreasing order of audit
significance, were as follows:
Acquisition of 5 Empire Cinemas (Total consideration
£94.5m) (New risk)
Refer to page 50 (Audit Committee report), page
93 (accounting policy) and pages 108–109 (financial
statement disclosures).
• The risk – the acquisition of 5 Empire Cinemas on 12
August 2016 was a significant transaction for Cineworld.
The identification of acquired intangible assets and
determination of their fair values are highly judgmental.
In addition the acquired leases contain discrete terms
including stepped rentals, varying lengths, break dates and
rent reviews. There is significant complexity in assessing
the classification of the longer term leases and recognising
any acquisition adjustment in relation to the market rent
of operating leases and the fair value of finance leases.
Judgement is also involved in determining completeness
and fair value of the other Balance Sheet items. Cineworld
engaged external valuation specialists to inform the
judgements and estimates required.
• Our response – Our audit procedures included examining
the sale and purchase agreement, legal due diligence
report, Group’s technical papers and handover accounts
and comparing these to the proposed opening Balance
Sheet positions. In addition we reviewed the above against
the requirements of the relevant accounting standards. We
used our own valuation specialists to assist in evaluating
whether all intangible assets had been identified and
whether the fair values were appropriate. Our evaluation of
this included comparison to other similar acquisitions made
by the Group, standard industry practice and our own
knowledge of the business.
In assessing any adjustment relating to market rent, we
compared the rent amounts under the acquired leases to
existing Cineworld cinema sites that are appropriate proxies
of current market rent to create our own expectation of the
market rent adjustment. Similarly the fair value adjustments
in relation to finance leases acquired were audited with
reference to external market data.
To assess the classification of the leases we examined
the Group’s technical paper and critically challenged the
approach, inputs and conclusions by inspecting lease
agreements and external valuation reports as well as
comparing to our own knowledge of the business and
standard industry practice.
To assess fair value measurement of the remaining
opening Balance Sheet position, we critically evaluated the
report prepared by the Group’s external valuation expert
and agreed opening balance position to the underlying
information including fixed assets records and stock count
as well as benchmarking against existing Cineworld cinema
sites. We independently considered completeness based
on our knowledge of the business, the legal due diligence
and the terms of the Sale and Purchase agreement.
We also considered the adequacy of the Group’s
disclosures regarding the acquisition and the underlying
assumptions applied.
Carrying value of property, plant and equipment £445.4m
(2015: £345.4m) Risk vs 2015 t u
Refer to page 50 (Audit Committee report), page 94
(accounting policy) and pages 103 – 104 (financial
statement disclosures).
• The risk – The carrying value of property, plant and
equipment balances at an individual cinema level may
not be recoverable through future cash flows as national
and local factors, such as movie slates or increased
competition, can materially affect site performance. The
key sensitivities in the calculation are the assumptions
used in calculating the discount rate and the difficulties
in accurately predicting site performance, particularly
due to external uncontrollable factors. The latter is mainly
because: the Group has no direct control over the films
released for distribution; there is limited visibility over the
release schedule more than 12 months into the future; and
there can be variation in performance of the films over the
diverse geographic footprint of the Group.
• Our response – Our audit procedures included challenging
the cash flow forecasts for all cinema sites by comparing
them against historical performance trends, together
with assessing the basis for and impact of both expected
changes in market conditions and the committed future
plans of the business. Our assessment was based on:
our existing knowledge of the business, the expected
future movie slate and discussion with the directors.
We considered the underlying assumptions within
the forecasts, including comparing revenue growth
and discount rates against our internal and external
benchmark data.
We assessed historical accuracy of the Group’s forecasting
process through comparison of forecasts to actual
results and considered whether the forecasts used in
the current year impairment tests took into account
actual performance during 2016, particularly for those
cinemas where impairment assessments showed the least
headroom. In considering the appropriateness of discount
rates applied we took into account the level of risks we
79
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Independent Auditor’s Report continued
to the Members of Cineworld Group plc only
considered was inherent in the underlying forecasts to
which they were being applied.
We assessed the Group’s sensitivity analysis and the
resulting headroom on the value-in-use estimates across
all cinemas and considered the appropriateness of the
associated disclosures.
Onerous lease provisions £2.4m (2015: £5.6m) Risk vs
2015 q
Refer to page 51 (Audit Committee report), page 94
(accounting policy) and page 121 (financial statement
disclosures).
• The risk – The onerous lease provision is revisited annually
using a valuation model to determine whether any further
provision or release is required. Estimating future operating
cash flows at a cinema level requires consideration of
current and expected market conditions both nationally
and locally. The value of the provision is particularly
sensitive to the assumptions used in relation to the discount
rate and to forecast revenues. As explained in the carrying
value of property, plant and equipment risk above, there
is inherent uncertainty involved in forecasting revenues.
Given this uncertainty and the number of sites across
the Group, this is deemed to be one of the Group’s key
judgement areas.
• Our response – Our audit procedures included challenging
the operating cash flow forecast of each cinema considered
at risk by performing those procedures described under
Carrying value of property, plant and equipment risk. We
further considered the adequacy of the Group’s disclosure
around the degree of estimation involved in arriving at
the provision and the level of sensitivity of the provision to
changes in the input assumptions.
We continued to perform procedures over recognition of
virtual print fee (“VPF”). However, following the expiration of
VPF contract in the UK in 2016, we have not assessed this as
one of the risks that had the greatest effect on our audit and,
therefore, it is not separately identified in our report this year.
3 Our application of materiality and an overview of the
scope of our audit
The materiality for the Group financial statements as a whole
was set at £4.5m (2015: £3.5m). This has been determined with
reference to a benchmark of Group profit before taxation (of
which it represents 4.6% (2015: 3.5%)).
We reported to the Audit Committee any corrected or
uncorrected identified misstatements exceeding £225,000
(2015: £175,000), in addition to other identified misstatements
that warranted reporting on qualitative grounds.
Scoping and coverage
Group revenue
Group audited 55%
Component audited 20%
Out of scope 25%
Group profit before taxation
Group total assets
Group audited 38%
Component audited 36%
Out of scope 26%
Group audited 70%
Component audited 15%
Out of scope 15%
The Group operates in nine countries across the UK and
Ireland, Central and Eastern Europe and Israel, each of which
is considered to be a reporting component. We performed
audits for Group reporting purposes on three (2015: five) of
these components, resulting in coverage of 75% (2015: 88%)
of total Group revenue; 74% (2015: 81%) of Group profit before
taxation; and 85% (2015: 93%) of Group total assets. For the
remaining components, we performed analytical procedures
at component level to re-examine our assessment that there
was no significant risk of material misstatement within these.
We note that in planning our 2015 audit, materiality was
originally set at 4.0% of budgeted Group profit before
taxation. Actual profit exceeded budget largely due to foreign
exchange gain on the euro-denominated loan. We did not
increase our materiality level of £3.5m despite this change.
We assessed that 2016 materiality should represent a higher
proportion of profit before tax than that used to plan our 2015
audit because we considered that the level of audit risk had
reduced, principally due the time that had elapsed since the
major acquisition of Cinema City in 2014 creating a higher level
of stability within the business.
The Group team is responsible for the audit of the UK
component with some input from the Polish team in relation
to processes relevant to the UK component performed in
Poland. The Group team instructed the KPMG component
auditors in Poland and Israel as to the significant areas to be
covered (including the relevant risks detailed above) and the
information to be reported back. The Group team approved
component materialities, which were set at £3.4m (2015:
£2.6m) for the UK component and at £2.5m (2015: £2.6m)
for Poland and Israel, having regard to the mix of size and risk
profile of the businesses within the Group.
80
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 The Group team visited the component locations in Poland
and Israel, including to assess the audit risk and strategy
and gain an understanding of the local finance environment.
Meetings were held with these component auditors
throughout the audit. At the planning stage these meetings
focused on the audit approach, while during the fieldwork and
reporting stage they focused on the findings and observations
reported to the Group team. All findings were discussed in
more detail, and any further work deemed necessary by the
Group team was then performed by the component auditor.
4 Our opinion on other matters prescribed by the
Companies Act 2006 is unmodified
In our opinion:
• the part of the Directors’ Remuneration Report to be
audited has been properly prepared in accordance with the
Companies Act 2006; and
• the information given in the Strategic Report and the
Directors’ Report for the financial year is consistent with the
financial statements.
Under the Companies Act 2006 we are required to report to
you if, in our opinion:
• 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.
Under the Listing Rules we are required to review:
• the Directors’ Statements, set out on pages 49 to 50, in
relation to going concern and longer-term viability; and
• the part of the Corporate Governance Statement on page
38 relating to the Company’s compliance with the eleven
provisions of the 2014 UK Corporate Governance Code
specified for our review.
We have nothing to report in respect of the above
responsibilities.
Scope and responsibilities
As explained more fully in the Directors’ Responsibilities
Statement set out on page 78, the Directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view. A description of
the scope of an audit of financial statements is provided on
the Financial Reporting Council’s website at
www.frc.org.uk/auditscopeukprivate. This report is made
solely to the Company’s members as a body and is subject
to important explanations and disclaimers regarding our
responsibilities, published on our website at
www.kpmg.com/uk/auditscopeukco2014a, which are
incorporated into this report as if set out in full and should be
read to provide an understanding of the purpose of this report,
the work we have undertaken and the basis of our opinions.
Hugh Green
(Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
Canary Wharf London
E14 5GL
United Kingdom
9 March 2017
Based solely on the work required to be undertaken in the
course of the audit of the financial statements and from
reading the Strategic Report and the Directors’ Report:
• we have not identified material misstatements in those
•
reports; and
in our opinion, those reports have been prepared in
accordance with the Companies Act 2006.
5 We have nothing to report on the disclosures of
principal risks
Based on the knowledge we acquired during our audit, we
have nothing material to add or draw attention to in relation to:
• the Directors’ Statement of longer-term viability statement
on pages 49 to 50, concerning the principal risks, their
management, and, based on that, the Directors’ assessment
and expectations of the Group’s continuing in operation
over the three years to 31 December 2019; or
• the disclosures in note 1 of the financial statements
concerning the use of the going concern basis of
accounting.
6 We have nothing to report in respect of the matters on
which we are required to report by exception
Under ISAs (UK and Ireland) we are required to report to you
if, based on the knowledge we acquired during our audit, we
have identified other information in the Annual Report that
contains a material inconsistency with either that knowledge
or the financial statements, a material misstatement of fact, or
that is otherwise misleading.
In particular, we are required to report to you if:
• we have identified material inconsistencies between the
knowledge we acquired during our audit and the Directors’
Statement that they consider that the Annual Report and
financial statements taken as a whole is fair, balanced and
understandable and provides the information necessary
for shareholders to assess the Group’s position and
performance, business model and strategy; or
• the Audit Committee Report does not appropriately
address matters communicated by us to the audit
committee.
81
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Consolidated Statement of Profit or Loss
for the Year Ended 31 December 2016
Revenue
Cost of sales
Gross profit
Other operating income
Administrative expenses
Operating profit
Analysed between:
EBITDA as defined in Note 1:
• Depreciation and amortisation
• Onerous leases and other non-recurring charges
• Impairments and reversals of impairments
• Transaction and reorganisation costs
• Profits on disposals of assets classified as held for sale
• Settlement of defined benefit pension liability
Finance income
Finance expenses
Net finance costs
Share from jointly controlled entities using equity accounting method, net of tax
Profit on ordinary activities before tax
Tax charge on profit on ordinary activities
Profit for the year attributable to equity holders of the Group
Basic earnings per share (pence)
Diluted earnings per share (pence)
The Notes on pages 87 to 128 are an integral part of these consolidated financial statements.
Year ended
31 December
2016
£m
Year ended
31 December
2015
£m
Note
2
3
4
4
4
4
4
18
7
7
8
5
5
797.8
(584.8)
213.0
2.7
(102.9)
112.8
175.8
(58.6)
1.5
0.4
(1.5)
–
(4.8)
3.0
(17.6)
(14.6)
–
98.2
(16.2)
82.0
30.8
30.4
705.8
(517.2)
188.6
8.7
(94.2)
103.1
155.3
(49.4)
1.7
(9.0)
(1.9)
6.4
–
8.7
(12.1)
(3.4)
–
99.7
(18.4)
81.3
30.7
30.4
82
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 Consolidated Statement of Other
Comprehensive Income
for the Year Ended 31 December 2016
Profit for the year attributable to equity holders of the Group
Items that will not subsequently be reclassified to profit or loss
Remeasurement of the defined benefit asset
Tax recognised on items that will not be reclassified to profit or loss
Items that will subsequently be reclassified to profit or loss
Movement in fair value of cash flow hedge
Net change in fair value of cash flow hedges recycled to profit or loss
Movement in fair value of net investment hedge
Foreign exchange translation gain/(loss)
Other comprehensive income/(loss) for the year, net of income tax
Total comprehensive income for the year attributable to equity holders of the Group
Year ended
31 December
2016
£m
Year ended
31 December
2015
£m
82.0
(5.1)
1.0
0.5
(1.9)
(1.3)
88.2
81.4
163.4
81.3
0.2
–
1.1
–
–
(16.9)
(15.6)
65.7
83
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Consolidated Statement of Financial Position
at 31 December 2016
Non-current assets
Property, plant and equipment
Goodwill
Other intangible assets
Investments in equity-accounted investee
Other receivables
Employee benefits
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
Provisions
Employee benefits
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity attributable to equity holders of the Group
Share capital
Share premium
Translation reserves
Merger reserve
Hedging reserves
Retained earnings
Total equity
31 December 2016
31 December 2015
Note
£m
£m
£m
£m
9
10
10
11
14
18
13
14
16
17
19
16
17
19
18
12
20
20
20
445.4
650.6
54.2
0.9
6.0
–
1,157.1
139.6
1,296.7
345.4
539.3
52.5
0.6
6.1
10.5
954.4
139.5
1,093.9
9.2
67.8
62.5
(15.7)
(141.8)
(8.4)
(4.7)
(209.4)
(170.6)
(292.0)
(68.8)
(18.5)
(1.3)
(8.0)
9.8
74.0
55.8
(16.8)
(175.8)
(10.5)
(6.3)
(321.3)
(76.5)
(11.6)
(1.8)
(12.7)
(423.9)
(633.3)
663.4
2.7
306.4
38.9
207.3
(2.4)
110.5
663.4
(388.6)
(559.2)
534.7
2.7
295.7
(49.3)
207.3
0.3
78.0
534.7
These financial statements were approved by the Board of Directors on 9 March 2017 and were signed on its behalf by:
Nisan Cohen
Director
84
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 Consolidated Statement of Changes in Equity
for the Year Ended 31 December 2016
Issued
capital
£m
Share
premium
£m
Merger
reserve
£m
Translation
reserve
£m
Hedging
reserve
£m
Retained
earnings
£m
Balance at 1 January 2015
Profit for the year
Other comprehensive income
Items that will not subsequently be reclassified to
profit or loss
Remeasurement of the defined benefit asset
Tax recognised on items that will not be
reclassified to profit or loss
Items that will subsequently be reclassified to
profit or loss
Movement in fair value of cash flow hedge
Retranslation of foreign currency denominated
subsidiaries
Contributions by and distributions to owners
Dividends
Movements due to share-based compensation
Issue of shares
Balance at 31 December 2015
Profit for the year
Amounts reclassified from equity to profit and loss
in respect of cash flow hedges
Other comprehensive income
Items that will not subsequently be reclassified to
profit or loss
Remeasurement of the defined benefit asset
Tax recognised on items that will not be
reclassified to profit or loss
Items that will subsequently be reclassified to
profit or loss
Movement in fair value of cash flow hedge
Movement in net investment hedge
Retranslation of foreign currency denominated
subsidiaries
Contributions by and distributions to owners
Dividends
Movements due to share-based compensation
Issue of shares
2.6
–
–
–
–
–
–
–
0.1
2.7
–
–
–
–
–
–
–
–
–
–
294.9
207.3
(32.4)
(0.8)
–
–
–
–
–
–
–
0.8
–
–
–
–
–
–
–
–
–
–
–
–
(16.9)
–
–
–
295.7
207.3
(49.3)
–
–
–
–
–
–
–
–
–
10.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
88.2
–
–
–
–
–
–
1.1
–
–
–
–
0.3
–
(1.9)
–
–
0.5
(1.3)
–
–
–
–
Total
£m
506.3
81.3
34.7
81.3
0.2
0.2
–
–
–
(39.0)
0.8
–
78.0
82.0
–
1.1
(16.9)
(39.0)
0.8
0.9
534.7
82.0
–
(1.9)
(5.1)
1.0
–
–
–
(47.0)
1.6
–
(5.1)
1.0
0.5
(1.3)
88.2
(47.0)
1.6
10.7
Balance at 31 December 2016
2.7
306.4
207.3
38.9
(2.4)
110.5
663.4
85
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Year ended
31 December
2016
£m
Year ended
31 December
2015
£m
Note
82.0
81.3
7
7
8
4
4
18
(3.0)
17.6
16.2
–
112.8
58.6
(0.1)
(0.4)
(0.8)
(6.0)
(0.6)
(2.0)
(1.6)
159.9
(9.8)
150.1
0.7
(47.0)
(83.7)
–
(0.3)
(8.7)
12.1
18.4
–
103.1
49.4
(5.7)
9.0
(1.6)
(8.3)
(1.5)
32.1
(0.2)
176.3
(10.4)
165.9
0.3
–
(88.6)
8.0
–
(130.3)
(80.3)
0.3
(47.0)
(7.8)
(6.4)
28.0
(1.0)
(33.9)
(14.1)
7.4
62.5
55.8
0.9
(39.0)
(9.4)
(98.6)
89.3
(0.9)
(57.7)
27.9
(2.8)
37.4
62.5
Consolidated Statement of Cash Flows
for the Year Ended 31 December 2016
Cash flow from operating activities
Profit for the year
Adjustments for:
Financial income
Financial expense
Taxation
Share from jointly controlled entities
Operating profit
Depreciation and amortisation
Non-cash property, pension and remuneration charges
Impairments and reversals of impairments
Surplus of pension contributions over current service cost
Increase in trade and other receivables
Increase in inventories
(Decrease)/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 subsidiaries net of acquired cash
Purchase of property, plant and equipment and intangible assets
Proceeds from disposal of property, plant and equipment
Investment in equity accounted investee
Net cash flows from investing activities
Cash flows from financing activities
Proceeds from share issue
Dividends paid to shareholders
Interest paid
Repayment of bank loans
Proceeds from bank loans
Payment of finance lease liabilities
Net cash flows from financing activities
Net (decrease)/increase in cash and cash equivalents
Exchange gains/(losses) on cash and cash equivalents
Cash and cash equivalents at start of year
Cash and cash equivalents at end of year
86
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 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 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 standards including FRS101 Reduced Disclosure Framework; these are presented on
pages 129 to 137.
The accounting policies set out below have been applied consistently to all years presented in these Group financial statements.
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 year 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 Officer’s Review on pages 6 to 7 and the Principal Risks and
Uncertainties section on pages 22 to 27. The financial position of the Group, its cash flows, liquidity position and borrowing
facilities are described in the Financial Review on pages 28 to 32. In addition Note 21 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.
At the year end the Group met its day-to-day working capital requirements through its bank loan, which consisted of a term loan
and a revolving facility (see Note 16 to the financial statements).
Reclassification of items in the Consolidated Statement of Profit or Loss
To ensure the cost allocations within the Consolidated Statement of Profit or Loss are consistent with the operations of the
Group, the classification of items between administrative expenses and cost of sales have been reviewed.
Two reclassifications have been made to the comparative results for the year ended 31 December 2015:
• A proportion of UK cinema wage costs which were previously included in administrative expenses have been reclassified to
cost of sales so all cinema employee costs are now included in cost of sales.
• For consistency, credits to the Statement of Profit or Loss in respect of operating leases have been reclassified from
administrative expenses to cost of sales to net against the charges. All operating lease items are now shown in cost of sales.
Overall there is no impact on EBITDA, operating profit, the profit after tax or the net assets of the Group.
Going Concern
At the year end the Group met its day-to-day working capital requirements through its bank loan, which consisted of a term
loan and a revolving facility (see Note 16 to the financial statements).
The Group entered into a five-year facility in January 2014 which included term loans of £165.0m and €132.0m and revolving
credit facilities of £75.0m and €60.0m.
On 29 July 2015 the Group signed an amendment and extension to its existing banking facility which was effective immediately
upon signing and extends the facility to June 2020. As a result, the term loans were reduced from £157.5m and €126.0m to
£130.0m and €63.0m. In August 2016 the Group extended the single currency revolving credit facility of £190.0m to £215.0m to
partly fund the empire acquisition.
The facility remains subject to the existing two covenants: the ratio of EBITDA (as defined in Note 1) to net debt and the ratio of
EBITDAR (pre-rent EBITDA) to net finance charges. A margin, determined by the results of the covenant tests at a given date is
added to LIBOR or EURIBOR. The margins currently applicable to Group are 1.40% on the term loans and 1.15% on the revolving
credit facility.
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 for at least 12 months from the approval date of the
financial statements, including compliance with the bank facility covenants. The Group therefore continues to adopt the going
concern basis.
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 Statement of Other
Comprehensive Income or as available for sale.
87
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
continued
1. Accounting Policies continued
Basis of Consolidation
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The
financial statements of subsidiaries are included in the consolidated financial statements from the date on which control
commences until the date on which 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. Unrealised gains arising from transactions with equity-accounted investees are eliminated against the investment to
the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only
to the extent that there is no evidence of impairment.
Use of non-GAAP Profit and Loss Measures
The Group believes that along with operating profit, the following measures, provide additional guidance to the statutory
measures of the performance of the business during the financial year:
• EBITDA
• Adjusted profit before tax
• Adjusted profit after tax
The Group defines EBITDA as reported in the Consolidated Statement of Profit and Loss as Operating profit before depreciation
and amortisation, onerous leases and other non-recurring charges, impairments and reversals of impairments, transaction
and reorganisation costs, profit on disposals of assets and the settlement of the defined benefit pension liability. EBITDA is
considered an accurate and consistent measure of the Groups trading performance, items adjusted to arrive at EBITDA are
considered to be outside the Groups ongoing trading activities.
Adjusted profit before tax is calculated by adding back amortisation of intangible assets (excluding acquired movie distribution
rights), and certain non-recurring, non cash items and foreign exchange as set out in Note 5. Adjusted profit before tax is an
internal measure used by management, as they believe it better reflects the underlying performance of the Group and therefore a
more meaningful comparison of performance from period to period.
Adjusted profit after tax is arrived at by applying an effective tax rate to taxable adjustments and deducting the total from
adjusted profit before tax.
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 Statement of Profit or Loss.
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 year where this rate approximates to the foreign exchange rates ruling at the dates of
the transactions.
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 Statement of Comprehensive Income except where derivatives qualify for hedge accounting when recognition
of any resultant gain or loss depends on the nature of the item being hedged.
88
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 1. Accounting Policies continued
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 Statement of Other
Comprehensive Income 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 Other Comprehensive
Income immediately.
Net Investment Hedge
The Group uses net investment hedges to mitigate translation exposure on certain net investments in subsidiary companies.
Changes in the fair values of hedging instruments are taken directly to the Statement of Other Comprehensive Income together
with gains or losses on the foreign currency translation of the hedged investments. Until the investment is disposed all of these
gains or losses are recognised in equity, within the hedging reserve.
Non-Derivative Financial Instruments
Non-derivative financial instruments comprise investments in equity, trade and other receivables, cash and cash equivalents,
interest bearing borrowings, and trade and other payables.
Trade and Other Receivables
Trade and other receivables are initially measured at fair value. Subsequently they are carried at amortised cost using the
effective interest method less any impairment losses. A bad debt allowance for receivables is established when there is objective
evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables.
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.
Trade and Other Payables
Trade and other payables are initially measured at fair value. They are subsequently carried at amortised cost using the effective
interest method.
Interest-Bearing Borrowings
Interest-bearing borrowings are initially measured at fair value less attributable transaction costs. They are subsequently carried
at amortised cost with any difference between cost and redemption value being recognised in the Statement of Profit or Loss
over the period of the borrowings on an effective interest basis.
Property, Plant and Equipment
Property, plant and equipment is stated at cost less accumulated depreciation and impairment losses.
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.
All other leases are operating leases. These leased assets are not recognised in the Group’s Balance Sheet.
89
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
continued
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:
• Land and buildings: freehold properties
• Land and buildings: long leasehold properties including leasehold improvements
• Land and buildings: short leasehold properties including leasehold improvements
• Plant and machinery
• Fixtures and fittings
50 years
life of lease
30 years or life of lease if shorter
3 to 16 years
3 to 16 years
No depreciation is provided on land, assets held for sale or assets in the course of construction.
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.
Depreciation methods, residual values and the useful lives of all assets are reassessed annually.
Business Combinations
For acquisitions on or after 1 January 2010, the Group measures goodwill as the fair value of the consideration transferred
(including the fair value of any previously-held equity interest in the acquire) and the recognised amount of any non-controlling
interests in the acquiree, less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities
assumed, all measured as of the acquisition date. When the excess is negative, a bargain purchase gain is recognised immediately
in the Statement of Profit or Loss . Transactions costs, other than those associated with the issue of debt or equity securities that
the Group incurs in connection with business combinations are expensed as incurred.
Goodwill and Other Intangible Assets
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.
Distribution rights that are acquired by the Group are stated at cost less accumulated amortisation and impairment losses.
Amortisation is charged to the Statement of Profit or Loss 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.
Distribution rights are amortised by film title from the date of release of the film, at 50% in the first year of release and 25% in
each of the two subsequent years. The estimated useful lives are as follows:
• Brands
• Distribution rights
• Other intangibles
10 to 20 years
3 years
5 to 10 years
Non-current Assets Held for Sale
A non-current asset or a group of assets containing a non-current asset (a disposal group) is classified as held for sale if its
carrying amount will be recovered principally through sale rather than through continuing use, it is available for immediate sale
and sale is highly probable within one year.
On initial classification as held for sale, non-current assets and disposal groups are measured at the lower of previous carrying
amount and fair value less costs to sell with any adjustments taken to Statement of Profit or Loss. The same applies to gains
and losses on subsequent remeasurement although gains are not recognised in excess of any cumulative impairment loss. Any
impairment loss on a disposal group first is allocated to goodwill, and then to remaining assets and liabilities on pro rata basis,
except that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets and investment
property, which continue to be measured in accordance with the Group’s accounting policies. Intangible assets and property,
plant and equipment once classified as held for sale or distribution are not amortised or depreciated.
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.
90
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016
1. Accounting Policies continued
Impairment
The carrying amounts of the Group’s 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 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 Statement of Profit or Loss.
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 intangible 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.
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.
Employee Benefits
Defined Contribution Pension Plans
Obligations for contributions to defined contribution pension plans are recognised as an expense in the Statement of Profit or
Loss as incurred.
Defined Benefit Pension Plans
The Group’s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of
future benefit that employees have earned in the current and prior years, discounting that amount and deducting the fair value
of any plan assets.
The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method.
When the calculation results in a potential asset for the Group, the recognised asset is limited to the present value of economic
benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the
present value of economic benefits, consideration is given to any applicable minimum funding requirements.
Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets
(excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in the Statement of
Other Comprehensive Income. The Group determines the net interest expense (income) on the net defined benefit liability (asset)
for the year by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual year to
the then-net defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the
year as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans
are recognised in the Statement of Profit or Loss.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service
or the gain or loss on curtailment is recognised immediately in the Statement of Profit or Loss. The Group recognises gains and
losses on the settlement of a defined benefit plan when the settlement occurs.
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 Group 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 are recognised in the Statement of Profit or Loss.
91
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
continued
1. Accounting Policies continued
Government Grants
Government grants are recognised initially as deferred income at fair value when there is reasonable assurance that they will be
received and the Group will comply with the conditions associated with the grant. They are then recognised in the Statement of
Profit or Loss as other income on a systematic basis over the useful life of the asset to which they relate.
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.
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 and services
• 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 over the period the advert is shown in cinemas.
• Distribution revenue is recognised on the date of the showing of the film it relates to for cinema distribution, for other media
the revenue is recognised over the life of the distribution contract.
• 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.
Given the nature of the Group’s revenue streams recognition of revenue is not considered to be a significant judgement area.
Other Income
Other income represents rent receivable and profit on disposals of fixed assets. Rental income is recognised on a straight-line
basis over the life of the lease.
Expenses
Operating Lease Payments
Payments made under operating leases are recognised in the Statement of Comprehensive Income. Lease incentives received are
recognised in the Statement of Profit or Loss 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 property 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 Statement of Profit or Loss 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 Statement of Profit or Loss on completion of the transaction, when the sale and subsequent lease back has
been completed at fair value.
92
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 1. Accounting Policies continued
Taxation
Tax on the profit or loss for the year 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 year, using tax rates enacted or substantively enacted at
the Balance Sheet date, and any adjustment to tax payable in respect of previous years.
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.
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.
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.
Judgements
The key judgements are:
Business Combinations
When the Group undertakes a business combination, there are specific judgments which need to be made in respect of the
acquisition accounting. This includes determining the fair value of the acquired total net identifiable assets, with particular
reference to intangible assets, property plant and equipment, acquired leases and any required provisions. Details of the
acquisition undertaken by the Group during the year, including the specific judgements taken are set out in Note 15.
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. The Group is not intending to early adopt the new lease accounting standard, IFRS 16,
“Leasing” which will be effective from 1 January 2019.
Depreciation and Amortisation
For the Group to be able to depreciate the property, plant and equipment and amortise the intangible assets, appropriate
useful economic lives must be determined for each class of asset. Judgement is applied based on knowledge and experience
of the assets within the Group to determine the expected useful economic life for each of the different asset classes. For all
property plant and equipment or intangible asset additions these are allocated to the various asset classes and depreciated or
amortised accordingly.
Hedging Arrangements
In order to be able to hedge account the Group must consider the effectiveness of its hedging arrangements in accordance
with IAS 39, “Financial Instruments”. The Group has two types of hedging arrangements, the first is interest rate swaps to fix a
portion of its exposure to variable interest rates on its loan arrangements and the second is a net investment hedge to reduce the
Group’s future exposure to changes in foreign currency as a result of our foreign operations. Judgement must be applied when
determining whether financial instruments will be accounted for as a hedge and as to whether the required criteria for hedge
accounting will be met by these specific instruments.
93
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
continued
1. Accounting Policies continued
Estimates
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the
year in which the estimate is revised and in any future years 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.
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. To estimate the value in use, the Group estimates the expected
future cash flows from the cash generating unit and discounts them to their present value at a determined discount rate, which is
appropriate for the territory where the goodwill is allocated to.
Forecasting expected cash flows, and selecting an appropriate discount rate inherently requires estimation. A sensitivity
analysis has been performed over the estimates (see Note 10).
Impairment of Tangible Fixed Assets
The Group determines whether tangible fixed assets are impaired when indicators of impairments exist or based on the annual
impairment assessment. The annual assessment requires an estimate of the value in use of the cash generating units to which the
tangible fixed assets are allocated, which is predominantly at the individual cinema site level. Where individual sites cash flows are
not considered independent from one another, mainly due to strategic or managerial decisions being made across more than one
site, they may be combined into a single cash generating unit.
Estimating the value in use requires the Group to make an estimate of the expected future cash flows from each cinema and
discount these to their net present value at a determined discount rate which is appropriate for the territory where the assets
are held.
The resulting calculation is sensitive to the assumptions in respect of future cash flows and the discount rate applied. The
Directors consider that the assumptions made represent their best estimate of the future cash flows generated by the cash
generating units, and that the discount rate used is appropriate given the risks associated with the specific cash flows. A
sensitivity analysis has been performed over the estimates (see Note 9).
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 operate the lease and any penalties or
other costs from exiting it early.
When calculating the provision for an onerous lease 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
which is appropriate to the territory where the cinema is located. The resulting provision is sensitive to the assumptions in respect
of future cash flows and the discount rate applied. The Directors consider that the assumptions made represent their best
estimate of the future cash flows to be generated by the cinema sites, and that the discount rate used is appropriate given the
risks associated with these cash flows. A sensitivity analysis has been performed over the estimates (see Note 19).
Employee Post Retirement Benefit Obligations
The Group had two defined benefit pension plans, the MGM Pension Scheme and the Adelphi-Carlton Limited Contributory
Pension Plan.
The MGM Pension Scheme was settled during the year through an insurance buy-out arrangement. The final present value of the
obligation was calculated by independent actuaries as at the buy-out date, with input from management, in accordance with the
Group’s usual approach as outlined below. Further details of the buy-out can be found in Note 18.
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. It is considered that the assumptions used are the most appropriate but it is
recognised that the resulting pension liability can be very sensitive to these assumptions. Details of the assumptions used are
provided in Note 18.
Going forward without the MGM Pension Scheme the estimation uncertainty regarding employee post retirement benefit
obligations will be significantly reduced for the Group as the Adelphi-Carlton scheme is less significant.
94
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 1. Accounting Policies continued
Virtual Print Fees
A Virtual Print Fee (“VPF”) is recognised as a discount from the cost the Group pays for film rental and reflects the cost saving
to the studios of the move to digital. The income recognition criteria in respect of the VPF received in the UK is complex as it
includes the number, type and timing of screenings.
A VPF is receivable the first time a film is played in a digital format on a screen rather than using 35mm film. A VPF is recognised
on the date of the showing of the film it relates to and is included in cost of sales as a reduction of the film hire costs.
VPFs in the UK were received in 2016, but will not be received thereafter.
Tax
The Group operates in nine territories and is subject to tax in numerous territories and jurisdictions. Judgement is required in
determining the provisions in relation to tax as there are varying tax treatments which have to be applied to transactions across
the jurisdictions. The treatments can be complex and cannot be finally determined until formal resolutions have been reached
with the relevant tax authorities – these can take several years to conclude. Provisions are made based on management’s
interpretation of country specific tax laws and likely settlement outcomes based on the facts known at the Balance Sheet date.
These judgements may impact the tax charge as well as the assets and liabilities.
Deferred taxes are recognised in respect of temporary differences between the tax treatment and treatment within the financial
statements for assets and liabilities. Deferred tax assets are only recognised to the extent they are expected to be recovered.
Recoverability is assessed on an ongoing basis. Deferred tax is calculated at the substantively enacted rate which is expected to
apply in the period the asset or liability is expected to be realised.
New Standards and Interpretations
The accounting policies adopted are consistent with those of the previous financial year. The following standards, amendments
and interpretations were adopted for the year ended 31 December 2016 and have not had a material impact on the consolidated
financial statements of the Group.
• Annual improvements to IFRSs
• Disclosure initiative – amendment to IAS1
The Group is currently assessing the impact of the following standards and interpretations which have been issued but which are
not effective for the year ended 31 December 2016. These standards and interpretations have not been adopted early.
•
•
•
IFRS 9, “Financial Instruments”
IFRS 15, “Revenue from Contracts with Customers”
IFRS 16, “Leasing”
At 31 December 2016 the impact of these changes on the Groups financial statements had not been quantified. However the
impact of IFRS 16, is expected to significantly affect the Group’s lease accounting and Financial Statements. Changes to IFRS 9
and IFRS 15 are not expected to have a material effect.
95
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
continued
2. Operating Segments
The Group has determined that is has two operating segments: UK and Ireland and Rest of the World (“ROW”). The results for
the UK and Ireland include the two cinema chain brands, Cineworld and Picturehouse and for the ROW they include the cinema
chain brands Cinema City in Central and Eastern Europe territories and Yes Planet and Rav Chen in Israel.
Year ended 31 December 2016
Total revenues(1)
EBITDA as defined in Note 1
Segmental operating profit
Net finance costs
Depreciation and amortisation
Transaction and reorganisation costs
Profit before tax
Non-current asset additions – property, plant and equipment
Non-current asset additions – intangible assets
Investment in equity accounted investee
Non-current asset – goodwill
Onerous leases and other non-recurring charges
Impairments and reversals of impairments
Segmental total assets
Year ended 31 December 2015
Total revenues(1)
EBITDA
Segmental operating profit
Net finance costs
Depreciation and amortisation
Transaction and reorganisation costs
Profit before tax
Non-current asset additions – property, plant and equipment
Non-current asset additions – intangible assets
Investment in equity accounted investee
Non-current asset – goodwill
Onerous leases and other non-recurring charges
Impairments and reversals of impairments
Segmental total assets
(1) All revenues were received from third parties.
UK &
Ireland
£m
494.0
97.1
60.2
13.4
28.9
1.5
46.8
46.9
60.6
0.6
296.8
(0.5)
0.8
ROW
£m
303.8
78.7
52.6
1.2
29.7
–
51.4
72.4
5.4
0.3
353.8
(1.0)
(1.2)
Total
£m
797.8
175.8
112.8
14.6
58.6
1.5
98.2
119.3
66.0
0.9
650.6
(1.5)
(0.4)
571.4
725.3
1,296.7
465.9
95.7
71.3
(3.0)
25.6
1.7
68.3
57.7
–
0.6
236.2
(1.6)
6.3
239.9
59.6
31.8
(0.4)
23.8
0.2
31.4
41.9
5.0
–
303.1
(0.1)
2.7
705.8
155.3
103.1
(3.4)
49.4
1.9
99.7
99.6
5.0
0.6
539.3
(1.7)
9.0
519.4
574.5
1,093.9
96
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 2. Operating Segments continued
Entity Wide Disclosures
Revenue by country
United Kingdom & Ireland
Israel
Poland
Bulgaria
Romania
Hungary
Slovakia
Czech Republic
Total revenue
UK and Ireland
Revenue by product and service provided
Box office
Retail
Other
Total revenue
ROW
Revenue by product and service provided
Box office
Retail
Other
Total revenue
3. Other Operating Income
Rental income
Profits on disposals of assets classified as held for sale
Total other operating income
Year ended
31 December
2016
£m
Year ended
31 December
2015
£m
494.0
63.5
98.1
11.9
42.6
49.7
8.4
29.6
797.8
465.9
52.0
78.0
11.0
30.3
39.0
6.7
22.9
705.8
Year ended
31 December
2016
£m
Year ended
31 December
2015
£m
324.0
117.5
52.5
494.0
311.9
107.2
46.8
465.9
Year ended
31 December
2016
£m
Year ended
31 December
2015
£m
176.9
73.3
53.6
303.8
139.7
55.5
44.7
239.9
Year ended
31 December
2016
£m
Year ended
31 December
2015
£m
2.7
–
2.7
2.3
6.4
8.7
97
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
continued
4. Operating Profit
Included in operating profit for the year are the following:
Depreciation (see Note 9)
Impairments (see Notes 9 and 10)
Reversals of impairments (see Notes 9 and 10)
Amortisation of intangibles (see Note 10)
Onerous leases and other non-recurring charges
Transaction and reorganisation costs
Hire of other assets – operating leases
Settlement of defined benefit pension liability
Year ended
31 December
2016
£m
Year ended
31 December
2015
£m
47.9
1.3
(1.7)
10.7
(1.5)
1.5
87.3(1)
4.8
38.4
9.0
–
11.0
(1.7)
1.9
80.8(1)
–
(1) £1.0m (2015: £0.9m) is included in administrative costs. The balance is included in cost of sales.
In 2016 there is a gain of £1.7m (2015: £2.0m) on onerous leases following changes in trading assumptions and a further release of
£1.0m due the closure of a site with an onerous lease provision in place. Other non-recurring charges included a gain on property
provisions of £0.1m and the write off of £1.3m lease related assets no longer considered recoverable.
In 2016 transaction and reorganisation costs include £0.8m relating the integration and relocation of head office functions and
redundancy costs (2015: £1.9m), £0.5m of costs incurred on the acquisition of five cinemas from Empire Cinemas Limited, £1.0m
incurred in the termination of contracts and the recovery £0.8m in VAT in respect of previously incurred transactions costs.
The total remuneration of the Group auditor, KPMG LLP, and its affiliates for the services to the Group is analysed below:
Auditor’s remuneration:
Group – audit
Company – audit
Amounts received by auditors and their associates in respect of:
– Audit of financial statements pursuant to legislation
– Audit related assurance services
– Tax compliance services
– Tax advisory services
– Other advisory services
– All other services
Year ended
31 December
2016
£m
Year ended
31 December
2015
£m
0.6
–
0.6
–
0.1
0.1
0.2
–
0.7
0.1
0.8
0.1
0.1
0.5
–
–
98
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 5. Earnings Per Share
Basic earnings per share is calculated by dividing the profit for the year attributable to ordinary shareholders by the weighted
average number of ordinary shares outstanding during the year, 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 year attributable to ordinary shareholders
is adjusted by adding back the amortisation of intangible assets recognised as part of business combinations and other one-
off income or expense and then adjusting for the tax impact on those items which is calculated at the effective tax rate for the
current year. The performance of adjusted earnings per share is used to determine awards to Executive Directors under the
Group Performance Share Plan (“PSP”). Diluted earnings per share is calculated by dividing the profit for the year attributable to
ordinary shareholders by weighted average number of any non-vested ordinary shares held by the employee share ownership
trust and after adjusting for the effects of dilutive options.
Year ended
31 December
2016
£m
Year ended
31 December
2015
£m
Earnings attributable to ordinary shareholders
Adjustments:
Amortisation of intangible assets(1)
Transaction and reorganisation costs
Impairments and reversals of impairments
Onerous lease cost and other non-recurring charges
Settlement of defined benefit pension scheme
Impact of foreign exchange translation gains and losses(3)
Exceptional finance credit(2)
Profit on disposal of assets classified as held for sale
Adjusted earnings
Tax effect of above items
Adjusted profit after tax
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 year end
Basic earnings per share
Diluted earnings per share
Adjusted basic earnings per share
Adjusted diluted earnings per share
82.0
4.6
1.5
(0.4)
(1.5)
4.8
6.1
(1.9)
–
95.2
(1.4)
93.8
81.3
4.2
1.9
9.0
(1.7)
–
(7.7)
–
(6.4)
80.6
(1.3)
79.3
Year ended
31 December
2016
Total
Year ended
31 December
2015
Total
266.2
266.2
4.4
270.6
267.6
Pence
30.8
30.4
35.2
34.7
264.7
264.7
2.5
267.2
265.2
Pence
30.7
30.4
30.0
29.7
(1) Amortisation of intangible assets includes amortisation of the fair value placed on brands, customer lists, distribution relationships, and advertising relationships as a
result of the Cinema City business combination. It does not include amortisation of purchased distribution rights (which totalled £6.1m (2015: £6.5m)).
(2) Exceptional finance credits of £1.9m in 2016 were made up of the net change in fair value of cash flow hedges reclassified from equity, no such charges were incurred
in 2015.
(3) Net foreign exchange gains and losses included within earnings comprises of £6.1m foreign exchange loss recognised on translation of the Euro term loan at
31 December 2016 (2015: £7.7m gain). 2015 Adjusted EPS has been amended, as it previously included £3.8m in foreign exchange losses recognised on translating
overseas operations into the reporting currency of the Group. Management no longer consider these movements should be excluded.
99
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
continued
6. Staff Numbers and Costs
The average number of persons employed by the Group (including Directors) during the year, analysed by category, was
as follows:
Head office
Cinemas
Number of staff
2016
683
9,263
9,946
2015
624
8,682
9,306
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:
Year ended
31 December
2016
£m
Year ended
31 December
2015
£m
101.8
8.8
0.3
2.0
112.9
88.6
7.8
0.6
1.8
98.8
Year ended
31 December
2016
£m
Year ended
31 December
2015
£m
0.7
–
0.4
1.9
3.0
7.8
1.4
0.6
0.7
0.4
6.7
–
17.6
14.6
0.3
8.0
0.4
–
8.7
9.3
1.3
0.8
–
0.4
–
0.3
12.1
3.4
Year ended
31 December
2016
£m
Year ended
31 December
2015
£m
0.5
(88.2)
1.1
(16.9)
Wages and salaries
Social security costs
Other pension costs – defined contribution
Share-based payments (see Note 18)
See pages 54 to 72 for details of Directors’ remuneration.
7. Finance Income and Expense
Interest income
Net foreign exchange gain
Defined benefit pension scheme net finance income (Note 18)
Amounts reclassified from equity to profit or loss in respect settled of cash flow hedges
Finance income
Interest expense on bank loans and overdrafts
Amortisation of financing costs
Unwind of discount on onerous lease provision
Unwind of discount on finance lease liability
Unwind of discount on market rent provision
Net foreign exchange loss
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)
100
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 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
Current year
Adjustments in respect of prior years
Total tax charge in statement of profit or loss
Effective tax rate
Current year effective tax rate
Reconciliation of Effective Tax Rate
Profit before tax
Tax using the UK corporation tax rate of 20.0% (2015: 20.25%)
Differences in overseas tax rates
Permanently disallowed depreciation
Other permanent differences
Adjustments in respect of prior years
Increase in unrecognised deferred tax assets
Effect of change in statutory rate on deferred tax
Total tax charge in statement of profit or loss
Year ended
31 December
2016
£m
Year ended
31 December
2015
£m
16.5
(4.1)
12.4
1.3
2.5
16.2
16.5%
18.1%
11.2
–
11.2
7.2
–
18.4
18.5%
18.5%
Year ended
31 December
2016
£m
Year ended
31 December
2015
£m
98.2
19.6
(5.9)
1.3
1.5
(1.6)
(1.4)
2.7
16.2
99.7
20.2
(2.2)
1.9
(1.5)
–
–
–
18.4
During the year there was a net deferred tax debit of £1.0m (2015: £Nil) recognised directly in the Statement of Other
Comprehensive Income. This related to the actuarial loss on the defined benefit scheme and the movement in the fair value of the
cash flow hedge on part of the Group’s bank loans; see Note 12.
Factors that May Affect Future Tax Charges
As at 31 December 2016 the Group had potential UK tax assets relating to the following:
• Capital losses of approximately £7.5m (2015: £7.5m).
No deferred tax liability has been recognised on £5.8m of unremitted earnings of overseas subsidiaries which are potentially
subject to withholding tax on distribution, as the Group can control the timing of remittances and it is probable that no
remittance will be made in the foreseeable future. No withholding tax or other taxes are imposed under local tax laws on the
distribution of unremitted earnings from other subsidiaries resident in the majority of the Group’s jurisdictions.
At 31 December 2016 the Group had unrecognised potential tax assets relating to the following temporary differences:
• UK capital losses of £7.5m
• Overseas tax losses of £1.6m expiring over periods to 2025
• Other overseas temporary differences of £12.1m
If is not considered probable that future taxable profit will be available against which these deductible temporary differences can
be utilised.
Deferred tax assets and liabilities are measured using the tax rates that are expected to apply to the periods when the assets are
realised or liabilities settled, based on tax rates enacted or substantively enacted at 31 December 2016.
The Group operates in nine countries and is subject to tax in numerous jurisdictions. Judgement is required in determining the
provision for taxes as the varying tax treatments applying to transactions across jurisdictions are complex and cannot be finally
determined until formal resolutions have been reached with the relevant tax authorities. These can take several years to conclude.
Provision is made based on management’s interpretation of country specific tax laws and likely settlement outcomes.
101
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
continued
9. Property, Plant and Equipment
Cost
Balance at 1 January 2015
Additions
Disposals
Transfers
Effects of movement in foreign exchange
Balance at 31 December 2015
Additions
Additions due to acquisition
Disposals
Transfers
Effects of movement in foreign exchange
Balance at 31 December 2016
Accumulated depreciation and impairment
Balance at 1 January 2015
Charge for the period
Disposals
Effects of movement in foreign exchange
Impairments
Reversals of impairments
Balance at 31 December 2015
Charge for the period
Disposals
Effects of movement in foreign exchange
Impairments
Reversals of impairments
Balance at 31 December 2016
Net book value
At 31 December 2015
At 31 December 2016
Land and
buildings
£m
Plant and
machinery
£m
Fixtures
and
fittings
£m
Assets
in the
course of
construction
£m
108.8
15.5
(4.4)
5.0
(3.1)
121.8
16.9
1.5
(4.1)
6.7
24.3
133.1
24.1
(6.9)
10.1
(1.3)
159.1
21.4
5.9
(2.3)
8.6
25.3
23.4
39.0
–
(52.2)
0.4
10.6
16.9
–
–
(20.2)
1.2
Total
£m
399.9
99.6
(13.5)
–
(6.3)
479.7
76.5
42.8
(11.6)
–
60.3
167.1
218.0
8.5
647.7
28.6
15.5
(2.6)
(1.9)
1.8
–
41.4
20.3
(3.5)
15.8
0.5
(0.9)
73.6
80.4
93.5
39.9
15.6
(7.5)
(1.7)
2.5
–
48.8
18.1
(2.4)
12.3
0.1
(0.7)
76.2
110.3
141.8
–
–
–
–
–
–
–
–
–
–
–
–
10.6
8.5
102.3
38.4
(10.4)
(5.0)
9.0
–
134.3
47.9
(11.1)
31.6
1.3
(1.7)
202.3
345.4
445.4
134.6
21.0
(2.2)
37.1
(2.3)
188.2
21.3
35.4
(5.2)
4.9
9.5
254.1
33.8
7.3
(0.3)
(1.4)
4.7
–
44.1
9.5
(5.2)
3.5
0.7
(0.1)
52.5
144.1
201.6
Land and buildings are made up of long and short leasehold properties (including leasehold improvements) and freehold properties.
The net book value of assets held under finance lease is:
Opening net book value
Additions
Depreciation charge
Closing net book value
31 December
2016
£m
31 December
2015
£m
6.8
16.5
(0.5)
22.8
7.1
–
(0.3)
6.8
The above assets held under finance leases relate to three cinema sites, two cinema sites for which the leased assets are included
within land and buildings and equipment and another site in which they are held in plant and machinery.
Interest of £0.5m (2015: £1.2m) has been capitalised during the period which relates to the construction of new sites.
No proceeds were received in the period in respect of the tangible fixed asset disposals.
102
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 9. Property, Plant and Equipment continued
Impairment
The Group determines whether tangible fixed assets are impaired when indicators of impairments exist or based on the annual
impairment assessment. The annual assessment requires an estimate of the value in use of the cash generating units to which the
tangible fixed assets are allocated, which is predominantly at the individual cinema site level. Where individual sites cash flows are
not considered independent from one another, mainly due to strategic or managerial decisions being made across more than one
site, they may be combined into a single cash generating unit.
Estimating the value in use requires the Group to make an estimate of the expected future cash flows from each CGU and
discount these to their net present value at a pre-tax discount rate which is appropriate for the territory where the assets are
held. A table summarising the rates used, which are derived from externally benchmarked data, is set out below:
United Kingdom
Israel
Poland
Bulgaria
Romania
Hungary
Slovakia
Czech Republic
Year ended
31 December
2016
£m
Year ended
31 December
2015
£m
9.20%
12.73%(1)
12.65%
10.64%
11.81%
12.96%
11.11%
11.04%
11.36%
17.28%
13.10%
15.27%
16.69%
17.78%
15.66%
15.48%
(1) For sites which generate significant rental cashflows in addition to cinema cashflows a separate discount rate of 13.06% was used to reflect the specific risks related to
those CGUs.
For established sites, expected future cash flows are based on financial budgets approved by the Board of Directors covering
a one-year period. Cash flows beyond the first period are extrapolated using the assumptions used in the impairment model.
Constant growth rate assumptions are used for projections on established sites. For new sites, where a constant growth would
not accurately reflect market conditions, more detailed growth assumptions are used for the first five years.
Discount rate
EBITDAR growth rate years 1-2
EBITDAR growth rate year 3 onward
UK & Ireland
ROW
Year ended
31 December
2016
%
Year ended
31 December
2015
%
Year ended
31 December
2016
%
Year ended
31 December
2015
%
9.20
3.00
2.00
11.36
3.00
2.00
(N/A)(1)
3.00
2.00
(N/A)(1)
3.00
2.00
(1) Individual discount rates for each operating territory have been used, a summary is disclosed above.
2017 forecast EBITDA, as defined in Note 1, was used as the basis of the future cash flow calculation. This was adjusted to add
back rent (EBITDAR). Property costs are factored into the model, but are assumed to grow at 3.0% per annum over the life of
the model. Cash flows are projected over the shorter of the life of the property lease or the intangible assets to which the cash
flow relates.
Impairments recognised during the year totalled £1.3m within the UK and Ireland operating segment, £0.8m related to capital
expenditure on cinema sites for which onerous lease provisions were in place, the remaining £0.5m related to the write off of
residual assets held at sites which were closed during the year.
Impairment Reversals
A review of future cash flows for previously impaired cinema sites identified improvements in trading performance at three sites
sufficient to recognise a reversal of impairment. An impairment reversal of £0.5m was recognised for one site in the UK and £1.2m
relating to two sites in the ROW, of these reversals £1.2m arose due to previously independent CGUs being considered together
as they are now considered to be strategically or operationally inter-dependant.
103
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
continued
9. Property, Plant and Equipment continued
Sensitivity to Changes in Assumptions
Impairment reviews are sensitive to changes in key assumptions. Sensitivity analysis has been performed on the established
CGUs’ calculated recoverable amounts giving consideration to incremental changes in the key assumptions of EBITDAR and
discount rates.
The cashflow models used in assessing the carrying values of sites opened within the last two years are based on specific
assumptions made prior to opening in respect of the early growth phase of the sites. Therefore sensitivity analysis is not applied
to these sites during this time.
The sensitivities applied reflect realistic scenarios which management believe would have the most significant impact on the cash
flows described above.
Discounts rates are largely derived from market data, and these rates are intended to be long term in nature so therefore should
be reasonably stable in the short term. However, the models are sensitive to changes in these rates. Increases by a factor of 1%,
2% and 5% have been applied in the sensitised scenarios on the basis they reflect the range of likely to maximum variances in
rates applied.
The growth rates for EBITDAR in years 1 and 2 have been reduced to 2%, 1% and nil. EBITDAR sensitivities reflect reductions in
growth which would largely be driven by changes in admissions and ticket price. Given the short term admissions trends and
ticket price inflation, sensitivities applied are believed to reflect a potential downside scenario.
From year 3 onward a lower long term growth rate is applied, which is in line or below long term inflation in each territory. As
such we already consider this assumption prudent and therefore this has not been included as part of the sensitivities performed.
When reviewing the outputs of the sensitivity analysis, particular focus is given to material amounts where headroom is
more limited.
The impact on the total impairment charge of applying different assumptions to the growth rates used in the first two years and
the discount rates would be as follows:
EBITDAR growth rate in years 1-2 reduced to 2%
EBITDAR growth rate in years 1-2 reduced to 1%
No growth in EBITDAR growth rate in years 1-2
1 percentage point increase to the discount rates
2 percentage point increase to the discount rates
5 percentage point increase to the discount rates
£m
4.8
5.0
5.2
0.1
0.1
0.7
For CGUs which are still in a rapid growth phase and include significant rental cash flows in addition to the cinema cash flows,
specific local factors should be considered when preparing the forecast admissions which differ from a constant future growth
rate. Therefore the basic sensitivities highlighted above are not appropriate to be applied. As such these CGUs have been
excluded from the above analysis and alternative sensitivities, reflecting management’s best estimate of likely possible changes,
have been applied.
EBITDAR is particularly sensitive to a change in admissions due to its particular growth profile. As such EBITDAR has been
reduced to reflect a 15% reduction in mature admissions and related cash flows. In assessing the risk associated with these cash
flows, discount rates have been increased across the various income streams to reflect the maximum expected variances which
are considered realistic in practice.
From the sensitivity analysis performed, including a mix of downsides when applying admissions decrease and discount rate
increase, the potential impairment level ranges from headroom of £0.3m to impairment of £5.1m.
104
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 10. Intangible Assets
Cost
Balance at 1 January 2015
Acquisition of subsidiary undertakings
Additions
Effects of movement in foreign exchange
Balance at 31 December 2015
Additions
Disposals
Effects of movement in foreign exchange
Balance at 31 December 2016
Accumulated amortisation and impairment
Balance at 1 January 2015
Amortisation
Effects of movement in foreign exchange
Balance at 31 December 2015
Amortisation
Disposals
Effects of movement in foreign exchange
Balance at 31 December 2016
Net book value
At 31 December 2015
At 31 December 2016
Goodwill
£m
Brand
£m
Distribution
rights
£m
Other
intangibles
£m
561.2
–
–
(13.5)
547.7
60.6
–
50.7
659.0
8.4
–
–
8.4
–
–
–
8.4
39.4
–
–
(0.7)
38.7
–
–
3.4
42.1
5.4
2.7
–
8.1
2.8
–
–
19.7
–
4.9
(0.5)
24.1
3.3
–
5.3
32.7
3.5
6.5
(0.3)
9.7
6.1
–
2.6
10.9
18.4
539.3
650.6
30.6
31.2
14.4
14.3
10.7
–
0.1
(0.7)
10.1
2.1
(0.8)
2.1
13.5
1.1
1.8
(0.3)
2.6
1.8
(0.7)
1.1
4.8
7.5
8.7
Total
£m
631.0
–
5.0
(15.4)
620.6
66.0
(0.8)
61.5
747.3
18.4
11.0
(0.6)
28.8
10.7
(0.7)
3.7
42.5
591.8
704.8
Impairment Testing
Each individual cinema, or collections of cinemas which are strategically or operationally co-dependant, are considered to be one
CGU. However, for the purpose of testing goodwill for impairment, it is acceptable under IAS 36 to group CGUs, in order to reflect
the level at which goodwill is monitored by management.
The ex-Cine-UK, ex-UGC (including Dublin) and Picturehouse businesses are now fully integrated, meaning that goodwill is
now monitored on a UK wide level. Cinema City CGUs are considered as separate groups and have been tested for goodwill
impairment on this basis, the Cinema City CGUs are considered on a territory basis, the territories being Poland (2016: £96.2m,
2015: 85.3m), Israel (2016: £64.4m, 2015: £52.6m), Hungary (2016: £47.9m, 2015: £40.3m), Romania (2016: £99.7m, 2015: £85.8m),
Bulgaria (2016: £15.3m, 2015: £13.1m), Czech (2016: £26.6m, 2015: £22.8m) and Slovakia (2016: £3.7m, 2015: £3.2m).
The five sites acquired from Empire Cinemas Limited in the year are considered to have been fully integrated from the date of
acquisition as there were no support functions included in the acquisition. The acquired goodwill in respect of this transaction is
therefore included within the UK CGU.
The recoverable amount of UK and Cinema City CGU’s have been determined based on a value in use calculation. That
calculation uses cash flow projections based on financial budgets approved by management covering a five-year period. Cash
flows beyond the first five 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 the CGU operates.
The UK business has discounted forecast cash flows using a pre-tax discount rate of 9.5% (2014: 11.36%) being a market
participant’s discount rate. The Cinema City CGUs have discounted forecast cash flows using a pre-tax discount rates relevant to
the operating territory of each CGU (see Note 9), being a market participant’s discount rate. This is considered to reflect the risks
associated with the relevant cash flows each CGU.
The key assumptions used in the cash flow projections for the purpose of the impairment review are as follows:
Discount rate
EBITDA growth rate from year 5 onward
(1) Individual discount rates for each operating territory have been used, a summary is disclosed in Note 9.
UK & Ireland
ROW
Year ended
31 December
2016
%
Year ended
31 December
2015
%
Year ended
31 December
2016
%
Year ended
31 December
2015
%
9.20
2.00
11.36
2.00
(N/A)(1)
2.00
(N/A)(1)
2.00
105
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
continued
10. Intangible Assets continued
2017 forecast EBITDA, as defined in Note 1, was used as the basis of the future cash flow calculation.
Management have sensitised the key assumptions in the goodwill impairment tests and under both the base case and sensitised
cases no impairment exists. The key assumptions used and sensitised were forecast cashflows and the relevant discount rate,
which were selected as they are the key variable elements of the value in use.
A reduction of 10% in the forecast cashflows for each CGU from year 2 to 5 or an increase in the discount rate applied to the
cashflows of each CGU of 1 percentage point would not cause the carrying value to exceed its recoverable amount for any
CGU. Therefore, management believe that any reasonably possible change in the key assumptions would not result in an
impairment charge.
Amortisation Charge
The amortisation of intangible assets is recognised in the following line items in the statement of profit or loss:
Administrative expenses
11. Investment in Equity Accounted Investees
The Group has the following investment in a jointly controlled entities:
Digital Cinema Media Limited
BLACK Schrauber Limited
Year ended
31 December
2016
£m
Year ended
31 December
2015
£m
10.7
11.0
Class of
Country of Incorporation
shares held Ownership
England and Wales
Israel
Ordinary
Ordinary
50%
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.
31 December
2016
£m
31 December
2015
£m
Cost
Share of post-acquisition reserves
Share of post-tax loss
Carrying value
Summary aggregated financial information on jointly controlled entities – 100%:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net liabilities
Income
Expenses
Net loss
106
0.9
(0.3)
0.6
–
0.6
0.9
(0.3)
0.6
–
0.6
31 December
2016
£m
31 December
2015
£m
20.3
1.8
(16.1)
(6.4)
(0.4)
65.2
(65.2)
–
31.5
1.7
(22.8)
(11.0)
(0.6)
65.3
(65.3)
–
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 11. Investment in Equity Accounted Investees continued
On 24 June 2015 the Group jointly formed a partnership for running a restaurant in the new complex in Jerusalem, as at
31 December 2016 the assets, liabilities and net profit of BLACK Schrauber Limited were not material to the Group.
Cost
Share of post-acquisition reserves
Share of post-tax loss
Carrying value
12. Deferred Tax Assets and Liabilities
Deferred tax assets and liabilities are attributable to the following:
31 December
2016
£m
31 December
2015
£m
0.3
–
0.3
–
0.3
–
–
–
–
–
Property, plant and equipment
Intangible assets
Employee benefits
Onerous lease
Market rent
Interest rate swap
Tax losses
Other
Tax assets/(liabilities)
Set off tax
Net tax assets/(liabilities)
Assets
Liabilities
Net
31 December
2016
£m
31 December
2015
£m
31 December
2016
£m
31 December
2015
£m
31 December
2016
£m
31 December
2015
£m
0.1
–
0.5
–
0.4
0.2
0.3
1.0
2.5
(2.4)
0.1
0.3
–
1.0
0.2
0.6
0.5
0.4
–
3.0
(3.0)
–
(6.2)
(8.6)
(0.3)
–
(0.1)
–
–
–
(15.2)
2.4
(12.8)
(2.1)
(6.8)
(2.1)
–
–
–
–
–
(11.0)
3.0
(8.0)
(6.1)
(8.6)
0.2
–
0.3
0.2
0.3
1.0
(12.7)
–
(12.7)
(1.8)
(6.8)
(1.1)
0.2
0.6
0.5
0.4
–
(8.0)
–
(8.0)
See Note 8 for details of unrecognised tax assets.
Deferred taxation provided for in the financial statements at the period end represents provision at the local tax rates on the
above items.
A review of the deferred tax will be performed at each balance date and adjustments made in the event of a change in any key
assumptions.
Deferred tax assets and liabilities are attributable to the following:
Property, plant and equipment
Intangible assets
Employee benefits
Onerous lease
Market rent
Interest rate swap
Tax losses
Other
Tax liabilities
13. Inventories
Goods for resale
Goods for resale recognised in cost of sales in the year amounted to £55.8m (2015: £45.5m).
1 January
2016
£m
Recognised
in income
£m
Recognised
in equity
£m
Forex
£m
31 December
2016
£m
(1.8)
(6.8)
(1.1)
0.2
0.6
0.5
0.4
–
(8.0)
(4.2)
(0.6)
0.9
(0.2)
(0.3)
(0.3)
(0.1)
1.0
(3.8)
–
–
0.4
–
–
–
–
–
0.4
(0.1)
(1.2)
–
–
–
–
–
–
(1.3)
(6.1)
(8.6)
0.2
–
0.3
0.2
0.3
1.0
(12.7)
31 December
2016
£m
31 December
2015
£m
9.8
9.2
107
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
continued
14. Trade and Other Receivables
Current
Trade receivables
Other receivables
Prepayments and accrued income
Non-current
Other property receivables
Land lease premiums
Loan to jointly controlled entity
31 December
2016
£m
31 December
2015
£m
29.8
7.7
36.5
74.0
23.5
7.5
36.8
67.8
31 December
2016
£m
31 December
2015
£m
4.5
0.9
0.6
6.0
4.6
0.9
0.6
6.1
Other property receivables represent the fair value asset of leases acquired with Cinema City Holdings B.V.
The Virtual Print Fee accrued income balance recognised at the year end of £nil (2015: £3.5m) is included within the prepayments
and accrued income. The balance is accrued based on the number of relevant film screenings during the year.
15. Business Combinations
On 28 July 2016 Cineworld Group Plc (the “Group”) announced the acquisition of five Cinemas from Cinema Holdings Limited by
means of an acquisition of 100% of the shares, including all of the voting rights.
Consideration transferred
The acquisition was completed on 11 August 2016, at which point the consideration equated to £94.5m which would be settled
equally in cash, and in Cineworld Group plc ordinary shares in addition to the transfer of the trade and assets of the Group’s
Haymarket cinema to Cinema Holdings Limited. The shares will be issued in five instalments during a 12 month period, based on
an issue price reflecting 20 days’ average trading price prior to the date of each issuance. The first issue of shares took place on
18 November 2016.
Fair Value of Consideration Transferred
Cash consideration
Share consideration
Transfer of cinema assets
Total fair value of consideration transferred
£m
47.0
47.0
0.5
94.5
The fair value of the shares issued to Cinema Holdings Limited will include £42.0m split into four tranches, issued at three month
intervals with the first issued on the three month anniversary of completion of the acquisition.
Identifiable Assets Acquired and Liabilities Assumed
Fair value of total net identifiable assets upon acquisition
Property, plant and equipment:
Finance lease liability
Deferred tax provisions
Provisions for liabilities
Cash and cash equivalents
Total net identifiable assets
Goodwill
Consideration transferred
108
£m
42.8
(8.2)
(0.2)
(0.5)
–
33.9
60.6
94.5
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016
15. Business Combinations continued
The Key Judgments considered were as follows:
Property and leases
The fair value of property, plant and equipment of £42.8m included a number of adjustments. Old cinema equipment and assets
which were previously held at their residual value of £3.2m were fully depreciated as the residual value is not expected to be
realised. A fair value adjustment of £3.0m was made in respect of the Bromley site in recognition of the residual value in the
sellers books being below the current market value.
As well as considering the fair value of acquired property, plant and equipment, management also considered the lease contract
for each of the cinemas. Where leases include options to extend beyond the existing contracted term this was taken into
consideration. Two leases held on the Leicester Square site were classified as finance leases and a liability for the fair value of the
minimum expected lease payments on each recognized, a corresponding asset was recognised in respect of the fair value of the
lease within Property, Plant and Equipment.
Tax
The acquired deferred tax liability of £0.2m reflects taxable temporary differences on fixed assets at acquisition.
No income tax liability is recognised on acquisition as future tax charges are not expected to arise in respect of tax positions
open at the date of acquisition.
Identifiable Intangible Assets
There were no identifiable intangible assets recognised on acquisition. Management consider the residual Goodwill of £60.6m to
represent a number of factors including the strategic location of the sites acquired, the established benefit of an established site,
the value the acquired sites can add to Cineworld’s existing brand and products as well as synergies expected to be realised post
acquisition. None of the goodwill is expected to be deductible for income tax purposes.
The revenue included in the Consolidated Statement of Profit or Loss since 11 August 2016 contributed by the acquired sites
was £11.9m. The profit before tax contributed was £2.6m over the same period. Had the five cinemas been consolidated from
1 January 2016 (the commencement of the current financial period), the Consolidated Statement of Profit or Loss would show
revenue of £814.5m and profit before tax of £101.9m.
Acquisition related costs of £0.5m were charged to administrative expenses in the Consolidated Statement of Profit or Loss for
the year ended 31 December 2016.
16. 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
Unsecured bank loan, less issue costs of debt to be amortised
Liabilities under finance leases
Current liabilities
Interest rate swaps
Unsecured bank loans, less issue costs of debt to be amortised
Liabilities under finance leases
31 December
2016
£m
31 December
2015
£m
0.6
307.1
13.6
321.3
0.5
14.9
1.4
16.8
0.6
285.3
6.1
292.0
1.0
14.0
0.7
15.7
109
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
continued
16. Interest-Bearing Loans and Borrowings and Other Financial Liabilities continued
The terms and conditions of outstanding loans were as follows:
Unsecured bank loan – 1
Unsecured bank loan – 2
Unsecured bank loan – 3
Finance lease liability – 1
Finance lease liability – 2
Finance lease liability – 3
Finance lease liability – 4
Total interest bearing liabilities
Currency
Nominal interest rate
GBP
EURO
NIS
GBP
EURO
GBP
GBP
LIBOR +1.40%
EURIBOR +1.40%
2.6%
7.2%
6.5%
6.2%
9.6%
Year of
maturity
2020
2020
2020
2029
2021
2060
2036
31 December 2016
31 December 2015
Face
value
£m
Carrying
amount
£m
Face
value
£m
Carrying
amount
£m
276.8
46.2
2.3
6.0
0.7
7.9
–
339.9
273.9
45.8
2.3
6.0
0.8
8.2
–
337.0
256.2
44.1
3.4
6.2
0.6
–
–
310.5
252.4
43.5
3.4
6.2
0.6
–
–
306.1
See Note 21 for bank loan maturity analysis.
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
At 1 January 2015
Cash flows
Non-cash movement
Effect of movement in foreign exchange rates
At 31 December 2015
Cash flows
Non-cash movement
Effect of movement in foreign exchange rates
At 31 December 2016
31 December
2016
£m
31 December
2015
£m
1.3
1.3
4.2
27.2
34.0
(19.3)
14.7
0.8
0.8
2.6
6.4
10.6
(3.8)
6.8
Cash at
bank
and in hand
£m
Bank
overdraft
£m
Bank
loans
£m
Finance
leases
£m
Interest rate
swap
£m
37.4
27.9
–
(2.8)
62.5
(14.1)
–
7.4
55.8
(2.1)
2.1
–
–
–
–
–
–
–
(307.1)
1.9
(1.8)
7.7
(299.3)
(13.4)
(1.8)
(7.5)
(7.4)
1.0
(0.4)
–
(6.8)
1.0
(9.2)
–
(322.0)
(15.0)
(2.7)
–
1.1
–
(1.6)
–
0.5
–
(1.1)
Net debt
£m
(281.9)
32.9
(1.1)
4.9
(245.2)
(26.5)
(10.5)
(0.1)
(282.3)
The non-cash movements relating to bank loans represent the amortisation of debt issuance costs.
110
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 17. Trade and Other Payables
Current
Trade payables
Other payables
Accruals and deferred income
Deferred consideration
Non-current
Accruals and deferred income
Government grants
31 December
2016
£m
31 December
2015
£m
30.1
27.7
81.0
37.0
175.8
33.9
24.8
83.1
–
141.8
31 December
2016
£m
31 December
2015
£m
74.8
1.7
76.5
67.0
1.8
68.8
Non-current accruals and deferred income include reverse-lease premiums and an accrual for straight-lining operating leases.
18. 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.
MGM Scheme
The Scheme is a funded scheme of the defined benefit type, providing retirement benefits based on final salary. The Scheme
closed to future accrual from 31 May 2009, though the link to final pay at retirement was retained.
On 15 December 2016 the scheme was bought out by Aviva Annuity UK Limited, with all risks in relation to the scheme passing
to Aviva Annuity UK Limited as of the buyout date. This transition was treated as a settlement occurring on 15 December 2016
(the inception date). Following this transaction, all members of the Scheme have had their benefits secured with Aviva Annuity
UK Limited, discharging the Group’s legal and constructive obligations for the scheme. The past service liabilities at 31 December
2016 are therefore shown as nil.
The Group has engaged its actuary’s assistance in measuring the defined benefit asset for the purposes of IAS19 revised for the
year ended 31 December 2016 as well as at the buyout date.
The valuation used for IAS19 disclosures has been based on a full assessment of the liabilities of the Scheme as at 5 April 2015.
The present values of the defined benefit obligation, the related current service cost and any past service costs were measured
using the projected unit credit method.
Actuarial gains and losses up to the date of the buyout were recognised in the year in which they occurred, but outside the
Statement of Profit or Loss, through Other Comprehensive Income.
The Group made contributions of £0.8m during 2016 (2015: £1.6m).
The net surplus/(deficit) in the pension scheme is:
MGM Pension Scheme
Net surplus
31 December
2016
£m
31 December
2015
£m
–
–
10.5
10.5
Following the buyout transaction there is no asset or liability recognised in respect of the fair value of the scheme, £1.6m is
recognised within other receivables in respect of the amount due to the Group from the settlement of the scheme.
111
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
continued
18. Employee Benefits continued
Profile of the Scheme
The defined benefit obligation includes benefits for current employees, former employees and current pensioners.
Analysis of defined benefit obligation by membership category
Total value of current employees benefits
Deferred members benefits
Pensioner member benefits
Total defined benefit obligation
31 December
2016
£m
31 December
2015
£m
–
–
–
–
2.9
10.0
18.1
31.0
Following the buyout transaction, all members of the scheme have had their benefits secured with Aviva Annuity UK Limited,
there is no longer any obligation by the Group to the members of the scheme.
Funding Requirements
UK legislation requires that pension schemes are funded prudently. The last funding valuation of the Scheme was carried out
by a qualified actuary as at 5 April 2015 and showed a surplus of £1.7m. The Group paid deficit contributions of £0.8m in 2016 to
support the scheme, following the buyout transaction no further contribution in respect of the scheme are expected.
Risks Associated with the Scheme
Following the buyout transaction all of the risks in respect of the scheme have been transferred to Aviva Annuity UK Limited.
Prior to settlement, the Scheme exposed the Group to a number of risks, the most significant of which are:
Asset Volatility
Changes in Bond Yields
Inflation Risk
The liabilities are calculated using a discount rate set with reference to corporate bond
yields; if assets underperform this yield, this will create a deficit. The Scheme holds a
significant proportion of growth assets (equity diversified growth funds and global
absolute return fund) which, though expected to outperform corporate bonds in the
long-term, create volatility and risk in the short term. The allocation to growth assets is
monitored to ensure it remains appropriate given the Scheme’s long-term objectives.
A decrease in corporate bond yields will increase the value placed on the Scheme’s
liabilities for accounting purposes, although this will be partially offset by an increase in the
value of the Scheme’s bond holdings.
A significant proportion of the Scheme’s benefit obligations are linked to inflation, and
higher inflation will lead to higher liabilities (although, in most cases, caps on the level of
inflationary increases are in place to protect against extreme inflation). The majority of the
assets are either unaffected by or only loosely correlated with inflation, meaning that an
increase in inflation will also increase the deficit.
Life Expectancy
The majority of the Scheme’s obligations are to provide benefits for the life of the member,
so increases in life expectancy will result in an increase in the liabilities.
A contingent liability previously existed in relation to the equalisation of Guaranteed Minimum Pension (“GMP”). The UK
Government intends to implement legislation which could result in an increase in the value of GMP for males. This would increase
the defined benefit obligation of the plan. At this stage, it is not possible to quantify the impact of this change. The buyout
premium paid includes an estimated additional cost for GMP equalisation and this cost is therefore included in the settlement
recorded through the Statement of Profit or Loss.
The amounts recognised on the Balance Sheet are set out below:
Present value of funded defined benefit obligations
Fair value of plan assets
Surplus in scheme
31 December
2016
£m
31 December
2015
£m
–
–
–
(31.0)
41.5
10.5
When the members’ benefits have been fully paid, the rules of the scheme permit any surplus to revert to the employer (the
Group). Therefore the surplus on the scheme has been recognised as an asset. The fair value of plan asset remaining at 31
December 2016 represent the residual balance following settlement of the scheme and all risks and obligations transferring to
Aviva Annuity UK Limited, it is expected that these assets will transfer to the Group on completion of the buyout process.
112
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 18. Employee Benefits continued
Movements in present value of defined benefit obligation:
At beginning of year
Interest cost
Actuarial (loss)/gain
Benefits paid
Settlements
At end of year
Movements in fair value of plan assets:
At start of year
Interest income
Re-measurement gain/(loss)
Contributions by employer
Administration costs incurred
Benefits paid
Settlements
At end of year
(Expense)/income recognised in the Consolidated Statement of Comprehensive Income:
Operating cost
Administration expenses
Settlement cost
Net finance costs
Defined benefit pension scheme net finance income
Other comprehensive income
Re-measurement of the defined benefit asset
Total recognised in profit and loss and other comprehensive income
The income is recognised in the following line items in the Consolidated Statement of Profit or Loss:
Administrative expenses
Finance income
Total
Analysis of amounts recognised in Other Comprehensive Income:
Actuarial (losses)/gains recognised in the year
Year ended
31 December
2016
£m
Year ended
31 December
2015
£m
(31.0)
(1.1)
(9.0)
2.0
39.1
–
(32.4)
(1.1)
1.4
1.1
–
(31.0)
Year ended
31 December
2016
£m
Year ended
31 December
2015
£m
41.5
1.5
3.9
0.8
(0.3)
(2.0)
(43.8)
1.6
41.0
1.4
(1.2)
1.6
(0.2)
(1.1)
–
41.5
Year ended
31 December
2016
£m
Year ended
31 December
2015
£m
(0.3)
(4.8)
0.4
(5.1)
(9.8)
(0.2)
–
0.4
0.2
0.4
Year ended
31 December
2016
£m
Year ended
31 December
2015
£m
(5.1)
0.4
4.7
(0.2)
0.4
0.2
Year ended
31 December
2016
£m
Year ended
31 December
2015
£m
(5.1)
0.2
113
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
continued
18. Employee Benefits continued
The Scheme assets are invested in the following asset classes (all assets have a quoted market value in an active market):
Equities
Absolute return funds
Liability driven instruments
Other
Total
Interest income
Re-measurement of plan assets in excess of interest income
Actual return on plan assets
The principal actuarial assumptions used to calculate the liabilities under IAS 19 are set out below:
RPI Inflation
CPI Inflation
Rate of general long-term increase in salaries
Rate of increase to pensions in payment
Discount rate for scheme liabilities
The financial assumptions reflect the nature and term of the Scheme’s liabilities.
Year ended
31 December
2016
£m
Year ended
31 December
2015
£m
–
–
–
–
–
8.3
16.1
16.7
0.4
41.5
Year ended
31 December
2016
£m
Year ended
31 December
2015
£m
1.5
3.9
5.4
1.4
(1.2)
0.2
Year ended
31 December
2016
%
Year ended
31 December
2015
%
3.55
2.55
5.55
2.25–3.3
2.85
3.1
2.0
4.1
1.8–3.3
3.70
Main demographic assumptions
Mortality table adopted
Life expectancy for male
currently aged 65
Life expectancy for female
currently aged 65
Cash commutation
Year ended
31 December 2016
Year ended
31 December 2015
Year ended
1 January 2015
S1PXA base table with
future improvements in
line with CMI 2014 core
projections with long-term
improvement rate of
1.75% per annum.
S1PXA base table with
future improvements in
line with CMI 2014
core projections with
long-term improvement
rate of 1% per annum.
S1PXA base table with
future improvements in
line with CMI 2013 core
projections with long-term
improvement rate of
1% per annum.
22.4
24.5
None
22.1
24.4
22.1
24.3
Members assumed to
exchange 31% of their
pension for a cash lump
sum at retirement
Members assumed to
exchange 31% of their
pension for a cash lump
sum at retirement
The mortality assumptions are based on the recent actual mortality experience of scheme members, and allow for expected
future improvement in mortality rates.
114
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 18. Employee Benefits continued
History of Plans
The history of the plans for the current and prior years is as follows:
Balance Sheet
Present value of defined benefit obligation
Fair value of plan assets
Surplus
Experience Adjustments
Experience (loss)/gain on plan assets
Experience (loss)/gain on plan liabilities
Year ended
31 December
2016
£m
Year ended
1 December
2015
£m
Year ended
1 January
2015
£m
Year ended
26 December
2013
£m
Year ended
27 December
2012
£m
–
–
–
(31.0)
41.5
10.5
(32.4)
41.0
8.6
(28.8)
34.1
5.3
(28.1)
32.5
4.4
Year ended
31 December
2016
£m
Year ended
1 December
2015
£m
Year ended
1 January
2015
£m
Year ended
26 December
2013
£m
Year ended
27 December
2012
£m
(3.9)
–
1.2
(0.1)
(5.2)
(0.1)
(0.1)
(0.1)
0.4
1.0
Sensitivity to Key Assumptions
No sensitivity analysis has been performed given there remains no liability on the Group’s Balance Sheet at the 31 December 2016.
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 £0.3m (2015: £0.6m). There was £nil accruing to these pension
schemes as at 31 December 2016 (2015: £0.1m).
Accrued Employee Retirement Rights
Local applicable labour laws and agreements in the ROW require certain Group companies to pay severance pay to dismissed
or retiring employees (including those leaving their employment under certain other circumstances). The calculation of the
severance pay liability has been made in accordance with labour agreements in force and based on salary components that, in
management’s opinion, create entitlement to severance pay.
Group companies’ severance pay liabilities to their employees are funded partially by regular deposits with recognised pension
and severance pay funds in the employees’ names and by purchase of insurance policies. They are accounted for as if they were
a defined contribution plan. The amounts funded as above are netted against the related liabilities and are not reflected in the
Balance Sheet since they are not under the control and management of the companies.
The amounts of the liability for severance pay presented in the Balance Sheet (see below) reflect that part of the liability
not covered by the funds and the insurance policies mentioned above, as well as the liability that is funded by deposits
with recognised central severance pay funds held under the name of the Company’s subsidiaries.
The cost of severance provision is determined according to the projected unit credit method. It has been calculated using a
discounted cash flow approach. The calculations are based on the following assumptions:
• Discount at 31 December 2016 1.73%.
• Expected returns on plan assets at 31 December 2016 1.02%.
The net provision for accrued employee rights upon retirement comprises:
Present value of unfunded obligation
Less: Fair value of plan assets
31 December
2016
£m
31 December
2015
£m
3.3
(1.5)
1.8
2.4
(1.1)
1.3
115
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
continued
18. Employee Benefits continued
Movements in the provision for accrued employee rights upon retirement:
At start of period
Payments made upon retirement
Net movement in provision – charged to net profit
Foreign exchange movements
Gross
amount
£m
Amount
deposited
£m
Net amount
£m
2.4
(0.1)
0.5
0.5
3.3
(1.1)
(0.2)
–
(0.2)
(1.5)
1.3
(0.3)
0.5
0.3
1.8
Adelphi-Carlton Limited Contributory Pension Plan
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 Group. Accordingly the surplus has not been recognised. The Scheme has a surplus of £0.3m as at 31 December 2016
(2015: £0.6m).
Actuaries for Adelphi-Carlton Limited carried out the last actuarial valuation of the scheme as at 1 April 2016. 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 Group contributions was in force from 1 April 2001 to 31 December
2016. Total contributions for the years ended 31 December 2016 and 31 December 2015 were £nil and £nil, respectively. No
contributions are expected for the year ended 31 December 2016.
Share-Based Payments
As at 31 December 2016 there were three types of share option and share schemes: the Cineworld Group 2007 Performance
Share Plan, the Cineworld Group plc Company Share Option Plan and the Cineworld Group 2007 Sharesave Scheme. Details of
each of the schemes are set out in the Directors Remuneration Report on pages 54 to 72.
The Cineworld Group Performance Share Plan (“PSP”)
The following share options have been granted under the PSP and were outstanding at 31 December 2016:
Date of grant
6 June 2014
23 April 2015
30 June 2015
18 April 2016
Exercise period
3 years from 6 June 2014
3 years from 23 April 2015
3 years from 30 June 2015
3 years from 18 April 2016
2016
Number
of shares
’000
2015
Number
of shares
‘000
567
398
7
352
584
414
7
–
Under the PSP, awards of conditional shares or nil cost options can be made that vest or become exercisable after three years
subject to continued employment and generally the achievement of specified performance conditions as follows:
6 June 2014
Under these grants, awards of 705,515 shares were made in total. Awards of 563,210 shares were made with the performance
conditions set out below.
• 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 26 December 2013 and the EPS for the financial year ending 31 December
2016) is not less than the annual compound increase of 10% per annum;
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 26 December 2013 and the EPS for the financial year ending 31 December 2016) is at least equivalent to
the annual compound increase of 18% per annum, and
• where the average annual growth in EPS (calculated by comparing the EPS for the financial year ended 26 December 2013
and the EPS for the financial year ending 31 December 2016) is between the two limits above, the award shall vest on a
straight-line basis between 30% and 100%.
Further awards over 142,305 shares were made which will vest after three years subject to continued employment only, with no
specified performance conditions attached.
EPS for the 2014 grant was defined as adjusted pro forma diluted earnings per share as calculated in Note 5 to the
financial statements.
116
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 18. Employee Benefits continued
23 April and 30 June 2015
Under these grants, awards of 517,530 shares were made in total. Awards of 405,826 shares were made with the performance
conditions set out below.
• 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 ending 1 January 2015 and the EPS for the financial year ending 31 December 2017) is
not less than 8.0%;
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 ending 1 January 2015 and the EPS for the financial year ending 31 December 2017) is at least 16.0%, and
•
• where the average annual growth in EPS (calculated by comparing the EPS for the financial year ending 1 January 2015 and
the EPS for the financial year ending 31 December 2017) is between the two limits above, the Award shall vest on a straight-
line basis between 30% and 100%.
“EPS” means adjusted earnings per share calculated by dividing the profits for the period attributable to ordinary shareholders
(adjusted by adding back the amortisation of intangible assets and other one-off income or expense adjusted pro forma and
applying a tax effect on all adjustments) by the number of ordinary shares outstanding at the end of the period, after excluding
non-vested ordinary shares held by the employee benefit trust at that time and adjusting for the effects of dilutive options
Further awards over 111,704 shares were made which will vest after three years subject to continued employment only, with
no specified performance conditions attached.
18 April 2016
Under these grants, awards of 366,465 shares were made in total. Awards of 253,192 shares were made with the performance
conditions set out below.
• 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 ending 1 January 2015 and the EPS for the financial year ending 31 December 2018) is
not less than 6.0%;
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 ending 1 January 2015 and the EPS for the financial year ending 31 December 2018) is at least 12.0%, and
•
• where the average annual growth in EPS (calculated by comparing the EPS for the financial year ending 1 January 2015 and
the EPS for the financial year ending 31 December 2018) is between the two limits above, the Award shall vest on a straight-
line basis between 30% and 100%.
EPS means adjusted earnings per share calculated by dividing the profits for the period attributable to ordinary shareholders
(adjusted by adding back the amortisation of intangible assets and other one one-off income or expense adjusted pro forma and
applying a tax effect on all adjustments) by the number of ordinary shares outstanding at the end of the period, after excluding
non-vested ordinary shares held by the employee benefit trust at that time and adjusting for the effects of dilutive options.
Further awards over 113,273 shares were made which will vest after three years subject to continued employment only, with
no specified performance conditions attached.
Assumptions relating to grants of share options outstanding are as follows:
Date of grant
6 June 2014
23 April 2015
30 June 2015
18 April 2016
Share price
at grant
(£)
Exercise
price
(£)
Expected
volatility
(%)
Expected
life
(years)
Dividend
yield
(%)
Risk
free rate
(%)
Fair value
(£)
3.46
4.81
4.81
5.48
–
–
–
–
41
39
39
38
3
3
3
3
4.3
4.3
4.3
2.9
0.56
0.59
0.59
0.37
3.07
4.22
4.22
5.02
A reconciliation of option movements over the year to 31 December 2016 is shown below:
Outstanding at the beginning of the year
Exercised in shares during the year
Granted during the year
Lapsed during the year
Outstanding at the end of the year
A charge of £1.7m was recorded in the statement of profit or loss for the four PSP schemes.
Number
of options
2016
Equity-
settled
‘000
Number
of options
2015
Equity-
Settled
‘000
1,425
(413)
366
(54)
1,324
1,926
(772)
518
(247)
1,425
117
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
continued
18. Employee Benefits continued
The Company Share Option Plan (“CSOP”)
The following share options have been granted under the CSOP and were outstanding at 31 December 2016:
Date of grant
6 June 2014
2016
Number
of shares
‘000
2015
Number
of shares
‘000
Exercise period
3 years from 6 June 2014
5
14
23 April 2015
3 years from 23 April 2015
18 April 2016
3 years from 18 April 2016
38
21
50
–
Assumptions relating to grants of share options outstanding are as follows:
Performance conditions
Awards of 2,891 shares were made with the
same conditions as the 2014 PSP grant.
Awards of 14,455 were made with no
performance conditions attached.
All awards were made with no
performance conditions attached.
All awards were made with no
performance conditions attached.
Date of grant
6 June 2014
23 April 2015
18 April 2016
Share price
at grant
(£)
Exercise
price
(£)
Expected
volatility
(%)
Expected
life
(years)
Dividend
yield
(%)
Risk
free rate
(%)
Fair value
(£)
3.46
4.81
5.48
3.46
4.81
5.48
41 3–10 years
39 3–10 years
38 3-10 years
4.3
4.3
2.9
0.56
0.59
0.37
0.73
0.94
1.16
A reconciliation of option movements over the year to 31 December 2016 is shown below:
Outstanding at the beginning of the year
Exercised during the year
Granted during the year
Lapsed during the year
Outstanding at the end of the year
Number
of options
2016
Equity-
settled
Number
of options
2015
Equity-
settled
87
(19)
24
(28)
64
104
(63)
50
(4)
87
A charge of £0.1m was recorded in the statement of profit or loss for the four CSOP schemes.
Sharesave scheme
The fair value is measured at the grant date and spread over the period during which the employees become unconditionally
entitled to the options.
The following share options have been granted under the Sharesave scheme and were outstanding at 31 December 2016:
2016
Number of
shares
’000
2015
Number of
shares
‘000
349
330
386
406
Date of grant
8 May 2014
12 May 2015
118
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 18. Employee Benefits continued
A reconciliation of option movement over the year to 31 December 2016 is shown below:
Outstanding at the beginning of the year
Exercised during the year
Granted during the year
Lapsed during the year
Outstanding at the end of the year
A charge of £0.2m was recorded in the statement of profit or loss for the 3 Sharesave schemes.
The total expenses recognised for the year arising from share-based payments are as follows:
Recognised in equity
Recognised in the statement of profit or loss
Number
of options
2016
Equity-
settled
’000
Number
of options
2015
Equity-
Settled
‘000
792
(13)
–
(100)
679
1,013
(543)
430
(108)
792
Year ended
December
2016
£m
Year ended
31 December
2015
£m
1.6
0.4
2.0
0.8
1.0
1.8
The share-based payment expense recognised in creditors relates to dividends accrued by the option holders over the
vesting period.
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 in shares during the year
Granted during the year
Lapsed during the year
Outstanding at the end of the year
Exercisable at the end of the year
Weighted
average
exercise
price 2016
(£)
Equity-
settled
1.24
0.22
0.33
2.49
1.17
–
Weighted
average
exercise
price 2015
(£)
Equity-
settled
0.77
0.77
1.90
0.84
1.24
2.81
Number
of options
2016
Equity-
settled
2,305
(445)
390
(183)
2,057
–
Number
of options
2015
Equity-
Settled
3,044
(1,378)
998
(359)
2,305
5
119
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
continued
18. Employee Benefits continued
Single Total Figure Table (audited information)
The table below gives a single figure for the total remuneration for each Director for the period.
Financial
Year
Base salary
and fees
(£000)
Benefits(1)
(£000)
Annual
bonus
(£000)
Sharesave(2)
(£000)
PSP
(£000)
CSOP
(£000)
Total LTI
(£000)
Pension
(£000)
Total
(£000)
Executive
Directors
Moshe Greidinger
Israel Greidinger
Philip Bowcock(4)
Stephen Wiener(4)
Non–Executive
Directors
Anthony Bloom
Martina King
Alicja
Kornasiewicz
David Maloney(4)
Scott Rosenblum
Arni Samuelsson
Rick Senat
Julie Southern
Peter Williams(4)
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
557
550
380
375
–
84
77
77
74
1
375(6)
20(7)
437
476
298
325
–
248
–
–
175
175
60
56
50
30
–
30
50
50
50
50
65
61(9)
70
39
–
24
–
1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,419(3)
–
968(3)
–
451(3)
492(5)
–
356(5)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
15
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,419
–
968
–
451
507
–
356
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
91
110
60
75
–
2,588
1,213
1,783
849
452
75(8)
1,229.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
357
175
175
60
56
50
30
–
30
50
50
50
50
65
61(9)
70
39
–
24
(1) See page 66 for details of the other benefits provided to the Executive Directors.
(2) Under the ShareSave Scheme, employees are able to acquire shares in the Company at a discount of up to 20% of the market value at grant. The figures in this table
relate to the value of this discount at the date of grant.
(3) The gain on PSP shares vesting in respect of the period has been calculated using a share price of £5.525, being the average price for the last three months of the
period (as PSP will not vest until 6 June 2017), and includes payment of 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. Currently, the dividend equivalent payment to Moshe Greidinger would amount to £101,604,
the dividend equivalent payment to Israel Greidinger would amount to £69,276, and the dividend equivalent payment to Philip Bowcock would amount to £32,256.
(4) Philip Bowcock left the Company on 31 October 2015, Stephen Wiener left the Company on 31 March 2014, Peter Williams left the Company on 26 May 2015, and
David Maloney left the Company on 26 May 2015.
(5) Details of the actual gain made are set out on page 71. The actual figures set out in the table above differ from those included in the 2015 Annual Report figures as last
year an estimated value of £5.58 a share was used to calculate the theoretical gain, as the awards had not yet vested. The figures above reflect the share price of £5.10
on the date of vesting, 15 March 2016.
(6) Philip Bowcock left the Company on 31 October 2015 and this figure includes two months’ salary paid in lieu of notice amounting to £62,500.
(7) Philip Bowcock left the Company on 31 October 2015 and this figure includes two months’ benefits paid in lieu of notice amounting to £3,066.
(8) Philip Bowcock left the Company on 31 October 2015 and this figure includes two months’ pensions allowance paid in lieu of notice amounting to £12,500.
(9) Figure includes a payment of £5,800 to Rick Senat for the portion of 2015 for which he served as Senior Independent Director.
Executive Directors are invited to participate in a Group Personal Pension Plan, which is a money purchase plan or alternatively
may receive a pension allowance in cash. The Company contribution to this pension scheme for Executive Directors is 20% of
salary. All the Executive Directors (except Stephen Wiener) have elected not to participate in this scheme and instead receive a
cash pension allowance of 20% of salary.
120
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 19. Provisions
Balance at 31 December 2015
Current
Non-current
Provisions made
Provisions released to administrative expenses during the year
Utilised against rent during the year
Unwound against interest during the year
Balance at 31 December 2016
Current
Non-current
Total
Property
provisions
£m
Other
provisions
£m
Total
provisions
£m
1.5
13.5
15.0
–
(3.1)
(4.3)
1.9
9.5
0.9
8.6
9.5
3.2
5.0
8.2
2.1
–
(1.9)
–
8.4
5.4
3.0
8.4
4.7
18.5
23.2
2.1
(3.1)
(6.2)
1.9
17.9
6.3
11.6
17.9
Other provisions do not require significant judgement and have historically been settled at in line with reported fair values.
Property provisions relate to onerous leases, dilapidations, market rent adjustments and other property liabilities. Market
rent provisions relate to the fair value of liabilities on leases acquired, which are assessed on acquisition and released over the
remaining life of the lease.
The property provision includes onerous leases, which are assessed as being the unavoidable costs of the lease obligations in
excess of the economic benefits expected to be received from operating it. The unavoidable costs of the lease reflect the lease
net cost of exiting from the contract and is measured as the lower of the net cost of continuing to operate the lease and any
penalties or other costs from exiting it, measured 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 one and 30 years (see
further analysis below).
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
31 December
2016
£m
31 December
2015
£m
1.2
1.6
2.8
3.9
9.5
1.5
1.4
3.8
8.3
15.0
The level of onerous lease provision is dependent upon judgement in forecasting future cash flows and used in arriving at
the discount rate applied to cash flow projections. Management have sensitised the key assumptions in assessing property
provisions including the discount rate, management believe that under any reasonably possible change in the key assumptions
on which provision is based they would not significantly change. Other property provisions are not considered to require ongoing
judgement as amounts relate to pre-determined unwinds and releases.
121
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
continued
20. Capital and Reserves
Share Capital
Cineworld Group plc
Allotted, called up and fully paid
267,581,189 (2015: 265,232,321) ordinary shares of £0.01 each
31 December
2016
£m
31 December
2015
£m
2.7
2.7
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.
Merger Reserve
In accordance with section 612 of the Companies Act 2006, the premium on ordinary shares issued in relation to acquisitions is
recorded as a merger reserve.
Hedging Reserve
The hedging reserve comprises the liability in relation to the interest rate swaps entered into, to hedge against variable interest
payments on £147.5m (2015: £119.0m) of the total £322.9m (2015: £300.3m) 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 statement of profit or loss. During 2016 a £1.9m gain was recycled through the Statement of Profit or Loss in
respect of the fair value of cash flow hedges on loans settled during the year.
A foreign currency exposure arises from the Group’s net investment in its Dutch subsidiary, which has a Euro functional currency.
The risk arises from fluctuations in exchange rates between the Pound and the Euro, which cause the value of the net investment
to vary.
The Group hedges part of its exposure to changes in the value of the investment arising from variances in Euro to Pound
exchange rate. The hedge is designated against the Group’s Euro term loan and €54.0m of the investment in the Dutch
subsidiary. The loan is designated as the hedging instrument for the changes in value that is attributable to the £GBP/EURO spot
rate.
The Group assesses effectiveness by comparing changes in the carrying amount of the debt that is attributable to a change in
spot rate with changes in the value of the investment in the foreign operation due to movements in the spot rate. The Group’s
policy is to hedge the net investment only to the extent of the debt principal.
The changes in fair value of the hedged item and instrument were reflected in the table were recognised in the hedge and foreign
exchange reserve respectively for the hedged item and hedging instrument.
Euro denominated loan
Euro denominated investment
Dividends
The following dividends were recognised during the year:
Interim
Final (for the preceding year)
Carrying amount
at inception
£m
Carrying amount
31 December 2016
£m
Asset
Liability
Asset
Liability
Change in
fair value
£m
–
47.5
47.5
47.5
–
47.5
–
46.2
46.2
46.2
–
46.2
1.3
(1.3)
–
2016
£m
13.8
33.2
47.0
2015
£m
13.3
25.7
39.0
An interim dividend of 5.2p per share was paid on 9 September 2016 to ordinary shareholders (2015: 5.0p). The Board has
proposed a final dividend of 13.8p per share, which will result in total cash payable of approximately £37.0m on 22 June 2017. In
accordance with IAS10 this had not been recognised as a liability at 31 December 2016.
122
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 21. Financial Instruments
Overview
The Group has exposure to the following risks from its use of financial instruments:
• 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 Group has in place a risk management programme and regular reports are made to the Audit Committee, which is tasked
with general oversight.
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 £29.8m (2015: £23.5m) due 75% (2015: 83%) are within credit terms. The bad debt provision as at 2016 is £Nil
(2015: £306,000), with a bad debt expense in the year of £Nil (2015: £nil). Based on past experience the Group believes that
no impairment allowance is necessary in respect of the 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.
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.
123
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
continued
21. Financial Instruments continued
31 December 2016
Non-derivative financial liabilities
Unsecured bank loans
Finance lease liabilities
Trade payables
Derivative financial liabilities
Interest rate swap 1
Interest rate swap 2
Interest rate swap 3
Interest rate swap 4
Interest rate swap 5
Interest rate swap 6
Interest rate swap 7
31 December 2015
Non-derivative financial liabilities
Unsecured bank loans
Finance lease liabilities
Trade payables
Derivative financial liabilities
Interest rate swap 1
Interest rate swap 2
Interest rate swap 3
Interest rate swap 4
Interest rate swap 5
Interest rate swap 6
Carrying
amount
£m
Contractual
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
322.0
15.0
30.1
(325.3)
(34.0)
(30.1)
0.2
0.2
0.1
0.1
0.2
0.2
0.1
(0.2)
(0.2)
(0.1)
(0.1)
(3.0)
(3.0)
(0.5)
(7.5)
(0.6)
(30.1)
(0.2)
(0.2)
(0.1)
(0.1)
–
–
–
(7.5)
(0.7)
–
–
–
–
–
(1.3)
(1.3)
–
(12.7)
(1.3)
–
–
–
–
–
(0.8)
(0.8)
(0.2)
(297.6)
(4.2)
–
–
(27.2)
–
–
–
–
–
(0.9)
(0.9)
(0.3)
–
–
–
–
–
–
–
368.2
(396.5)
(38.8)
(10.8)
(15.8)
(303.9)
(27.2)
Carrying
amount
£m
Contractual
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
299.3
6.8
33.9
(303.8)
(10.4)
(33.9)
0.1
0.1
0.5
0.5
0.2
0.2
(0.1)
(0.1)
(0.5)
(0.5)
(0.2)
(0.2)
(7.7)
(0.4)
(33.9)
(0.1)
(0.1)
(0.2)
(0.2)
(0.05)
(0.05)
(7.7)
(0.4)
–
–
–
(0.2)
(0.2)
(0.05)
(0.05)
(11.9)
(0.7)
–
–
–
(0.1)
(0.1)
(0.1)
(0.1)
(276.5)
(2.1)
–
–
(6.8)
–
–
–
–
–
–
–
–
–
–
–
–
–
341.6
(349.7)
(42.7)
(8.6)
(13.0)
(278.6)
(6.8)
The Group entered into a five-year facility in January 2014 which included term loans of £165.0m and €132.0m and revolving
credit facilities of £75.0m and €60.0m.
On 29 July 2015 the Group signed an amendment and extension to its existing banking facility which was effective immediately
upon signing and extends the facility to June 2020. As a result, the term loans were reduced from £157.5m and €126.0m to
£130.0m and €63.0m. In August 2016 the Group extended the single currency revolving credit facility of £190.0m to £215.0m to
partly fund the empire acquisition.
The facility remains subject to the existing two covenants: the ratio of EBITDA (as defined in Note 1) to net debt and the ratio of
EBITDAR (pre-rent EBITDA) to net finance charges. A margin, determined by the results of the covenant tests at a given date is
added to LIBOR or EURIBOR. The margins currently applicable to Group are 1.40% on the term loans and 1.15% on the revolving
credit facility.
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 for at least 12 months from the approval date of the financial
statements, including compliance with the bank facility covenants. The Group therefore continues to adopt the going concern basis.
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.
124
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 21. Financial Instruments continued
31 December 2016
Interest rate swaps:
Swap 1
Swap 2
Swap 3
Swap 4
Swap 5
Swap 6
Swap 7
31 December 2015
Interest rate swaps:
Swap 1
Swap 2
Swap 3
Swap 4
Swap 5
Swap 6
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
0.2
0.2
0.1
0.1
0.2
0.2
0.1
1.1
(0.2)
(0.2)
(0.1)
(0.1)
(3.0)
(3.0)
(0.5)
(7.1)
(0.2)
(0.2)
(0.1)
(0.1)
–
–
–
–
–
–
–
(1.3)
(1.3)
–
(0.6)
(2.6)
–
–
–
–
(0.8)
(0.8)
(0.2)
(1.8)
–
–
–
–
(0.9)
(0.9)
(0.3)
(2.1)
–
–
–
–
–
–
–
–
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
0.1
0.1
(0.5)
0.5
0.2
(0.2)
1.6
0.1
(0.1)
(0.5)
(0.5)
(0.2)
(0.2)
(1.6)
0.1
(0.1)
(0.2)
(0.2)
(0.05)
(0.05)
–
–
(0.2)
(0.2)
(0.05)
(0.05)
–
–
(0.1)
(0.1)
(0.1)
(0.1)
(0.7)
(0.5)
(0.4)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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
Operating across nine territories increases the Groups exposure to currency risk. Wherever possible, overseas operations will
fund their day-to-day working capital requirements in local currency with cash generated from operations, naturally hedging
the currency risk exposure to the Group. Management will continually monitor the level of currency risk exposure, and consider
hedging where appropriate. Currently the Group considers the currency risk on consolidation of the assets and liabilities of its
foreign entities to be of low materiality and no hedging has been undertaken.
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 fixed 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.
The Group has hedging arrangements in place to mitigate the potential risk of a material impact arising from interest rate
fluctuations. At 31 December 2016, the Group had seven (2015: six) interest rate swaps, four GBP denominated swaps which
hedged 80% (2015: 82%) of the Group’s variable rate GBP unsecured term loan and, the three remaining Euro denominated
swaps hedging 100% (2015:100%) of the Euro denominated unsecured loan.
The revolver loan, of which £158.0m (2015: £130.0m) was drawn down at the end of the year, is not hedged. At the year end the
Group had six (2015 year end: six) interest rate swaps which hedged 100% (2015: 100%) of the Group’s variable rate unsecured
Euro denominated term loan and 82% (2015: 59%) of the sterling denominated term loan. As a result, there is no impact on the
statement of profit or loss relating to the hedged bank debt as a result of any changes in interest rates.
125
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
continued
21. Financial Instruments continued
At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was:
Fixed rates instruments
Financial liabilities (interest rate swap)
Financial liabilities (unsecured bank loans – hedged portion)
Finance lease liabilities
Variable rate instruments
Financial liabilities (unsecured bank loans – unhedged portion)
Carrying amount
31 December
2016
£m
31 December
2015
£m
(1.1)
(158.0)
(14.9)
(174.0)
(1.6)
(119.0)
(6.8)
(127.4)
(164.1)
(180.3)
£158.0m (2015: £119.0m) of the variable rate financial liability is hedged via the interest rate swaps 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 Statement of Profit or Loss 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 £1.6m (2015: £1.9m) or decreased equity by £1.6m
(2015: £1.9m) for each swap and would have increased or decreased profit or loss by £nil (2015: £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 2015.
Effect in GBP thousands
31 December 2016
Variable rate instruments
Interest rate swap
Cash flow sensitivity (net)
31 December 2015
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
(3,100)
1,500
3,100
(1,500)
(3,100)
1,500
3,100
(1,500)
(1,600)
1,600
(1,600)
1,600
(3,300)
1,400
3,300
(1,400)
(3,300)
1,400
3,300
(1,400)
(1,900)
1,900
(1,900)
1,900
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, creditors and cash and cash equivalents have been excluded from the following disclosures on the basis that
their carrying amount is a reasonable approximation to fair value.
Unsecured bank loans
Finance lease liabilities
Interest rate swaps
Carrying
amount
31 December
2016
£m
Fair value
31 December
2016
£m
Carrying
amount
31 December
2015
£m
Fair value
31 December
2015
£m
322.0
15.0
1.1
338.1
323.0
15.0
1.1
346.7
299.3
6.8
1.6
307.7
303.8
6.8
1.6
312.2
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 unsecured 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.
126
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 21. Financial Instruments continued
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 2016 and 31 December 2015. 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:
• 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 2016
Derivative financial instruments
Interest bearing loans and borrowings
31 December 2015
Derivative financial instruments
Interest bearing loans and borrowings
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
–
–
–
–
1.1
337.0
1.6
306.1
–
–
–
–
1.1
337.0
1.6
306.1
There have been no transfers between levels in 2016. No other financial instruments are held at fair value.
Capital Management
The capital structure of the Group consists of the following items:
Cash and cash equivalents
Bank loans
Equity attributable to equity holders of the parent
2016
£m
55.8
322.0
596.0
973.8
2015
£m
62.5
307.7
570.6
940.8
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. Ratios
used in the monitoring of debt capital include the ratio of EBITDA to net debt and the ratio of EBITDAR (pre-rent EBITDA) to net
finance charges.
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.
22. 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
102.7
390.7
1,161.9
1,655.3
Other
£m
31 December
2016
£m
Land and
buildings
£m
Other
£m
31 December
2015
£m
0.5
0.8
1.2
2.5
103.2
391.5
1,163.1
93.8
352.3
1000.3
1,657.8
1,446.4
0.1
0.2
–
0.3
93.9
352.5
1000.3
1,446.7
The total future minimum sublease payments expected to be received are £17.5m (2015: £15.1m).
Lease Arrangements
The Group enters into operating leases for sites in all territories in UK and Ireland and the ROW. These leases are typically for 25-
35 years with rent increases and options to renew leases determined in line with local market practice in each territory. The key
contractual terms of each lease are taken into consideration when calculating the rental charge over the lease term. There are no
significant restrictions placed on the Group as a result of its leasing arrangements.
127
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
continued
23. Capital Commitments
Capital commitments at the end of the financial year for which no provision has been made:
Contracted
Capital commitments at the end of the current and preceding financial year relate to new sites.
24. Related Parties
The compensation of the Directors is as follows:
31 December
2016
£m
31 December
2015
£m
44.7
35.0
Year ended 31 December 2016
Total compensation for Directors
Year ended 31 December 2015
Total compensation for Directors
Salary and
fees including
bonus
£000
Compensation
for loss of
office
£000
Pension
contributions
£000
Total
£000
5,192
–
151
5,343
Salary and fees
including bonus
£000
Compensation
for loss of
office
£000
Pension
contributions
£000
Total
£000
3,973
–
260
4,233
Share-based compensation benefit charges for Directors was £2.3m in 2016 (2015: £0.9m). Details of the highest paid Director
can be found in the Directors’ Remuneration Report on pages 54 to 72.
Other Related Party Transactions
Digital Cinema Media Limited (“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 year ending 31 December 2016 totalled £18.3m (2015: £18.4m) and as
at 31 December 2016 £nil (2015: £nil) was due from DCM in respect of receivables. In addition the Group has a working capital
loan outstanding from DCM of £0.5m (2015: £0.5m).
During the year the Group incurred property charges of £7.8m by companies under the ownership of Global City Holdings N.V.
(“GCH”), which is considered a related party of Group as Moshe Greidinger and Israel Greidinger are directors in both groups.
Details of subsidiaries held by the Group can be found in Note 28.
128
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 Company Statement of Financial Position
at 31 December 2016
Fixed assets
Investments
Current assets
Debtors
Cash at bank
Creditors: amount falling due within one year
Interest-bearing loans, borrowings and other financial
liabilities
Other payables
Bank overdraft
Net current assets
Total assets less current liabilities
Creditors: amount falling due within one year
Interest-bearing loans
Net assets
Capital and reserves
Called up share capital
Share premium account
Merger reserve
Profit and loss account
Hedging reserve
Shareholders’ funds – equity
Note
28
29
30
31
31 December
2016
£m
31 December
2016
£m
31 December
2015
£m
31 December
2015
£m
741.4
646.9
343.2
–
343.2
(13.1)
(118.1)
(49.7)
(180.9)
296.5
0.1
296.6
(11.1)
(48.1)
(27.3)
(86.5)
162.3
903.7
30
(307.7)
(286.4)
20
596.0
2.7
306.4
207.3
81.2
(1.6)
596.0
210.1
857.0
570.6
2.7
295.7
207.3
63.8
1.1
570.6
These financial statements were approved by the Board of Directors on 9 March 2017 and were signed on its behalf by:
Nisan Cohen
Director
129
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Company Statement of Changes in Equity
for the Year Ended 31 December 2016
Balance at 31 December 2015
Profit for the year
Amounts reclassified from equity to profit and loss in respect
of cash flow hedges
Other comprehensive income
Items that will subsequently be reclassified to profit or loss
Movement in fair value of cash flow hedge
Movement in net investment hedge
Tax recognised on income and expenses recognised directly
in equity
Contributions by and distributions to owners
Dividends
Movements due to share-based compensation
Issue of shares
Issued
capital
£m
Share
premium
£m
2.7
–
295.7
–
Merger
reserve
£m
207.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
10.7
–
–
–
–
–
–
–
Hedging
reserve
£m
Retained
earnings
£m
Total
£m
570.6
66.2
(1.9)
0.5
(1.3)
–
63.8
66.2
–
–
–
–
(47.0)
(1.8)
–
(47.0)
(1.8)
10.7
1.1
–
(1.9)
0.5
(1.3)
–
–
–
–
Balance at 31 December 2016
2.7
306.4
207.3
(1.6)
81.2
596.0
130
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 Notes to the Company Financial Statements
26. 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 Financial Review on pages 28 to 32 and the Risks and Uncertainties section on pages
22 to 27. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Financial
Review on pages 28 to 32. In addition Note 21 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.
In these financial statements, the Company has applied the exemptions available under FRS 101 in respect of the
following disclosures:
• a Cash Flow Statement and related notes;
• Comparative period reconciliations for share capital, tangible fixed assets and intangible assets;
• Disclosures in respect of transactions with wholly owned subsidiaries;
• Disclosures in respect of capital management;
• The effects of new but not yet effective IFRSs;
• An additional Balance Sheet for the beginning of the earliest comparative period following the retrospective change in
accounting policy; and
• Disclosures in respect of the compensation of Key Management Personnel.
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
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.
Deferred tax is recognised, without discounting, in respect of all temporary differences except as otherwise required by IAS 12.
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 addition to fixed asset investments 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.
131
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Notes to the Company Financial Statements
continued
27. Staff Numbers and Costs
The Company pays no employees. Salaries of the Directors of the Company, including Non-Executive Directors, as well as
the Company Secretary are recharged to the Company from its subsidiary Cineworld Cinemas Ltd. Total salaries paid to Non-
Executive Directors were £520,000 (2015: £509,000). See pages 54 to 72 for further details of Directors’ emoluments.
28. Fixed Asset Investments
Company
Balance at 31 December 2015
Additions
Balance at 31 December 2016
Net book value
At 31 December 2015
At 31 December 2016
Subsidiary undertakings
Directly Held
Augustus 1 Limited
Cinema City Holding B.V.
Cinema Finco 1 Limited
Cinema Finco 3 Limited
Cinema Finco 4 Limited
Indirectly Held
Augustus 2 Limited
Cineworld Holdings Limited
Cine-UK Limited
Cineworld Cinemas Holdings Limited
Cineworld Cinemas Limited
Cineworld Estates Limited
Shares in Group
undertakings
£m
646.9
94.5
741.4
646.9
741.4
% of shares
held
Registered Office
Principal activity
Class
8th Floor, Vantage London, Great
West Road, Brentford,TW8 9AG
Holding company
Ordinary
PO Box 1370
NL-3000 BJ Rotterdam
The Netherlands
8th Floor, Block E, Iveagh Court,
Harcourt Road, Dublin 2, Ireland
8th Floor, Block E, Iveagh Court,
Harcourt Road, Dublin 2, Ireland
8th Floor, Block E, Iveagh Court,
Harcourt Road, Dublin 2, Ireland
Holding company
Ordinary
Financing company
Ordinary
Financing company
Ordinary
Financing company
Ordinary
8th Floor, Vantage London, Great
West Road, Brentford,TW8 9AG
8th Floor, Vantage London, Great
West Road, Brentford,TW8 9AG
8th Floor, Vantage London, Great
West Road, Brentford,TW8 9AG
8th Floor, Vantage London, Great
West Road, Brentford,TW8 9AG
Holding company
Ordinary
Holding company
Ordinary
Cinema operation
Ordinary
Holding company
Ordinary
8th Floor, Vantage London, Great
West Road, Brentford,TW8 9AG
Holding company and cinema
operation
Ordinary
8th Floor, Vantage London, Great
West Road, Brentford,TW8 9AG
Cinema property leasing
Ordinary
Cineworld South East Cinemas Limited 8th Floor, Vantage London, Great
Holding company
Ordinary
Gallery Holdings Limited
Gallery Cinemas Limited
Adelphi-Carlton Limited
West Road, Brentford,TW8 9AG
8th Floor, Vantage London, Great
West Road, Brentford,TW8 9AG
Holding company
Ordinary
8th Floor, Vantage London, Great
West Road, Brentford,TW8 9AG
Dormant
Ordinary
8th Floor, Block E, Iveagh Court,
Harcourt Road, Dublin 2, Ireland
Cinema operation
Ordinary
132
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 28. Fixed Asset Investments continued
Cineworld Cinema Properties Limited 8th Floor, Vantage London, Great
Property company
Registered Office
Principal activity
Class
Ordinary
Classic Cinemas Limited
Digital Cinema Media Limited
West Road, Brentford,TW8 9AG
8th Floor, Vantage London, Great
West Road, Brentford,TW8 9AG
350 Euston Road, London,
NW1 3AX
Retail services company
Ordinary
Screen Advertising
Ordinary
Picturehouse Cinemas Limited
(formerly City Screen Limited)
8th Floor, Vantage London, Great
West Road, Brentford,TW8 9AG
Cinema operations
Ordinary
City Screen (Bath) Limited
City Screen (Brighton) Limited
CS (Brixton) Limited
City Screen (Cambridge) Limited
City Screen (Clapham) Limited
CS (Exeter) Limited
CS (Greenwich) Limited
City Screen (Liverpool) Limited
CS (Norwich) Limited
Newman Online Limited
City Screen (Oxford) Limited
City Screen (Southampton) Limited
City Screen (SOA) Limited
City Screen (Stratford) Limited
Picturehouse Bookings Limited
City Screen (Virtual) Limited
City Screen (York) Limited
Picturehouse Entertainment Limited
Cinema Finco 2
8th Floor, Vantage London, Great
West Road, Brentford,TW8 9AG
8th Floor, Vantage London, Great
West Road, Brentford,TW8 9AG
8th Floor, Vantage London, Great
West Road, Brentford,TW8 9AG
8th Floor, Vantage London, Great
West Road, Brentford,TW8 9AG
8th Floor, Vantage London, Great
West Road, Brentford,TW8 9AG
8th Floor, Vantage London, Great
West Road, Brentford,TW8 9AG
8th Floor, Vantage London, Great
West Road, Brentford,TW8 9AG
8th Floor, Vantage London, Great
West Road, Brentford,TW8 9AG
8th Floor, Vantage London, Great
West Road, Brentford,TW8 9AG
Cinema operations
Ordinary
Cinema operations
Ordinary
Cinema operations
Ordinary
Cinema operations
Ordinary
Cinema operations
Ordinary
Cinema operations
Ordinary
Cinema operations
Ordinary
Cinema operations
Ordinary
Cinema operations
Ordinary
8th Floor, Vantage London, Great
West Road, Brentford,TW8 9AG
Software development
and provider
Ordinary
8th Floor, Vantage London, Great
West Road, Brentford,TW8 9AG
8th Floor, Vantage London, Great
West Road, Brentford,TW8 9AG
8th Floor, Vantage London, Great
West Road, Brentford,TW8 9AG
8th Floor, Vantage London, Great
West Road, Brentford,TW8 9AG
8th Floor, Vantage London, Great
West Road, Brentford,TW8 9AG
8th Floor, Vantage London, Great
West Road, Brentford,TW8 9AG
8th Floor, Vantage London, Great
West Road, Brentford,TW8 9AG
8th Floor, Vantage London, Great
West Road, Brentford,TW8 9AG
8th Floor, Block E, Iveagh Court,
Harcourt Road, Dublin 2, Ireland
Cinema operations
Ordinary
Cinema operations
Ordinary
Cinema operations
Ordinary
Cinema operations
Ordinary
Ticket booking operations
Ordinary
Cinema operations
Ordinary
Cinema operations
Ordinary
Film distribution
Ordinary
Financing company
Ordinary
% of shares
held
100
100
50
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
133
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Notes to the Company Financial Statements
continued
28. Fixed Asset Investments continued
Basildon Cinema 2 Limited
Registered Office
Principal activity
Class
% of shares
held
2nd floor , The Le Gallais
Building, 54 Bath Street, St
Helier, Channel Islands, JE2 1FW
Cinema property leasing
Ordinary
100
Basildon Cinema Number Two 2 Limited 2nd floor , The Le Gallais
Cinema Operations
Bromley Cinema 2 Limited
Empire Cinema 2 Limited
Building, 54 Bath Street, St
Helier, Channel Islands, JE2 1FW
2nd floor , The Le Gallais
Building, 54 Bath Street, St
Helier, Channel Islands, JE2 1FW
2nd floor , The Le Gallais
Building, 54 Bath Street, St
Helier, Channel Islands, JE2 1FW
Cinema Operations
Cinema Operations
Ordinary
and
Preference
Ordinary
and
Preference
Ordinary
and
Preference
100
100
100
Hemel Hempstead Two Cinema 2 Limited 2nd floor , The Le Gallais
Cinema Operations
Ordinary
100
Ordinary
and
Preference
Ordinary
Ordinary
Poole Cinema 2 Limited
Building, 54 Bath Street, St
Helier, Channel Islands, JE2 1FW
2nd floor , The Le Gallais
Building, 54 Bath Street, St
Helier, Channel Islands, JE2 1FW
Cinema Operations
Cinema City Holdco (Hungary) K.F.T.
1132 Budapest, Váci út 22-24
Financing company
I.T. Planet Advertising Ltd
Norma Film Limited
Cinema Theatres Limited
Cinema-Phone Ltd
Forum Film Limited
IT Magyar Cinema Moziüzemeltető és
Filmforgalmazó K.F.T.
91 Medinat Hayehudim, Herzelia,
Israel
Dormant
91 Medinat Hayehudim, Herzelia,
Israel
91 Medinat Hayehudim, Herzelia,
Israel
Cinema operations
Ordinary
Cinema operations
Ordinary
18 Haneviim, Haifa, Israel
Cinema operations
91 Medinat Hayehudim, Herzelia,
Israel
Cinema operations
Ordinary
Ordinary
1132 Budapest, Váci út 22-24
Cinema operations
Ordinary
Palace Cinemas Hungary K.F.T.
1132 Budapest, Váci út 22-24
Cinema operations
Forum Hungary K.F.T.
1132 Budapest, Váci út 22-24
Cinema operations
New Age Cinema K.F.T.
1132 Budapest, Váci út 22-24
Advertising
Holding company
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
100
100
100
100
100
Prodromou, 75
1st floor, Flat/Office 101
Strovolos, 2063, Nicosia, Cyprus
Zabłocie street No 25/20
Post code 30-701, City Kraków,
Poland
CC SP.ZO.O. SP.J.
UL. WOŁOSKA 12
02-675 WARSZAWA
NIP 521-33-62-959
KRS- 0000493229
UL. FOSA 37
02-768 WARSZAWA
NIP 521-33-04-554
REGON: 015805025
KRS- 0000217016
Seracus Limited
Forum 40 Fundusz Inwestycjny
Zamkniety
All Job CC sp. Zoo. SJ
CC Sp. Zoo
134
Holding company
Ordinary
100
Cinema operations
Ordinary
100
Fund general partner
Ordinary
100
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 Registered Office
Principal activity
Class
% of shares
held
28. Fixed Asset Investments continued
Cinema City Poland CC sp. Zoo SJ
Cinema City Poland spolka
komandytowa sp. Zoo (Poland)
Forum Film Poland CC Sp. Zoo SJ
I.T. Poland Development 2003 CC sp.
Zoo SJ
New Age Media CC sp. Zoo SJ
Entertainment SCSp
Film SCSp
Hollywood SCSp
Star SCSp
Studio SCSp
Cinema City Czech s.r.o.
Forum Film Czech s.r.o.
UL. FOSA 37
02-768 WARSZAWA
NIP 521-30-97-055
KRS- 0000493032
UL. FOSA 37
02-768 WARSZAWA
NIP 521-30-97-055
KRS- 0000493032
CC SP.Z O.O SP.J.
UL. WOŁOSKA 12
02-675 WARSZAWA
NIP 521-32-47-566
KRS- 0000493092
UL. FOSA 37
02-768 WARSZAWA
NIP 982-02-32-895
KRS- 0000493402
UL. POWSIŃSKA 31
02-903 WARSZAWA
522-26-16-744
KRS- 0000493146
39 Avenue John F. Kennedy,
L-1855, Luxembourg
39 Avenue John F. Kennedy,
L-1855, Luxembourg
39 Avenue John F. Kennedy,
L-1855, Luxembourg
39 Avenue John F. Kennedy,
L-1855, Luxembourg
39 Avenue John F. Kennedy,
L-1855, Luxembourg
Arkalycká 951/3
149 00 Praha 4
Arkalycká 951/3
149 00 Praha 4
Forum Home Entertainment Czech
s.r.o.
Arkalycká 951/3
149 00 Praha 4
Cinema City Slovakia s.r.o.
Forum Film Slovakia s.r.o.
Cinema City Bulgaria EOOD
Forum Film Bulgaria EOOD
Cinema City Romania SRL
Forum Film Romania SRL
Einsteinova 20
851 01 Bratislava
Einsteinova 20
851 01 Bratislava
45 Bregalnitza Str, 5 floor
Vazrajdane Region
Sofia 1303, Bulgaria
45 Bregalnitza Str, 4 floor
Vazrajdane Region
Sofia 1303, Bulgaria
13 Ana Davila street, Sector 5,
Bucharest 050491
Romania
13 Ana Davila street, Sector 5,
Bucharest 050491
Romania
Cinema operations
Ordinary
100
Cinema operations
Ordinary
100
Film distribution
Ordinary
100
Cinema operations
Ordinary
100
Advertising
Ordinary
100
Holding company
Ordinary
Holding company
Ordinary
Holding company
Ordinary
Holding company
Ordinary
Holding company
Ordinary
Cinema operations
Ordinary
Film distribution
Ordinary
Film distribution
Ordinary
Cinema operations
Ordinary
Film distribution
Ordinary
Cinema operations
Ordinary
100
100
100
100
100
100
100
100
100
100
100
Film distribution
Ordinary
100
Cinema operations
Ordinary
100
Film distribution
Ordinary
100
135
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Notes to the Company Financial Statements
continued
28. Fixed Asset Investments continued
New Age Media Romania SRL
Cinema City Cinemas sp. Zoo
Northfleet sp. Zoo
Registered Office
13 Ana Davila street, Sector 5,
Bucharest 050491
Romania
Principal activity
Advertising
Class
% of shares
held
Ordinary
100
UL. FOSA 37
02-768 WARSZAWA
NIP 521-33-04-554
REGON: 015805025
KRS- 0000217016
UL. FOSA 37
02-768 WARSZAWA
NIP 521-33-04-554
REGON: 015805025
KRS- 0000217016
Group services
Ordinary
100
General partner
Ordinary
100
136
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 29. Debtors
Amounts due from subsidiary undertakings
30. Interest-Bearing Loans, Borrowings and Other Financial Liabilities
Non-current liabilities
Unsecured bank loan, less issue costs of debt to be amortised
Interest rate swaps
Current liabilities
Unsecured bank loans, less issue costs of debt to be amortised
Interest rate swaps
For details of interest bearing loans, borrowings and other financial liabilities see Note 17.
31. Creditors: Amounts Falling Due Within One Year
Amounts due to subsidiary undertakings
Deferred consideration
Accruals
31 December
2016
£m
31 December
2015
£m
343.2
296.5
31 December
2016
£m
31 December
2015
£m
307.1
0.6
307.7
12.6
0.5
13.1
285.4
1.0
286.4
10.5
0.6
11.1
31 December
2016
£m
31 December
2015
£m
80.6
37.0
0.5
118.1
46.5
–
1.6
48.1
Fair Values
Fair value disclosures for debtors and creditors have not been prepared on the basis that their carrying amount is a reasonable
approximation to fair value.
32. Share-Based Payments
See Note 18 to the Group financial statements.
137
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Shareholder Information
as at 31 December 2016
Directors
A H Bloom
M Greidinger
I Greidinger
R Senat
J Southern
M King
S Rosenblum
A Samuelsson
A Kornasiewicz
(Non-Executive Director and Chairman)
(Chief Executive Officer)
(Deputy Chief Executive Officer)
(Non-Executive Director and Senior Independent Director)
(Non-Executive Director)
(Non-Executive Director)
(Non-Executive Director)
(Non-Executive Director)
(Non-Executive Director)
Joint Brokers
Barclays Bank Plc
1 Churchill Place
London E14 5HP
Investec Bank plc
2 Gresham Street
London EC2V 7QP
Legal Advisers to the Company
Slaughter and May
1 Bunhill Row
London EC1Y 8YY
Head Office
8th Floor
Vantage London
Great West Road
Brentford TW8 9AG
Telephone Number
020 8987 5000
Website
www.cineworldplc.com
Place of Incorporation
England and Wales
Company Number
Registered Number: 5212407
Registered Office
8th Floor
Vantage London
Great West Road
Brentford TW8 9AG
Final Dividend – 2016
Announcement 9 March 2017
25 May 2017
Ex Dividend
26 May 2017
Record Date
22 June 2017
Payment Date
Auditor
KPMG LLP
15 Canada Square
London E14 5GL
138
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016
Notes
139
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS
Notes
140
FINANCIAL STATEMENTS uCINEWORLD GROUP PLC | ANNUAL REPORT AND ACCOUNTS 2016 Upcoming releases
for 2017
Guardians Of The Galaxy
Vol 2
April
Alien: Covenant
May
Pirates Of The Caribbean:
Salazar’s Revenge
May
Wonder Woman
June
Transformers: The Last Knight
June
Despicable Me 3
June
Spider-Man: Homecoming
July
War For The Planet Of
The Apes
July
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July
Valerian And The City Of A
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August
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Dmax
File Name
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Job Description
Build% Final Size
PATCH BUILD
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INTL FULL PAGE
WB Rev#
Date
100 27"x 40"
XX%
Billing
Block%
C Y A N
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336425id1_IT_Intl_Teaser_27x40_1Sheet
Kingsman: The Golden Circle
September
The LEGO Ninjago Movie
October
Paddington 2
November
Justice League
November
Star Wars: The Last Jedi
December
Cineworld Group plc
8th Floor
Vantage London
Great West Road
Brentford TW8 9AG
020 8987 5000
www.cineworldplc.com