TIDMCINE
RNS Number : 4643T
Cineworld Group plc
25 March 2021
CINEWORLD GROUP plc
Preliminary Results for the year ended 31 December 2020
Cineworld Group plc ("the Group") presents its preliminary
results for the year ended 31 December 2020. These results are
presented in US Dollars.
Summary
-- The COVID-19 global pandemic has significantly impacted the
industry and the Group's results for the period, with all sites
across the Group being temporarily closed from mid-March 2020
-- All sites remain closed as at the date of these results, with
re-opening in the US anticipated from 2 April 2021
-- Group revenue of $852.3m (2019: $4,369.7m) and Group Adjusted
EBITDA (loss of $115.1m) (2019: profit of $1,580.3m) for the period
was severely impacted by these closures
-- Management's main priorities have been the safety of
customers and employees, liquidity, cash preservation and costs
reduction
-- Operating loss of ($2,257.7m) (2019: profit of $724.7m) which
has been impacted by asset impairments of $1,344.5m
-- Raised $810.8m additional liquidity during the period,
including issuance of equity warrants
-- Obtained Group leverage covenant waivers until June 2022 and
are currently operating under a minimum liquidity covenant
Additional Liquidity Secured
-- Announcement of a binding commitment from a group of
institutional investors for a new $213m Convertible Bond due
2025
-- In parallel, the Group announces that it will today publish
and post (or otherwise make available) to shareholders a circular
(the "Circular") containing a Notice of General Meeting convening a
general meeting to seek shareholder approval of a resolution
temporarily suspending the borrowing limit in Cineworld's Articles
of Association.
-- Together with the expected $200m US Cares Act Tax refund
provides the Group with additional liquidity for reopening and any
further closure periods
Outlook
-- Anticipated cinema re-opening from 2 April in the US, 17 May
in the UK and May 2021 in ROW supported by a strong pipeline of
movies and current indication that government restrictions will be
lifted
-- Strong pent-up demand for affordable out-of-home
entertainment anticipated post re-opening due to the COVID-19
pandemic as indicated by the theatrical industry performing well in
re-opened markets such as China, Japan and Australia
-- There can be no certainty as to the future impact of COVID-19
on the Group. Governments strengthening of restrictions on social
gathering may lead to closure of cinemas or studios delaying movie
releases. This would have a negative impact on the Group's
financial performance and likely require the need to raise
additional liquidity. The material uncertainties, as well as some
one-off cash flow impacts on the Group are highlighted within the
going concern statement in these results
Key Financial Information
Statutory Statutory 2020 Year ended Year ended
Year ended Year ended Statutory
results
vs.2019
31 December 31 December 31 December 31 December
2020 2019 2020 2019
(under IFRS (under IFRS (under IAS (under IAS
16) 16) 17) 17)
Admissions 54.4m 275.0m (80.2%) 54.4m 275.0m
Revenue $852.3m $4,369.7m (80.5%) $852.3m $4,369.7m
Adjusted EBITDA(1) ($115.1m) $1,580.3m (107.2%) ($651.6m) $1,032.6m
(Loss) / profit before
tax ($3,007.9m) $212.3m
Adjusted (loss) /
profit before tax(1) ($1,326.9m) $355.4m
(Loss) / profit after
tax ($2,651.5m) $180.3m
Adjusted (loss) /
profit after tax(1) ($913.2m) $293.0m
Basic EPS ($193.2c) 13.1c
Diluted EPS ($193.2c) 13.1c
Adjusted diluted EPS(1) ($66.5c) 21.3c
(1) Refer to Notes 2 and 5 for the full definition and reconciliation.
Alicja Kornasiewicz, Chair of Cineworld Group plc, said:
"The Group has demonstrated resilience through what has been a
very difficult year and I am extremely proud of the commitment our
colleagues have shown during these exceptional times. Despite the
significant challenges that COVID-19 continues to present, we look
forward to reopening cinemas worldwide and welcoming our
guests."
Commenting on these results, Mooky Greidinger, Chief Executive
Officer of Cineworld Group plc, said:
"For all of us across the world, this has been an incredibly
challenging year. COVID-19 has created a huge amount of stress and
uncertainty, both in business and in our personal lives. At
Cineworld, I never imagined a time that we would see the closure of
our entire cinema estate, nor that varying restrictions would
remain in place for so long as we continue to navigate our way
through this crisis. I am immensely proud and inspired by the
response of our people to these very difficult circumstances. We
have worked hard to strengthen the long-term prospects of the
business and, looking forward, Cineworld enters 2021 confident
about the next chapter in our development; not least the intention
to reopen our cinemas starting April 2(nd) ."
Cautionary note concerning forward looking statements
Certain statements in this announcement are forward looking and
so involve risk and uncertainty because they relate to events and
depend upon circumstances that will occur in the future and
therefore results and developments can differ materially from those
anticipated. The forward looking statements reflect knowledge and
information available at the date of preparation of this
announcement and the Group undertakes no obligation to update these
forward-looking statements. Nothing in this announcement should be
construed as a profit forecast.
Details for analyst presentation
The results presentation is accessible via a listen-only dial-in
facility and the presentation slides can be viewed online. The
appropriate details are stated below:
Date: 25 March 2021
Time: 09:30am
Webcast link: https://secure.emincote.com/client/cineworld/cineworld016/
Conference Call:
https://secure.emincote.com/client/cineworld/cineworld016/vip_connect
Enquiries:
Cineworld Group plc Media
Israel Greidinger investors@Cineworld.co.uk James Leviton cineworld-lon@finsbury.com
Nisan Cohen 8th Floor, Vantage Rob Allen +44 (0)20 7251 3801
Manuela Van Dessel London
Great West Road
Brentford
TW8 9AG
Chief Executive Officer's Review
2020 was an extraordinarily difficult year for our sector. While
short-term uncertainty remains, we have taken decisive actions to
enable the Group to withstand the challenges presented, including
raising $810.8m of new liquidity. We are well positioned to recover
and reopen our cinemas when restrictions are eased and a pipeline
of incredible content is in place. The rollout of the vaccine
across our territories is clearly critical, with the US, UK
reopening in April and May respectively, Israel hopefully close to
reopening and we are convinced that the CEE market will be able to
reopen soon too. I would like to thank the entire team at Cineworld
for their loyalty, dedication and hard work during these hugely
difficult times.
Looking ahead, we are excited about the next chapter in the
Group's development and intend to reopen our cinemas starting
April, 2nd subject to lifting of government restrictions. There is
clear evidence that consumer demand for cinemas remains strong, and
due to the long-term investment in our estate, which boasts high
quality cinemas with the latest technology, we are well placed to
leverage the market opportunities available to us over the medium
to long term.
2020 Performance
The 2020 results were significantly impacted by the COVID-19
pandemic, with all our cinemas being temporarily closed for
extensive periods from mid-March. During this time, our focus was
on supporting our people, while also ensuring that our liquidity
position was adequate and minimising cash burn.
Our high quality cinema estate is well placed to recover from
the impact of the pandemic and take advantage of growth
opportunities, underpinned by the four tenets of our strategy and
culture: to give the best cinema experience to our customers; to be
leaders in technology; to expand and enhance our estate; and to
drive up value.
Our financial strategy continues to be focused on minimising
cash burn and ensuring the business has sufficient liquidity
throughout the closure period. However, we also remain focused on
our long-term objective of debt reduction through cash flow
generation and cost optimisation. In 2020, we raised over $800m of
liquidity and accelerated our tax year closure to bring forward an
expected tax refund of over $200m under the United States CARES
Act, which we expect to receive by April 2021. Further details of
our underlying and statutory earnings for the period are set out in
the Financial Review on page 5.
Our COVID-19 response
In response to the closure of our cinemas in March, our focus
was to minimise cash burn and to mitigate the effect of closures,
whilst prioritising the welfare of our employees, customers and
other stakeholders. Our efforts included:
- Raising $810.8m of liquidity
- Obtaining a Group leverage covenant waiver until June 2022,
and currently operating under a minimum liquidity covenant
- Negotiations with our landlords for material abatements and
long-term rent deferrals
- Discussions with all key suppliers to reduce costs and
implement payment plans
- Accessing government grants and employment schemes to support
our part-time, hourly paid cinema employees and head office
staff
- Weekly review and approvals of invoices and payments
- Curtailing all unnecessary capital expenditure
- Suspension of Group dividends
- Regular interaction with industry institutes and associations
including the National Association of Theatre Owners ("NATO"), the
Global Cinema Federation ("GCF") and more
Most importantly, we would like to thank our teams for their
perseverance through this challenging time. Through their fantastic
efforts, when cinemas reopened for a short period during the
summer, we provided our guests with a safe and enjoyable experience
while ensuring we complied with safety and government
guidelines.
Industry fundamentals and the respect for the theatrical
window
Our industry has proved its resilience time and time again over
many years, from the introduction of the first television to more
recent innovations such as VHS, DVD, and now Video on Demand
("VOD"). These streaming services are going through a period of
growth, highlighted by new entrants such as Netflix, Disney+, Apple
TV+, HBO Max and more. However, we remain convinced that the cinema
provides a clearly differentiated proposition to these at-home
activities.
Seeing a blockbuster movie on the big screen compared to
watching it at home on a TV or a mobile device is similar to how
dining out at a restaurant and ordering a takeaway are very
different consumer experiences. Against this backdrop, we believe
that we offer excellent value in terms of an out-of-home
experience. People do not naturally want to stay at home seven days
a week, and cinema-going is a very affordable and attractive
alternative.
While we have seen changes to the theatrical release window
policy in our industry during 2020, our position remains unchanged.
We see the window as an essential part of our business and most of
our studio partners remain committed to it as big supporters of the
theatrical business. The window has clearly proven its benefits for
both studios and movie theatres. By playing new films in movie
theatres for a set time period, the studios can generate
significant extra revenue, while benefiting from the value it adds
to the overall marketing of that movie. This in turn brings
additional revenue as the film moves through subsequent
distribution channels. More importantly, it enables consumers to
see movies as they were intended to be seen - on the big screen -
with the best picture and sound quality, which add to the overall
viewing experience. While the window may therefore be slightly
shorter moving forward, I believe it is clear that a window of
theatrical exclusivity should remain once business gets back to
normal.
Cineplex
In June 2020, Cineworld terminated the arrangement agreement
with Cineplex Inc. ("Cineplex") due to breaches by Cineplex and,
accordingly, this transaction will no longer proceed. Cineplex
denies that it breached the arrangement agreement and has initiated
proceedings against Cineworld to seek damages for the termination
and what it describes as breaches by Cineworld. Cineworld denies
that it breached the arrangement agreement and has submitted a
defence to the Cineplex claim. Cineworld has itself filed a
counterclaim against Cineplex for Cineworld's damages and losses
suffered as a result of Cineplex's breaches and the termination of
the arrangement agreement, including Cineworld's lost financing
costs, advisory fees and other costs incurred.
Outlook
Following the second closure of cinemas in October and recent
government restrictions, our estate of 767 cinemas currently
remains closed. We continue to work to mitigate the effect of
closures and minimise cash burn during this period, including
continued furloughing of the majority of our employees, suspension
of all new capex programmes, continuing discussions with landlords
and the establishment of new payment plans with suppliers.
Looking forward, the outlook is more positive, with restrictions
expected to ease in light of the vaccination programmes underway
across our territories. Before COVID-19, the 2019 global box office
reached an all-time record of $42.5bn, demonstrating the underlying
strength of our industry around the world. Furthermore, the
performance of the theatrical industry in countries which have
broadly recovered from COVID-19 has been encouraging, in particular
in China and Japan, where the industry has seen box office records.
We believe that we can return to previous performance levels should
the situation normalise, given that consumer demand remains strong
- our guests want to go out and socialise, and we are confident
they will do so as soon as they are permitted.
While uncertainty regarding the duration of the COVID-19
pandemic remains, the Group has assumed a base case scenario with
cinemas reopening in May 2021. Under this scenario, the Group has
sufficient headroom for 2021 and beyond, However, there are
material uncertainties in respect of certain aspects of the
forecast, details of which are included in Note 1 of the Financial
Statements. In the event of a further delay to cinema reopenings,
the Group expects to retain sufficient liquidity for a number of
additional months but may require term loan lender support in order
to deploy that liquidity.
Our roots go back 90 years in the cinema industry. Throughout
our history, the industry has faced significant hurdles from time
to time but has always come back fighting, still going from
strength to strength. We remain extremely confident in the future
of our sector, the high quality of the experience in our cinemas,
and that we will continue to be THE BEST PLACE TO WATCH A
MOVIE.
Moshe (Mooky) Greidinger
Chief Executive Officer
25 March 2021
Chief Financial Officer's Review
Year ended Year ended
31 December 31 December
2020 2019 Movement
Admissions 54.4m 275.0m (80.2%)
$m $m %
Box office 448.6 2,536.1 (82.3%)
Retail 232.2 1,240.3 (81.3%)
Other Income 171.5 593.3 (71.1%)
Total revenue 852.3 4,369.7 (80.5%)
=============== ============= ============= =========
Cineworld Group plc (the "Group") results are presented for the
year ended 31 December 2020 and reflect the trading and financial
position of the US, UK and Ireland ("UK&I") and the Rest of the
World ("ROW") reporting segments. As widely reported, the industry
has been severely impacted by the global COVID-19 pandemic, which
had a significant adverse effect on the Group's results for the
period. Although the Group is now looking to re-opening and
recovery from the impact of the pandemic, material uncertainty
around its ability to continue as a going concern remains (as set
out in note 1).
Total admissions decreased by 80.2% year on year to 54.4m,
reflecting closures required due to lockdown measures implemented
to control the spread of COVID-19 and a lack of major film
releases. Total revenue for the year ended 31 December 2020 was
$852.3m, a decrease of 80.5% on the prior year.
The principal revenue stream for the Group is box office
revenue, which made up 52.6% (2019: 58.0%) of total revenue. Box
office revenue is a function of the number of admissions and the
ticket price per admission, less sales tax. Admissions (one of the
Group's Key Performance Indicators) depend on the number, timing
and popularity of the movies the Group is able to show in its
cinemas. In addition, the Group operates membership schemes which
provide customers with access to screenings in exchange for
subscriptions fees, and this revenue is reported within box
office.
The Group's second most significant revenue stream is from
retail sales of food and drink for consumption within cinemas,
which made up 27.2% (2019: 28.4%) of total revenue. Retail revenue
across the Group is driven by admissions trends within each
operating territory. Other Income represents 20.1% (2019: 13.6%) of
total Group revenue.
Other Income is made up of all income other than box office and
retail, predominantly revenue from advertisements shown on screen
prior to film screenings and revenue from booking fees associated
with the purchase of tickets online. The Group also generates
distribution revenue in the UK and ROW, which is included within
Other Income.
US
The results below show the Group's performance in the US.
Year ended Year ended
31 December 31 December
2020 2019 Movement
Admissions 30.1m 177.3m (83.0%)
$m $m %
Box office 280.3 1,859.6 (84.9%)
Retail 161.1 953.9 (83.1%)
Other Income 134.5 396.1 (66.0%)
Total revenue 575.9 3,209.6 (82.1%)
=============== ============= ============= =========
Box office
Box office revenue represented 48.7% (2019: 57.9%) of total
revenue. Admissions and box office revenue decreased by 83.0% and
84.9% respectively. These results reflect the impact of the closure
of cinemas for significant periods during the year and the lack of
major film releases.
Regal announced the closure of all cinemas in the United States
on 17 March 2020. This shutdown remained in place until cinemas
began reopening on 21 August 2020. Many of the cinemas opened to
reduced operating hours with library content and reduced ticket
pricing to encourage patrons to return to the cinema. On 21 August,
Regal initially opened 182 cinemas, reopened an additional 104
cinemas on 28 August, and 75 additional cinemas opened during
September 2020. Some states, such as New York and California,
remained closed for theatrical exhibition. The local restrictions
in these key markets continued throughout the remainder of the year
and, as a result, studios were reluctant to release major titles.
Regal announced a second closure of the entire circuit effective 8
October 2020 and remained closed for the rest of the year.
The total North American industry box office revenue for the
year was 80.7% lower compared with the prior year (source:
Comscore). The top three movies in 2020 were "Bad Boys for Life",
"1917" and "Sonic the Hedgehog", which in total grossed $507m. The
top three movies in 2019 were "Avengers: Endgame", "The Lion King"
and "Toy Story 4", which in total grossed $1.8bn. During the year,
20 sites were closed in the United States, and the net cash flow
generated by these sites in the year ended 31 December 2019 was
negative. These closures did not have a significant impact on
performance during 2020.
The average ticket price achieved in the United States decreased
by 11.2% to $9.31 (2019: $10.49). The decrease reflects the lack of
premium film releases available across our premium offerings.
Retail
Retail revenue represented 28.0% of total revenue (2019: 29.7%).
Retail revenue decreased as a result of the cinema closures during
the year. Retail spend per person decreased by 0.5% to $5.35 (2019:
$5.38).
Other Income
Other Income represented 23.4% of total revenue (2019: 12.3%).
Other Income is made up of on-screen advertising revenue, corporate
and theatre income and revenue from online booking fees charged on
the purchase of tickets for screenings, which is driven by the
demand for tickets and the propensity of customers to book tickets
online. Screen advertising revenue is earned through the Group's
agreements with National CineMedia ("NCM") and direct contracts
with concession vendors and distributors. NCM operates on behalf of
a number of United States exhibitors to sell advertising time prior
to screenings. Advertising revenues are driven primarily by
admissions levels and the value of advertising sold. Other Income
also includes less significant elements related to the sale of gift
cards and bulk ticket programmes and the hire of theatres for
events. Other Income has decreased by 66.0% due to the impact of
cinema closures. The impact on Other Income has not been as great
due to certain contractual advertising revenues being recognised
regardless of cinemas being closed.
UK & Ireland
The results below for the UK&I include the two cinema brands
in the UK: Cineworld and Picturehouse.
Year ended Year ended
31 December 31 December
2020 2019 Movement
Admissions 11.4m 48.2m (76.3%)
$m $m %
Box office 99.4 405.7 (75.5%)
Retail 37.2 156.7 (76.3%)
Other Income 17.3 86.0 (79.9%)
Total revenue 153.9 648.4 (76.3%)
=============== ============= ============= =========
Box office
Box office revenue represented 64.6% of total revenue (2019:
62.6%). Admissions decreased by 76.3% and box office revenue
decreased by 75.5%. Admission and box office trends reflect the
closure of cinemas for significant parts of the year due to
lockdown restrictions and a lack of major film releases. All of the
Group's cinemas were closed on 17 March in response to the first
wave of COVID-19. The estate was reopened on 31 July. However, the
strength of the performance in the subsequent weeks and further
delays to major film release dates resulted in the announcement of
a further closure on 5 October. The entire UK estate remained
closed for the rest of the year.
In the UK&I, the top three grossing movies were "1917",
"Sonic the Hedgehog" and "Tenet", which grossed $96.1m (source:
Comscore). This compares to the top three titles in 2019 which were
"Avengers: Endgame", "The Lion King" and "Toy Story 4", which
grossed $273.2m (source: Comscore).
The average ticket price achieved in the UK&I increased by
3.6% to $8.72 (2019: $8.42). This increase was largely driven by
the types of releases during the period that cinemas were open
during 2020.
Retail
Retail revenue represented 24.2% (2019: 24.2%) of total revenue.
Retail revenue decreased by 76.3% from the prior year, driven by
cinema closures during the year. Retail spend per person increased
by 0.4% to $3.26 (2019: $3.25).
Other Income
Other Income decreased by 79.9% from 2019 and represented 11.2%
(2019: 13.3%) of total revenue. Other Income includes all other
revenue streams outside of box office and retail, mainly
advertising, online booking fees and some distribution revenue
through Picturehouse. Advertising revenue is primarily generated by
on-screen adverts and is earned though our joint venture screen
advertising business Digital Cinema Media Limited ("DCM"). DCM
sells advertising time on screen on behalf of the UK cinema
industry and advertising revenue is impacted by admissions trends
and the value of advertising sold.
Rest of the World
The results below for the ROW include Poland, Romania, Hungary,
the Czech Republic, Bulgaria, Slovakia and Israel.
Year ended Year ended movement
31 December 31 December
2020 2019
Admissions 12.9m 49.5m (73.9%)
$m $m %
Box office 68.9 270.8 (74.6%)
Retail 33.9 129.7 (73.9%)
Other Income 19.7 111.2 (82.3%)
Total revenue 122.5 511.7 (76.1%)
=============== ============= ============= =========
Box Office
Box office revenue represented 56.2% (2019: 52.9%) of total
revenue. Admissions in the ROW decreased by 73.9% and box office
revenue decreased 74.6% compared to the prior year. Admission
across all ROW territories decreased significantly from the prior
year due to prolonged closure periods resulting from lockdown
restrictions and delays to major film releases.
All ROW territories closed in March in response to lockdowns and
measures taken in response to the first wave of COVID-19. The first
territories to reopen were the Czech Republic and Slovakia in June.
Poland, Hungary, Romania, and Bulgaria opened in July. Cinemas
across all ROW territories closed again in November. Israel
remained closed from March for the remainder of the year.
The average ticket price decreased by 2.4% to $5.34 (2019:
$5.47). The decrease reflects the lack of premium film releases
available across our premium offerings.
Retail
Retail revenue represented 27.7% of the total revenue (2019:
25.3%). Retail spend per person was $2.63 (2019: $2.62).
Other Income
Other Income includes distribution, advertising and other
revenues and represents 16.1% (2019: 21.7%) of total revenue. Forum
Film is the Group's distribution business for the ROW and
distributes movies on behalf of certain major Hollywood studios as
well as owning the distribution rights to certain independent
films. Other Income and distribution revenue performed in line with
admission trends generally in 2020.
Financial Performance
Year ended
31 December
Year ended 31 December 2020 2019
--------------------------------------------------------------------- --------------------------------- ------------
US UK&I ROW Total Group Total Group
--------------------------------------------------------------------- ------ ----- ----- ----------- ------------
Admissions 30.1m 11.4m 12.9m 54.4m 275.0m
--------------------------------------------------------------------- ------ ----- ----- ----------- ------------
$m $m $m $m $m
--------------------------------------------------------------------- ------ ----- ----- ----------- ------------
Box office 280.3 99.4 68.9 448.6 2,536.1
Retail 161.1 37.2 33.9 232.2 1,240.3
Other Income 134.5 17.3 19.7 171.5 593.3
--------------------------------------------------------------------- ------ ----- ----- ----------- ------------
Total revenue 575.9 153.9 122.5 852.3 4,369.7
Adjusted EBITDA (as defined in Note 2) (115.1) 1,580.3
Operating (Loss)/profit (2,257.7) 724.7
Finance income 69.6 26.3
Finance expenses (786.8) (568.0)
--------------------------------------------------------------------- ------ ----- ----- ----------- ------------
Net finance costs (717.2) (541.7)
Share of (loss)/profit from joint ventures (33.0) 29.3
--------------------------------------------------------------------- ------ ----- ----- ----------- ------------
(Loss)/profit on ordinary activities before tax (3,007.9) 212.3
Tax on (loss)/profit on ordinary activities 356.4 (32.0)
--------------------------------------------------------------------- ------ ----- ----- ----------- ------------
(Loss)/profit for the year attributable to equity holders of the
Group (2,651.5) 180.3
--------------------------------------------------------------------- ------ ----- ----- ----------- ------------
Adjusted EBITDA
Adjusted EBITDA has decreased to a loss of $115.1m (2019: profit
of $1,580.3m). This was mainly driven by the impact of the
reduction in admissions caused by closures in response to the
COVID-19 pandemic.
Adjusted EBITDA generated by the US, UK and ROW was negative
($87.2m), negative ($35.0m) and $7.1m respectively for 2020,
compared with $1,197.1m, $192.2m and $191.0m in 2019. Decreases
across all segments were driven by the loss of revenue caused by
the COVID-19 pandemic.
From 1 January 2019, the Group has adopted IFRS 16 "Leases".
Below, a reconciliation of the results on the basis of the previous
standard, under IAS 17, to IFRS 16 is presented:
Impact
Statutory of IFRS Pre IFRS
Results 16 16 Results
$m $m $m
------------------------------------- --------- -------- -----------
Revenue 852.3 - 852.3
Cost of sales (888.1) (536.5) (1,424.5)
Other operating income 2.3 - 2.3
Administrative expenses (2,224.2) 348.7 (1,875.6)
--------- -------- -----------
Operating Profit (2,257.2) (187.8) (2,445.5)
--------- -------- -----------
Adjusted EBITDA as defined in Note 2 (115.1) (536.5) (651.6)
--------- -------- -----------
Operating loss
Due to the impact of COVID-19 the Group reported an operating
loss for the first time of $2,257.7m compared with an operating
profit of $724.7m in 2019, representing a decrease of
$2,982.4m.
Certain material one-off items have been included within
operating profit in 2020, most significantly the impairment charges
described below. In addition to impairment charges, within
operating profit there are a number of non-recurring and
non-trade-related items that have a net negative impact of $127.2m
(2019: net negative impact $12.8m), including $19.9m relating to
costs arising from the Group's response to the COVID-19 pandemic,
$60.8m in transaction and reorganisation costs and $46.6m in
refinancing costs. These items are excluded from Adjusted EBITDA
and have been set out in detail in Note 2.
The total depreciation and amortisation charge (included in
administrative expenses) in the year totalled $643.3m (2019:
$729.8m). The charge is lower year on year due to impairment
charges reducing the value of the Group's depreciable assets and
amendments to leases during the year reducing a large number of
right-of-use assets, with the reductions caused by a higher
incremental borrowing rate applied to lease cash flows.
Where available, government support for companies to continue
paying employees through the shutdown was accessed. In some cases,
employees were paid directly. In others, the Group reclaimed
amounts once paid to employees. In such instances, amounts received
are shown reducing staff costs in the period. Where available the
Group has also accessed business rates relief.
The impact of the COVID-19 pandemic on the Group's forecast cash
flows, in addition to increased uncertainty in the market, a higher
discount rate reflecting the increased cost of debt and changes to
forecast cash flows, have resulted in the impairment of property,
plant and equipment and right -- of -- use assets at cinema
cash-generating units ("CGUs"), as well as goodwill in country
level CGUs and the Group's investment in National Cinemedia Inc
amounting to a total net charge of $1,344.5m (2019: $46.9m in
respect of property, plant and equipment and right-of-use assets at
cinema CGUs). These impairments are considered to be largely driven
by the impact of the pandemic and are considered to be exceptional
charges in the current period.
Leases
The impact of COVID-19 and the associated shutdown has resulted
in the Group renegotiating over 450 leases by the Balance Sheet
date and accessed government relief from payment of leases in
certain countries. The Group has sought to agree the waiver and
deferral of contractual rent under existing leases in order to
manage cash flow during the shutdown and recovery from the impact
of the virus. Payment of lease liabilities has decreased to $198.6m
from $613.3m in 2019, reflecting negotiation with landlords and
amendments agreed to date.
Amendments to leases, additions in the period, changes to
discount rates applied in the calculation of lease balances, and
cash flows in the period have resulted in total right -- of -- use
assets of $2,306.4m (2019: $3,441.2m), with a depreciation charge
of $348.7m (2019: $398.2m), with lease liabilities of $3,971.7m
(2019: $4,197.5m) and an interest cost of $349.0m (2019: $304.2m).
For leases amended during the year, higher incremental borrowing
rates reflecting the Group's higher cost of debt and lower credit
rating have been applied to cash flows, resulting in lower assets
and liabilities and higher lease interest cost for these leases.
With the impact of the virus continuing and discussions ongoing
with a number of landlords, there will be significant further
modification to leases subsequent to the year end.
Net finance costs
At 31 December 2019 the Group had USD term loans of $3.4bn and a
Euro term loan of $215.4m, and a $462.5m revolving credit facility
("RCF") of which $95.0m had been drawn upon.
In June 2020, the Group agreed the terms for an extension of
$110.8m on the RCF with a maturity of December 2020 and a new
$250.0m secured private loan with a maturity of 2023 with private
institutional investors.
In November 2020, the Group agreed the terms of a further
facility of $450.0m with a group of existing term loan lenders.
Alongside the new debt facility, the Group issued to participating
lenders 153,539,786 equity warrants representing in aggregate 9.99%
of the fully diluted ordinary share capital of the Company assuming
full exercise of the warrants. The new debt facility also includes
certain financial and operating covenants and entitles the lenders
to appoint a Board observer. The Group further agreed the amendment
of the previously agreed incremental RCF of $110.8m to a term loan
with a maturity of May 2024. The amendment to this facility was
considered to represent a discount to the fair market value of the
debt at the time of the agreement and therefore resulted in a gain
on extinguishment of debt of $33.2m, which has been recognised
within finance income.
At 31 December 2020 the Group had United States term loans
outstanding totalling $3.9bn, a Euro term loan of $233.8m, a
private placement loan of $250.0m and a $462.5m RCF which was fully
drawn.
Net financing costs totalled $717.2m during the period (2019:
$541.7m). Finance income of $69.6m (2019: $26.3m) included interest
income of $7.4m (2019: $4.5m), a gain of $9.0m on the movement of
the fair value of financial derivatives (2019: $10.4m), $8.4m on
the unwind of the discount on non-current assets (2019: $3.4m) and
$0.7m in respect of the unwind of the discount on sub-lease assets
(2019: $0.7m). A gain of $33.2m relating to the gain on
extinguishment on amending the extended RCF was also recognised in
the year.
Foreign exchange gains of $10.9m (2019: $7.3m) were incurred in
respect of monetary assets and non-USD denominated loans.
The Group had previously designated the Euro leg of three cross
currency swaps held as a net investment hedge against the assets of
certain Euro denominated subsidiaries. During the period the hedge
relationship became ineffective and the hedge relationship ended.
This resulted in $9.8m credit to the hedge reserve and charge to
the income statement.
During the year the Group designated a net investment hedge
relationship between the Group's Euro term loan and a portion of
the carrying value of the Group investments in Euro denominated
investments in order to mitigate the risk of reported foreign
exchange movements in respect of these items.
In 2019 the Group entered into a contingent forward contract and
a contingent swap contract in order to hedge certain cash flows
expected to take place on completion of the proposed Cineplex
combination. Due to the termination of the deal, the contingent
elements of the derivatives were not met. The Group terminated the
swap resulting in a gain of $4.5m and a loss of $10.4m on the deal
contingent forward in line with the fair values reported at 31
December 2019. In addition, the forward contract was modified on
termination, resulting in an additional loss of $10.2m and $16.8m
which has been assessed to be in respect of debt issuance costs
which have been capitalised and have been amortised over the
remainder of the year.
The finance expense of $786.8m (2019: $568.0m) has increased due
to higher incremental borrowing rates being applied to lease
liabilities that were amended during the year, driven upward by
changes in the Group's credit rating. Lease liability interest for
the year was $349.0m (2019: $304.2m). A lower average LIBOR rate in
2020 compared with 2019, the timing to the Group's refinancing in
2019 and the new debt facilities during the year also had an impact
on the overall finance expense.
Interest on bank loans and overdrafts in the period totalled
$166.3m (2019: $167.3m) benefiting from reduction in the LIBOR
level compared with the previous year. The other finance costs
included: $33.1m (2019: $27.2m) of amortised prepaid finance costs,
$49.4m (2019: $51.3m) in respect of the unwind of discount on
deferred revenue and loss of $153.4m on the movement of the fair
value of financial derivatives (2019: $8.1m). This included the
movements on the fair value of the derivative liability in respect
of the equity warrants issued in the year and two additional
embedded derivatives recognised on the refinancing entered into in
November. In addition, $11.8m in respect of foreign exchange losses
(2019: $9.9m) were incurred in the year.
Upon modifications being made to existing debt agreements during
the year, which implemented a 1% floor in LIBOR-linked interest
rates applied to US dollar-denominated term loans, embedded
derivative liabilities with a total value of $98.0m were
identified. These derivatives were initially recognised as an
exceptional finance cost, with subsequent movements of $5.6m being
recorded within movement on financial derivatives during the year.
Subsequent to the year end, it is expected that the underlying
contracts relating to these Cineworld Group plc 30 Annual Report
and Accounts 2020 derivatives will be further modified, resulting
in their derecognition. $11.8m in respect of foreign exchange
losses (2019: $9.9m) were incurred in the year.
Taxation
The overall tax credit during the year was $356.4m, giving an
effective tax rate of 11.8% (2019: 15.1%) on the loss before tax
for the year.
The tax credit includes a current tax credit of $224.0m. This
primarily relates to a carry back of 2020 United States tax losses
against profits of earlier periods under the Coronavirus Aid,
Relief and Economic Security ("CARES") Act, resulting in a cash tax
refund which we expect to receive in April 2021.
The effective tax rate for the year reflects one-off factors.
The rate is increased by the carry back of 2020 tax losses against
profits of earlier periods in which the United States Federal tax
rate was 35% (2019: 21%). Cash tax repayments relating to these
years will reflect the higher rate. The rate is decreased by a
partial de-recognition of deferred tax assets.
Tax uncertainties and risks are increasing for all multinational
groups which could affect the future tax rate. The Group takes a
responsible attitude to tax, recognising that it affects all 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 the
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
The loss on ordinary activities after tax in the period was
$2,651.5m, compared with a profit in the prior year of $180.3m. The
decrease is the result of the loss of revenue due to closures and a
lack of major film releases, both caused by the COVID-19 pandemic.
There have also been significant non-recurring charges and
expenses, including total non-cash impairment charges set out
above, which significantly increase the loss in the year.
Basic Earnings Per Share amounted to (193.2)c (2019: 13.1c).
Eliminating the one-off, non-trade -- related items totalling
$1,738.3m, Adjusted diluted Earnings Per Share were (66.5)c (2019:
21.3c).
Statement of cash flows and statement of financial position
Overall, net assets have decreased by $2,711.4m to $226.3m since
31 December 2019. Total assets decreased by $1,825.3m. This is
predominantly driven by the impairment of property, plant and
equipment and right -- of -- use assets at cinema CGUs and goodwill
at country CGUs. The total liabilities have increased by $886.1m,
primarily due to additional debt obtained in order to secure
liquidity.
With the material loss of revenue following the outbreak of the
COVID-19 pandemic, the Group agreed new sources of liquidity and
entered lease negotiations as set out above. These measures are
reflected in the Group statement of cash flows. Total net cash used
in operating activities in the year was $227.6m (2019: cash
generated $1,293.7m). Net debt of $8.3bn at the year end is $0.6bn
higher than the balance at 31 December 2019 primarily due to losses
driven by the impact of COVID-19 and the additional financing
raised during the year.
Dividends
The interim dividend of 3.75 United States cents per ordinary
share in respect of the third quarter of 2019 was paid to
shareholders on 10 January 2020. The total cash consideration was
$51.4m.
The distribution of dividends on our ordinary shares is subject
to validation by the Board of Directors and must be in line with
applicable law. The board of directors validates the amount of
future dividends to be paid, taking into account the cash balance
then available, the anticipated cash requirements, the overall
financial situation, restrictions on loan agreements, future
prospects for profits and cash flows, as well as other relevant
factors. On 7 April 2020 the Board announced the suspension of the
2019 fourth quarter dividend of 4.25 cents per share to conserve
cash for the Group.
Nisan Cohen
Chief Financial Officer
25 March 2021
Consolidated Statement of Profit or Loss for the Year Ended 31
December 2020
Year ended Year ended
31 December 31 December
2020 2019
Note $m $m
---------------------------------------------------- ---- ------------ ------------
Revenue 4 852.3 4,369.7
Cost of sales (888.1) (2,749.1)
---------------------------------------------------- ---- ------------ ------------
Gross (loss) / profit (35.8) 1,620.6
Other operating income 2.3 5.7
Administrative expenses (879.7) (854.7)
Net impairment of goodwill, property, plant
and equipment, right-of-use assets and investments (1,344.5) (46.9)
---------------------------------------------------- ---- ------------ ------------
Operating (loss) / profit (2,257.7) 724.7
Adjusted EBITDA as defined in Note 2 (115.1) 1,580.3
---------------------------------------------------- ---- ------------ ------------
Finance income 6 69.6 26.3
Finance expenses 6 (786.8) (568.0)
---------------------------------------------------- ---- ------------ ------------
Net finance costs (717.2) (541.7)
Share of (loss) / profit from jointly controlled
entities using equity accounting method net
of tax (33.0) 29.3
---------------------------------------------------- ---- ------------ ------------
(Loss) / profit before tax (3,007.9) 212.3
Tax credit / (charge) on profit 8 356.4 (32.0)
---------------------------------------------------- ---- ------------ ------------
(Loss) / profit for the year attributable
to equity holders of the Group (2,651.5) 180.3
Basic (Deficit) / Earnings Per Share (cents) 5 (193.2) 13.1
Diluted (Deficit) / Earnings Per Share (cents) 5 (193.2) 13.1
---------------------------------------------------- ---- ------------ ------------
Consolidated Statement of Comprehensive Income for the Year
Ended 31 December 2020
Year ended Year ended
31 December 31 December
2020 2019
$m $m
------------------------------------------------------------ ------------ ------------
(Loss) / Profit for the year attributable to equity
holders of the Group (2,651.5) 180.3
Items that will not subsequently be reclassified
to profit or loss
Net change in fair value of equity investments - (7.5)
Items that will subsequently be reclassified to
profit or loss
Retranslation gain of foreign currency denominated
operations 3.5 12.6
De-designation of net investment hedge 9.8 -
Movement of net investment hedge (19.8) 22.2
Income tax (charge) recognised within other comprehensive
income (0.1) (0.7)
------------------------------------------------------------ ------------ ------------
Comprehensive (loss)/income for the year, net of
income tax (6.6) 26.6
------------------------------------------------------------ ------------ ------------
Total comprehensive (loss)/income for the year attributable
to equity holders of the Group (2,658.1) 206.9
------------------------------------------------------------ ------------ ------------
Consolidated Statement of Financial Position at 31 December
2020
31 December 31 December
2020 2019
Note $m $m
----------------------------------------- ---- ----------- -----------
Non-current assets
Property, plant and equipment 1,788.2 2,039.5
Right-of-use assets 9 2,306.4 3,441.2
Goodwill 4,868.3 5,492.1
Other intangible assets 489.5 515.6
Investment in equity-accounted investees 215.1 300.2
Financial assets at FVOCI 10.0 10.0
Deferred tax assets 278.1 138.8
Fair value of financial derivatives 7.8 -
Other receivables 48.7 64.6
----------------------------------------- ---- ----------- -----------
Total non-current assets 10,012.1 12,002.0
----------------------------------------- ---- ----------- -----------
Current assets
Assets classified as held for sale 2.9 0.9
Inventories 13.2 33.2
Current taxes receivables 206.6 1.6
Trade and other receivables 53.7 261.8
Fair value of financial derivatives - 10.4
Cash and cash equivalents 336.7 140.6
----------------------------------------- ---- ----------- -----------
Total current assets 613.1 448.5
----------------------------------------- ---- ----------- -----------
Total assets 10,625.2 12,450.5
----------------------------------------- ---- ----------- -----------
Current liabilities
Loans and borrowings 10 (54.2) (133.9)
Fair value of financial derivatives - (4.5)
Fair value of warrants (97.2) -
Lease liabilities (596.6) (321.6)
Trade and other payables (596.3) (712.1)
Deferred revenue (270.9) (263.1)
Current taxes payable (40.6) (48.8)
Provisions 11 (8.0) (6.4)
----------------------------------------- ---- ----------- -----------
Total current liabilities (1,663.8) (1,490.4)
----------------------------------------- ---- ----------- -----------
Non-current liabilities
Loans and borrowings 10 (4,608.5) (3,485.4)
Fair value of financial derivatives (130.1) (9.7)
Lease liabilities (3,375.1) (3,875.9)
Other payables (9.2) (12.4)
Deferred revenue (607.0) (635.0)
Provisions 11 (1.1) (0.5)
Employee benefits (4.1) (3.5)
Total non-current liabilities (8,735.1) (8,022.4)
----------------------------------------- ---- ----------- -----------
Total liabilities (10,398.9) (9,512.8)
----------------------------------------- ---- ----------- -----------
Net Assets 226.3 2,937.7
----------------------------------------- ---- ----------- -----------
Equity attributable to equity holders of
the Group
Share Capital 20.1 20.1
Share Premium 513.8 516.0
Foreign currency translation reserve (247.3) (250.8)
Hedging reserve 11.6 21.6
Fair value reserve (14.4) (14.4)
Retained earnings (57.5) 2,645.2
----------------------------------------- ---- ----------- -----------
Total Equity 226.3 2,937.7
----------------------------------------- ---- ----------- -----------
These Financial Statements were approved by the Board of
Directors on 25 March 2021 and were signed on its behalf by:
Nisan Cohen, Director
Consolidated Statement of Changes in Equity for the Year Ended
31 December 2020
Foreign
currency Fair
Share Share Merger translation Hedging value Retained
capital premium reserve reserve reserve reserve earnings Total
$m $m $m $m $m $m $m $m
-------------------------------- -------- -------- -------- ------------ -------- -------- ---------
1 January 2019 20.1 513.8 - (263.4) (0.6) (6.9) 2,984.0 3,247.0
-------------------------------- -------- -------- -------- ------------ -------- -------- --------- ---------
Profit for the year - - - - - - 180.3 180.3
Comprehensive income
Items that will not subsequently - - - - - - - -
be reclassified to profit
or loss
Net change in fair value
of equity investments - - - - - (7.5) - (7.5)
Items that will subsequently - - - - - - - -
be reclassified to profit
or loss
Movement on net investment
hedge - - - - 22.2 - - 22.2
Tax that will subsequently
reclassified to profit
or loss - - - - - - (0.7) (0.7)
Retranslation of foreign
currency denominated operations - - - 12.6 - - - 12.6
-------------------------------- -------- -------- -------- ------------ -------- -------- --------- ---------
Total comprehensive loss - - - 12.6 22.2 (7.5) 179.6 206.9
-------------------------------- -------- -------- -------- ------------ -------- -------- --------- ---------
Contributions by and
distributions
to owners
Dividends - - - - - - (520.2) (520.2)
Movements due to share-based
compensation - - - - - - 1.8 1.8
Transfer of shares - 2.2 - - - - - 2.2
-------------------------------- -------- -------- -------- ------------ -------- -------- --------- ---------
31 December 2019 20.1 516.0 - (250.8) 21.6 (14.4) 2,645.2 2,937.7
-------------------------------- -------- -------- -------- ------------ -------- -------- --------- ---------
Loss for the year - - - - - - (2,651.5) (2,651.5)
Comprehensive income
Items that will not subsequently - - - - - - - -
be reclassified to profit
or loss
Net change in fair value - - - - - - - -
of equity investments
Items that will subsequently - - - - - - - -
be reclassified to profit
or loss
De-designation of net
investment hedge - - - - 9.8 - - 9.8
Movement on net investment
hedge - - - - (19.8) - - (19.8)
Tax that will subsequently
reclassified to profit
or loss - - - - - - (0.1) (0.1)
Retranslation of foreign
currency denominated operations - - - 3.5 - - - 3.5
-------------------------------- -------- -------- -------- ------------ -------- -------- --------- ---------
Total comprehensive loss - - - 3.5 (10.0) - (2,651.6) (2,658.1)
-------------------------------- -------- -------- -------- ------------ -------- -------- --------- ---------
Contributions by and
distributions
to owners
Dividends - - - - - - (51.4) (51.4)
Movements due to share-based
compensation - - - - - - (1.9) (1.9)
Transfer of shares - (2.2) - - - - 2.2 -
-------------------------------- -------- -------- -------- ------------ -------- -------- --------- ---------
31 December 2020 20.1 513.8 - (247.3) 11.6 (14.4) (57.5) 226.3
-------------------------------- -------- -------- -------- ------------ -------- -------- --------- ---------
Consolidated Statement of Cash Flows for the Year Ended 31
December 2020
Year ended Year ended
31 December 31 December
2020 2019
Note $m $m
---------------------------------------------------- ---- ------------ ------------
Cash flow from operating activities
(Loss)/profit for the year (2,651.5) 180.3
Adjustments for:
Finance income 6 (69.6) (26.3)
Finance expense 6 786.8 568.0
Taxation 8 (356.4) 32.0
Share of profit of equity accounted investee 33.0 (29.3)
---------------------------------------------------- ---- ------------ ------------
Operating (loss)/profit (2,257.7) 724.7
---------------------------------------------------- ---- ------------ ------------
Depreciation and amortisation 643.3 729.8
Share-based payments charge (2.3) 4.9
Impairment and reversal of impairment
of goodwill, property, plant and equipment
and right-of-use assets 1,307.4 46.9
Impairment of investment 37.1 -
Decrease in trade and other receivables 214.4 37.9
Decrease in inventories 20.0 2.3
Decrease in trade, other payables and
deferred income (204.5) (97.5)
Increase / (decrease) in provisions and
employee benefit obligations 2.1 (35.0)
Loss/ (gain) on sale of assets 6.4 (12.2)
---------------------------------------------------- ---- ------------ ------------
Cash (used) / generated from operations (233.8) 1,401.8
Tax received/(paid) 6.2 (108.1)
---------------------------------------------------- ---- ------------ ------------
Net cash flows from operating activities (227.6) 1,293.7
---------------------------------------------------- ---- ------------ ------------
Cash flows from investing activities
Interest received 6.5 3.6
Income from net investment in sublease 1.0 1.2
Acquisition of property, plant and equipment (290.0) (455.6)
Investment in joint ventures (0.3) -
Investment in financial asset at FVOCI - (10.0)
Acquisition of distribution rights and
other intangibles (2.5) (5.2)
Distributions received from equity accounted
investees 17.8 42.6
Proceeds from sale and leaseback - 542.4
Proceeds from sale of property, plant
and equipment 3.2 22.0
---------------------------------------------------- ---- ------------ ------------
Net cash flows from investing activities (264.3) 141.0
---------------------------------------------------- ---- ------------ ------------
Cash flows from financing activities
Dividends paid to shareholders (51.4) (520.2)
Interest paid (158.3) (165.5)
Repayment of bank loans (54.2) (1,458.5)
Repayment of loans from equity accounted
investees - (3.0)
Draw down of bank loans 1,207.8 1,130.3
Debt issuance costs paid (73.2) -
Repayment on termination of financial
derivatives (10.2) -
Landlord contributions 13.5 28.4
Payment of lease liabilities* (198.6) (613.3)
---------------------------------------------------- ---- ------------ ------------
Net cash flows from financing activities 675.4 (1,601.8)
---------------------------------------------------- ---- ------------ ------------
Cash and cash equivalents at start of
the period 140.6 316.3
Net movements in cash and cash equivalents 183.5 (167.1)
Exchange gain / (loss) on cash and cash
equivalents 12.6 (8.6)
---------------------------------------------------- ---- ------------ ------------
Cash and cash equivalents at the end of
year 336.7 140.6
---------------------------------------------------- ---- ------------ ------------
*Payment of lease liabilities includes $115.7m (2019: $304.2m)
of interest payment and $82.9m (2019: $309.1m) of principal lease
payments.
During the financial year $47.8m (2019: $nil) of government
grants were received in cash
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 Limited by
shares, incorporated and domiciled in the UK.
This consolidated financial information for the year ended 31
December 2020 comprises the Company and its subsidiaries (together
referred to as the 'Group') and the Group's interests in jointly
controlled entities. The financial information presented has been
prepared applying the accounting policies and presentation applied
in the preparation of the Group's consolidated financial statements
for the year ended 31 December 2020. These preliminary results do
not constitute the Group's statutory accounts for the years ended
31 December 2020 and 31 December 2019. The statutory accounts for
the year ended 31 December 2019 have been reported on by the
Company's auditors and delivered to the Registrar of Companies. The
statutory accounts for the year ended 31 December 2020, which have
been approved by the Directors, will be sent to shareholders in
April 2021 and delivered to the Registrar of Companies.
The auditor has reported on the Group's statutory accounts for
the years ended 31 December 2020 and 2019. The reports were (i)
unqualified, although included an emphasis of matter in respect of
material uncertainty around going concern and (ii) did not contain
a statement under section 498(2) or (3) of the Companies Act
2006.
The accounting policies set out below have been applied
consistently to all years presented in these Group Financial
Statements.
Going Concern
In assessing the appropriateness of applying the going concern
basis in preparation of the consolidated and company financial
statements the directors have considered the Group's liquidity and
forecast cash flows under a range of potential scenarios, taking
into account reasonably possible outcomes over a 15-month period
from the date of approval of these financial statements. Given the
global political and economic uncertainty driven by the continuing
COVID-19 pandemic, and its specific impact on the cinema exhibition
industry, the directors consider some volatility in performance and
a certain amount of disruption to business likely over the coming
months. Although the recent roll out of vaccination programs, and
the positive announcements from both the US and UK on cinema
openings, suggest significant potential for recovery over the
coming 15 months, the directors consider the performance to be
sensitive to the ability to reopen, the availability of film
content available and the recovery profile of admissions.
The scenarios modelled consider the potential impact of lifting
and continuation of COVID-19 restrictions affecting the cinema
exhibition industry, the availability and timing of film content,
consumer behaviour driven by COVID-19, the impact on contractual
cash flows specific to the Group and its liquidity position, as
well as future access to liquidity. These scenarios cover a range
of potential outcomes primarily based on the speed of recovery of
the cinema exhibition industry from the COVID-19 pandemic, as well
as the potential for further impact in the future. Each of the
scenarios are sensitive to forecast admissions levels and certain
material cash flows.
For the forthcoming re-openings, in line with the re-openings
from the first outbreak of COVID-19 in 2020, the Group will
reimplement safety measures across all territories to ensure the
safety of customers and employees. These include staggered film
start times, social distancing measures in auditoriums and foyers,
additional cleaning procedures, temperature checks and the wearing
of face coverings in certain territories. Restrictions in place,
and additional measures taken in order to ensure appropriate social
distancing is maintained in all cinemas, constrain the potential
capacity for attendance. However, the level of unused capacity
available in theatres, operational changes made regarding film
times and the choice of films shown should ensure that forecast
revenues are still achievable despite such restrictions.
In May 2020, in order to provide additional liquidity, the Group
agreed the terms for an extension of $110.8m on the revolving
credit facility (RCF) and in June of 2020, a new $250.0m secured
loan. In November 2020, the Group agreed the terms of a further
facility of $450.0m and the amendment of the previously agreed
incremental RCF of $110.8m to a term loan with a maturity of May
2024. The Group also successfully agreed the waiver of all existing
financial covenants until the June 2022 testing point.
The new $450m facility includes certain new financial and
operating covenants, which remain in place until the Group achieves
admission levels consistent with 80% of comparable periods in 2019
for a period of three consecutive months. These covenants include
minimum liquidity requirements, restrictions on cash disbursements
for operations and capital expenditure and the prohibition of
settlement of certain specific material liabilities. The Directors
are confident that the Group can continue to operate and recover
fully from the impact of the pandemic whilst complying with all
obligations under its lending agreements.
Weighted base Case Scenario
The Group's weighted base case scenario assumes a gradual
recovery from the current shutdown, with cinemas across all
territories opening in May 2021 at 60% of comparable levels to
2019, returning to admissions levels of 90% of comparable periods
in 2019 by the end of the year. Admissions are then forecast to
remain on average 10% below 2019 levels throughout 2022 and 5%
below through 2023. In addition to cinema performance, the Group's
cash flows and liquidity are sensitive to the timing and level of
rent payments. The Group has been successful in agreeing the waiver
and deferral of significant rent payable under lease agreements
through the current shutdown period, and beyond with the support of
landlords. Rent payments have been modelled in line with actual
modifications and the expectations of achievable deferrals over the
coming 12-month period based on on-going discussions with the
landlords. The Group has also taken into consideration mitigating
actions available to it, these include stopping all non-essential
capital expenditure for the coming 9 months which has been modelled
under the weighted base case scenario. In addition, the Group has
taken steps to reduce operational and administrative costs, in
order to further preserve liquidity. Further steps would be taken
to operate at a minimal costs basis should the directors consider
it necessary. No further lockdowns or operating restrictions in
winter 2021 are considered within this forecast
Under the weighted base case scenario, the Group maintains
headroom against available cash and debt facilities throughout the
going concern assessment period, including in May 2021 and the
early months of reopening. Restrictions on operating and capital
expenditure cash flows are complied with at all times. Financial
covenants on the RCF, of 5.0x net leverage at the June 2022 testing
point, would not be breached.
In addition, two significant matters arise in this period being
a large one off tax cash receipt under the US CARES act which
allows losses for 2020 to be offset against tax paid in earlier
periods creating a cash tax refund of $202m, and the expected
judgement on the Regal Dissenting Shareholders claim where the
Dissenting Shareholders are claiming more than $202 million
(excluding any interest payable).
The Group accelerated its tax year closure in order to bring
forward the expected cash refund. Following professional advice and
in line with government guidelines, the Directors are satisfied
that the receipt in respect of the claim will occur by the end of
April 2021.
The Group is currently prohibited from making payments in
respect of the Dissenting Shareholder liability by the terms of
$450 million loan, except for any payments made from the proceeds
of an equity raise or from permitted subordinated debt in
accordance with the $450 million loan agreement. A judgment in
respect of the Dissenting Shareholder liability is expected to be
received no later than 30 June 2021, and the Directors anticipate
that judgment will be in line with the fair value of the original
transaction plus interest. The Directors are satisfied, based on
external legal advice, that the restriction on paying the
dissenting shareholders under the $450 million loan is enforceable
and that no payments in respect thereof are likely to arise in the
going concern period that are in violation of the terms of the $450
million loan.
Severe but plausible downside scenario
Given the current uncertainty around the potential impact of
disruption caused by COVID-19 in the forthcoming period and the
challenges around forecasting the impact on the cinema industry,
the Directors have considered the following severe but plausible
downside scenarios to stress test the Group's financial
forecasts:
1. In the event that the US CARES Act tax cash receipt of $202
million is not received before the end of April 2021 there would be
a breach in the minimum liquidity covenant in April 2021 which
would require a waiver from the lenders. Further, if both the tax
receipt was not received, and cinemas were not to open, before the
end of May 2021, then additional liquidity would be required in May
2021. As a mitigating action management has engaged advisors around
the potential for raising additional unsecured liquidity. In
parallel the Group is requesting consent of its shareholders to
amend its articles of association to release it from its current
borrowing limits.
2. Modelling the same cash flow positions as the weighted base
case but with; a) a slower recovery from the current wave of
COVID-19 affecting all of the Group's territories to the extent
that the forecast reopening of its cinemas is delayed until August
2021 and, b) that no rent abatements are achieved on leases yet to
be renegotiated. The scenario forecasts no revenue until August
2021, at which point, admissions are forecast to be 60% of 2019
levels in August and increase to an average of 75% of 2019 levels
for the remainder of 2021. Admissions are then forecast to remain
at 80% of 2019 levels until 2023, 90% in 2024 and fully recover
from 2025 onward.The modelling for this scenario indicates that the
Group, in addition to breaching the covenants under its lending
agreements in May 2021 and the leverage covenant in June 2022,
would need additional liquidity in order to continue to operate
from September 2021.
3. There remains uncertainty in the market around consumer
confidence, the ability to visit cinemas in the short term and the
scheduling of movies. This has been reflected in recent
announcements by certain studios and the vaccination challenges
being faced across Central Europe. If forecast admissions on films
were to decline by a further 10% in 2021 this would result in a
breach of the Rest of World covenant in December 2021 and the Group
leverage covenant in June 2022. Further, if cinema openings were
delayed until June 2021, or if admissions were only at 19% of 2019
levels in May 2021, then this would result in a breach of the
minimum liquidity covenant in May 2021 and June 2021
respectively.
4. In addition, should an agreement not be reached with the
Dissenting Shareholders there is a risk that they may wish to
challenge any failure not to pay them in accordance with a
judgement.
Conclusion
The Directors recognise the challenges facing the business and
the uncertainty around the recovery of the cinema industry
following the impact of COVID-19, and the potential risks that
remain, which represent material uncertainties with respect to the
Group's and company's ability to continue as a going concern.
Having considered all known factors the Directors are comfortable
that the weighted base case supports the going concern
assumption.
However, whilst sufficient liquidity is considered to exist in
the weighted base case, and waivers have been obtained in respect
of covenants which are forecast to be breached, the uncertainty
around the recovery profile and the availability of film content,
the timing of the US CARES Act tax cash receipt, the payment
restriction on the Dissenting Shareholder liability, as well as the
lack of headroom in the severe but plausible scenario, indicate the
existence of material uncertainties that may cast significant doubt
upon the Group's and company's ability to continue to operate as a
Going Concern. The Consolidated and company Financial Statements do
not include the adjustments that would result if the Group or
company were unable to continue as a going concern.
2. Alternative performance measures
The Group uses a number of Alternative Performance Measures
("APMs") in addition to those measures reported in accordance with
IFRS. Such APMs are not defined terms under IFRS and are not
intended to be a substitute for any IFRS measure. The Directors
believe that the APMs are important when assessing the underlying
financial and operating performance of the Group. The APMs improve
the comparability of information between reporting periods by
adjusting for factors such as fluctuations in foreign exchange
rates, one-off items and the timing of acquisitions.
The APMs are used internally in the management of the Group's
business performance, budgeting and forecasting, and for
determining Executive Directors' remuneration and that of other
management throughout the business. The APMs are also presented
externally to meet investors' requirements for further clarity and
transparency of the Group's financial performance. Where items of
profits or costs are being excluded in an APM, these are included
elsewhere in our reported financial information as they represent
actual income or costs of the Group.
Other commentary within the Annual Report and Accounts (such as
the Chief Financial Officer's Review on pages 5 to 12), should be
referred to in order to fully appreciate all the factors that
affect the business.
The Group's Alternative Performance Measures are set out below.
Additional adjustments have been made in the current period to
reflect exceptional items incurred due to the impact of the
COVID-19 pandemic:
Adjusted EBITDA
Adjusted EBITDA is defined as operating (loss)/profit adjusted
for (losses)/profits of jointly controlled entities using the
equity accounting method net of tax and excess cash distributions,
depreciation and amortisation, impairments of goodwill, property,
plant and equipment, right-of-use assets and investments in the
ordinary course of business, property-related charges and releases,
business interruption costs, share-based payment charges and
operating exceptional items. Exceptional items are charges and
credits which are a non-recurring item that is outside the Group's
normal course of business and material by size or nature.
Adjustments have been made for specific costs associated with the
impact of COVID-19 including stock write offs, additional cleaning
costs, legal costs associated with employee furlough schemes,
redundancy and refinancing.
The following items are adjusted for within the Group's Adjusted
EBITDA APM as they are non-cash items: depreciation and
amortisation, impairment of property, plant and equipment,
right-of-use assets and investments in the ordinary course of
business, property-related charges and releases, and share-based
payment charges.
The net impact of share of profit of jointly controlled entities
and the associated excess cash distributions from joint controlled
entities are included within Adjusted EBITDA as these items are
cash items outside of operating profit.
Adjusted (Loss)/Profit
Adjusted (loss)/profit before tax is defined as (loss)/profit
before tax adjusted for amortisation of intangible asset created on
acquisition, excess cash distributions from jointly controlled
entities, impairments of goodwill, property, plant and equipment,
right-of-use assets and investments in the ordinary course of
business, property-related charges and releases, business
interruption costs, share-based payment charges,movements on
financial derivatives, exceptional operating items, foreign
exchange translation gains and losses, de-designation of net
investment hedge, exceptional financing items and exceptional tax
items. Adjustments have been made for exceptional items associated
with the impact of COVID-19 including stock write offs, additional
cleaning costs, legal costs associated with employee furlough
schemes, redundancy and refinancing.
Adjusted (loss)/profit after tax is arrived by applying an
effective tax rate to the taxable adjustments and deducting the
total from adjusted (loss)/profit.
The Adjusted EBITDA and Adjusted (Loss)/ Profit after tax
reconciliation to statutory operating profit are presented as
follows:
Year ended Year ended
31 December 31 December
2020 2019
$m $m
------------------------------------------------------- ------------ ------------
Operating (loss)/profit (2,257.7) 724.7
------------------------------------------------------- ------------ ------------
Depreciation and amortisation 643.3 729.8
Share of (loss)/profit of jointly controlled entity
using equity accounting method net of tax (33.0) 29.3
Excess cash distributions from jointly controlled
entities 56.4 20.3
Impairment of goodwill, property, plant and equipment,
right-of-use assets and investments in the - 46.9
ordinary course of business
Business interruption - 6.3
Property-related charges and releases 6.4 5.3
Share-based payment charges (2.3) 4.9
Operating exceptional items:
- Net impairment of goodwill, property, plant and
equipment, right-of-use assets and investments 1,344.5 -
- Transaction and reorganisation costs 60.8 17.1
- COVID-19 costs 19.9 -
- Cost of refinancing 46.6 -
- One-time write off of other current assets - 13.2
- Gain on sale and leaseback transaction - (17.5)
------------------------------------------------------- ------------ ------------
Adjusted EBITDA (115.1) 1,580.3
------------------------------------------------------- ------------ ------------
Depreciation and amortisation (643.3) (729.8)
Amortisation of intangibles created on acquisition 25.7 27.8
Net finance costs (717.2) (541.7)
Movement on financial derivatives 46.4 (2.2)
Foreign exchange translation gains and losses (9.3) 5.9
Recycle of net investment hedge 9.8 -
Financing exceptional items:
- Accelerated amortisation of capitalised finance
fees - 15.1
- Gain on extinguishment of debt (33.2) -
- Remeasurement loss on financial instrument 98.0 -
- Remeasurement of financial asset amortised cost 11.3 -
------------------------------------------------------- ------------ ------------
Adjusted (Loss)/ Profit before Tax (1,326.9) 355.4
------------------------------------------------------- ------------ ------------
Tax benefit/(charge) 356.4 (32.0)
Tax impact of adjustments (225.4) (30.4)
De-recognition of deferred tax assets due to impact
of COVID-19 319.7 -
Tax credit arising on capitalised foreign exchange
loss (37.0) -
------------------------------------------------------- ------------ ------------
Adjusted (Loss)/Profit after Tax (913.2) 293.0
------------------------------------------------------- ------------ ------------
Excess cash distributions from jointly controlled entities
The Group receives cash distributions over and above the level
of profit recognised in equity accounting for its joint ventures,
this is a recurring cash amount.
Net Impairment of goodwill, property, plant and equipment,
right-of-use assets and investments
Goodwill
At 30 June 2020, the impact of Covid-19 on the operations of the
Group was deemed as a triggering event and an impairment assessment
was performed. As a result of this test, the Group impaired $342.1m
in respect of the United Kingdom goodwill. Of this impairment
$14.5m was in relation to the Picturehouse CGU.
A further impairment test was performed at 31 December 2020,
which resulted in an additional impairment charge of $315.3m in
respect of the United States goodwill ($242.3m), United Kingdom
goodwill ($29.9m), Israel goodwill ($16.8m), Romania goodwill
($25.9m) and Bulgaria goodwill ($0.4m).
Property, plant and equipment, right-of-use assets
Total impairments recognised, across property, plant and
equipment and right-of-use assets during the six month period to 31
December 2020 was a net charge of $36.6m. The total net impairment
charge for the year ended 31 December 2020 was $649.2m (2019:
$46.9m). Of this impairment charge $382.9m (2019: $18.8m) related
to ROU assets (30 June 2020 charge $385.3m; 31 December 2020 $2.4m
reversal) and $266.3m (2019: $28.1m) related to property, plant and
equipment (30 June 2020 charge $227.3m; 31 December 2020 $39.0m
charge).
Impairments recognised during 2020 were in relation to 239 sites
in the US (2019: 49), 53 sites in the UK (2019: five) and 28 sites
in the ROW (2019: one), whose recoverable amount (calculated by
reference to its value in use) was less than carrying amount. The
most significant factors causing impairment were the forecast
continued impact of COVID-19 on operations and a higher discount
rate, driven by the Group's higher cost of debt. The recoverable
amount of these CGUs subsequent to impairment was $1,362.4m (2019:
$198.6m).
Investments
A reduction in the present value of dividends forecast to be
received from the Group's holding in National Cinemedia LLC ("NCM")
whilst NCM recovers from the impact of the COVID-19 pandemic,
resulted in an impairment being recognised during the year. The
Group determined that the carrying amount exceeded the recoverable
amount and as such, recorded an impairment charge of $37.1m to our
investment in NCM for the year ended 31 December 2020.
Business interruption
In 2019 the Group incurred expenses of $6.3m in relation to
sites which were closed or partially closed during the year for
refurbishment or were under construction.
Property related charges and releases
The loss of $6.4m (2019: $5.3m) is being composed by the
following:
- $ 12.3m gain as a result of remeasurement of right-of-use
assets which were modified and due to the modification the asset
was decreased by an amount in excess of its carrying value. The
excess above carrying value was therefore recognised in the income
statement.
- Disposal of 18 sites in US has resulted in $1.0m gain due to
the de-recognition of the lease liabilities and right-of-use
assets. Losses of $13.6m were incurred on property, plant and
equipment disposed of at these sites.
- During the year, 6,416 digital projectors were transferred to
the Group from its joint operation DCIP. At the date of transfer
the assets had a net with a net book value of $117.6m. Following
the transfer, the Group disposed of projector assets with a net
book value of $5.8m. In addition, a $4.7m gain incurred connected
to the termination of the master lease with DCIP.
- $5.0m in losses assets disposed at on sites under construction
in the UK, which are no longer expected to go ahead, were also
incurred.
- The loss of $5.3m during 2019 related to the closure of 16
theatres in the US and one in ROW.
Operating exceptional items
- The impact of the COVID-19 pandemic on the Group's forecasts
cash flows. In addition to increased uncertainty in the market, a
higher discount rate driven by the higher cost of debt, and changes
to forecast cash flows have resulted in the impairment of property,
plant and equipment, right -- of -- use assets and investments at
cinema CGUs, as well as goodwill in country level CGUs amounting to
a net total charge of $1,344.5m. These impairments are considered
to be driven by the impact of the pandemic and are therefore
considered to be exceptional charges.
- Transaction and reorganisation costs of $60.8m were incurred
in 2020 of which $2.2m relates to reorganisation costs, $12.8m to
costs incurred with the Cineplex transaction and receipt of a VAT
refund of ($1.6m). Costs in connection with the dissenting
shareholder liability which arose on the acquisition of Regal of
$47.4m were incurred, which includes $41.7m in respect of interest
on the outstanding liability. Transaction costs of $17.1m were
recognised in 2019 of which $4.3m relates to the proposed Cineplex
acquisition, $6.4m reorganisation costs and $6.4m in other legal
costs.
- One-off costs of $19.9m associated with the impact of COVID-19
including stock write offs of $16.0m, additional cleaning expenses,
redundancy and write offs of $3.9m.
- Legal and adviser costs, in addition to those capitalised as
directly attributable to new debt instruments, of $46.6m were
incurred in connection with the new debt facilities entered into
during the year.
- In the year ended 31 December 2019 a one-off charge of $13.2m
in respect of plastic cards acquired for resale as gift cards, that
were no longer considered recoverable and should have been adjusted
at the time of the purchase price allocation but was not material
to restate the prior period.
- In the year ended 31 December 2019 a gain of $17.5m in
relation to the two sale and leaseback transactions was
recognised.
Accelerated amortisation of capitalised finance fees
These costs represent the accelerated amortisation of
capitalised finance fees following the partial settlement of the
Group's term loans during 2019.
Gain on extinguishment of debt
The Group amended a previously agreed incremental revolving
credit facility of $110.8m to a term loan. The amendment to this
facility was considered to represent a discount to the face value
of the debt at the time of the agreement and therefore resulted in
a gain on extinguishment of $33.2m, please refer to note 10 for
further information.
Remeasurement loss on financial asset
During the year the Group reassessed the time frame over which
its tax receivable asset from National Cinemedia LLC would
be received, which resulted in a longer timeframe and the asset
was remeasured. As such the Group wrote off $11.3m of the tax
receivable asset asset during the year.
Movement on financial derivatives
In 2019 the group entered a contingent forward contract and a
contingent swap contract in order to hedge certain cash flows
expected to take place on completion of the proposed Cineplex
combination. Due to the termination of the deal, the contingent
elements of the derivatives were not met. The Group terminated the
swap resulting in a gain of $4.5m and a loss of $10.4m on the deal
contingent forward in line with the fair values reported at 31
December 2019. In addition, the forward contract was modified on
termination, resulting in an additional loss of $10.2m and $16.8m
which has been assessed to be in respect of debt issuance costs
which were capitalised and fully amortised over the remainder of
the year elsewhere within finance expenses.
During the year the Group recognised three derivative financial
instruments in respect to its new financing arrangements. On term
loan B1, the Group recognised detachable equity warrants, and the
fair value movement for the year was a loss of $15.2m.
Additionally, linked to term loan B1 is a call option, and the fair
value movement during the year amounts to a gain of $4.5m. Term
loan B2 includes an embedded derivative linked to the USD-LIBOR and
the fair value movement for the year amounts to a loss of
$0.1m.
In addition to the charge arising due to the termination of a
hedge relationship set out below, there was a further movement on
the fair value of the Group's cross currency swaps during the year.
This movement totalled $13.9m and was recognised in the movement on
financial derivatives. The movement was driven by interest rate and
currency fluctuations, as well as being significantly affected by
reductions in the Group's credit rating.
Upon modifications being made to existing debt agreements during
the year, which implemented a 1% floor in LIBOR-linked interest
rates applied to US dollar-denominated term loans, embedded
derivative liabilities with a total value of $103.6m were
identified, of which $98.0m is recognised as a remeasurement loss
on financial instrument and $5.6m as a fair value movement on
derivative. Subsequent to the year end, it is expected that the
underlying contracts relating to these derivatives will be further
modified, resulting in their de-recognition.
In 2019 the Group has recognised gains or losses on three
financial derivatives during the year. A gain of $10.4m and a loss
of $4.5m have been recognised respectively on a contingent forward
contract and contingent cross currency swap entered into to hedge
certain expected transaction flows linked to the proposed
acquisition of Cineplex. A further loss $3.7m was incurred on a
short term forward contract entered into as part of the minor
financing restructure.
Unwind of net investment hedge
The Group had previously designated the Euro leg of three cross
currency swaps held as a net investment hedge against the assets of
certain Euro denominated subsidiaries. During the period the hedge
relationship became ineffective and the hedge relationship ended.
This resulted in a $9.8m credit to the hedge reserve and charge to
the income statement.
Foreign exchange translation gains and losses
Gains and losses arise due to movements on foreign exchange in
respect of the Group's unhedged loans. These gains and losses are
excluded from Adjusted Profit Before Tax. During the year the
Group's Euro denominated term loan was designated as a net
investment hedge.
Tax exceptional items
During the year the Group recognised a one off tax credit under
the CARES Act in the US of $37.0m due to the carry back of losses
against profits of earlier years with higher tax rates. In
addition, the Group has de-recognised $319.7m in deferred tax
assets due to reduction in the Group's forecast cash flows.
Net debt
Net Debt is defined as total liabilities from financing net of
cash at bank and in hand. A reconciliation of movements in Net Debt
is provided in Note 10.
3. Operating Segments
The Group has determined that it has two reporting operating
segments: the US and the UK&I. The Group also reports a third
segment, the ROW, which includes the cinema chain brands Cinema
City in Central and Eastern Europe territories and Yes Planet and
Rav-Chen in Israel. The ROW reporting segment includes Poland,
Romania, Hungary, Czech Republic, Bulgaria, Slovakia and Israel.
The results for the US include the three cinema chain brands;
Regal, United Artists and Edwards theatres. UK&I includes two
cinema chain brands, Cineworld and Picturehouse, which operate in
the same territory with the same external regulatory environment
and ultimately provide the same services and products. On this
basis it is deemed appropriate that these two segments can be
aggregated and reported as one reporting segment for the
UK&I.
US UK&I ROW Total
$m $m $m $m
--------------------------------------------------- --------- ------- ------- ---------
Year ended 31 December 2020
Total revenues 575.9 153.9 122.5 852.3
Adjusted EBITDA as defined in Note 2 (87.2) (35.0) 7.1 (115.1)
Operating loss (1,500.3) (585.9) (171.5) (2,257.7)
Finance income 8.4 49.7 11.5 69.6
Finance expense (462.1) (269.4) (55.3) (786.8)
Depreciation and amortisation 481.6 90.7 71.0 643.3
Net impairment of property, plant and equipment
and right-of-use assets, goodwill and investments 761.5 493.8 89.2 1,344.5
Share of loss from jointly controlled entities
using equity accounting
method net of tax (32.7) - (0.3) (33.0)
--------------------------------------------------- --------- ------- ------- ---------
Loss before tax (1,986.6) (805.6) (215.6) (3,007.9)
--------------------------------------------------- --------- ------- ------- ---------
Non-current asset additions - property, plant
and equipment 231.8 41.1 9.8 282.7
Non-current asset additions - intangible
assets - 0.3 2.2 2.5
Investment in equity accounted investee 213.3 1.0 0.8 215.1
--------------------------------------------------- --------- ------- ------- ---------
Total assets 8,552.8 1,163.9 908.5 10,625.2
--------------------------------------------------- --------- ------- ------- ---------
Total liabilities 8,403.9 1,377.2 617.8 10,398.9
--------------------------------------------------- --------- ------- ------- ---------
Year ended 31 December 2019
Total revenues 3,209.6 648.4 511.7 4,369.7
Adjusted EBITDA as defined in Note 2 1,197.1 192.2 191.0 1,580.3
Operating profit 535.5 65.0 124.2 724.7
Finance income (6.0) (11.5) (8.8) (26.3)
Finance expense 448.7 96.5 22.8 568.0
Depreciation and amortisation 558.2 92.5 79.1 729.8
Impairment of property, plant and equipment
and right-of-use assets 40.5 5.3 1.1 46.9
Share of profit / (loss) from jointly controlled
entities using equity accounting method net
of tax 29.6 - (0.3) 29.3
--------------------------------------------------- --------- ------- ------- ---------
Profit / (loss) before tax 122.6 (5.0) 94.7 212.3
--------------------------------------------------- --------- ------- ------- ---------
Non-current asset additions - property, plant
and equipment 328.8 120.4 34.4 483.6
Non-current asset additions - intangible
assets - 1.7 3.6 5.3
Investment in equity accounted investee 298.8 0.9 0.5 300.2
--------------------------------------------------- --------- ------- ------- ---------
Total assets 9,801.0 1,381.0 1,268.5 12,450.5
--------------------------------------------------- --------- ------- ------- ---------
Total liabilities 7,999.4 1,134.1 379.3 9,512.8
--------------------------------------------------- --------- ------- ------- ---------
4. Revenue
The Group derives revenue from the transfer of goods at a point
in time and services over time in the following territories:
Year ended Year ended
31 December 31 December
2020 2019
Revenue by country $m $m
------------------------- ------------ ------------
United States 575.9 3,209.6
United Kingdom & Ireland 153.9 648.4
Poland 42.7 153.8
Israel 15.9 113.2
Hungary 22.0 77.3
Romania 16.0 73.4
Czech Republic 17.1 58.4
Bulgaria 4.8 21.5
Slovakia 4.0 14.1
------------------------- ------------ ------------
Total revenue 852.3 4,369.7
------------------------- ------------ ------------
Revenue per operating segment can be broken down by product and
service provided as follows:
United States
Year ended Year ended
31 December 31 December
2020 2019
Revenue by product and service provided $m $m
---------------------------------------- ------------ ------------
Box office 280.3 1,859.6
Retail 161.1 953.9
Other 134.5 396.1
---------------------------------------- ------------ ------------
Total revenue 575.9 3,209.6
---------------------------------------- ------------ ------------
Timing of revenue recognition
At a point in time 474.0 3,016.0
Over time 101.9 193.6
---------------------------------------- ------------ ------------
UK and Ireland
Year ended Year ended
31 December 31 December
2020 2019
Revenue by product and service provided $m $m
---------------------------------------- ------------ ------------
Box office 99.4 405.7
Retail 37.2 156.7
Other 17.3 86.0
---------------------------------------- ------------ ------------
Total revenue 153.9 648.4
---------------------------------------- ------------ ------------
Timing of revenue recognition
At a point in time 152.6 646.0
Over time 1.3 2.4
---------------------------------------- ------------ ------------
ROW
Year ended Year ended
31 December 31 December
2020 2019
Revenue by product and service provided $m $m
---------------------------------------- ------------ ------------
Box office 68.9 270.8
Retail 33.9 129.7
Other 19.7 111.2
---------------------------------------- ------------ ------------
Total revenue 122.5 511.7
---------------------------------------- ------------ ------------
Timing of revenue recognition
At a point in time 116.5 463.7
Over time 6.0 48.0
---------------------------------------- ------------ ------------
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. Diluted Earnings Per Share is calculated by dividing the
profit for the year attributable to ordinary shareholders by the
weighted average number of ordinary shares plus any dilutive
non-vested/non-exercised ordinary shares. Adjusted Earnings Per
Share is calculated dividing the adjusted profit after tax 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.
Year ended Year ended
31 December 31 December
2020 2019
$m $m
---------------------------------------------------------- ------------ -------------
Earnings attributable to ordinary shareholders (2,651.5) 180.3
---------------------------------------------------------- ------------ -------------
Adjustments:
Amortisation of intangible assets(1) 25.7 27.8
Excess cash distributions from jointly controlled
entities 56.4 20.3
Impairment of property, plant and equipment, right-of-use
assets and investments in the
ordinary course of business - 46.9
Business interruption - 6.3
Property related charges and releases 6.4 5.3
Share-based payment charges (2.3) 4.9
Operating Exceptional items:
- Net impairment of goodwill, property, plant
and equipment, right-of-use assets and investments 1,344.5 -
- Transaction and reorganisation costs 60.8 17.1
- COVID-19 costs 19.9 -
- Refinancing costs 46.6 -
- One time write off of other current assets - 13.2
- Gain on sale and leaseback transaction - (17.5)
Financing exceptional items :
- Accelerated amortisation of capitalised finance
fees - 15.1
- Gain on extinguishment of debt (33.2) -
- Remeasurement of financial asset amortised cost 11.3 -
- Remeasurement loss on financial instrument 98.0 -
Movement on financial derivatives 46.4 (2.2)
Foreign exchange translation gains and losses(2) (9.3) 5.9
Recycle of net investment hedge 9.8 -
---------------------------------------------------------- ------------ -------------
Adjusted earnings (970.5) 323.4
---------------------------------------------------------- ------------ -------------
Tax effect of above items (225.4) (30.4)
---------------------------------------------------------- ------------ -------------
Tax exceptional items:
De-recognition of deferred tax assets due to impact
of COVID-19 319.7 -
Tax credit arising on capitalised foreign exchange
loss (37.0) -
---------------------------------------------------------- ------------ -------------
Adjusted (loss) /profit after tax (913.2) 293.0
---------------------------------------------------------- ------------ -------------
Year ended Year ended
31 December 31 December
2020 2019
$m $m
------------------------------------------- ------------ ------------
Weighted average number of shares in issue 1,372.4 1,371.6
------------------------------------------- ------------ ------------
Basic Earnings Per Share denominator 1,372.4 1,371.6
------------------------------------------- ------------ ------------
Dilutive options (3) - 3.6
------------------------------------------- ------------ ------------
Diluted Earnings Per Share denominator 1,372.4 1,375.2
------------------------------------------- ------------ ------------
Shares in issue at year end 1,372.8 1,372.0
------------------------------------------- ------------ ------------
Cents Cents
------------------------------------------------ ------- -----
Basic (deficit) / earnings per share (193.2) 13.1
------------------------------------------------ ------- -----
Diluted (deficit) / earnings per share (193.2) 13.1
------------------------------------------------ ------- -----
Adjusted basic (Deficit) / Earnings Per Share (66.5) 21.4
------------------------------------------------ ------- -----
Adjusted diluted (Deficit) / Earnings Per Share (66.5) 21.3
------------------------------------------------ ------- -----
(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 and Regal business combination which totalled $25.7m
(2019: $27.8m)). It does not include amortisation of purchased
distribution rights.
(2) Net foreign exchange gains and losses included within
earnings comprises $9.3m foreign exchange gain (2019: $5.9m loss)
recognised on translation loans.
6. Finance Income and Expense
Year ended Year ended
31 December 31 December
2020 2019
$m $m
---------------------------------------------------- ------------ ------------
Interest income 7.4 4.5
Foreign exchange gain 10.9 7.3
Unwind of discount on sub-lease assets 0.7 0.7
Gain on movement in the fair value of financial
derivatives 9.0 10.4
Gain on extinguishment of debt 33.2 -
Unwind of discount on non-current receivables 8.4 3.4
---------------------------------------------------- ------------ ------------
Finance income 69.6 26.3
---------------------------------------------------- ------------ ------------
Interest expense on bank loans and overdrafts 166.3 167.3
Amortisation of financing costs 33.1 27.2
Lease liability interest 349.0 304.2
Unwind of discount of deferred revenue 49.4 51.3
Remeasurement of financial asset amortised cost 11.3 -
Remeasurement of net investment in sub-lease assets 2.7 -
Loss on movement in the fair value of financial
derivatives 55.4 8.1
Remeasurement loss on financial instrument 98.0 -
Foreign exchange loss 11.8 9.9
De-designation of net investment hedge 9.8 -
---------------------------------------------------- ------------ ------------
Finance expense 786.8 568.0
---------------------------------------------------- ------------ ------------
Net finance costs (717.2) 541.7
---------------------------------------------------- ------------ ------------
Recognised within comprehensive income
Year ended Year ended
31 December 31 December
2020 2019
$m $m
---------------------------------------------------------- ------------ ------------
Movement on net investment hedge (19.8) 22.2
---------------------------------------------------------- ------------ ------------
De-designation of net investment hedge 9.8 -
---------------------------------------------------------- ------------ ------------
Retranslation gain/(loss) of foreign currency denominated
operations 3.5 12.6
---------------------------------------------------------- ------------ ------------
7. Dividends
The following dividends were recognised during the year:
2020 2019
$m $m
------------------------------- ---- -----
Special - 278.1
------------------------------- ---- -----
Q1 Interim - 51.4
------------------------------- ---- -----
Q2 Interim - 51.4
------------------------------- ---- -----
Q3 Interim - -
------------------------------- ---- -----
Interim - -
------------------------------- ---- -----
Final (for the preceding year) 51.4 139.3
------------------------------- ---- -----
Total dividends 51.4 520.2
------------------------------- ---- -----
On 7 April 2020 the Board announced the suspension of the 2019
fourth quarter dividend of 4.25c per share to conserve cash for the
Group.
Prior to the impact of the COVID-19 pandemic, the Board paid
four interim dividends for each financial year. Payments in
relation to the first three quarters of each year were equal to 25%
of the full year dividend of the preceding year, with the final
payment reflective of the Group's full year earnings performance
and resulting in a full year dividend payment aligned with the
Group's pay-out ratio.
In 2020, only the interim dividend of 3.75 US cents per ordinary
share in respect of the third quarter of 2019 was paid to
shareholders on 10 January 2020. The total cash consideration was
$51.4m.
8. Taxation
Recognised in the Consolidated Statement of Profit or Loss
Year ended Year ended
31 December 31 December
2020 2019
$m $m
----------------------------------------------------- ------------ ------------
Current tax expense
Current year (220.9) 102.1
Adjustments in respect of prior years (3.1) 2.5
----------------------------------------------------- ------------ ------------
Total current tax (credit)/expense (224.0) 104.6
----------------------------------------------------- ------------ ------------
Deferred tax expense
Current year (138.0) (66.7)
Adjustments in respect of prior years 8.9 (6.8)
Adjustments from change in tax rates (3.3) 0.9
----------------------------------------------------- ------------ ------------
Total tax (credit)/charge in the Statement of Profit
or Loss (356.4) 32.0
----------------------------------------------------- ------------ ------------
Reconciliation of effective tax rate
Year ended Year ended
31 December 31 December
2020 2019
$m $m
----------------------------------------------------- ------------ ------------
(Loss)/profit before tax (3,007.9) 212.3
----------------------------------------------------- ------------ ------------
Tax using the UK corporation tax rate of 19.0%
(2019: 19.0%) (571.5) 40.3
Differences in overseas tax rates (100.3) (10.6)
Permanently disallowed depreciation 9.2 2.0
Permanently disallowed exceptional costs 2.4 2.4
Impact of higher prior year US tax rate applied
to loss carry backs (37.0) -
Impairment of goodwill on which no deferred tax
asset is recognised 124.7 -
De-recognition of deferred tax assets 319.7 -
Tax effect of Fair Value adjustments (85.5) -
Other permanent differences (20.7) 1.3
Adjustment in respect of prior years 5.8 (4.3)
Effect of change in statutory rate of deferred
tax (3.2) 0.9
----------------------------------------------------- ------------ ------------
Total tax (credit)/charge in the Statement of Profit
or Loss (356.4) 32.0
----------------------------------------------------- ------------ ------------
During the year there was a tax charge of $0.1m, recognised
directly in the Statement of Comprehensive Income (2019: credit of
$1.3m). This related to share remuneration schemes.
Factors that may affect future tax charges
The Group expects that the tax rate in the future will be
affected by the geographical split of profits and the different tax
rates that will apply to those profits.
The UK Budget on 3 March 2021 announced an increase in the UK
corporation tax rate from 19% to 25% with effect from 1 April 2023.
The effect of the rate increase is not reflected in the financial
statements as it was not substantively enacted at the balance sheet
date. If the rate increase had been substantively enacted at the
balance sheet date an additional $19.4m UK deferred tax asset would
be recognised, resulting in an increase of $19.4m in the tax credit
for the period.
No deferred tax liability has been recognised on $236.8m of
taxable temporary differences related to investments, as the Group
can control the timing of the reversal and it is probable that no
reversal will happen in the foreseeable future.
At 31 December 2020 the Group had unrecognised deferred tax
assets relating to the following temporary differences:
- US tax losses of $797.7m with no expiry date (2019: $44.6m in
2019 with expiry dates between 2020 and 2032);
- US deferred revenue of $239.4m (2019: nil);
- UK tax losses of $137.6m with no expiry date (2019: nil);
- UK deferred rent deductions of $67.2m (2019: nil);
- Israeli tax losses of $20.0m with no expiry date (2019: nil);
- Israeli deferred rent deductions of $16.4m (2019: nil);
- Bulgarian tax losses of $3.1m with no expiry date (2019: nil);
- Bulgarian deferred rent deductions of $2.8m (2019: nil);
- Slovakian deferred rent deductions of $5.1m (2019: nil);
- Hungarian tax losses of $143.9m with no expiry date (2019: nil);and
- UK capital losses of $9.8m with no expiry date (2019: $9.5m).
On 25 April 2019 the European Commission released its decision
which concluded that for years to 31 December 2018 the UK
Controlled Foreign Company legislation represents recoverable State
Aid in some circumstances. There remains uncertainty surrounding
the quantum of any additional tax exposure which is subject to
ongoing discussion with HM Revenue & Customs. Following a
review of the potential application of the decision to Controlled
Foreign Company claims to 31 December 2018 the Group has recognised
a provision of $0.9m against potential exposures. The maximum
potential exposure is $11.1m. .
9. Leases
The Consolidated Statement of Financial Position shows the
following amounts relating to leases:
Land and Plant and
buildings machinery Other Total
$m $m $m $m
-------------------------------- ---------- ---------- ----- -------
Right-of-use assets
Balance at 1 January 2019 2,937.4 1.5 2.2 2,941.1
Additions 897.1 - 0.1 897.2
Depreciation of Right-of-use
assets (396.5) (0.5) (1.2) (398.2)
Disposals (0.8) - - (0.8)
Impairments (18.8) - - (18.8)
Effects of movement in foreign
exchange 20.7 - - 20.7
-------------------------------- ---------- ---------- ----- -------
31 December 2019 3,439.1 1.0 1.1 3,441.2
-------------------------------- ---------- ---------- ----- -------
Additions 44.6 - - 44.6
Modifications (435.3) - - (435.3)
Depreciation of Right-of-use
assets (347.2) (0.5) (1.0) (348.7)
Disposals (20.7) - - (20.7)
Impairments (519.1) - - (519.1)
Reversal of impairments 136.2 - - 136.2
-------------------------------- ---------- ---------- ----- -------
Effects of movement in foreign
exchange 8.2 (0.1) 0.1 8.2
-------------------------------- ---------- ---------- ----- -------
31 December 2020 2,305.8 0.4 0.2 2,306.4
-------------------------------- ---------- ---------- ----- -------
Lease liabilities
1 January 2019 3,494.1 0.5 2.2 3,496.8
Additions 982.3 - 0.1 982.4
Interest expense related
to lease liabilities 304.0 0,1 0.1 304.2
Disposals (1.3) - - (1.3)
Effects of movement in foreign
exchange 28.7 - - 28.7
Repayment of lease liabilities
(including interest) (611.9) (0.2) (1.2) (613.3)
-------------------------------- ---------- ---------- ----- -------
31 December 2019 4,195.9 0.4 1.2 4,197.5
-------------------------------- ---------- ---------- ----- -------
Additions 52.8 - - 52.8
Modifications (447.5) - - (447.5)
Interest expense related
to lease liabilities 348.9 0.1 - 349.0
Disposals (21.7) - - (21.7)
Effects of movements in foreign
exchange 40.2 - - 40.2
Repayment of lease liabilities
(including interest) (197.3) (0.2) (1.1) (198.6)
-------------------------------- ---------- ---------- ----- -------
31 December 2020 3,971.3 0.3 0.1 3,971.7
-------------------------------- ---------- ---------- ----- -------
Current 596.2 0.3 0.1 596.6
-------------------------------- ---------- ---------- ----- -------
Non-current 3,375.1 - - 3,375.1
-------------------------------- ---------- ---------- ----- -------
In response to COVID-19, the IASB announced, considered and
issued a COVID-19 specific amendments to IFRS 16 on 28 May
2020.
The amendment exempts lessees from having to consider individual
lease contracts to determine whether rent concessions occurring as
a direct consequence of the COVID-19 pandemic are lease
modifications and allows lessees to account for such rent
concessions as if they were not lease modifications. The exemption
applies to COVID-19-related rent concessions that reduce Lease
payments due on or before 30 June 2021. The Group elected not to
apply the exemption.
Modification and Discount Rates
Due to the negotiations held with landlords, the amended leases
have changed in substance either from a consideration or term
perspective. Thus, the modification treatment per IFRS16 has been
followed.
In line with the approach on transition to IFRS 16, the Group
has used an incremental borrowing rate and made a corresponding
adjustment to the right-of-use asset. The amendments did not result
in the identification of a separate lease.
On transition, the incremental borrowing rates applied to
property leases ranged between 2.6% and 11.7%. The asset specific
incremental borrowing rate applied to each lease was determined by
taking into account the risk-free rate, adjusted for factors such
as the credit rating linked to the life of the underlying lease
agreement. These rates are intended to be long term in nature and
calculated on inception of each lease. The incremental borrowing
rates applied to property leases for the COVID-19 amendments ranged
between 5.9%-16.8% for modifications between March and September
and ranged between 17.9%-26.4% for modifications between October
and December.
Due to the number of renegotiated agreements in the period, the
Group amended a large number of its leases and expects further
modifications in 2021.
During the year, there were lease modifications that would have
required a reduction to the right of use asset in excess of the
carrying amount at the date of modification. For these leases, the
asset carrying values were reduced to $nil with the excess gain
credited to the consolidated statement of profit or loss. Where
these leases were previously impaired, this is first presented as
an impairment reversal (up to the amount of impairment reversal
permitted by IFRSs) with any remaining gain presented as a lease
modification gain within property related releases and charges as
part of administrative expenses.
The consolidated statement of profit or loss includes within
administrative expenses a lease modification gain of $12.3m. The
impairment reversal is part of net impairments of goodwill,
property, plant and equipment, right-of-use assets and investments
in the consolidated statement of profit or loss.
The number of size of amendments made are such that judgement
taken were significant. These judgments included:
- Where a lease includes the option for the Group to extend the
lease term, beyond the non-cancellable period, the Group makes a
judgement as to whether it is reasonably certain that the option
will be taken. This will take into account the length of time
remaining before the option is exercisable; current and future
trading forecast as to the ongoing profitability of the site; and
the level and type of planned future capital investment. Extension
options (or periods after termination options) are only included in
the lease term if the lease is reasonably certain to be extended
(or not terminated). Therefore, potential future cash outflows have
not been included in the lease liability where it is not reasonably
certain the extension periods will be taken or that the leases will
be extended on similar terms (or not terminated).
- The discount rate applied. The Group elected to apply an
average discount rate over periods with consistent relevant
characteristics rather than applying the rate at the specific date
of the amendment. Given the judgement required around the date of
amendment and the uncertainty affecting incremental borrowing
rates, using such a rate is considered to be appropriate.
- The date of the amendment. Judgement was required to determine
when the terms of each amendment were formally agreed, which in
some cases was considered to have occurred prior to the date of
signing the agreement.
- All renegotiated leases were treated as modification under
IFRS 16, management has taken the judgement that all renegotiated
lease met the criteria for amendment based on the changes to the
cashflows, length and conditions of the original leases.
Impairments and Disposals
The Group recognised impairment of $519.1m of right-of-use
assets.
The Group also recognised $136.2m reversal of impairments. The
reversals relate to 102 sites.
The disposals refer to 18 sites in the US Segment that were
closed, resulting in a $1m gain.
The Consolidated Statement of Profit or Loss shows the following
amounts relating to leases:
Year ended Year ended
31 December 31 December
2020 2019
$m $m
---------------------------------------------------------- ------------ ------------
Depreciation charge of right-of-use assets 348.7 398.2
- Land and buildings 347.2 396.5
- Other 1.5 1.7
Sublease income (2.3) (5.7)
Impairment of right-of-use assets 519.1 18.8
Reversal of Impairment of right-of-use assets (136.2) -
Expenses relating to short-term leases (included in
cost of goods sold and administrative expenses) 1.3 13.2
Expenses relating to variable lease payments not included
in lease liabilities (included in cost of sales) 3.5 19.9
---------------------------------------------------------- ------------ ------------
Charge to operating profit 734.1 444.4
---------------------------------------------------------- ------------ ------------
Interest expense (included in finance costs) 349.0 304.2
---------------------------------------------------------- ------------ ------------
Charge to profit before taxation for leases 1,083.1 748.6
---------------------------------------------------------- ------------ ------------
The total cash outflow for leases in 2020 was $198.6m (2019:
$613.3m).
Commitments for short-term leases at 31 December 2020 was $nil
(2019: $1.2m).
Sensitivity
In 2020, for sites which are subject to variable lease payments,
a 10% increase in sales across all sites in the Group with such
variable lease contracts would increase total lease payments by
approximately $0.4m (2019: $1.9m).
Extension options (or periods after termination options) are
only included in the lease term if the lease is reasonably certain
to be extended (or not terminated). Should the next available
option for all leases be taken the impact on the lease liability
and right of use asset would be an increase of $249.6m (2019:
$524.2m) increasing future cash flows by $1,703.9m (2019:
1,014.4m).
No leases contain a residual value guarantee clause.
Some cinema sites are sub-leased to tenants under operating
leases with rentals payable monthly. Lease payments for some
contracts include CPI increases, but there are no other variable
lease payments that depend on an index or rate. Where considered
necessary to reduce credit risk, the Group may obtain bank
guarantees for the term of the lease.
Sub-lease income of $2.3m was recognised during the current
financial year (2019: $5.7m).
Minimum lease payments receivable on sub-leases are as
follows:
31 December 31 December
2020 2019
$m $m
---------------------- ----------- -----------
Within 1 year 5.5 5.0
---------------------- ----------- -----------
Between 1 and 2 years 4.1 4.7
---------------------- ----------- -----------
Between 2 and 3 years 2.9 3.9
---------------------- ----------- -----------
Between 3 and 4 years 2.4 2.7
---------------------- ----------- -----------
Between 4 and 5 years 1.8 2.4
---------------------- ----------- -----------
Later than 5 years 11.9 10.5
---------------------- ----------- -----------
Sale and leaseback
On 15 May 2019 the Group announced the signing and completion of
a sale and leaseback transaction relating to 18 US-based
multiscreen cinemas totalling 255 screens. On 13 June 2019, the
Group announced the signing and completion of the second sale and
leaseback transaction relating to a further 17 US-based
multi-screen cinemas totalling 251 screens. The transactions are
consistent with the Group's existing business model of operating a
predominantly leasehold estate and long-term strategy of
crystallising value for its shareholders. The properties had a book
value of $462.0m at the sale date and the total sales proceeds from
the two transactions were $556.3m. This resulted in a gain of
$17.5m recognised within the Consolidated Statement of Profit or
Loss as per the table below:
31 December
2019
$m
--------------------------------------------------------- -----------
Sales proceeds 556.3
--------------------------------------------------------- -----------
Assets disposed of (462.0)
--------------------------------------------------------- -----------
Cost to sell (13.9)
--------------------------------------------------------- -----------
Gain prior to right-of-use assets adjustment 80.4
--------------------------------------------------------- -----------
Adjustment for right-of-use asset retained under IFRS 16 (62.9)
--------------------------------------------------------- -----------
Gain on disposal 17.5
--------------------------------------------------------- -----------
The Group has not been involved in any sale and leaseback
transaction during 2020.
10. Loans and Borrowings
This note provides information about the contractual terms of
the Group's interest-bearing loans and borrowings.
31 December 31 December
2020 2019
$m $m
----------------------------------------------- ----------- -----------
Non-current liabilities
Secured bank and private placement loans, less
issue costs of debt to be amortised 4,608.5 3,485.4
----------------------------------------------- ----------- -----------
Total non-current liabilities 4,608.5 3,485.4
----------------------------------------------- ----------- -----------
Current liabilities
Secured bank and private placement loans, less
issue costs of debt to be amortised 32.4 131.4
Overdraft 21.8 2.5
----------------------------------------------- ----------- -----------
Total current liabilities 54.2 133.9
----------------------------------------------- ----------- -----------
The terms and conditions of outstanding loans were as
follows:
31 December 31 December
2020 2019
-------------------- -----------------
Carrying Face Carrying
Nominal interest Year of Face value amount value amount
Currency rate maturity $m $m $m $m
----------------------- --------- ------------------------ --------- ---------- -------- ------- --------
Eurocurrency Base
Initial US Dollar Rate(1) plus applicable
Term Loan USD margin(2) 2025 2,692.7 2,658.2 2,716.8 2,672.1
Eurocurrency Base
Initial Euro Term Rate(1) plus applicable
Loan EUR margin(2) 2025 233.8 230.9 215.4 212.2
Eurocurrency Base
Incremental US Rate(1) plus applicable
Dollar Term Loan USD margin(2) 2026 643.5 635.2 648.4 642.3
7.0% plus 8.25%
B1 Term Loan USD PIK 2024 480.8 342.4 - -
Eurocurrency Base
Rate(1) plus 5.0%
B2 Term Loan USD margin 2024 110.8 69.4 - -
Private placement USD and
loan EUR 11.0% 2023 263.3 246.2 - -
Eurocurrency Base
Revolving credit Rate(1) plus applicable
facility USD margin(2) 2023 456.8 451.6 95.0 90.2
Secured bank loan
- DCIP USD 4.17% 2021 0.4 0.4 - -
Israeli government Base rate plus
loan NIS 2% 2026 6.6 6.6 - -
----------------------- --------- ------------------------ --------- ---------- -------- ------- --------
Total interest-bearing
liabilities 4,888.7 4,640.9 3,675.6 3,616.8
---------------------------------- ------------------------ --------- ---------- -------- ------- --------
(1) The rate of interest in the case of any Eurocurrency Rate
Loan denominated in Dollars is the rate per annum equal to the
London interbank offered rate administered by ICE Benchmark
Administration Limited, subject to a 1% floor (2019: zero floor).
The rate of interest in the case of any Eurocurrency Rate Loan
denominated in Euro is the rate per annum equal to the euro
interbank offered rate administered by the European Money Markets
Institute, subject to a zero floor. B2 Term loan is subject to a
LIBOR floor of 1.00%.
(2) The margin applicable to each tranche of Term Loans and to
drawings under the Revolving Credit Facility is calculated
according to the first lien net leverage ratio of Crown UK Holdco
Limited and its subsidiaries. The applicable margin on Eurocurrency
Rate Loans is as follows:
Initial US Dollar Term Loan - 2.50% per annum where the first
lien net leverage ratio is greater than or equal to 3.50:1.00 and
otherwise 2.25%. per annum;
Initial Euro Term Loan - 2.625% per annum where the first lien
net leverage ratio is greater than or equal to 3.50:1.00 and
otherwise 2.375%. per annum;
Incremental US Dollar Term Loan - 2.75%. per annum where the
first lien net leverage ratio is greater than or equal to
3.50:1.00, 2.25% per annum where the first lien net leverage ratio
is less than or equal to 3.00:1.00 and otherwise 2.50% per annum;
and
Revolving Credit Facility drawings - 3.00% per annum where the
first lien net leverage ratio is greater than or equal to
3.50:1.00, 2.50%. per annum where the first lien net leverage ratio
is less than 3.00:1.00 and otherwise 2.75 per cent. per annum.
On 30 June 2020 the Group secured a $250.0m private placement
debt facility with a maturity of 30 June 2023. The $250.0m debt
facility consisted of a EUR122.9m and $112.5m loan. An original
issue discount of EUR4.9m and $4.5m was incurred on draw down
respectively alongside borrowing costs of $9.3m which were
capitalised against this facility.
On 28 May 2020 the Group further increased its RCF limit by
$110.8m to $573.3m. On 23 November 2020, the Group converted the
incremental RCF of $110.8m into a term loan facility (B2 term loan)
with a maturity of May 2024. The amendment to this facility was
considered to represent a discount to the face value of the debt at
the time of the agreement and therefore resulted in a gain on
extinguishment of $33.2m, which has been recognised within finance
income. The new amended facility has been secured with the same
collateral as for the new debt facility, bringing lenders in second
line on these assets. The remaining RCF of $462.5m was fully
utilised as of December 2020.
On 23 November 2020, the Group secured a new debt facility of
$450.0m with a majority group of existing term loan lenders with a
maturity of 24 May 2024. Alongside the new debt facility, the Group
issued to participating TLB lenders 153,539,786 equity warrants
representing in aggregate 9.99% of the fully diluted ordinary share
capital of the Company assuming full exercise of the warrants. Each
of the equity warrants that were issued alongside the new debt
facility are exercisable into one ordinary share of the Company at
an exercise price of 41.49 pence per share with the proceeds of
such exercise being retained by the Company. The warrants are
exercisable at any time over the next five years. The exercise
price represents a 10% discount to the closing share price on 20
November 2020. The detachable equity warrants include an
antidilution provision, meaning that the number of shares to be
issued on exercise of the warrants is not fixed.
The separate initial recognition of the equity warrants issued
in connection with the new facility as a derivative liability of
$80.2m, the recognition of a derivative asset in respect of a
prepayment option within the new agreement of $3.3m and fees
directly incurred in connection with obtaining the facility of
$36.0m resulted in an initial carrying value of $337.1. The Group
also incurred upfront fees of $27.0m on issuance of this debt on
draw down which were capitalised against this facility. The new
debt facility has been secured with specific assets in the US as
collateral. At year end the separate recognition of the equity
warrants are valued at $97.2m and the embedded derivative asset in
respect of a prepayment option within the new agreement valued at
$7.8m.
During the year the Israeli government granted a loan of NIS 24m
($6.9m) with a maturity of 2026. There are no conditions attached
to the loan.
During the year the Group drew $0.4m on the DCIP secured bank
loan.
Loans and Borrowings covenants
Revolving credit facility
The RCF is subject to a springing covenant when utilisation is
above 35.0%. The covenant requires the Company to maintain a
leverage ratio below 5.0x. In 2020, the Company secured a covenant
waiver on the RCF until June 2022 testing date.
Private placement loan
The following financial covenants are attached to the private
placement debt facility raised in June 2020. These financial
covenants are calculated only on those entities within the ROW
operating segment:
- Springing liquidity covenant: Minimum $30m, tested monthly
from closing provided that if on a test date falling after 30 June
2021, net leverage is less than 2.0x, the minimum liquidity
covenant shall not be required to be tested on that test date.
- Net leverage: 5.0x, tested semi-annually from 31 December
2021, on a 12 month rolling basis.
B1/B2 term loan
The B1 and B2 term loan facilities are subject to financial and
liquidity covenants. Until cinema reopening until the group reaches
80% of admission levels for a 3 month comparable period in 2019, it
is subject to minimum liquidity covenants and restrictions on
operating and capital cash disbursements. The minimum liquidity
covenant ranges between $66.9m and $297.1m during 2021. The
agreement also entitles the lenders to appoint a board
observer.
Analysis of net debt
Total
financing Cash at
Lease Bank activity bank and
Bank loans liabilities Derivatives overdraft liabilities in hand Net debt
$m Loan note $m $m $m $m $m $m $m
------------- ------------ ------------ ------------ ----------- ------------ ------------ --------- ---------
1 January
2019 (3,946.2) (3.0) (3,496.8) 0.2 - (7,445.8) 316.3 (7,129.5)
------------- ------------ ------------ ------------ ----------- ------------ ------------ --------- ---------
Cash flows 330.7 3.0 613.3 - (2.5) 944.5 (167.1) 777.4
Non-cash
movement (27.2) - (1,285.3) (4.0) - (1,316.5) - (1,316.5)
Effect of
movement in
foreign
exchange
rates 25.9 - (28.7) - - (2.8) (8.6) (11.4)
------------- ------------ ------------ ------------ ----------- ------------ ------------ --------- ---------
At 31
December
2019 (3,616.8) - (4,197.5) (3.8) (2.5) (7,820.6) 140.6 (7,680.0)
------------- ------------ ------------ ------------ ----------- ------------ ------------ --------- ---------
Cash flows (1,062.1) - 198.6 10.2 (18.3) (871.6) 183.5 (688.1)
Non-cash
movement 71.3 - 67.4 (24.9) - 113.8 - 113.8
Effect of
movement in
foreign
exchange
rates (33.3) - (40.2) - (1.0) (74.5) 12.6 (61.9)
------------- ------------ ------------ ------------ ----------- ------------ ------------ --------- ---------
At 31
December
2020 (4,640.9) - (3,971.7) (18.5) (21.8) (8,652.9) 336.7 (8,316.2)
------------- ------------ ------------ ------------ ----------- ------------ ------------ --------- ---------
Net debt as defined in note 2, excludes a embedded derivative of
$103.6m (2019: $nil) and equity warrants of $73.2m (2019:
$nil).
In the Analysis of Net Debt table above, cash flows from bank
loans includes the full cash proceeds of the new financing arranged
in the year.
In accordance with IFRS 9, $80.2m of the transaction price was
allocated to the equity warrants, which has been recognised within
non cash movements in bank loans above. A non-cash fair value
movement of $17.0m was recognised on the equity warrants between
initial recognition and year end.
Non-cash movements on bank loans also includes $0.6m attributed
to the initial fair value of embedded derivatives with an equal and
opposite non-cash movement in the derivatives column.
In addition, the non-cash movements of $71.3m (2019: $27.2m)
within bank loans includes the amortisation of debt issuance costs,
accrued interest, accrued debt issuance costs and discounting on
draw down of term and Israeli government loan.
The non-cash movement of $67.4m (2019: $1,285.3m) within lease
liabilities relates to the following: the interest expense related
to lease liabilities of $349.0m (2019: $304.2m), the impact of
entering into new leases $52.8m (2019: $982.4m), modifications of
existing leases of $447.5m (2019: $nil), and disposal of leases
during the year of $21.7m (2019: $1.3m).
11. Provisions
Other Total
provisions provisions
Provisions for contracts with suppliers $m $m $m
------------------------------------------------ ------------------------------------------ ----------- -----------
Balance at 31 December 2019 2.4 4.5 6.9
Provisions made - 2.7 2.7
Provisions utilised - (0.5) (0.5)
Provisions released to profit or loss during the
year - - -
------------------------------------------------ ------------------------------------------ ----------- -----------
Balance at 31 December 2020 2.4 6.7 9.1
------------------------------------------------ ------------------------------------------ ----------- -----------
Current 2.4 5.6 8.0
Non-current - 1.1 1.1
------------------------------------------------ ------------------------------------------ ----------- -----------
Total 2.4 6.7 9.1
------------------------------------------------ ------------------------------------------ ----------- -----------
Provisions for contracts with suppliers relate to claims from
suppliers against contractual obligations. These provisions were
assessed by applying the expected payments based on settlement of
historic claims, and legal claims which have been assessed based on
legal advice received.
Other provisions relate to legal, sales tax and unclaimed
property amounts. A provision in respect of royalty claims in the
ROW segment was made during the year and based on legal advice is
not expected to be used within the next two years.
12. Related Parties
Transactions between the Group and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note. The transactions between the Group and its
joint ventures and associates are disclosed below.
For the purposes of IAS 24, Related Party Disclosures,
executives below the level of the Company's Board are not regarded
as related parties.
Remuneration paid to directors during the year, who are the key
management personnel of the Group, is set out in the aggregate in
the Directors' Remuneration report section of the Group's Annual
Report.
The compensation of the Directors is as follows:
Salary and
fees Pension
including contributions Total
Year ended 31 December 2020 bonus $'000 $'000 $'000
--------------------------------- ------------ -------------- -------
Total compensation for Directors 2,747.0 281.1 3,028.1
--------------------------------- ------------ -------------- -------
Salary and
fees Pension
including contributions Total
Year ended 31 December 2019 bonus $'000 $'000 $'000
--------------------------------- ------------ -------------- -------
Total compensation for Directors 7,451.1 363.4 7,814.5
--------------------------------- ------------ -------------- -------
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 ended 31 December
2020 totalled $5.3m (2019: $24.9m) and as at 31 December 2020 no
amounts were due from DCM in respect of receivables (2019: $3.8m).
In addition, the Group has a working capital loan outstanding from
DCM of $0.7m (2019: $0.6m).
NCM is a joint venture between AMC Entertainment Holdings Inc,
Cinemark Holdings Inc and the Group. As at 31 December 2020 $0.2m
(2019: $1.4m) was due to NCM in respect of trade payables and $1.0m
(2019: $6.3m) was due from NCM in respect of trade receivables.
Revenue receivable from NCM in the year ended 31 December 2020
totalled $83.7m (2019: $97.8m).
Fathom AC JV is a joint venture between AMC Entertainment
Holdings Inc, Cinemark Holdings Inc and NCM. There were no
transactions during the year. As at 31 December 2020 $0.2m (2019:
$0.9m) was due to Fathom AC in respect of trade payables.
Revenue receivable from Black Shrauber Limited in the year ended
31 December 2020 totalled $0.1m (2019: $0.1m). There were no
amounts due to or from Black Shrauber Limited at 31 December
2020.
DCIP is a joint venture between Regal, AMC and Cinemark. On
November 1, 2020, the master lease agreement was terminated and all
digital projectors were distributed to the founding members. In
connection with the termination of the Master Lease agreement,
Regal is required to pay a termination fee which is effectively the
monthly obligation (i.e. rent payments) until the revised cost
recoupment date in October 2021. The termination fee payable at 31
December 2020 was $4.9m.
Global City Holdings N.V. ('GCH'), is a company in which Moshe
Greidinger and Israel Greidinger, Directors of the Group, have a
controlling interest. During the year, the Group made lease
payments of $6.1m (2019: $10.4m) to companies under the control of
GCH. At 31 December $59.6m (2019: $57.5m) in lease liabilities were
included within the Group's Statement of Financial Position. The
Group had amounts payable of $0.2m (2019: $1.7m) by companies under
the control of GCH.
No related party transactions other than compensation have
occurred during both the current or prior financial years with Key
management personnel.
All related party transactions were made on terms equivalent to
those that prevail in an arm's length transaction.
14. Contingent Liability
Following Cineworld's termination on 12 June 2020 of the
Arrangement Agreement relating to its proposed acquisition of
Cineplex Inc. ("Cineplex"), Cineplex initiated proceedings against
Cineworld. The proceedings allege that Cineworld breached its
obligations under the Arrangement Agreement and/or duty of good
faith and honest contractual performance. Cineworld is defending
its position and has made a counter claim against Cineplex.
The proceedings allege that Cineworld breached its obligations
under the Arrangement Agreement and/or duty of good faith and
honest contractual performance and claim damages of up to C$2.18
billion less the value of Cineplex shares retained by Cineplex
shareholders. As previously announced, the directors are of the
view that Cineworld did not breach these (or any) obligations or
duties and the Group is vigorously defending this claim. In any
event, Cineworld believes that Cineplex's claim, if successful,
would be limited to its costs and expenses incurred in relation to
the Acquisition and would not be assessed by reference to the
consideration that was payable under the Acquisition
The Group terminated the Arrangement Agreement because Cineplex
breached a number of its covenants under the Arrangement Agreement
and could not meet certain conditions necessary for closing.
Cineplex did not remedy its breaches when given the opportunity to
do so. As of the date of these financial statements, the Directors
are of the view that no material liability will arise in respect of
this claim.
15. Annual Report and Accounts and Annual General Meeting
The 2020 Annual Report and Accounts and Notice of the General
Meeting will be posted to shareholders and published on the Group's
website at www.cineworldplc.com in April. The Annual General
Meeting is to be held on 25 May 2021.
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END
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