TIDMCINE
RNS Number : 3819I
Cineworld Group plc
12 August 2021
CINEWORLD GROUP plc
Interim Results for the period ended 30 June 2021
Cineworld Group plc ("the Group"), a leading cinema operator in
10 countries including the United States and the United Kingdom
with 759 sites and 9,269 screens globally, presents its interim
results for the six-month period ended 30 June 2021. These results
are presented in US Dollars.
Cineworld has delivered a resilient performance in a very
challenging market, strengthening its liquidity position and
continuing to demonstrate tight control over its operating costs
and cash usage. The Group is in a strong position to benefit from
the expected industry recovery.
Summary
-- The Group's results for the period include a period of
temporary closures from January to April/May 2021 due to COVID-19
restrictions and limited film slate
-- Group revenue of $292.8m (H1 2020: $712.4m) and Group
Adjusted EBITDA loss of $21.1m (H1 2020: profit of $53.0m) for the
period was severely impacted by these closures
-- Operating loss of $208.9m (H1 2020: loss of $1,340.9m) which
has been reduced by asset impairment reversals of $95.6m resulting
from lease modifications
-- Cash burn(4) of $271.0m during the period, averaging
approximately $45.0m per month, supported by positive working
capital in June. Total period cash burn of $66.6m after tax receipt
of $204.4m in the US
-- Net external borrowings less cash were $4,632.9m up from $4,552.0m at 31 December 2020
-- Cash of $436.5m at June 2021, further strengthened by an
additional term loan with principal value of $200m raised in July
2021
Outlook
-- Estate now reopened and majority of capacity restrictions
lifted in the US and in the UK since 21 July
-- Gradual recovery of admissions and demand since re-opening,
supported by strong retail sales
-- Anticipate strong trading in Q4 supported by a strong film
slate and pent-up demand for affordable out-of-home entertainment,
subject to COVID-19 situation
-- Decisive action taken during the pandemic to ensure Cineworld
emerges as a stronger business well placed for the future
Key Financial Information
Reported results Reported 2021 Non-statutory Non-statutory
for the 6 results for Reported results results for
months ended the 6 months results for the 6 the 6 months
30 June 2021 ended vs.2020 months ended ended
(under IFRS 30 June 2020 30 June 2021 30 June 2020
16) (under IFRS (under IAS (under IAS
16) 17)(2) 17)
Admissions 14.1m 47.5m (70.3%) 14.1m 47.5m
Revenue $292.8m $712.4m (58.9%) $292.8m $712.4m
Adjusted EBITDA(1) ($21.1m) $53.0m (139.8%) ($268.6m) ($237.0m)
Adjusted EBITDAaL(3) ($103.4m) ($113.3m)
Loss before tax ($576.4m) ($1,644.7m)
Adjusted loss before
tax(1) ($658.5m) ($567.7m)
Loss after tax ($515.2m) ($1,582.5m)
Adjusted loss after
tax(1) ($581.8m) ($436.0m)
Basic EPS (37.5c) (115.3c)
Diluted EPS (37.5c) (115.3c)
Adjusted diluted EPS(1) (42.4c) (31.8c)
(1) Refer to Notes 2 and 6 for the full definition and reconciliation.
(2) IAS 17 measures are presented as certain performance and
reporting obligations continue to be tested on this basis.
(3) Adjusted EBITDAaL is defined as Adjusted EBITDA less payment
of lease liabilities in the period.
(4) Cash burn is defined as cash used in operations net of;
payment of lease liabilities, cash flows from acquisition of
property, plant and equipment, landlord contributions received,
interest paid and interest received.
Alicja Kornasiewicz, Chair of Cineworld Group plc, said:
"Cineworld has continued to deliver strong operational and cash
control despite the challenging trading conditions we have been
faced with in light of COVID-19. Our teams have given their utmost
during periods where we have been able to open, and I would like to
thank them for their commitment and dedication. I look forward to
continuing to work with the Board, the management team and all our
employees, as we return to delivering sustainable growth as the
market recovers, for the benefit of all our stakeholders."
Commenting on these results, Mooky Greidinger, Chief Executive
Officer of Cineworld Group plc, said:
"Despite the challenges, the actions we have taken have ensured
that Cineworld has emerged a more focused business with significant
liquidity and a clear vision for the future. Trading has been
encouraging since we started to re-open our sites in April and it
has been great to have our teams back, doing what they do best, and
welcoming customers back into our cinemas. Cineworld is in the
position it is today thanks to the great dedication and commitment
of the Cineworld team around the world and I sincerely thank each
and every member of the team for their loyalty and contribution. I
am confident that the business is in a strong position to execute
its strategy and deliver a return to growth as we recover from the
pandemic and capitalise on the forthcoming strong film slate
alongside clear pent-up consumer demand."
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: 12 August 2021
Time: 09:30am
Webcast link: https://secure.emincote.com/client/cineworld/cineworld017/
Conference Call:
https://secure.emincote.com/client/cineworld/cineworld017/vip_connect
Chief Executive Officer's Review
While during most of the period under review our cinemas were
closed, we were very excited to start reopening on 2nd April 2021
and were open across all territories in June. Looking at our
performance since early June, it is clear that our customers have
missed the big screen experience as well as the social event of
watching a movie with others. In addition, our latest
refurbishments and new cinemas are being embraced with great
enthusiasm.
While our results still carry the effect of COVID and related
lack of product, we are encouraged by the upcoming line-up of big
releases, especially for the upcoming four months. This will
include four new Marvel movies as well as Top Gun Maverick, the new
Bond, Matrix, Dune and many more. Nonetheless, we will need to
remain alert to any new COVID-related developments - currently, it
appears that the booster vaccination is on its way but as we have
seen in the past, we need to be reactive and ready to handle all
scenarios.
Strategy
Our strategy has always been focused on our customers, and we
remain committed to giving them the best experience combined with
the most COVID-safe environment. We are carefully following all of
the requirements of the relevant authorities with regards to
sanitation, mask-wearing, social distancing (where needed) and
more.
As for the cinematic experience itself, we continue to offer our
customers big screens, stadium seating accompanied by the great
technology of our special formats, IMAX, 4DX, Screen-X,
SuperScreen, RPX and more, as well as upgrading to the use of laser
projectors. Across the business we refurbished 6 cinemas and opened
4 new sites in the period, which have been welcomed by our
customers with great enthusiasm. Most of these projects were under
construction prior to the onset of COVID-19, and the decision not
to put them on hold paid off. While our development plans slowed
somewhat, we believe that we will be able to progress again soon
and when appropriate to do so.
Industry fundamentals and respect for the theatrical window
The main topic in focus throughout the pandemic was the length
of the theatrical window. In view of the situation related to
COVID-19, the studios entered into various experiments which we
believe ultimately will lead to a situation whereby there is a
theatrical window but it is shorter than in the past and dependent
on the theatrical revenue potential of the movie itself. Currently,
movies are being released with windows that are anywhere between
0-60 days. We expect that by 2022, the window will stabilise to
somewhere between 20 and 60 days, but subject to each movie's
potential.
A point which has also become clear is the influence of
high-quality pirated copies of movies from PVOD day and date
releases, which can affect a movie's total revenue in a big way,
not only in cinemas but also in ancillary markets. As the most
affordable out-of-home entertainment option, we believe that
cinemas will be back and continue to be the main locomotive of the
industry, as they have been so many times in the past despite the
arrivals of new technologies, such as TV, Video, DVD and
others.
Outlook
Trading since our cinemas have reopened has been encouraging and
increasingly improving, and with our customers showing their
appreciation for our high quality offering and team. We expect this
progress to continue as vaccination programs continue to
successfully roll out and as restrictions ease into the second half
of 2021. The strong film slate, in particular for Q4, gives us
great confidence in our ability to continue to rebound strongly,
with a clear focus on driving growth and underpinned by our team of
great people.
Following the acquisition of Regal in 2018, Cineworld derives
the substantial majority of its revenues and profits from the US,
which remains a key market for future growth. US equity capital
markets are the largest and most liquid in the world and include a
large number of publicly listed cinema companies including peer
group companies. These companies are typically covered by a
significant number of North American equity analysts with a wide
domestic investor following. The Board is therefore considering
options to maximise shareholder value now and into the future by
accessing this liquidity through a listing of Cineworld or a
partial listing of Regal in the US. The Board will evaluate these
options over the coming months and will consult with shareholders
in due course if any formal proposals are to be made.
There can be no certainty around the recovery from COVID-19 in
the short term, however we are encouraged by our return to trading,
the positive reaction of our customers and the success of
vaccination programs in our key operating territories. We look
forward to a strengthening film slate and we hope to continue our
recent recovery and the recovery of the industry as a whole. Having
said that, we acknowledge the uncertainty and have highlighted
certain matters with regard to them within our going concern
statement in this document.
I would like to conclude by expressing my deep appreciation and
gratitude to all the members of the Cineworld team. This has been,
and continues to be, an extremely challenging time both for the
Group and for each one of the team individually. We have a great
team, and we are all committed to continue to be THE BEST PLACE TO
WATCH A MOVIE.
Moshe (Mooky) Greidinger
Chief Executive Officer
12 August 2021
Financial Review
Group Revenue
6 months to 6 months to
30 June 2021 30 June 2020 Movement
Admissions 14.1m 47.5m (70.3%)
$m $m
Box office 140.4 391.3 (64.1%)
Retail 79.8 203.6 (60.8%)
Other Income 72.6 117.5 (38.2%)
Total revenue 292.8 712.4 (58.9%)
=============== ============== ============== =========
Cineworld Group plc (the "Group") results are presented for the
six months ended 30 June 2021 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 continued to be significantly impacted by the global COVID-19
pandemic, which had an adverse effect on the Group's results for
the period and the comparative period in 2020. During the six
months ended 30 June 2021, the Group began to resume operations,
with cinemas beginning to open in April. As of 30 June 2021, the
Group had reopened across all territories, with the exception of a
small number of sites, serving customers and continuing to recover
from the impact of the pandemic.
Total admissions decreased by 70.3% during the six months ended
30 June 2021, reflecting the temporary closures of the cinemas
across the Group due to COVID-19 in the respective periods and a
lack of major film releases since the beginning of the pandemic.
Total revenue for the six months ended 30 June 2021 was $292.8m, a
decrease of 58.9% from the six months ended 30 June 2020. The
overall decrease in total revenue was due primarily to the 70.3%
decline in admissions, partially offset by increases in average
ticket prices and spend per person ("SPP") across all territories,
as well as a lesser decline in other income due to the contractual
advertising revenue in the US.
The principal revenue stream for the Group is box office
revenue, which made up 48.0% (June 2020: 54.9%) 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 27.3% (June 2020: 28.6%) of total revenue. Retail
revenue across the Group is driven by admissions trends within each
operating territory. During the six months ended 30 June 2021, SPP
increased across all territories due to an increase in the
percentage of our customers making retail purchases.
Other Income represents 24.8% (June 2020: 16.5%) 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 Revenue
The results below show the Group's performance in the United
States ("US") under the Regal brand.
6 months to 6 months to
30 June 2021 30 June 2020 Movement
Admissions 8.8m 28.4m (69.0%)
$m $m
Box office 94.2 262.0 (64.0%)
Retail 57.0 150.2 (62.1%)
Other Income 60.0 89.1 (32.7%)
Total revenue 211.2 501.3 (57.9%)
=============== ============== ============== =========
Box office
In the US, during the six months ended 30 June 2021, cinemas
remained temporarily closed until 2 April 2021. The Group reopened
77 cinemas during April 2021, reopened an additional 423 cinemas
during May 2021, and reopened 7 cinemas during June 2021. As of 30
June 2021, the Group was operating 508 cinemas in the US
representing 98% of the US circuit.
Box office revenue represented 44.6% (2020: 52.3%) of total
revenue. Box office revenue decreased by 64.0% during the six
months ended 30 June 2021 compared to the six months ended 30 June
2021, primarily due to a 69.0% decrease in admissions, partially
offset by a 16.0% increase in average ticket price. The decrease in
admissions was due to the impact of the temporary closure of our
cinemas for significant periods during the six months ended 30 June
2021 and 30 June 2020, as well as a lack of major film releases as
distributors delayed the release of major titles due to the
COVID-19 pandemic.
The average ticket price in the US increased by 16.0% to $10.70
(2020: $9.23). The increase in average ticket price was a result of
variability of ticket prices across the circuit and the timing the
various regions reopened during the six months ended 30 June 2021,
as well as the increased availability of premium format content
during the six months ended 30 June 2021 as compared to 30 June
2020.
The total North American industry box office revenue for the six
months ended 30 June 2021 was 41.9% lower compared with the
comparative period (source: Comscore). The decrease in box office
revenue for the Group was inconsistent with the industry, due to
differing periods of operation, some cinema operators continuing to
operate from January to May whilst the Group remained mostly
closed, there were not any major Hollywood releases during this
period. The top performing films during the six months ended 30
June 2021 were "Quiet Place Part II", "Godzilla vs. Kong" and "Fast
and Furious 9" which grossed $327.9m versus "Bad Boys for Life",
"1917" and "Sonic the Hedgehog" which grossed $509.8m in the
comparative prior period (Source: Comscore). During the six months
ended 30 June 2021, four new sites opened and 11 sites were closed.
These openings and closures did not have a significant impact on
the results during 2021.
Retail
Retail revenue represented 27.0% of total revenue (2020: 30.0%).
Retail revenue decreased 62.1% during the six months ended 30 June
2021 primarily due to the decrease in admissions as a result of the
temporary closures during the period. Retail spend per person
increased by 22.5% to $6.48 (2020: $5.29), driven by an increase in
overall purchase frequency.
Other Income
Other Income represented 28.4% of total revenue (2020: 17.8%).
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 programs and the hire of theatres for events.
Other income decreased by 32.7% due to the impact of the temporary
closures during the period. 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 Revenue
The results below for the UK & Ireland include the two
cinema brands in the UK, Cineworld and Picturehouse.
6 months to 6 months to
30 June 2021 30 June 2020 Movement
Admissions 2.6m 9.6m (72.9%)
$m $m
Box office 30.2 79.3 (61.9%)
Retail 12.9 29.4 (56.1%)
Other Income 3.9 15.1 (74.2%)
Total revenue 47.0 123.8 (62.0%)
=============== ============== ============== =========
Box office
In the UK and Ireland, during the six months ended 30 June 2021,
cinemas remained temporarily closed until 19 May 2021. As of 30
June 2021, the Group was operating 125 cinemas, representing 99% of
its cinemas in the UK.
Box office revenue represented 64.3% (2020: 64.1%) of total
revenue. Box office revenue decreased by 61.9% during the six
months ended 30 June 2021 compared to the six months ended 30 June
2021, primarily due to a 72.9% decrease in admissions, partially
offset by a 40.6% increase in average ticket price. The increase in
average ticket price was driven by a mix of customer behaviour and
timing of film releases. The decrease in admissions was due to the
impact of the temporary closure of our cinemas for significant
periods during the six months ended 30 June 2021 and 30 June 2020,
as well as a lack of major film releases as distributors delayed
the release of major titles due to the COVID-19 pandemic.
The top performing films in during the six months ended 30 June
2021 were "Peter Rabbit 2", "Quiet Place Part II" and "Conjuring:
The Devil Made Me Do It" which grossed $49.4m (Source: Comscore)
compared to "1917", "Star Wars: The Rise of Skywalker" and "Little
Women" which grossed $103.6m in the comparative prior period
(Source: Comscore).
Retail
Retail revenue represented 27.4% of total revenue (2020: 23.7%).
Retail revenue decreased 56.1% during the six months ended 30 June
2021 primarily due to the decrease in admissions as a result of the
temporary closures during the period. Retail spend per person
increased by 62.0% to $4.96 (2020: $3.06), driven by an increase in
overall purchase frequency . At 30 June 2021, the Group had 38
Starbucks sites and 5 sites with a VIP offering.
Other Income
Other income decreased 74.2% during the six months ended 30 June
2021 due to the temporary closures, in line with the decline in
admissions.
Rest of the World Revenue
The results below for the ROW include Poland, Romania, Hungary,
the Czech Republic, Bulgaria, Slovakia and Israel.
6 months to 6 months to Movement
30 June 2021 30 June 2020
Admissions 2.7m 9.5m (71.6%)
$m $m
Box office 16.0 50.0 (68.0%)
Retail 9.9 24.0 (58.8%)
Other Income 8.7 13.3 (34.6%)
Total revenue 34.6 87.3 (60.4%)
=============== ============== ============== =========
Box office
Admissions across all ROW territories decreased from the six
months ended 30 June 2020 due to temporary closures resulting from
continued COVID-19 restrictions and delays in major film releases.
All ROW territories remained closed until they began reopening in
April 2021. The first territory to reopen was Bulgaria in April
2021, followed by Israel, Romania, Slovakia and Poland in May and
Hungary and Czech Republic in early June 2021. Box office revenue
represented 46.2% (June 2020: 57.3%) of total revenue. Admissions
in the ROW decreased by 71.6% and box office revenue decreased
68.0% compared to the six months ended 30 June 2020. The average
ticket price increased by 12.6% to $5.93 (June 2020: $5.26). The
increase was largely driven by the film mix during the period ended
30 June 2021.
Retail
Retail revenue represented 28.6% (June 2020: 27.5%) of total
revenue. Retail revenue decreased by 58.8% compared to the six
months ended 30 June 2020 primarily due to the decrease in
admissions as a result of the temporary closures during the period.
Retail spend per person increased by 45.1% to $3.67 (June 2020:
$2.53) driven by an increase in purchase frequency.
Other Income
Other Income includes distribution, advertising and other
revenues and represents 25.1% (June 2020: 15.2%) of total revenue.
Forum Film is the Group's distribution business for the ROW and
distributes movies to theatres, DVD and television on behalf of
certain major Hollywood studios as well as owning the distribution
rights to certain independent films.
Financial Performance
6 month period ended 30 June 2021 6 month period ended 30 June 2020
US UK&I ROW Total Group Total Group
Admissions 8.8m 2.6m 2.7m 14.1m 47.5m
$m $m $m $m $m
Box office 94.2 30.2 16.0 140.4 391.3
Retail 57.0 12.9 9.9 79.8 203.6
Other Income 60.0 3.9 8.7 72.6 117.5
---------------------------------------- -------- ------ ------ -------------- ----------------------------------
Total revenue 211.2 47.0 34.6 292.8 712.4
Adjusted EBITDA as defined in note 2 (21.1) 53.0
Operating loss (208.9) (1,340.9)
Finance income 74.1 18.1
Finance expenses (417.2) (308.4)
---------------------------------------- -------- ------ ------ -------------- ----------------------------------
Net finance costs (343.1) (290.3)
Share of loss from joint ventures (24.4) (13.5)
---------------------------------------- -------- ------ ------ -------------- ----------------------------------
Loss on ordinary activities before tax (576.4) (1,644.7)
Tax on loss on ordinary activities 61.2 62.2
---------------------------------------- -------- ------ ------ -------------- ----------------------------------
Loss for the period attributable to
equity holders of the Company (515.2) (1,582.5)
---------------------------------------- -------- ------ ------ -------------- ----------------------------------
Performance
The Group's financial performance was severely impacted by the
necessary temporary cinema closures globally for a significant
proportion of the period under review. Total revenue and operating
profit declined significantly as a result. The Group continued cash
preservation efforts and strong cost control actions.
The Group's cash burn during the period was $271.0m (2020:
$389.4m) reflecting the continued tight management of operating
costs and cash flow, and representing an average monthly cash burn
of approximately $45.0m, supported by positive working capital
movements in June with the release of the latest Fast and the
Furious title. This was below the c.$60m per month guidance
previously provided. Capital expenditure was $45.8m, a significant
reduction of $153.2m compared to the prior year. Further details
are provided in the Statement of Cash flows on page 12.
The Group's liquidity position has been strengthened, following
the issuance of our $213m convertible bond in April 2021, receipt
of US CARES Act tax refund of $203m and our $200m term loan
financing in July 2021. The group had total cash and restricted
cash of $452.5m at June 2021, further strengthened by the
additional term loan raised in July 2021.
Adjusted EBITDA
The Adjusted EBITDA has decreased to negative $21.1m (2020:
$53.0m) due to greater periods of COVID-19 related closure than the
comparative period in 2020.
Operating Loss
As in 2020, due to the impact of COVID-19 the Group reported an
operating loss. The operating loss of $208.9m (2020: 1,340.9m)
reflects the closures of the majority of cinemas from January
through to April/May 2021, when sites were opened at various times
in the month. Within operating loss there are a number of
non-recurring and non-trade related items that have a net positive
impact of $65.3m (2020: net negative impact $1,013.2m). These items
are excluded from Adjusted EBITDA and have been set out in detail
in Note 2.
During the period the Group incurred exceptional costs arising
due to the COVID-19 pandemic of $4.4m (2020: $12.5m). These include
stock write offs, additional legal fees and cleaning and
preparatory costs.
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 have
been shown as a reduction in staff costs in the period. Where
available the Group has also accessed business rates relief.
The total depreciation and amortisation charge (included in
administrative expenses) in the period totaled $268.4m (2020:
$362.7m), movements reflect changes in the Group's property plant
and equipment and right of use asset bases year on year.
The impact of the COVID-19 pandemic has had a significant impact
on the Group's forecasts cash flows. In addition to increased
uncertainty in the market, changes to discount rates driven by
fluctuations in the cost of debt, and changes to forecast cash
flows have resulted in impairments and reversals of impairment of
property, plant and equipment and right -- of -- use assets at
cinema CGUs, amounting to a net total reversal of $95.6m in the
period ended 30 June 2021. These impairment charges and credits are
considered to be driven by the impact of the pandemic and are
therefore considered to be exceptional charges. Full details of
impairment reversals and charges are disclosed in notes 8 and
9.
Net finance costs
At 30 June 2021 the Group had US term loans outstanding totaling
$3.7bn, a Euro term loan of $224.1m, a private placement loan of
$244.5m and a $449.0m revolving credit facility, which was fully
drawn upon. During the period, the Group agreed the terms of a
convertible bond with a maturity of April 2025. In the prior year,
upon modifications being made to existing debt agreements
a floor of 1% was implemented in LIBOR-linked interest rates
applied to US dollar-denominated term loans, this floor remains in
place.
Net financing costs totalled $343.1m during the period (2020:
$290.3m).
Finance income of $74.1m (2020: $18.1m) related to interest
income of $1.5m (2020: $5.0m), $65.0m (2020: $10.1m) of gain on
movement on fair value of financial derivatives, $4.2m (2020:
$1.0m) of foreign exchange gains on monetary assets and non-USD$
denominated loans, $3.0m (2020: 1.7m) on the unwind of discounting
on non-current receivables and $0.4m (2020: $0.3m) regarding the
unwind of discount on sub-lease assets.
The finance expense of $417.2m (2020: $308.4m) predominantly
relates to the charge in respect of the unwind of discount on lease
liabilities which totaled $219.0m (2020: $164.2m) and the interest
on bank loans and overdrafts which totaled $126.6m (2020: $72.9m).
The other finance costs of $71.6m (2020: $71.3m) included:
-- $24.9m (2020: $5.8m) amortisation of finance costs;
-- $23.8m (2020: $24.8m) unwind of discount of deferred revenue;
-- $22.5m (2020: $nil) change in fair value of equity warrants;
-- $nil (2020: $19.5m) of loss on movement in fair value of financial derivatives;
-- $nil (2020: $9.8m) unwind of net investment hedge
-- $0.4m (2020: $11.4m) of foreign exchange losses from translation;
Taxation
The overall tax income for the period was $61.2m giving an
overall effective tax rate of 10.6% (H1 2020: 3.8% and full year
2020: 15.1%). The effective tax rate partially reflects the
restrictions on deferred tax asset recognition, as well as changes
to the UK corporate tax rate.
During the period the Group received $202.8m of cash repayments
in the US from the carry back of 2020 tax losses against taxable
profits of the preceding 5 years.
Earnings
Loss on ordinary activities after tax in the period was $515.2m,
a decrease in the loss of $1,067.3m compared with the comparative
period (2020: $1,582.5m). The decreased loss year on year is the
result of the material impairment charges driven by the COVID-19
pandemic which were recognised in the prior period.
Basic earnings per share amounted to a negative 37.5c (2020:
115.3c). Adjusted diluted earnings per share were negative 42.4c
(2020: 31.8c).
Cash Flow and Balance Sheet
Overall, net assets have decreased by $502.9m, to a net
liability of $276.6m since 31 December 2020. Total assets decreased
by $225.4m. This predominantly relates to a decrease in non-current
assets due to amendments to right of use assets as well as an
increase in the lease liability due to the unwind of the discount
not being offset by lease payments, as a result of negotiations
with landlords to defer and abate cash rent costs. During the
period the Group recognised a fair value increase of $7.6m on a
financial asset held at FVOCI.
With no trading income while the sites were closed, the Group
utilised cash during the period at the operating level. Total net
cash utilised in operations in the period was $33.2m. A cash inflow
from the US CARES Act tax rebate of $202.8m was also received. Net
cash outflows from investing activities were $48.5m during the
period, with $48.2m in capital expenditure.
Net debt of $8,435.1m at the period end is higher than the
balance at 31 December 2020 by $118.9m. A net cash inflow of $15.8m
is driven by the receipt of the CARES act tax rebate and the
proceeds of the convertible bond.
The group had total cash of $452.5m at June 2021, further
strengthened by the additional term loan raised in July 2021. Under
the terms of the convertible bond the Group is required to hold one
year of interest payments in a separate bank account, totaling
$16.0m. These funds are classified a restricted and will be used
for the settlement of the first two interest payments on the
bond.
Risks and uncertainties
The Board retains ultimate responsibility for the Group's Risk
Management Framework, and continues to undertake on-going
monitoring to review the effectiveness of the Framework and ensure
the principal risks of the Group are being appropriately mitigated
in line with its risk appetite.
The principal risks and uncertainties which could impact the
Group for the remainder of the current financial year remain those
detailed on pages 15-21 of the Group's Annual Report for 2020, a
copy of which is available from the Group's website
www.cineworldplc.com . A summary of the principal risks and any
changes from those detailed in the 2020 Annual Report are
summarised after the Independent Review Report.
Related party transactions
The Group's directors deferred their salary in full for the
first period of closure due to the pandemic in 2020, no deferrals
were made in the 6 months ended June 2021, details of the deferral
and other related party transactions are set out in Note 15 of the
interim financial statements.
Going concern
The Group's financing arrangements consist of a USD and Euro
term and private placement loans totalling $4.2bn at 30 June 2021,
a revolving credit facility of $449.0m and a convertible bond of
$186.4m. The revolving credit facility leverage covenant is
triggered above 35% utilisation, and is subject to testing twice a
year at 30 June and 31 December, the private placement loan also
has a leverage covenant tested on the ROW segment of the Group. In
addition, the B1 and B2 loans require a minimum liquidity of $100m,
this was agreed subsequent to 30 June 2021 and amended further
operating and financial covenants that were in place previously.
The Group's lenders waived the covenant test at 30 June 2021 and
the RCF covenant test at December 2021. At 30 June 2022 and
subsequent testing points, the RCF leverage covenant requires Net
Debt to Adjusted EBITDA of below 5.0x. At 31 December 2021 and
subsequent testing points, the ROW Private Placement loan leverage
covenant requires Net Debt to Adjusted EBITDA of below 5.0x.
As previously announced, judgment was received in May 2021 in
favour of the dissenting shareholders of Regal Entertainment Group
in respect of their claim arising out of the acquisition of Regal
Entertainment Group by Cineworld in 2018. The amount of the
judgment is in the region of US$260m (subject to the final
calculation of interest). The dissenting shareholders have
subsequently filed a motion for a charging order in the Delaware
Chancery Court and recognition of their judgment in New York.
Cineworld is engaging with the dissenting shareholders to reach a
constructive resolution. The directors have factored payment of the
judgment within the next 12 months into their assessment of whether
it is appropriate to adopt the going concern basis for the Group as
at 30 June 2021.
The Group's forecasts and projections, taking account of
reasonably possible changes in trading performance, show that the
Group should be able to operate within the level of its current
facilities for at least 12 months from the approval date of these
interim consolidated financial statements. The Group's weighted
base case forecasts that no covenants will be breached during this
period. However, the covenants are forecast to be breached at 30
June 2022 under the Group's severe but plausible downside forecast.
Details of the Directors' assessment of Going Concern are set out
in Note 1 to the Interim Financial Statements.
Dividends
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 4.25c per share to conserve cash
for the Group. No dividend has been declared in the current period,
the Group continues to prioritise liquidity preservation during its
recovery from the pandemic.
Moshe Greidinger
Chief Executive
Officer
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.
Condensed Consolidated Statement of Profit and Loss and
Comprehensive Income
for the period ended 30 June 2021
6 month
6 month
period ended period ended
30 June 30 June Year ended
2021 2020 31 December
(unaudited) (unaudited) 2020
NOTE $m $m $m
Revenue 292.8 712.4 852.3
Cost of sales (283.2) (624.9) (888.1)
Gross profit/(loss) 9.6 87.5 (35.8)
Other operating income 7.1 1.5 2.3
Administrative expenses (321.2) (475.2) (879.7)
Reversals/(Impairment) of goodwill, property,
plant and equipment 8,
and right-of-use assets 9 95.6 (954.7) (1,344.5)
Operating loss (208.9) (1,340.9) (2,257.7)
Adjusted EBITDA as defined in note 2 (21.1) 53.0 (115.1)
Finance income 5 74.1 18.1 69.6
Finance expenses 5 (417.2) (308.4) (786.8)
Net financing costs (343.1) (290.3) (717.2)
Share of loss of jointly controlled entity
using equity accounting method, net of tax (24.4) (13.5) (33.0)
Loss before tax (576.4) (1,644.7) (3,007.9)
Tax credit on loss 4 61.2 62.2 356.4
Loss for the period attributable to equity
holders of the Group (515.2) (1,582.5) (2,651.5)
Items that will subsequently be reclassified
to profit or loss net of tax
Retranslation (loss) / gain of foreign currency
denominated operations (3.7) (59.2) 3.5
De-designation of net investment hedge - 9.8 9.8
Movement of net investment hedge 7.4 - (19.8)
Income tax credit recognised on other comprehensive
income - - (0.1)
Change in fair value of financial assets at
FVOCI 7.6 - -
Deferred tax on change in fair value of financial
assets at FVOCI (2.1) - -
Comprehensive income/(loss) for the period,
net of income tax 9.2 (49.4) (6.6)
Total comprehensive loss for the period attributable
to equity holders of the Group (506.0) (1,631.9) (2,658.1)
Basic earnings per share 6 (37.5) (115.3) (193.2)
Diluted earnings per share 6 (37.5) (115.3) (193.2)
The notes on pages 13 to 33 are an integral part of these
interim condensed consolidated financial statements.
Condensed Consolidated Balance Sheet
As at 30 June 2021
30 June 2021 (unaudited) 31 December 2020
Note $m $m $m $m
Non-current assets
Property, plant and equipment 8 1,722.3 1,788.2
Right-of-use assets 9 2,168.4 2,306.4
Goodwill 4,864.1 4,868.3
Other intangible assets 477.1 489.5
Investment in equity-accounted investee 194.2 215.1
Financial assets at FVOCI 17.6 10.0
Deferred tax asset 338.1 278.1
Fair value of financial derivatives 12 10.2 7.8
Other receivables 50.1 48.7
Total non-current assets 9,842.1 10,012.1
Current assets
Assets classified as held for sale 4.2 2.9
Inventories 15.5 13.2
Trade and other receivables 84.1 53.7
Current Tax Receivable 1.4 206.6
Restricted cash and cash equivalents 16.0 -
Cash and cash equivalents 436.5 336.7
Total current assets 557.7 613.1
Total assets 10,399.8 10,625.2
Current liabilities
Loans and borrowings 10 (54.9) (54.2)
Fair value of financial derivatives 12 (128.7) (97.2)
Lease liabilities 9 (611.4) (596.6)
Trade and other payables (670.9) (596.3)
Deferred revenue (260.9) (270.9)
Current taxes payable (39.8) (40.6)
Provisions 14 (6.3) (8.0)
Total current liabilities (1,772.9) (1,663.8)
Non--current liabilities
Loans and borrowings 10 (4,802.5) (4,608.5)
Fair value of financial derivatives 12 (87.8) (130.1)
Lease liabilities 9 (3,403.7) (3,375.1)
Other payables (9.4) (9.2)
Deferred revenue (595.0) (607.0)
Employee benefits (4.1) (4.1)
Provisions 14 (1.0) (1.1)
Total non-current liabilities (8,903.5) (8,735.1)
Total liabilities (10,676.4) (10,398.9)
Net (liabilities)/assets (276.6) 226.3
Equity attributable to equity holders
of the Group
Share capital 20.1 20.1
Share premium 513.8 513.8
Foreign currency translation reserve (251.0) (247.3)
Hedging reserve 19.0 11.6
Fair value reserve (8.9) (14.4)
Retained earnings (569.6) (57.5)
Total equity (276.6) 226.3
Condensed Consolidated Statement of Changes in Equity
(unaudited)
for the period ended 30 June 2021
Foreign
currency
Share Share translation Hedging Fair value Retained
capital premium reserve reserve reserve earnings Total
$m $m $m $m $m $m $m
Balance at 1 January
2021 20.1 513.8 (247.3) 11.6 (14.4) (57.5) 226.3
Loss for the period - - - - - (515.2) (515.2)
Comprehensive income
Items that will subsequently
be reclassified to profit
or loss
Movement in net investment
hedge - - - 7.4 - - 7.4
Retranslation of foreign
currency denominated
operations - - (3.7) - - - (3.7)
Change in fair value
of financial assets
at FVOCI - - - - 7.6 - 7.6
Deferred tax on change
in fair value of financial
assets at FVOCI - - - - (2.1) - (2.1)
Contributions by and
distributions to owners
Movements due to share-based
compensation - - - - - 3.1 3.1
Balance at 30 June 2021 20.1 513.8 (251.0) 19.0 (8.9) (569.6) (276.6)
Condensed Consolidated Statement of Changes in Equity
for the period ended 31 December 2020
Foreign
currency
Share Share translation Hedging Fair value Retained
capital premium reserve reserve reserve earnings Total
$m $m $m $m $m $m $m
Balance at 1 January 2020 20.1 516.0 (250.8) 21.6 (14.4) 2,645.2 2,937.7
Loss for the period - - - - - (2,651.5) (2,651.5)
Other comprehensive income
Items that will subsequently
be reclassified to profit
or loss
De-designation of investment
hedge - - - 9.8 - - 9.8
Movement on net investment
hedge - - - (19.8) - - (19.8)
Tax that will subsequently
be reclassified to profit
or loss - - - - - (0.1) (0.1)
Retranslation of foreign
currency denominated operations - 3.5 - - - 3.5
Contributions by and distributions
to owners
Dividends - - - - - (51.4) (51.4)
Movement due to share
based compensation - - - - - (1.9) (1.9)
Transfer of shares - (2.2) - - - 2.2 -
Balance at 31 December
2020 20.1 513.8 (247.3) 11.6 (14.4) (57.5) 226.3
Condensed Consolidated Statement of Cash Flows
for the period ended 30 June 2021
6 month period 6 month period
ended ended
30 June 2021 30 June 2020 Year ended
31 December
(unaudited) (unaudited) 2020
$m $m $m
Cash flows from operating activities
Loss for the period (515.2) (1,582.5) (2,651.5)
Adjustments for:
Financial income (74.1) (18.1) (69.6)
Financial expenses 417.2 308.4 786.8
Taxation (61.2) (62.2) (356.4)
Share of loss of equity accounted
investee 24.4 13.5 33.0
Operating loss (208.9) (1,340.9) (2,257.7)
Depreciation and amortisation 268.4 362.8 643.3
Share based payments charge 3.1 0.6 (2.3)
Non-cash property charges (0.4) - -
Impairment and (reversal or impairments)
of property, plant and equipment,
right-of-use assets, and goodwill (95.6) 954.7 1,307.4
Impairment of investment - - 37.1
Net loss/(gain) on sale of assets (18.9) 11.3 6.4
Movement in trade and other receivables (25.8) 205.6 214.4
Movement in inventories (2.4) 13.5 20.0
Movement in trade, other payables
and deferred income 39.6 (208.9) (204.5)
Movement in provisions and employee
benefit obligations 7.7 - 2.1
Cash used in operations (33.2) (1.3) (233.8)
Tax received/(paid) 204.4 (5.2) 6.2
Net cash flows from operating activities 171.2 (6.5) (227.6)
Cash flows from investing activities
Interest received 1.5 0.1 6.5
Income received from net investment
in sub-lease - - 1.0
Investment in joint ventures (0.1) (0.3) (0.3)
Acquisition of property, plant and
equipment (48.2) (199.8) (290.0)
Proceeds from sale of property,
plant and equipment 0.1 0.1 3.2
Acquisition of distribution rights
and other intangibles (1.8) (1.3) (2.5)
Distributions received from equity
accounted investees - 17.4 17.8
Net cash flows from investing activities (48.5) (183.8) (264.3)
Cash flows from financing activities
Dividends paid to shareholders - (51.4) (51.4)
Interest paid (111.2) (40.5) (158.3)
Repayment of bank loans (26.6) (20.9) (54.2)
Draw down of bank loans 213.6 605.7 1,207.8
Debt issuance costs paid (1.1) - (73.2)
Repayment on termination of financial
derivatives - - (10.2)
Landlord contributions 2.4 1.0 13.5
Payment of lease liabilities (1) (82.3) (166.3) (198.6)
Change in restricted cash (16.0) - -
Net cash flows from financing activities (21.2) 327.6 675.4
Net increase in cash and cash equivalents 101.5 137.3 183.5
Exchange (loss)/gain on cash and
cash equivalents (1.7) 7.5 12.6
Cash and cash equivalents at start
of period 336.7 140.6 140.6
Cash and cash equivalents at the
end of period 436.5 285.4 336.7
(1) Payment of lease liabilities includes $40.8m (period ended
30 June 2020: $164.2m; year ended 31 December 2020: $115.7m) of
interest payment and $41.5m (period ended 30 June 2020: $2.1m; year
ended 31 December 2020: $82.9m) of principal lease payments.
During the financial period $35.1m (period ended 30 June 2020:
$20.9m; year ended 31 December 2020: $47.8m) of government grants
was received in cash.
Notes to the Interim Condensed Consolidated Financial
Statements
1. Basis of preparation
Reporting entity
Cineworld Group plc (the "Company") is a Company both
incorporated and domiciled in the United Kingdom. The interim
condensed consolidated financial statements of the Company as at
and for the six-month period ended 30 June 2021 comprise the
Company and its subsidiaries (together referred to as the "Group")
and the Group's interests in jointly controlled entities.
These interim condensed consolidated financial statements have
been prepared on the basis of policies set out in the 2020 annual
financial statements and in accordance with UK adopted IAS 34
'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the UK's Financial Conduct
Authority.
These interim condensed consolidated financial statements should
be read in conjunction with the annual consolidated financial
statements for the year ended 31 December 2020 which were prepared
in accordance with IFRS in conformity with the requirements of the
Companies Act 2006 and IFRS adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union.
In the year to 31 December 2021 the annual financial statements
will be prepared in accordance with IFRS as adopted by the UK
Endorsement Board and this change in basis of preparation is
required by UK company law for the purposes of financial reporting
as a result of the UK's exit from the EU on 31 January 2020 and the
cessation of the transition period on 31 December 2020. This change
does not constitute a change in accounting policy but rather a
change in framework which is required to ground the use of IFRS in
company law and there is no impact on recognition, measurement or
disclosure between the two frameworks in the period reported
on.
These interim condensed consolidated financial statements have
been presented in US dollars.
The consolidated financial statements of the Group as at and for
the year ended 31 December 2020 are available upon request from the
Company's registered office at 8th Floor, Vantage London, Great
West Road, Brentford, TW8 9AG.
Going Concern
In assessing the appropriateness of applying the going concern
basis in the preparation of the interim condensed consolidated
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
period up to and including December 2022. Given the global
political and economic uncertainty driven by COVID-19 and its
specific impact on the exhibition industry, the Directors consider
some volatility in performance and a certain amount of disruption
to business likely over the coming 12 months.
The scenarios modelled consider the speed of recovery from the
impact of COVID-19 and its effect on the cinema exhibition
industry, consumer behaviour, the availability and timing of film
content, 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 strength and speed of the recovery from the COVID-19 outbreak
and the return to pre-pandemic levels of activity, as well as the
potential for further impact in the future. Each of the scenarios
are sensitive to forecast admission levels over the coming 12-month
period. In assessing the going concern basis the Directors have
assumed the industry will return to levels of performance similar
to those observed prior to the COVID-19 impact by the end of 2023,
with continued gradual build up to those levels over a period of
time.
Restrictions required by law across operating territories have
reduced significantly since reopening and currently do not impede
the Group's ability to operate at levels observed prior to the
pandemic. The Group has implemented additional safety measures and
operational changes where considered appropriate to ensure the
safety of customers and employees.
Since the year end, the Group agreed the terms of a convertible
bond issue with principal of $213m. In addition, the Group received
the US CARES Act refund of $203m in May 2021. Subsequent to 30 June
2021, the Group has further agreed incremental loans of $200m
maturing in May 2024 from a group of its existing lenders. These
recent steps provide significant liquidity as the Group continues
its return to business. The recent agreement with existing lenders
also amends the requirements under the agreement entered into in
November 2020, to reduce the minimum liquidity requirement and
relax limitations on the use of cash, including in respect of the
settlement of the dissenting shareholder liability, which the Group
expects to settle within the going concern period. These changes
and the additional liquidity provided by the new arrangements will
further support the Group. The minimum liquidity covenant, net
leverage covenant on the revolving credit facility (RCF) and the
net leverage covenant on the Rest of the World private placement
loan (RoWPP) are the only remaining financial covenants with which
the Group is required to comply. 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.
As previously announced, judgment was received in May 2021 in
favour of the dissenting shareholders of Regal Entertainment Group
in respect of their claim arising out of the acquisition of Regal
Entertainment Group by Cineworld in 2018. The amount of the
judgment is in the region of US$260m (subject to the final
calculation of interest). The dissenting shareholders have
subsequently filed a motion for a charging order in the Delaware
Chancery Court and recognition of their judgment in New York.
Cineworld is engaging with the dissenting shareholders to reach a
constructive resolution. The directors have factored payment of the
judgment within the next 12 months into their assessment of whether
it is appropriate to adopt the going concern basis for the Group as
at 30 June 2021.
Base Case Scenario
The Group's base case scenario assumes a continued gradual
recovery from the current shutdown, with cinemas across all
territories remaining open. Admissions are forecast to return to
levels representing 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 further waiver and
deferral of significant rent payable under lease agreements 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 six
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. Financial covenants, including the
5.0x net leverage tests on the RCF at June 2021 and on the RoWPP at
December 2021, would not be breached.
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. A resurgence of the virus, connected to a new variant,
resulting in interruption to trading through capacity restrictions
and film release changes that reduce admissions by half compared
with the base case scenario, for a period of three months in the
winter of 2021 followed by a gradual return to levels modelled
under the base case. No further lockdown period is considered. This
scenario forecasts admissions at 45% of 2019 levels for December
through to February. The modelling for this scenario indicates that
the Group would breach the leverage covenant under its term loan
arrangements in June 2022 and December 2022. Sufficient liquidity
to continue operating would remain throughout the Going Concern
period and there would be no breaches of the minimum liquidity
covenant.
2. In the event of a more extreme resurgence of the virus,
warranting a full global lockdown for six weeks from 1st December
before a gradual return to 80% of 2019 admissions in H2 of 2022,
the Group would breach its leverage covenant at both its June 2022
and December 2022 testing points. In this scenario the Group would
still not breach the minimum liquidity covenant and would maintain
sufficient liquidity.
Conclusion
The Directors are encouraged by the reopening of the business
and the demand for cinema-going shown by customers in recent
months. Recent steps in securing additional liquidity and relaxing
restrictions on the business are also believed to represent
significant progress towards a return to previous levels of
stability. However, the Directors recognise the challenges facing
the business and some 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 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.
In the Directors' assessment of the appropriateness of the
application of the going concern basis, sufficient liquidity is
observed in the weighted base case, which indicates compliance with
covenants and liquidity being maintained throughout the going
concern assessment period. However, the potential breach of the net
leverage covenant in the severe but plausible scenario, indicates
the existence of a material uncertainty that may cast significant
doubt upon the Group's ability to continue to operate as a Going
Concern. The interim condensed consolidated financial statements do
not include the adjustments that would result if the Group was
unable to continue as a going concern.
Taxation
Taxes on income in the interim condensed consolidated financial
statements are accrued using the tax rate that would be applicable
to the expected full financial year results for the Group, with any
significant one-off charges or credits which are specific to the
interim period included as such.
The interim condensed consolidated financial statements do not
include all of the information required for full annual financial
statements, and should be read in conjunction with the consolidated
financial statements of the Group as at and for the year ended 31
December 2020 and any public announcements made by the Group during
the interim reporting period.
The comparative figures for the financial year ended 31 December
2020 are not the Company's statutory accounts for that financial
year. Those accounts have been reported on by the Company's
auditors and delivered to the Registrar of Companies. The report of
the auditors was (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.
New and amended standards adopted by the Group
There were no new standards adopted by the Group in the period
but the following amendments became applicable during the current
reporting period:
-- Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
Interest Rate Benchmark Reform - Phase 2
These amendments did not have a material impact on the Group's
accounting policies and have therefore not resulted in any
changes.
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 income or expense are being excluded in an APM,
these are included elsewhere in our reported financial information
as they represent actual income and expenses of the Group.
Other commentary within the interim report should be referred to
in order to fully appreciate all the factors that affect our
business.
The Group's Adjusted Performance Measures are set out below,
additional adjustments have been made in the current period to
reflect one-off charges 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, lease penalties, redundancy, refinancing
and asset impairments driven by COVID-19.
The following items are adjusted for within the Group's Adjusted
EBITDA APM as they are non-cash items: depreciation and
amortisation, impairment of goodwill, 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 (loss)/profit of jointly controlled
entities and the associated excess cash distributions from jointly
controlled entities are included within Adjusted EBITDA to reflect
cash received which is reported outside of operating profit.
Adjusted 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, lease penalties, redundancy,
refinancing and asset impairments driven by COVID-19.
Adjusted (loss)/profit after tax is arrived at by applying an
effective tax rate to the taxable adjustments and deducting the
total from adjusted profit.
The Adjusted EBITDA and Adjusted Profit reconciliation to
statutory Operating Profit are presented as follows:
Period ended Period ended Year ended
30 June 30 June 31 December
2021 2020 2020
(unaudited) (unaudited)
$m $m $m
Operating loss (208.9) (1,340.9) (2,257.7)
--------------------------------------------- ------------ ------------ ------------
Depreciation and amortisation 268.4 362.7 643.3
Share of loss of jointly controlled entity
using equity accounting method net of tax (24.4) (13.5) (33.0)
Adjustment to reverse loss from jointly
controlled entities and to reflect cash
distributions received in the period. 24.4 31.0 56.4
Pre-opening expenses 0.5 - -
Property related charges and releases (18.9) 11.3 6.4
Share based payment charges 3.1 0.6 (2.3)
Operating Exceptional items:
- Net impairment/(reversal) of property,
plant and equipment, right-of-use assets
and investments (95.6) 954.7 1,344.5
- Transaction and reorganisation costs 20.2 25.4 60.8
- COVID-19 costs 4.4 12.5 19.9
- Cost of refinancing 5.7 - 46.6
- Legal costs - 9.2 -
--------------------------------------------- ------------ ------------ ------------
Adjusted EBITDA (21.1) 53.0 (115.1)
--------------------------------------------- ------------ ------------ ------------
Depreciation and amortisation (268.4) (362.7) (643.3)
Amortisation of intangibles created on
acquisition 12.0 12.9 25.7
Net finance costs (343.1) (290.3) (717.2)
Movement on financial derivatives (42.5) 9.4 46.4
De-designation of net investment hedge - 9.8 9.8
Foreign exchange translation gains and
losses 4.6 0.2 (9.3)
Financing exceptional items:
- Gain on extinguishment of debt - - (33.2)
- Remeasurement loss on financial instrument - - 98.0
- Remeasurement of financial asset amortised
cost - - 11.3
------------ ------------
Adjusted Loss before Tax (658.5) (567.7) (1,326.9)
--------------------------------------------- ------------ ------------ ------------
Tax credit 61.2 62.2 356.4
--------------------------------------------- ------------ ------------ ------------
Tax impact of adjustments 15.5 (8.3) (225.4)
--------------------------------------------- ------------ ------------ ------------
De-recognition of deferred tax assets due
to impact of COVID-19 - 118.3 319.7
--------------------------------------------- ------------ ------------ ------------
Tax exceptional items - (40.5) (37.0)
Adjusted Loss after Tax (581.8) (436.0) (913.2)
--------------------------------------------- ------------ ------------ ------------
Excess cash distributions from jointly controlled entities
The Group receives cash distributions over and above the level
of profit or loss 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
Impairment charges relate to property, plant and equipment and
right-of-use assets and is a non-cash charge. The size and nature
of the impairment charges recognised in the current period are such
that they are considered exceptional in the context of similar
charges commonly incurred by the Group, as set out in the summary
of exceptional items below. During the six months ended 30 June
2021, the Group determined there was no indicator of impairment as
the forecasted cash flows were broadly in line with the forecasts
as of 31 December 2020. It was determined that due to a significant
number of lease amendments entered into during the period, that a
previously recognised impairment may not exist or may have
decreased due to the decrease in the carrying value of the CGU
(related to a decrease in the right-of-use asset due to rent
abatement and/or rent deferrals), or a further impairment may be
required where the carrying value of the CGU increased due to a
lower discount rate being applied than in the prior year. In these
instances, an impairment charge or reversal was recognised where
indicated. Refer to notes 8 and 9 for further information.
Property related charges and releases
The net decrease to operating loss of $18.9m (2020: increase of
$6.4m) is a result of the following:
- $13.3m gain as a result of remeasurement of right-of-use
assets (2020: $12.3m) 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 5 sites in US has resulted in $2.8m gain due to
the de-recognition of the lease liabilities and right-of-use
assets.
- Gain of $2.8m recognised on property, plant and equipment disposed of in the US.
- In 2020, 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 recognised on property, plant and
equipment disposed of at these sites.
- During 2020, 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 was
recognised connected to the termination of the master lease with
DCIP.
- In 2020, $5.0m in losses on assets which had been held at
sites classified as under construction in the UK, but were disposed
of during the year as the projects were no longer expected to go
ahead, were also incurred.
Operating exceptional items
The following operating exceptional items were recognised during
the period:
- In the six months ended 30 June 2021 the impact of the
pandemic has continued to affect the Group's forecast cash flows.
An additional impairment charge of $45.2m has been recognised. In
addition, amendments to leases at a lower discount rate in the
current period have resulted in reductions to right of use assets
within CGUs previously impaired due to the impact of COVID-19,
these amendments have resulted in impairment reversals of $140.8m.
During 2020 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 in the year ended
31 December 2020. These impairments are considered to be driven by
the impact of the pandemic and are therefore considered to be
exceptional charges.
- One off costs of $4.4m associated with the impact of COVID-19
including stock write-offs of $1.8m, lease penalties and redundancy
of $2.6m. As of 31 December 2020, one-off costs of $19.9m
associated with the impact of COVID-19 included stock write offs of
$16.0m, additional cleaning expenses, redundancy and write offs of
$3.9m.
- Transaction and reorganisation costs of $20.2m were incurred
in 2021 of which $17.2m relates to dissenting shareholders legal
case and $3.0m incurred with the Cineplex transaction. 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 $41.6m in respect of interest on the
outstanding liability.
- Legal and adviser costs, in addition to those capitalised as
directly attributable to new debt instruments, $2.4m were incurred
in connection with the new debt facilities entered into during the
period and $3.3m relative to the 2020 new debt facilities. In 2020,
legal and adviser costs, in addition to those capitalised as
directly attributable to new debt instruments, $46.6m were incurred
in connection with the new debt facilities entered into during the
year 2020.
Movement on financial derivatives
In 2020 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
2020 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. These derivatives were recognised as a cost within
movement on financial derivatives during the year.
In 2020 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.
During the period ended 30 June 2021, the movements on the
instruments described above included a loss on the fair value
movement of the warrants of $22.5m, a gain on the fair value
movement of the B2 LIBOR floor of $0.7m, a gain on the fair value
movement of the US dollar denominated term loans of $33.7m, a gain
on the fair value movement of the B1 prepayment feature of $2.4m
and a gain in the revaluation of the cross currency swaps resulted
in a gain of $7.9m. These movements were recognised within net
finance costs.
On 16 April 2021, the Group raised additional funding by issuing
convertible bonds. The Group separately recognised a derivative
liability in respect of the holder's option to convert the bonds
into ordinary shares. The value of the derivative at inception was
$27.8m. At 30 June 2021, the derivative liability in respect of the
embedded conversion feature within the bond agreement was valued at
$7.5m.
De-designation 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 2020 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.
Foreign exchange translation gains and losses
Gains and losses arise due to movements on foreign exchange in
respect of the Group's unhedged Euro denominated term loan. These
gains and losses are excluded from Adjusted Profit Before Tax.
During 2020 the Group's Euro denominated term
loan was designated as a net investment hedge.
Remeasurement loss on financial asset
During 2020 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 during the year.
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 11.
3. Operating segments
The Group has determined that it has three reporting operating
segments: the US; the UK&I and the ROW. The ROW operating
segment 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, the Czech Republic, Bulgaria, Slovakia and Israel.
The results for the United States 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 Group
$m $m $m $m
Period ended 30 June 2021
Total revenues 211.2 47.0 34.6 292.8
Adjusted EBITDA as defined in
note
2 (10.7) (15.0) 4.6 (21.1)
Operating loss (162.1) (23.1) (23.7) (208.9)
Finance income 6.0 64.4 3.7 74.1
Finance Expense (298.2) (84.4) (34.6) (417.2)
Depreciation and amortisation 195.1 38.8 34.5 268.4
Impairment reversal of
property,
plant and equipment and
right-of-use
assets and goodwill (57.6) (33.9) (4.1) (95.6)
Share of loss of jointly
controlled
entities using equity method,
net
of tax (24.4) - - (24.4)
Loss before taxation (478.7) (43.1) (54.6) (576.4)
Segmental total assets 8,144.4 1,347.1 908.3 10,399.8
Segmental total liabilities 8,429.0 1,600.3 647.1 10,676.4
Period ended 30 June 2020
Total revenues 501.3 123.8 87.3 712.4
Adjusted EBITDA as defined in
note
2 35.3 1.0 16.7 53.0
Operating profit (773.2) (511.1) (56.6) (1,340.9)
Net finance expense 215.5 54.4 20.4 290.3
Depreciation and amortisation 276.9 47.5 38.3 362.7
Share of loss of jointly
controlled
entities using equity method,
net
of tax (13.5) - - (13.5)
Impairments of property, plant
and equipment and
right-of-use
assets 464.4 453.7 36.6 954.7
(Loss) before taxation (1,002.2) (563.8) (78.7) (1,644.7)
Segmental total assets 8,946.5 1,134.9 1,171.9 11,253.3
Segment total liabilities 8,016.5 1,387.0 595.1 9,998.6
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 Impairments 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 (1,986.7) (805.6) (215.6) (3,007.9)
Segmental total assets 8,552.8 1,163.9 908.5 10,625.2
Segment total liabilities 8,403.9 1,377.2 617.8 10,398.9
4. Taxation
Tax recognised in the income statement during the period is as
follows:
Period ended Period ended
30 June 30 June Year ended
2021 2020 31 December
(unaudited) (unaudited) 2020
$m $m $m
Current period tax expense
Current period 0.1 (156.7) (220.9)
Adjustments in respect of prior periods - 6.8 (3.1)
Total current period tax expense 0.1 (149.9) (224.0)
Deferred tax (credit)/charge
Current period (33.4) 93.2 (138.0)
Adjustments in respect of prior periods (8.5) (5.0) 8.9
Adjustments from change in tax rates (19.4) (0.5) (3.3)
Total deferred tax (credit)/expense (61.3) 87.7 (132.4)
Total tax credit in the income statement (61.2) (62.2) (356.4)
Effective tax rate 10.6% (3.8%) 15.1%
Current period effective tax rate 9.4% (3.9%) 17.1%
Deferred tax credit
An increase in the UK tax rate from 19% to 25% was substantively
enacted on 24 May 2021. The increase will apply from 1 April 2023.
A one-off deferred tax credit of $19.4m arises from the revaluation
of UK deferred tax assets which are expected to be realised at the
new rate.
Deferred tax recognition
The Group recognises deferred tax assets to the extent it is
probable that future taxable profits will be available against
which they can be utilised.
The deferred tax credit of $61.3m is restricted by the ability
to recognise deferred tax assets where there is insufficient
certainty over the availability of taxable profits in the
foreseeable future due to the impact of COVID-19.
Recognition of these deferred tax assets will be re-assessed at
each balance sheet date on the basis of updated projections of
future taxable profits.
Factors that may affect future tax charges
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.
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 represent 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 a
provision of $1.1m against potential exposures. The maximum
potential exposure is $10.8m.
5. Finance income and expense
Period ended Period ended
30 June 30 June Year ended
2021 2020 31 December
(unaudited) (unaudited) 2020
$m $m $m
Interest income 1.5 5.0 7.4
Foreign exchange gain 4.2 1.0 10.9
Unwind of discount on sub-lease assets 0.4 0.3 0.7
Gain on movement on fair value of financial
derivatives 65.0 10.1 9.0
Unwind of discount on non-current receivables 3.0 1.7 8.4
Other financial income - - 33.2
Financial income 74.1 18.1 69.6
Interest expense on bank loans and overdrafts 126.6 72.9 166.3
Amortisation of financing costs 24.9 5.8 33.1
Lease liability interest 219.0 164.2 349.0
Unwind of discount of deferred revenue 23.8 24.8 49.4
Foreign exchange loss 0.4 11.4 11.8
Change in fair value of warrants 22.5 - -
De-designation of net investment hedge - 9.8 9.8
Loss on movement in fair value of financial
derivatives - 19.5 55.4
Remeasurement of financial asset amortised
cost - - 11.3
Remeasurement of net investment in sub-lease
assets - - 2.7
Remeasurement loss on financial instrument - - 98.0
- -
Financial expense 417.2 308.4 786.8
Net financial expense 343.1 290.3 717.2
6. Earnings per share
Basic Earnings Per Share is calculated by dividing the profit
for the period attributable to ordinary shareholders by the
weighted average number of ordinary shares outstanding during the
period, after excluding the weighted average number of non-vested
ordinary shares. Diluted Earnings Per Share is calculated by
dividing the profit for the period attributable to ordinary
shareholders by the weighted average number of ordinary shares plus
any non-vested/non-exercised ordinary shares. Where dilutive
options are not considered likely to vest no dilution is applied.
Adjusted Earnings Per Share is calculated dividing the adjusted
profit after tax for the period attributable to ordinary
shareholders by the weighted average number of ordinary shares
outstanding during the period, after excluding the weighted average
number of non-vested ordinary shares.
Period ended Period ended
30 June 30 June Year ended
2021 2020 31 December
(unaudited) (unaudited) 2020
$m $m $m
Loss attributable to ordinary shareholders (515.2) (1,582.5) (2,651.5)
Adjustments:
Amortisation of intangible assets(1) 12.0 12.9 25.7
Excess cash distributions from jointly
controlled entities 24.4 31.0 56.4
Pre-opening expenses 0.5 - -
Property related charges and releases (18.9) 11.3 6.4
Share based payment charges 3.1 0.6 (2.3)
Operating Exceptional items:
- Net impairment of property, plant
and equipment, right-of-use assets
and investments (95.6) 954.7 1,344.5
- Transaction and reorganisation costs 20.2 25.4 60.8
- Legal costs - 9.2 -
- COVID-19 costs 4.4 12.5 19.9
- Gain on extinguishment of debt - - (33.2)
- Remeasurement of financial asset
amortised cost - - 11.3
- Remeasurement loss on financial instrument - - 98.0
- Refinancing costs 5.7 - 46.6
Movement on financial derivatives (42.5) 9.4 46.4
Recycle of net investment hedge - 9.8 9.8
Foreign exchange translation gains
and losses(2) 4.6 0.2 (9.3)
Adjusted earnings (597.3) (505.5) (970.5)
--------------------------------------------- ------------ ------------ ------------
Tax effect of above items 15.5 (8.3) (225.4)
Tax exceptional
De-recognition of deferred tax assets
due to impact of COVID-19 - 118.3 319.7
Tax credit arising on capitalised foreign
exchange loss - (40.5) (37.0)
--------------------------------------------- ------------ ------------ ------------
Adjusted loss after tax (581.8) (436.0) (913.2)
--------------------------------------------- ------------ ------------ ------------
Number of shares Number of shares Number of shares
m m m
--------------------------------------- ---------------- ---------------- ----------------
Weighted average number of shares in
issue 1,372.9 1,372.0 1,372.4
Basic Earnings per Share denominator 1,372.9 1,372.0 1,372.4
Dilutive options - - -
Diluted Earnings per Share denominator 1,372.9 1,372.0 1,372.4
Shares in issue at period end 1,373.0 1,372.0 1,372.8
--------------------------------------- ---------------- ---------------- ----------------
Cents Cents Cents
--------------------------------------- ---------------- ---------------- ----------------
Basic (Deficit) / Earnings per Share (37.5) (115.3) (193.2)
--------------------------------------- ---------------- ---------------- ----------------
Diluted (Deficit) / Earnings per Share (37.5) (115.3) (193.2)
--------------------------------------- ---------------- ---------------- ----------------
Adjusted basic (Deficit) / Earnings
per Share (42.4) (31.8) (66.5)
--------------------------------------- ---------------- ---------------- ----------------
Adjusted diluted (Deficit) / Earnings
per Share (42.4) (31.8) (66.5)
--------------------------------------- ---------------- ---------------- ----------------
(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 $12.0m
(2020: $25.7m)). It does not include amortisation of purchased
distribution rights.
(2) Net foreign exchange gains and losses included within
earnings comprises $4.6m (2020: gains of $9.3m) foreign exchange
gain recognised on translation of loan.
7. Dividends
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.
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. No dividend has been declared in the current period; the
Group continues to prioritise liquidity preservation during its
recovery from the pandemic.
8. Property, plant and equipment
Land and Plant and Fixtures Assets in
buildings machinery and Fittings the course
$m $m $m of construction Total
$m $m
------------------------------- ---------- ------------------------- ------------- ---------------- -----------
Cost
Balance at 1 January 2021 683.7 1,413.6 756.2 228.4 3,081.9
------------------------------- ---------- ------------------------- ------------- ---------------- -----------
Additions 3.3 9.8 3.0 31.8 47.9
Disposals (1.9) (37.0) (3.7) (0.2) (42.8)
Transfers 65.6 60.7 22.8 (149.1) -
Effects of movement in foreign
exchange 3.6 (5.3) (4.1) 0.2 (5.6)
Balance at 30 June 2021 754.3 1,441.8 774.2 111.1 3,081.4
------------------------------- ---------- ------------------------- ------------- ---------------- -----------
Accumulated depreciation
and impairment
Balance at 1 January 2021 (341.1) (554.2) (376.5) (21.9) (1,293.7)
------------------------------- ---------- ------------------------- ------------- ---------------- -----------
Charge for the period (28.6) (63.5) (32.1) - (124.2)
Disposals 1.3 20.1 3.2 - 24.6
Impairment Reversals 8.8 11.6 6.0 0.3 26.7
Effects of movement in foreign
exchange - 5.0 2.5 - 7.5
30 June 2021 (359.6) (581.0) (396.9) (21.6) (1,359.1)
------------------------------- ---------- ------------------------- ------------- ---------------- -----------
Net book value
Opening 342.6 859.4 379.7 206.5 1,788.2
Closing 394.7 860.8 377.3 89.5 1,722.3
------------------------------- ---------- ------------------------- ------------- ---------------- -----------
Commitments
At 30 June 2021 the Group had committed $38.4m in relation to
capital expenditure (31 December 2020: $294.5m).
Impairment
The Group evaluates assets for impairment annually or when
indicators of impairment exist. As of 30 June 2021, it was
determined that there was no indicator that an impairment exists as
forecasts were broadly in line with those from the year ended 31
December 2020. As required by IAS 36, the Group assessed whether
there was an indication that a previously recognised impairment no
longer exists or may have decreased. A reversal of an impairment
loss should only be recognised if there has been a change in the
estimates used to determine the asset's recoverable amount since
the last impairment loss was recognised. It was determined as of 30
June 2021, a CGU that had a lease modification during the period
would be an indicator that previous impairment may have reduced or
be eliminated and thus an impairment reversal would be recorded.
For these CGUs, management has performed an assessment to estimate
the recoverable amount and record an impairment or impairment
reversal based on the revised recoverable amount and carrying value
of the CGU including the impact of any modifications to
right-of-use assets. The Group includes both property, plant and
equipment and right-of-use assets in each CGU.
The recoverable amount of a CGU is the higher of value-in-use or
fair value less cost of disposal. The Group determines the
recoverable amount with reference to its value-in-use. Where the
recoverable amount is less than the carrying value, an impairment
charge to reduce the assets down to recoverable amount is
recognised.
The Group has identified that the lowest level of cash-flows in
which a CGU independently generates is predominantly at the
individual cinema level. Where individual sites' cash inflows are
determined not to operate independently from one another, mainly
due to strategic or managerial decisions being made across more
than one site, they may be clustered into a single CGU.
Estimating the value in use requires the Group to make an
estimate of the expected future cash flows generated from each CGU
and discount these to their net present value at a pre-tax discount
rate which is appropriate for the territory where the assets are
held.
A table summarising the rates used, which are derived from
externally benchmarked data, is set out below:
30 June 2021 31 December 2020
% %
--------------- ------------ ----------------
United States 14.2 14.2
United Kingdom 14.5 14.5
Poland 14.9 14.9
Israel (1) 14.2 14.2
Hungary 14.9 14.9
Romania 15.6 15.6
Czech Republic 14.4 14.4
Bulgaria 14.5 14.5
Slovakia 14.9 14.9
--------------- ------------ ----------------
(1) For sites which generate significant rental cash flows in
addition to cinema cash flows a separate discount rate of 12.8% (31
December 2020: 12.8%) was applied to rental cash flows to reflect
the specific risks related to them.
The value in use is calculated using expected future cash flows
(defined as the Adjusted EBITDA generated by each CGU), which are
based on management's anticipated performance of the CGU over the
term remaining on its respective lease.
Management have prepared individual cash-flow forecasts for each
CGU. These cash-flow forecasts apply specific growth assumptions to
the key drivers within the cash-flow such as attendance, average
ticket price ("ATP"), spend per person ("SPP") and long term growth
rates of other revenue and cost streams.
COVID-19 has had a significant impact on the operations of the
business and the territories in which it operates. The impact of
COVID-19 has impacted each CGUs ability to generate future cash
flows in the short-term and management have factored this into each
CGUs cash flow forecast.
The key assumptions applied within these models are as
follows:
- Adjusted EBITDA for the year ended 31 December 2019 is deemed
to represent a standard year of cash-flows generated under normal
operating conditions. Management have therefore used 31 December
2019 actuals as the base assumptions within the cash-flow
forecast.
- These assumptions however have been adjusted to reflect
management's assessment of the short-term impact of COVID-19 and
longer term growth over the life of each CGU.
- As part of the Group's assessment of going concern and longer
term viability a five year forecast reflecting the impact of
COVID-19 has been prepared. Management have compared the
assumptions used within this model to that of the actuals at 31
December 2019. The differential between 31 December 2019 and the
COVID-19 five year forecast has been deemed to represent an implied
reduction as a result of virus.
- Within this five year forecast management believe cash-flows
will return to pre COVID-19 levels (31 December 2019 actual
Adjusted EBITDA) by the end of the year ended 31 December 2023.
- For the 2021 - 2023 forecast period, management have applied
the respective financial year's hair-cut to the 31 December 2019
actuals to generate the forecast Adjusted EBITDA for each financial
year. In turn this will result in the Adjusted EBITDA for the year
ended 31 December 2023 to represent the 31 December 2019
actuals.
- From 31 December 2023 onwards management have forecast
attendance will remain at 31 December 2019 levels, however all
other assumptions will grow at a long term growth rate of 1%.
For CGUs which have either opened or been refurbished within
2018 - 2021 financial years, management acknowledge that 31
December 2019 actuals do not represent a full year of standard
trading. Therefore, specific assumptions have been applied to the
key drivers over the 2021 - 2023 forecast period, in order for the
forecast 2023 adjusted EBITDA to represent management's
expectations of a standard year of operations (pre COVID-19) for
that CGU.
For specific CGUs which have had negative decline in EBITDA over
the 2017 - 2019 financial years, management have assumed this
historical decline will continue to at least 31 December 2023.
Further declines have been applied for those CGUs which forecast
admissions per screen at 31 December 2023 were above the
territories average admissions per screen, until the financial year
the admissions per screen is below the territories average.
Total net reversal of impairments, across property, plant and
equipment and right-of-use-assets during the period to 30 June 2021
of $95.6m are split between $57.5m within the US reporting segment
(period to 30 June 2020: $465.8m net impairment), $34.1m within the
UK reporting segment (period to 30 June 2020: $111.6m net
impairment) and $4.0m within the ROW reporting segment (period to
30 June 2020: $35.2m net impairment). Reversal of impairments were
recognised during the period to 30 June 2021 at 80 total sites,
comprised of 50 sites in the US, 13 sites in the UK and 17 sites in
the ROW. Impairments recognised during the period were in relation
to 28 sites in the US and one site in the ROW, whose recoverable
amount was less than carrying amount. The recoverable amount of
these 29 sites subsequent to impairment was $87.8m.
In assessing the impairment, consideration was given to whether
the fair value less cost to sell each CGU is higher than the
calculated value in use of each CGU and therefore whether the
recoverable amount was higher than carrying value.
Sensitivity to changes in assumptions
During these uncertain times, there are significant challenges
in preparing forecasts necessary to estimate the recoverable amount
of a CGU. Management determined that using an expected cash flow
approach is the most effective means of reflecting the
uncertainties of the COVID-19 pandemic in its estimates of
recoverable amount. This approach reflects all expectations about
possible cash flows instead of the single expected outcome.
Notwithstanding this impairment reviews are sensitive to changes
in key assumptions, especially given that the full extent of
COVID-19 on the operations and future cash-flows of the Group is
not fully known at this stage. Management have determined that the
following assumptions used within the cash-flow forecast are most
sensitive to further changes as a result of COVID-19. Sensitivity
analysis has been performed on all CGUs calculated recoverable
amounts giving consideration to incremental changes in the key
assumptions of the following:
In calculating the CGU recoverable amount, management have
applied specific growth rates in admissions which are deemed to be
highly sensitive to the short-term impact of COVID-19 and in the
recovery of the operations of the business. The growth rate of
admissions has been reduced by 1% per annum over the forecast
period. This has therefore reflected the assumption that attendance
for each CGU would decline by 1% per annum over the forecast
period. The growth rate of ATP and SPP has been reduced by 1% per
annum over the forecast period in an additional sensitised
scenario.
Discount rates are largely derived from market data, and these
rates are intended to be long term in nature. However, the models
are sensitive to changes in these rates. An increase and decrease
by a factor of 1% has been applied in the sensitised scenarios.
The sensitivities applied reflect realistic scenarios which
management believe would have the most significant impact on the
cash flows described above.
The sensitivity analysis has been prepared on the basis that the
reasonably possible change in each key assumption would not have a
consequential impact on other assumptions used in the impairment
review.
The impact on the total net impairment reversal charge of
applying different assumptions to the growth rates used over the
forecast period and the discount rates would be as follows:
Decrease (increase)
in net impairment
reversal $m
Growth in admissions reduced by 1% 39.7
Growth in ATP and SPP reduced by 1% 29.4
1 percentage point increase in the discount rates 16.5
1 percentage point decrease in the discount rates (14.7)
9. Leases
Despite the scale and impact of the changes to leases during the
period and the volatility in key inputs to their calculation and
their potential materiality of the impact on the financial
statements as whole, the Group's significant judgments in respect
of the matters set out below are unchanged. The Group's accounting
policy with respect to leases is also unchanged and remains in line
with the Group's annual financial statements.
Modification and Discount Rates
During the six months ended 30 June 2021, due to continued
negotiations with our landlords, it was determined that amended
leases have changed in substance, either from a consideration or
lease term perspective. Thus, the modification treatment per IFRS
16 has been followed.
In line with the approach on transition to IFRS 16, the Group
has used an incremental borrowing rate ("IBR") to measure the lease
liability, with a corresponding adjustment to the right-of-use
asset. The amendments did not result in the identification of a
separate lease.
The asset specific IBR 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 IBR applied to property
leases for the COVID-19 amendments in 2020 ranged between 5.9% and
16.8% for modifications between March and September 2020, and
ranged from 17.9% to 26.4% for modifications between October and
December 2020.
During the six months ended 30 June 2021, the IBRs varied
primarily due to changes in the credit risk and market debt
pricing. The IBR applied to amended leases during the period,
depending on the territory and remaining lease term, ranged
between:
Jan 2021 20.00% - 26.50%
Feb 2021 19.80% - 26.20%
-----------------
March 2021 19.80% - 26.95%
-----------------
1-15 April 2021 (1) 19.70 % - 26.89%
-----------------
16-30 April 2021 (1) 8.89%- 17.30%
-----------------
May 2021 8.94% - 14.05%
-----------------
June 2021 8.36% - 18.32%
-----------------
(1) The Group issued convertible bond issued on 16 April. As a
result, the credit risk applied in calculating IBRs has reduced,
resulting in lower overall IBR results.
During the first three months of the year, the IBRs were similar
to the period in Q4 2020. The relatively high IBRs are the most
significant factor behind the decrease in right of use assets and
lease liabilities during the first 3 months of the year. However,
subsequent to 16 April 2021, leases that were amended could have
had an increase in the right of use asset and lease liability due
to the lower IBRs in Q2 2021.
Due to the ongoing negotiations with the landlords during the
six months ended 30 June 2021, the Group amended a large number of
its leases and expects further modifications during the second half
of 2021, modifications often lead to a reversal of impairment in
the event that the right of use asset reduces by an amount greater
than the current impairment charge as a result of the amendment.
Significant judgements related to the lease modifications
include:
- 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 monthly discount rate over the period 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 a rate covering a monthly period
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 modifications under
IFRS 16. Management has taken the judgement that all renegotiated
leases met the criteria for amendment based on the changes to the
contractual cash flows, lease term and conditions of the original
leases.
Impairment and Disposals
During the year ended 31 December 2020, the Group recognised
impairment of $519.1m of right-of-use assets and $136.2m reversal
of impairments.
During the six months ended 30 June 2020, the Group recognised
impairment of $385.3m of right-of-use assets. The Group also
recognised $0.8m reversal of impairments in 3 sites in US segment
that were previously impaired, but due to the modification, the
asset was decreased below $nil and was adjusted therefore back to
$nil.
During the six months ended 30 June 2021, 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 assets' 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. Further details are set out in note 8.
The consolidated statement of profit and loss includes a lease
modification gain of $13.3m recognised within Administrative
expenses. The impairment reversal is recognised within
Reversals/(Impairment) of goodwill, property, plant and equipment
and right-of-use assets in the consolidated statement of profit and
loss.
The disposal value of $4.3m was offset by liabilities of $7.1m
in associated lease liabilities related to 5 sites which closed
within the US operating segment, resulting in a $2.8m gain.
Land and Plant and
buildings machinery Other Total
$m $m $m $m
---------------------------------- ---------- ---------- ----- -------
Right-of-use assets
1 January 2021 2,305.8 0.4 0.2 2,306.4
Modifications (119.9) - - (119.9)
Additions 45.9 - - 45.9
Disposals (4.3) - - (4.3)
Effects of movement in foreign
exchange 2.4 0.1 (0.1) 2.4
Impairment reversals 108.5 - - 108.5
Impairment charges (39.6) - - (39.6)
Depreciation (130.7) (0.2) (0.1) (131.0)
---------------------------------- ---------- ---------- ----- -------
30 June 2021 2,168.1 0.3 0.0 2,168.4
---------------------------------- ---------- ---------- ----- -------
Lease liabilities
1 January 2021 3,971.3 0.3 0.1 3,971.7
Modifications (138.5) - - (138.5)
Additions 48.2 - - 48.2
Interest expense related to lease
liabilities 219.0 - - 219.0
Disposals (7.1) - - (7.1)
Effects of movement in foreign
exchange 4.0 (0.1) 0.2 4.1
Repayment of lease liabilities
(including interest) (82.0) (0.1) (0.2) (82.3)
---------------------------------- ---------- ---------- ----- -------
30 June 2021 4,014.9 0.1 0.1 4,015.1
---------------------------------- ---------- ---------- ----- -------
Current 611.2 0.1 0.1 611.4
Non-current 3,403.7 - - 3,403.7
---------------------------------- ---------- ---------- ----- -------
10. Loans and borrowings
30 June 2021 31 December
2020
$m $m
-------------------------------------- ------------- ------------
Non-current liabilities
Secured bank loans, less issue costs
of debt to be amortised 4,802.5 4,608.5
-------------------------------------- ------------- ------------
Total non-current liabilities 4,802.5 4,608.5
-------------------------------------- ------------- ------------
Current liabilities
Bank loans, less issue costs of debt
to be amortised 33.2 32.4
Overdraft 21.7 21.8
-------------------------------------- ------------- ------------
Total current liabilities 54.9 54.2
-------------------------------------- ------------- ------------
Total liabilities 4,857.4 4,662.7
-------------------------------------- ------------- ------------
The terms and conditions of outstanding loans were as
follows:
30 June 2021 31 December
2020
------------------- -------------------
Currency Nominal interest Year Face Carrying Face Carrying
rate of maturity value amount value amount
$m $m $m $m
------------------------ ---------- ----------------------- ------------- -------- --------- -------- ---------
Eurocurrency Base
Initial US Dollar Rate (1) plus
Term Loan USD applicable margin(2) 2025 2,673.5 2,644.9 2,692.7 2,658.2
Eurocurrency Base
Rate(1) plus
Initial Euro Term applicable
Loan EUR margin(2) 2025 226.6 224.1 233.8 230.9
Eurocurrency Base
Rate(1) plus
Incremental US Dollar applicable
Term Loan USD margin(2) 2026 640.2 633.4 643.5 635.2
7.0% plus 8.25%
B1 term loan USD PIK 2024 501.3 373.2 480.8 342.4
Eurocurrency Base
Rate(1)
B2 term loan USD plus 5.0% margin 2024 110.8 73.9 110.8 69.4
Private placement USD and
loan EUR 11.0% 2023 258.6 244.5 263.3 246.2
Convertible bonds USD 7.5% 2025 213.0 186.4 - -
Eurocurrency Base
Rate(1) plus
Revolving credit applicable
facility USD margin(2) 2023 454.2 449.0 456.8 451.6
Secured Bank loan
- DCIP USD 4.17% 2021 0.2 0.2 0.4 0.4
Israeli government Base rate plus
loan NIS 2% 2025 7.0 6.1 6.6 6.6
------------------------ ---------- ----------------------- ------------- -------- --------- -------- ---------
Total interest-bearing
liabilities 5,085.4 4,835.7 4,888.7 4,640.9
------------------------------------ ----------------------- ------------- -------- --------- -------- ---------
(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. 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 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 debt of $33.2m, which has been recognised within
finance income. The new amended facility has been secured with the
same collateral as 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 and June 2021.
On 23 November 2020, the Group secured a new debt facility of
$450.0m with majority group of existing term loan lenders with a
maturity of 24 May 2024. Alongside the new debt facility, the Group
issued to participating Term Loan B 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
anti-dilution 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 $337.1m. 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 30 June
2021 the separate recognition of the equity warrants are valued at
$121.2m (2020: $97.2m) and the embedded derivative asset in respect
of a prepayment option within the new agreement valued at $10.2m
(2020: $7.8m).
On 16 April 2021, the Group raised additional funding by issuing
Convertible Bonds which are convertible into equity shares of
Cineworld Group Plc. The bonds have principal amount of $213.0m and
were issued at a 1% original issuance discount with a 4 year
maturity. The Convertible Bonds are denominated into units of
$200,000 each and the Investors have an option to convert each unit
into ordinary shares of the Group at a conversion price of $1.762
(the 'Conversion Price') per unit. The Group recognised a separate
derivative liability in respect of the conversion feature with an
initial value of $27.8m. Directly attributable fees of $1.2m were
incurred in connection with raising the facility. The initial
carrying value of the amortised cost debt component of the bonds
was $181.9m. At 30 June 2021, the derivative liability was valued
at $7.5m.
In 2020 the Israeli government granted a loan of NIS 24.0m
($6.9m) with a maturity of 2025. There are no conditions attached
to the 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 Group to maintain a leverage
ratio below 5.0x, tested semi-annually. In 2020, the Group secured
a covenant waiver on the RCF until the 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 liquidity of $30.0m,
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 and B2 term loans
The B1 and B2 term loan facilities are subject to financial and
liquidity covenants.
Until the group reaches 80% of admission levels for a 3-month
comparable period in 2019, it is subject to a minimum liquidity
covenant and restrictions on operating and capital cash
disbursements. The minimum liquidity covenant ranges between $66.9
and $297.1m during 2021. The agreement also entitles the lenders to
appoint a board observer.
On 30 July 2021, the Group announced that it secured $200m of
incremental loans from a group of existing lenders. The Group also
agreed amendments on certain covenants and restrictions under its
B1 and B2 term loan agreements, including the removal of the
operating and capital cash disbursements covenants described above.
The minimum liquidity covenant has been amended to $100m until the
group reaches 80% of comparable 2019 admissions levels for a period
of 3 consecutive months. At this point the Group's remaining
minimum liquidity requirement would be $30.0m under the terms of
the Rest of the World Private Placement loan.
11. Net debt
Total Cash at
financing bank
Bank Convertible Lease Bank activity and
loans bond liabilities Derivatives overdraft liabilities in hand Net debt
$m $m $m $m $m $m $m $m
--------- --------- -------------------------- ----------- ----------- --------- ----------- ------- ---------
1 January
2020 (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
on
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)
--------- --------- -------------------------- ----------- ----------- --------- ----------- ------- ---------
Cash
flows 24.1 (209.7) 82.3 1.4 (0.3) (102.2) 118.0 15.8
Non-cash
movement (44.8) 23.3 (121.6) 2.0 - (141.1) - (141.1)
Effect of
movement
on
foreign
exchange
rates 12.3 - (4.1) - 0.4 8.6 (2.2) 6.4
--------- --------- -------------------------- ----------- ----------- --------- ----------- ------- ---------
At 30
June
2021 (4,649.3) (186.4) (4,015.1) (15.1) (21.7) (8,887.6) 452.5 (8,435.1)
--------- --------- -------------------------- ----------- ----------- --------- ----------- ------- ---------
Net debt excludes an embedded derivative of $70.0m (as at 31
December 2020: $103.6m) which reflects the fair value of future
interest charges arising from interest rate floor features in the
Group's US dollar denominated term loans and equity warrants of
$121.2m (as at 31 December 2020: $97.2m), which had a non cash
movement in the period and which will not result in future cash
outflows.
The non-cash movements of $44.8m (31 December 2020: $71.3m)
within bank loans includes the amortisation of debt issuance costs,
accrued interest, loan forgiveness and Israeli government loan
finance interest.
The non-cash movement of $121.6m (31 December 2020: $67.4m)
within lease liabilities relates to the following: the interest
expense related to lease liabilities of $219.0m (31 December 2020:
$349.0m), the impact of entering into new leases $48.2m (31
December 2020: $52.8m), modifications of existing leases of $138.5m
(31 December 2020: $447.5m), and disposal of leases during the
period of $7.1m (31 December 2020: $21.7m).
12. Fair value measurement of financial instruments
Set out below is a comparison by category of carrying amounts
and fair values of the Group's financial instruments that are
carried in the financial statements. Short-term debtors, creditors
and cash and cash equivalents have been excluded from the following
disclosures on the basis that their carrying amount is a reasonable
approximation to fair value.
Finance lease liabilities are recorded at amortised cost, as
derived from expected cash outflows and the estimated incremental
borrowing rate attached to the lease. Finance lease liabilities are
separately disclosed within the Consolidated Statement of Financial
Position.
Carrying amount Fair value Carrying amount Fair value
30 June 2021 30 June 2021 31 December 31 December
2020 $m 2020 $m
$m $m
------------------------------- --------------- ------------- --------------- ------------
Secured bank and private
placement loans (1) 4,835.7 4,693.0 4,640.9 3,734.9
Bank overdrafts 21.7 21.7 21.8 21.8
Equity investments (17.6) (17.6) (10.0) (10.0)
Unhedged interest rate swap 15.7 15.7 23.6 23.6
Equity warrants 121.2 121.2 97.2 97.2
Embedded derivatives liability 79.6 79.6 106.5 106.5
Embedded derivatives asset (10.2) (10.2) (7.8) (7.8)
------------------------------- --------------- ------------- --------------- ------------
Total 5,046.1 4,903.4 4,872.2 3,966.2
------------------------------- --------------- ------------- --------------- ------------
(1) The fair value of the secured bank and private placement
loans stated include the Fair value of embedded derivatives.
Fair Value Hierarchy of Financial Instruments:
Under the provisions of IFRS 9, the interest rate swap
agreements are recorded on the Consolidated Statement of Financial
Position at their fair values, with subsequent changes in fair
value recorded in the Consolidated Statement of Profit and
Loss.
Equity investments relate to investments designated as fair
value through OCI. Any movement in fair value has been recognised
within the fair value reserve.
The difference between net carrying amount and estimated fair
value reflects unrealised gains or losses inherent in the
instruments based on valuations at 30 June 2021 and 31 December
2020. The volatile nature of the markets means that values at any
subsequent date could be significantly different from the values
reported above.
The fair value of derivatives and borrowings has been calculated
by discounting the expected future cash flows at prevailing
interest rates, except where the borrowings are traded in secondary
markets and traded prices are available. The carrying amount of
unsecured bank loans is stated net of debt issuance costs and the
fair value is stated gross of debt issuance costs and is calculated
using the market interest rates.
The table below analyses financial instruments carried at fair
value by valuation method. The different levels have been defined
as follows:
- In general, fair values determined by Level 1 inputs use
quoted prices in active markets for identical financial assets or
financial liabilities that the Group has the ability to access.
- Fair values determined by Level 2 inputs use inputs other than
the quoted prices included in Level 1 that are observable for the
financial asset or financial liability, either directly or
indirectly. Level 2 inputs include quoted prices for similar
financial assets and financial liabilities in active markets, and
inputs other than quoted prices that are observable for the
financial assets or financial liabilities. The Group uses market
interest rates and yield curves that are observable at commonly
quoted intervals in the valuation of its interest rate swap
agreements. The derivative positions have been determined by a
third party expert. The Group considers its own credit risk as well
as the credit risk of its counterparties when evaluating the fair
value of its derivatives. Any adjustments resulting from credit
risk are recorded as a change in fair value of the derivatives and
reflected in the Statement of Comprehensive Income.
- Level 3 inputs are unobservable inputs for the financial asset
or financial liability, and include situations where there is
little, if any, market activity for the financial asset or
financial liability. The Group's assessment of the significance of
a particular input to the fair value measurement in its entirety
requires judgement, and considers factors specific to the financial
asset or financial liability.
Level Level Level
1 2 3 Total
$m $m $m $m
--------------------------------- ----- ----- ------ ------
30 June 2021
Derivative financial instruments - 206.3 - 206.3
Equity investments - - (17.6) (17.6)
31 December 2020
Derivative financial instruments - 219.5 - 219.5
Equity investments - - (10.0) (10.0)
--------------------------------- ----- ----- ------ ------
There have been no transfers between levels in 2021 (2020: no
transfers). No other financial instruments are held at fair
value.
Valuation techniques used to determine fair values
Specific valuation techniques used to value financial
instruments include:
-- The fair value of derivatives and borrowings has been
calculated by discounting the expected future cash flows at
prevailing interest rates.
-- The carrying amount of bank loans is stated net of debt
issuance costs and the fair value is stated gross of debt issuance
costs and is calculated using the market interest rates.
-- The fair value of investments has been calculated by
reference to quoted market values where available. The Group holds
two unquoted equity investments and have concluded that the cost of
one of these investments represents its fair value at 30 June 2021.
The second investment was partially disposed of in a transaction
subsequent to the period end, in which the Group also received a
distribution. As part of the transaction additional equity in the
investee was issued to a third party. The value implied by the unit
price of this transaction has been used to calculate the fair value
of the investment at 30 June 2021.
-- The fair value of the convertible bonds has been calculated
by reference to the credit spread and volatility assumptions on the
movement of equity prices.
All of the resulting fair value estimates are included in level
2 except for unquoted equity investments (Level 3).
The difference between net carrying amount and estimated fair
value reflects unrealised gains or losses inherent in the
instruments based on valuations at 30 June 2021 and 31 December
2020. The volatile nature of the markets means that values at any
subsequent date could be significantly different from the values
reported above.
Cost is considered to be a reasonable approximation of fair
value for the Group's financial instruments classified as level
three due to the timing of the purchase of the asset.
13. Equity securities issued
2021 2020 Shares 2021 2020
Shares (thousands)
(thousands)
$m $m
Issues of ordinary shares during the
period ended 30 June
Exercise of options issued under the
Employee share scheme and employee
performance plan 198 847 - -
198 847 - -
------------- ------------- ----- -----
14. Provisions
Provisions
for contracts
with suppliers Other provisions Total provisions
$m $m $m
--------------------------------------------- --------------- ---------------- ----------------
Balance at 31 December 2020 2.4 6.7 9.1
--------------------------------------------- --------------- ---------------- ----------------
Provisions made - - -
Provisions utilised - (1.8) (1.8)
Provisions released to profit or loss during
the period - - -
--------------------------------------------- --------------- ---------------- ----------------
Balance at 30 June 2021 2.4 4.9 7.3
--------------------------------------------- --------------- ---------------- ----------------
Current 2.4 3.9 6.3
Non-current - 1.0 1.0
--------------------------------------------- --------------- ---------------- ----------------
Total 2.4 4.9 7.3
--------------------------------------------- --------------- ---------------- ----------------
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.
15. Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation.
Total compensation for the Directors during the period to 30
June 2021 was $2.1m (period ended 30 June 2020: $3.5m; year ended
31 December 2020: $3.9m). At 30 June 2021 the balance owed to
directors was $0.9m (year ended 31 December 2020: $1.5m). Partial
payment has been made in respect of amounts deferred earlier in the
prior year.
Digital Cinema Media (DCM) is a joint venture between the Group
and Odeon Cinemas Holdings Limited. Revenue receivable from DCM in
the period to 30 June 2021 was $0.3m (year ended 31 December 2020:
$5.3m). In addition, the Group has a working capital loan
receivable outstanding from DCM of $1.0m (year ended 31 December
2020: $0.7m).
National CineMedia (NCM) is a joint venture set up between AMC
Entertainment Holdings Inc, Cinemark Holdings Inc and Regal. As at
30 June 2021 $0.6m (year ended 31 December 2020: $0.2m) was due to
NCM in respect of trade payables and $3.1m (year ended 31 December
2020: $1.0m) was due from NCM in respect of trade receivables.
Revenue receivable from NCM during the period to 30 June 2021
was $41.2m (year ended 31 December 2020: $83.7m).
Fathom AC JV is a joint venture between AMC Entertainment
Holdings Inc, Cinemark Holdings Inc and NCM. As of 30 June 2021
$0.2m (year ended 31 December 2020: $0.2m) was due to Fathom AC in
respect of trade payables.
Digital Cinema Distribution Coalition (DCDC) is also a Group
joint venture. No transactions occurred during the period with this
related party. There were no amounts owing from or owing to these
related parties at 30 June 2021.
There was no revenue receivable from Black Shrauber Limited in
the period ended 31 December 2021 (year ended 31 December 2020:
$0.1m). Amounts due to Black Shrauber Limited as at 30 June 2021
was $nil (year ended 31 December 2020: $nil).
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 30
June 2021 $2.0m (year ended 31 December 2020: $4.9m).
Global City Holdings B.V. ("GCH"), is a company in which Moshe
Greidinger and Israel Greidinger, Directors of the Group, have a
controlling interest. During the period, the Group made lease
payments of $3.2m (for the year ended 31 December 2020: $6.1m) to
companies under the control of GCH. At 30 June 2021 $57.9m (year
ended 31 December 2020: $59.6m) in lease liabilities were included
within the Group's Statement of Financial Position. The Group had
amounts payable of $0.2m (year ended 31 December 2020: $0.2m) to
companies under the control of GCH.
16. Contingent Liabilities
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. 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.
Independent review report to Cineworld Group plc
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed Cineworld Group Plc's condensed consolidated
interim financial statements (the "interim financial statements")
in the interim results of Cineworld Group Plc for the 6 month
period ended 30 June 2021 (the "period").
Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority.
Emphasis of matter
Without modifying our conclusion on the interim financial
statements, we have considered the adequacy of the disclosure made
in note 1 to the interim financial statements concerning the
group's ability to continue as a going concern.
The global pandemic continues to have a significant impact on
the cinema exhibition industry, with the group's cinemas being
closed for a significant part of the period to 30 June 2021. During
the period, the group secured additional liquidity, agreeing terms
for a convertible bond of $213 million. Subsequently, in July 2021,
a new $200 million term loan was also agreed which has also
released the group from certain reporting covenants. In light of
the ongoing global pandemic, there remain material uncertainties
over the short term in respect of the impact that this will
continue to have on the group and the cinema exhibition industry.
Management's basis of preparation in note 1 to the interim
financial statements sets out the key assumptions in respect of
both the weighted base case and severe but plausible downside
forecasts.
Management's weighted base case is sensitive to the speed at
which admission levels return and to the risk of further government
restrictions as a result of new Covid-19 variants, including the
risk of further lockdowns over the going concern period. Under
management's severe but plausible downside forecast, which takes
into account any of these situations materialising, a covenant
breach in the June 2022 and December 2022 group leverage covenant
would occur. These conditions, along with other matters explained
in note 1 to the interim financial statements, indicate the
existence of a material uncertainty which may cast significant
doubt about the group's ability to continue as a going concern. The
interim financial statements do not include the adjustments that
would result if the group were unable to continue as a going
concern.
What we have reviewed
The interim financial statements comprise:
-- the Condensed Consolidated Balance Sheet as at 30 June
2021;
-- the Condensed Consolidated Statement of Profit and Loss and
Comprehensive Income for the period then ended;
-- the Condensed Consolidated Statement of Cash Flows for the
period then ended;
-- the Condensed Consolidated Statement of Changes in Equity for
the period then ended; and
-- the explanatory notes to the interim financial
statements.
The interim financial statements included in the interim results
of Cineworld Group Plc have been prepared in accordance with UK
adopted International Accounting Standard 34, 'Interim Financial
Reporting' and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The interim results, including the interim financial statements,
is the responsibility of, and has been approved by the directors.
The directors are responsible for preparing the interim results in
accordance with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the interim results based on our review.
This report, including the conclusion, has been prepared for and
only for the company for the purpose of complying with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the interim
results and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
12 August 2021
Risk and Uncertainties
The principal risks and uncertainties which could have a
material impact on the Group's performance in the remaining six
months of 2021 are largely the same as those described in detail
pages 15-21 of the Group's Annual Report for 2020, a copy of which
is available from the Group's website .
These include:
1. Technology and Data A critical system interruption or major IT security
Control breach encountered
2. Availability and Performance Lack of access to high quality, diverse and well
of Film Content publicised movie product
--------------------------------------------------------
3. Provision of next Generation Maintaining/refurbishing existing sites and/or
Cinemas developing new sites fails to provide a circuit
of next generation cinemas.
--------------------------------------------------------
4. Viewer Experience and The quality of products and services offered fails
Competition to meet the needs of the customer and deliver an
enhanced viewer experience
--------------------------------------------------------
5. Revenue from Retail/Concession Delivery of a retail/concession offering that does
Offerings not meet the requirements and preferences of our
customers
--------------------------------------------------------
6. Cinema operations Failure to maintain and operate well run and cost
effective cinemas
--------------------------------------------------------
7. Regulatory Breach A major statutory, regulatory or contractual compliance
breach
--------------------------------------------------------
8. Strategy and Performance The approach to setting, communicating, monitoring
and executing a clear strategy fails to deliver
long-term objectives
--------------------------------------------------------
9. Retention and Attraction Failure to attract and retain Senior Management
and/or other key personnel
--------------------------------------------------------
10. Governance and Internal A critical internal control and/ or governance
Control failing occurs
--------------------------------------------------------
11. Major incident Inability to respond to a major incident
--------------------------------------------------------
12. Treasury Management Ineffective treasury management slows down our
ability to service our debt obligations and deliver
against our planned strategic initiatives (e.g.
refurbishment programs)
--------------------------------------------------------
Responsibility Statement of the Directors' in Respect of the
Interim Report
The directors confirm that to the best of our knowledge:
These interim condensed consolidated financial statements have
been prepared on the basis of policies set out in the in the 2020
annual financial statements and in accordance with UK adopted IAS
34 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the UK's Financial Conduct
Authority.
The Chief Executive Officer's Review report includes a fair
review of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being
an indication of important events that have occurred during the
first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
The directors of Cineworld Group plc are listed on the Cineworld
Group plc website ( www.cineworldplc.com ).
By order of the Board
Moshe Greidinger Nisan Cohen
Director Director
12 August 2021
Shareholder Information
Registered and Head Office
8(th) Floor
Vantage London
Great West Road
Brentford
TW8 9AG
Telephone Number
0208 987 5000
Website
www.cineworldplc.com
Company Number
Registered Number: 5212407
Place of incorporation
England and Wales
Joint Brokers
Barclays Bank plc
1 Churchill Place
London
E14 5HP
Investec Bank plc
2 Gresham Street
London
EC2V 7QP
Goldman Sachs International
Plumtree Court, 25 Shoe Lane
London
EC4A 4AU
Legal Advisers to the Company
Slaughter and May
1 Bunhill Row
London
EC1Y 8YY
Auditor
PricewaterhouseCoopers LLP
1 Embankment Place
London
WC2N 6RH
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END
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