Cineworld’s mega £2.7bn purchase of US cinema chain Regal sent profits soaring 125 per cent in 2018 the group revealed today, even as UK cinemas struggled.
Cineworld saw profit before tax grow 125 per cent to $349m (£262.9m) last year, up from $155.1m the year before.
Revenue rocketed 260 per cent year on year to $4.12bn.
The acquisition meant net debt rose 10 per cent year on year to $3.73bn while the combined business generated cashflow of $687.4m, up from 2017’s $244m.
Adjusted diluted earnings per share rose to $0.27, up from $0.23 in 2017.
The board hiked the dividend 18 per cent to $0.10 per share, after a $0.485 dividend in October, and revealed it will pay dividends in quarterly instalments.
Why it’s interesting
Cineworld hailed the impact of its Regal purchase in its full-year results, despite the market seeing it as having paid a king’s ransom for the chain last year.
The cinema group’s profit boost sent shares up 7.3 per cent to 310p in early trading as it benefited more than it had predicted from the acquisition.
Ian Forrest, investment research analyst at The Share Centre, said the results were encouraging for what Cineworld can expect from Regal in future, with cost savings for 2019 set to hit $150m.
“The scale of the purchase for Cineworld can be seen by the fact that on a statutory basis profits more than doubled to $349m,” he said.
“The size of the Regal purchase last year was a risk for Cineworld’s management but the early signs are certainly positive and there could be much more to come for investors as improvements are made to Regal over time.”
Russ Mould, investment director at AJ Bell, added that Cineworld must make an effort to tackle its net debt, which has dogged shares over the past year, after the purchase.
However, the chain has already committed to refurbishing its cinemas this year as it seeks to boost admissions after UK and Ireland revenue growth of 3.3 per cent in 2018.
“It will need to balance this investment with the need to rapidly reduce its debt,” Mould said.
“In terms of getting bums on seats, the remainder of this year has plenty of big blockbusters with the latest instalments in the Toy Story, Avengers and Star Wars film series coming to the big screen,” he added.
Cineworld confirmed trading for 2019 remains in line with expectations.
What Cineworld said
Calling 2018 a “transformative” year for Cineworld, chairman Anthony Bloom said: “The acquisition of Regal on 28 February made us into a global operator and the second largest cinema chain in the world.
“Looking to 2019 and beyond, it is clear to me that it will be another exciting time for the group. Our well diversified cinema estate, along with continued investment in the UK and rest of world circuits and our development plans for the US leave us well placed to take advantage of multiple opportunities to generate cashflow and grow earnings.”
Group chief executive Mooky Greidinger added: “The combination with Regal has exceeded our expectations - we have incorporated the best of both companies by bringing together world-class talent, integrating best practice from both sides of the Atlantic and deepened our understanding of the US market.
“Whilst the group has expanded significantly, our strategy and vision remain the same, to be "The Best Place to Watch a Movie" by continually focusing on providing the best customer experience, maintaining technological leadership, expanding and upgrading the estate, and training and retaining highly motivated, experienced and loyal staff.”