3D is proving a boost for cinema audiences

Published on Wednesday 18 August 2010 21:02

Cinema group Cineworld is banking on the first 3D instalment of the Harry Potter saga to boost takings this year amid signs of strong demand for blockbusters in the new format.

While the World Cup prompted a 3 per cent fall in admissions during the six months to June, Cineworld says filmgoers should flock to the first part of Harry Potter and the Deathly Hallows and other 3D movies such as Chronicles of Narnia - Voyage of the Dawn Treader.

More-expensive 3D films made up more than 20 per cent of the firm's admissions in the first half - up from 8 per cent a year earlier - lifting average ticket prices from 4.59 to 4.93.

This helped protect profits despite the distractions of South Africa's football festival, with underlying earnings rising 5 per cent to 24.4 million.

Cineworld, which expects 18 films to be shown in 3D during the second half of the financial year, had 252 screens capable of showing movies in the format at the end of June.

Analysts noted that Cineworld is due to add a further 150 projectors capable of showing 3D films to its cinemas during the second half of the year, in time for the release of the next Harry Potter film.

The World Cup was not all bad for business as the company screened several matches from the latter stages of the tournament in 3D.

This went down well with customers and the firm is planning to expand its range of live sporting offerings as a result.

Meanwhile the company has also reported a strong start to the second half after the latest instalment of the Twilight vampire series, Eclipse, as well as Toy Story 3, which is now the most successful animated movie of all-time.

Other eagerly anticipated films later this year include Wall Street: Money Never Sleeps, the long-awaited sequel to the 1980s classic starring Michael Douglas as Gordon Gekko.

Chief executive Stephen Wiener said: "The strong film line up in the second half, coupled with our solid first-half performance, underpins our confidence in performing in line with market expectations for the year."

Group revenue rose by 3.8 per cent to 162m, with pre-tax profits edging up from 11.6m during a 27-week first-half last year to 11.8m in this year's 26-week period.

Nigel Parson, an analyst at Evolution Securities, highlighted the importance of Cineworld's deal with Arts Alliance Media (AAM), which was announced in June.

AAM - which installs digital projectors and provides films - will fit all of Cineworld's 790 screens with digital projectors over the next three years.Pasron said: "It's been an important six months for the strategic development of Cineworld: the AAM deal will result in all screens converting to digital projection by spring 2013 and it has signed two new cinema deals, at the O2 in London and Quintain's Wembley development.

"Stock market recognition of the digital potential could drive a substantial re-rating from yield to growth stock."

Parson is predicting full-year pre-tax profits of 34m, compared with 31.7m last year.

Nick Batram, an analyst at KBC Peel Hunt, said that the strong line-up of films gave Cineworld short-term appeal for investors.

He added: "Longer term, we see significant room for a recovery in advertising revenues, the potential to broaden the customer base through broader content and we continue to view retail as an underexploited area."

Cineworld has 78 cinemas in the UK and Ireland, including seven in Scotland, having opened a second cinema in Aberdeen in October. Its city centre site in Glasgow is the highest grossing cinema in the UK.

Wiener founded the firm in 1995 and listed it on the stock exchange in May 2007.