Cineworld back in frame on run of 3D blockbusters

Figures released yesterday by the group revealed that box office revenues had risen 1.1 per cent in the 26 weeks to the end of June. Takings were boosted by the release of more 3D films such as Transformers: Dark of the Moon and popular movies, including The Hangover Part II.

The performance, which benefited from weaker comparatives with the previous year, represents a turnaround from the first 19 weeks of Cineworld's financial year, when box office takings fell by 7.8 per cent because of a lack of 3D films and comparisons with Avatar and Alice in Wonderland a year earlier.

The group, which has seven cinema complexes north of the Border, said it should benefit over the next six months from a strong line-up of 3D movies, including the final Harry Potter instalment, Puss In Boots and Tintin.

3D movies not only command a higher ticket price but also boost the cinema's revenues as customers buy or hire special glasses.

The audiences for such films tend to be younger and spend more money on food and drink, whereas films such as The King's Speech attract an older crowd who are less free-spending, Cineworld noted.

The group's total revenues in the half-year were flat as the rise in box office takings was offset by falls in advertising revenues and other income including food and drink sales.

Cineworld said the strong line-up of films meant it was confident of delivering full-year results in-line with City expectations for a 5 per cent rise in revenues to 361 million.

Nick Batram, an analyst at Peel Hunt, said the picture had brightened at Cineworld, with the brokerage issuing a "buy" recommendation on the cinema operator's shares.

In a note, Batram said: "As expected, the past six weeks has seen a significant improvement in UK box office and the outlook appears equally as solid.

"The rating remains well below recent industry transactions, while there is still much more to come from digital."

Analysts at Evo Securities were similarly bullish on the stock, which last night closed up 4.25p at 200p.

In a "buy" note, Evo analyst Nigel Parson said: "The year is panning out much as predicted with a good Q2 following a weaker Q1.Looking forward, Q3's comparatives are tough, but this year's film slate is strong with the final Harry Potter film, Cars 2, Transformers and Captain America to look forward to.

"The digital roll-out continues well, which should facilitate further market share gains from the 3D slate."

Trion Reid, an analyst at Berenberg Bank, said the trading update represented a strong performance, even though sales had been flattered by weak figures last June when fewer people visited the cinema because of the football World Cup.

Cineworld said it had grown its share of the movie market over the half-year and continued to invest in new technology, with 485 of its screens, or 60 per cent, now capable of playing digital films.

It opened a new premium cinema concept in Cheltenham earlier this month called the Screening Rooms.