Potter magic helps to turn round fortunes at film giant Cineworld

Cineworld, the UK's largest cinema operator, posted a drop in profits yesterday but revealed a Harry Potter-inspired turnaround was already under way.

Prior to the launch of the final instalment in the boy wizard series, half-year revenues rose by just 1 per cent to 163.6 million after fewer blockbusters and 3D releases hit average ticket prices and the amount spent on cinema visits.

With sharply-higher finance charges and one-off items, Cineworld's profits fell to 6.9m from 11.8m in the six months to 30 June.

The group, which has 78 sites and including seven north of the Border, increased its market share in UK and Ireland slightly to 26.4 per cent, from which it expects to generate healthy revenues with a string of potential blockbuster film releases over the rest of the year.

The final instalment of the Harry Potter series, Deathly Hallows: Part 2, has already taken 65m industry wide since its launch last month.

With a new film in the Transformers series and Cars 2 also released, Cineworld said the second half had started "very well".

The firm also confirmed that it would meet City targets for the current year.

Chief executive Stephen Wiener said the strength of the film line-up in the second half and the solid first-half performance "underpinned his confidence", illustrated in a 5.9 per cent increase in the interim dividend to 3.6p.

Admissions in the first half rose by 2.2 per cent, while box office takings grew by 4.2 per cent, much better than the sector overall. The roll-out of its cinemas to a digital format - which enables the group to show live events such as sport, concerts and opera as well as films - is continuing with screenings of performances by the New York Metropolitan Opera and England's National Theatre.

At the end of June, 494 screens were digitally enabled, with 400 set up for 3D. A further 80 are due to convert to digital by the year end, which will take the proportion of its cinemas able to operate in a digital format up to 70 per cent.

A new super-comfortable three-screen "The Screening Rooms" cinema also opened in Cheltenham in June and, after good customer feedback, a second, seven-screen cinema in the same style will open in Leigh later this year.

Wiener said 3D admissions in the past six months fell as a proportion of the total, from 20 per cent to 16 per cent, even though the number of films released in the format rose from seven to 17.

He added: "Cinema goers are becoming more discerning when choosing between 3D and 2D versions of the same film and the quality of the film remains the primary factor in the decision to see a film in 3D."

Wayne Brown, an analyst at Collins Stewart, said the results highlight the resilience of cinema despite the tough consumer backdrop. He said: "Trading momentum has improved in the second half with the release of numerous 3D and 2D blockbusters which should directly drive advertising and retail revenue."