REG - Cineworld Group plc - Preliminary Results
17/03/2022 07:00
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RNS Number : 1081F Cineworld Group plc 17 March 2022
CINEWORLD GROUP plc
Preliminary Results for the period ended 31 December 2021
Cineworld Group plc ("the Group"), a leading cinema operator in 10 countries
including the United States and the United Kingdom with 751 sites and 9,189
screens globally, presents its Preliminary results for the full year ended 31
December 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 good
position to benefit from the expected industry recovery.
Summary
· The Group's results for the year include a period of temporary
closures from January to April/May 2021 due to COVID-19 restrictions and
limited film slate
· Strong trading in Q4 supported by a strong film slate and pent-up
demand for affordable out-of-home entertainment
· Group revenue of $1,804.9m (2020: $852.3m) and Group Adjusted
EBITDA of $454.9m (2020: loss of $115.1m) for the period was severely impacted
by COVID-19 related closures
· Raised over $424.9m of liquidity and received $203m under the
United States CARES Act tax refund
· Net debt (ex. lease liabilities) increased by $492.7m from
$4,344.5m to $4,837.2m, cash and restricted cash of $354.3m at December 2021
(2020: $336.7m)
· Ontario Superior Court awarded C$1.23 billion in damages to
Cineplex. The Group strongly disagrees with this judgment and has appealed the
decision. The Group does not expect damages to be payable whilst any appeal is
ongoing. No liability has been recognised in respect of the judgment
Outlook
· Gradual recovery of admissions and demand since re-opening,
supported by strong retail sales and premium formats
· January and February impacted by Omicron and lack of major movie
releases but we anticipate strong trading starting March 2022 supported by a
strong and full film slate
· Decisive action taken during the pandemic to ensure Cineworld
emerges well positioned to benefit from the strong movie slate in 2022 and
beyond
Key Financial Information
Statutory Year ended Statutory Year ended 2021 Reported results vs.2020
31 December 2021 31 December 2020
Admissions 95.3m 54.4m 75.2%
Revenue $1,804.9m $852.3m 111.8%
Adjusted EBITDA((1)) $454.9m ($115.1m) 495.2%
Adjusted EBITDAaL((2)) $54.4m ($313.7m) 117.3%
Loss before tax ($708.3m) ($3,007.9m)
Adjusted loss before tax((1)) ($822.8m) ($1,326.9m)
Loss after tax ($565.8m) ($2,651.5m)
Adjusted loss after tax((1)) ($655.7m) ($913.2m)
Basic EPS (41.2c) (193.2c)
Diluted EPS (41.2c) (193.2c)
Adjusted diluted EPS((1)) (47.8c) (66.5c)
((1) Refer to Notes 2 and 5 for the full definition and
reconciliation. )
((2) Adjusted EBITDAaL is defined as Adjusted EBITDA less
payment of lease liabilities in the period.)
Alicja Kornasiewicz, Chair of Cineworld Group plc, said:
"The COVID-19 pandemic dominated the financial year and provided an enormous
challenge for our business, our people and our partners. I am very proud of
how the business has met these challenges, delivering to the very best of our
abilities for all our stakeholders. I would like to thank our people for their
loyalty and support during the closure periods and their determination and
efforts to reopen our cinemas. 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:
"Whilst our 2021 results still reflect the impacts of COVID-19, particularly
at the start of the financial year, we are encouraged by the recent strong
trading performance throughout the final quarter. It is clear that our
customers remain loyal and have missed the big screen experience as well as
the sociability of watching a movie with others. Our strong final quarter
performance reflects the pent-up demand for affordable out-of-home
entertainment and the record breaking film slate, including "Spider-Man: No
Way Home", which showcased the importance of cinematic releases. The business
is well positioned to execute its strategy and capitalise on the highly
anticipated movie schedule, which includes Avatar, Top Gun Maverick, Jurassic
World: Dominion, Minions: The Rise of Gru, Doctor Strange in the Multiverse of
Madness, Thor: Love and Thunder, Black Panther: Wakanda Forever, Bullet Train,
Spider-Man: Across the Spider-Verse, Pixar's Lightyear, Fantastic Beast, Elvis
and many more. I want to thank everyone across our team who make it possible
for our customers to experience the best place to watch a movie.
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: 17
March 2022
Time: 09:30am
Webcast link:
https://secure.emincote.com/client/cineworld/cineworld018/
(https://secure.emincote.com/client/cineworld/cineworld018/)
Contacts
Cineworld Group plc: Finsbury:
Israel Greidinger +44 (0)20 8987 5000 James Leviton +44 (0)20 7251 3801
Nisan Cohen investors@cineworld.co.uk (mailto:investors@cineworld.co.uk) Ed Treadwell cineworld-lon@finsbury.com (mailto:cineworld-lon@finsbury.com)
Manuela Van Dessel
Chief Executive Officer's Review
Whilst our cinemas were partially closed during the period under review, we
were very excited to start reopening from 2nd April 2021 and finished opening
across our territories by 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.
Our results still carry the effect of COVID-19 and related lack of product
but we are encouraged by the upcoming line-up of big releases in 2022. This
will include Avatar, Top Gun Maverick, Jurassic World: Dominion, Minions: The
Rise of Gru, Doctor Strange in the Multiverse of Madness, Thor: Love and
Thunder, Black Panther: Wakanda Forever, Bullet Train, Spider-Man: Across the
Spider-Verse, Pixar's Lightyear, Fantastic Beast, Elvis and many more.
Nonetheless, we will need to remain alert to any new COVID-related
developments - currently, it appears that cases are slowly decreasing in our
territories and we may be entering the endemic phase of this pandemic.
2021 performance
Our 2021 results reflect the recovery from the pandemic's impact on our
business. Our revenue in 2021 increased by 111.8% to $1,804.9m as the pandemic
continued to impact our revenues and, throughout the year, lockdowns and
restrictions were imposed and relaxed across our markets.
Throughout 2021, we continued to minimise and control our expenses, including
resizing the cost base and increasing levels of labour flexibility. These
actions, along with continued contract renegotiations, focus on procurement,
as well as general cost control, minimised our cash burn during the cinema
closures and increased our margins in H2 2021. Adjusted EBITDA increased by
495.2% to $454.9m and margin was 25.2%.
Our high quality cinema estate is well placed to recover from the impact of
the pandemic and take advantage of growth opportunities underpinned by the
four tenets of our strategy and culture: to give the best cinema experience to
our customers; to be leaders in technology; to expand and enhance our estate;
and to drive up value.
Our financial strategy continues to be focused on cash flow generation and
ensuring the business has sufficient liquidity. However, we also remain
focused on our long-term objective of debt reduction through cash flow
generation and cost optimisation. In 2021, we raised over $424.9m of liquidity
and received $203m under the United States CARES Act tax refund. Our net debt
(ex. lease liabilities) increased by $492.7m from $4,344.5m to $4,837.2m.
Further details of our underlying and statutory earnings for the period are
set out in the Financial Review on pages 5 to 11.
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. 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. These special formats provide our
customer with an enhanced experience, incremental revenues for the group and
are the first viewing to sell-out.
Across the business we closed 25 underperforming sites in the period,
refurbished 7 cinemas and opened 10 new sites, 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 to continue with
these projects during COVID-19 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 light of COVID-19, the studios tried various experiments
which led to a shortening of the theatrical window and is dependent on the
theatrical revenue potential of each movie. In 2022, we anticipate movies
will be released with windows that are anywhere between 20 to 60 days
and subject to each movie's potential. The influence of high-quality pirated
copies of movies from PVOD day and date releases can also significantly affect
a movie's total revenue not only in cinemas but also in ancillary markets.
As the most affordable out-of-home entertainment option, we believe that
cinemas will continue to be the main driver of the industry, as they have been
for so many decades despite the arrivals of new technologies, such as TV,
Video, DVD and others.
Cineplex
On 6 July 2020 the Group confirmed that Cineplex had initiated proceedings
against it in relation to its termination on 12 June 2020 of the Arrangement
Agreement relating to its proposed acquisition of Cineplex (the
"Acquisition"). The proceedings alleged that the Group breached its
obligations under the Arrangement Agreement and/or duty of good faith and
claimed damages of up to C$2.18 billion less the value of Cineplex shares
retained by Cineplex shareholders.
The Group defended these proceedings on the basis that it had terminated the
Arrangement Agreement because Cineplex breached a number of its covenants and
counter-claimed against Cineplex for damages and losses suffered as a result
of these breaches and the Acquisition not proceeding, including the Group's
financing costs, advisory fees and other costs.
The Ontario Superior Court of Justice has now handed down its judgment. It
granted Cineplex's claim, dismissed the Group's counter-claim and awarded
Cineplex damages of C$1.23 billion for lost synergies to Cineplex and C$5.5
million for lost transaction costs. The Group strongly disagrees with
this judgment and has appealed the decision. Cineplex has submitted a
cross-appeal to Cineworld's own appeal.
The Group does not expect damages to be payable whilst any appeal is ongoing.
No liability has been recognised in respect of the judgement.
Outlook
Trading since our cinemas reopened has been encouraging and increasingly
improving, and our customers have been expressing their appreciation for our
high quality offering and team. We expect this progress to continue
as COVID-19 reduces in significance. The strong film slate gives us great
confidence in our ability to continue to rebound strongly, with a clear focus
on driving growth which will be underpinned by our team of great people.
Although the COVID-19 pandemic continues to impact our global operations, we
are encouraged by our return to trading, the continued recovery seen across
our industry and the return to profitability and cash flow generation in Q4
2021. The success of Spiderman - No Way Home which is now the 6th biggest
movie of all time globally and 3rd biggest movie in the US while Omicron was
emerging across the globe demonstrates the love and loyalty to the big screen.
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 as we continue our commitment to be THE
BEST PLACE TO WATCH A MOVIE.
Moshe (Mooky) Greidinger
Chief Executive Officer
17 March 2022
Chief Financial Officer's Review
Year ended Year ended Year ended
31 December 31 December 31 December
2021 2020 2019
Admissions 95.3m 54.4m 275.0m
$m $m $m
Box office 955.7 448.6 2,536.1
Retail 552.3 232.2 1,240.3
Other Income 296.9 171.5 593.3
Total revenue 1,804.9 852.3 4,369.7
Cineworld Group plc (the "Group") results are presented for the year ended 31
December 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. The
impact of COVID-19 continued to affect the Group's operations and performance
into 2021, however, the Group was successful in reopening its full estate and
saw its most successful months since the outbreak of the pandemic in the
fourth quarter of the year. The results presented reflect the period of
closure in the first two quarters of the year, the reopening of cinemas during
the summer and then the return to trading at levels approaching those seen
prior to the pandemic in the fourth quarter, with the return of major film
releases. Whilst the Group is now looking to continue its recovery with its
full estate operating, the removal of restrictions imposed due to COVID-19 and
a full film release schedule approaching, material uncertainty around its
ability to continue as a going concern remains (as set out in Note 1 to the
Financial Statements).
Total admissions increased by 75.2% year on year to 95.3m, reflecting the
length of closures required due to COVID-19 in 2020 and 2021 respectively and
film content available in each year. Total revenue for the year ended 31
December 2021 was $1,804.9m, an increase of 111.8% on the prior year.
The principal revenue stream for the Group is box office revenue, which made
up 53.0% (2020: 52.6%) 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 30.6% (2020:
27.2%) of total revenue. Retail revenue across the Group is driven by
admissions trends within each operating territory.
Other Income represents 16.4% (2020: 20.1%) 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.
United States
The results below show the Group's performance in the United States.
Year ended Year ended Year ended
31 December 31 December 31 December
2021 2020 2019
Admissions 56.2m 30.1m 177.3m
$m $m $m
Box office 627.4 280.3 1,859.6
Retail 391.9 161.1 953.9
Other Income 201.0 134.5 396.1
Total revenue 1,220.3 575.9 3,209.6
Box office
In the US, during 2021, cinemas remained temporarily closed until 2 April. The
Group reopened 77 cinemas during April, an additional 423 cinemas during May,
and 7 cinemas during June, representing 98% of the US circuit at the time. As
of 31 December 2021, the Group operated 511 theatres in the US.
Box office revenue represented 51.4% (2020: 48.7%) of total revenue. Box
office revenue increased by 123.8% from 2020 to 2021, driven by an 86.7%
increase in admissions and 19.9% increase in average ticket price. The
increase in admissions was due to the reopening of the Group's cinemas after
the temporary closures for significant periods during 2020 and the first half
of 2021, as well as the release of several major films in late 2021.
The total North American industry box office revenue for 2021 was 105.3%
higher compared with 2020 (source: Comscore). The increase in box office
revenue for the Group was inconsistent with the industry due primarily to
differing periods of operation during 2020 and 2021 across the cinema
operators. The top performing films during 2021 were "Spider-Man: No Way
Home", "Shang-Chi and the Legend of the Ten Rings" and "Venom: Let there Be
Carnage" which grossed $988.6m versus "Bad Boys for Life", "1917" and "Sonic
the Hedgehog" which grossed $507.1m in 2020 (Source: Comscore). During 2021,
seven new sites opened, and 23 sites were closed. These openings and closures
did not have a significant impact on the results during 2021.
The average ticket price in the US increased by 19.9% to $11.16 (2020: $9.31).
The increase in average ticket price was primarily a result of the increased
availability and uptake of premium format content during 2021 compared with
2020.
During 2021, Regal reinstated its policy of expiring Regal Crown Club credits
not redeemed within 12 months. The reinstatement of the policy, which had been
suspended during the COVID-19 pandemic, led to the expiration of all
unredeemed credits earned during the period from March 2019 through December
2020. The expiration of those unredeemed credits resulted in $12.1m in box
office revenue in 2021.
Retail
Retail revenue represented 32.1% of total revenue (2020: 28.0%). Retail
revenue increased as a result of the cinemas reopening during the year and
growth in retail spend per person once open. Retail spend per person
increased by 30.3% to $6.97 (2020: $5.35), driven by an increase in overall
purchase frequency and a small concessions price increase in some US cinemas
at the end of September 2021. The reinstatement of the Regal Crown Club
credits expiration policy set out above resulted in $18.1m of retail revenue
during the year.
Other Income
Other Income represented 16.5% of total revenue (2020: 23.4%). 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 programmes and the hire of
theatres for events. Other Income has increased by 49.4% due to the opening of
cinemas. The impact of the cinemas closures throughout 2020 and 2021 on Other
Income has not been as great as on Box Office and Retail revenue due to
certain contractual advertising revenues being recognised regardless of
cinemas being closed.
UK & Ireland
The results below for the UK&I include the two cinema brands in the UK and
Ireland: Cineworld and Picturehouse.
Year ended Year ended Year ended
31 December 31 December 31 December
2021 2020 2019
Admissions 18.2m 11.4m 48.2m
$m $m $m
Box office 210.0 99.4 405.7
Retail 90.1 37.2 156.7
Other Income 48.0 17.3 86.0
Total revenue 348.1 153.9 648.4
Box office
Box office revenue represented 60.3% of total revenue (2020: 64.6%).
Admissions increased by 59.6% and box office revenue increased by 111.3%.
Admission and box office trends reflect the respective periods of closure of
cinemas due to lockdown restrictions in 2020 and 2021 and the film content
available in each year. All of the Group's cinemas were closed until 19 May,
when the estate was reopened. Performance improved gradually following
reopening, until a significant improvement with the release of the "No Time to
Die" in October and "Spiderman: No Way Home" in December.
In the UK&I, the top three grossing movies were "No Time to Die",
"Spider-Man: No Way Home" and "Dune", which grossed $266.0m (source:
Comscore). This compares to the top three titles in 2020 which were "1917",
"Sonic the Hedgehog" and "Tenet", which grossed $96.1m (source: Comscore).
The average ticket price achieved in the UK&I increased by 32.3% to $11.54
(2020: $8.72). This increase was largely driven by the types of releases
during the period that cinemas were open during 2020.
Retail
Retail revenue represented 25.9% (2020: 24.2%) of total revenue. Retail
revenue increased by 142.2% from the prior year, driven by longer operating
periods, the strength of film content released compared with 2020 and a higher
retail spend per person. Retail spend per person increased by 51.8% to $4.95
(2020: $3.26) driven by a greater proportion of customers purchasing retail
goods.
Other Income
Other Income increased by 177.5% from 2020 and represented 13.8% (2020: 11.2%)
of total revenue. Other Income includes all other revenue streams outside of
box office and retail, mainly advertising, online booking fee revenue and some
distribution revenue through Picturehouse. Advertising revenue is primarily
generated by on-screen adverts and is earned though our joint venture screen
advertising business Digital Cinema Media Limited ("DCM"). DCM sells
advertising time on screen on behalf of the UK cinema industry and
advertising revenue is impacted by admissions trends and the value of
advertising sold.
Rest of the World
The results below for the ROW include Poland, Romania, Hungary, the Czech
Republic, Bulgaria, Slovakia and Israel.
Year ended Year ended Year ended
31 December 31 December 31 December
2021 2020 2019
Admissions 20.9m 12.9m 49.5m
$m $m $m
Box office 118.3 68.9 270.8
Retail 70.3 33.9 129.7
Other Income 47.9 19.7 111.2
Total revenue 236.5 122.5 511.7
Box office
Box office revenue represented 50.0% (2020: 56.2%) of total revenue.
Admissions in the ROW increased by 62.0% and box office revenue increased
71.7% compared to the prior year. Admissions across all ROW territories
increased significantly from the prior year due to the reopening of theatres
in 2021 after prolonged closure periods during 2020 due to COVID-19.
The first ROW 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. The average ticket price increased by 6.0% to $5.66 (2020:
$5.34). The increase reflects the number of film releases available across the
Group's premium offerings.
Retail
Retail revenue represented 29.7% of the total revenue (2020: 27.7%). Retail
spend per person increased by 27.8% to $3.36 (2020: $2.63). The increase in
retail spend per person resulted from an increase in purchase frequency.
Other Income
Other Income includes distribution, advertising and other revenues and
represented 20.3% (2020: 16.1%) of total revenue. Forum Film is the Group's
distribution business for the ROW and distributes movies on behalf of certain
major Hollywood studios as well as owning the distribution rights to certain
independent films. Other Income and distribution revenue performed in line
with admission trends generally in 2021.
Financial performance
Year ended 31 December 2021 Year ended
31 December
2020
US UK&I ROW Total Group Total Group
Admissions 56.2m 18.2m 20.9m 95.3m 54.4m
$m $m $m $m $m
Box office 627.4 210.0 118.3 955.7 448.6
Retail 391.9 90.1 70.3 552.3 232.2
Other Income 201.0 48.0 47.9 296.9 171.5
Total revenue 1,220.3 348.1 236.5 1,804.9 852.3
Adjusted EBITDA (as defined in Note 2) 454.9 (115.1)
Operating profit/(loss) 15.8 (2,257.7)
Finance income 208.4 69.6
Finance expenses (899.2) (786.8)
Net finance costs (690.8) (717.2)
Share of loss from joint ventures (33.3) (33.0)
Loss on ordinary activities before tax (708.3) (3,007.9)
Tax on loss on ordinary activities 142.5 356.4
Loss for the year attributable to equity holders of the Group (565.8) (2,651.5)
Adjusted EBITDA
Adjusted EBITDA has increased to a profit of $454.9m (2020: loss of $115.1m).
This was mainly driven by the longer periods of operating in 2021 compared
with 2020, which were caused by the impact of COVID-19 and restrictions on
opening.
Adjusted EBITDA generated by the US, UK and ROW was $310.7m, $67.1m and $77.1m
respectively for 2021, compared with negative $(87.2)m, negative $(35.0)m and
$7.1m respectively for 2020. Decreases across all segments were driven by
trading period in each year and the availability of film content.
Operating profit/(loss)
Due to the impact of COVID-19 the Group reported an operating profit of $15.8m
compared with an operating loss of $2,257.7m in 2020, representing a
improvement of $2,273.5m.
Certain material one-off items have been included within operating loss in
2021, most significantly the net impairment reversals described below. In
addition to impairment reversals, within operating loss there are a number of
non-recurring and non-trade-related items that have a net negative impact of
$49.3m (2020: net negative impact $127.3m), including $2.1m relating to costs
arising from the Group's response to COVID-19, $38.1m in transaction and
reorganisation costs and $9.1m in refinancing costs. These items are excluded
from Adjusted EBITDA and have been set out in detail in Note 2.
The total depreciation and amortisation charge (included in administrative
expenses) in the year totalled $534.9m (2020: $643.3m). The charge is lower
year on year due to impairment charges recognised since the outbreak of the
pandemic reducing the value of the Group's depreciable assets and amendments
to leases during the year reducing a large number of right-of-use assets, with
the reductions caused by a higher incremental borrowing rate applied to lease
cash flows.
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 are shown reducing staff cost in the period.
Where available the Group has also accessed business rates relief.
The impact of COVID-19 on the Group's forecast cash flows in 2020, in addition
to increased uncertainty in the market, a higher discount rate reflecting the
increased cost of debt and changes to forecast cash flows, have resulted in
the impairment of property, plant and equipment and right-of-use assets at
cinema cash-generating units ("CGUs"), as well as goodwill in country level
CGUs and the Group's investment in National Cinemedia Inc (NCM) amounting to
a total net charge of $1,344.5m.
During 2021 uncertainty around the forecast cashflows from the Group's
investment in NCM and reduction in its share price have resulted in a further
impairment of $55.1m, bringing the total impairment of NCM since the outbreak
of the pandemic to $92.1m.
Since the beginning of the pandemic the Group has amended the majority of its
leases. When leases are amended, assets and liabilities are recalculated using
the incremental borrowing rate applicable at the date of the amendment.
Incremental borrowing rates are materially higher since the outbreak of the
pandemic and therefore have the effect of reducing asset balances when
amendments take place for the first time since the pandemic begun. Where asset
balances are reduced in this way at cinema CGUs which have previously been
impaired due to higher discount rate being applied to forecast cashflows,
reversal of impairment charges recognised earlier in the pandemic can occur.
The total reversal of impairment recognised in the year was $199.6m. In
addition, further impairment charges of $17.4m were recognised in the year for
CGUs at which forecast cashflows no longer support the carrying value of the
assets.
No impairment was recognised in respect of goodwill at country CGUs during the
year. Impairment charges and reversals recognised during the year are
considered to be largely driven by the impact of the pandemic and are
therefore considered to be exceptional charges in the current period.
Leases
The impact of COVID-19 and the associated shutdowns resulted in the Group
renegotiating the majority of its leases and accessing government relief from
payment of leases in certain countries. The Group has sought to agree the
waiver and deferral of contractual rent under existing leases in order to
manage cash flow during the shutdown and recovery from the impact of the
virus. Payment of lease liabilities has increased to $400.5m from $198.6m in
2020, reflecting agreements reached with landlords and relative periods of
opening during 2020 and 2021. Whilst this remains below pre-pandemic levels,
monthly payment of lease liabilities in the fourth quarter was closer to
levels observed prior to the pandemic.
Amendments to leases, additions in the year, changes to discount rates applied
in the calculation of lease balances, impairment charges and reversals
recognised, and cash flows in the year have resulted in total right-of-use
assets of $2,234.1m (2020: $2,306.4m), with a depreciation charge of $260.9m
(2020: $348.7m), with lease liabilities of $4,040.2m (2020: $3,971.7m) and an
interest cost of $444.5m (2020: $349.0m). For leases amended for the first
time since the outbreak of COVID-19 during the year, higher incremental
borrowing rates reflecting the Group's higher costs of debt a lower credit
rating have been applied to cash flows, resulting in lower assets and
liabilities and higher lease interest cost for these leases.
Net finance costs
At 31 December 2020 the Group had USD term loans outstanding totalling $3.9bn,
a Euro term loan of $233.8m, a private placement loan of $250.0m and a $462.5m
RCF which was fully drawn.
In April 2021, the Group raised additional funding by issuing Convertible
Bonds which are convertible into equity shares of Cineworld Group Plc. The
bonds have a 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 of debt component of the bonds was $181.9m. At 31 December 2021
the derivative liability was valued at $6.3m.
In July 2021, the Group agreed the terms of a further term loan facility of
$200.0m with a maturity of May 2024 with existing lenders. Directly
attributable fees of $11.6m were incurred in connection with raising the
facility. Upon raising this additional term loan facility, the Group paid
amendment fees totalling $46.5m in connection with the B1 term loan facility
of $450.0m raised in November 2020, of which fees of $16.5m were directly
apportioned to the initial term loans increasing their notional position.
Amendments to the B1 term loan enabled the Group to remove certain covenants
and cash flow restrictions that were in place.
In September 2021, the Group announced that it has reached agreement with
dissenting shareholders of Regal Entertainment Group with respect to the
payment of judgment of their claim. Under this agreement, the Group paid an
initial cash settlement of $170.0m and $92.0m was placed into an escrow
account to be available as additional liquidity under certain circumstances,
with a corresponding term loan entered into for $92.0m.
In 2021 the Group secured a $11.9m loan with Arvest Bank for the Midwest City
cinema in the US with a maturity of 2041.
At 31 December 2021 the Group had USD term loans outstanding totalling $4.1bn,
a Euro term loan of $214.1m, a private placement loan of $251.8m, a
convertible bond of $213.0m and a $462.5m RCF.
Net financing costs totalled $690.8m during the year (2020: $717.2m). Finance
income of $208.4m (2020: $69.6m) included interest income of $3.1m (2020:
$7.4m), $3.0m on the unwind of the discount on non-current assets (2020:
$8.4m) and $0.8m in respect of the unwind of the discount on sub-lease assets
(2020: $0.7m). Finance income also includes a gain of $167.7m on the movement
of the fair value of financial derivatives (2020: $9.0m), this gain is driven
by movements in the Group's share price affecting the valuation of the Group's
warrants and convertible bond derivative liabilities, as well the impact of
movements in the LIBOR on embedded derivatives in respect of interest rate
floors on the Groups term loans. A gain of $33.2m relating to the gain on
extinguishment on amending the extended RCF was recognised in 2020. During the
year the Group's net investment hedge became ineffective and was
de-designated, resulting in a credit of $11.6m being recycled to the Income
Statement.
Foreign exchange gains of $22.2m (2020: $10.9m) were incurred in respect of
monetary assets and non-USD denominated loans.
The finance expense of $899.2m (2020: $786.8m) has increased due to higher
incremental borrowing rates being applied to lease liabilities that were
amended during 2020 and 2021, driven upward by changes in the Group's credit
rating. Lease liability interest for the year was $444.5m (2020: $349.0m).
Interest on bank loans and overdrafts in the period totalled $276.2m (2020:
$166.3m), the increase is the result of additional lending facilities entered
into in 2020 and 2021, described above. The other finance costs included:
$61.3m (2020: $33.1m) of amortised prepaid finance costs, $47.6m (2020:
$49.4m) in respect of the unwind of discount on deferred revenue and loss of
$5.0m on the movement of the fair value of financial derivatives (2020:
$55.4m). This included the movements on the fair value of the derivative
liability in respect of the prepayment feature on one of the Group's term
loans. In addition, $16.8m in respect of foreign exchange losses
(2020: $11.8m) were incurred in the year.
Upon modifications being made to existing debt agreements during 2020, 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 $98.0m were identified.
In 2019 the Group entered a contingent forward contract and a contingent swap
contract in order to hedge certain cash flows expected to take place on
completion of the proposed Cineplex combination. Due to the termination of the
deal, the contingent elements of the derivatives were not met.
During 2020 the Group terminated the swap resulting in a gain of $10.4m and a
loss of $4.5m on the deal contingent forward in line with the fair values
reported at 31 December 2019. In addition, the forward contract was modified
on termination, resulting in an additional loss of $10.2m during 2020 and
$16.8m which was assessed to be in respect of debt issuance costs which had
been capitalised and were amortised over the remainder of the year.
During 2020 the Group designated a net investment hedge relationship between
the Group's Euro term loan and a portion of the carrying value of the Group
investments in Euro denominated investments in order to mitigate the risk of
reported foreign exchange movements in respect of these items. In 2021, the
net investment hedge became ineffective. This resulted in a $11.6m credit to
the hedge reserve and charge to the income statement.
During the 2020 a hedge relationship between the Group's cross currency swaps
and certain Euro denominated assets became ineffective and the hedge
relationship ended. This resulted in $9.8m credit to the hedge reserve and
charge to the income statement.
Taxation
The overall tax credit during the year was $142.5m, giving an effective tax
rate of 20.1% (2020: 11.8%) on the loss before tax for the year.
The tax credit for 2020 included a current tax credit of $224.0m. This
primarily relates to a carry back of 2020 US tax losses against profits of
earlier periods under the Coronavirus Aid, Relief and Economic Security
("CARES") Act, resulting in a cash tax refund which was received in 2021.
The effective tax rate for the year is decreased by a partial de-recognition
of the additional deferred tax assets arising in 2021.
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 it
operates, 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 its overall governance
structure the governance of tax and tax risk is given a high priority by the
Board.
Earnings
The loss on ordinary activities after tax in the period was $565.8m, compared
with a loss in the prior year of $2,651.5m. The decrease in the loss is the
result of the impact of restrictions and closures due to COVID-19 during 2020
and 2021 respectively, as well as the knock-on impact on film releases. There
have also been significant non-recurring charges and expenses in both years,
with significant total non-cash impairment charges set out above, which
significantly increased the loss in 2020.
Basic Deficit Per Share amounted to (41.2)¢ (2020: (193.2)¢). Eliminating
the one-off, non-trade-related items totalling $116.1m, Adjusted diluted
Deficit Per Share were (47.8)¢ (2020: (66.5)¢).
Statement of cash flows and statement of financial position
Overall, net assets have decreased by $571.3m to a net liability of $(345.0)m
since 31 December 2020. Total assets decreased by $254.5m. This is driven by
the loss for the year. The total liabilities have increased by $316.8m,
primarily due to additional debt obtained in order to secure liquidity.
With the material loss of revenue driven by the outbreak of COVID-19
continuing throughout 2021, the Group agreed new sources of liquidity and
entered lease negotiations as set out above. These measures are reflected in
the Group statement of cash flows. Total net cash generated in operating
activities in the year was $555.1m (2020: cash used $227.6m). Net debt of
$8.9bn at the year end is $0.6bn higher than the balance at 31 December 2020
primarily due to losses driven by the impact of COVID-19 and the additional
financing raised during the year.
Cineplex
On 6 July 2020 the Group confirmed that Cineplex had initiated proceedings
against it in relation to its termination on 12 June 2020 of the Arrangement
Agreement relating to its proposed acquisition of Cineplex (the
"Acquisition"). The proceedings alleged that the Group breached its
obligations under the Arrangement Agreement and/or duty of good faith and
claimed damages of up to C$2.18 billion less the value of Cineplex shares
retained by Cineplex shareholders.
The Group defended these proceedings on the basis that it had terminated the
Arrangement Agreement because Cineplex breached a number of its covenants and
counter-claimed against Cineplex for damages and losses suffered as a result
of these breaches and the Acquisition not proceeding, including the Group's
financing costs, advisory fees and other costs.
The Ontario Superior Court of Justice has now handed down its judgment. It
granted Cineplex's claim, dismissed the Group's counter-claim and awarded
Cineplex damages of C$1.23 billion for lost synergies to Cineplex and C$5.5
million for lost transaction costs. The Group disagrees with this judgment and
has appealed the decision. The Group does not expect damages to be payable
whilst any appeal is ongoing. No liability has been recognised in respect of
the judgement.
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 4.25 cents per share to conserve cash for the Group.
Nisan Cohen
Chief Financial Officer
17 March 2022
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.
Consolidated Statement of Profit or Loss
for the Year Ended 31 December 2021
Note Year ended Year ended
31 December 31 December
2021 2020
$m $m
Revenue 4 1,804.9 852.3
Cost of sales (1,263.2) (888.1)
Gross profit/(loss) 541.7 (35.8)
Other operating income 15.4 2.3
Administrative expenses (668.4) (879.7)
Net reversal of impairment/(impairment) of goodwill, property, plant and 127.1 (1,344.5)
equipment, right-of-use assets and investments
Operating profit/(loss) 15.8 (2,257.7)
Adjusted EBITDA as defined in Note 2 2 454.9 (115.1)
Finance income 6 208.4 69.6
Finance expenses 6 (899.2) (786.8)
Net finance costs (690.8) (717.2)
Share of loss from jointly controlled entities using equity accounting method (33.3) (33.0)
net of tax
Loss before tax (708.3) (3,007.9)
Tax credit on loss 8 142.5 356.4
Loss for the year attributable to equity holders of the Group (565.8) (2,651.5)
Basic Deficit Per Share (cents) 5 (41.2) (193.2)
Diluted Deficit Per Share (cents) 5 (41.2) (193.2)
The Notes on pages 17 to 34 are an integral part of these Consolidated
Financial Statements.
Consolidated Statement of Comprehensive Income
for the Year Ended 31 December 2021
Year ended Year ended
31 December 31 December
2021 2020
$m $m
Loss for the year attributable to equity holders of the Group (565.8) (2,651.5)
Items that will not subsequently be reclassified to profit or loss
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) -
Items that will subsequently be reclassified to profit or loss
Retranslation (loss)/gain of foreign currency denominated operations (6.1) 3.5
De-designation of net investment hedge (11.6) 9.8
Movement on net investment hedge - (19.8)
Income tax charge recognised within other comprehensive loss (0.2) (0.1)
Comprehensive loss for the year, net of income tax (12.4) (6.6)
Total comprehensive loss for the year attributable to equity holders (578.2) (2,658.1)
of the Group
Consolidated Statement of Financial Position
at 31 December 2021
Note 31 December 2021 31 December 2020
$m $m
Non-current assets
Property, plant and equipment 1,698.1 1,788.2
Right-of-use assets 9 2,234.1 2,306.4
Goodwill 4,837.1 4,868.3
Other intangible assets 464.6 489.5
Investment in equity-accounted investees 130.3 215.1
Financial assets at FVOCI 5.8 10.0
Deferred tax assets 415.9 278.1
Fair value of financial derivatives 2.8 7.8
Other receivables 48.8 48.7
Total non-current assets 9,837.5 10,012.1
Current assets
Assets classified as held for sale 1.8 2.9
Inventories 24.3 13.2
Current taxes receivables 2.7 206.6
Trade and other receivables 142.1 53.7
Restricted cash and cash equivalents 8.0 -
Cash and cash equivalents 354.3 336.7
Total current assets 533.2 613.1
Total assets 10,370.7 10,625.2
Current liabilities
Loans and borrowings 10 (169.5) (54.2)
Fair value of financial derivatives (50.8) (97.2)
Lease liabilities (547.9) (596.6)
Trade and other payables (526.2) (596.3)
Deferred revenue (226.9) (270.9)
Current taxes payable (35.3) (40.6)
Provisions 11 (5.0) (8.0)
Total current liabilities (1,561.6) (1,663.8)
Non-current liabilities
Loans and borrowings 10 (5,020.1) (4,608.5)
Fair value of financial derivatives (37.1) (130.1)
Lease liabilities (3,492.3) (3,375.1)
Other payables (19.6) (9.2)
Deferred revenue (579.5) (607.0)
Provisions 11 (1.0) (1.1)
Employee benefits (4.5) (4.1)
Total non-current liabilities (9,154.1) (8,735.1)
Total liabilities (10,715.7) (10,398.9)
Net (liabilities)/assets (345.0) 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 (253.4) (247.3)
Hedging reserve - 11.6
Fair value reserve (8.9) (14.4)
Retained earnings (616.6) (57.5)
Total equity (345.0) 226.3
These Financial Statements on pages 12 to 34 were approved by the Board of
Directors on 17 March 2022 and were signed on its behalf by
Nisan Cohen, Director
Consolidated Statement of Changes in Equity
for the Year Ended 31 December 2021
Share capital Share premium Foreign currency translation reserve Hedging reserve Fair value reserve Retained earnings/(Accumulated losses) Total
$m $m $m $m $m $m $m
At 1 January 2020 20.1 516.0 (250.8) 21.6 (14.4) 2,645.2 2,937.7
Loss for the year - - - - - (2,651.5) (2,651.5)
Other comprehensive income/(expense)
Items that will subsequently be reclassified to profit or loss:
De-designation of net 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
Total comprehensive loss - - 3.5 (10.0) - (2,651.6) (2,658.1)
Contributions by and distributions to owners
Dividends - - - - - (51.4) (51.4)
Movements due to share-based compensation - - - - - (1.9) (1.9)
Transfer of shares - (2.2) - - - 2.2 -
At 31 December 2020 20.1 513.8 (247.3) 11.6 (14.4) (57.5) 226.3
Loss for the year - - - - - (565.8) (565.8)
Other comprehensive income/(expense)
Items that will not subsequently be reclassified to profit or loss:
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)
Items that will subsequently be reclassified to profit or loss:
De-designation of net investment hedge - - - (11.6) - - (11.6)
Tax that will subsequently be reclassified to profit or loss - - - - - (0.2) (0.2)
Retranslation of foreign currency denominated operations - - (6.1) - - - (6.1)
Total comprehensive loss - - (6.1) (11.6) 5.5 (566.0) (578.2)
Contributions by and distributions to owners
Movements due to share-based compensation - - - - - 6.9 6.9
At 31 December 2021 20.1 513.8 (253.4) - (8.9) (616.6) (345.0)
Consolidated Statement of Cash Flows
for the Year Ended 31 December 2021
Note Year ended Year ended
31 December 2021 31 December 2020
$m $m
Cash flows from operating activities
Loss for the year (565.8) (2,651.5)
Adjustments for:
Finance income 6 (208.4) (69.6)
Finance expense 6 899.2 786.8
Taxation 8 (142.5) (356.4)
Share of loss of equity accounted investee 33.3 33.0
Operating loss 15.8 (2,257.7)
Depreciation and amortisation 534.9 643.3
Share-based payments charge/(credit) 6.9 (2.3)
(Reversal of impairment)/impairment of property, plant and equipment, (182.2) 1,307.4
right-of-use assets and goodwill
Impairment of investment 55.1 37.1
(Gain)/Loss on sale of assets (32.8) 6.4
(Increase)/decrease in trade and other receivables (87.6) 214.4
(Increase)/decrease in inventories (11.6) 20.0
Increase/(decrease) in trade, other payables and deferred income 41.5 (204.5)
Increase in provisions and employee benefit obligations 14.0 2.1
Cash generated from/(used in) operations 354.0 (233.8)
Tax received 205.5 6.2
Tax paid (4.4) -
Net cash flows from operating activities 555.1 (227.6)
Cash flows from investing activities
Interest received 3.0 6.5
Income from net investment in sub-lease 1.1 1.0
Acquisition of property, plant and equipment (152.1) (290.0)
Investment in joint ventures (0.1) (0.3)
Acquisition of distribution rights and other intangibles (4.3) (2.5)
Acquisition of subsidiaries*** 10 (202.7) -
Proceeds from sale of property, plant and equipment 21.3 3.2
Distributions received from equity accounted investees - 17.8
Distributions received from financial assets at FVOCI 11.8 -
Net cash flows from investing activities (322.0) (264.3)
Cash flows from financing activities
Dividends paid to shareholders 7 - (51.4)
Interest paid (227.3) (158.3)
Repayment of bank loans (55.5) (54.2)
Draw down of bank loans 526.2 1,207.8
Debt issuance costs paid (12.7) (73.2)
Exceptional finance cost (30.5) -
Repayment on termination of financial derivatives - (10.2)
Landlord contributions 5.1 13.5
Payment of lease liabilities* (400.5) (198.6)
Movement in restricted cash** (16.0) -
Net cash flows from financing activities (211.2) 675.4
Cash and cash equivalents at the start of the year 336.7 140.6
Net movements in cash and cash equivalents 21.9 183.5
Exchange (loss)/gain on cash and cash equivalents (4.3) 12.6
Cash and cash equivalents at the end of the year** 354.3 336.7
Notes to the Consolidated Financial Statements
(forming part of the Financial Statements)
* Payment of lease liabilities includes $251.2m (2020: $115.7m) of
interest payments and $149.3m (2020: $82.9m) of principal lease payments.
** During the year $16.0m of cash and cash equivalentts was restricted
for settlement of interest on the convertible bond. $8.0m of this was paid
during the year.
*** During the year the Group reached agreement with the Regal Dissenting
Shareholders in respect of the Judgement awarded to them. This agreement
settled the outstanding consideration due in respect of the Group's
Acquisition of Regal Entertainment. Further details of amounts still
outstanding to the Regal Dissenting Shareholders are set out in note 19. The
total settlement amounted to $265.7m, of which $63.0m is included in the trade
and other payables movement as it was previously charged to operating profit.
1. Accounting Policies
Basis of preparation
Cineworld Group plc (the "Company") is a company limited by shares,
incorporated and domiciled in the UK. The Company's registered address is
Eighth Floor, Vantage West, Great West Road, Brentford TW8 9AG. Cineworld
Group plc (the 'Company') is a company Limited by shares, incorporated and
domiciled in the UK.
This consolidated financial information for the year ended 31 December 2021
comprises the Company and its subsidiaries (together referred to as the
'Group') and the Group's interests in jointly controlled entities. The
financial information presented has been prepared applying the accounting
policies and presentation applied in the preparation of the Group's
consolidated financial statements for the year ended 31 December 2021. These
preliminary results do not constitute the Group's statutory accounts for the
years ended 31 December 2021 and 31 December 2020. The statutory accounts for
the year ended 31 December 2020 have been reported on by the Company's
auditors and delivered to the Registrar of Companies. The statutory accounts
for the year ended 31 December 2021, which have been approved by the
Directors, will be sent to shareholders in April 2022 and delivered to the
Registrar of Companies.
The auditor has reported on the Group's statutory accounts for the years ended
31 December 2021 and 2020. The reports were (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.
The accounting policies set out below have been applied consistently to all
years presented in these Group Financial Statements.
Presentational currency
The financial results of the Group are presented in US dollars.
Going concern
In assessing the appropriateness of applying the going concern basis in the
preparation of the 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
15-month period from the date of approval of these financial statements. Given
the global 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 impact 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.
The minimum liquidity covenant (which will not apply if the Group reaches 80%
of admission levels for a 3-month comparable period in 2019), 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
Group is only required to comply with the RCF net leverage covenant when the
facility is drawn down by greater than 35%. 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.
In addition, the RCF has a maturity of February 2023, at which point the group
will either repay or refinance the facility.
Dissenting Shareholders
On 10 September 2021, the Group announced that it had reached agreement with
the dissenting shareholders of Regal Entertainment Group (the "Regal
Litigation Parties") with respect to the payment of judgment of their claim.
Under this agreement, the Company paid $170 million of the Judgment to the
dissenting shareholders and $92 million was placed into an escrow account to
be available to Cineworld as additional liquidity under certain circumstances.
On 1 February 2022, Cineworld announced that it had initiated discussions with
the Regal Litigation Parties in relation to a potential rescheduling of the
Group's payment obligations under the unsecured facility agreement relating to
the settlement reached with them in September 2021 (the "Unsecured Facility
Agreement"). It was agreed that the remaining $79.3 million (plus interest and
fees) owed under the facility would be paid to the Regal Litigation Parties in
instalments with a final payment due on 30 June 2022, rather than the
previously agreed date of 31 March 2022.
Cineplex
On 6 July 2020 the Group confirmed that Cineplex had initiated proceedings
against it in relation to its termination on 12 June 2020 of the Arrangement
Agreement relating to its proposed acquisition of Cineplex (the
"Acquisition"). The proceedings alleged that the Group breached its
obligations under the Arrangement Agreement and/or duty of good faith and
claimed damages of up to C$2.18 billion less the value of Cineplex shares
retained by Cineplex shareholders.
The Group defended these proceedings on the basis that it had terminated the
Arrangement Agreement because Cineplex breached a number of its covenants and
counter-claimed against Cineplex for damages and losses suffered as a result
of these breaches and the Acquisition not proceeding, including the Group's
financing costs, advisory fees and other costs.
The Ontario Superior Court of Justice has now handed down its judgment. It
granted Cineplex's claim, dismissed the Group's counter-claim and awarded
Cineplex damages of C$1.23 billion for lost synergies to Cineplex and C$5.5
million for lost transaction costs. The Group disagrees with this judgment and
has appealed the decision. The Group does not expect damages to be payable
whilst any appeal is ongoing, which is likely to take longer than the
assessment out to 30 June 2023. No liability has been recognised in respect of
the judgement on the basis that payment is not considered probable at this
stage, and the directors have not factored any payment of damages within their
assessment of whether it is appropriate to adopt the going concern basis for
the Group as at 31 December 2021. It is the view of the Directors that the
appeal process is unlikely to conclude within the going concern assessment
period.
There is a material uncertainty around the Group's ability to successfully
appeal the judgment and avoid the damages payment. Cineworld believes it has
compelling arguments that the trial judge erred when assessing liability and
damages and believes that it has a meritorious appeal. In the event that
Cineworld is unsuccessful on appeal the group would not have sufficient
liquidity to pay the existing level of damages awarded. It is also noted that
Cineplex is an unsecured creditor.
Base Case Scenario
The Group's base case scenario assumes a continued recovery to pre-pandemic
levels of admissions, with cinemas across all territories remaining open. In
the US, admissions are forecast to return to levels representing 85% of
comparable periods in 2019 during 2022, with corresponding levels for the UK
and ROW at 90% and 95% respectively. Admissions are then forecast to remain on
average 5% below 2019 levels throughout 2023 and to recover to 2019 levels in
2024. 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
on a number of 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 15-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 2022 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 on the RCF would not be breached as the Group
would have sufficient funds to pay down the facility such that the covenant is
not applicable. It is noted however, that the ability to do this is sensitive
to admission levels not being hit, any further film delays and any a material
rent payment that has not been modelled. As such, there is considered to be a
material uncertainty as to whether the Group will be able to pay down the RCF
as at the June 2022 covenant testing date. In the event that it is not able to
a covenant waiver for June 2022 would be required.
The minimum liquidity covenant would not be breached and the Group would
achieve 80% of 2019 admission levels for a 3-month comparable period in August
2022. Sufficient liquidity would exist to repay the RCF when it matures in
February 2023, however, to support working capital requirements of the Group,
it would need to be refinanced.
Considering the liquidity implications of the scenario analysis and the
uncertainty, the Board are assessing several options with regard to additional
sources of liquidity including the increase of the RoWPP.
Severe but Plausibile Downside Scenario
Given the current uncertainty around the speed of recovery from the effects of
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.
- A lack of film content for two months in 2022, driven by changes to the film
slate and uncertainty caused by a resurgence of COVID-19, with a gradual
return to admission levels modelled under the weighted base case. Under this
scenario the Group would achieve 50% of the admission levels modelled under
the base case for two months, this represents admissions at 43% of 2019 levels
during April and May of 2022. Then, averaging 70% of 2019 levels from July
through to December 2022, admissions gradually return to the admissions levels
modelled under the base case in January 2023 and beyond. No further lock down
or additional operational restrictions are considered. Under this scenario the
Group would breach its net leverage covenant in June 2022, it would also
breach its minimum liquidity covenant in September 2022, and would not have
sufficient liquidity to repay the RCF in February 2023. Sufficient liquidity
to continue operating would remain up to the point at which the RCF matures.
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. Having considered all known factors the Directors are
comfortable that the weighted base case supports the going concern assumption.
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 that may cast significant doubt upon the Group's ability to
continue to operate as a going concern. Given the sensitivity to admission
levels, and any changes in the current schedule of film releases, material
uncertainties exist in respect of the ability to repay the RCF sufficiently by
the end of June 2022 to avoid the net leverage covenant, and the ability to
repay and refinance the RCF in February 2023.
Further there is a material uncertainty as to whether Cineworld is able to
successfully appeal the Cineplex judgment against it, as sufficient liquidity
does not exist to be able to pay the damages awarded.
In addition, the potential covenant breaches in the severe but plausible
scenario along with the inability to repay the RCF in February 2023, indicate
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
consolidated financial statements do not include the adjustments that would
result if the Group was unable to continue as a going concern.
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 profits or costs are being excluded in an APM, these are included
elsewhere in our reported financial information as they represent actual
income or costs of the Group.
Other commentary within the Chief Financial Officer's Review on pages 5 to 11,
should be referred to in order to fully appreciate all the factors that affect
the business.
The Group's Alternative Performance Measures are set out below. Additional
adjustments have been made in the current and prior 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 and reversals of impairment of property, plant and
equipment, right-of-use assets, goodwill 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 and reversals
of impairment 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 joint controlled entities are
included within Adjusted EBITDA as these items are cash items outside of
operating profit.
Adjusted Loss
Adjusted loss before tax is defined as loss before tax adjusted for
amortisation of intangible asset created on acquisition, excess cash
distributions from jointly controlled entities, impairments and reversals of
impairment of property, plant and equipment, right-of-use assets, goodwill 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 and reversals of impairment driven by
COVID-19.
Adjusted loss after tax is arrived by applying an effective tax rate to the
taxable adjustments and deducting the total from Adjusted loss.
The Adjusted EBITDA and Adjusted Loss after tax reconciliation to statutory
Operating Loss are presented as follows:
Year ended Year ended
31 December 31 December
2021 2020
$m $m
Operating profit/(loss) 15.8 (2,257.7)
Depreciation and amortisation 534.9 643.3
Share of loss of jointly controlled entity using equity accounting method net (33.3) (33.0)
of tax
Adjustment to reverse loss from jointly controlled entities and to reflect 33.3 56.4
cash distributions received in the period
Pre-opening expenses 1.7 -
Property-related charges and releases (26.6) 6.4
Share-based payment charges 6.9 (2.3)
Operating exceptional items:
- Net (reversal of impairment)/impairment of property, plant and (127.1) 1,344.5
equipment, right-of-use assets, goodwill and investments
- Transaction and reorganisation costs 38.1 60.8
- COVID-19 costs 2.1 19.9
- Cost of refinancing 9.1 46.6
Adjusted EBITDA 454.9 (115.1)
Depreciation and amortisation (534.9) (643.3)
Amortisation of intangibles created on acquisition 23.6 25.7
Net finance costs (690.8) (717.2)
Movement on financial derivatives (162.7) 46.4
Foreign exchange translation gains and losses 29.0 (9.3)
De-designation of net investment hedge 11.6 9.8
Financing exceptional items:
- Amendment fees for refinancing 46.5 -
- Gain on extinguishment of debt - (33.2)
- Remeasurement loss on financial instrument - 98.0
- Remeasurement of financial asset at amortised cost - 11.3
Adjusted Loss before Tax (822.8) (1,326.9)
Tax credit on loss 142.5 356.4
Tax impact of adjustments 24.6 (225.4)
De-recognition of deferred tax assets due to impact of COVID-19 - 319.7
Tax credit for carry back of losses to previosu years - (37.0)
Adjusted Loss after Tax (655.7) (913.2)
Excess cash distributions from jointly controlled entities
The Group receives cash distributions over and above the level of profit
recognised in equity accounting for its joint ventures. This is a recurring
cash amount.
Property-related charges and releases
The net decrease to operating loss of $26.6m (2020: increase of $6.4m) is a
result of the following:
- $21.3m 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 10 sites in US and one site in the UK has resulted in
$3.3m gain due to the de-recognition of the lease liabilities and right-of-use
assets.
- Gain of $8.2m recognised on property, plant and equipment disposed
of in the UK and UK,
- Loss of $6.2m recognised on lease penalties in the US and in the
UK.
- 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 year:
- During 2021 the impact of the pandemic has continued to affect the
Group's forecast cash flows. A net reversal resulting from changes to right of
use assets caused by amendments made during the year of $182.2m has been
recognised. This is made up of impairment reversals of $199.6m caused by
amendments to leases at a lower discount rate in the current period have
resulted in reductions to right of use assets and property, plant and
equipment within CGUs previously impaired due to the impact of COVID-19. In
addition, changes to asset carrying values have resulted in additional
impairment charges of $17.4m during the year.
- During the year forecast future dividend cash flows from the
Group's investment in national Cinemedia Inc (NCM) were reduced significantly.
The Group determined that the fair value indicated by the NCM share price, in
excess of the value in use, represented the recoverable amount of the NCM
asset. The Group therefore determined that the carrying amount exceeded the
recoverable amount and, as such, recorded an impairment charge of $55.1m.
- 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 impairment charges and reversals are
considered to be driven by the impact of the pandemic and are therefore
considered to be exceptional charges.
- One off costs of $2.1m associated with the impact of COVID-19
including stock write-offs of $1.6m and $0.5m legal fees. During the prior
year 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 $38.1m were incurred in
2021 of which $20.5m relates to dissenting shareholders legal case, $9.1m
incurred with the Cineplex transaction, $7.7m relates to the settlement of a
license claim in the US, $0.9m receipt of VAT refund, $1.3m redundancy costs
and $0.4m relates to reorganisation costs. 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, $9.1m was incurred in
connection with new debt facilities entered into and amendments to existing
debt facilities during the period. 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.
Amendment fees for refinancing
These costs represent the amendment fees paid in relation to the new B1 term
loan secured in July 2021 of which $30.5m was paid in cash and $16.0m
recognised as PIK, please refer to note 10 for further information.
Gain on extinguishment of debt
In 2020, the Group amended a previously agreed incremental revolving credit
facility of $110.8m to a term loan. 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 $33.2m,
please refer to note 10 for further information.
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 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 in 2020.
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 year 2021, the movements on the instruments described above
included a gain on the fair value movement of the detachable equity warrants
of $58.2m, a gain on the fair value movement of the B2 LIBOR floor embedded
derivative of $1.8m, a gain on the fair value movement of the US dollar
denominated term loans LIBOR floor of $68.0m, a loss on the fair value
movement of the B1 prepayment option of $5.0m and a gain in the revaluation of
the cross currency swaps of $18.2m. 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 fair value
movement on the derivative was $21.5m during the year
De-designation of net investment hedge
In 2020, 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 the period the hedge relationship became
ineffective and the hedge relationship ended. This resulted in a $9.8m credit
to the hedge reserve and charge to the income statement.
On 30 June 2020 the Group designated the Euro denominated term loan and the
assets of a Euro trading subsidiary as a net investment hedge. In January
2021, the net investment hedge became ineffective. This resulted in a $11.6m
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.
Tax exceptional items
In 2020 the Group recognised a one-off tax credit under the CARES Act in the
United States of $37.0m due to the carry back of losses against profits of
earlier years with higher tax rates. In addition, the Group has de-recognised
$319.7m in deferred tax assets due to reduction in the Group's forecast cash
flows. In 2021 the Group did not recognise tax exceptional items.
Net debt
Net Debt is defined as total liabilities from financing, excluding embedded
derivatives, net of cash at bank and in hand. A reconciliation of movements in
Net Debt is provided in Note 10.
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 Total
$m $m $m $m
Year ended 31 December 2021
Total revenues 1,220.3 348.1 236.5 1,804.9
Adjusted EBITDA as defined in Note 2 310.7 67.1 77.1 454.9
Operating loss (27.8) 20.6 23.0 15.8
Finance income (33.9) (170.0) (4.5) (208.4)
Finance expense 684.1 136.2 78.9 899.2
Depreciation and amortisation 391.9 75.5 67.5 534.9
Net reversal of impairment of property, plant and equipment and right-of-use (81.2) (35.3) (10.6) (127.1)
assets, and investments
Share of loss from jointly controlled entities using equity accounting (33.2) - (0.1) (33.3)
method net of tax
(Loss)/profit before tax (711.2) 54.4 (51.5) (708.3)
Non-current asset additions - property, plant and equipment 85.4 39.2 7.6 132.2
Non-current asset additions - intangible assets - 0.9 3.7 4.6
Investment in equity accounted investee 128.4 1.0 0.9 130.3
Total assets 8,300.7 1,171.9 898.1 10,370.7
Total liabilities 8,543.6 1,529.2 642.9 10,715.7
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 profit (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
Impairment of goodwill, property, plant and equipment and right-of-use assets 761.5 493.8 89.2 1,344.5
and investments
Share of profit/(loss) from jointly controlled entities using equity (32.7) - (0.3) (33.0)
accounting
method net of tax
Loss before tax (1,986.7) (805.6) (215.6) (3,007.9)
Non-current asset additions - property, plant and equipment 231.8 41.1 9.8 282.7
Non-current asset additions - intangible assets - 0.3 2.2 2.5
Investment in equity accounted investee 213.3 1.0 0.8 215.1
Total assets 8,552.8 1,163.9 908.5 10,625.2
Total liabilities 8,403.9 1,377.2 617.8 10,398.9
There were no (2020: none) revenues from transactions with other operating
segments. All revenue is generated from external customers
4. Revenue
The Group derives revenue from the transfer of goods at a point in time and
services over time in the following territories:
Revenue by country Year ended Year ended
31 December 31 December
2021 2020
$m $m
United States 1,220.3 575.9
United Kingdom & Ireland 348.1 153.9
Poland 69.7 42.7
Israel 60.9 15.9
Hungary 36.5 22.0
Romania 26.8 16.0
Czech Republic 28.0 17.1
Bulgaria 10.0 4.8
Slovakia 4.6 4.0
Total revenue 1,804.9 852.3
Revenue per operating segment can be broken down by product and service
provided as follows:
United States
Revenue by product and service provided Year ended Year ended
31 December 31 December
2021 2020
$m $m
Box office 627.4 280.3
Retail 391.9 161.1
Other 201.0 134.5
Total revenue 1,220.3 575.9
Timing of revenue recognition
At a point in time 1,092.3 474.0
Over time 128.0 101.9
UK and Ireland
Revenue by product and service provided Year ended Year ended
31 December 31 December
2021 2020
$m $m
Box office 210.0 99.4
Retail 90.1 37.2
Other 48.0 17.3
Total revenue 348.1 153.9
Timing of revenue recognition
At a point in time 348.1 152.6
Over time - 1.3
ROW
Revenue by product and service provided Year ended Year ended
31 December 31 December
2021 2020
$m $m
Box office 118.3 68.9
Retail 70.3 33.9
Other 47.9 19.7
Total revenue 236.5 122.5
Timing of revenue recognition
At a point in time 217.8 116.5
Over time 18.7 6.0
All revenue is generated from external customers except for the funding
received from government support schemes in ROW during 2020 only, for an
amount of $1.0m.
5. Earnings Per Share
Basic Earnings Per Share is calculated by dividing the profit for the year
attributable to ordinary shareholders by the weighted
average number of ordinary shares outstanding during the year, after excluding
the weighted average number of non-vested
ordinary shares. Diluted Earnings Per Share is calculated by dividing the
profit for the year attributable to ordinary shareholders
by the weighted average number of ordinary shares plus any dilutive
non-vested/non-exercised ordinary shares. Where dilutive
options are not considered likely to vest; no dilution is applied. Equity
Warrants and the convertible bond are potential dilutive
instruments for the dilute basic earnings per share in the future. These were
not included in the calculation of diluted earnings
per share because they are antidilutive for the periods presented. Adjusted
Earnings Per Share is calculated dividing the
adjusted profit after tax for the year attributable to ordinary shareholders
by the weighted average number of ordinary shares
outstanding during the year, after excluding the weighted average number of
non-vested ordinary shares.
Year ended Year ended
31 December 31 December
2021 2020
$m $m
Loss attributable to ordinary shareholders (565.8) (2,651.5)
Adjustments:
Amortisation of intangible assets((1)) 23.6 25.7
Adjustment to reverse loss from jointly controlled entities and to reflect 33.3 56.4
cash distributions received in the period
Pre-opening costs 1.7 -
Property-related charges and releases (26.6) 6.4
Share-based payment charges 6.9 (2.3)
Operating exceptional items:
- Net (reversal of impairment)/impairment of goodwill, property, plant and
equipment, right-of-use assets and investments
(127.1) 1,344.5
- Transaction and reorganisation costs 38.1 60.8
- COVID-19 costs 2.1 19.9
- Refinancing costs 9.1 46.6
Financing exceptional items:
- Amendment fees for refinancing costs 46.5 -
- Gain on extinguishment of debt - (33.2)
- Remeasurement of financial asset amortised cost - 11.3
- Remeasurement loss on financial instrument - 98.0
Movement on financial derivatives (162.7) 46.4
Foreign exchange translation gains and losses((2)) 29.0 (9.3)
De-designation of net investment hedge 11.6 9.8
Adjusted loss (680.3) (970.5)
Tax effect of above items 24.6 (225.4)
Tax exceptional items:
- De-recognition of deferred tax assets due to impact of COVID-19 - 319.7
- Tax credit arising on capitalised foreign exchange loss - (37.0)
Adjusted loss after tax (655.7) (913.2)
Weighted average number of shares in issue 1,373.0 1,372.4
Basic Earnings Per Share denominator 1,373.0 1,372.4
Dilutive options - -
Diluted Earnings Per Share denominator 1,373.0 1,372.4
Shares in issue at year end 1,373.0 1,372.8
Cents Cents
Basic Deficit Per Share (41.2) (193.2)
Diluted Deficit Per Share (41.2) (193.2)
Adjusted Basic Deficit Per Share (47.8) (66.5)
Adjusted Diluted Deficit Per Share (47.8) (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 $23.6m (2020: $25.7m). It does not include
amortisation of purchased distribution rights.
(2) Net foreign exchange gains and losses in 2021 included within
earnings comprises $29.0m (2020: loss of $9.3m) foreign exchange gain
recognised on translation loans Euro denominated loans held in US Dollar
functional currency entities.
6. Finance Income and Expense
Year ended Year ended
31 December 31 December
2021 2020
$m $m
Interest income 3.1 7.4
Foreign exchange gain 22.2 10.9
Unwind of discount on sub-lease assets 0.8 0.7
Gain on movement in the fair value of financial derivatives 167.7 9.0
Gain on extinguishment of debt - 33.2
Unwind of discount on non-current receivables 3.0 8.4
De-designation of net investment hedge 11.6 -
Finance income 208.4 69.6
Interest expense on bank loans and overdrafts 276.2 166.3
Amortisation of financing costs 61.3 33.1
Lease liability interest 444.5 349.0
Unwind of discount of deferred revenue 47.6 49.4
Remeasurement of financial asset amortised cost 1.3 11.3
Remeasurement of net investment in sub-lease assets - 2.7
Loss on movement in the fair value of financial derivatives 5.0 55.4
Remeasurement loss on financial instrument - 98.0
Foreign exchange loss 16.8 11.8
De-designation of net investment hedge - 9.8
Refinancing costs 46.5 -
Finance expense 899.2 786.8
Net finance costs (690.8) (717.2)
Recognised within comprehensive income
Year ended Year ended
31 December 31 December
2021 2020
$m $m
Movement on net investment hedge - (19.8)
Change in fair value of financial assets at FVOCI 7.6 -
De-designation of net investment hedge (11.6) 9.8
Retranslation (loss)/gain of foreign currency denominated operations (6.1) 3.5
7. Dividends
The following dividends were recognised during the year:
2021 2020
$m $m
Special - -
Q1 Interim - -
Q2 Interim - -
Q3 Interim - -
Interim - -
Final (for the preceding year) - 51.4
Total dividends - 51.4
On 7 April 2020 the Board announced the suspension of the 2019 fourth quarter
dividend of 4.25 cents per share to conserve cash for the Group.
Prior to the impact of the COVID-19 pandemic, the Board paid four interim
dividends for each financial year. Payments in relation to the first three
quarters of the year are equal to 25% of the full year dividend of the prior
year, with the final payment reflective of the Group's full year earnings
performance and resulting in a full year dividend payment aligned with the
Group's pay-out ratio.
In 2020, only 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.
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 4.25 cents 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. Taxation
Recognised in the Consolidated Statement of Profit or Loss
Year ended Year ended
31 December 31 December
2021 2020
$m $m
Current tax credit
Current year (1.5) (220.9)
Adjustments in respect of prior years - (3.1)
Total current tax credit (1.5) (224.0)
Deferred tax (credit)/expense
Current year (103.1) (138.0)
Adjustments in respect of prior years (15.3) 8.9
Adjustments from change in tax rates (22.6) (3.3)
Total tax credit in the Statement of Profit or Loss (142.5) (356.4)
Reconciliation of effective tax rate
Year ended Year ended
31 December 31 December
2021 2020
$m $m
Loss before tax (708.3) (3,007.9)
Tax using the UK corporation tax rate of 19.0% (2020: 19.0%) (134.6) (571.5)
Differences in overseas tax rates (52.0) (100.3)
Permanently disallowed depreciation 1.6 9.2
Permanently disallowed exceptional costs 1.3 2.4
Impact of higher prior year US tax rate applied to loss carry backs - (37.0)
Impairment of goodwill on which no deferred tax asset is recognised - 124.7
De-recognition of deferred tax assets 84.6 319.7
Tax effect of Fair Value adjustments - (85.5)
Other permanent differences (5.5) (20.7)
Adjustment in respect of prior years (15.3) 5.8
Effect of change in statutory rate of deferred tax (22.6) (3.2)
Total tax credit in the Statement of Profit or Loss (142.5) (356.4)
During the year there was a tax charge of $0.2m, recognised directly in the
Statement of Comprehensive Income (2020: $0.1m). This related to share
remuneration schemes. A $203.0m US CARES Act tax refund was received in May
2021.
Factors that may affect future tax charges
The Group expects that the tax rate in the future will be affected by the
geographical split of profits and the different tax rates that will apply to
those profits.
An increase in the UK corporation tax rate from 19% to 25% was substantively
enacted on 24 May 2021. The increased rate will apply from 1 April 2023. UK
deferred tax asset and liabilities have been revalued at the increased rate to
the extent they are expected to reverse after 1 April 2023.
At 31 December 2021 the Group had unrecognised deferred tax assets relating to
the following temporary differences:
− US tax interest of $1,049.2m with no expiry date (2020: $797.7m);
− US deferred revenue of $383.1m (2020: $239.4m);
− UK tax losses of $122.4m with no expiry date (2020: $137.6m);
− UK deferred rent deductions of $45.9m (2020: $67.2m);
− Israeli tax losses of $nil with no expiry date (2020: $20.0m);
− Israeli deferred rent deductions of $nil (2020: $16.4m);
− Bulgarian tax losses of $nil with no expiry date (2020: $3.1m);
− Bulgarian deferred rent deductions of $nil (2020: $2.8m);
− Slovakian deferred rent deductions of $nil (2020: $5.1m);
− Hungarian tax losses of $136.2m with no expiry date (2020: $143.9m); and
− UK capital losses of $10.2m with no expiry date (2020: $9.8m).
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 represents 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 recognised a
provision of $0.9m against potential exposures. The maximum potential exposure
is $11.1m.
9. Leases
The Consolidated Statement of Financial Position shows the following amounts
relating to leases:
Land and Plant and Other Total
buildings machinery $m $m
$m $m
Right-of-use assets
Balance at 1 January 2020 3,439.1 1.0 1.1 3,441.2
Additions 44.6 - - 44.6
Modifications (435.3) - - (435.3)
Depreciation of right-of-use assets (347.2) (0.5) (1.0) (348.7)
Disposals (20.7) - - (20.7)
Impairments (519.1) - - (519.1)
Reversal of Impairments 136.2 - - 136.2
Effects of movement in foreign exchange 8.2 (0.1) 0.1 8.2
31 December 2020 2,305.8 0.4 0.2 2,306.4
Additions 86.7 - - 86.7
Modifications (9.0) - - (9.0)
Depreciation of right-of-use assets (260.4) (0.3) (0.2) (260.9)
Disposals (5.1) - - (5.1)
Impairments (13.7) - - (13.7)
Reversal of Impairments 141.4 - - 141.4
Effects of movement in foreign exchange (11.7) - - (11.7)
31 December 2021 2,234.0 0.1 - 2,234.1
Lease liabilities
Balance at 1 January 2020 4,195.9 0.4 1.2 4,197.5
Additions 52.8 - - 52.8
Modifications (447.5) - - (447.5)
Interest expense related to lease liabilities 348.9 0.1 - 349.0
Disposals (21.7) - - (21.7)
Effects of movements in foreign exchange 40.2 - - 40.2
Repayment of lease liabilities (including interest) (197.3) (0.2) (1.1) (198.6)
31 December 2020 3,971.3 0.3 0.1 3,971.7
Additions 91.9 - - 91.9
Modifications (34.9) - - (34.9)
Interest expense related to lease liabilities 444.5 - - 444.5
Disposals (8.5) - - (8.5)
Effects of movements in foreign exchange (24.0) - - (24.0)
Repayment of lease liabilities (including interest) (400.2) (0.2) (0.1) (400.5)
31 December 2021 4,040.1 0.1 - 4,040.2
Current 547.8 0.1 - 547.9
Non-current 3,492.3 - - 3,492.3
In response to COVID-19, the IASB announced, considered and issued a COVID-19
specific amendment to IFRS 16 on 28 May 2020. The amendment exempts lessees
from having to consider individual lease contracts to determine whether rent
concessions occurring as a direct consequence of the COVID-19 pandemic are
lease modifications and allows lessees to account for such rent concessions as
if they were not lease modifications. The exemption applies to
COVID-19-related rent concessions that reduce lease payments due on or before
30 June 2021. The Group elected not to apply the exemption.
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.
Modification and discount rates
Due to the negotiations held with landlords, the amended leases have changed in substance either from a consideration or 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") and made a corresponding adjustment to the right-of-use asset. The amendments did not result in the identification of a separate lease.
On transition, the incremental borrowing rates applied to property leases ranged between 2.6% and 11.7%. 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. In 2020, the IBRs applied to property leases for the COVID-19 amendments ranged between 5.9% and 16.8% for modifications between March and September and ranged between 17.9% and 26.4% for modifications between October and December. In 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:
January 2021 19.8% - 26.5%
February 2021 19.8% - 26.2%
March 2021 19.8% - 26.9%
1-15 April 2021 (1) 19.7 % - 28.1%
16-30 April 2021 (1) 8.9% - 17.3%
May 2021 8.9% - 14.0%
June 2021 8.4% - 18.3%
July 2021 7.5% - 14.4%
August 2021 8.6% - 15.1%
September 2021 9.3% - 15.2%
October 2021 9.1% - 18.0%
November 2021 9.0% - 17.9%
December 2021 10.8% - 18.1%
((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 number of renegotiated lease agreements in the period, the Group
has recognised a large number of lease modifications and expects further
modifications in 2022.
During the year, 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 asset 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.
The consolidated statement of profit or loss includes within administrative
expenses a lease modification gain of $21.3m (2020: $12.3m).
The impairment reversal is part of net impairments of goodwill, property,
plant and equipment, right-of-use assets and investments in the consolidated
statement of profit or loss.
The number and size of amendments made are such that judgements taken were
significant. These judgements included
the following:
− 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; the
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 discount
rate over periods with consistent relevant characteristics 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 IBRs,
using such a rate 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 modification under IFRS 16.
Management has taken the judgement that all renegotiated leases met the
criteria for amendment based on the changes to the cash flows, and length and
conditions of the original leases.
Impairments and disposals
During the year ended 31 December 2021, the Group recognised impairment
charges of $13.7m on right-of-use assets and $141.4m reversal of impairments.
The reversal relates to 168 cinema CGUs.
During the year ended 31 December 2020, the Group recognised impairment
charges of $519.1m on right-of-use assets and $136.2m reversal of impairments.
The reversal related to 102 cinema CGUs.
During the year ended 31 December 2021, the disposals relate to 10 sites in
the US Segment that were closed and 1 site in the UK&I segment, resulting
in a $3.3m gain.
During the year ended 31 December 2020, the disposals relate to 18 sites in
the US segment that were closed, resulting in a $1.0m gain.
Consolidated Statement of Profit or Loss
The Consolidated Statement of Profit or Loss shows the following amounts
relating to leases:
Year ended Year ended
31 December 31 December
2021 2020
$m $m
Depreciation charge of right-of-use assets 260.9 348.7
- Land and buildings 260.4 347.2
- Other 0.5 1.5
Sub-lease income (3.6) (2.3)
Impairment of right-of-use assets 13.7 519.1
Reversal of Impairment of right-of-use assets (141.4) (136.2)
Expenses relating to short-term leases - 1.3
(included in cost of goods sold and administrative expenses)
Expenses relating to variable lease payments not included in lease liabilities 14.4 3.5
(included in cost of sales)
Charge to operating profit 144.0 734.1
Interest expense (included in finance costs) 444.5 349.0
Charge to profit before taxation for leases 588.5 1,083.1
The total cash outflow for leases in 2021 was $400.5m (2020: $198.6m).
Commitments for short-term leases at 31 December 2021 was $Nil (2020: $Nil).
Sensitivity
In 2021, for sites which are subject to variable lease payments, a 10%
increase in sales across all sites in the Group with such variable lease
contracts would increase total lease payments by approximately $1.4m (2020:
$0.4m).
As outlined in the Groups accouting policies, in tis financial statements
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). Should the next available option for all leases be taken the
impact on the lease liability and right‑of‑use asset would be an increase
of $612.2m (2020: $249.6m) increasing future cash flows by $2,279.6m (2020:
$1,703.9m).
No leases contain a residual value guarantee clause.
Some cinema sites are sub-leased to tenants under operating leases with
rentals payable monthly. Lease payments for some contracts include CPI
increases, but there are no other variable lease payments that depend on an
index or rate. Where considered necessary to reduce credit risk, the Group may
obtain bank guarantees for the term of the lease.
Sub-lease income of $3.6m was recognised during the current financial year
(2020: $2.3m).
Minimum lease payments receivable on sub-leases are as follows:
31 December 31 December
2021 2020
$m $m
Within 1 year 5.4 5.5
Between 1 and 2 years 3.0 4.1
Between 2 and 3 years 2.9 2.9
Between 3 and 4 years 2.6 2.4
Between 4 and 5 years 2.0 1.8
Later than 5 years 11.9 11.9
10. Loans and Borrowings
This note provides information about the contractual terms of the Group's
interest-bearing loans and borrowings.
31 December 31 December
2021 2020
$m $m
Non-current liabilities
Secured bank and private placement loans, less issue costs of debt to be 4,833.8 4,608.5
amortised
Unsecured bank and private placement loans, less issue costs of debt to be 186.3 -
amortised
Total non-current liabilities 5,020.1 4,608.5
Current liabilities
Secured bank and private placement loans, less issue costs of debt to be 50.5 32.4
amortised
Unsecured bank and private placement loans, less issue costs of debt to be 98.7 -
amortised
Overdraft 20.3 21.8
Total current liabilities 169.5 54.2
The terms and conditions of outstanding loans were as follows:
31 December 2021 31 December 2020
Currency Nominal interest rate Year of Face value Carrying amount Face value Carrying
maturity $m $m $m amount
$m
Initial US Dollar term loan USD Eurocurrency Base Rate ((1)) 2025 2,672.6 2,649.5 2,692.7 2,658.2
plus applicable margin
((2))
Initial Euro term loan EUR Eurocurrency Base Rate ((1)) 2025 214.1 212.2 233.8 230.9
plus applicable margin
((2))
Incremental US Dollar term loan USD Eurocurrency Base Rate ((1)) 2026 636.9 631.5 643.5 635.2
plus applicable margin
((2))
Incremental B1 term loan USD Eurocurrency Base Rate plus 8.25% margin ((1)) 2024 200.0 193.0 - -
B1 term loan USD 7.0% plus 8.25% PIK 2024 523.0 407.8 480.8 342.4
B2 term loan USD Eurocurrency Base Rate ((1)) 2024 110.8 79.5 110.8 69.4
plus 5.0% margin
Private placement loan USD and EUR 11.0% 2023 251.8 240.6 263.3 246.2
Convertible Bonds USD 7.5% 2025 213.0 189.8
Revolving credit facility USD Eurocurrency Base Rate ((1)) 2023 456.7 451.9 456.8 451.6
plus applicable margin
((2))
Regal Dissenting Shareholders USD 4.0% to 11% 2022 95.8 95.6 - -
Midwest City USD Base rate plus 3.0% 2041 11.9 11.9 - -
Secured bank loan - DCIP USD 4.17% 2021 - - 0.4 0.4
Israeli government loan NIS Base rate plus 2.0% 2025 6.5 6.0 6.6 6.6
Total interest-bearing liabilities 5,393.1 5,169.3 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 1.00% floor (2020: 1.00% 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. RCF and Term loans are 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.
Private Placement loan
On 30 June 2020 the Group secured a $250.0m private placement debt facility
with a maturity of 31 December 2023. The $250.0m debt facility consisted of a
€122.9m and $112.5m loan. An original issue discount of €4.9m and $4.5m
was incurred on draw down respectively alongside borrowing costs of $9.3m
which were capitalised against this facility.
B2 Term Loan
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 2021.
B1 Term Loan
On 23 November 2020, the Group secured a new debt facility of $450.0m (B1 term
loan) 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
TLB lenders 153,477,195 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 from inception date. The exercise price represents a 10%
discount to the closing share price on 20 November 2020. The detachable equity
warrants include an antidilution provision, meaning that the number of shares
to be issued on exercise of the warrants is not fixed.
On 23 November 2020, the Group recognised in connection to equity warrants a
$80.2m derivative liability, a $3.3m derivative asset in respect of a
prepayment option and fees of $36.0m incurred in connection with obtaining the
facility. The initial carrying value of the B1 term loan on issuance date was
$337.1m. The Group also incurred upfront fees of $27.0m on issuance, which
were capitalised against this facility.
At 31 December 2021, the equity warrants are valued at $39.0m (2020: $97.2m)
and the embedded derivative asset in respect of a prepayment option within the
new agreement valued at $2.8m (2020: $7.8m).
The B1 and B2 term loans are secured against specific assets in the US and is
senior to the other facilities.
Convertible Bond
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 to 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 31 December 2021,
the derivative liability was valued at $6.3m.
Incremental B1 Term loan
On 29 July 2021, the Group secured $200m of incremental loans from a group of
existing lenders with a maturity of 23 May 2024. Directly attributable fees of
$11.6m were incurred in connection with raising the facility. Upon raising
this additional term loan facility, the Group paid amendment fees totalling
$46.5m in connection with the B1 term loan facility of $450.0m raised in
November 2020, of which fees of $16.5m were directly apportioned to the
initial term loans increasing their notional position. The initial carrying
value of the amortised cost B1 Term loan debt was $188.4m.
Regal Dissenting Shareholders
On 10 September 2021, the Group announced that it has reached agreement with
dissenting shareholders of Regal Entertainment Group with respect to the
payment of judgment of their claim. Under this agreement, the Group paid an
initial cash settlement of $170.0m and $92.0m was placed into an escrow
account to be available as additional liquidity under certain circumstances,
with a corresponding term loan entered into for $92.0m. The Group paid an
upfront fee of $1.0m and a base cash fee of $2.7m to Shareholders. On 8
October 2021 and 14 December 2021 the Group drew down $45.0m and $47.0m
respectively from the escrow account. At year end, cash balance remaining on
the escrow account is nil.
Other loans
In 2021 the Group secured a $11.9m loan with Arvest Bank for the Midwest City
cinema in the US with a maturity of 1 July 2041.
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. In 2020 the
Group drew $0.4m on the DCIP secured bank loan.
In 2021 the entire DCIP secured bank loan was forgiven.
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 Company to maintain a net leverage of 5.0x, tested
semi-annually on a 12 months rolling basis. In 2020, the Company secured a
covenant waiver on the RCF until 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/B2 term loan
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. The agreement
also entitles the lenders to appoint a board observer.
On 30 July 2021, the Group 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.
Analysis of Net Debt
Bank loans Convertible bond Lease liabilities Derivatives Bank overdraft Total financing activity liabilities Restricted cash Cash at Net Debt
$m $m $m $m $m $m $m bank and $m
in hand
$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 in 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 (248.8) (209.7) 400.5 3.0 0.5 (54.5) 8.0 21.9 (24.6)
Non-cash movement (118.9) 19.9 (493.0) 5.6 - (586.4) - - (586.4)
Effect of movement in foreign exchange rates 29.1 - 24.0 - 1.0 54.1 - (4.3) 49.8
At 31 December 2021 (4,979.5) (189.8) (4,040.2) (9.9) (20.3) (9,239.7) 8.0 354.3 (8,877.4)
Net debt as defined in note 2, which included dissenting shareholders' term
loan, excludes an embedded derivative of $36.1m (2020: $103.6m) which was a
non cash movement in the year and equity warrants of $39.0m (2020: $97.2m)
explained further below.
Cash flows from bank loans, loan notes and bank overdraft in the current year
of $458.0m (2020: $1,080.4m) are made up of the following:
31 December 31 December
2021 2020
$m $m
Repayment of bank loans and overdrafts 55.5 54.2
Draw down of bank loans (526.2) (1,207.8)
Debt issuance costs paid 12.7 73.2
Total cash flows (458.0) (1,080.4)
In the Analysis of Net Debt table above, cash flows from convertible bond
includes the full cash proceeds issued on 16 April 2021. In accordance with
IFRS 9, a non-cash movement of $27.8m of the conversion feature was allocated
to derivative liability in the year. In addition, a non-cash movement of
($7.9m) within convertible bond includes the amortisation and accrued
interest.
In 2020, cash flows from bank loans includes the full cash proceeds of the new
financing arranged in the prior year. In accordance with IFRS 9, $80.2m of the
transaction price was allocated to the equity warrants in prior year, which
has been recognised within non cash movements in bank loans above. A non-cash
fair value movement of $17.0m was recognised on the equity warrants between
initial recognition and year end of 2020.
In 2020, non-cash movements on bank loans also includes $0.6m attributed to
the initial fair value of embedded derivatives with an equal and opposite
non-cash movement in the derivatives column.
In addition, the non-cash movements of $118.9m (2020: $71.3m) within bank
loans includes PIK, the amortisation of debt issuance costs, accrued interest,
accrued debt issuance costs and discounting on draw down of term and Israeli
government loan.
The non-cash movement of $493.0m (2020: $67.4m) within lease liabilities
relates to the following: the interest expense related to lease liabilities of
$444.5m (2020: $349.0m), the impact of entering into new leases $91.9m (2020:
$52.8m), modifications of existing leases of ($34.9m) (2020: ($447.5m)), and
disposal of leases during the year of ($8.5m) (2020: ($21.7m)).
11. Provisions
Provisions for contracts with suppliers $m Other Total
provisions provisions
$m $m
Balance at 31 December 2020 2.4 6.7 9.1
Provisions made 2.6 - 2.6
Provisions utilised - (5.7) (5.7)
Balance at 31 December 2021 5.0 1.0 6.0
Current 5.0 - 5.0
Non-current - 1.0 1.0
Total 5.0 1.0 6.0
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. During the year, a
further provision was made based on the management assessment on contracts in
place during the year and expected claims against those contracts.
Other provisions relate to legal, sales tax and unclaimed property amounts. A
provision of $3.8m, recognised on acquisition of Regal, was utilised on
settlement of the dissenting shareholder claim during the year. A provision in
respect of royalty claims in the ROW segment was made in prior year, of which
$1.9m was utilised during the year. Based on legal advice, the remaining
provision is not expected to be used within the next year.
12. Contingent Liabilities
On 6 July 2020 the Group confirmed that Cineplex had initiated proceedings
against it in relation to its termination on 12 June 2020 of the Arrangement
Agreement relating to its proposed acquisition of Cineplex (the
"Acquisition"). The proceedings alleged that the Group breached its
obligations under the Arrangement Agreement and/or duty of good faith and
claimed damages of up to C$2.18 billion less the value of Cineplex shares
retained by Cineplex shareholders.
The Group defended these proceedings on the basis that it had terminated the
Arrangement Agreement because Cineplex breached a number of its covenants and
counter-claimed against Cineplex for damages and losses suffered as a result
of these breaches and the Acquisition not proceeding, including the Group's
financing costs, advisory fees and other costs.
The Ontario Superior Court of Justice has now handed down its judgement. It
granted Cineplex's claim, dismissed the Group's counter-claim and awarded
Cineplex damages of C$1.23 billion for lost synergies to Cineplex and C$5.5
million for lost transaction costs. The Group disagrees with this judgement
and has appealed the decision on the basis of both liability and damages.
There is no requirement to settle the existing judgement on damages whilst any
appeal is ongoing. No liability has been recognised in respect of the
judgement as based on external advice, management has concluded that it is
currently not probable that damages will be payable.
In the event that the appeals process is not successful, it would not be
possible to determine an appropriate settlement range as Cineplex is an
unsecured creditor, and sufficient liquidity would not be available.
The Group is also exposed to certain other claims in its ROW operating
segment, including in respect of royalty and exclusivity agreements. The Group
does not believe that there is any merit in these claims and does not expect
any outflow will occur as a result of them.
13. Related Parties
Transactions between the Group and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note. The transactions between the Group and its joint ventures and associates
are disclosed below.
For the purposes of IAS 24 "Related Party Disclosures", executives below the
level of the Company's Board are not regarded as related parties.
The compensation of the Directors is as follows:
Salary and fees Pension Total
including bonus contributions $'000
$'000 $'000
Year ended 31 December 2021
Total compensation for Directors 4,491.0 353.0 4,844.0
Year ended 31 December 2020
Total compensation for Directors 2,747.0 281.1 3,028.1
Other related party transactions
Digital Cinema Media Limited ("DCM") is a joint venture between the Group and
Odeon Cinemas Holdings Limited set up on 10 July 2008. Revenues from DCM in
the year ended 31 December 2021 totalled $8.4m (2020: $5.3m) and as at 31
December 2021, $3.0m were due from DCM in respect of receivables (2020: nil).
In addition, the Group has a working capital loan outstanding from DCM of
$0.7m (2020: $0.7m).
NCM is a joint venture between AMC Entertainment Holdings Inc, Cinemark
Holdings Inc and the Group. As at 31 December 2021 $10.1m (2020: $0.2m) was
due to NCM in respect of trade payables and $3.8m (2020: $1.0m) was due from
NCM in respect of trade receivables. Revenue received from NCM in the year
ended 31 December 2021 totalled $91.1m (2020: $83.7m).
AC JV is a joint venture between AMC Entertainment Holdings Inc, Cinemark
Holdings Inc and NCM. As at 31 December 2021 $2.6m (2020: $0.2m) was due to
Fathom AC in respect of trade payables.
Revenue received from Black Shrauber Limited in the year ended 31 December
2021 was nil (2020: $0.1m).
Global City Holdings N.V. ("GCH"), is a company in which Moshe Greidinger and
Israel Greidinger, Directors of the Group, have a controlling interest. During
the year, the Group made lease payments of $9.1m (2020: $6.1m) to companies
under the control of GCH. At 31 December 2021 $57.1m (2020: $59.6m) in lease
liabilities were included within the Group's Statement of Financial Position.
The Group had amounts payable of $13.6m (2020: $0.2m) by companies under the
control of GCH.
No related party transactions other than compensation have occurred during
both the current or prior financial years with key management personnel.
All related party transactions were made on terms equivalent to those that
prevail in an arm's length transaction.
14. Annual Report and Accounts and Annual General Meeting
The 2021 Annual Report and Accounts and Notice of the General Meeting will be
posted to shareholders and published on the Group's website at
www.cineworldplc.com in April. The Annual General Meeting is to be held on 12
May 2022.
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