Cineworld Boosts Regal Deal Cost-Savings Target, Says Full-Year Revenue to Fall Short

Courtesy of Cineworld

Cineworld in London's Leicester Square

It raises its synergies goal by $40 million to $190 million, citing "significant improvements in contractual terms and the elimination of excess costs," and touts the early success of its U.S. Unlimited program.

Movie theater giant Cineworld Group, which last year completed its $3.6 billion acquisition of Regal Entertainment Group, on Tuesday reported lower revenue for the year-to-date period and said full-year revenue would come in below projections, but said it would achieve higher cost savings from the Regal deal than previously expected.

"Our integration plans for Regal have progressed well, and management is pleased to announce an increase in achievable synergies from $150 million to $190 million following significant improvements in contractual terms and the elimination of excess costs," the company said. "Further, the group has achieved better than anticipated results from revenue initiatives. The full impact of all these additional initiatives and cost savings will be realized in 2020."

Management also provided an updated on its Unlimited program, which has operated in the U.K. and Poland for several years and was launched in the U.S. in July. "The program has been extremely well received and is well on track to reach membership levels above initial management expectations by year end," Cineworld said. 

The largest cinema operator in the U.K. said its worldwide revenue for the year through Dec. 1 fell 9.7 percent over the same period last year, with the U.S. down 10.9 percent, the U.K. and Ireland down 9.7 percent (or 4.9 percent assuming constant currency rates) and the rest of the world down 0.5 percent (or up 4.9 percent, assuming constant currencies).

Box office revenue was down 12.8 percent through the start of December, including a 13.9 percent decline in the U.S., while retail, meaning concession, revenue fell 7.4 percent, the company said. 

"Given the weaker full year box office, partially offset by strong execution of synergies and revenue initiatives, management expects trading for the full year to be slightly below management's expectations," Cineworld said.

The company in May had said that the year got off to a slow start, despite the record-breaking performance of Avengers: Endgame, given such year-ago blockbusters as Black Panther, Avengers: Infinity War and Jurassic World.

"As anticipated, the box office performance for the reported period was slower than the comparative period in 2018 reflecting the phasing of major releases and postponement of some highly anticipated movies to 2020," Cineworld said Tuesday. "The second half of the year started strongly with the release of The Lion King, Spider-Man: Far From Home, the record-breaking Joker and recently Frozen 2. There are still two major blockbusters to be released in 2019 with Jumanji: The Next Level and Star Wars: The Rise of Skywalker in December."

Said Cineworld CEO Mooky Greidinger: "Despite the challenging backdrop, Cineworld has continued to execute well and our strategy of focusing on optimizing customer experience remains unchanged. There is an impressive selection of movies to come, which coupled with our extensive premium technology-led offering and exciting food and beverage offerings, will contribute strongly to our operating results and underpin our mission to be 'the best place to watch a movie.' I am confident both about the future of the theatrical business as a whole and most importantly our ability to be a leader in it."