By Chris Bragg

Cineworld Group - 111.5p Cineworld Group was founded in 1995 by the current senior management team. It now consists of 74 sites including some of the highest grossing cinemas in the UK and Ireland.

Interestingly, in a recession cinema revenues are said to hold up well. Watching films is one of the cheapest forms of entertainment. The key measures of the UK cinema industry are number of admissions and box office revenue. Between 1995 and 2006 the number of admissions rose from 108 million to 165 million. Over the same period gross box office revenue jumped from £352m to £763m.

Interim results for the first half of 2008 were released on August 21. The biggest films in this period were Sex and the City and the latest Indiana Jones. In the first half of 2007 there were blockbusters such as Pirates of the Caribbean and Hot Fuzz, which meant that attendances were down 4.8 per cent year-on-year. Despite this fact, group revenue edged up 0.9 per cent to £137.0m with average ticket prices rising 6.1 per cent to £4.34 and average retail spend rising 5.4 per cent to £1.73 per head. Operating profit was up 19.5 per cent to £14.1m and operating cash flow before changes in working capital and provisions was very strong at £21.5m. This allowed net debt to be reduced from £129.6m in June 2007 to £125.4m despite the fact that such a large proportion of the cash generated is paid out as dividends. Basic earnings per share came in at 4.2p and the interim dividend was 3.2p per share. The yield is now approaching 9 per cent. It should be noted that the ex-dividend date was September 3, which will have had a negative impact on the share price on the day.

The second half of the year has started well for Cineworld and the outlook is good. While the company is unlikely to see rapid growth in either revenue or profitability, it has already proven that it is able to generate significant profits. Even if the economic outlook weakens even further, the company is relatively well positioned. Results in the second half of 2008 should be boosted by high profile films such as Quantum of Solace, the new James Bond movie. Family favourites Madagascar 2 and High School Musical 3 are also expected to have a positive impact and all in all the shares look attractive at the current time, especially for income seekers.

WARNING: Opinions expressed are the writers’ judgments at the time of writing. The information does not constitute a personal recommendation and readers should seek their own professional advice as to the suitability of the investments.