Everyone. Hope you hear me well. Good. Thank you for coming. Okay. We'll go through the agenda very briefly. Transaction highlights, Cineplex overview, creation of the leading cinema operator in North America, transaction structure, expected timeline, and summary. We'll start with the highlights, and most of you are aware, but we'll go through this briefly. Acquisition of Cineplex, it's the number one exhibition circuit in Canada, holding 75% of the market share in the Canadian market. 165 cinemas with approximately 1,700 screens. Highly synergetic deal, I think that what jumps out immediately when we looked at the acquisition, and when we analyzed it in the past few months, and very deeply in the last few weeks. Really great synergetic opportunity, which means $130 million run rate as a combination benefits.
Of course, this will be reached by applying best practice, by sides of revenues and by side of costs. We will go in details in a few minutes. Post synergy, we are showing a business which will be on the level of a multiplier of 6.3x. We believe it's really a big business opportunity for Cineworld Group. We are happy to do this deal. Double-digit accretive earnings, free cash flow in the first full year. Of course, all the deal is debt financed. We are not going into the shareholders this time to raise any equity. Naturally, the debt will go up, but w e are committed to bring it down towards the end of 2021, back to the level of approximately 3x. I think management have proved already twice our capabilities to do this. We did it once following the Cineworld deal back in 2013.
At that time, the ratio, if I'm not mistaken, went up over 3x, and on the eve of the Regal deal, we were close to a ratio of 1x. Same happened with Regal. Regal, the ratio of debt to EBITDA went up to the region of 4.2x or even 4.3x if I'm not mistaken, and we took it down this year. At the end of the year, before the Cineplex deal, we will be in the region of 3.3x, and on our way to stand into our targets for next year. We are creating, by this move, the largest cinema circuit in North America. Scale matters in this business and gives us also some other benefits above the synergetical benefits as a whole. Needless to say that our family, which holds 28% in Cineworld, is fully behind and supportive of the deal.
Maybe if I can add one more point, yes. We are buying a very good company. There are not many good assets that you can buy. This is a good company, well-run, well-established, with good cinemas in the Canadian market, with very good position. There's not many opportunities like this. We really believe that to put these two companies together, and that's what we are doing, we take two very good companies, we put them together, and we think that here really one plus one is going to equal more than two. There are not many opportunities to find companies like this.
If we are going into operational best practice and things that are on the table here. I think first, of course, and if you ask anyone in the management in Cineplex, and you will ask anyone in the management of Cineworld, the success of Unlimited is really indisputable. Great performance in the U.K., also in Poland, by the way, and a great success in the launching in the U.S. We just launched at the end of July the Unlimited in the U.S., and this is really performing over expectation. There is no Unlimited program yet in Canada. It was on the plan. We will have the ability because of also the fact that we are using a very similar systems in the box office to implement Unlimited subscription in Canada very quickly.
This is really to support cinema lovers that want to see many movies in a month. One of the stages is, of course, the subscription. The second thing is the online opportunity here is also big. There is a big move that current management of Cineplex initiated that are going to conclude reserved seating in the cinemas in the first quarter this year. We, for sure, support it. We are great believers in reserved seating as part of the quality of the service, but this is pushing incomes from online. This is also giving the customers some more relaxed atmosphere when they are waiting in the lobby before the movie starts to spend some more money in concession. This is a big point for us on the way of increasing revenues. Concession, I touched it. I think there is two main things.
First of all, of course, reserved seating supports concession income, this is proved. The second thing is really that between the two companies, best practice and best cost can be achieved from both sides. By the way, we might find some things that Cineplex are paying less than we do or the other way. In any way, this will mean a big saving for the company. Cinema advertising, again, a good, solid, strong performance in cinema advertising in Canada. It's a good market for cinema advertising. Some of you are aware of the changes that we've done already in the U.S. in this, and which have proved to be successful for Regal. Here again, we believe that on scale and on best practice, cinema advertising income can be increased and improved and will be a great contributor, especially as a very high margin income.
Last, but definitely not least, is cost efficiency, which of course is another main point on the strategy with regards to the synergies. Nisan, maybe you take the next slide.
Yeah. Can you hear me?
Not now.
Try to speak loud. If I move to the synergies, similar to two years ago with Regal, this time we hired Ernst & Young to be our synergy advisors, and we spent the last weeks and months to learn the business from close and to complete all the synergies DD. The level of synergy on a run -rate basis is coming to $130 million after, I will say, by the end of 2021. We are dividing the synergy into two, I will say, group. One is cost efficiency, and the second one is business initiative, which is more impacting the revenue lines. If I'm going deeply into the cost efficiency, we're talking about commercial scale, streamline of functions, infrastructure consolidation, and removal of Cineplex to be a listing company and all the expenses that link to it. This is about $65 million.
If you talk about the business initiatives that Mooky described before, here we're talking about best practice across the group, which is one online channel, including seat reservations, subscription program, which is our Unlimited program that we launch successfully in the U.S. this year, and t he advertising segment, which is well run right now in Canada, but we can achieve some synergies also in this segment. I will mention maybe another point, this is the tax structure, which is much more, I would think, simple than it was two years ago when we acquired Regal. Canada is, I can say, a bit more friendly from a debt financing point of view. We will be allowed to claim 100% of the interest tax cost here, which will contribute positively to our cash flow going forward.
The pre-tax cost of implementing the combination benefit is approximately $20 million, mainly in 2020. The impact on EBITDA in first year is between $50 million- $60 million positive impact on EBITDA. It depends really when the deal will be closed. If it will close end of March or end of April, maybe it can change a bit. The run -rate of the synergies in the first year is about $120 million. Moving to the next slide, transaction expected to be double digit accretive to earnings and to free cash flow. EPS accretion, dilution, post IFRS 16, 2020 accretive, 2021 double digit accretive, the same free cash flow. ROIC is positive from a WACC point of view.
This deal is strongly, I will say, accretive in the beginning of the transaction, meaning 2020, and in the following year, 2021.
A few words about Cineplex itself. As Israel said before, a great company, good management, really took this business all the way to become a very strong exhibitor in Canada, covering 75% market share in the country. This was done through all kind of ways of acquisition and natural development. Currently, 165 cinemas with close to 1,700 screens, representing great numbers on both revenue and EBITDA. Canada, in general, a population of 37 million, which is smaller than U.K. If we compare, we try to find some similarities. On the other hand, selling more tickets because it has more cinemas, than the U.K. Naturally, as we know, North America is a very healthy market for visiting cinemas. There are two main lines. First and foremost, of course, representing 80% is the theater exhibition. I think you're all aware to this business. Very high-quality cinemas.
By the way, cinemas are really looking in a good shape and really starting have a lot of premium concepts, which are very advanced, like IMAX and their special screens, what we call in the U.K., the Super screens, which is the UltraAVX. A very successful concept in Canada. Very early stages for 4DX and ScreenX. There, which is, again, a good opportunity for us. We are going to put many 4DXs. The proof success of 4DX in the U.K., in the rest of the world, what we call Central Europe, and above all, the huge success of 4DX in the U.S., gives us confidence that this is also a good move for us in the Canadian market as well as ScreenX.
There is also a non-exhibition, what is called business, which is on one hand, a digital place-based media, and on the other hand, a big entertainment segment, which deals with gaming in cinemas. Businesses have a big growth potential. Cineplex is a supplier of Regal and also supplier of Cinemark, the third largest circuit in the U.S. of gaming equipment and operation in this, and some entertainment centers that are called Rec Room and Playdiums, different sizes, a bit different concepts, but also a business which is positive in EBITDA and cash flow positive and growing very nicely. If we go, again, to the side of the theater exhibition, I think we mentioned the numbers already. A strong presence of premium formats, as you can see, 476 premium format.
Another very strong element in the theatrical business that really goes to the credit of Cineplex is that they have 10 million members in a very unique loyalty scheme that they are running in partnership with Scotiabank, which is the third largest bank, I think, in Canada. The great cooperation there gives them a lot of data, a lot of opportunities to give special offerings to their customers. Data today is a big part in the world. We have our own Crown Club in Regal. We have our own My Cineworld in the U.K. This is a very important scheme in Canada, is really called Scene, and is a very successful one. Apart from this, I think there are general information here and numbers that we have mentioned already. If we continue about the high quality of the cinema.
As I mentioned before, very strong presence of IMAX. IMAX originally come from Toronto. UltraAVX, big success, what we call in the U.K. Super screen, Cineplex VIP, and D-BOX also. You see here on the other side, the growth opportunity, only two 4DX because it just started, and one ScreenX. Both of these formats are gaining, as I said, big success and giving us a great growth potential in the Canadian market as well as in our other markets. I mentioned before, by doing this deal, we are becoming the largest cinema exhibition circuit in North America. You can see on the slide here, how it looked before and how it is going to look now. AMC will be with 8,043 screens, while Cineworld will be with 8,906 screens. Again, I say it always, number of screen is not what counts.
What it counts really is the bottom line, is the EBITDA, the cash flow and the profit. There is a meaning for scale in this business. There is a meaning for consolidation in this business, we saw a lot of consolidation in recent year in the exhibition side and in our industry, by the way, also from the studio side. Disney and Fox was really the most glamorous deal, I would say, in the industry in recent years. Consolidation is part of the life today, not only in the cinema industry. This is where we are in the North American market. If we look at the Canadian market, there is one player there, which was Landmark, bought by Kinepolis, which is well-known here from their European operation, the Belgian company and others are other players.
If we look at the company combined, numbers are relatively self-explanatory. We will get close to 400 million customers visiting our cinemas in every year, and almost 1,000 sites. We have here good numbers to try and approach. More than 11,000 screens. If we look at December 2018 numbers, you see here also the numbers of revenue, EBITDA and EBITDA CapEx. Nisan, you want to do this one?
Yes. If we move to the next slide, we can see we are very confident that in our ability to deploy our best practice from a Regal acquisition. I think it gave us a lot of experience and know-how to implement similar things that we did two years ago in this transaction. Just to mention a few items from Regal acquisition, we upgraded the synergy levels from $100 million to $ 190 million a week ago. This is a run -rate of $190 million. Maybe we should show here from $100 million, we have first upgraded to $ 150 million, last week we have upgraded another time to $190 million. From an EBITDA margin point of view, U.S. adjusted EBITDA margin 2017 pro forma was 22.2%, the first half of 2019, it's almost close to 24%. The leverage, as we mentioned before, March until we're 4x.
We even a bit higher if you look on pro forma. We took it down to 3.3x net debt to EBITDA. That's about the Regal deal. If we're talking about the Cineplex acquisition, we are talking here again about $130 million of synergy. You can see the difference in the margin between Cineplex theater exhibition to Regal. There are many reasons to this, definitely it give us an opportunity to work hard and to close this gap. Our goal is to reduce the leverage from 4 x. That's the leverage that will start pro forma post synergies. That's the leverage that will start day one, pre IFRS 16, towards 3 x. If we maybe go back to the slide before, you can see the cash conversion of close to $1 billion.
This is EBITDA before implementing the synergy, reduced by the CapEx, showing you really that this business together is creating material free cash flow, and that's what we are counting to use in order to reduce the leverage in the next one year and a half.
Okay. Continue.
Transaction structure and expected timeline. Again, if you look on the left, the offer price is CAD 34 per share. We are committed debt facility of approximately $2.3 billion. Bank of America, HSBC and Goldman Sachs are financing this transaction. Transaction is fully underwritten by them. As I said before, pro forma December 2019 leverage multiply of 4 x, including full synergy, combination benefits. The goal is really to go to 3x end of 2021. Our plan is to maintain the current Cineworld dividend policy of 55% payout of our net profit, our EPS. The board of both company fully supporting the transaction and intend to recommend the shareholders to vote in favor. The transaction announced today morning. In January, we are going to apply the circular to the Cineworld shareholder. Cineplex will do the same to their shareholder.
In February, we expect to go to the shareholder meeting, and hopefully we'll close the transaction end of March, beginning of April. It's subject to approval and clearance of the Canadian government. The cinemas are culture activity there, and some possible which we need to complete in the next few months. Summarizing? Okay. Summarize.
Okay. Summarizing, I think, goes here again to the point where we started. We are really buying here a great business, I think with a very good team, which is running it, led by Ellis Jacob. You know, he's the guy who took it all the way from childhood into maturity. Really, we worked in a great cooperation with the Cineplex team. Both companies are fully b ehind this deal, and we believe that we are really presenting here a great business opportunity, again, based on synergies and based on best practice between the two groups. I know there are a lot of rumors or discussions around how it's going to look the 2020 slate, which becomes more and more important for us. I say it everywhere, so I will not say it for the first time here.
I think that the 2020 slate is great. I think that although we had this year the biggest movie of all time, Avengers: Endgame, we had a sensational success in October with the Joker and probably Star Wars is going to break new records three days away from now.
Yeah.
At the end of the day, this year was not as good as expected because of many loopholes through the years. If you look at this product, on one hand there is no Avengers or Star Wars, but on the other hand, the combination here of the movies, and there are more even than what you see on this slide. You'll see in a minute a clip that shows them a little bit more live. I think it is important to emphasize, first of all, we know already what is going to be the number one movie in the U.K. next year, which is James Bond. This question is solved. We need to remember that both Bond and Wonder Woman moved from 2019 to 2020, it's a big strength for 2020. There are two new Marvel movies. There are two new Pixar movies.
There is a new Christopher Nolan movie, which looks really amazing, which is coming on the summer, and many other movies that I will invite you to share with us in the next three minutes, and then we will move to the Q&A. Just saying, when you hear the sound here, you understand why it's good that Bank of America will continue to deal with banking, and we will deal with exhibition. It gave you the right message, I hope. It's good. Q&A. Yes, please. Please. Oh, here the microphone is coming.
There's a microphone.
Morning. Thank you. Ivor Jones from Peel Hunt. Why is there an extra termination clause in the agreement relating to Global City Theatres? I haven't seen anything like that before. Why is that needed, and why is that in the press release? The other simple question is, are there any antitrust issues to be dealt with? Are there any Cineplex screens to close? Thank you.
First of all, there is no termination clause that has to do anything with GCH. GCH just announcing in the press release its support of the deal. We own 28% of the shares.
Maybe there's something about the breakup fee now.
In addition, Cineworld's majority shareholder agrees to pay an additional termination fee if the acquisition agreement is terminated.
This is just for termination. In case of termination.
We always have the problem, we also had it on the Regal transaction, that it's very hard for North America to accept the fact that you have the limitation by law in the U.K., that you cannot pay any termination fee, which are higher than 1% of the market cap of a company. People in North America are not used to it. We had the same issue in our Regal transaction. At the end of the day, when you sit late at night in the negotiation, you're saying, that's the only thing I can do because that's what the law is saying. Sometimes people push us as a main shareholder, and we are willing to show a good face by adding more. It's nothing material.
It specifically refers to the potential of GCT bidding for Cineworld. Was it your intention to highlight that with this clause?
Based on, again, I'm speaking for lawyers, yes, and I'm not a lawyer. Based, again, on U.K. law, the board can change its mind about the transaction for various reasons. Theoretically, if there is any bidder who is coming tomorrow and offering GBP 10 million for Cineworld, the board of Cineworld can say, sorry, Cineplex, we're selling Cineworld. They started to raise an issue on what's happening if this is GCT. Yes, which is us. We said, GCT have no intention to do it. They said, fine, if you have no intention to do it, so agree to pay extra if it's going to be you. We said, fine, we don't have any intention. Technically, either way our lawyers are spending your money.
Our lawyers, that you pay them by hours, are spending your money to argue these points, and you have to pay them at end.
Okay. Thank you.
Technical point. From point of view of this third question, I remember was Cineplex were not planning to close any screens apart from something in the normal course of business, maybe a lease which ends or something like this. By the way, three new cinemas to be opened by Cineplex next year. The second question was?
Was antitrust.
Yeah. The deal's conditional. No antitrust issues because we don't have any activity in Canada. Okay. We need, by the way, to get the approval of the Canadian government, which is common in Canada. This is a process. This is why the reason we are not saying closing is expected in three months, might take up to six months. Not rejected, as most of the history shows, but i t is still a process that some regulations that we need to pass.
\Okay. Thank you.
Yeah, thank you very much. It is Julian Easthope from RBC. Just a few sort of housekeeping things initially. In terms of the new debt you have taken on, is it on the same interest rates as your existing debt? Are there any sort of covenants attached to the debt? Second question is just a question of timing. Clearly, it comes quite soon after Regal is still sort of going through the restructuring process in terms of the new sites being redeveloped. I just was intrigued to know, did they actually come to you to sell the deal? What was the structure of the way that it was decided, of the timing of this decision? Whether you have the management in depth now to actually carry on and complete your plans. Just again, a piece of housekeeping.
Will you actually have the Canadian business as a separate division or will you incorporate it into a North American division when you report? Thank you.
You can start.
First of all, of course, the Canadian business is a big business, but it will be integrated as part of the group. There will be for sure, a main office, head office, continue to be in Toronto. As well as we share between the territories, responsibilities of different things, part of the things will be run from Knoxville, some part of the things from London, part of the things from Toronto. For sure, everything is going to be integrated at the end of the day. The other question was on the covenants, yes or no?
No, why? I think you said why.
Why? It was at a certain stage, it was not really one side that initiated it, but Cineplex, in a way, as we understand, started talking to different opportunities, different groups. We were one. We know the people there for many years, and it really pushed forward in the last couple of months, and this is the result.
About the debt and the structure, we are raising here a debt on top of the Term Loan B that we holding right now. The current agreement that we have with our lenders, there is enough headroom, I would say, to raise most of the funds on top of the Term Loan B that we have now. We might need to take some small bridge loan in order to complete the full transaction, but we'll pay it in a short time from our free cash flow. The debt cost will be probably similar to what we have now.
I'm not expecting, at least the bankers or advisor, are not expecting some decrease or increase from the level we are paying now. The last question was about the segments. Look, there are some accounting rules which still need to be learned and analyzed, if we need to treat it as a different segment. I think our first intention is to look on U.S. and Canada as a North America segment. On the side of U.K. and the rest of the world, we need to analyze it internally between us and think really we might maybe change it and now look on this North America and out of North America. It's something to be analyzed in the next few weeks.
Thank you.
Morning. Owen Shirley at Berenberg. Just on the 20% of sales from the non-cinema businesses. There was a line in the statement that suggested perhaps you might consider those non-core. Would you consider selling those? What could drive that? On synergies, just would you be able to give any more details about what percentage of bookings are online, where you think you can make improvements on advertising? Thirdly, just on the cost of debt or on the debt structure, will it be floating like the existing debt?
If we start with the issue of the synergies, I think that it is, in a way, in some of the aspects, is similar to what we had in Regal. I remind you, people that remember, when we arrived to the U.S., the number of tickets that were sold online in Regal were in a region of something like 15% or 18%. We are now on the level of approximately 40%, and even growing. In busy weekends, it even goes higher. This is a result of mainly reserved seating, but also marketing. We had a great app. We have a great application that is doing this. Really, once you give this service, people are embracing it and using it. The bigger the movies are, also the big use of this is there.
We believe that by implementing reserved seatings, as I said, it was on the table already by the management there, this will grow in a substantial way. In the advertising, again, there are all kind of changes currently in the industry. We just implemented a post-show advertising in U.S., for example. There is a post-show advertising, like in Europe, also in Canada, but there's also a pre-show, so there is a potential for efficiencies there, and savings and increasing in sales. Really, if we talk about the synergies potential, this is in what we can say, in a way.
Yeah. A question about the floating. Yes, it's floating. However, part of the debt we will raise in Canadian dollar by doing a swap in order to match the cash flow to the debt. I think we are saying all the time about currencies, that the type of our business is, I would say, helping us to hedge any future increase in interest cost by, for example, increases prices in order to limit, I would say, any cost or interest cost increase in the future. It's something that we are analyzing it from time to time and taking a decision going forward.
The last question was about the other businesses. Again, as I said, these businesses are giving a good income. They are growing nicely. It's a good add-on to the business. On the other hand, is not the main core business. There are all kind of possibilities that we will analyze and check, but currently this is part of the EBITDA, and this is part of the cash flow, and this is part of the growth story.
Thank you. Daria Fomina, Goldman Sachs. I have two questions, if I may. Sorry for, again, asking about the debt. Your leverage target, taking it from 4x to 3 x, or closer to 3x in just a year. Looking at the operating cash flow, all the dividends and everything seems to be quite a bunch of deleveraging, given that both numbers include synergies. Is there anything in the cash flow statement or anything in the deleveraging that you have that is beyond the P&L? Any one-offs, any incremental cash flow on disposal of some of the assets that you mentioned that is in that target? The second question is on the operational risks. Obviously, U.S. business, North American business now is going through refurbs of the cinemas, and it's going to be part of the same bigger North American region.
How do you manage the operational risks in terms of stretching the management efforts there? Is it going to be different people running completely the Canadian business? Just again, put into perspective that you expect to extract some of the synergies from just the managing the cost and the headquarter expense as well. Is there any operational issues that you are worried about in terms of the turnaround of the U.S. business?
Okay. We'll start with the debt. The debt is not planned to be go down in one year, it's two years. It's end of 2021. We have still two years ahead of us. We are not having currently on the table any one-offs. We are considering all kind of alternatives there, and they might be. This time, if we do any sale, it will go only to the debt. Remind you that when we did the sale and leaseback in Regal, we used 50% for reducing the debt and 50% for the dividend. We felt it was the right thing to do as shareholders invested in the right issue when we did the Regal deal. In this stage it's not the case. If we will have a one-off, it will go directly to the debt. It's too early to say. Second thing is with the operational synergies.
There are very good teams on both sides. Naturally, some of the things can move into the U.S., even some of them maybe will be in Europe. We are today having our service center for the U.S. done in Poland. There are all kind of opportunities here. Some of the things are natural, local and has to stay local. If we talk about part of the marketing activities, if we are talking about issues of service, if we are looking about controlling operations and things like this. The actual way how it's going to be structured, we'll know a little bit in a later stage. There will be, for sure, things that will be run from Knoxville, and there will be things that will be running from Toronto. At this stage, it's too early to say exactly how it's going to be structured.
Thank you.
Hi, it's Natasha Brilliant from Citi. Just coming back to the leverage, you've given us a target on a pre-IFRS 16 basis. Could you give it to us on a post-basis as well, please? Secondly, updated CapEx guidance. It sounds like we're not going to see a big sort of refurbishment program as we have done in the U.S. Could you just give us an update to your CapEx guidance for the next couple of years while the U.S. is still rolling out, and then also in the medium term, once that's come to an end? Finally, given the sort of increased geographic footprint in the U.S., is this a business that's best listed in London, or would you consider moving the listing to the U.S., and what would be the considerations around that?
I'll start. Regarding the IFRS 16 leverage, as you say, pre-IFRS 16, we are targeting to be net EBITDA 3 x, post-IFRS 16, it will be approximately 4 x.
About the listing, I think that even though theoretically it might make sense for a company like us to be listed in the U.S., we are listed in the U.K. That's where our shareholders are. To make a move, to move from here, we need 75% shareholder support. It's a very big step. I know that other tried and didn't work out. I think we have a lot of better things to focus on our plate than to move the listing. You'll probably continue seeing us here at least for a while.
Sorry, can I just come back on the CapEx guidance as well?
Yeah. You ask about the CapEx. I think that CapEx plans are not going to change dramatically. We don't see ourselves doing less or doing more than what we expected. There is a good business in Canada. We are going to invest in Canada. It's definitely. We don't believe in holding cinema businesses without investing, and we are going to invest in Canada. At the end, we always say, and we continue to say, we have three main legs of what to use the cash flow for. One of them is investment, one of them is dividend, one of them reducing debt. We think we are generating enough cash to support the sale of them, and that's what we are going to do.
Thank you.
I will take a question.
Hi. Richard Stuber from Numis. Three questions, please. The first one is on EBITDA margin.
Everyone asks three questions. It's like a tradition.
Okay.
If anyone have only two questions is fine as well.
In terms of the EBITDA margin, 18% at the moment, 23% in the U.S. Obviously, there's various synergies and cost savings you can do to get that up. Are there any structural reasons why they shouldn't be equal, so in terms of like the rent as a proportion of revenue or labor costs or anything else? The second question is, in terms of the Unlimited, when you're rolling that out, obviously, it took a while for the U.S. version to launch. How quickly can you launch the one in Canada? Are you going to start very quickly sort of discussing studios around pricing terms? The final question is, could you just tell us, so what your assumptions are for the U.S. box office for this year and next? Thank you.
Okay. We'll start with the box office U.S. I think we just show the product. There are some estimations that are coming and talking about a negative number. I think that if you ask me according our experience and how it's going to look, it will be anywhere between -2% to +2%. Towards this year, as again, I said, are not going to be huge peaks, but on the other hand, there are going to be a big number of very big movies. Very strong characteristic of the product of next year, if you noticed a bit, is the family product. Families, I remind you, are going in big numbers.
We are optimistic with regards to the box office in the U.S., or if we call it now North America, because you know that the studios are using to include Canada in the North American box office. When you see an opening result of a movie, it includes also Canada. This is with regard to the assumptions. In the Unlimited, for Canada will be quicker than it was in Regal. We set already, not for Canada, of course, but we set already understanding and rules with the studios for the U.S. It not need to be different in a big way in Canada. Technically, both companies are using the Vista system of selling the tickets in the box office, so the integration is not going to be too complicated.
There will need to be, of course, adjustments and things. We can expect, I believe, Unlimited from closing at a gap of something like six months. Yes, I think. Something like six months. We look good, is that for the margin?
Yes. As for the EBITDA margin, look, in every territory, even the territories that we are operating, you will find a different EBITDA margin. I think the main reason probably for the difference between the U.S. margin that we are operating than the Canadian, it's combination of few things. I will mention maybe two, three, just to give you some idea. One is the average ticket price in general in Canada is lower than the U.S. market, and there are some cost lines there that still need to be analyzed. For example, cost of concession is a bit higher there. On the other, there are some other lines which are working in better, I will say, performance than we have in different territories. I think that by the end of the day, it's just an opportunity for us.
An opportunity for us to work hard to implement the synergies and to bring the EBITDA margin to our level or even better.
Thanks. Ed Young from Morgan Stanley. I'll ask two questions just to be good.
You are the winner.
Thank you. The first question is just on the non-core assets, the Cineplex headquarters, for instance. Can you give us any numbers around what there is that you could do to dispose of assets, what those kind of assets contribute, what they might be disposed for, and pay down debt? With that, is there any opportunity for any sale and leasebacks within the Cineplex estate?
The easy answer is that there is no sale and leaseback options. All the cinemas are leased. Regarding disposal, I think it's an early answer, yes, which means we have to analyze, we have to do work, we have to learn these businesses. We have to know exactly what they're doing. We learned the due diligence, but the due diligence, relatively quick process. What we know, these are good businesses that are generating positive cash flow, and we're going to work hard now between the selling and the closing to analyze what's the best way to go forward with them.
Okay.
I think just to add to this also, that there is growth potentials in this business, which are continuing to grow. Part of it is the deal they just signed with Cinemark, as I mentioned, and of course, the Regal deal. This company is active with the gaming and all these things also in the U.S. There is a growth potential. It's a healthy business, and whether it will be disposed or not, we'll see on a later stage.
Thanks. The second one was on that growth potential, I guess, because it's a company I don't think probably many of us know that well, but it looks like it's been seeing EPS downgrades for the last four years, attendance is down every year for the last four years. Is there anything we need to understand, given you said it's a well-invested estate, et cetera, a well-run company, is there anything we need to understand about the Canadian market in particular, or things that you look to change operationally to sort of turn that around? It seems sort of slightly at odds with what you've been saying so far.
I think that this is quite a stable market, a flat market in a way with admissions. Is not, in a way, very much different from other markets, except from the emerging markets, which are really growing. If we look at our Central European operation, there you really see a big growth in admissions because of infrastructure, et cetera. These are mature markets. I think that we see clearly that everywhere we're implementing a program like Unlimited, there is a growth in admissions, really gives opportunity for people that really love to go to the movies to go more. The growth in this business is coming from new sites. The growth in this business is coming from new premium offerings.
We need to remember that once you implement, let's say, a new 4DX, it comes with a premium charge, same as IMAX is doing, or same as the UltraAVX, and same as the ScreenX. There is a VIP opportunity, which is also bringing a growth, not so much in admission, but in box office and in revenue. Really, it is the opportunity there is open. Cineplex put a lot of effort in their VIP offerings, and as I mentioned before, there are three new cinemas that will be opened this year. The Canadian market for sure have a growth potential, and we intend to give great attention to this as part of the general strategy of the group to invest. Just in the last few months, we opened three big projects in the U.K., for example, Plymouth, York, and Warrington only opened last week.
Also, we are on track, we are online. The refurbishment plan in the U.S. is now really kicked off and working already, one cinema after the other. In line with this, and really adding now the Canadian operation to the group is a very strong and important move for the group.
Thanks very much.
Hi there. Heidi from UBS. Can I ask, similar to what's been asked before, but just to confirm, your guidance around getting to near 3x by FY 2021, can I confirm that that is based on a flat box office expectation for both years? I understand you don't like to forecast the box office, but have you been more conservative than the zero you typically talk about? That's first.
Yes. The answer is yes.
Yes?
It's a conservative number, obviously.
If box office will double, we're going to reduce it faster.
Just checking. On the synergies, has the recent experience with the synergies in Regal allowed you to be potentially more accurate in your final expectation for synergies around the market, or have you built in an equal level of conservatism?
I would say that when we did the Regal deal, we said that we are coming to the U.S. much more experienced because of the Cineworld experience that we had before. It was the right thing to say, because one of the big differences, Regal was a much bigger deal than Cineworld deal, but one of the big differences for us as management was that we reached the synergies much quicker. We were more experienced. We reached it much quicker. You look now at Cineplex, we are even more experienced because Regal was really a big story and ended up with a big success. I think no one will doubt the fact that we came up planning $100 million synergies, we ended up with $190 million. It really went up and gave a great result. If we look now at Cineplex, I think openly, we are more experienced.
It gave us better tools to analyze and to look for the things we want to look at. I cannot say that here we again will have double the synergies as we had in Regal. On the other hand, I think people know us already. We are conservative with the numbers that we give. There is a potential there maybe to do a bit more. I think even with $130 million as synergies, this is a great deal to go with. If we do more, or if the box office will double like my brother is expecting, it will be great news for all of us.
Thanks. Similar to what Ed said, the Cineplex business does look to be much better invested. Just for some context, can you talk about the proportion of business that comes from premium format seems to be quite high in the Canadian business. Can you talk about how that compares to the U.S. and U.K. business as it stands?
On the premium format?
Yeah.
I think on one hand, the IMAX level there is good. Probably there is a potential for maybe a few more IMAXs. Very successful, the Super screen of Canada, which is the UltraAVX, which is doing very well, and this is why you see it in 93 screens out of 165 locations. It's a big success embraced by the Canadian audience, probably great marketing work around it. On the other end, if you look at 4DX and ScreenX, Cineworld Group is much more advanced. We came to the U.S., Regal had four 4DXs. We are finishing this year, we will have almost 40. By next year, we will have 80. Talking U.S. Now, Cineplex had plans to continue with 4DX because it's very successful. I can easily see anywhere between 12- 15 new 4DXs opening in Canada in the next year.
Depends, of course, on the date of the closing, and might take a little bit more time. Canada, for sure, have a potential for anywhere of 25, maybe even more, 4DXs and ScreenXs.
Does it have the highest proportion of premium formats as a percentage of box office of all the markets you currently operate in?
Pardon?
Does it have the highest proportion of revenues coming from premium formats of the markets you currently operate in?
Yeah, I think It, t he premiums are contributing a lot to the box office. I think that what you can also see, that once you introduce Unlimited and the customers need to pay only the premium, the usage of the premiums is going up. Once psychologically you come to the cinema and you need to add only another GBP 4 for the IMAX, and you paid already because you have an Unlimited in your hand, it also drives higher the level of the income from the premium surcharges.
Proportionally, they have a lot of screens like this, and that's what generated this really big part in the revenue there. Also, they have, to the best of my memory, they charge less as premium. They have a different philosophy of pushing more the premium format. That's why you see it in the numbers like this.
By the way, Canada is still very, very strong with 3D format, which is less so in the case in the U.S. This is a matter of taste. It's really an advantage for the Canadian business because 3D also represents a premium.
Thank you.
You're welcome.
Thank you. It's Harry Gowers from JP Morgan. Hopefully three quick ones. It sounds like management are all staying with the business. Is that correct? Obviously, increases your scale in North America even more. Does that give you any more negotiating power with the studios, or does that not really come into your thinking? Is there any kind of go -shop period for another bidder to come in? Thanks.
As for management, I don't think there is an acquisition that all management is staying. There will be, for sure, changes in management. Of course, we would like to keep part of the management with us. Some people have other plans that already we know about their future. This is early to say. We are being asked each time when we do an acquisition deal, are we going to pay less to the studios? The answer is no. I think that the studio's exhibition relations vis-à-vis the terms are very conservative. Not the same in all the countries. Each country has its history and has the reason why, and has the what we do and what we don't. I don't see here a thing. On the other hand, scale matters to the studio. We can get bigger promotions with them. We can enlarge the cooperation.
The marketing cooperation with the studios for Cineworld currently is amazing. Same with Cineplex. Cineplex being so dominant in the Canadian market is a great way for the studios to market their movies. We believe that the cooperation with the studios will only grow in a positive way, which will also mean money. For the go shop, they have a go -shop until the end of January?
Seven weeks from now.
Seven weeks from now. We had it also in the Regal deal, and we'll need to wait and see.
We have a right to match together with this go -shop.
Okay.
Thank you very much.
Thank you very much.
Thank you for coming on the show.