Everyone, hope you hear me well. Good. Thank you for coming. Okay. So we'll go through the agenda very briefly, transaction highlights, Cineplex overview, creation of the leading cinema operator in North America, transaction structure, expected time line and summary.
So we'll start with the highlights. Most of you are aware, but I'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 look at 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 $130,000,000 run rate as a combination benefit. Of course, this will be reached by applying best practice, by size of revenues and by size of costs and we will go into it in details in a few minutes.
Post synergy, we are showing a business which will be on the level of a multiplier of 6.3 And we believe it's really a big business opportunity for Sino World Group and we are happy to do this deal. Double digit accretive earnings, free cash flow in the first full year. And of course, all the deal is debt financed. We are not going into the shareholders this time to raise any equity. And naturally, the debt will go up, but we are committed to bring it down towards the 2021 back to the level of approximately three.
I think management approved already twice, our capabilities to do this. We did it once following the Sinuwal deal back in 2013. At that time, the ratio, if I'm not mistaken, went up over three. And on the eve of the Regal deal, we were close to a ratio of one. Same happened with Regal.
Regal, the ratio of debt to EBITDA went up to the region of 4.2 or even 4.3, 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 3.3 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. And needless to say that, the family, our family, which holds 28% in Synology, is fully behind and supportive of the deal.
And and and maybe if I can add one more point. Yes. We are buying a very good company, and there are not many good assets that you can buy. This is a good company, well run, well established with with good cinemas in the Canadian market, with very good position, and there's not many opportunities like this. And 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.
And there are not many opportunities to find companies like this. So if we are going into operational best practice and things that are on the table here, so, I think first, of course, and if you ask anyone in the management in Cineplex, you will ask anything anyone in the management of Cineworld, the success of Unlimited, is really undisputable. Great, performance in The UK, also in Poland, by the way, and a great success in the launching in The US. We just launched, at the July, the unlimited in The US, and this is really performing over expectation. And there is no unlimited program yet in Canada.
It was on the plan. And, 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. And this is really to support cinema lovers cinema lovers that, want to see, many movies, in a month. So the 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. And, 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, reserve seating supports concession income, and this is proved. And 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 US, 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 it's a very high margin income.
And last but definitely not least is cost efficiency, which of course is another main point on the strategy with regards to the synergies. Isan, maybe you take the next slide.
Try to speak loud. If we move to the synergies, similar to two years ago with legal, this time we hired Ernst and Young to be our synergy advisers, and we spent the last weeks and months to learn the business from close to complete all the synergies DD. The level of synergy on a run rate basis is coming to $130,000,000 million US dollar after, I will say, by the 2020, 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 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 linked to it. This is about $65,000,000 If you talk about the business initiatives that Mookie described before, here we're talking about the best practice across the group, which is one online channel, including seat reservations, subscription of a subscription program, which is our unlimited program that we launched successfully in The US this year, and the advertising segment, which is run well done right now in Canada, but we can achieve some synergies also in this segment. I will mention maybe another point, and 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 pretax cost of implementing the combination benefit is approximately $20,000,000 mainly in 02/2020, and the impact on EBITDA in first year is between 50,000,000 to $60,000,000 positive impact on EBITDA. It depends really when will the deal will be closed. If it will close March or April, maybe it will can change a bit. And the run rate of the synergies in the first year is about $120,000,000 Moving to the next slide. Transaction expected to be double digit accretive to earning and to free cash flow.
EPS accretion, dilution, post IFRS '16, 02/2020, accretive, 02/2021, double digit accretive, and the same free cash flow. And ROIC is positive. And from WAC 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. Okay.
So 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 and representing great numbers on both revenue and EBITDA. And Canada in general, a population of 37,000,000, which is smaller than UK.
If we compare, we try to find some similarities. But on the other hand, selling more tickets because it has more cinemas than The UK. And naturally, as we know, North America is a very healthy market for visiting cinemas. There are two lines, main lines. You know, first and foremost, of course, it's 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 like, their special screens, what we call in The UK the super screens, which is the Ultra AVX. 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 four d x's, the proof success of four d x in The UK, in the rest of the world, what we call Central Europe, and above all, the huge success of four d x in The US 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 potentials. By the way, Cineplex is a supplier of Regal and also supplier of Cinemark, the third largest circuit in The US of gaming, equipment and operation, in this, and some entertainment, centers that, are called Rec Room and Palladiums, different sizes, a bit different concept, but, also a business which is positive in EBITDA and cash flow positive and growing very nicely. So if we go again to the side of the theater exhibition, I think we mentioned the numbers already.
Strong presence of premium formats, as you can see, four seventy six premium format. Another very strong element in the theatrical business really goes to the credit of Cineplex is that they have 10,000,000 members in a very unique, loyalty, scheme that they are running in partnership with Scotiabank, which is the largest third largest bank, I think, in Canada. And the great cooperation there gives them a lot of data, a lot of opportunities to give special offerings to their customers. And data today is a big part in the world. We have our own CrankLab in Regal.
We have our own My Cineworld in The UK. And, this is a very important scheme in Canada is, really called SCENE and is a very, 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, so as I mentioned before, very strong presence of IMAX. IMAX originally come from Toronto.
Ultra AVX, big success, what we call in The UK Superscreen, Cineplex VAP, and D BOX also. You see here on the other side the growth opportunity, only two for the access because you 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. As 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 And will be with eight eight thousand forty three screens while, Sydney World will be with 8,906 screens. As again, I say, and I say it always, you know, number of screen is not what counts. What counts really is the bottom line, is the EBITDA, the cash flow, and the profit. But there is a meaning for scale in this business. There is a meaning for consolidation in this business, and we saw a lot of consolidation in recent years in the exhibition side and in our industry, by the way, also from the studio side.
So Disney and Fox was really the most glamorous deal, I would say, in the industry in recent years. But consolidation is part of the life today, not only in the cinema industry. So 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 KINOPOLIS, which is well known here from their European operation, the Belgium company and others are other players. If we look at the company combined, numbers are relatively self explanatory.
We will get close to 400,000,000, customers visiting our cinemas in every year and almost thousand sites. So we have here good numbers to try and approach, more than 11,000 screens. And if we look at December 2018 numbers, you see here also the numbers of revenue, EBITDA and EBITDA CapEx.
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 legal acquisition. I think it's gave us a lot of experience and know how to implement similar things that we did two years ago in the in this transaction. And just to mention few items from a legal acquisition, we upgraded the synergy levels from $100,000,000 to 190 a week ago. This is a run rate of 190.
It was maybe we should show you from 100. We have first upgraded to 150. And, last week, we have upgraded another term to 190. From a EBITDA margin point of view, US adjusted EBITDA margin, 2017 pro form a was 22.2%. And the 2019, it's almost close to 24%.
And the the leverage, as we mentioned before, March and till, we're four time. We are even a bit higher if you look on pro form a, and we took it down to 3.3 time net debt to EBITDA. That's about the Riegel deal. If we're talking about the Cineplex Cineplex acquisition, we're talking here again about 130,000,000 US dollar of synergy. You can see the difference in the margin between Cineplex theater exhibition.
To Regal, there are many reasons to this and but definitely it's give us an opportunity to work hard and to close this gap. And our goal is and to reduce the leverage from four times. That's the leverage that will start pro form a post synergies. That's the leverage that will start day one, pre IFRS 16, total of three time. And if we if we maybe go back to the to the slide before, you can see the cash conversion of close to $1,000,000,000.
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. Transaction structure and expected timeline. So again, if you look on the left, the offer price is at 34 Canadian per share. The we are committed debt facility of approximately $2,300,000,000. Bank of America, HSBC, and Goldman Sachs are financing this transaction.
Transaction is fully underwritten by them. As I said before, pro form a, December 19 leverage multiplier of four time, including a full synergy combination benefit. And the goal is really to go to free time 2021. Our plan is to maintain the current senior dividend policy of 55% payout of, our net profit, our EPS, And the the both the boards 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. And in February, we expect to, go to the shareholder meeting, and, hopefully, we'll close the transaction, March, April. It's subject to approval and clearance of the Canadian government. Cinemas are culture activity there, and some possible which we need to complete in the next few months.
Summarizing?
Okay. Summarize. Okay. So summarizing, I think, goes here again to the points where we started. We are really buying here a great business, I think, with a very good team, which is running it, led by Elise Jacob.
You know, he's the guy who took it all the way from childhood into, maturity. And, really, we worked in a great cooperation with Cineplex team, and, both, companies are fully behind these deals. And, we had 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. And, 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 the sensational success in October with the Joker, and probably Star Wars is going to break new records three days away from now. At the end of the day, this year was not as good as expected because of many loopholes, through the years. And 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 what you see on this slide. You'll see in a minute a clip that shows them a little bit more in live, but I think it is important to emphasize, first of all, we know already what is going to be the number one movie in The UK next year, which is James Bond.
So this question is solved. We need to remember that both Bond and Wonder Woman moved from 19 to 20, so it's a big strength for, 2020. But there are two new Marvel movies. There are two new Pixar movies. There is a new Chris Nolan movie, which looks really amazing, which is coming, on the summer, and many, 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 and a.
Just saying, you know, 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. But it gave you the right message, I hope. So it's good. Q and A. Yes, please.
Please. Oh, here's the microphone. Good
morning. Thank you. Ivor Jones from Peel Hunt. Why is there an extra termination clause in the agreement relating to Global City theaters? I haven't seen anything like that before.
Why is that needed and why is that in the press release? And the other simple question is, are there any antitrust issues to be dealt with? And are there any Cineplex screens to close? Thank you.
So 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 a breakup thing.
Addition, Cineworld's largest shareholder agrees to pay an additional termination fee if the acquisition agreement is terminated.
Action So this is just for termination? We always have the problem. We have the problem. We also add it on the legal transaction that it's very hard for North American to accept the fact that you have the limitation by law on The UK that you cannot pay extra, you cannot pay any termination fee which are higher than 1% of a market cap of a company. And people in North America are not used to it.
We had the same issue in our legal transaction. And at the end of the day, when you sit late and not in the negotiation, you're saying that's only thing I can do because that's what the law is saying. So sometimes people push us as a main shareholder, and we are willing to show our good faith by adding more. But it's not nothing material.
But it specifically refers to the potential of GCT bidding for Cineworld. Was it your intention to highlight that with this clause?
They were the the the there was the you know, based on based on, again, and I'm speaking for lawyers, yes, and I'm not a lawyer, but based on the, again, on UK law, the board can change his mind about the transaction for various reasons. And theoretically, if there is any bidder who is coming tomorrow and offering £10,000,000 for Cineworld, the board of Cineworld can say, sorry Cineplex, we're selling Cineworld. And and they started to resonate with what's happening if this is GCT, Yes. Which is which is asthma. We said GCT have no intention to do it.
So I said, fine. If you have no intention to do it, so I agree to pay extra if it's going to be you. And we said, fine. We don't have any intentions. It just our lawyers that can pay your money.
Our lawyers that you pay them by hours of spending your money to argue these points, and, and you have to pay them a debt. K. Thank you. Technical point. From point of view of this third question I remember was Cineplex.
We're not, planning to close any screens effect apart from something in a normal course of business, maybe a lease which ends or something like this. There are, by the way, three new cinemas to be opened by Cineplex next year. And, this? And the second question was?
Was antitrust. Yeah. I did not trust
because we don't have any activity in Canada. We need, by the way, to get 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 it is still a process that, some regulations that we need to pass.
Okay. Thank you.
Yes. Thank you very much. It's Julian Easttape from RBC. Just a few sort of housekeeping things initially. The in terms of the new debt you've taken on, is it on the same interest rates as your existing debt?
And are there any sort of covenants attached to the debt? Second question is just a question of timing. Clearly, comes quite soon after the initial after Regal and Regal is still sort of going through the restructuring process in terms of the new sites being redeveloped. I just was intrigued to know why did they actually come to you to sell the deal? What was the sort of the structure of the way that it was decided of the timing of this decision?
Will you have the management in-depth now to actually cover carry on and complete your plans? And just 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.
So you can start.
So first of all, of course, the Canadian business is is a big business and, 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, but as well as we share, between the territories responsibilities of different things. Part of the things will be run from Knoxville, part of the things from London, part of the things from Toronto. But for sure, everything is going to be integrated, at the end of the day. The other question was on the covenant.
Yes.
No. Why? I think you said why.
Ah, and why. Okay. So why? It was, at a certain stage, really starting. It was not really one-sided initiated it, but Cineplex in a way, as we understand, started talking to different, opportunities, different groups, and 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 the debt and the structure, we are raising here a debt on top of the term b that we're holding right now. The agreement the current agreement that we have with the, our lenders allowing us to, there is enough headroom, I would say, to raise most of the fund 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 an increase.
The bankers or adviser 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 on the and analyzed. If you can treat it as a if we need to treat it as a different segment, I think our first intention is to look on US and Canada as a North America segment, on side of, UK and the and 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 it's something to be an been 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 we should you might consider those noncore. Would you consider selling those?
And what could drive that? Then 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? And thirdly, just on the cost of debt or on the debt structure, will it be floating like the existing debt?
So, 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 you people that remember, you know, when we arrived to The US, the number of tickets that were, sold online in Regal were in a region of something like 15% or 18%. We are now in 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. And, really, you give this service, people are embracing it and using it. And the bigger the movies are also the big use of this is, there. And we believe that by implementing reserved seatings, as I said, it was on the 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 US, 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.
So, really, if we talk about the, synergies potential. This is in, what we can say, you know, in a
way. But your 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. But I think we are saying all the time, you know, about currency that, I mean, type of our business is, I will say, helping us to hedge any future increase in interest cost by, for example, increases prices in order to limit, I will say, any cost, or interest cost increase in the future. But it's something that we are analyzing it from time to time and taking a decision going forward.
And the last question was about the other businesses. So, 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, it's not the main core business.
So, 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.
You. Dario Ferminen, Goldman Sachs. I have two questions, if I may. Sorry for again asking about the debt. Your leverage target, taking in from 4x to 3x 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 and L? Any one offs? Any incremental cash flow on disposals, some of the assets that you mentioned in that target? And 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 are you going to manage the operational risks in terms of stretching the management efforts there? Is it going to be different people doing running completely the Canadian business? Just again, put into perspective that you expect to extract some of the synergies from just 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. So we'll start with The debt. So the debt is is not planned to be go down in one year. It's two years. It's 2021.
We have still two years ahead of us. We are not having currently on the table any one offs. You know, we are considering all kinds of alternative 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 in Lisbon 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. So 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 US. Even some of them maybe will be in Europe. We are today having our service center in for The US done in Poland. So 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 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. But, at this stage, it's too early to say, exactly how it's going to be structured.
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. So 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.
And then 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?
So regarding the IFRS 16 leverage, as you say, pre IFRS 16, are targeting to be net debt to EBITDA free time. And post IFRS 16, it will be, approximately four time.
About the listing, I think that, even the theoretically, it might make sense for a company like us to be listed in The US. We're listed in The UK. That's where our shareholders are. To 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, and didn't work out. I think we have a lot of better things to focus on on our plate than to move the listing. And, so you'll probably continue seeing us here at least for a while. So
Sorry. Can I just come back
on the CapEx guidance as well?
Yeah. I I You asked 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's 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. But at the end, we always say and we continue to say we have three main legs of, of what to use the cash flow for. And, and one of them is investment, one of them is dividend, one of them is reducing debt, and we think we are generating enough cash to support the serve them, and that's what we're going to do.
Hi. So Richard Stueger from Numis. Three questions, please. The first one is on EBITDA margin.
No, I'll ask three questions. It's like a tradition. If anyone has only two questions, it's fine as well.
In terms of 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. But underneath of structural reasons why they shouldn't be equal, so in terms of like the event 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? Have you are you going to start very quickly sort of discussing studios around sort of pricing terms? And the final question is, could you just tell us sort of what your assumptions are for The U.
S. Box office for this year and next? Thank you.
Okay. So we'll start with the box office U. S. I think we just show the product. There are some estimated, 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 minus two to plus two, and, 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.
And so we are optimistic with regards to the box office in The US, 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. So this is with regard to the assumptions. It's unlimited For Canada, it will be quicker than it was in legal. We set already not for Canada, of course, but we set already understanding and rules with the, studios for The US and 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, but we can expect, I believe, unlimited from closing at a gap of something like six months. Yes. Something like six months. We look good as 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 US margin that we are operating than the Canadian ratio, It's combination of few things. I will mention mention maybe two, three just to give you some idea. One is the average ticket price in general in Canada is lower than, The US market, And there are some cost lines there.
I think it's still need to be analyzed. For example, cost of concession is a bit higher there. On the other hand, there are some other lines which are working in better, I would say, performance than, we have in in different territories. But I think that by the end of the day, it's just an opportunity for us. Opportunity for us to work hard to implement the synergies and to bring the EBITDA margin to our level or even better.
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 noncore 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? And with that, is there any opportunity for any selling leasebacks within the Cineplex estate?
So the easy answer is that there is no selling leaseback options. All the cinemas are leased. Regarding disposal, I think, it's it's an early answer, yes, which means we have to analyze, we have we have to do work, we have to learn these businesses, we have to know exactly what they're doing. We learn the diligent, but the diligent relatively quick process. What we know, these are good businesses that are generating positive cash flow, and, and, we're going to work hard now between the signing and the closing to analyze, what's the best plan, what's the best way to go forward with them.
Okay. And
I think just to add to this also that there is a growth potential 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. So this company is active with the gaming and all these things also in The US. So 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. And the second one was on that growth potential, 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. So is there anything we need to understand, given you said it's a well invested estate, etcetera, 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?
Because it seems sort of slightly in odds with what you've been saying so far.
I think
that this is a quite stable market, a flat market in a way with admissions. It's not in a way very much different from other markets, except from the emerging markets, which are really growing. If you look at our Central European operation, there you really see a big growth in admissions because of infrastructure, etcetera. These are mature markets. I think that, we see clearly, that everywhere we implement a program like Unlimited, there is a growth in admissions and really gives opportunity for people that really love to go to the movies to go, more.
But 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 four d x, it comes with a premium charge, same as IMAX is doing or same as, the Ultra AVX, and same as the Screen X. There is a VIP opportunity, which is also bringing a growth not so much in admission, but in box office and in revenue. So really, it is, the opportunity there is open.
Cineplex put a lot of effort in their VIP offer 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 a great attention to this, as part of the general strategy of of the group, to invest. You know, just in the last few months, we opened three big projects in The UK, for example, Plymouth, York, and Warrington only opened last week. And also we are on track.
We are online. The refurbishment plan in The US is now really kicked off and working already one cinema after the other. So in line with this and, really adding now, the Canadian operation to the group is a very strong and and important move for the group.
Thanks very much.
Heidi from UBS. Can I ask similar to what's been asked before, just to confirm, your guidance around getting to near 3x by FY 'twenty one, can I confirm that, that is based on a flat box office expectation for both years? Because I understand you don't like to forecast the box office, but have you been more conservative than the zero you typically talk about? Because that's first.
Yes. The answer is yes. It's a
conservative number. If the will double, we're going to reduce it faster.
Just checking. And then on the synergies, has the kind of 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 the Regal when when we did the Regal deal, we said that we are coming to The US much more experienced because of the Cineworld experience that we had before. And and it was the right thing to say because we really if one of the big differences you know, 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, much quicker. You look now at, Cineplex, we're 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 a $100,000,000 synergies. We ended up with one ninety. So it really went up and gave a great result. If we look now at Cineplex, I think openly, you know, we are more experienced. We 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. But 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, but I think even with $130,000,000 as a a 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.
And as is 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 UK 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 IMAX's. Very successful, the super screen of Canada, which is the AVX, which is doing very well.
And this is why you see it in 93 screens out of 165 locations. So it's a big success embraced by the Canadian audience, probably great marketing work around it. But on the other end, if you look at four d x and Screen x, Cineworld Group is much more advanced. And we came to The US. Regal had four four DXs.
We are finishing this year. We will have almost 40. And by next year, will have 80, talking US. Now Cineplex had plans to continue with four d x because it's very successful. I can easily see, anywhere between, 12 to 15 new four d x's opening in Canada in the next year.
Depends, of course, on the date of the closing, and might take a little bit more time. But Canada, for sure, have a potential for anywhere of 25, maybe even more four d access and screen access.
But does it have the highest proportion of premium formats as a percentage of box office of all the markets you currently operate in? Does it have the highest proportion of revenues coming from premium formats of the markets you currently operate in?
Yeah. I think, you know, it's the premiums are contributing a lot to the box office. And, I think that what you can also see, you know, that once you introduce unlimited and the customer need to pay only the premium, the usage of the premiums is going up. So once psychologically you come to the cinema and you need to add only another four pints for the IMAX and you paid already because you have an unlimited, in your hand, it also drives, higher the the level of the income from the premium, surcharges. But but proportionally proportionally, they have a lot of screens like this, and that's what generated this really big part in the revenue there.
And also they have a, the best of my memory, they charge less as premium. So they they have a 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 three d format, which is lesser in in the case in The US. This is a matter of taste, but, it's really an advantage for the Canadian business because three d also, represents a premium.
Thank you. It's Harry Gowers from JPMorgan. Hopefully, quick ones. So 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 already come into your thinking? And is there any kind of go shop period for another bidder to come in? Thanks.
So as for management, I don't think there is an acquisition that all management is staying. There will be, for sure, changes in management. But, 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, so this is early to say. We're 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 studios' exhibition relations with vis a vis the terms are very conservative, not the same in all the countries. And each country has its history and has the reason why and has the what we do and what we don't. So I don't see here a thing. But 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.
And, we believe that the cooperation with the studios, will only grow in a positive way, which will also mean money. And for the go shop, they have a go shop until the January. Seven weeks. From now. Seven weeks, from now.
And we had it also in the Regal deal, and, we'll need to wait and see. And we have a right to match together with this golf shop. So
Okay.
Thank you very much.
Thank you very much. Thanks a lot.
Coming on the short