Everyman Media Group – Redefining Cinema

The box-office shattering films Barbie and Oppenheimer have already helped Everyman Media Group (LON:EMAN) to push its second half-year takings.

The 41 cinemas chain, with four new openings in the current trading year, is now looking forward to a dominant H2 film slate for 2023.

The £54m capitalised group has already seen the early success of Barbie and Oppenheimer at the Box Office, with the positive impact of both titles continuing into August.

It is now viewing a strong pipeline of further titles set to be released including Dune: Part Two, Wonka, The Hunger Games: The Ballad of Songbirds & Snakes, Napoleon, and Killers of the Flower Moon.

The Business

The company is a leading independent cinema group in the UK.

The business model is to further build its portfolio of venues whilst successfully growing its existing estate by bringing together great food, drink, atmosphere, service and of course film, to create exceptional experiences for its customers.

The Everyman brand is positioned at the premium end of the UK leisure/cinema market.

The company’s proposition is based upon its high quality and its unique venues in central high street locations.

The group seeks to differentiate itself by focusing on delivering a high-quality offering through its venues, content, staff and food and beverage.

Everyman has an innovative lifestyle approach for its venues, where customers swap their soft drink for a nice glass of red wine and a slice of freshly made pizza served to their seats.

The company aims to create a warm and friendly atmosphere, with an excellent food and drink selection and fantastic customer service.

It offers a wide array of mainstream, independent and classic films, special events, launches and a diverse calendar of live satellite broadcasts.

The Management believes that the opportunities to develop new Everyman venues both across the UK and more widely are significant, with new venues either being part of a large new developer-led complex, the refurbishment of an old existing traditional cinema or by the conversion of small existing spaces.

On a sales per business basis film and entertainment made up some 50.5% of last year’s takings, food and beverages was 40.9% while the balance 8.6% was made up by venue hire, advertising and membership income.

First Half Trading

This morning’s Trading Update for the first six months to 29th June reported revenues of £38.3m (2022: £40.7m) against a strong H1 2022 comparator. 

The majority of key 2023 releases fall in H2 2023, leading to a second half weighting to annual financial performance.

The group EBITDA of £5.8m (2022: £7.5m), with the prior period benefitting from the reduced rate of VAT in the first quarter of last year worth £0.9m in EBITDA, and popular film releases.

In the first half last year it benefitted from the releases of Top Gun: Maverick, Batman and Belfast.

Just as an indication of the boost of the two hit films in the last week of July, the group reported that for the month revenues rose to a record £10.6m (£7.1m) while EBITDA was £2.6m (£1.3m).

Management Comment

CEO Alex Scrimgeour stated that:

“Everyman remains an affordable and popular choice for consumers.

The record week of admissions we saw in July demonstrates both the value of original content, and the fact that cinema remains as relevant as ever.

Alongside this, we continue to see increasing demand for our high-quality food and beverage offering.

The all-encompassing Everyman experience leaves us very well placed to satisfy consumer demand for premium entertainment.

We have added three carefully selected new venues to our estate and we look forward to building on the significant momentum we have seen in July and August.”

New Banking Facilities

This morning the group also announced that it had agreed a new three-year loan facility of £35m with Barclays and NatWest, extendable by a further two years subject to lender consent.

The new facility replaces the existing £25m Revolving Credit Facility and £15m Coronavirus Large Business Interruption Loan Scheme held with Barclays and Santander.

The facility ensures that the group is soundly financially structured and well positioned to take advantage of opportunities moving forwards.

The Equity

There are some 91.2m shares in issue.

The larger holders include Blue Coast Private Equity (19.64%), Tellworth Investments (8.63%), Canaccord Genuity Wealth (7.94%), Charles Dorfman (6.44%), Adam Kaye (5.98%), Sam Kaye (5.51%), BlackRock Investment Management (5.07%) Otus Capital Management (5.07%), Schroder Investment Management (3.79%) and Paul Wise (3.28%).

Broker’s View

Analyst Mark Photiades at Canaccord Genuity Capital Markets rates the group’s shares as a Buy, with a Target Price of 200p.

His estimates for the current year to end December show a lift in sales to £94.4m (£78.8m), with EBITDA at £17.2m (£14.5m), which should lower the adjusted pre-tax losses to reduce from £1.3m last year to £0.9m.

He expects a revenue uplift next year to £114.5m, an EBITDA of £19.3m, with the loss lowering to £0.7m.

However, the analyst is already anticipating an even bigger swing upwards in 2025, to £139.9m takings, £24.7m EBITDA and a profit of £2.6m.

My View

Operating some 141 screens, the premium cinema chain, boasting High Street locations and intimate venues, should be expecting the second half weighting to be highly beneficial to its operations.

It continues to grow both operationally and financially and remains an affordable and popular choice for its consumers.

The shares, which were 112p this time last year, are currently trading at around 59p at which level they offer some strong upside potential.

With its interim results due to be published on Wednesday 27^th September, I now fix an early Target Price of 73.5p.