Cineworld and Savills

Thursday, March 14, 2019 - 10:34

“The fact MPs voted to take no deal off the table may not have legal force, but the pound is certainly taking it as making that outcome less likely, consolidating overnight gains this morning.

“Having struggled for direction early on, the FTSE 100 traded slightly higher as investors digested the news,” says Russ Mould, Investment Director at AJ Bell.

Cineworld

“Straight year-on-year comparisons in these results from Cineworld do not make much sense, though in one sense they do reflect the transformation of the group following its acquisition of US cinema operator Regal Entertainment. The number of admissions up more than 160%.

“Though on a pro forma basis, or, in English, if the group had already been a combined entity in 2017, revenue and earnings both showed pretty healthy growth too.

“Buying Regal was undoubtedly a big, bold strategic move by the company, and funding it involved taking on a lot of debt as well as launching a big rights issue. Concerns over the level of borrowings, which are in excess of three-and-a-half times earnings, have dogged the stock in the last 12 months.

“In terms of getting bums on seats, the remainder of this year has plenty of big blockbusters with the latest instalments in the Toy Story, Avengers and Star Wars film series coming to the big screen.

“Historically cinema has proved fairly resilient during periods of economic turbulence, seen as a relatively affordable treat which can help people escape reality for a couple of hours.

“Reassuringly Cineworld is not taking cinemagoers for granted as it rolls out a refurbishment programme across its estate. It will need to balance this investment with the need to rapidly reduce its debt.”

Savills

“Given the breadth of its exposure to real estate, taking in the full spectrum of property services, Savills is seen as a bit of a bellwether for the sector.

“As such today’s results are likely to have an impact beyond the company. As flagged in January, profit for 2018 was down 3%. But the reason for a negative market reaction to the numbers is the outlook.

“Despite a ‘solid start’, the company expects to see transactions fall in 2019 as global economic and political uncertainties hit demand. This warning could well shake the foundations of the wider industry.

“Beyond these macro concerns, at a micro level the company reaffirmed its backing for Yopa, revealing a small additional investment in the online estate agent.

“This comes after fellow Yopa backer LSL Property Services wrote down the value of its holding in the company by 61% earlier this month.”

These articles are for information purposes only and are not a personal recommendation or advice.


The daily market comment is written by Russ Mould, AJ Bell’s Investment Director and his team. The article highlights the movement in the main index, winners and losers on the day and any macro-economic announcements.