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The market

The geographic spread of the Group provides us with diversification and opportunities across both mature and growth markets.

Characteristics of the Cinema Market

The Group operates in nine territories and, as measured by number of screens, is either the number one or two operator in each. The nine territories are a blend of mature and growth markets which provides the Group with varying opportunities, including expansion and modernisation. Mature markets such as the UK and Israel tend to be characterised by higher admissions per capita, higher average ticket prices and a lower population per screen ratio. Growth markets have the opposite characteristics and provide great investment potential for the Group.

Structure of the Market and Competitive Landscape

There are four significant cinema chains in Europe, the Middle East and Africa, with over 1,000 screens. The cinema industry globally has recently seen an increase in acquisition activity, with AMC Entertainment acquiring Odeon during 2016 and subsequently they also recently announced the proposed acquisition of the Nordic Cinema Group. Outside of the top four chains, the rest of the market is represented by smaller multiplex operators, which only operate in one or two territories, and independent operators which are specific to local markets.

External Factors

The cinema industry is dependent upon the customer choosing to spend disposable income on watching a movie. Value for money remains an important factor and cinema has tended to be a less expensive form of entertainment in the wider leisure market in which the Group competes. Historical trends and patterns show that cinema attendance is most closely related to the quality of the movies rather than the gross domestic product (GDP) of a country.

Although there continue to be developments in the online video sector, superior experiences offered by technologies such as IMAX and 4DX are ensuring that watching a movie in the cinema is a unique experience which cannot be replicated at home or on a portable electronic device. Going to the cinema has also become more that just watching a movie, with the expansion of the retail offerings including coffee shops and bars.

The customer experience has also been assisted by developments in technology, such as the ability to book online and through mobile applications. In addition, the digitalisation of cinemas has resulted in both a greater range of films being offered, and the streaming of live events such as opera, theatre and ballet.

Market Performance

The industry is largely dependent on the quality of films and therefore the appeal of such films to the cinemagoing public. Box office revenue is driven by admissions and average ticket price. Admissions depend on the number, timing and popularity of films. The average ticket price is driven by film mix, format of the film i.e. IMAX, 3D, Superscreen or 4DX, the demographics of admissions and local economic factors such as local levels of disposable income and competition.

Information accurate as at 9 March 2017