Cineworld Group plc Annual Report and Accounts 2020 Accounts and Report Annual The Best Place to Watch a Movie ANNUAL REPORT AND ACCOUNTS 2020 THE BEST PLACE TO WATCH A MOVIE 2020 has been an incredibly challenging year for Cineworld. Despite COVID-19 causing doubts about the industry, the pandemic only strengthens our belief in our business’s future as there is a clear demand and desire among our customers to go out when it is safe to do so. We offer a superior entertainment experience with the latest technology and this offer will be more important than ever when the crisis is over. We are proud of our journey and unwavering vision to be The Best Place to Watch a Movie. CONTENTS 2020 HIGHLIGHTS Strategic Report Strategic Strategic Report Sites Screens p01–31 767 9,311 Chair’s Letter 02 2019: 787 2019: 9,500 04 Chief Executive Officer’s Review 06 Market Drivers 08 Our Business Model 10 Strategic Priorities and KPIs Admissions Group Revenue 14 Risk Management 15 Principal Risks and Uncertainties 54.4m $852.3m Governance Corporate 2019: 275.0m 2019: $4,369.7m 20 Viability Statement 22 Resources and Relationships 26 Chief Financial Officer’s Review Adjusted EBITDA(1) (Loss)/Profit After Tax Corporate Governance p32–87 ($115.1m) ($2,651.5m) 2019: $1,580.3m 2019: $180.3m 32 Chair’s Introduction to Governance Financial Statements 35 Board of Directors 38 Corporate Governance Statement Adjusted (Loss)/Profit Diluted EPS (2) 49 Nomination Committee Report After Tax 52 Audit Committee Report (193.2¢) ($913.2m) 2019: 13.1¢ 56 Remuneration Committee 2019: $293.0m 57 Directors’ Remuneration Report (including Remuneration Policy) 80 Directors’ Report (2) 87 Statement of Directors’ Adjusted Diluted EPS Dividend Per Share Responsibilities (66.5¢) – Financial Statements 2019: 21.3¢ 2019: 15.5¢ p88–177 88 Independent Auditor’s Report 98 Consolidated Statement of Profit or Loss 99 Consolidated Statement of Comprehensive Income 100 Consolidated Statement of Financial Position 101 Consolidated Statement of Changes in Equity 102 Consolidated Statement of Cash Flows 103 Notes to the Consolidated Financial Statements 163 Company Statement of Financial Position For more information visit: 164 Company Statement of Changes in Equity www.cineworldplc.com 165 Notes to the Company Financial Statements Footnotes: 177 Shareholder Information (1 ) Refer to Note 2 for the full definition and reconciliation. (2) Refer to Notes 2 and 7 for the full definition and reconciliation. Cineworld Group plc Annual Report and Accounts 2020 01 CHAIR'S LETTER Strong foundations for the future “ The Group has demonstrated resilience through what has been a very difficult year and I am extremely proud of the commitment our colleagues have shown during these exceptional times. Despite the significant challenges that COVID-19 continues to present, we look forward to reopening cinemas worldwide and welcoming our guests.” Alicja Kornasiewicz Chair COVID-19 has presented the theatrical available across most of our territories We acted quickly to mitigate our costs industry with extraordinary challenges, including the US, UK and ROW and minimise cash burn. not least the temporary closure of all territories and additional support our cinemas, and has therefore had has been provided locally through The majority of our cinema and a substantial impact on the Group’s mechanisms such as employee HQ employees were furloughed and, financial results. I am hugely grateful assistance programmes and through our proactive, direct approach to all those who work at Cineworld hardship funds. with our landlords, we secured around the world and would like to agreements protecting our rent position thank them for their hard work during Our aim since March 2020 was to with most of our key properties. In this difficult period. I am extremely maintain consistent communications addition, we raised $810.8m through proud of how the organisation has with our employees to help support new debt and an extension of our responded, and I am humbled by their wellbeing and to ensure that, revolving credit facility, secured a the commitment and dedication our once our businesses reopened, they covenant waiver and accelerated our tax people are showing to ensure the were fully prepared to deliver great year in the United States, anticipating survival of the business through experiences for our guests with a a tax refund of $200m by April 2021. this crisis. culture that places guests at the heart of everything we do. We achieved As a result of our cinemas remaining During this period of temporary closure, this through a focus on direct closed for the majority of 2020 due to our focus has been on supporting our communication, welfare, and support. COVID-19, our revenue for the year people at a time of great uncertainty, declined by (80.5%) and adjusted ensuring that the business has enough The Group’s Management concurrently EBITDA was a loss of $115.1m. The liquidity and minimising cash burn, took extensive action to reorganise and uncertainties arising from COVID-19 while planning for the reopening of simplify the business to minimise cash and current closures have led to the our cinemas. I believe that we have burn, which included salary deferrals for net impairment of assets of $1,344.5m, successfully met those objectives. the Executive Directors. The pandemic which has been reflected in the The Group finished the year in as strong has impacted our sector more than Balance Sheet. a position as it could given current others and, during this difficult time circumstances, material uncertainty of extended closure, we have tried Despite the encouraging news about remains with regards to the Group's to protect as many jobs as possible. the international rollouts of vaccines, the ability to continue as a going concern However, there have unfortunately pace and shape of the recovery remains (as disclosed in Note 1 to the Financial and inevitably been redundancies uncertain as trading remains dependent Statements). We are well placed to and reductions in working hours. on government guidance and the timing recover in the long term supported by a of key studio releases. Details of our strong backlog of movies to be released. Financial results financial performance can be found on Our financial performance has been pages 26 to 31. Our people and culture severely impacted by closure of Across the Group, a range of initiatives cinemas since mid-March last year. have been deployed to support our The immediate priorities of the senior people through the COVID-19 crisis. leadership team were our people’s Government salary support was welfare and protecting liquidity. Cineworld Group plc 02 Annual Report and Accounts 2020 Corporate responsibility As a Board, we spend time ensuring that Director, will be stepping down from the Report Strategic and sustainability our guest-centred culture is aligned to Board at the conclusion of the Despite these challenging times, and supports the Company’s strategy, Company’s 2021 Annual General managing our business in a sustainable values and business model. Meeting. I would also like to thank our manner remains a key element of our long-standing and deeply respected culture and strategy. Our customers We remain committed to achieving outgoing Board member, Rick Senat. benefit from our affordable, safe, out the highest standards of Corporate of home entertainment which allows Governance, as outlined in detail in our Cineplex access to a high quality, diverse and Corporate Governance Statement on In June 2020, Cineworld terminated the cultural offering that is essential to pages 38 to 48. arrangement agreement with Cineplex our communities. Inc. (“Cineplex”) due to breaches As previously announced, Anthony by Cineplex and, accordingly, this Our ongoing engagement with Bloom stepped down as Chair following transaction will no longer proceed. Governance Corporate employees has been vital during periods the AGM in May 2020, having been Cineplex denies that it breached the of closure and we have maintained a Chair of Cineworld since its inception in arrangement agreement and has strong focus on our people’s wellbeing. 1995. Our thanks go to Anthony for the initiated proceedings against Cineworld Through our open and inclusive culture, remarkable contribution that he made to seek damages for the termination we aim to create an environment which to the Board over the past 25 years and and, what it describes as, breaches allows our people to develop and thrive. I consider it a great honour to take on by Cineworld. Cineworld denies that it We are proud of the training and the role of Chair and continue our breached the arrangement agreement development opportunities we offer incredible journey. and has submitted a defence to the and strive to provide progression Cineplex claim. Cineworld has itself filed opportunities to all of our people. On 13 May 2020, Helen Weir, Non- a counterclaim against Cineplex for Executive Director and member of the Cineworld’s damages and losses Separately, we are always looking Audit Committee and Remuneration suffered as a result of Cineplex’s Financial Statements for ways to minimise the impact of Committee, stepped down to pursue breaches and the termination of the our operations on the environment, other interests. arrangement agreement, including exercising tight control on energy and Cineworld’s lost financing costs, food waste, limiting the use of single- On 1 August 2020, Damian Sanders advisory fees and other costs incurred. use plastic, and through refurbishments was appointed to the Board as an and installation of new energy initiatives. independent Non-Executive Director Looking ahead, the vaccine rollouts and member of the Audit Committee. globally will be critical to removing the We recognise that our people are critical Mr Sanders brings extensive financial physical restrictions on our business, as to our ability to achieve our goals in a and commercial expertise to the Board, well as providing confidence to studios responsible and sustainable manner.