Annual Report and Accounts 2018 THE BEST PLACE TO …

Annual Report and Accounts 2018

THE BEST PLACE TO WATCH A MOVIE

OUR PURPOSE

To provide our customers with a choice of how to watch a movie, in modern state-of-the-art cinemas with the latest technology and a variety of retail offerings, all underpinned by great customer service.

OUR BUSINESS AT A GLANCE

We are an international cinema chain operating in ten different countries with 790 sites and 9,518 screens. We are focused on providing our customers with the best possible cinema experience, offering a variety of movies, as well as different formats using the latest technologies. Our vision is always to be "The Best Place to Watch a Movie".

OUR GLOBAL THEATRE OPERATIONS: 10 COUNTRIES, 790 SITES, 9,518 SCREENS

United States

UK & Ireland

Poland Czech Republic Slovakia

Hungary Romania

Bulgaria

Israel

Read more about our Regal acquisition page 6

130

Number of IMAX screens

Country US UK & Ireland Poland Romania Hungary Czech Republic Israel Bulgaria Slovakia Total

53

Number of 4DX screens

PLF

116

Number of PLF(1) screens

19

Number of ScreenX screens

Total no. Total no. of sites of screens

555 7,269

124

1,119

34

377

26

237

17

153

14

133

11

136

6

65

3

29

790

9,518

No. of screens opened in 2018

59 43

? 6 ? ? ? ? ?

108

No. of 4DX

screens 8 21 6 5 3 3 4 2 1

53

No. of IMAX screens

95

No. of ScreenX screens

9

21

8

6

?

2

?

1

1

1

?

3

1

1

?

?

?

130

19

A BRIEF HISTORY

1995

Cineworld Group plc was founded.

2007

The Group listed on the London Stock Exchange

in May 2007.

2012

The Group acquired the arts chain of cinemas, Picturehouse.

2014

Completed combination with

Cinema City International

N.V.

2018

Completed acquisition of Regal

Entertainment Group.

OUR BRANDS

2018 HIGHLIGHTS

Group pro-forma(2) revenue $m

4,711.4

(+7.2%)

Adjusted pro-forma(2) EBITDA(2) $m

1,072.4(3)

(+9.4%)

Adjusted profit after tax(3) $m

345.3

(+148.4%)

Profit after tax(3) $m

284.3

(+119.5%)

Adjusted diluted EPS(3) (rights adjusted) $c

27.2

(+20.4%)

Diluted EPS(3) (rights adjusted) $c

22.4

(+7.1%)

DPS(3) (rights adjusted) $c

15.0

(+17.6%)

Pro-forma(2) admissions m

308.4

(+2.6%)

Total Shareholder Return

1,000

Total Shareholder Return (rebased to 100)

800

600

400

200

0 Dec

2008

Dec 2009

Dec 2010

Cineworld FTSE 250

Dec 2011

Dec 2012

Dec 2013

Dec 2014

FTSE All-Share Travel & Leisure

Dec 2015

Dec 2016

Dec 2017

Dec 2018

Screens

7,269

SItes

555

Screens

1,038

SItes

100

Screens

994

SItes

100

Screens

81

SItes

24

Screens

136

SItes

11

(1) PLF is defined as Premium Large Format and includes RPX screens in the US and Superscreen screens in the UK and ROW.

(2) Pro-forma results reflect the Group and US performance had Regal been consolidated for the entirety of the period from 1 January 2018. For the purposes of percentage movements, the same comparative period has been applied. Performance against the comparative period has been calculated by taking the Regal performance, converted to IFRS, for the same period from 1 January 2017 to 31 December2017, to present the consolidated performance as if Regal had been acquired on 1 January 2017.

(3) Adjusted EBITDA is defined as Operating profit plus share of profits from joint ventures using the equity accounting method net of tax adjusted for depreciation and amortisation, onerous lease charges and releases, impairments and reversals of impairments, transaction and reorganisation costs, gains/losses on disposals of assets and subsidiaries, share based payment charges, and share of profits received from associates in excess of distributions or any undistributed such profits. Adjusted profit before tax is calculated by adding back amortisation of intangible assets (excluding acquired film distribution rights), and certain non-recurring or non-cash items and foreign exchange difference arising on monetary assets and liabilities as set out in Note 6. Adjusted profit before tax is an internal measure used by management, as they believe it better reflects the underlying performance of the Group and therefore a more meaningful comparison of performance from period to period. Adjusted profit after tax is arrived at by applying an effective tax rate to taxable adjustments and deducting the total from adjusted profit before tax.

Part I: Strategic Report

Part I Strategic Report

02

Chairman's Letter

04

Chief Executive Officer's Review

10

Market Drivers

12

Our Business Model

14

Strategy in Action

22

Risk Management

23

Principal Risks and Uncertainties

28

Resources and Relationships

31

Chief Financial Officer's Review

Part II Corporate Governance

36

Chairman's Introduction to Governance

38

Board of Directors

40

Leadership

43

Effectiveness

46

Nomination Committee Report

48

Accountability

50

Audit Committee Report

55

Directors' Remuneration Report

67

Directors' Report

73

Statement of Directors' Responsibilities

Part III Financial Statements

74

Independent Auditor's Report

83

Consolidated Statement of Profit or Loss

84

Consolidated Statement of Other Comprehensive Income

85

Consolidated Statement of Financial Position

86

Consolidated Statement of Changes in Equity

87

Consolidated Statement of Cash Flows

88

Notes to the Consolidated Financial Statements

130

Company Statement of Financial Position

131

Company Statement of Changes in Equity

132

Notes to the Company Financial Statements

140

Shareholder Information

Part II: Corporate Governance

Part III: Financial Statements

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Cineworld Group plc Annual Report and Accounts 2018

01

CHAIRMAN'S LETTER

A TRANSFORMATIVE YEAR

Anthony Bloom CHAIRMAN

OVERVIEW

2018 was a transformative year for the Cineworld Group. The acquisition of Regal Entertainment Group ("Regal") on 28 February made us into a global operator and the second largest cinema chain in the world. By the end of 2018, the Group was operating 9,518 screens in 790 sites across 10 countries. This significant achievement would have been difficult to imagine when we began operations in 1996.

Since that time, both profits and dividends have increased each year, and in the UK alone over 5,000 jobs have been created. The Group is very proud of this record and I am confident its growth will continue in the future.

So it gives me great pleasure to present shareholders with this Annual Report, being the Group's first inclusive of the results of our US operations. As you will see, the acquisition has proved very successful commercially as regards the integration of the business.

Group Pro-forma revenue for the year increased by 7.2% to $4,711.4m (2017:$4,394.5m), and Adjusted Pro-forma EBITDA rose to $1,072.4m (2017: $979.9m). The growth was driven by the inclusion of the US operations, where on a Pro-forma basis, revenue and Adjusted EBTIDA for the Regal business grew by 8.6% and 13.2% respectively.

The US now represents 74.8% of revenue on a Pro-forma basis with the UK representing 14.8% and the Rest of the World ("ROW") 10.4%. As the US is by far the largest segment of the Group's operations, the Board has decided that the Group's results should be reported in US dollars to provide a more meaningful picture of its activities; this Annual Report is the first in that currency.

The Group's UK and ROW operations also continued to perform well, against a bar set very high by 2017's record year in Europe. I am pleased to report that the UK achieved revenue growth of 3.3% with the figure for ROW revenue growth being 3.6%.

Following the combination with Cinema City International N.V. ("Cinema City") in 2014, the Board and Executive Management Team adopted a Strategic Operating Plan which consists of:

----the opening of new cinemas in areas considered to have the potential for double digit growth rates;

----the pursuit of suitable acquisition opportunities;

----the refurbishment of the existing estate by introducing state-of-the-art design and installing the latest cutting edge screening and other technology;

----a consistent focus on cost reduction;

----the implementation of a programme to continuously optimise the customer experience; and

----always living up to our vision to be "The Best Place to Watch a Movie".

During this landmark year in the Group's development, this Strategic Operating Plan remained the focus for generating further success. These broad objectives remain relevant for the Group and going forward will be extended to encompass the operations of Regal.

02

Cineworld Group plc Annual Report and Accounts 2018

Part I: Strategic Report

Part II: Corporate Governance

While mentioning Regal, I would like to acknowledge the tremendous work undertaken by the management and staff on both sides of the Atlantic with regard to the integration and development of the Regal business and cinema estate. I am delighted with the results achieved, but those results in no way diminish the significant challenge the task presented. Of course, the acquisition remains a significant opportunity for us and I believe that with the strength and experience of our people, the Group is well positioned to make the most of it.

While 2018 has seen a focus on the integration of the US, there has been no reduction in the development of the estate and operations in the UK and ROW. We have opened six sites in the UK and one in ROW, while also refurbishing four sites in the UK.

As well as expanding our geographic footprint, the Regal acquisition also had a considerable impact on the Group's Balance Sheet. The acquisition was funded by the proceeds of a fully underwritten rights issue which raised $2.3bn, and $4.1bn was raised with debt.

As at 31 December 2018 the Group's Adjusted net debt to Adjusted EBITDA ratio was 3.7 times. The Group is cash generative and has a strong record of sound capital allocation, enabling a significant reduction in debt in the years following the Cinema City combination while we also invested the strategic rollout of new sites and our refurbishment programme.

To demonstrate its confidence in this regard, and given the increase in statutory profit after tax to $284.3m (2017: $129.5), the Board has increased the cash dividend paid for the full year by 163.1%. The proposed final dividend per share is 10.15c.

----Camela Galano was appointed to the Board as an Independent Non-Executive Director. Camela began her career at New Line Cinema, progressing to the role of President of International Sales, Marketing & Distribution, where she oversaw the international distribution of innumerable titles, including the blockbuster trilogy "The Lord of the Rings". Subsequently, Camela became the President of International Film Acquisitions for Warner Bros. Following her time at Warner Bros. she served as President of Relativity International, overseeing global sales, marketing and distribution management of Relativity's own titles, acquisitions and third party releases. Camela is a long-time member of the Academy of Motion Picture Arts and Sciences and the British Academy of Film and Television Arts. Camela is Head of International at Studio 8.

OUTLOOK

Looking to 2019 and beyond, it is clear to me that it will be an exciting time for the Group. Our well diversified cinema estate, along with continued investment in the UK and ROW circuits and our development plans for the US leave us well placed to take advantage of the strong film slate ahead.

We will focus on maximising cash flow to expand and refurbish our cinemas, while at the same time reducing borrowing levels and maintaining our well established dividend policy. I remain confident that we have the right team and resources to continue growing and making the most of the opportunities ahead.

Anthony Bloom CHAIRMAN 28 March 2019

BOARD AND MANAGEMENT

The Board is committed to attaining the highest standards of corporate governance and applying the utmost rigour in our approach to areas such as gender, diversity, health and safety. Environmental concerns were an area focused upon, and appropriate improvements were made in our practices by reducing plastic usage and energy conservation projects.

On behalf of the Board I would like to express sincere thanks to our highly professional Executive Management Team and all of our employees for their dedication and hard work both in ensuring the successful completion of the Regal acquisition and in achieving the gratifying results now presented; their efforts are a credit to the Group.

The following Board changes took place during the year:

----On 17 January 2019 the appointment of Alicja Kornasiewicz as Deputy Chair was announced. Alicja will succeed to the position of Chair when I step down at the Annual General Meeting ("AGM") in 2020. Alicja has extensive experience in business, finance, politics and regulatory bodies, and has been a valuable member of the Board since 2015. I would like to congratulate her on her appointment.

----Renana Teperberg, Chief Commercial Officer joined the Board as an Executive Director. Renana joined Cinema City International as a cinema cashier in 1997 while studying for a BA in psychology at the Hebrew University of Jerusalem. After progressing to General Manager, she moved to the Cinema City Head Office where she subsequently became Head of Programming and Marketing. Following the combination with Cineworld, she became Senior Vice President of Commercial and then Chief Commercial Officer in 2016. Renana played a major role in the acquisition of Regal. Renana holds an executive MBA in business management from IDC Herzliya.

In 2018 the Group became a global cinema operator.

Part III: Financial Statements

Cineworld Group plc Annual Report and Accounts 2018

03

CHIEF EXECUTIVE OFFICER'S REVIEW

2018 HAS BEEN A LANDMARK YEAR FOR THE GROUP

Moshe Greidinger CHIEF EXECUTIVE OFFICER

OUR STRATEGY

Our strategy is to:

Provide the best cinema experience

Expand and enhance our estate

Be technological leaders in the industry

Read more page 14

Drive value for shareholders

04

Cineworld Group plc Annual Report and Accounts 2018

2018 has been a landmark year for the Group following the successful acquisition of Regal Entertainment Group on 28 February 2018.

We are well on our way to achieving a successful business integration following strong performance and record box office results in the US.

The combination with Regal has exceeded our expectations ? we have incorporated the best of both companies by bringing together world-class talent, integrating best practice from both sides of the Atlantic and deepened our understanding of the US market. Although the Group has expanded significantly, our strategy and vision remain the same, to be "The Best Place to Watch a Movie" by continually focusing on providing the best customer experience, maintaining technological leadership, expanding and upgrading the estate, and training and retaining highly motivated, experienced and loyal staff.

An overview of our key achievements in 2018 is provided below.

INTEGRATION OF REGAL

Following the completion of the transaction, we spent the past year implementing our strategy and vision for Regal. I am very pleased with the Regal acquisition. Cost synergies are not only greater than originally expected, but they are also being delivered at a faster pace. Revenue synergies are well underway with many initiatives covering a large scope of our activity. We are focused on delivering on the full potential of the combination through the strengths of our brands, focus on customer experience and investment in technology.

2018 was a record year for the US box office. Audiences flocked to action-packed thrillers such as "Avengers: Infinity War", "Black Panther" and "Venom" and re-joined some of the most beloved animated characters in "Incredibles 2", "Mary Poppins Returns" and "Ralph Breaks the Internet". This year proved again that cinema is the premier way to experience the magic of movies.

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