CCI posted a weak set of results for 1Q11, missing expectations on all major P&L lines in the period. The bottom line came in at € 3.6m (down 71% y/y) for 1Q11, or 33% below the consensus estimate and 31% below our forecast. The strong year-on-year deterioration of the bottom line was the consequence of several factors: the weaker top-line structure year-onyear (i.e. lower share of 3D movies); lower cinema ticket sales year-on-year (despite the consolidation of Palace Cinemas); and one-off costs related to the Palace Cinemas acquisition, which boosted operating expenses in 1Q11. The top line came in at € 65.8m (down 6.1% y/y) for 1Q11, or 2-4% below the consensus and our forecast.
The firm’s top line deteriorated despite the acquisition of Palace Cinemas, which made a full contribution to the group’s 1Q11 numbers and was absent in the base period. Adjusted for the operating results of Palace Cinemas (not yet provided by the company), the year-on-year deterioration of CCI’s top line would have been much deeper in 1Q11. Ticket sales were down 2.7% y/y in 1Q11 on a reported basis and down 22.8% y/y on a like-for-like basis. The latter was the consequence of the very strong movies portfolio in 1Q10 (i.e. Avatar) and no major blockbusters projected in 1Q11. EBITDA came in at € 11.0m (down 46% y/y) for 1Q11, or 13-14% below both the consensus and our forecasts. Apart from the weaker year-on-year top line and its structure (which hit sales profitability), EBITDA was also dragged down by one-off costs related to the purchase of Palace Cinemas in 1Q11. The latter lowered the group’s EBITDA by € 2.4m in 1Q11. As a consequence, EBITDA margin contracted by 5.2pp y/y to 16.7% in 1Q11. Overall, CCI’s 1Q11 numbers and KPIs are uninspiring and we expect them to put pressure on the stock price today.