Everyman Media — Home is not where the heart is

Everyman Media — Home is not where the heart is

With its cinemas set to reopen imminently, a new endorsement of the continuing appeal of the big screen is a topical boost for Everyman. Despite growing competitive forces such as streaming, cinema has been the most missed out-of-home entertainment activity during lockdown, according to a Film Distributors’ Association survey, with 76% planning a cinema visit within two months. Such pent-up demand, proven where markets have reopened, and a recovering mainstream film slate, driven by a backlog of prime releases and complemented by Everyman’s innovative programming and broadening customer offer, bodes well for a resumption of its success before the pandemic (2019 pre-IFRS 16 EBITDA up 33%, albeit expansion-led). Everyman’s growth prospects as a well-funded operator with a strong pipeline may only be enhanced by COVID-19 fallout.

Richard Finch

Written by

Richard Finch

Analyst, Consumer

Everyman Media

Home is not where the heart is

Media

QuickView

7 May 2021

Price

145p

Market cap

£132m

Share price graph

Share details

Code

EMAN

Listing

AIM

Shares in issue

91.1m

Business description

Everyman Media Group is the fourth largest cinema business in the UK by number of venues (35, with 117 screens). Under its premium Everyman brand, the focus is on venue (smaller capacity on central high streets) and experience (wide array of content, food and drink and customer service).

Bull

Proven successful, straightforward model: expansion (117 screens vs 18 at AIM admission in 2013) and broadening of offering (36% of 2019 revenue from F&B; spend per head up 13% y-o-y).

Increasingly attractive mainstream film slate owing to a backlog of prime releases, complemented by popular innovative programming, eg independent films, theatre and live concert streams.

Strong finances for growth after recent £10m rise in facilities (£21m headroom at December 2020).

Bear

Continuing COVID-19 restrictions (sites scheduled to reopen on 17 May).

Reliance on film slate managed through distributor relationships and provision of alternative content.

Other media channels, eg streaming, mitigated by offer of better customer experience than at home.

Analysts

Richard Finch

+44 (0)20 3077 5700

Russell Pointon

+44 (0)20 3077 5700

With its cinemas set to reopen imminently, a new endorsement of the continuing appeal of the big screen is a topical boost for Everyman. Despite growing competitive forces such as streaming, cinema has been the most missed out-of-home entertainment activity during lockdown, according to a Film Distributors’ Association survey, with 76% planning a cinema visit within two months. Such pent-up demand, proven where markets have reopened, and a recovering mainstream film slate, driven by a backlog of prime releases and complemented by Everyman’s innovative programming and broadening customer offer, bodes well for a resumption of its success before the pandemic (2019 pre-IFRS 16 EBITDA up 33%, albeit expansion-led). Everyman’s growth prospects as a well-funded operator with a strong pipeline may only be enhanced by COVID-19 fallout.

Lights on

Despite the continued challenge of COVID-19 response and disruption (nine weeks of closures and 17 weeks of restrictions, hence a 75% fall in revenue), H220 saw further refinement of Everyman’s offer. This included imaginative programming, eg ‘lockdown house parties’ and the first pantomime to be filmed for cinema, a wider food and drink menu as well as takeaway during closures, increased social media engagement (Instagram followers up 29% in 2020) and, impressively, a maintained commitment to prime site expansion with two openings (King’s Road, Chelsea and Lincoln; seven screens). When allowed to trade, business was brisk, ie on summer 2020 reopening at c 40% of 2019 levels despite social distancing and limited content. Indeed, ‘Tenet’ showed the strength of demand for a blockbuster in a cinema setting, which was only slightly below management’s pre-COVID-19 expectations.

Ready to grow

With liquidity headroom of c £21m at end 2020, a new £10m increase in facilities to £40m appears targeted for expansion. While the growth strategy has been paused, at September 2020 the pipeline for 2021/22 was eight venues. A fragile property market on pandemic fallout should prompt site availability on advantageous terms.

Valuation: Long-term appeal

Despite positive fundamentals, financial recovery may be protracted, given continued COVID-19 measures on reopening and possible delays in high-quality film releases. With no consensus forecasts available for Everyman, we note that rival Cineworld’s revenue is not expected to return to 2019 levels until 2022/23.

Consensus estimates

Year
end

Revenue
(£m)

EBITDA
(£m)

EPS**
(p)

DPS
(p)

Yield
(%)

EV/EBITDA
(x)

12/19

65.0

12.0*

2.4

0.0

N/A

11.8*

12/20

24.2

(1.1)

(24.0)

0.0

N/A

N/A

12/21e

N/A

N/A

N/A

N/A

N/A

N/A

12/22e

N/A

N/A

N/A

N/A

N/A

N/A

Source: Refinitiv. Note: *Pre-IFRS 16 (net bank debt £9.7m). **FRS 3.

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This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

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Schumannstrasse 34b

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Research: Consumer

bet-at-home — Trading well against expectations

bet-at-home’s (BAH) Q121 results are strong in the context of management guidance for FY21. Trading in the early part of FY21 is likely to be as bad as it gets for BAH. The initial (negative) effects of regulatory changes in Germany will be followed by a more favourable sporting calendar and management’s belief that increased legal certainty from Q321 will help the company to better plan and develop its business. Management is optimistic that regulated companies should be able to take share from the black market, which it believes may be more than 30% of the total market. We upgrade our FY21 EBITDA forecast by 11%, taking it above management’s reiterated guidance. Our DCF-based valuation increases to €51 per share.

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