(16/09/2005) Kinepolis Group: E 1.3 million net profit in first half

Brussels, 16 september 2005 Kinepolis Group ended the first half of 2005 with an EBITDA [1] of E 18,1 million, an operating profit of E 7.7 million, and a net profit of E 1.3 million. As previously announced by the group, falling ticket sales during the first half negatively impacted the half-year results. As from 2005 the balance sheet and income statement are produced in accordance with IFRS international accounting standards. [2] To permit comparison of the first half 2005 results with H1 2004 figures, the latter have been restated pro forma to IFRS standards. The conversion to IFRS enables Kinepolis Group and its stakeholders to benchmark the group worldwide against comparable enterprises in the same and other sectors. The group is expecting a better second half in terms of audience figures, but a lower annual total than for 2004. Kinepolis is looking to report an annual profit for 2005 of at least E 8 million.

KEY FIGURES IN EUR E'000	30/06/2005	30/06/2004	%
Audience figures	10.700	12.133	-11,8%
Turnover	91.041	99.048	-8,1%
EBITDA	18.082	23.028	-21,5%
Operating profit	7.733	13.233	-41,6%
Financial result	-4.511	-3.697	-22,0%
Profit before taxes	3.222	9.536	-66,2%
Taxes	-1.874	-3.756	-50,1%
Net profit	1.349	5.779	-76,7%
Earnings per share (normal)	0,2	0,85	-76,7%
Earnings per share (diluted)	0,19	0,84	-76,8%
Net financial debt (NFD)	141.953	167.322	-15,2%

Audience figures

AUDIENCE FIGURES IN '000	30/06/2005	% of TOT	30/06/2004	% of TOT	%
Belgium	4.777	45%	5.500	45%	-13%
France	2.852	27%	3.322	27%	-14%
Spain	2.455	23%	2.411	20%	2%
Other	616	6%	900	7%	-32%
Total	10.700	100%	12.133	100%	-12%
Like-for-like basis (excl. Max Linder (F)
and Granada (S)	10.403		12.121		-14%

The absolute audience figure for H1 (10.7m) is down 12% on the comparable period in 2004 (12.1m). On a like-for-like basis, i.e. excluding visitors to the Max Linder complex in Paris (sold in February '04) and the new Granada complex (opened in June '04), this represents a fall of 14% compared with H1 2004. The European and American cinema sectors struggled across the board with a significant drop in audience numbers. The main reason lies in the film line-up. Most of last's years blockbusters were released in the first half. 2004 was therefore an 'atyical' year with an exceptionally strong first half, and an only moderate year-end. 2005 promises, by contrast, a normal pattern, with a moderate first half and better second half. Films like Star Wars Episode 3, Kingdom of Heaven, Alexander, Constantine (H1 2005) were unable to match the successes of The Last Samurai, Brother Bear, Podium en The Passion of the Christ (H1 2004). - Audience figures for Kinepolis Belgium were off 13% compared with H1 2004. This is somewhat better than the 15% fall recorded for the Belgian cinema market as a whole. In several regions Kinepolis was even able to improve its market position thanks to the digital programming of films like Star Wars and Madagascar, and its "Cinemania" program of authors' films. - In France, apart from Brice De Nice, there were no box office hits during H1 2005. In 2004, by contrast, various French films like Podium, Les 11 Commandements and Les Choristes achieved exceptional results during the first hald. Kinepolis France nonetheless performed better than the overall French market. - In Spain absolute audience figures were up 2%. On a like-for-like basis (i.e. without Kinepolis Granada), ticket sales were down. Kinepolis Granada has been growing steadily since opening in June 2004 and constantly strengthening its market position. - In Poland, audience figures at Kinepolis Poznan were down sharply compared with 2004. Even so the Polish megaplex outperformed the Polish competition. Film-wise the first half of 2004 was exceptionally strong with the overwhelming success of The Passion of the Christ. In 2005 the death of Pope John-Paul II placed a damper on Poland's socio-cultural life for several weeks. - Kinepolis Switzerland's audience figures followed the general market downturn. Impact of the transition to IFRS Kinepolis made the transition to IFRS on 31 December 2003, with the balance sheet dd. 31.12.2003 corrected to give an opening balance in conformity with the new accounting standards. The main effects of the IFRS on the balance sheet have been: - revaluation of land and buildings to market value, and the change in depreciation period from 20 to 30 years - the recognition of deferred tax assets and liabilities. - discounting of amounts receivable in respect of CNC subsidies in France - reclassification of investment grants from shareholders' equity to other liabilities. - own shares are recorded by deducting them from equity The main effects of the IFRS on the income statement have been: - lower annual depreciation on land and buildings - goodwill (consolidation differences) is no longer amortised - the effect of financial instruments and the revaluation of the Polish lease debt - the effect of deferred taxation - earnings on own shares are recognized directly to equity A detailed report on the impact of the transition to IFRS is available on the www.kinepolis.com/investors website under "financial information". Revaluation of real estate Under IFRS land and buildings, with the exception of Kinepolis Mulhouse, assets for sale and assets under construction, have been revalued to market value, i.e. E 239 million. The market value is the sales value of the real estate in a normal sale as estimated by an outside party. As the cinema activity is not part of the sale, this value is considerably lower than the going-concern value, in which the destination of the premises is factored in. In the context of IFRS the depreciation period for real estate has been revised from 20 to 30 years. Turnover TURNOVER KINEPOLIS GROUP 30/06/05 Ticket sales: 63% Food & beverage: 20% Media & events: 13% Rent from concessions: 3% Film distribution: 1% Technical services: 0% For the six months to 30.06.2005 Kinepolis Group achieved turnover of E 91.0 million, 8% lower than the E 99.0 million of H1 2004. Food and drink turnover was down just 5% thanks to increased per visitor consumption and higher sales prices. Turnover from events, screen advertising etc. rose by 7%. Film distribution turnover fell significantly compared with H1 2004, when mainly local film offerings, including De Zaak Alzheimer and Team Spirit 2 generated significant income flows. EBITDA EBITDA is not an IFRS-defined term. Kinepolis has defined the concept by adding back charges for depreciation, amortization, value impairments and provisions to the operating profit, and subtracting any reversals or uses of the same items. EBITDA for H1 2005 was E 18.1m compared with E 23.0m in H1 2004. EBITDA mirrored turnover in every country except Spain. The other operating income relates, among other things, to the group's real estate activities (H1 2005: E 0.9m; H1 2004: E 1.7m). Operating profit (EBIT) Operating income was down 42% on H1 2004. On a country-by-country basis, the operating profit logically mirrored the EBITDA figure, except in Spain, where additional depreciation charges related to the opening of Kinepolis Granada significantly impacted the operating profit. Financial result The financial result for the first half was -E 4.4m (H1 04: -E 3.7m). This fall is due primarily to: - The project financing of the construction of Kinepolis Granada (operational since 26.06.2004) and Kinepolis Nancy (since 23.09.2005). - The negative effects of financial derivatives. The group already had a number of derivative contracts outstanding to hedge interest and exchange rate risks. During the first half of 2005 additional hedging contracts were concluded to limit the risk of rising interest rates and to lock in the present low interest rate levels for the longer term. The continuing fall of interest rates produced a negative market value of these hedging contracts at 30.06.2005, which is expressed in the income statement. Profit before taxes The profit before taxes fell by 66% to E 3.2 million. Consolidated net profit Taxes fell from E 9.5m during H1 2004 to E 3.2m in H1 2005. Despite this significant fall, the relative tax pressure[3] rose from 39% (H1 04) to 58% (H1 05). The rise is due primarily to the recognition of deferred tax assets. The net profit for the first half of 2005 amounts to E 1.3m. This compares with E 5.8m in the same period in 2004. Balance sheet and cash flow analysis At 30.06.2005 equity amounted to E 91.8m, equal to 25.2% of the balance sheet total. Under the syndicated loan agreement concluded in November 2004, financial debts were restructured during the first half in order to bring them more into line with existing and future financing needs. This has had the effect of halving debt repayments to around E 16m a year. The net financial debt [4] (NFD) was further reduced to E 142m at 30.06.2005 compared with E 167m at 30.06.2004 and E 157m at 31.12.2004. Fixed assets (including those intended for sale) of E 310m made up no less than 86% of the balance sheet total. This includes land and buildings (including those intended for sale) worth E 239m. The cash generated by the operating results is E 17.2m (H1 2004: E 21.6m). As a result of working capital movements, the net cash from operating activities [5] rose to E 21.8m (H1 2004: E 1.0m). These resources were used for the project financing of Kinepolis Nancy, for replacement investments in existing complexes and for debt repayments. Additional resources were generated by the sale of land. Cost structure Since May 2005 Kinepolis Group has been carrying out cost-saving operations to lighten the overhead structure. At organizational level cost efficiency has been improved by the decentralization of responsibilities. The corporate structure has been reduced, with greater authority given to national managements to enable them to react to the specific market needs of the various countries in which Kinepolis Group is active. The structural savings plan should considerably reduce the indirect cost portion. Kinepolis Group and digital cinema Kinepolis Group has digitalized another 10 theatres since the release of Star Wars (May 2005). The digital equipment was initially leased, but was since acquired in August 2005. 21 Kinepolis theatres are now fitted for digital screening. All Kinepolis cinemas in Belgium (13 digital theatres), France (5 digital theatres) and Spain (3 digital theatres) now have at least one theatre with High Definition Digital Cinema. (HDDC). This places Kinepolis Group in worldwide number one position in digital cinema with the largest number of digital theatres and proportionally the highest number of digital screens as a percentage of total screens per complex. The digital offering of full-length films and alternative context is steadily growing. Cooperation between TV and cinema is also gradually intensifying. Digital offering until August 2005 inclusive: - Digital full-length films: Saraband (F), Pollux (F), Constantine, Robots, Star Wars Episode III, Madagascar, The Island (ES) - February 2005: digital special marking the 15th anniversary of the TV series 'FC De Kampioenen' by VRT in all Flemish Kinepolis complexes. - 11 May 2005: opening ceremony of the Cannes Film Festival live at Kinepolis Lomme - 5 March 2005: live concert by Sioen in all digital Kinepolis theatres - 24 April 2005: Real The Movie press event at Kinepolis Madrid - 11 June 2005: At Kinepolis Brussels ophthalmologists could follow the surgical techniques of 11 eye operations down into the smallest detail live on the large screen. The images were satellite transmitted by Alfacam. Guidance For 2005 as a whole Kinepolis Group expects a total audience figure of at least 23.5 million and a net profit of at least E 8 million. On 23 September this year Kinepolis Nancy (France) will be opening its doors with 10 screens and 2 580 seats. The construction of Kinepolis Bruges begins in November. With 8 screens, the Bruges cinema complex will open in June or July 2006. The group will already be applying for a building permit for its construction project in Ostend at the end of September. Kinepolis is planning to begin building work in April 2006, with opening scheduled for September or October 2006. Kinepolis Ostend will also have 8 screens. Extract from the report of the statutory auditor on the limited review of the half year consolidated figures of Kinepolis Group S.A. NV as per June 30, 2005 In the context of our auditor's mandate, we have performed a limited review of the half year consolidated financial statements of the Kinepolis Group NV as per June 30, 2005. Our review consisted principally in applying analytical review procedures, comparisons and inquiries on financial data and was performed in accordance with the auditing standards of the Institut des Réviseurs d'Entreprises with respect to a limited review. Its scope is therefore substantially less than a full audit of the consolidated annual accounts. Our review did not reveal any elements requiring significant corrections of the figures quoted in this press release. We refer explicitly to our entire review opinion which is published together with the supplementary financial information on the website of Kinepolis. Antwerp, 13th September 2005 Klynveld Peat Marwick Goerdeler Bedrijfsrevisoren - Réviseurs d'Entreprises , represented by L. Ruysen, Partner Financial Diary Friday 14 October 2005: Publication of 3Q 2005 audience figures Monday 9 January 2006: Publication of 2005 audience figures Friday 10 March 2006: Publication of 2005 annual results Friday 14 April 2006: Publication of 1Q 2006 audience figures Friday 19 May 2006: Kienpolis Group NV Annual General Meeting Friday 14 July 2006: Publication of 1st half 2006 audience figures Friday 8 September 2006: Publication of 2006 half-year results Contact: Myriam Dassonville Corporate Communication Tel: +32 2 474 26 91 E-mail: mdassonville@kinepolis.com [1] EBITDA is not an IFRS-defined term. Kinepolis defines the concept by adding back charges for depreciation, amortization, value impairments and provisions to the operating profit, and subtracting any reversals or uses of the same items. [2] A declaration of conformity and the IFRS valuation rules are available on the www.kinepolis.com/investors website under "financial information". [3] Relative tax pressure: The sum of taxes and deferred taxes, divided by the profit before taxes. [4] Net financial debt (NFD): all financial debts maturing after 1 years, plus all financial debts maturing within one year and all bank overdrafts, less cash and cash equivalents [5] Net cash flow from operating activities: the sum of the cash generated from operating profits, changes in trade and other receivables, debts and inventories, less interest paid and income taxes. © CompanynewsGroup