Kinepolis Group NV — Earnings Release 2011

Feb 16, 2012

Kinepolis Group

Annual results 2011 Regulatory information 16 February 2012

Kinepolis generates €253.7 million revenue and € 36.5 million profit

• Revenue up by 6.1%
• Increase in Box Office revenue1 and In-theatre Sales2
• 21.3 million admissions internationally, in line with 2010
• Strong growth in Business-to-Business (B2B) revenue
• Increased Screen Advertising revenue in all markets
• Real estate development on track
• Current3 EBITDA⁴ up by 7.8% and current³ EBITDA margin at 28.3%
• Current3 profit at € 35.2 million, up by 25.5%
• € 2.9 million capital gain on sale of Ghent (Blijweert) real estate project
• Earnings per share 32.1% higher, partly driven by cancellation of 349,423 treasury shares
• Higher free cash flow5 thanks to higher EBITDA and positive working capital movements (seasonality and timing effects)
• Net financial debt of € 76.5 million, after € 50 million capital optimisation
• Acquisition of Brightfish nv in December 2011
• Proposed dividend per share € 1.69

Key figures

In million €	2011	2010	% difference
Visitors ('000)	21,261	21,320	-0.3%
Revenue	253.7	239.2	6.1%
EBITDA4	74.6	68.0	9.7%
Current3 EBITDA4 (REBITDA6 )	71.7	66.5	7.8%
REBITDA margin	28.3%	27.8%
EBIT	53.3	45.2	18.1%
Current3 EBIT (REBIT)	51.2	43.4	18.0%
REBIT margin	20.2%	18.1%
Profit	36.5	28.1	30.0%
Current3 profit	35.2	28.0	25.5%
Earnings per share (in €)	5.53	4.19	32.1%
Free cash flow5	56.1	38.6	45.3%

In million €	31 Dec 2011	31 Dec 2010	% difference
Total assets	327.0	326.0	0.3%
Equity	133.9	157.3	-14.9%
Net financial debt (NFD)	76.5	67.0	14.3%

Notes

Revenue

Revenue was € 253.7 million, an increase of 6.1% compared to 2010. The continuing investments in customer experience (digitisation, remodelling, Mega Candies etc.) are well appreciated by the customers, resulting in an increase in revenue.

Revenue can be broken down as follows:

Spain's share decreased in 2011 as a consequence of difficult market circumstances.

B2B growth was proportionally higher in 2011, also thanks to the acquisition of Brightfish nv.

Box Office revenue was € 149.1 million in 2011, an increase of 2.5% compared to 2010. This increase is due to the improved product and country mix, adjustments to compensate for inflation and VPF ('Virtual Print Fee') revenue, in spite of the virtually stable visitor numbers.

Kinepolis welcomed 21.3 million visitors in 2011, which comes close to the number of visitors in 2010 (-0.3% compared to 2010). 2010 was a strong film year, thanks to 'Avatar'. Visitors picked up quite substantially in the final quarter of 2011. The backlog in the year-to-date visitor numbers at the end of September 2011 was significantly reduced by the end of the year. This

was mainly due to the strong international offering and the success of local movies in French and Belgian cinemas, as well as the absence of snow in December 2011. In Belgium the implementation of the marketing strategy also drove strong growth in online sales. Whereas 2010 was an atypical film year with a very strong first half of the year, 2011 was a film year with a traditional spread of movie offerings and visitors throughout the year.

The top 5 of 2011 was 'Harry Potter and the Deathly Hallows – Part 2', 'Pirates of the Caribbean: on Stranger Tides', 'The Adventures of Tintin', 'Intouchables' and 'The Smurfs'. 'Rundskop' was the most seen Flemish film, while in France 'Intouchables' earned its place in the top 10 of the most popular French movies of all time.

A large number of 3D films were released in 2011 (four of the top five films were available in 3D). However, fewer 3D tickets were sold than in 2010, which was characterised by the major 3D success of 'Avatar'.

Visitors (in millions)	Belgium	France	Spain	Switzerland	Total
Number of cinemas	11	7	3	1	22
2011	9.9	7.0	4.2	0.2	21.3
2010	9.6	6.9	4.6	0.2	21.3
2011 vs 2010	2.8%	0.5%	-7.9%	-1.2%	-0.3%

In-theatre Sales (ITS) increased by 5.0%, driven by the optimisation of the product range, which is increasingly geared to movie lovers, in combination with the continued rollout and success of the Mega Candy self-service shops.

Business-to-business (B2B) revenue in 2011 grew by 29.2% compared to 2010, partly due to the intensive efforts of the B2B sales teams, who concentrate on the sale of cinema vouchers and business events. Screen advertising revenue also increased, as the market picked up in three countries.

Real estate revenue increased by 1.0%. At constant exchange rates the increase was 1.5%. New rental agreements were signed in France, Poland and Switzerland. In Belgium rent income declined slightly as a result of the preparation of the redevelopment of the Leuven multiplex.

Revenue from Kinepolis Film Distribution (KFD) was € 2.3 million in 2011, a decrease of 26.5% compared to 2010, due to fewer film releases. As the leading distributor of Flemish movies, KFD distributed in 2011 among others 'Rundskop', 'Hasta La Vista', 'Groenten uit Balen' and 'Mega Mindy en de Snoepbaron'. In September 2011 KFD entered into a partnership with Dutch Film Works (DFW), the largest independent distributor in the Netherlands. Under this partnership KFD distributes DFW catalogue titles in Belgium and Luxembourg.

REBITDA

Current EBITDA (REBITDA) rose by 7.8% to € 71.7 million thanks to the continued focus on measures to improve efficiency and increase the margin, despite the constant visitor numbers. The REBITDA margin rose further to 28.3%, compared to 27.8% in 2010. Marketing and selling expenses with regard to publicity and investments in talented employees, management and systems increased. Some of these were one-off costs. They are related to the continued implementation of the strategic goal of Kinepolis to be the best marketeer.

Profit for the period

Current profit for the period was € 35.2 million, a rise of 25.5% compared to 2010 (€ 28.0 million). This rise is primarily thanks to much higher operating profit combined with much lower interest charges.

Total profit for the period was € 36.5 million, compared to 2010 (€ 28.1 million), an increase of 30.0%.

The main non-current items in 2011 were the capital gain of € 2.8 million on the completion of the final phases of the Ghent (Blijweert) real estate project and the sale of the former 'Opéra' cinema in Liège, transformation costs of € -0.7 million and profit from the acquisition of Brightfish nv of € 0.3 million.

The effective tax rate was 27.3%.

Profit per share was € 5.53, an increase of 32.1%. This is due to the higher profit for the period and the purchase and cancellation of treasury shares in 2011, in accordance with the optimisation of the capital structure.

Free cash flow and net financial debt

The free cash flow was € 56.1 million compared to € 38.6 million in 2010.

The increase in the free cash flow by € 17.5 million is primarily due to the higher EBITDA (corrected for a number of non-cash elements) (€ 6.3 million) and positive working capital movements (€ 10.0 million).

The working capital movements can be primarily explained by the seasonal fluctuations in the cinema business and differences in the timing of collection and payment of receivables and payables.

In 2011 capital expenditure was € 13.0 million, € 1.2 million less than last year.

The net financial debt of Kinepolis was € 76.5 million as at 31 December 2011, an increase of only € 9.5 million compared with the end of 2010 (€ 67.0 million) despite the paid-out capital reduction of € 28.7 million and the share buy-back for € 21.6 million. The NFD/EBITDA ratio remained conservative at 1.0 as at 31 December 2011.

The total gross financial debt increased by € 14.7 million to € 94.5 million as at 31 December 2011 compared to 31 December 2010 (€ 79.8 million).

In view of the refinancing of its existing syndicated credit facility and the financing of the group's further general development, Kinepolis announces today that she has signed a new credit agreement for € 90 million with ING Belgium, KBC and BNP Paribas Fortis and that she has also authorised them to issue retail bonds in Belgium with a seven-year maturity. There will be further announcements on this matter in the near future, if the market conditions remain positive.

Balance sheet

Fixed assets (including those classified as held for sale) at € 278.9 million represented 85.3% of the balance sheet total as at 31 December 2011. This includes land and buildings (including those classified as held for sale and investment property) with a carrying value of € 198.9 million.

As at 31 December 2011 equity was € 133.9 million. Solvency was still 41.0%, even after the capital optimisation rounded off to € 50 million.

Dividend: € 1.69 per share

The Board of Directors will propose to the General Shareholders' Meeting of 18 May 2012 to maintain the pay-out ratio of 30%, applied to the current profit, for the eighth consecutive year and to distribute of a gross dividend of € 1.69 per share for the financial year 2011 (payable: 25 May 2012). This represents an increase of 34.1% compared to 2010 (€ 1.26 per share).

Key events in 2011

Kinepolis Group capital optimisation

In line with the Extraordinary General Shareholders' Meeting of 20 May 2011, a capital reduction was carried out and the Board of Directors was authorised to buy back shares. In doing so, Kinepolis wishes to optimise its capital structure to create value for its shareholders. The registered capital of Kinepolis Group was reduced by a rounded € 30 million. A dividend of € 4.33 per share was accordingly paid out to shareholders. At the same time 395,502 shares were bought back between 1 September 2011 and 31 December 2011. On 14 December 2011 349,423 treasury shares were cancelled, bringing the total number of treasury shares as at 31 December 2011 to 323,310. In total there were 6,581,355 outstanding shares as at 31 December 2011.

Real estate sale

In 2011 the final two phases of the Ghent (Blijweert) real estate project were accepted and recognised in the results. The capital gain was € 2.9 million.

In September 2011 Kinepolis sold the former 'Opéra' cinema in Liège (which closed in 2004) to ULG (Liège university).

The overall capital gain on the two projects was € 2.8 million.

Kinepolis acquires advertising agency Brightfish

Kinepolis Group nv acquired advertising agency Brightfish nv on 19 December 2011. The acquisition was driven by the importance of keeping the Belgian screen advertising market united and the ambition of Kinepolis to achieve long-term growth through digital screen advertising. The acquisition expanded Kinepolis' activities in Belgium and again provided the Belgian cinema industry with a stable screen advertising partner. Kinepolis Group nv gained control of Brightfish nv on 1 October 2011, so Brightfish nv has been recognised in the group's consolidated figures as of this date.

Marie-Suzanne Bert-Vereecke resigns as director

Mrs Marie-Suzanne Bert-Vereecke (Pentascoop nv), founding director and honorary president, resigned her seat on the Kinepolis Group nv Board on 31 December 2011 after turning 80 years of age. Mrs Bert has been actively involved in the expansion of Kinepolis Group in various capacities since its formation and can look back on a long and successful career. The Board of Directors thanks Mrs Bert for her contribution to the development of the group.

Significant event since 31 December 2011

Kinepolis presents new website and personalised apps

On 23 January 2012 Kinepolis launched a new website, personalised iPhone, iPad and Android apps, and the My Kinepolis newsletter, tailored to film and event lovers in 2012. The Kinepolis website will also be personalised as from the spring of 2012.

Line-up

The line-up for 2012 looks promising with major sequels in both 2D and 3D (including 'Ice Age 4', 'Madagascar 3', 'Men in Black 3', 'Twilight 4 Part 2' and 'Spiderman 4'). A number of new titles will be released (including 'The Hobbit', 'Django Unchained' and 'The Avengers'). There will also be an interesting offering of local films in all countries: in Flanders among others 'Allez Eddy' and the new Felix van Groeningen movie 'The Broken Circle Breakdown', in France 'La Vérité si je Mens 3' and 'Asterix et Obelix: God Save Britannia' and in Spain 'Lo Impossible', 'Tengo ganas de ti', Grupo 7' and 'Redlights'.

Kinepolis will also continue to complement the usual film offering with more specialised programming, such as Ladies@theMovies and Cinémanie, as well as live highlights, such as opera, ballet, theatre, musicals and sport, which are attracting a new cinema audience.

Auditor's report (free translation – originally prepared in Dutch)

To the Board of Directors of KINEPOLIS GROUP NV

The statutory auditor, KPMG Bedrijfsrevisoren – Réviseurs d'Entreprises, represented by Sophie Brabants, has confirmed that the audit procedures, which have been substantially completed, have not revealed any material adjustments which would have to be made to the accounting data included in the Company's annual announcement.

Kontich, 16 February 2012

KPMG Bedrijfsrevisoren / Réviseurs d'Entreprises Represented by

Sophie Brabants Partner

Financial calendar

Friday 17 August 2012 Half-year results 2012

Contact

Kinepolis Press Office Kinepolis Investor Relations Tel: +32 9 241 00 16 Tel: +32 9 241 00 22

Tuesday 15 May 2012 Business update first quarter 2012 Friday 18 May 2012 General Shareholders' Meeting Wednesday 14 November 2012 Business update third quarter 2012

Email: pressoffice@kinepolis.com Email: investor-relations@kinepolis.com

¹ Revenue from ticket sales

² Revenue from the sale of beverages, snacks and merchandising in the cinema

³ After eliminating non-current transactions

⁴ EBITDA is not a recognised IFRS term. Kinepolis Group has defined this concept by adding depreciations, amortisations and provisions to the operating profit and subtracting any reversals or uses of the same items

⁵ Kinepolis Group defines the free cash flow as the cash flow generated from operating activities less the maintenance capital expenditures in other intangible assets, property, plant and equipment and investment property, interest paid, including the sales of property, plant and equipment and other financial assets.

⁶ REBITDA is not a recognised IFRS term. Kinepolis Group has defined this concept as the current operating profit increased by current depreciations, amortisations, impairments and provisions (including any reversals or uses of these items).

Consolidated financial statements

• Consolidated income statement
• Consolidated statement of comprehensive income
• Consolidated statement of financial position
• Consolidated statement of cash flows
• Consolidated statement of changes in equity
• Segment information

The consolidated financial statements for the twelve months ending on 31 December 2011 have been prepared in accordance with IFRS as published by the International Accounting Standards Board (IASB) and approved by the European Community. The financial accounting principles applied in these consolidated financial statements are the same as those applied by the Group in the consolidated financial statements for the financial year 2010. There are no new standards or amendments to existing standards or interpretations which have an impact on the financial statements 2011.

CONSOLIDATED INCOME STATEMENT	31/12/2011	31/12/2010
IN '000 €
Revenue	253.704	239.170
Cost of sales	-174.065	-172.150
Gross profit	79.639	67.020
Gross profit / Revenue	31,4%	28,0%
Distribution expenses	-14.925	-10.937
Administrative expenses	-14.849	-14.667
Other operating income and expenses	3.476	3.769
Operating profit	53.341	45.185
Operating profit / Revenue	21,0%	18,9%
Finance income	1.701	2.340
Finance cost	-4.870	-7.493
Profit before tax	50.172	40.032
Income tax expense	-13.701	-11.970
Profit for the period	36.471	28.062
Profit for the period / Revenue	14,4%	11,7%
Attributable to:
Owners of the Company	36.194	27.847
Non-controlling interests	277	215
Profit for the period	36.471	28.062
Basic earnings per share (€)	5,53	4,19
Diluted earnings per share (€)	5,44	4,14

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME in '000 €	31/12/2011	31/12/2010
Profit of the period	36.471	28.062
Translation differences	-1.390	810
Net changes in the fair value of derivative financial instruments	-109	1.593
Total other comprehensive income for the period	-1.499	2.403
Total comprehensive income for the period	34.972	30.465
Attributable to:
Owners of the Company	34.695	30.250
Non-controlling interests	277	215
Total comprehensive income for the period	34.972	30.465

CONSOLIDATED STATEMENT OF FINANCIAL POSITION / ASSETS	31/12/2011	31/12/2010
in '000 €
Other intangible assets	3.367	3.386
Goodwill	18.761	18.761
Property, plant and equipment	221.231	227.446
Investment property	12.837	14.485
Deferred tax assets	1.551	1.548
Derivative financial instruments	0	5
Other receivables	14.365	16.198
Other financial assets	27	27
Non-current assets	272.139	281.856
Assets classified as held for sale	6.721	8.138
Inventories	3.024	3.703
Trade and other current receivables	27.375	19.623
Current tax assets	24	136
Cash and cash equivalents	17.670	12.584
Derivative financial instruments	0	0
Current assets	54.814	44.184
TOTAL ASSETS	326.953	326.040
CONSOLIDATED STATEMENT OF FINANCIAL POSITION / EQUITY AND LIABILITIES in '000 €	31/12/2011	31/12/2010
Issued capital	18.952	48.963
Share premium	1.154	1.154
Consolidated reserves	114.040	106.292
Translation reserve	-2.019	-629
Total equity attributable to owners of the Company	132.127	155.780
Non-controlling interests	1.815	1.538
Equity	133.942	157.318
Loans and borrowings	38.502	57.437
Provisions	3.513	2.274
Deferred tax liabilities	14.319	13.918
Derivative financial instruments	856	1.018
Trade and other payables	9.318	10.132
Non-current liabilities	66.508	84.779
Bank overdrafts	126	346
Loans and borrowings	55.894	22.017
Trade and other payables	63.331	55.548
Provisions	278	172
Derivative financial instruments	511	284
Current tax liabilities	6.363	5.576
Current liabilities	126.503	83.943
TOTAL EQUITY AND LIABILITIES	326.953	326.040

CONSOLIDATED STATEMENT OF CASH FLOWS (in '000 €)	31/12/2011	31/12/2010
Cash flows from operating activities
Profit before tax	50.172	40.032
Adjustments for:
Depreciations and amortization	19.954	22.949
Provisions and impairments	1.267	-138
Government grants	-775	-811
Gains / losses on sale of fixed assets	-2.895	-2.315
Change in fair value of derivative financial instruments and unrealised foreign exchange results
	-176	-1.059
Discounting long-term receivables	-837	-905
Share-based payments	491	434
Write-down tax shelter investments	733	412
Translation differences realised due to liquidation Polish subsidiary	0	1.324
Badwill	-271	0
Interest expense and income	2.616	4.048
	70.279	63.971
Changes in inventory, trade and other receivables and payables	3.691	-6.293
Cash from operating activities	73.970	57.678
Income taxes paid Net cash from operating activities	-12.402 61.568	-10.385 47.293
Cash flows from investing activities
Acquisition of other intangible assets	-898	-1.562
Acquisition property, plant and equipment and investment property	-12.110	-12.695
Proceeds from sale of property, plant and equipment	2.007	1.652
Net cash used in investing activities	-11.001	-12.605
Cash flows from financing activities
Capital reduction	-28.693	0
New loans	79.072	9.954
Repayment of borrowings	-64.130	-40.000
Interest paid	-2.675	-4.145
Interest received	56	106
Repurchase of own shares	-21.645	0
Dividends paid	-8.383	-6.121
Settlement cross-currency interest rate swaps	0	-2.483
Net cash used in financing activities	-46.398	-42.689
Net cash flow	4.169	-8.001
Cash and cash equivalents
Cash and cash equivalents at beginning of the period	12.239	20.136
Cash and cash equivalents at end of the period	17.544	12.238
Changes in the scope of consolidation	1.192	0
Effect of exchange rate fluctuations on cash held	-56	103
Net cash flow	4.169	-8.001

									Tot al e qui ty
									attr ibut able to
								Sha re-b d ase	ity h old equ ers
CO NSO LID ATE D S TAT EM ENT OF CH AN GES IN EQU ITY IN '000 €	Cap ital	Sha ium re p rem	Tra nsla tion rese rve	Hed gin g rese rve	Fair val ue rese rve	Ret aine d nin ear gs	Tre asu ry sha res	ts pay men rese rve	of t he com pan y	Non lling ntro -co Inte rest s	Tot al E qui ty
At 3 1 D mbe r 20 10 ece	48.9 63	1.15 4	-62 9	-1.2 10	0	112 .949	-6.9 74	1.52 7	155 .780	1.53 8	157 .318
Pro fit f he p erio d or t						36.1 94			36. 194	277	36.4 71
Tra nsla tion diff ere nce s			-1.3 90						-1.3 90		-1.3 90
Net cha s in the fair val f de riva tive fina ncia l ins trum ents nge ue o				-109					-109		-10 9
Oth hen sive inc e fo r th riod er c om pre om e pe	0	0	-1.3 90	-10 9	0	0	0	0	-1.4 99	0	-1.4 99
Tot al c hen sive inc e fo r th riod om pre om e pe	0	0	-1.3 90	-10 9	0	36. 194	0	0	34.6 95	277	34.9 72
Cap ital dec reas e	-30 .011					1.20 0			-28 .811		-28 .811
Divi den ds p aid						-8.3 83			-8.3 83		-8.3 83
Sha re-b d pa acti nt tr ase yme ans ons								491	491		491
Pur cha se/S ale of tr sha eas ury res							-21 .645		-21 .645		-21 .645
Can cell atio n of hare tre asu ry s s						-19 .130	19. 130		0		0
Tot al t tion ith ded dir ly in uity ect ran sac s w own ers , re cor eq	-30 .011	0	0	0	0	-26 .313	-2.5 15	491	-58 .348	0	-58 .348
At 3 1 D mbe r 20 11 ece	52 18.9	1.15 4	-2.0 19	-1.3 19	0	122 .830	-9.4 89	2.0 18	132 .127	15 1.8	133 .942

CO NSO LID ATE D S TAT EM ENT OF CH AN GES IN EQU ITY IN '000 €	Cap ital	Sha ium re p rem	Tra nsla tion rese rve	Hed gin g rese rve	Fair val ue rese rve	Ret aine d nin ear gs	Tre asu ry sha res	Sha re-b d ase ts pay men rese rve	Tot al e qui ty ibut able attr to ity h old equ ers of t he com pan y	Non ntro lling -co Inte rest s	Tot al E qui ty
At 3 1 D mbe r 20 09 ece	48.9 63	1.15 4	-1.4 39	-2.8 03	0	91.2 23	-6.9 74	1.09 3	131 .217	1.32 3	132 .540
Pro fit f or t he p erio d						27.8 47			27.8 47	215	28.0 62
Tra nsla tion diff ere nce s			810						810		810
Net cha s in the fair val f de riva tive fina ncia l ins trum ents nge ue o				1.59 3					1.59 3		1.5 93
Oth hen sive inc e fo r th riod er c om pre om e pe	0	0	810	1.59 3	0	0	0	0	2.40 3	0	2.40 3
Tot al c hen sive inc e fo r th riod om pre om e pe	0	0	810	1.59 3	0	27.8 47	0	0	30.2 50	215	30.4 65
Divi den ds p aid						-6.1 21			-6.1 21		-6.1 21
Sha re-b d pa acti nt tr ase yme ans ons								434	434		434
Tot al t tion ith ded dir ect ly in uity ran sac s w own ers , re cor eq	0	0	0	0	0	-6.1 21	0	434	-5.6 87	0	-5.6 87
At 3 1 D mbe r 20 10 ece	48.9 63	1.15 4	-62 9	-1.2 10	0	112 .949	-6.9 74	1.52 7	155 .780	1.53 8	157 .318

	Bel	giu m		Fra nce		Spa in		Oth (P L+S WI) ers		Not all ted oca		TO TA L
SEG ME NT INF OR MA TIO N IN '00 0 €	31/ 12/2 011	31/ 12/2 010	31/ 12/2 011	31/ 12/2 010	31/ 12/2 011	31/ 12/2 010	31/ 12/2 011	31/ 12/2 010	31/ 12/2 011	31/ 12/2 010	31/ 12/2 011	31/ 12/2 010
Seg nt r me eve nue	151 .177	137 .109	65. 651	64. 123	40. 635	42. 174	4.7 49	4.5 81	0	0	262 .212	247 .987
Inte ent r-se gm rev enu e	-8.5 08	-8.8 17	0	0	0	0	0	0	0	0	-8.5 08	-8.8 17
Rev enu e	142 .66 9	128 .29 2	65. 651	64. 123	40. 635	42. 174	4.7 49	4.5 81	0	0	253 .70 4	239 .17 0
Seg rofi nt p t me	25. 804	18. 185	18. 027	16. 828	8.3 08	8.6 80	1.2 02	1.4 92	0	0	53. 341	45. 185
Fina inc nce om e									1.70 1	2.3 40	1.7 01	2.3 40
Fina st nce co									-4.8 70	-7.4 93	-4.8 70	-7.4 93
Pro fit b efo re t ax											50. 172	40. 032
Inco tax me exp ens e									-13 .70 1	-11 .970	-13 .70 1	-11 .970
fit f Pro or t he iod per											36. 471	28. 062
Inv est nts me	7.9 57	7.1 17	1.9 61	4.5 08	3.0 16	2.3 41	74	290	0	0	13. 008	14. 256
Tot al a ts sse	127 .66 2	125 .39 8	93. 041	97. 488	50. 835	49. 964	27. 247	28. 878	28. 168	24. 312	326 .95 3	326 .04 0