This article by John Snowden was published in The IRS Report in May 2011.

Low-cost cinema is a recession winner

My view of the cinema has fundamentally changed, which has led me to this month's selection. Everyone knows that cinema is a good value entertainment. But I for one used to say, well, if you wait a couple of years, you can always see it on TV. The huge advances in technology and the cinema experience over the last few years mean this simply is no longer the case.

A good example is Mamma Mia, which I have seen live at the theatre - amazing; at the cinema - an amazing atmosphere with terrific sound; and on TV; rather boring, no atmosphere and poor sound quality unless you have a really expensive sound system.

So I believe cinema audiences will remain on the increase during the recession. My past notes on possible stocks to cover here included Cineworld Group, and I had made a note to buy around 185p. On looking at the shares at the turn of the year they were trading around 222p so I again put the subject to one side. They have drifted a bit lower and I do not think they will get much cheaper.

Cineworld operates in the UK and has a unit in Dublin. The group was founded in 1995 by the current CEO, Steve Weiner who joined the board in 2004. He has 41 years experience in the industry and from lowly beginnings as a cinema usher in the US, he rose through the ranks and ended up as Vice President for the Cineplex Odeon in New York City. He moved to Warner Brothers Europe in 1991 and became Managing Director, and then left in 1995 to found Cine-UK Ltd. Having built up a chain of 34 cinemas, he was taken out by a bid from Blackstone in 2004, but remained as chief executive of the group. Blackstone worked closely with the management team to help accelerate growth and develop the digital media side of the business.

The group went public in May 2007 with Blackstone remaining the largest single shareholder. Today, Steve Weiner is also noon-executive director of Digital Cinema Media Ltd, the screen advertising company 50 per cent owned by Cineworld. In November 2010 Blackstone flet their investment had achieved their set targets and sold out their remaining 20.1 per cent to institutions at 205p. Matthew Tooth who is managing director of Blackstone Group International, remains a non-executive director of Cineworld.

The shares at the current price look good value as the annual results announced in March confirmed steady progress. Turnover increased to £342.8m from £327.1m and pre-tax profits inched up to £30.4m from £30.3m. The proposed final dividend was lifted to 7.1p from 6.0p making 10.5p (10p) for the year. Income seekers, please note that subject to approval, the final dividend will be paid on 6th July to shareholders on the register on 10th June.

Since the results I have seen some adverse comment saying that Cineworld could be a casualty from the UK recession. I would query this as so far weather conditions seem to have been the main negative factor. The snow in December hit both box office and retail revenues during the festive period. Since then we have had the annual bum-on-seat figures and box office revenues were up 4.1 per cent on the year to £235.8m. Seven out of eight investment houses maintain a buy rating.

At the end of 2010, the group estate had increased to 78 cinemas with 801 screens. More than 50 per cent are digital with 3D capability and a steady conversion programme is under way. Seven-screen cinemas are due to open in Greater Manchester and Hampshire during 2011 and the group wants to expand but caution is the word until there are further signs of an end to the recession and finance for developments becomes more readily available. As well as gaining the recent acclaim as number 1 cinema operator in the UK for 2010, Cineworld is the market leader in showing a wide variety of content such as Bollywood and Live events. These include opera, ballet and rugby in 3D. The group has another first in the UK in that it participates in the Tesco Clubcard programme and operates the only cinema subscription service, the Unlimited Card.

In April, the group acquired Cinesur Circuito Sanchez-Ramada, Spain's fifth largest cinema group and the largest operator in the Andalucia region for 18.6m euros. The deal is financed by a loan and the transaction is dependent on certain unpublished conditions being met. Cinesur has 11 multiplexes and 136 screens and produces 800m euros revenue a year. This looks like a logical expansion, especially considering the huge number of British ex-pats living in the region. Despite the recession, a trip to the cinema is a relatively inexpensive outing to shut out the real world for a few hours.

Cineworld looks a solid company with solid revenues. Marry that with exciting new films such as The King's Speech, new Harry Potter and Sherlock Holmes films and more than 30 3D films scheduled for release in 2011. The board remain confident for the current year. As the leader in their industry, and given the opportunity created by digital demand, we must give the shares a positive rating.

I started drawing my pension eight years ago to spend longer holidays in Norway where my wife and I have friends and family. At NOK17 to the pound, life was pleasant as long as one was not too extravagant. Three years ago, I was spending about four months of the year in Oslo. At NOK15 to the pound, I was still pretty happy as property prices in the UK remained on a high and Norwegian prices moved sideways after several up years. My state pension also kicked in which meant a little more flexibility.

A year ago, the pound had continued its downtrend and traded at NOK13 or below. The recession in the UK had started but most people seemed content with their lot and there was much talk but not much bite. As the year progressed, NOK11 to the pound was a little hurtful but then another sharp fall pushed the price down to NOK10. Today I look forward to a technical bounce in the hope I can change some funds at NOK9. But last week, with high heating bills to be paid, I had to bite the bullet and change funds at NOK8.73. With the Norwegian Oil Fund worth in excess of $700 billion and the oil still gushing, the kroner is liable to remain strong.

So my personal recession started a year ago and our lifestyle has had to change to a lower gear in order to cope. I look forward to cheap shopping in the UK or Germany where we load up the car to avoid Oslo's high prices. I chat to Oslo friends who pop over to London for weekend breaks as for them it is so cheap to shop there. On the plus side, my flat in downtown Oslo will fetch a small fortune in sterling at today's rates.

To give an idea about the cost of living in Oslo, an ordinary bottle of wine sets you back £12.50 while a can of 4.5 per cent beer costs about £2.90. The stronger beers cost between £3.50 and £5.00 per can or bottle. Petrol is nudging 164p per litre so we walk more and feel fitter. Public transport is fantastic and the trams and bendy buses run like clockwork. As a pensioner, I now pay half price on all transport as does my wife or immediate family if they accompany me. Children enjoy free transport everywhere until they are 15.

Within 15 minutes I can be on a beach, in the cty centre or in a large park. As for entertainment, live events are now a rare treat. Instead, a visit to my local cinema in Oslo costs around £11 and I sit in plush seats with a built in side table. I can buy wine before the film starts and take it to my seat. If my own recession has led me to the cinema, I feel the same will apply to plenty more, both in the UK and elsewhere.