Financial Reporting

The Big Picture (TBP) can build financial reports for a variety of clients whether asset managers, property developers or local authorities. A financial report takes the form of a detailed spreadsheet containing large quantities of aggregated data and other significant information, and is based on the conclusions drawn from feasibility (or viability) studies.

A feasibility (or viability) study investigates certain logistical aspects of an existing (or proposed) cinema, in order to be able to forecast potential admissions. It’s critical to obtain this figure at the start of the process. From here we’ll ascertain the the predicted size of the site, meaning the number of seats per screen, the number of screens and the overall capacity - of the proposed cinema or redevelopment.

The report is then populated with the estimated build, auditorium fit out or redevelopment costs. The capacity and admissions predictions not only inform the build cost but also allow us to set out the projected efficiency of the project.

A Profit & Loss (P&L) statement will usually cover a five year forecasted period, with business maturity at three years. This enables the client to see when they’ll get a return on their investment (RoI) while indicating what the property developer may have to contribute financially. This is known as a “build budget” and is crucial for an asset manager or property developer to be aware of before operators are approached.

Using the P&L we will then work through all relevant revenues pertinent to the business case. To do this we use benchmarked box office figures (by calculating average local ticket price), concessions spend (by using average spend per head for all food and beverage - F&B) plus any other ancillary spend (3D glasses, Business to Business - B2B - spend).

Build Budget

To calculate a projection of operating costs a databank of international case studies is used to benchmark figures against. This is amended to suit the particular country in question.The most significant outgoings that sit under the banner of the Operating Budget are staff payroll, film hire and marketing.

A range of factors are taken into account to make these calculations, including local taxes, wages, opening hours, number of screens and any previous projects carried out in that region.

Film hire costs are calculated by using known figures from the particular territory in question, or a similar one. Payroll costs are calculated in a similar way and knowledge of the specific territory is vital in this instance. An example of this: India and Europe are incomparable due to the former having no minimum wage. If TBP have been engaged from the inception of a project, a full staffing schedule will be built, incorporating the payroll figures as part of this process.

Ticket and retail pricing are approached in a similar way. To look at the former, current local ticket pricing is required to give an overview but the other important factor to consider is desired brand positioning. The target audience of the brand and whether it’s aiming to be upmarket, downmarket or mass market is key. These same considerations are applicable to retail pricing. An upmarket premium offer will be more expensive per head than a mass market, family option.

Operating Budget

Specific commercial agreements sit under the umbrella of Operating Costs. For a new-build cinema, TBP will benchmark the relevant predicted costs and assist in the negotiating of these agreements. Web providers, marcomms (marketing communications), and onscreen advertising are all areas to be aware of. In these instances we will short list relevant names that we know to provide the ideal services, bring them in and then arrange the necessary contracts.

Our yardstick processes are in place to ensure you won't be overpaying or receiving a subpar service. If current contracts do not line up with our benchmarked figures we’ll go through all suppliers and charges, renegotiate, reposition your brand and, if necessary, change contracts.

Commercial Agreements

Other costs include, but are not limited to, rent, service charges and necessary insurance. An estimate will be made as to each of these other costs, which plays a necessary part in determining overall profitability. The objective is to strike a balance between the developer seeing a return on investment, but should the cinema fail, the operator won’t “lose their shirt".

Other Costs

If a cinema isn’t performing as it should be, TBP will analyse current processes and outgoings, usually in the auditing or feasibility reporting stages. We’ll then investigate the following:

Why is payroll percentage so high?
Why is marketing spend too high or low?
Why are goods costing more than benchmark figures provided?
Why are admissions down?

Low admissions can usually be linked back to payroll and marketing spend. This will be discovered and advised on during the streamlining process if relevant.We don’t do “guess work” - we always use data and past case studies to steer a project. Cutting spend is sometimes necessary to enable a cinema to achieve its potential profitability.

Streamlining Your Business

Simply put, a TBP P&L is based on the model that if each cinema seat in a specific venue is sat in 400 times a year, the business will be profitable. Our objective is for the operator to make money so that the developer sees a return on investment within the first three to five years.