Kinemax Case Study

Dive into the business of a modern company operating in growth markets

Kinemax
1. Company Overview
In June 2009, Kinemax Sarl an entity founded by a prominent French entrepreneur started developing its chain of
cinemas operating in France. The company chose to target a promising niche, marketing its products to younger
audiences. While the rest of the cinema market is mature and experiences slow growth, studies show that there is
a significant growth potential in the under 14 market segment.
All of Kinemaxs cinemas are multiplex buildings offering a vast array of commercial services targeted at children.
The firms strategy is to leverage childrens impulsiveness, and the parents dedication to their children on holidays
and special occasions. In order to grow its influence among children, Kinemax organizes special events such as
mini-concerts, sport competitions, celebrity visits etc.
A few months after the company was founded, it received a Round A of Private Equity financing amounting to 50
million. The total amount of the agreed financing was 140 million. The company received another 50 million at
the end of 2010. The final amount was drawn at the end of 2012.
in million
Round A
Round B
Round C
Total

50.0
50.0
40.0
140.0

2. International Expansion
Kinemax began its international expansion in 2010, when its operations in North Italy started. Later that year,
Kinemax acquired the operations of UK cinema player Moviez for 25 million, taking advantage of its functioning
structure and compatible cinema centers.
The company continued its strong growth in 2011, by starting operations in Germany and Turkey. Next in 2012, it
decided to form a Joint Venture with local players in the Brazilian cinema market. With such move, Kinemax made
the first step towards its access to the South American cinema market, which is one of the fastest growing in the
world.
Below, you can see a table summarizing the various entities within the Kinemax Group:

Legal entity
Kinemax Sarl
Kinemax Italia Spa
Kinemax UK Ltd
Kinemax Deutschland Saar
Kinemax Turkey A.S.
Kinemax Brasil LTDA

Type of
company
Holding
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Joint Venture

% of Country of
Ownerhsip Operations
100.0%
100.0%
100.0%
80.0%
49.0%

France
Italy
UK
Germany
Turkey
Brasil

Start of
Operations

Staff

Jun-09
Feb-10
Nov-10
Mar-11
Jul-11
Nov-12

342
156
192
134
124
38

The firm plans to apply its original market strategy to all markets, in which it participates.
There are a number of advantages deriving from the companys international expansion. Kinemax has an
increasing customer reach with significant savings potential. Customers in large metropolitan cities are becoming
increasingly familiar with the companys brand. Positive customer experiences in one country are often a
testimonial for other countries thus providing a solid base for the companys marketing efforts. In addition to that,
by having larger operations Kinemax has the ability to command better price conditions by film producing studios.
The company has a growing importance for some of its key providers (for ex. Walt Disney), as it sells a number of
its products in its locations. Traditional cinema salons will have to accept that Kinemax offers a better experience.

3. Future plans
3.1 Kinemax plans to establish its leadership in Europe. The company plans to start operating in Spain and
Netherlands by the end of 2014, and in Norway by the end of 2015. Although, Kinemax seems to be on its way to
achieve leadership in its market niche, it is unclear whether its current competitors would not respond or if a new
entrant to the market would not apply Kinemaxs business model.
3.2 The South American cinema market is one of the fastest growing in the world. A key question is whether
Kinemax would be able to take advantage of its presence there and whether it would manage to grow its
operations in a profitable manner.
3.3. Kinemax plans to introduce a new service line in its locations by the end of 2014. It would comprise of event
rooms, which would be rented by childrens parents in order to celebrate birthdays or any types of special
occasions. If the market response well to this product it would represent a superb opportunity for the firm, as it
would affirm its locations as the top destination where children would like to spend their time.

4. KPIs and Financials

The firm prepares its financial figures under IFRS. All entities are consolidated fully in Kinemaxs financial figures
given that the firm exercises control in all of them, even in the ones that are not owned at 100%.
Management is able to monitor the business development through a number of key performance indicators:

Legal entity
Kinemax Sarl
Kinemax Italia Spa
Kinemax UK Ltd
Kinemax Deutschland Saar
Kinemax Turkey A.S.
Kinemax Brasil LTDA

% of Sales % of Sales % of Sales Gross Margin

in FY11
in FY12
in FY13
in FY13
47.5%
21.2%
17.0%
8.2%
6.1%
0.0%

37.0%
19.4%
19.4%
12.5%
11.5%
0.2%

35.1%
17.1%
18.1%
14.2%
13.0%
2.5%

26.3%
24.8%
29.8%
32.3%
22.7%
18.6%

Avg. (*)
Attendance %
43.9%
37.4%
37.1%
42.3%
42.9%
29.3%

Number of
Avg. Price (*) Other sales
cinemas (*) of Tickets in Eur as % of total
145
49
58
36
34
12

5.5
5.9
6.1
6.5
4.8
3.9

43.5%
48.9%
45.3%
50.1%
38.3%
32.3%

(*) Figures related to FY13

The firms clients fall into the following categories:

Kinemax Sarl
Kinemax Italia Spa
Kinemax UK Ltd
Kinemax Deutschland Saar
Kinemax Turkey A.S.
Kinemax Brasil LTDA

Under 14
56.3%
49.8%
53.9%
46.3%
57.3%
60.4%

14 - 30
11.7%
14.9%
8.9%
21.3%
15.9%
7.3%

Over 30
32.0%
35.3%
37.2%
32.4%
26.8%
32.3%

Kinemaxs financial performance throughout the period FY11-FY13 can be summarized by the following shortened
P&L statement:
in million
Cinema revenues
Other revenues
Total Revenues
Cost of Sales
Gross Margin
Operating expenses
EBITDA
Operating Cash Flow
KPIs
Cinema revenues %
Other revenues %
Gross Margin %
EBITDA %
Cash conversion %

FY11
Act

FY12
Act

FY13
Act

135.3
102.6
237.9
(183.9)
54.0
(35.9)
18.1

152.5
119.6
272.1
(207.3)
64.8
(40.5)
24.2

169.1
138.2
307.3
(229.1)
78.2
(46.6)
31.7

16.1

22.8

24.1

56.9%
43.1%
22.7%
7.6%
89.3%

56.1%
43.9%
23.8%
8.9%
94.3%

55.0%
45.0%
25.5%
10.3%
76.20%

Var %
Var %
FY11-FY12 FY12-FY13
12.7%
16.6%
14.4%
12.8%
19.9%
12.9%
33.9%

10.9%
15.6%
12.9%
10.5%
20.8%
14.9%
30.7%

41.4%

5.6%