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Potter boost for Cineworld as gilt yields fall to lowest ever

Cineworld shares rose on Thursday morning on the back of the success of the latest Harry Potter film.

The lift was one of the few bright spots on a morning of sell-offs – with the FTSE 100 down 57 points at 9:30 on new fears over the global economy and gilt yields falling to new lows.

Cineworld’s first half profits were down to £6.9m from £11.8m last year, hit by digital investment costs. But analysts from Evolution said that nevertheless the results were strong, and suffering from tough comparisons with last year.

Cineworld’s year is panning out much as expected. It has grown y-o-y admissions (+2.2%) and market share despite the lack of 3D blockbusters in H1. Current trading is good versus tough comparatives thanks mostly to Harry Potter. Q4 comps are easier. Strategically, the digital roll-out continues well (70% complete by year end), and it has refinanced successfully. We reiterate our BUY recommendation and 245p target price; the stock remains excellent value on both dividend yield (FY11E 6.0%) and growth (EPS +c10% pa) prospects.

The shares rose 2% to 188p.

The other major story of the morning was gilt yields – the UK 10-year government bonds are yielding 2.38%.

That is believed to be the lowest ever – the lowest recorded yield on British government borrowing coming in July 1896, when consoles, the ancestors of modern gilts, yielded 2.42%.

The chancellor George Osborne has argued the UK’s low borrowing costs show the UK is a safe haven. Others argue that investors’ willingness to accept such low rates on safe assets reflects expectations of very weak growth.

Elsewhere, Savills said prime London residential property was still doing well despite the tough economic climate, but it did warn that the current volatile environment might hit its business.

First-half profits before tax rose 39% to £20m. The shares rose 0.4% to 314p. © Guardian News & Media Limited 2011 | Use of this content is subject to our Terms & Conditions | More Feeds