Cineworld warns on future as it sinks to $1.6bn loss
Cineworld shares sunk 15 per cent at the open today after warned it may need to raise cash after the cinema chain sunk to a first-half loss of $1.6bn due to the coronavirus outbreak.
Cineworld posted revenue of $712.4m in the six months to the end of June, down 67 per cent on last year.
The group swung to a pre-tax loss of $1.6bn, compared to a $139.7m profit in 2019.
Basic earnings per share were -115.3 cents, down from 8.6 cents last year.
Net debt stood at $8.2bn at the end of the period, up by $512m since 31 December 2019.
Why it’s interesting
Cineworld’s half-year results highlight the stark challenges faced by cinema chains after they were forced to shutter venues due to the outbreak of coronavirus.
The chain, which operates most of its sites from the US, was forced to close all 780 sites globally between mid-March and late June or August.
In the US, admissions plunged from 89m to 28m, while for the rest of the world admissions dropped from 23m to 9.5m.
Overall box office income, which accounts for the majority of the group’s revenue, dropped almost 70 per cent to $391m.
The closures took its toll on Cineworld’s revenue, which slumped by more than two-thirds over the period.
The company also incurred charges of $12.5m relating to the pandemic, including stock write-offs, additional legal fees and cleaning costs.
As a result, Cineworld posted a pre-tax loss of $1.6bn.
The firm said it had taken a number of measures to mitigate the impact of the virus, including negotiating rent relief and deferrals with landlords, using government support schemes and cutting salaries.
Cineworld also raised an additional $360.8m during the period to help shore up its balance sheet.
The group has now reopened 561 cinemas, with 200 sites in the US and six in the UK still closed.
It said the re-opened sites were booking a “steady” performance and admissions were beginning to increase, driven largely by the release of Christopher Nolan smash hit Tenet.
But Cineworld warned of ongoing uncertainty, adding it might be forced to close sites again and push back film released if new government measures restricted social interaction.
The company said it should be able to operate for at least 12 months, but warned it was likely to breach its covenants in December and next year, though it said it expected to obtain waivers.
Cineworld said any government changes would have a negative impact on its financial performance and require the need to raise additional cash.
Micheal Hewson, senior analyst at CMC Markets said Cineworld’s debt trouble cannot be attributed only to Covid-19.
“Even before the February, March sell-off Cineworld’s share price had been in a steady decline weighed down by declining footfall and high levels of debt after the acquisition of the US Regal chain a few years before”.
What Cineworld said
“Despite the difficult events of the last few months, we have been delighted by the return of global audiences to our cinemas toward the end of the first half, as well as by the positive customer feedback we have received from those that have waited patiently to see a movie on the big screen again,” said chief executive Mooky Greidinger.
“The impact of Covid-19 on our business and the wider leisure industry has been substantial, with the closures of all of our cinemas worldwide for an extended period. During this unprecedented time, our priority has been the safety and health of our customers and employees, while at the same time preserving cash and protecting our balance sheet.”