Cineworld reports $1.6 billion loss and warns of risks if lockdown rules get stricter
Debt-laden cinemas giant Cineworld has warned it may struggle to survive another round of Covid-19 lockdowns as it crashed to a huge $1.6 billion (£1.3 billion) loss.
The cinemas giant admitted profits had been hammered after venues were forced to close for months, and its shares fell 13% to 41.83p.
The company, which is saddled with net debt of $8 billion, warned that it may need to raise additional funds if governments introduce further lockdown restrictions. These factors, it said “represent uncertainties with respect to the group’s ability to continue as a going concern.”
The company is locked in talks to secure waivers on its debt covenants for December and next June.
Pre-tax losses hit $1.6 billion in the six months to June 30, compared with a profit of £139.7 million a year earlier. Sales plunged 66.9% to $712.4 million.
Cinema chains had to shut sites in March for the Covid-19 lockdown and they could only reopen from July with social distancing rules in place. On top of that, a number of film releases including the latest James Bond movie were delayed due to the virus outbreak.
Israel Greidinger, deputy chief executive, said the company is in “advanced discussions with banks and confident” they will waive the December covenant.
However the company warned: “If governments were to strengthen restrictions on social gathering, which may therefore oblige us to close our estate again or further push back movie releases, it would have a negative impact on our financial performance and likely require the need to raise additional liquidity.”
The company said in its worst-case scenario it would need to raise funds early next year, which Greidinger said could be hundreds of millions. He said: “We are far from being back to normal… but people are starting to go back to the movies.” He added that the firm is confident it “will survive despite these difficulties”.
Cineworld now has 561 out of 778 cinemas open and said current trading has been encouraging, helped by the release of spy thriller Tenet. The firm said the delayed Bond film, as well as Wonder Woman 1984, should further boost takings.
Adding to the turbulence this year, Cineworld in June said it would no longer proceed with a deal to buy Canada’s Cineplex chain for C$2.8 billion.
Alongside the coronavirus disruption, investors have been concerned about the debt pile, and whether the company had been too ambitious with big US expansion plans. It agreed a $3.6 billion deal for the Regal chain in 2017.
The shares have slumped 78% this year.
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