Cineplex profits take 95% hit
Cineplex Inc. said revenue dropped 95 per cent in the second quarter and that it burned through about $54 million in cash as it shut theatres because of the coronavirus.
“To immediately mitigate the impact of the closure of our theatres and entertainment venues, we focused on reducing all expenses to the greatest extent possible,” CEO Ellis Jacob said in a statement. “We also shifted our attention to plan for the safe return of our employees and guests and to strengthen Cineplex’s financial position over the short and long term.”
The company lost $98.9 million in the quarter and said free cash flow was negative $53.8 million on an adjusted basis. That was consistent with analysts’ expectations, according to Royal Bank of Canada analyst Drew Mcreynolds.
Canada’s largest chain of movie theatres has gradually reopened cinemas across the country as it exits from a lockdown that began in March. As of Aug. 14, about 80 per cent of locations have resumed operations, the company said in a call with analysts Friday, with the remaining 20 per cent set to open by next week.
The Toronto-based company said it’s “implementing a number of pricing and marketing strategies to entice its guests to return.” Jacob said in an interview with Bloomberg News on Friday that customers “are starved for content, and they can’t wait to come back.”
Many theatres have already reached capacity under physical-distancing rules, and attendance numbers are expected to increase as new films such as Unhinged and The Spongebob Movie: Sponge on the Run come out, he added.
Cineplex said in June it was working with lenders on a deal to relax financial covenants after London-based Cineworld Group Plc, the world’s second-largest cinema group, scrapped its deal to take over the Canadian chain, alleging breach of contract. Cineplex denied the claim and has filed a suit against Cineworld, seeking billions in damages. The trial is tentatively set for September 2021.
The merger would have created the biggest operator of movie theatres in North America. Now, the stock is the worst performer in the S&P/TSX Composite Index this year, falling about 75 per cent. It was up 3.2 per cent at $8.45 in mid-afternoon Friday trading in Toronto.