Cineworld issues warning over future after £1.3bn loss
Cineworld raised doubts over its ability to survive a second lockdown as it reported a £1.3bn loss for the first half of the year because of the Covid-19 crisis.
The cinema chain said that while the return of audiences had been encouraging since the reopening of most of its screens, it might need to raise more money in the event that any future government restrictions forced further closures.
The cinema chain’s pre-tax loss for the six months to June compares with profits of £110m a year earlier and follows the forced closure of its 778 cinemas worldwide earlier this year because of the pandemic.
It said admissions have been growing since it reopened sites in the UK and the US in recent weeks, thanks in part to local films and the release of the blockbuster movie Tenet. Cineworld also reported “steady performance” across sites in the rest of the world. It has reopened 561 of its cinemas.
The firm – which also owns boutique cinemas under the Picturehouse brand – warned, however, that its financial future could be in doubt if authorities introduced further restrictions to combat the next wave of the virus.
“There can be no certainty as to the future impact of Covid-19 on the group,” Cineworld said in a statement. “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.”
That would be on top of the $360.8m (£283m) that the firm raised in the first half of the year.
Cineworld – which is the UK’s largest cinema by market share and has 128 cinemas across the UK and Ireland – said the pandemic posed challenges for the industry’s recovery that “represent uncertainties with respect to the group’s ability to continue as a going concern”.
The FTSE 250 company, which had net debts of £8.2bn at the end of June, said it “should be able” to operate within its current facilities for at least 12 months. It forecast that it would breach loan covenants in December this year, June 2021 and December 2021 but said it was “confident” it would be able to obtain waivers.
Its base case scenario would require all of its sites to reopen by October this year and for 2021 admissions to only be 16% lower than 2019. It does not expect the business to recover to preCovid levels until at least 2023.
A Cineworld spokesperson said they could not confirm whether any job cuts were on the horizon. The company employs more than 35,000 staff globally and 5,500 in the UK.
Cineworld shares fell 11%, making it the biggest faller on the FTSE 250 on Thursday.
Michael Hewson, the chief market analyst at CMC Markets UK, warned that Cineworld might not be able to survive without a takeover. “With UK cinemas only now starting to reopen and a lot of the major studios delaying the release of their summer blockbusters, Cineworld appears to be in a fight for survival as they struggle to get people through the door even without the rules that require that customers wear a mask.”
Cineworld has grappled with the uncertainty of local lockdowns, including in the UK and US, and studios’ decisions to skip the cinema and put hits such as Disney’s Mulan directly online. Meanwhile, Star Wars and Avatar films have been delayed and the latest James Bond film will not be released until November. The 25th Bond film – No Time to Die – was originally set to be released in April.
The chain has tried to boost customer confidence by implementing safety measures that include staggered film times, physical distancing in auditoriums and foyers, additional cleaning and temperature checks.
“If there is another lockdown or people are further put off heading out for an evening of big screen entertainment, then Cineworld’s days could well be numbered,” Hewson said. “Their only hope now is the prospect of a takeover bid from a big Hollywood studio or a significant restructuring of the business in the event that footfall doesn’t pick up significantly between now and the end of the year.”