Cineworld posts H1 loss as it mulls US listing

Cineworld posted an interim operating loss of $208.9m as the Covid pandemic forced the closure of cinemas in the opening months of the year and a limited number of films were produced, but said trading since reopening had been "encouraging".

The cinema chain on Thursday added that it was considering a listing of itself or a partial listing of its movie chain Regal in the US, its biggest market.

Operating losses in the six months to June 30 were reduced by asset impairment reversals of $95.6m resulting from lease modifications and were sharply narrower compared to the same period in 2020 when the group posted a loss of $1.34bn.

Group revenues fell to $292.8m from $712.4m and adjusted core earnings showed a loss of $21.1m from a profit of $53m when Covid-enforced closures hit the leisure industry hard. Admissions plunged 70.3% to 14.1m.

Cash burn was around $45m a month, supported by positive working capital in June. As of June 2021, the group had cash of $436.5m, which was strengthened by an additional term loan with principal value of $200m raised in July.

“In view of the situation related to Covid-19, the studios entered into various experiments which we believe ultimately will lead to a situation whereby there is a theatrical window but it is shorter than in the past and dependent on the theatrical revenue potential of the movie itself,” the company said.

“Currently, movies are being released with windows that are anywhere between 0-60 days. We expect that by 2022, the window will stabilize to somewhere between 20 and 60 days, but subject to each movie’s potential.”

Cineworld said it was encouraged by an upcoming film release slate the includes the four new Marvel movies as well as ‘Top Gun Maverick’ , a new Bond film, the fourth in the ‘Matrix’ series and ‘Dune’. The group operates in 10 countries with 9,269 screens globally.

Chief executive Mooky Greidinger said trading had been encouraging since the chain started to re-open sites in April.

"We expect this progress to continue as vaccination programs continue to successfully roll out and as restrictions ease into the second half of 2021. The strong film slate, in particular for Q4, gives us great confidence in our ability to continue to rebound strongly."

“I am confident that the business is in a strong position to execute its strategy and deliver a return to growth as we recover from the pandemic and capitalise on the forthcoming strong film slate alongside clear pent-up consumer demand,” he said.

Harry Barnick, analyst at Third Bridge, said "some estimates suggest that box office revenues will be 10% lower post-covid permanently as customers have grown accustomed to watching films at home, studios shortened the theatrical window and exhibitors have permanently closed the curtains on unprofitable cinemas".

"Cineworld is dependent on blockbuster films enticing customers back to the cinema. It must also pivot to new revenue streams: less Hollywood, more arthouse and alternative content."

"Cineworld's leverage has skyrocketed during covid and its debt burden will be an additional challenge through the recovery period."