The reopening of the UK economy hasn’t had the positive effect on the Cineworld share price that you would have expected, after the lifting of restrictions over the past few months.
Cineworld share price plunges from March highs
Cineworld's share price has almost halved from their March peaks, when the company reported an X-rated $2.6bn loss, over half of which was driven by impairments of $1.34bn. In July, the Cineworld share price hit its lowest level this year as investors grew ever more sceptical over its prospects.
Unlike its peer in the US, AMC Entertainment, who reported earlier this week, Cineworld doesn’t have the Reddit crew watching its back, while its finances remain in a similarly precarious state, and the stop-start nature of its UK reopening won’t have helped, although its US operations should have done better if AMC’s numbers are any guide.
This also means that the bar was set low for today’s first-half numbers, which helps explain today’s rebound in the Cineworld share price; however, the numbers are still stark. Expectations for 2021 revenue back in March were in the region of $2.5bn, and for a number above $4bn in 2022.
Today’s H1 numbers have blown a giant hole in those projections, as first-half revenue came in at $292.8m, well below the same period a year ago of $712.4m. Admissions were down to 14.1m, from 47.5m, a reduction of 70.3% from the same period last year, which saw the chain experience similar restrictions to its business, albeit on a shorter timeframe.
On a more positive note, its first-half loss after tax improved to $576.4m, however these were set against last year’s awful comparative, of a $1.645bn loss. Cash burn averaged around $45m monthly, although this was improved because of a $204.4m tax receipt under the US CARES act.
Hopes for better second half
Given these numbers, Cineworld will certainly be hoping for a stronger second half to its financial year, along with a strong film release slate, which will include the new James Bond and Top Gun films and help push its annual revenues up towards the $2bn benchmark of analyst estimates.
The company has bought itself some time with various plans to restructure its finances as well as raising extra funds last November, when management managed to get the extra liquidity it needed to secure a stay of execution, agreeing lending waivers until June 2022, and securing a new debt facility of $450m, which matures on 23 May 2024.
The company also announced another $200m of incremental loans maturing in May 2024, from a group of its existing lenders, at the end of July however this is unlikely to be enough. This is perhaps why management has taken the decision to explore a US listing, as well as the possibility of listing its Regal operations in the US to shore up its finances further.
This is a remarkable aboutturn given that it was only three years ago that Cineworld bought Regal, but also highlights what a precarious state the company’s finances are in, and perhaps there’s a faint hope they might benefit from the AMC effect, which has seen their cinema counterparts shares soar.
While Cineworld's share price is higher in today's trading, it also doesn’t change the fact that its debt at the end of 2020 was within touching distance of $8bn.
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