- Cineworld continues to operate through chapter 11 process
- Admissions to remain below pre-pandemic for next two years
- Seeking to deleverage and strengthen balance sheet
Embattled cinema group Cineworld (CINE) said it continued to operate its global brands while it worked through the chapter 11 bankruptcy process in the US.
But the company warned that a slower than expected post pandemic recovery and fewer film releases schedule for the next couple of years has led it to revise down short and medium term admissions forecasts.
While this suggests a poorer outlook for cinema groups, it contrasts with the recent trading update from premium UK cinema company Everyman Media (EMAN:AIM) which reported healthy demand.
The shares dropped 0.7% to 3.1p and have lost 95% of their value over the last year.
DELEVERAGING FOCUS
With the expected support of secured lenders Cineworld said it is seeking to implement a ‘deleveraging transaction’ that will ‘significantly’ reduce debt and strengthen the balance sheet.
This suggests a debt-for-equity swap whereby senior lenders convert their loans in shares, creating dilution for existing shareholders.
Meanwhile the company will be able to continue trading with the help of existing cash resources and court approval for access to $785 million of an approximate $1.94 billion of debtor in possession financing.
TRADING BELOW PRE-PANDEMIC
Trading in the first half to 30 June showed revenues jumping to $1.52 billion from $292 million reflecting the uninterrupted operation of cinemas across all territories.
The company returned to profitability with EBITDA (earnings before interest, depreciation, and amortisation) of $364.2 million.
At the end of June, the group had cash of $130.6 million down from $354 million at 31 December 2021. Net debt was $5.2 billion compared with $5 billion.
Cineworld has been granted a ‘stay of execution’ by the court regarding litigation action brought against it by Canadian cinema group Cineplex.
Since the period end the company said third quarter admissions have been below expectations but it anticipated a strong final quarter.
This is expected to be supported by the releases of Black Adam, Black Panther: Wakanda Forever, Avatar: The Way of Water and other blockbuster films.
Admissions for both 2023 and 2024 are expected to remain below pre-pandemic.
