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Cineworld's corona-crash

The cinema chain swung to an eye-watering pre-tax loss of $1.6bn (£1.3bn) in the first half
September 24, 2020

Cineworld’s (CINE) shares plunged by as much as 17 per cent following the release of its half-year results, as the cinema chain warned that tighter coronavirus restrictions could force it to  raise additional funds and re-close its estate. 

IC TIP: Sell at 42p

The company said that it had already raised $361m (£283m) in liquidity over the six months to June. While roughly three-quarters of the chain's cinemas has now reopened, all of its sites were closed from mid-March until later in the summer as the pandemic raged on. Pre-tax losses landed at $1.6bn, from a profit of $140m a year earlier.

Management is ostensibly nervous about how far its balance sheet can stretch as the virus persists. The group secured a waiver for the June 2020 testing date, but is still in negotiations for waivers for December 2020 and June 2021. That is not to mention the last-minute ditch of its $2.1bn plan to buy Canadian Chain Cineplex (TSX:CGX) earlier this summer, which has now tangled the company in a legal dispute.

Box office revenues dropped by more than two-thirds to $391m over the reporting period, but the relaxation of some lockdown restrictions in the UK and the US have since partially revived admissions. Cineworld said that this was helped by the release of both local movies and blockbusters such as AT&T (US:T) subsidiary WarnerMedia's ‘Tenet’. The blockbuster reportedly made $7.1m opening weekend in the UK, according to Variety

But coronavirus has thrown the future of cinema into doubt. Indeed, media giant Walt Disney (US:DIS) skipped the theatres for its new Mulan film and instead pushed it directly to its Disney+ streaming service. Across the industry there are a number of other new titles scheduled for release for the remainder of the year - including a new James Bond film,  which could pick up the momentum kicked off by Tenet. But ultimately Cineworld’s trading is directly connected to how well coronavirus contagion is managed.