Cineworld has warned that a worsening of the coronavirus crisis would cast doubt over its ability to stay afloat after reporting a $1.6bn loss for the first six months of the year.
The group said its directors believed it had sufficient cash to see it through its expectation of some cinemas being shut until october and only achieving up to 62 per cent of 2019s admission levels by the end of 2020.
Cineworld warned, however, that under more severe circumstances including a second wave of covid-19 next year affecting several of the group's territories to the extent that further prolonged, partial shut downs are required it would face more acute pressure to its balance sheet.
Cineworld shares fell more than 14 per cent after the update on thursday morning.
The modelling for this scenario indicates that the group would need additional facilities in order to continue to operate from early 2021, cineworld said.
The company added that under both its base and severe but plausible downside scenario, it would breach loan covenants in december of this year and june 2021. it said it was in negotiations with lenders over waivers and its directors were confident they would be obtained.
Pwc, cineworlds auditor, said it was unable to determine whether it was appropriate to present the companys results on a going concern basis. the absence of the [covenant] waivers and the uncertainty over the short term as a result of the ongoing covid-19 situation represent material uncertainties which are too severe for us to express a conclusion on the interim financial statements, it said.
Cineworld had a total of $3.6bn in loans at the end of june as well as a $573m revolving credit facility.
The group said that as of june 30 it had net debt of $8.2bn. revenues fell 67 per cent, to $712.4m, in the six months to june compared with the same period last year. cineworld sunk to a $1.6bn pre-tax loss, from a $139.7m profit during the same period last year.
Of its 778 cinemas, cineworld said that 561 had reopened following periods of enforced closures due to coronavirus. it noted that despite 200 of its us cinemas, mostly in new york and california, remaining closed, it had seen a steady build up in admissions in those that were open, helped by the release of the christopher nolan blockbuster tenet.
The group came into the crisis in a vulnerable position as it was part way through an attempt to buy the indebted canadian cinema chain cineplex in a $2.1bn deal. it has since called off the takeover, leaving the two companies facing an expensive legal battle after cineplex announced it would sue cineworld for $1.1bn in damages, accusing the larger group of buyers remorse.
Cineworld said it had filed a counterclaim against the canadian group for alleged losses suffered as a result of cineplexs breaches as well as lost financing costs and advisory fees.
Mooky greidinger, cineworlds chief executive, described the groups current trading as encouraging considering the circumstances adding that he believed there remains a significant difference between watching a movie in a cinema with high-quality screens and best-in-class sounds to watching it at home.