Shares in Cineworld plunged more than 40% after the world’s second-largest cinema chain said a lack of blockbuster films has led to lower-than-expected admissions.
The London-listed company, which has run up debt of almost $10bn (£8.27bn) as losses soared during the pandemic, said that despite the success of hits such as Top Gun: Maverick starring Tom Cruise, not enough films were hitting cinemas.
“Despite a gradual recovery of demand since reopening in April 2021, recent admission levels have been below expectations,” Cineworld said. “These lower levels are due to a limited film slate that is anticipated to continue until November 2022 and are expected to negatively impact trading and the group’s liquidity position in the near term.”
While cinemas are expected to benefit from films such as James Cameron’s Avatar 2 later this year and Marvel releases including Thor: Love and Thunder, Hollywood has released fewer films than in a typical summer.
This is due to the knock-on effect of filming disruptions through the pandemic, and also films in some mid-budget genres, such as romantic comedies, often being released directly on streaming services.
The company, which operates 9,000 screens in 10 countries including the US and UK, admitted about 95 million moviegoers in 2021, up 75% on the 54 million in 2020 but well below the 275 million who attended before the Covid crisis.
“The group has been taking proactive steps to ensure it has the balance sheet strength and flexibility to adapt to market conditions,” the company said.
Cineworld said it was in discussions with stakeholders over strategic options to improve its balance sheet and deleverage its debt pile, which it said would result in the “significant dilution” of shareholder stakes in the business.
“The group’s business operations are expected to remain unaffected by these efforts and Cineworld expects to continue to meet its ongoing business counterparty obligations,” it said.
Cineworld’s net debt was $8.9bn at the end of 2021.
The group, which operates the Cineworld and Picturehouse chains in the UK and Regal in the US, made a $708m loss last year as Covid closures continued to impact cinema operators. However, revenues more than doubled from $852m to $1.8bn, thanks to the latest James Bond and Spider-Man films. In 2020, the company reported a record $3bn loss.
The warning from Cineworld stands in stark contrast to the performance of AMC Entertainment, the world’s largest cinema group and owner of the Odeon chain in the UK, which said the new Top Gun and Dr Strange films had fuelled a doubling of ticket sales in the US.
The company, which has a $12.8bn market value compared with Cineworld’s £154m, said July had the highest monthly attendance in US cinemas since before the pandemic.
“This raises the rather awkward question as to what AMC are doing well that Cineworld clearly aren’t, as both can’t be right,” said Michael Hewson, chief analyst at CMC Markets. “Either those two films were very popular, or they weren’t. And if AMC saw record July admissions, Cineworld probably needs to ask why it didn’t. That’s the question shareholders need to pose to management.”
