Troubled cinema chain Cineworld (LSE: CINE) released first-half figures Friday, and there were no surprises. In response, the Cineworld share price fluctuated a percent or so either way in morning trading.
Shareholders will be looking for news on any bankruptcy and rescue progress. On that front, the company commenced Chapter 11 bankruptcy proceedings on 7 September, in the Southern District of Texas.
Cineworld confirmed that it “with the expected support of its secured lenders, will seek to implement a de-leveraging transaction that will significantly reduce the Group’s debt, [and] strengthen its balance sheet“.
That mention of lenders gives us a timely reminder. They’re higher up the food chain than shareholders, and get priority treatment.
Chapter 11
The bankruptcy court has granted access to the first $785m from a $1.94bn debtor-in-possession financing facility. There’s some operational cash and cash reserves too. And the board reckons this should “provide sufficient short-term liquidity for the group to meet its ongoing obligations, including post-petition obligations to vendors and suppliers, as well as employee wages, salaries and benefits programs“.
In other words, the lights are staying on. And that’s the essential purpose of Chapter 11 bankruptcy. It gives a company breathing space to tackle its financial problems. It’s hard to do that while struggling to keep heads above water.
First-half figures
On the financial front, Cineworld tells us its “results have been positively impacted by the easing of all remaining COVID restrictions in Q1 2022“.
It added that cash burn of $145m in the period however, “reflects the slower-than-expected recovery in H1 2022“.
Revenue for the half came in at $1,515m. That’s a good deal higher than the first half of 2021, which brought revenue of just $293m.
Profits
We also saw gross profit of $425m in the half, and an operating profit of $57.3m. That’s better than a tiny $9.6m gross profit a year previously, and a sizeable $209m operating loss. As well as rising admission numbers, ticket prices and customer spend have been increasing.
Cineworld’s debt dominates the financial picture right now. Net external borrowings as of 30 June stood at $5.2bn, up a little from December. That seems like a lot for a company with a market-cap of just £42.7m ($47.7m.)
There’s no real progress to report on the legal battle with Cineplex, as the appeal process “remains ongoing“. Cineplex, it seems, filed for relief against any Chapter 11 stay in the process, but the court has denied it.
Mixed outlook
Third-quarter cinema admissions have been below expectations. The fourth quarter, though, should be stronger. But the the company still expects admissions in 2023 and 2024 to remain below pre-pandemic days.
What else can we say at this point? Chief executive Mooky Greidinger was not exaggerating when he said: “This has been a challenging period for Cineworld.”
He reiterated that the Chapter 11 process was needed so the company can “implement a de‐leveraging transaction that will provide the financial strength and flexibility to accelerate and capitalise on, Cineworld’s strategy.“