Cineworld expects sales recovery to take two more years

Cinema chain Cineworld, which this month filed for Chapter 11 bankruptcy, has admitted it does not expect ticket sales to recover to pre-pandemic levels for at least the next two years.

The world’s second-biggest cinema chain, which operates Regal Cinemas in the US along with brands in the UK and eastern Europe, said on Friday that admissions were “expected to remain below pre-pandemic levels” throughout 2023 and 2024.

The company, which previously blamed a lack of blockbuster films for its financial woes, said ticket sales between June and September this year were also “below expectations”.

Like its rivals, Cineworld has been hit by an exodus of customers to streaming services and a dearth of major films since the Covid-19 pandemic.

Vue, Europe’s biggest privately owned cinema, resorted to a debt-for-equity swap this year to stay afloat. AMC, which has even bigger debts than Cineworld, has been boosted not by strong financials but by becoming a “meme stock”, popular among retail traders.

Cineworld said it burnt through $145mn of cash in the first half of the year to service its growing debt, which stood at $5.2bn at the end of June, up from $5bn last year. The chain’s cash reserves were down 63 per cent over the period to $130.6mn. Its net debt and lease liabilities total $8.8bn.

Cineworld was on the line for a potential $1bn payout as part of a lawsuit brought by Canadian rival Cineplex over a botched takeover deal, which collapsed in June 2020. But this week, a US bankruptcy court upheld a stay on any liabilities owed to Cineplex, meaning the claim will be dealt with as part of the Chapter 11 proceedings.

The group posted revenues of $1.5bn in the six months to the end of June, a significant recovery from $293mn in the same period last year when most of its cinemas were closed because of Covid restrictions, but still about 30 per cent down on 2019 levels. Cineworld’s share price stands at just 3p.

Cineworld is pinning its recovery hopes on a slate of new blockbuster films, including Black Panther: Wakanda Forever and Avatar: The Way of Water, which it said could contribute to stronger admissions figures in the fourth quarter.

Mooky Greidinger, Cineworld’s chief executive, acknowledged the “ongoing material uncertainties” over the group’s future. He added that the chain was “cautious” about its short and medium-term outlook because of “economic uncertainty in a number of our key markets and the impact of significant inflationary pressures on guests”.

Alice Enders, a media analyst at Enders Analysis, said Cineworld’s troubles were indicative of the problems faced by the cinema industry at large.

“The appeal of going to the cinema has simply vanished for many consumers after the pandemic,” said Enders. “The pandemic accelerated structural change and Cineworld didn’t smell the coffee.”