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Feb 11, 2021

Cineplex revenue falls amid film delays, theater closures

The bullish case for former TSX darling Cineplex

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Cineplex Inc. shares were little changed after the company said revenue declined 88 per cent to $52.5 million (US$41.4 million) from $443 million a year ago, missing average analyst expectations as the COVID-19 pandemic continues to pummel the film industry.

Canada’s largest chain of movie theaters has been hurt by the delay of big budget films. The release of the latest James Bond flick “No Time to Die,” has been moved to October amid a Hollywood-wide bet that the second half of the year will be safer for debuts.

Key Insights

- The Toronto-based company is trying to slow the rate at which it uses cash. It burned about $24.8 million per month in the quarter. It sold its headquarters in December in an effort to generate enough cash to pay down debt.
- On Monday, Cineplex said it had reached an agreement with lenders for relief on its financial covenants to the fourth quarter of 2021 under certain conditions, including completing a minimum $200-million financing of second lien secured notes by the end of March. The proceeds would be used to repay debt.

“The feedback has been extremely positive,” Chief Executive Officer Ellis Jacob said about the proposed sale in a Thursday interview with Bloomberg News. “We have been a company that’s been in business for a hundred years and we will return and thrive once this is behind us.”

The company’s theaters are still closed in parts of Canada, many of which were shuttered when a second wave of the coronavirus struck. It is not expected to reopen its locations in Toronto, Ottawa and Peel region anytime soon.
Cineplex is continuing to pursue litigation against London-based Cineworld Group Plc. after the latter backed out of a merger that would have created North America’s biggest cinema operator. The trial is expected to get underway in September.

Market Reaction

Cineplex shares fell as much as 7.3 per cent before recovering to trade near flat at 12:20 p.m. in Toronto