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Jun 30, 2020

'We can survive': Cineplex touts balance sheet despite tumbling stock, Q1 loss

We will be encouraging masks and distributing them as we open: Cineplex CEO

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Despite a takeover arrangement that fell apart and a global pandemic that shuttered cinemas for months, the head of Canada’s largest movie theatre chain says his company can survive the turmoil.

“We have a strong balance sheet. We have committed employees. We are doing all the steps we are required to do to make sure that we can survive for the long-term, and we will come out of this,” Cineplex Inc. Chief Executive Officer Ellis Jacob told BNN Bloomberg Tuesday.

“The only risk is that at the end of the day we don’t know how long this pandemic is going to last and that’s the factor that has to be taken into account. But we feel good at this particular time.”

Jacob’s comments come one day after Cineplex reported a $178.4-million first-quarter loss, largely attributed to significant impairment charges in the three-month period ending March 31.

The company also warned in a regulatory filing that uncertainties about its financial liquidity “lend significant doubt about [its] ability to continue as a going concern.” However, it stated that it has sufficient cash to cover its immediate obligations and announced some immediate covenant relief from its lenders.

Cineplex also continues to deal with fallout from the collapse of its planned $2.8-billion takeover by Cineworld Plc. That deal was scrapped in mid-June with Cineworld accusing Cineplex of breaching the deal’s terms and Cineplex responding with a plan to sue its former suitor.

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    Cineplex shares tumbled on Tuesday, dropping as much as 23 per cent in early trading, leaving the stock at a fraction of the $34-per-share takeover price that had been negotiated with Cineworld before the transaction fell apart.

    The road to recovery for the theatre industry could be a slow one, as customers adjust to their own level of comfort returning to cinemas and the realities of a socially-distanced movie-going experience.

    A BNN Bloomberg.ca poll conducted Tuesday found that nearly two-thirds of respondents are not ready to entertain the idea of returning to theatres.

    Cineplex has begun slowly reopening select locations, with six Alberta venues resuming operations last Friday. Jacob also expressed hope that rescheduled August release dates for some of the summer’s biggest movies – specifically The Walt Disney Co.’s “Mulan” and the new Christopher Nolan film “Tenet” - could provide an immediate box office boost.

    “Our desire – and we are working very, very hard as an industry – [is] to have those movies stay on those particular dates,” Jacob said.

    “The issue again is how things evolve in the U.S. and in different parts of the world.”