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Can Bond pull off his most dramatic rescue yet: Cineworld

James Bond has saved many a tricky situation but it might need all of his inestimable powers to rescue Cineworld PLC (LON:CINE) from its dice with corporate death.

Bond curiously seems intractably linked to the fate of Cineworld.  It was the postponing of the release of the latest Bond epic No Tine to Die that signalled how bad the coronavirus crisis might be for the cinema business.

Now could it be that the planned screening at the end of September (after several false starts) might herald a revival?

It’s a big ask, as Cineworld’s numbers this week underlined.

Losses in the year to end-December 2020 were more than US$3bn while it needed a further fundraise of USS213mln of convertible debt to get it to the re-opening period.

Net debt at the end of the year already stood at an eye-watering US$8.3bn and Cineworld is to ask shareholders for permission to increase its borrowing limits even more.

A hopeless situation, even for Mr Bond?

Maybe no if the scenario was the same as pre-coronavirus and it was just a case of making up lost ground, but filmmakers have used the opportunity of cinemas being closed to trial streaming of new releases.

And the results suggest this might turn in to a more long-term threat to cinema-going than even the pandemic.

A deal with Warner Bros signed earlier this week gives Cineworld just a 45-day window of exclusivity on new blockbusters in the US and 31 days in the UK.

Disney, meanwhile, said it would release its delayed blockbuster Black Widow simultaneously in cinemas and on its premium streaming channel.

While the direction of travel by the filmmakers does not look good for cinema owners, it might work for Cineworld according to investment research house Third Bridge analyst Harry Barnick: “Cineworld’s deal with Warner Bros sets a new precedent for the theatrical window. 

“With experts indicating that 80% of box office revenues are generated in the first two weeks, this agreement appears to be a win-win deal. 

“The big unknown is how customers will respond – will they be willing to pay for the cinema if they know they can watch the film at home within 45 days?  The jury is still out on that one.”

Third Bridge points out that cinemas need around 40% attendance levels to break even and that these levels are not expected until the fourth quarter of 2021 assuming no resurgence of Covid-19 or restrictions.

Cineworld shares are 103p, valuing the group at £1.3bn and suggesting there are still plenty of cinema fans out there at least among investors and who knows what the cinema visitor numbers will be like like when people can finally go out again – they could potentially be off the scale.

But in the cold light of day it still looks like option money.

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