Cineworld, the U.K.-based parent company of Regal Cinemas, saw its stock price drop by more than half in early trading on Wednesday after reporting lower-than-expected ticket sales that have exacerbated the chain’s debt woes.
Shares were trading at £9.50 on the London Stock Exchange, down from £20.80 at market close on Tuesday. That puts more pressure on the world’s second-largest cinema chain, which reported net debt $8.9 billion at the end of 2021 against revenues of $1.8 billion.
In a letter to shareholders on Wednesday, The company confirmed that it continues to seek additional funding and restructuring of its debt load but that “any deleveraging transaction will likely result in very significant dilution of existing equity interests in Cineworld.”
While the year-to-date U.S. box office ($5.12 billion) is up 176% compared to pandemic-starved 2021, ticket sales are still nearly 32% behind the record-setting 2019 and 36% behind 2018 in the same span. Even blockbusters like “Top Gun: Maverick” have not been enough to improve the exhibitors’ revenue picture.
“Despite a gradual recovery of demand since re-opening in April 2021, recent admission levels have been below expectations,” the exhibition company said in an update on Wednesday. “These lower levels of admissions are due to a limited film slate that is anticipated to continue until November 2022 and are expected to negatively impact trading and the group’s liquidity position in the near term.”
Regal Cinemas has been hit hard by the pandemic, losing $3 billion in 2020 and nearly $710 million before tax in 2021. While 2022 has produced several box office hits, the volume of wide releases is far below pre-pandemic years. Through the end of May, just 28 films debuted in wide release as compared to 42 films through the same span in 2019. Cineworld noted that it would explore alternatives to address its disappointing financial situation, which includes concerns about liquidity and debt load.
The company said it was “taking proactive steps to ensure it has the balance sheet strength and flexibility to adapt to market conditions.” This includes “significant previously disclosed operational and financial initiatives to manage costs and enhance liquidity. The group believes these steps are required to optimize its ability to maximize enterprise value as part of the recovery in the cinema industry.”
As an extension of these efforts, Cineworld said it is in “active discussions” with various stakeholders to evaluate “strategic options” to procure additional liquidity and potentially “restructure its balance sheet through a comprehensive deleveraging transaction.”
Cineworld is not the only exhibition company still feeling the financial force of the pandemic. AMC Entertainment, which owns the largest movie theater chain in the U.S., has seen its share price fall 17% (as of this writing) from its 2022 high in March.
