Citi downgrades Cineworld to 'neutral'

Citi has downgraded its stance on shares of Cineworld to ‘neutral’ from ‘buy’ as it considers the impact of the coronavirus on cinema attendance.

It noted the postponement of the latest James Bond film due to coronavirus and said there would likely be "more to come".

"We think the market is going to continue to punish those stocks with an uncertain trajectory and with meaningful risk to earnings," it said. "As Cineworld falls firmly into that camp, we downgrade to neutral."

In addition, the bank said concerns around leverage and a potential margin call will continue, and argued that there is no manoeuvring away from the current Cineplex acquisition.

"Given the uncertainty, we remove our price target," it said.

At 0940 GMT, the shares were down 6.4% at 113.70p.

The downgrade occurred before Cineworld put out a statement early on Friday saying that it had not seen any "material" impact on movie theatre admissions from the coronavirus outbreak.

The company, whose shares fell 13% on Thursday amid concerns about how the delay of the latest Bond film and the spread of coronavirus would impact footfall, said it had continued to see "good levels" of admission in all its territories.

"Although the release of the new Bond movie has been postponed to November 2020 largely due to closure of cinemas in the Asian markets, the studios have advised us that in the countries in which we operate, they currently remain committed to their release schedule for the coming months and remainder of the year," it said.

The group said there can be no certainty as to the future impact of the Covid-19 outbreak, but that it is taking measures to ensure it prepares the business "for all possible eventualities".

"Should conditions relating to COVID-19 continue or worsen, we have measures at our disposal to reduce the impact on our business including, but not limited to, capex postponement and cost reduction," it said.