Cineworld warns over worst-case coronavirus impact

Cineworld warned over its ability to keep trading on Thursday as it said it may not be able to pay its debts due to the coronavirus outbreak.

The company said that while so far it has seen little impact on its business, it is taking measures to ensure it is prepared for all eventualities.

Cineworld said that under its "downside scenario" of widespread cinema closures, which would see the company lose the equivalent of between two and three months’ revenue across the estate, "there is a risk of breaching the group's financial covenants, unless a waiver agreement is reached with the required majority of lenders within the going concern period".

However, it also said that such a scenario was unlikely.

Chief executive officer Mooky Greidinger said: "We are closely monitoring the evolution of COVID-19 and so far, we have seen minimal impact on our business. However, there can be no certainty on its future impact on our activities, hence we are taking measures to ensure that we are prepared 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, cost reduction, in order to maintain cash liquidity, however we have highlighted the potential impact this could have on the group within our going concern statement."

The warning came alongside Cineworld’s results for the year ended 31 December 2019, which showed a 6.2% decline in revenue to $4.4bn as admissions fell 10.8%. Adjusted earnings before interest, tax, depreciation and amortisation were down 3.7% to $1.0bn.

Cineworld attributed the drop in revenue predominantly to the strong comparative film slate.

At 0855 GMT, the shares were down 32% at 59.94 in a sharply lower London market.

CMC Markets analyst David Madden said: "The group has large exposure to Europe as well as the US, and the situation in both regions seems to be getting worse by the day. Public health warnings are on the rise and more people are staying away from city centres, and other areas that are densely populated. Sporting as well as music events are being postponed or cancelled, so cinemas are in the firing line as traders feel they could see a large decline in footfall in the months ahead.

"Cineworld wasn’t doing so well in terms of admissions before the health crisis, so how will they cope if lockdowns become common place."