Cineworld’s auditor said it was unable to determine whether it was appropriate to present the cinema chain as a going concern
Cineworld’s auditor said it was unable to determine whether it was appropriate to present the cinema chain as a going concern © Getty Images

Cineworld has reported a $1.6bn loss for the first six months of the year and warned that a worsening of the coronavirus crisis could cast doubt on its ability to survive.

PwC, the cinema chain’s auditor, said it was unable to determine whether it was appropriate to present the company as a going concern.

The group said its directors believed it had enough cash to see it through its assumptions that some cinemas would remain shut until October and that admission levels this year would be 62 per cent of last year’s at most.

But under worse circumstances — including if a second wave of coronavirus infections next year affects “several of the group's territories to the extent that further prolonged, partial shut downs are required” — it would face more acute pressure on its balance sheet.

Under both its base and “severe but plausible downside scenario”, it would breach loan covenants in December this year and June 2021, it said.

Shares in Cineworld fell more than 14 per cent after the update on Thursday morning.

Mooky Greidinger, Cineworld’s chief executive, said the cinema chain was looking at “every kind of possibility” for raising capital and that it had made progress in negotiations with lenders over covenant waivers.

It is also expecting a tax rebate from the US government that could amount to more than $150m, according to a person with knowledge of the position.

PwC said: “The absence of the [covenant] waivers and the uncertainty over the short term as a result of the ongoing Covid-19 situation represent material uncertainties which are too severe for us to express a conclusion on the interim financial statements.”

Cinemas are facing acute challenges, with major film releases delayed and worldwide lockdowns that have encouraged more consumers than ever to subscribe to streaming services.

Mr Greidinger has continually rejected claims that the growth of services such as Netflix and Disney Plus could have an existential effect on the industry. He admitted that he had several streaming subscriptions but said he believed people bought them to watch TV series rather than films.

Cineworld came into the crisis carrying large amounts of debt as a result of pursuing two major acquisitions in recent years. It had a total of $3.6bn in loans at the end of June as well as a $573m revolving credit facility and said that as of June 30 it had net debt of $8.2bn.

Revenues fell 67 per cent, to $712.4m, in the six months to June compared with the same period last year. Cineworld sunk to a $1.6bn pre-tax loss, from a $139.7m profit during the same period last year.

Of its 778 cinemas, Cineworld said 561 had reopened since lockdowns had eased. In the US, 200 cinemas mostly in New York and California remained closed but there had been a steady rise in admissions at those that are open, it said, helped by the release of the Christopher Nolan blockbuster Tenet.

Its most recent takeover attempt, which targeted the indebted Canadian cinema chain Cineplex, was called off in June as a result of the crisis. The two companies now face an expensive legal battle after Cineplex announced it would sue Cineworld for $1.1bn in damages.

Cineworld has filed a counterclaim against the Canadian group for alleged “losses suffered as a result of Cineplex’s breaches” as well as lost financing costs and advisory fees.

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