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Well put RS. There is so much misinformation being spouted, its good to see balance and some reasoned sense. Hope no one new to shares has been spooked into selling by the negative spin being spouted. ATB
RS2002 where did you get info of re opening in Scotland this Friday?
I have not seen any such welcome news.
Missing my cinema visits big time so hope you are correct.
Nothing in my unlimited email or local news I have spotted.
I welcome every piece of positive news we can get during this difficult time around the world.
RS2002 for Prime Minister !
Single handedly defeating the doomsters.
It just seems the doomsters are getting very very desperate because they realise that Cine will be surging next few weeks towards £1. Prospects of ending up bankrupt and on the streets from their shorting activities can only be described as karma.
I got in last week. I find that there are quite a lot of derampers here.
The way i see it, the cinemas are shut and they are not spending on rent or in some venues, nothing more than rent as the operation is ceased. So, no revenue or profit, but apart from that, they are also spending nothing for operations unlike other companies or business sectors. So, if they can hold off for now and once cinemas reopen, there will be cash flow. I notice when the new movie is out, the seats will be full for the first two weeks then they will become quite empty. So, with Covid cautions, the cinema will only be able to occupy ar about 30-40% or may be more. But every movie up in the cinema will stay there for about a month or in some cases is more due to demand. So, the amount of audiance they get will be spread out during the full showing period of the movie instead of cramping within the first two weeks. So, they will still get the same or similar amount of profit and revenue once the cinemas are reopen.
I for one always go to cinema after two weeks of avoiding spoilers because they are always free in the morning time or after two weeks of release. This literally applies to every cinema. So, they will have similar revenue and profit to continue operation.
Debt and interest? Yes, just like any other business, they will have it and they are not alone in facing this problem. Since they are not alone, there will be schemes that will soften the blow. So I don't see why people are so negative about this share. I am invested in some other sectors which are a bit more risky. for example, I'm invested in IAG, but I feel like there are so much more negativity towards such a simple industry like this compared to an air-liner.
Correct me if I'm wrong, is this business sector (Cineworld) this complicated? I'm not so sure. hmmm,.....
The last paragraph was from Johnny who posted some good fundamentals to support.
Thanks RS!
I think this post needs reposting regularly. Especially when all the negative crap keeps getting regurgitated.
Thank you
*re-opening Wales and Scotland this Friday
“...unless a waiver agreement is reached with the required majority of lenders within the going concern period.”
It is widely understood that Cineworld, citing such a risk concern mitigated it before it became material.
22 June 2020: Cineworld is pleased to announce that the Group has agreed with a group of private institutional investors the terms of a new $250m secured debt facility with a maturity of 2023. This, TOGETHER with the COVENANT AMENDMENTS and revolving credit facility increase of $110m announced on 28 May 2020, further strengthens the Group's balance sheet as cinemas begin to re-open around the world.
Source: https://otp.tools.investis.com/clients/uk/cineworldplc1/rns/regulatory-story.aspx?cid=655&newsid=1397845
No one has a crystal ball, however the de-ramps and flooding of the board with imminent failure are simply noise with no basis.
Cineworld:
1. Don’t need more loans or a cash injection as they have sufficient liquidity to keep them afloat until July 2021 in the event ALL of their cinemas remained closed indefinitely until then. Given they have reopen ALL European cinemas and are opening England cinemas this Friday, that is unlikely.
2. Don’t need to do a rights issue to dilute shareholders shares.
3. Have negotiated lease cuts and in some instances like Poland when they were shut DIDN’T pay a penny in rent.
4. Have European cinemas that play domestic movies not linked to Hollywood/American; this means they have UNLIMITED membership paid and domestic box office sales that don’t care one iota about Hollywood titles.
5. Have variable costs to the tune of 70% and a flexible manpower model, read: zero contract hours with temporary staff. Not popular, I know, but from a spend perspective is great for shareholders.
The angle they are going bust doesn’t fly.
Fitch the rating agency even testified to that stating, the issue of a USD250 million secured debt facility and a USD110 million increase in its revolving credit facility (RCF) have ALLEVIATED short-term cash risks
Pre Covid, free cash flow was well over $1bn a year, interest on bank loans was under $200M. Net debt was being reduced and around $500M a year was being paid out in dividends.
Even with reduced capacity CINE will easily be able to cover the interest payments just from 100% openings in UK and ROW and a fraction of the US market. Fair enough there is not enough going around for a dividend but no one is buying in for that. There is no issue of CINE defaulting on debt short term unless they remain closed until well into 2021 which is not going to happen.
I agree indep. I'm one of those people. However, after I lost the first 10% and reached my stop cap, I looked into cine closer and decided to leave it be. Instead of a quick buck, im now looking at doubling or tripling my money instead.
*2021
@Indepthwins, it’s refreshing to see you ACKNOWLEDGE the POSITIVE LIQUIDITY position Cineworld posses that will see them comfortably through a challenging 2020.
Given the positive advancements in vaccine programmes, that won’t just benefit leisure but global industries, the outcomes for 2020 in my opinion remain optimistic.
The current SP presents a substantial discount to the pre-covid19 era and I and many investors have taken positions to see this recover well.
RS202 and from the same RNS..
“ This analysis does not take account of the fact that in the case of widespread site closures the films scheduled to be released during this period of closure could be moved to later in 2020. These downside scenarios are currently considered unlikely, however it is difficult to predict the overall outcome and impact of COVID-19 at this stage. Under the specific downside scenario, however, of the Group losing the equivalent of between two and three months' total revenue across the entire 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.
Only the specific downside scenario detailed above would indicate the existence of a material uncertainty which may cast significant doubt about the Group's ability to continue as a going concern. The Consolidated Financial Statements do not include the adjustments that would result if the Group was unable to continue as a going concern.”
Now the situation is far worse than that demonstrated above and accordingly the covenants have already had to be re-negotiated.
Cineworlds admissions are going to be a far cry from those they were in Jan/Feb infact they are going to be a far cry from anything they have ever seen!
How does that fit with the model you are trying to push as positive RS?
Lovely RS.. just lovely
Good post RS.
Exciting times ahead me thinks
I particular appreciate the proactive stance, Cineworld took before lockdowns were imposed. They had a clear strategy and we should expect to see the H1 results demonstrate the cost reductions to further strengthen the EBITDA figures.
“... 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...”
Source: https://otp.tools.investis.com/clients/uk/cineworldplc1/rns/regulatory-story.aspx?cid=655&newsid=1378287
Good post RS, I would add that not only were Jan and Feb unaffected but I believe Mooky mentioned that before covid struck they'd had higher admissions on a year on year basis for those early months.
Its gonna fly high
Cine will rise tomorrow.. bring it on
Great post RS
So I was thinking a little more about the POSITIVE news that the Cineworld BoD retrieved for the company and it’s investors. That the ND/EBITDA ratio covenant test was increased from 5.5x to 9.0x.
We know that in 2019, Cineworld scored a very good EBITDA of $1033m which resulted in a ND/EBITDA of just 3.4x ($3500m/$1033m). This kept lenders very satisfied that Cineworld were comfortably within revenue making headroom to clear the much more generous 5.5x ratio they imposed, which would have seen EBITDA needing to come in at a minimum of $636m. So to put that into perspective, Cineworld scored 62% higher in the test and easily passed to keep the lenders happy that Cineworld would be good to honour their debts.
Given the lenders have now provided a much more GENEROUS ND/EBITDA of 9.0x, to put that into perspective, Cineworld, at a minimum, to satisfy their net debt of $3500m, need a EBITDA of JUST $388m.
What is that as a percentage comparable to 2019? 37% ($1033m/$388m). Cineworld can pass their covenant test on the basis they can demonstrate profit earnings, EBITDA of just 37% of 2019.
As for 2020, the lenders have set the next test in June/ July 2021 and the ND/EBITDA at 5.5x.
My opinion is that Cineworld will comfortably clear the test for 2019, given Jan/Feb were unaffected months and they are on course to re-open their largest territory, the US (73% of their estate) in less than 2 weeks. This will generate more than sufficient revenue and see the test score is met.
With regards to 2021, given the next test date is July, there is enough time to
1. Monitor income streams including those that are passive such as UNLIMITED memberships.
2. Assess the movie slate for 2021 to ensure a sufficient catalogue exists to entice footfall.
3. Assess the market for a vaccine
4. Establish if a second wave is to come about or just a few local flares which regional lockdowns address
5. Assess income and re-negotiate with lenders in a manner akin to AMC, should it be required.
In short, Cineworld is NOT facing imminent collapse and need to undertake a rights issue, as some commentators would like you to believe. Their loan maturity is not until 2023 and their market cap is very much removed given their current share price doesn’t reflect their true Net Asset Value (NAV).
Good luck and DYOR.
Great post RS2002
RS202 one other thing, the results you commented on are for 2019.
2020 is where the focus is and your comments take zero effects of COVID into account.
Surely you know this before posting such comments?
Great post RS, informative as always. Looks like we have a new shorter in tidd83. Bit late to the party I would say.
RS202.
Very simple to copy and paste extracts, I can quite easily find posts to counter your argument.
Look at what has now occurred, increased PPE and sanitary costings, face mask requirement, reduced visitor count to date, fear of second wave and now major films pulled from the screens until 2021.
Let us see who was right, I wouldn’t be so dismissive and open your eyes to reality.
The Net Debt (ND) to Earnings Before Interest Depreciation and Amortisation (EBITDA) ratio is a debt ratio that shows how many years it would take for a company to pay back its debt.
Lenders will often undertake covenant tests, usually after each financial year to test the company on their earnings and ability to honour their loans and debts.
Pre-Coronavirus, Cineworld’s Net Debt being $3.5 Billion had a 3.4 ND/EBITDA ratio. Which was very low (under 5 is considered good) and was used to support covenant testing by lenders to install confidence that they were in a good place to pay back their debt.
Source (Financials at a Glance, Slide 4): https://www.cineworldplc.com/sites/cineworld-plc/files/2020-03/2019-full-year-presentation_0.PDF
It’s no secret that Coronavirus has impacted footfall and we have seen Q2 have zero income.
What investors need to be aware of is that Cineworld have negotiated some changes to their ND/EBITDA ratio to give them more breathing space to get through the current pandemic and reduced footfall.
Cineworld have had their ND/EBITDA ratio increased to 9.0 to support the testing covenant due 31 December 2020. This means when the lenders crunch the numbers, they will account for REDUCED income and a higher debt ratio. This is favourable as one cannot expect a company in leisure like Cineworld to perform at levels pre-Coronavirus until we see a vaccine in place and footfall back to its pre levels.
Now imagine my surprise when another commentator on this BB suggested this was negative news.
Be careful who you follow on this BB as they will happily take positive news, spin it to imply a negative connotation to manipulate investor sentiment for their own personal (short position) gain.