Member Info for Hexam

Just can’t see vertical integration working in the age of the multiplex.

Stiggsy - it's not possible to say until we know the terms of the hosting agreement with Galaxy. In particular how much of the Helios overhead costs taken on by them will be passed straight back to ARB and whether Galaxy add a margin on top or run it as a loss leader until they attract other miners (and/or install their own machines) to spread those overheads more. PW has said Opex costs will come down but he's said a lot of things in the past that haven't exactly come true - so I'd rather believe the numbers, when we see them, than his promises.

We should get a good idea in the January numbers though as the direct costs they report should now include the hosting fees. Current all-in costs have been running at around $40-45k per BTC each month (or about $30k on a cash basis) so any improvement would be very welcome!

Of course if electricity prices continue to come down then this will certainly help too, especially if Galaxy are successful in getting a decent PPA.

“The redundant staff can be bought though reducing the risk of cabin crew for busy times”

Indeed:

https://www.bbc.co.uk/news/business-64445669

The news came out Friday during trading so not sure why a big impact is expected tomorrow?

Elvis - this just repeats what was said in the filing so nothing new and it doesn't mention retaining other parts of the business. The 'insider' is also not adding anything of note. The article is also behind in its number of leases where rejection has been approved - it's now 28 out of the 109 so far proposed.

Wolf, I'm afraid the opposite is true. The Jan 4th presentation highlighted that revenues so far are well behind expectations, especially for November and December. Hopefully the increase we are seeing in the number of releases will help to reverse that.

Sounds like we're all agreeing then? :-)

Of course there's a balance to be reached. It's always been the case that studios carefully manage releases so that they don't overcrowd the market and shoot themselves in the foot. The point is that 'saturation' has not been reached yet with box office still well below pre-pandemic levels. Cruis is spot on - we need more quality releases and on a regular basis and it's good to see the promising start to the year in this respect with the choice currently available and the upcoming releases. Hopefully this continues and improves further so that CINE can move back to profitability sooner rather than later.

Huss, given that the deadline for the submitting non-binding offers of interest is February 16th I think if we do get to hear anything on the business plan it will be before then or shortly thereafter. We should have heard on the plan already (last week) but for the lack of response to it from the lenders so unless they are happy just to go with the marketing process instead then would expect them to pull their finger out and respond before that process goes too far down the road. Otherwise I don't think we'll ever see a reorganisation plan and it will just be the sales process that we're pinning our hopes on.

HNS - Just to clear up a couple of points. The accounts don't give an explicit figure for general and administrative costs without depreciation and so I derived it but it didn't agree with the $88m as the figure in the slide is actually an adjusted figure rather than the unadjusted figure I came up with. The main difference it appears is re-organisation costs and I agree that your number is more appropriate (I just didn't know where it came from).

Secondly, the reason I was quoting the $700m is that you mentioned $400m as a 'profit' figure and 'profit' is very different to cash flow - for starters it allows for depreciation. As I know now you actually meant cash flow then I agree the $700m is inappropriate to compare with which was why I didn't mention it in my later response.

Instead I used the cash flows projections produced by CINE in docket 722 and the line in them that is consistent with what I think you are trying to estimate i.e. cash flow before interest and one-offs (like the Chapter 11 professional fees). These projections are much lower than your numbers for, I think, the reasons I gave i.e. the rent you are using is too low and you have not included capex. So that is why I think suggesting a $400m 'profit' (or rather cash flow) for 2022 is misleading.

I think this is healthy exchange and I think actually that we are closer than you think as really it just boils down to what you indeed say i.e. that you have used cash costs from previous years - which are much higher now largely due to rent (and the capex).

I also don't think 40p is unattainable but to me it doesn't come from the current financials (for the above reasons) but relies on something more uncertain and that is a view of future financials assuming much higher box office, reduction in rents etc. That is why I think the sp is so low at the moment as the sort of level of cash flows you are talking about involve a bit of a leap of faith whereas if the current financials were already giving those sort of cash flows we'd be much closer to the 40p already. Long-winded as that was I hope it makes sense?

Just looking back at the docs it's actually clear that the savings quoted only relate to the ones in each docket so it is not cumulative.

So if they are successful in rejecting all the 108 leases they have proposed in the five sets of requests then they will save $73.5m in rent annually (12 + 5 + 19.5 + 15 + 22). Having said that only 27 have so far have actually been approved for closure so I suppose it could end up being somewhat less than this?

LTHcine - I having a feeling the $20m of savings (actually $22m) may only apply to the latest 39 leases they are seeking to reject as the wording says: "As such, the Debtors seek to reject these additional 39 Leases effective as of the applicable Rejection Date. In total, the Debtors estimate that rejecting the Leases will save their estates approximately $22 million annually", so it may be better than this but the wording is very unclear.

However, as well as losing the rent though they also lose all the revenue which will reduce the impact. I agree that the greater impact could well be in the renegotiations as the as revenue is unaffected and, even though they are shedding 20% or so of their Regal sites, as you say more should be covered by the renegotiations. So fingers crossed!

HNS - Apologies if I came across as brusque but I do think what you are suggesting is very misleading. I have seen now though where you get your G&A figure from - I was looking at the accounts rather than the presentation. I also agree that the return should be evaluated on cash flows but by 'mix and match' I simply meant that you were mixing profit and loss items and cash items and also not including everything that should be included when valuing a business. So for example whilst I agree with excluding depreciation it should include the cash equivalent of this which is capital expenditure - which cannot stay low forever. I still think your rent figure is way too low and if you look at the slides where you have taken your numbers from you'll see that the cash payments for rent in the second half of the year alone were $318m.

Rather then critique each number though, I'd just point out that your $400m figure for surplus cash is very different to the the sort of numbers CINE themselves are suggesting. If you look at the cash flow projections included in docket 722 they show only around $10m cash surplus a month on average going forward and that's with an assumption on ticket sales much higher than they are actually experiencing (by over 30% for both November and December). So it's difficult to reconcile what you are saying with what I can see in the accounts and what CINE are suggesting for 2022/23 and I think capex and rent are the two main differences.

Having said this I don't think a $6bn+ valuation is entirely out of the question, I just don't think you can get to it by looking at current financials (instead it needs an optimistic view of future recovery and the better financials that would bring).

Sorry HNS but I think you are adopting a mix and match approach to the numbers, some of which I still don't see where they are coming from (like the general and administration costs you are quoting), but as this gives an appealing answer it gets you lots of upticks. Fair enough but I think it's a flawed approach and an unrealistic conclusion. Put it this way, the share price wouldn't be languishing around 3p to 4p if what you are suggesting is very likely.

Stanley - yes, some of that $700m loss is interest ($276m in 2021 and obviously more for 2022). There is simply no way though that a buyer would part with over $6bn for a business unless they were confident they would get a decent return and that would not be possible on 2021 or 2022 revenues - they need to look beyond that - and be very upbeat about cinema's recovery.

Hi HNS,

Must admit I'm confused by some of your numbers in particular why your general and administration costs are only 88m. You appear to have excluded depreciation altogether which is fair enough if you are looking at cash flows but then you would need to allow for future capital spend. Also it looks like you have used a figure for lease payments actually paid which for 2021 was artificially low because of rent deferrals.

Bottom line is that we know that CINE made an overall loss of $700m before tax in 2021 and we know from the figures they have already disclosed for 2022 (which covers about 80% of the year) that they are likely to show a similar loss again.

So I'm afraid I don't think a cash buyer will be close to breakeven on 2021 revenues or even on 2022 numbers. Hopefully though any potential buyer will be looking beyond this and have confidence that cinema can return to pre-pandemic levels, see a more streamlined business providing the sort of returns they are looking for and that justifies a price that would leave us at least with something...

...you can't have a lien on goodwill and I struggle to see how a banking covenant could possibly be linked to it - certainly none of CINE's were.

Elvis - the goodwill is not a separate, negotiable asset. I think most of it relates to the price they paid for Regal which was more than the value of assets purchased precisely because as you rightly say when buying a business you look at the NPV of future cash flows. If say someone new now buys Regal then they will do their own NPV calculation and use this to value the business and negotiate the price - it may well be close to the goodwill number but that depends on what assumptions the new potential buyer uses and how these compare with those CINE used originally (plus other factors ).

RI - I don't pay for parking as I don't drive there but agree if I did it would obviously add to the total cost (except if after 6pm).

Agree Salem, except I'm not sure just how much power the other creditors have. I don't think they can do much to stop any agreement if CINE, the DIP lenders and the judge are happy?