Member Info for Hexam

@Salem - as just explained CINE never believed they had a chance of passing the test (it was way beyond what was achievable) but instead they (CINE IR) said they WOULD issue an RNS if they successfully obtained a waiver or refinanced (by this stage they had given up paying the loan down as well).

Of all the uncertainties at the moment the one certainty is they never had a hope of passing that test - it was just too far out of reach and CINE knew this and recognised it and is why they were trying so hard to avoid it.

@jimmij17 - It is what CINE said themselves. The test itself (I think) was for the net debt to stay below 5xadjusted EBITDA which they are miles from achieving. The wording below is from the last accounts which shows they did not even consider that they could pass the test but did think they could avoid it by paying off enough of it if box office recovered in line with their expectations (but we know now that it fell far short). So that left them with the waiver option or refinancing (as a more recent RNS confirmed) but presumably given the position they are now in they were unsuccessful in both.

"In respect of the weighted base case, this currently forecasts sufficient liquidity for the group to pay down enough
of the Revolving Credit Facility (‘RCF’) in June 2022 to avoid the group net leverage covenant test and to repay the RCF upon maturity in February 2023. The weighted base case is, however, very sensitive to the speed at which admission levels return, with the US forecast to be 85% of comparable FY19 periods in FY22, with the UK and ROW at 90% and 95% respectively, increasing to 95% of FY19 in FY23 for all territories. If management is unable to pay down the RCF then a covenant waiver would be required for the June 2022 test.

No. They said so themselves which is why they were trying to avoid it altogether by paying down the amount drawn so it was less than 35%. It's pretty clear now they didn't do that or manage to 'refinance' which is why they are now considering a more comprehensive restructuring.

If you're talking about the huge loss that shouldn't be shocking at all. All miners are posting big losses due to the fall in BTC and that is outside of their control.

Having said that, in my view there are a few disappointing things in these results (the delay to 'intel rigs', poor cash position, quite high net debt, very high cost per BTC mined and a general lack of detail/transparency). Most of this wasn't really a surprise either but it puts more pressure on H2 where if things don't improve significantly (particularly around efficiency) then personally I won't be interested in hearing any more excuses.

I'm not so sure. The June sale is the number I gave i.e. £9.2m was the cash position after that. They did sell a lot more in July but remember quite a bit would have been used to reduce the Galaxy loan and some on machines as well as operating expenses - so doubt the £9.2m cash figure is much higher, if at all. From the last update:

"During the month of July, the Company sold 887 Bitcoin at an average price of approximately $22,670. Proceeds were used to reduce obligations under a BTC-backed loan agreement with Galaxy Digital, as well as to fund operating expenses and growth capital."

There seems to be more detail on the nasdaq site under SEC filings but not an awful lot more and not much help on liquidity although is does show ARB had £9.2m cash at the end of June along with £28m of digital assets (this was before the July sale of BTC). I can't immediately see though how much payment for the new machines (including the intel chip ones) is outstanding but on the face of it they don't seem to have nearly enough especially as they are probably making cash losses each month at the moment.

Maybe there will be more tomorrow in the actual RNS (or on their website) but I presume it will just repeat what is in the SEC filing?

Thanks FP - Had a quick look. Must admit I don't trust such tables very much and this one's not off to a great start as the ARB numbers are in £s not $s so it is £46k per BTC using his numbers (so not so good as thinks)! I think he also struggles with companies that do other things (like CORZ) and hasn't taken out costs not related to mining (tbf that's what the asterisks may be for).

Another thing to note is that ARB is H1 and the others are Q1. This favours ARB as Q1 was far better for most miners (including ARB).

His BITF numbers are OK (apart from again a little non-mining cost being included) but I haven't looked at others and all I think exclude interest (for ARB this was just under £3.5m in H1).

They also said "In response to current market conditions and to reduce near-term capital intensity, the Group is updating its year end guidance for hashrate capacity." In other words they haven't got the cash - which is no great surprise.

Likewise Wolf but you do seem to be determined to ram home the negatives on this stock at every opportunity (I know thinks are VERY bad). I can appreciate that you may just be using your knowledge and experience to try to warn those people of the seriousness of the situation who may seem a bit too casual about it but it feels a little overkill at times (albeit not quite as much as the tedious trolls that have flooded to the board with whatever motive they have).

Wolf - I disagree with that conclusion given what the current liabilities represent and that I think cash flow will be borderline after allowing for rent payments (as it nearly was in H2 last year) which is the largest current liability. Also deferred revenues will actually be going up as ticket sales are higher (just as with airlines and advance bookings where cash on recovery runs ahead of revenue recognition). So appreciate the response but we'll just have to agree to disagree.

*could be positive at H1

"If you are going to do a quick analysis on anything I would try the profit and loss account, balance sheet and cash flow statement as at 31/12/21 - it’s bad and things have likely got worse."

Wolf - I have looked at all three. Many times. Almost certainly the profit and loss and cash flow will look a whole lot better this year and could be positive at H2 (borderline in my view but probably not quite). The balance sheet therefore may be similar to last year - could be a bit better but more likely to be a bit worse. But what is undeniable is the turnaround hasn't been quick enough so they are not where they expected to be or where they needed to be to meet the RCF covenant (or repay 65% of the drawdown). I thought they would get a waiver for this given they are moving back into profitability but clearly they have not and now the pressure is on (with the thin film slate in next few months and the upcoming court case adding more pressure).

So things are indeed very bad but you seem to suggesting they are even worse - unless I have misunderstood you? If you do think they are much worse what do you think is in the accounts and market stats that I've missed?

"Can mooky sell now, only weeks from results day ??"

No - but he can't sell anyway with what's going on.

@Specialonek - That's just made up nonsense. Have you actually done any research that can back that up or any numbers that show that might be the case?

"We are here to post facts."

That's funny, as I've seen precious few of those here today.

@DamayHill - I don't try to get into debates of streaming v cinema as most people's viewed are skewed by their own preferences (or agendas). Instead I just look at the actual numbers attending cinema and this shows no sign yet at least of audiences turning away from cinema (yes overall numbers compared to pre-pandemic are down but that is no surprise given that the number of films released is currently less than half what it was as studios are still gearing up).

In other words I'll believe it when I see it and I'm not seeing it yet and since streaming has been here for quite some time already it's not obvious that it's just a too early to call situation.

All this is of course academic though if CINE can't sort out their current problems without decimating existing shareholders.

"If they can achieve a 2 cent PPA they will be very profitable even at these BTC prices."

AB - This may be true in the future but I don't think it is the case at the moment. Their costs without any electricity costs at all were over $30k per BTC mined in Q1 and tonight we are likely to see that be even worse for Q2 (due to the poor Q2 mining numbers).

So 2 cent PPA will help but it won't turn ARB profitable until either efficiency improves significantly or BTC rises sharply or preferably both. This is not just ARB - i suspect it is true of most, if not all, miners at the moment.

"You can use EBIDA, you just gotta consider lease payments aswell in your calculation"

Yes, but people often don't - they just run with the headline number (as seen here) and don't bother with leases (or other things you have to pay like interest and any unavoidable capital expenditure).

That's why I don't like EBITDA - not so much for what it is but how (badly) it gets used.

I don't think they actually give a figure for EBITDAal which they define as "Adjusted EBITDA less payments of lease liabilities" but the leases paid in 2021 were $400m (less than in normal years because of rent deferrals).

EBITDA is not really a useful measure of profit or cash flow in assessing liquidity for CINE - far better looking at profit and cash flow directly and understanding these.

We know cash flow and profits were both moving towards positive territory - in fact in Q4 last year we know that cash flow was positive and overall in the second half of the year adjusted free cash flow to equity (which is after both capex and interest) was just $89m negative. Adjusted PBT over the same period was a loss of just $22m.

So we know they were already close to profitability and positive cash flow and in 2022 box office has improved again and is likely to improve much more in 2023.

So I think is it correct to say that CINE is (or at least will very soon will be) a profitable company but you can't really use EBITDA to demonstrate this.

This should give encouragement to how the negotiations might go but if the lenders really have run out of patience then it may be a case of too little too late. We just don't know.

Apologies - CINE even made a big thing of it in their 2019 accounts (not 2020). The change in treatment increased EBITDA by over $500m (that change also meant leases were now included in net debt).