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Thought I would add to the chorus of feedback on cinema crowds. Watched Bond this evening and have never seen it as busy - much larger crowds then pre covid on opening weekends -- yes it’s just one London cinema and one film but when you see the crowds for yourself really does give confidence and clear that people are ready to go back to watching films on the big screen in large numbers which puts streaming/covid fears to bed.

Huge drops in cases continue and for the first time in a while very reassuring to see New York has finally joined our other big Regal territories posting a reduction in cases over the 14 day average

Texas –39%
California › –26%
Florida –55%
New York › –4%
North Carolina –31%
Georgia ›–44%

Opinions are just that ideally wouldn’t rile up anyone bearish or bullish but when people post information as fact I think it deserves to be challenged some examples over the year I have been reading on this board

Back in 20p days lots posting that we were about to enter a zombie apocalypse and a vaccine would never emerge - some would cheerfully post updates on the progress being made on vaccines

Then we had the naysayers that Cine was going to fold due to it’s debt as if it was a virtual certainty again some pointed to the fact that negotiations were ongoing and was unlikely given the business trading was paused rather then a fundamental issue with its business model ie people didn’t want the product

Then we had the slew of messages categorically stating cinema was dead and streaming was the way forward - again some stepped forward or challenge that and point to markets like China where cinema was doing extremely well post opening and what we could expect when regal/Cine reopened

Lots of messages about how covid was evading vaccination so Cinema will never be fully safe only to be challenged with data showing hospitals sadly full of unvaccinated people

I could go on with court cases, debt levels etc etc

The most recent example was someone who claimed that at 2019 revenue levels (4bn) Cine would be unprofitable as it couldn’t cover its costs and manage debt- with no data or facts to back it up - challenged back with analysis to the contrary

I am not saying these points shouldn’t be debated as that’s what I think the board is for and has made it an interesting read- if people come on making statements as facts then a polite but firm challenge is to be expected giving the other side of the argument

If someone comes on saying they are happy or unsatisfied about the share price I don’t really mind but my personal preference is to celebrate even small victories as it gives a nice feel good factor for a group of strangers rooting for the continued success of Cine and for that to be reflected in the share price

PW so hard to actually rationalise anything about this so really hope they do give up.

For example let’s say for arguments sake the judge saw all the merits of Cineplex case and ordered Cineworld to meet their request effectively ordering them to buy the business for the original price of $2bn - it’s bleeding obvious that It would fail ICA approval as the new entity would have a much higher risk of failing (harming Canadian economy jobs etc) then the business that actually exists and is trading today! So Cine would still have to renage on the deal as no ICA approval - you really couldn’t make this up!

So just finished watching the court case and some great exchanges today between Cineworld defence and the so called "impartial" expert summerising the events around Investment Canada Approval (ICA) aspect of the case.

Yet again a strong performance from the Cineworld legal team and much better then the relatively uneventful ending of yesterdays proceedings. Key points really underlined a post I made a few days ago as follows.

Cine defence made the point that Cineworld could not have provided the type of undertakings required to achieve ICA approval if it could not a) agree to conditional undertakings around employment, capex etc that were in submission pre Covid which had clearly changed and it could not be assured it had a prospect of meeting given the uncertainty around business operations of Cineplex b) That the actual completion of the deal may have posed a greater risk to the stability of the combined entity and therefore harming the Canadian business and the impacts that would have and that this expert had no knowledge of those potential impacts to make a judgement on whether Cineworld was not acting "in good faith" by not completing the ICA process.

The witnessess lack of impartiality was discredited both in the language used in his report to describe the situation as well as the fact that he appeared to distort the timeline of events leaving out key milestones of when Cine did actually endeavour to respond to queries and making it looked like there was no engagement between submissions.

To me it is quite clear the Cineplex strategy of trying to compartmentalise the different aspects i.e. Cineworld agreed to complete an ICA process by x date is not working and that hopefully the judge looks at the broader picture and evidence as a whole to see that viewing these in isolation makes no logical sense.

No court action next week - who knows maybe some sensible discussions will take place behind the scenes and end this grubby attempt to extract money through a pointless court case ends here.

Update to previous post - data on hospitalisation this time in those states where Cine/Regal has its largest share of cinemas all trending downwards -further supports confidence in uninterrupted trading in Q4 and beyond

Texas ›–10%
Florida ›–35%
California › –19%
Georgia › –17%
North Carolina –6%
New York › –11%
South Carolina –4
Oregon –6%

Appreciate the feedback all - genuinely trying to not be one sided (given I am invested in Cine not Cineplex) and report on any positives on the Cineplex side - perhaps I am missing something but I cannot see much strength in their case certainly nothing approaching the kinds of damages they believe they are entitled to

Perhaps they are saving something up something big for later - who knows but right now looks loaded in Cineworld's favour at the moment

Should have ready CEO was a “very very nice man”

Another day in court and imho another strong day for the Cine defence here is my assessment

I missed the remaining cross of the legal representative but the cross of the estates lead landed a number of points

1) Cineplex had no intention of engaging in negotiations with its landlords and simply refused to pay rent with cut and paste emails providing no clarity on a plan of when they would resume

2) that landlords made good faith proposals that were refused in totality even very small landlords one called Cineplex a bad corporate citizen or words to that effect . Effectively Countering Cineplex narrative as “working productively with their landlords” through a range of emails and ms teams messages which made it very clear the steer from the top was not to pay any rent or entertain any proposals primarily to maintain the debt position to complete the deal and using landlords as a bank

3) the suspension of rent period exactly reflected the outside date of the agreement to complete the Cineworld deal again strengthing the suggestion it was being done to stay in the debt limit and not what they would have ordinarily done by treating landlords in this way

For me the main takeaway is that Cineplexs Desire to meet the debt covenant was paramount and that they were willing to harm relationships with their landlords and not engage properly in these matters by issuing blanket refusals to pay and not engage on any terms other then no payment

counsel for Cineplex tried to rescue this a senior exec witness from Paramount who testified to say the CEO was a very now very man and they got paid in advance of films being released again. No questions on the cross - on to Wednesday….

Your welcome Bonkers! Hopefully those large drops in cases continue as vaccine mandates for 1st jabs, second jabs and boosters continue in earnest

I would expect to see Nisan but perhaps not Mooky given the level of detail being scrutinised

My own personal theory and pure speculation is that perhaps Mooky or Ellis won’t show as they are still negotiating in parallel to this court case around settlement - given they put forward $700m minimum compensation from the opening statement eg I think Cineplex are going for $400-$500m eg roughly half to sod off and as this goes on perhaps they will further revise down to a much lower figure in light of the lack of progress they are making in showing any convincing argument.

Overall 14 day change is a 9% reduction in cases across US. Meanwhile in Cine largest US territories that account for 65% of cinemas mostly large drops in cases which hopefully further assured uninterrupted trading into Q4

14 day case change % of cinemas in ()

Florida (8%) -41% drop
California (15%) -31% drop
New York (8%) +8% rise
Texas (5%) -9% drop
Virginia (5%) +12% increase
Washington (5%) -8% drop
Pennsylvania (4%) +34% increase
Georgia (3%) -30% drop
Oregon (3%) -18% drop
Ohio (3%) +37%
North Carolina (3%) +1% increase
South Carolina (3%) -11% decrease

My summary of today’s action

Cine lawyer landed some very strong points on CFO:

That the decision of March 2nd to defer payments was way in advance of knowing impact of covid and that no mention of this as a material issue to exec team

That deferring to additional 60 days was actually a major departure from normal behaviour - I think he mentioned hadn’t happened in 20-30 years so departure from ordinary course

That they were aware of the lack of benefit from govt assistance around support on rent/ leases yet this wasn’t fully explained in response to Cine enquires therefore suggesting they were concealing the true picture in relation to ability to meet lease obligations

On the cross against the legal exec for cineplex he managed to make her concede that the agreement did not bind Cine in the way it was being suggested around obligations - won’t go into the details of this as I am bound to misquote but related to the undertakings associated with the Investment Canada portion of the agreement

All in all a well argued defence for what I think is an opportunistic and grubby case being perused by Cineplex

This court case is becoming more of a joke as it goes on …and I am watching this in disbelief at the arguments being advanced - of so let me clarify the arguments (as I understand them) from the latest witness

There is a tunnel vision testimony that seeks to portray Cine as frustrating the process from the legal standpoint without taking account the wider context around the state of the business and it’s debt position but more then this if the judge takes a rational view of this

If Cine had completed the transaction what exactly was the expected outcome? a default by Cine on day one on debt secured to buy the business due to neither business generating revenue to cover operating costs resulting in the likely permanent loss of jobs for 1000s of Cineworld, Regal and Cineplex workers as well as knock on effects to partner suppliers, landlords etc - but the likely vast enrichment of Cineplex board and shareholders- what a great outcome!

Now I understand that isn’t the point of law being argued but it underlines the broader point around the debt ceiling that this transaction simply wasn’t viable and both parties could / should have respectfully called it off or paused until conditions to pick up were forthcoming rather then forcing this ridiculous case

I’m trying to fight any subconscious bias but the most peculiar exchange was when the lawyer for Cineplex asked if Nisan ( in convo with the CFO) expressed any visible concern or surprise on a call about the decisions having been taken to defer rents etc - as if it was off he didn’t go ape sh11t on the call yet then made it seem peculiar he followed up with a formal letter to clarify the detail. Why is it important that he didn’t get emotional on the call enough to ask a string of questions about his reactions

I had it on in the background - my takeaways from the CFO testimony - unfortunately there was no time for cross examination by Cineworld lawyers

Cineplex seemed to set out the measures they took as quite normal and expected and not a deviation from normal practice either from its own course or what was happening in other businesses in light of the pandemic disruption taking shape

That Cineworld requests for information on how Cineplex were managing were discussed on the phone and that the follow up written request was overly detailed and “unreasonable” in terms of some of the information being asked for

That it was acceptable and acknowledged that they were managing to the $775m debt limit and they are not denying that was a consideration but that had that not been there they would have taken the same steps

There was an inference without any evidence from Cineworld but from media reports that the deal was beginning to sour on Cineworlds end and perhaps planting a seed that they were looking for ways to back out

I am looking forward to seeing how Cineworld side comes back on the points tomorrow

I am interested in the response as it’s pretty central part of my investment thesis for Cine - if there is something these 25 analysts have missed that someone on this board is aware of I am keen to understand and learn!

@popeye you made a claim that Cine is loss making at 2019 revenue and I presented analyst forecasts that showed the contrary - do you have anything to offer or share that would support your claim or do you withdraw your statement as incorrect?

Just to avoid confusion in the 2019 line I reported the figures the other way around so to summerise for clearer comparision

31/12/2023 4,287.465 (Revenue) 230.869 (Net Income) 1,391.89 9 (Cash Flow)
31/12/2019 4,369.7 (Revenue) 180.3 (Net Income 1,293.7 (Cash Flow)

@ Popeye - Figures below - I have also included the 2019 position as at 31/12/19

Date Revenue Net Income * Cash Flow Avg. No. Analysts
31/12/2023 4,287.465 230.869 1,391.89 9
31/12/2022 3,897.315 -38.835 1,233.762 10
31/12/2021 1,910.066 -721.942 337.063 8
31/12/2019 4,369.7 1,293.7 180.3

Analyst Sources

Institution Analyst
Barclays Richard Taylor
Berenberg Robert Chantry
BofA Global Research Kiranjot Grewal
Canaccord Genuity Nigel Parson
Collins Stewart plc Wayne Brown
Deutsche Bank James Christopher Wheatcroft
Goldman Sachs Mayan Uthayakumar
HSBC Ali Naqvi
Investec Bank plc (UK) David Amira
J.P. Morgan Alexander Mees
Jefferies LLC James Christopher Wheatcroft
Morgan Stanley Edward Young
Noble Group Limited Geetanjali Sharma
Nomura Securities Co. Ltd. Richard Stuber
Numis Securities Ltd. William Wallis
Numis Securities Ltd. Richard Stuber
Oriel Securities Ltd. Jeffrey Harwood
Panmure Gordon Michael Mitchell
Panmure Gordon Mark Irvine-Fortescue
Peel Hunt LLP Ivor Griffith Jones
RBC Capital Markets
RBC Capital Markets Julian Easthope
Seymour Pierce Limited Hugh-Guy Lorriman
Stifel Jeffrey Harwood
UBS Investment Bank Heidi Richardson