Pre-covid times article on cineworld from 10th Jan 202026 Aug 2020 17:51
Everyone loves a good blockbuster — a Star Wars or Marvel epic that wipes away our daily worries. The challenge for Cineworld is that not everyone wants to watch it in a cinema.
What to do about the rise of streaming services such as those offered by Netflix and Amazon is one of the big questions being asked of the traditional operators of the world’s commercial movie screens.
The answer that Cineworld and its like give is that if they make cinema-going an experience to savour — with good food and drink alongside a chosen film — then the whole episode becomes viable, and more profitable. In short, there should be room for both the new and the old.
A more specific problem for Cineworld, which has chosen to further counter the threat of the streamers by bulking up through acquisitions, is the level of its debts, getting on for a worrying four times profits before tax and other items after its most recent deal to buy Cineplex of Canada.
It is scepticism on both of these two counts that has prompted hedge funds to place large bets against Cineworld’s share price. The group is among the most shorted companies on the stock market, with positions against it accounting for about 14.2 per cent of its market value, according to Short Tracker.
Cineworld began as a single outlet in Stevenage in 1995 and listed on the stock market in 2007. It has grown to become the world’s second-largest cinema operator, behind AMC Theatres, operating 9,494 screens across 786 sites in ten countries. It also owns the Picturehouse chain in the UK.
Central to its latter-day strategy are Moshe and Israel Greidinger, two brothers who joined in 2014 when Cineworld took over Cinema City, which they owned. Moshe, 67, is chief executive and Israel, 58, is his deputy and together they own 28 per cent of the company’s shares.
Their decisions have certainly been bold. In late 2017 they spent £2.7 billion buying Regal, America’s second-largest cinema chain, taking on a further $2.2 billion in debts and paying for some of it through a £1.7 billion rights issue.
Many of Regal’s 561 sites were in need of an upgrade, meaning that as well as servicing its debts, Cineworld has had to lay out hundreds of millions in investment. Then, last month, the brothers again took shareholders by surprise, agreeing to buy Cineplex for about £1.6 billion, including debts. The chain, which has 165 cinemas and 1,695 screens is not in need of a Regal-style makeover, but the takeover took Cineworld’s net debts excluding leases to an eye-watering $5.7 billion.
That’s not to knock the acquisition per se, which doesn’t look expensive, has plenty of scope for savings — roughly $130 million a year by the end of 2021 — and is immediately beneficial to Cineworld’s earnings.
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