Member Info for WolfofWarks

Jeff - read the annual report mate. They keep deferring rents. It’s all rolled up on the balance sheet.

Poor - it’s standard accounting practice that provision is made for doubtful debts. Banks carry provisions for billions. Have a look at how much banks provided for during covid and how much they got to write back into profit once they got paid.

Sadoldgit - it’s the debt holders and the bankers that will pull the plug. They’ve most likely written it off already so will want to realise whatever they can.

Happens every day if the week.

Creditors are already starting legal proceedings in the UK. The chapter 11 will apply to the US business, they’ll need to go into administration for the UK part.

https://www.cityam.com/cineworld-landlord-files-winding-up-petition-against-cinema-chain/

The chapter 11 stops the creditors forcing this and gives the company time to come up with a deal - which will put the D2E on the table if they are struggling to get it through now.

“Jeff. I do know that commercial property rents are based on turnover. Normally the rent based on a percentage of the previous audited years accounts. This is on turnover and not profit. If a company had zero turnover in a financial year, is it right they should be charged rental when the previous years turnover was 750,000 for arguments sake? The owner is not obligated to do this I will add.
Many commercial property owners have reduced their rents considerably after discussions with tenants due to loss of turnover caused by the pandemic. It is easier to resolve by negotiation than by court action.

That’s been more for the retail sector. The likes of H&M and Mike Ashley have had some success in linking rent payments to turnover but it’s done very aggressively, a huge ask in London and the south east where rents are skyrocketing (I’ve seen some go up by 40% on review in my line of work).

Hi Sadoldgit - Unless they can find someone to lend them £250m+ I think the C11 or something similar is inevitable.

I think it C11 is on the table it might well be that the discussions around the D4E transactions are not bearing much fruit.

It's a big ask in this market though to ask for further borrowing, fair play if they manage it.

All conjecture of course. No one knows with any certainty how any of this is playing out.

FTH - we're talking fundamentals here, not your gambling.

They are not meeting their obligations though. They are deferring rent payments and obtaining waivers every time they breach their debt obligations. Jeff - have a read of the going concern section of the 2021 annual report. It's not pretty.

I hadn't realised they didn't consider the Cineplex claim when evaluating going concern. They state "No liability has been recognised in respect of the judgement on the basis that payment is not considered probable at this stage, and
the directors have not factored any payment of damages within their assessment of whether it is appropriate to adopt the going concern basis for the Group as at 31 December 2021"

So there is no provision in the accounts for this potential payment.

But then strangely also go on to say "There is a material uncertainty around the Group’s ability to successfully appeal the judgment and avoid the damages payment."

The real kicker is "In the event that Cineworld is unsuccessful on appeal the group would not have sufficient liquidity to pay the existing level of damages awarded. It is also noted that Cineplex is an unsecured creditor."

So if this appeal is unsuccessful I think it will be the final nail in the coffin. They've basically told us where Cineplex sits in the event of an insolvency.

"Wolf you do realise the lack of blockbuster movie is “Temporarily”
And it is already a know. fact?"

FTH - I would argue that a modern 'blockbuster' isn't the same as a blockbuster ten/twenty years ago. Today's blockbusters are annual rolled out franchises, completely lacking in originality and one of the reason's box office numbers have been stagnant for the last 20 years.

I think the latest Star Wars films brought folks like me back to the cinema but even Disney has changed the SW format to be series based though PPV.

Now while Poor mentions about the forecasts for profits returning next year - it's more 'jam tomorrow' and they failed with the current forecasts. 2021 became 2022 which is now 2023 ....

I think cinema will live on but I don't think it will ever be what it was.

I’m sure they’ve modelled various scenarios and come up with what they think will make the most money.

They’ve got to be careful that they don’t change behaviour so much that £4.99 becomes the standard price for a ticket as they will enter a race to the bottom and the only group that wins there are the customers.

I’ve done all sorts this week at various costs:

Cinema - £25
Jump in - £60
McDonalds - £12
Local park/fair ground/mini golf - £30
Bowling with food/drink - £30

So you can see the cinema isn’t an expensive proposition.

I don't know what margin they make on the food and drink. Suspect it's what keeps the lights on mind. That's why I made my point about variable costs or lets say contribution? A 'busy fool' model doesn't necessary equate to making more money.

For what it's worth my local cinema is Viu and all tickets have been £4.99 for a good while I have noticed.

Showing ET on it's 40th anniversary was the clever part for me yesterday, but it's a track they cannot repeat every week.

It's also unlikely McDonalds made any money.

I don’t think you can extrapolate too much from what’s a once a year event - especially when you don’t even know if it made any money. The ET showing was a great idea but it’s an anniversary event and not something that can be rolled out on a weekly basis. Plus if we are saying that the way forward it by adding old films to the existing slate it doesn’t say much for the (lack of) original content coming out.

Plus how many seats does an average screen have - couple of hundred? That would be £600m revenue which also includes vat so £500m. Does anyone know the variable costs of showing a film? If these theatres were packed they would have needed more staff, more energy, etc.

They are not Jeff or at least they are not likely to be in the near future, which is why this is all happening.

"Spiderman and Batman have had many many TV series and still they are a major Box Office draw - many before many of us were born!"

Its the production money they are diverting though that's the issue. Major budgets being spent on PPV rather than film regardless of what's happened in the past - everyone needs to look at whats's likely to happen in the future.

Hexam - Re output. I was thinking about this earlier as I was watching the first Lord of the Rings series. I think it's a bad sign that the makers of both Star Wars and LOR have decided to put out mini series on PPV rather than make movies. I think there's a lot of production dollars that won't now even hit the box office and if this trend continues?

FTH - you are talking nonsense again - for every transaction there is a buyer and a seller - they are in equilibrium. If I want to sell a share the MM's match we with a buyer and vice versa.

Plus I would have thought most of these Cineworld employees would be more bothered about keeping their job. Mostly young student types so highly unlikely they have £500 disposal income.

Plus them buying only accrues benefits to the rampers looking to make a quick buck - it doesn't change the fortunes of the company itself, unless they can look down the back of their sofas and donate £5bn to clear the debt.

The problem you’ve got harry is that the meme craze was 18 months ago when the US were writing free cheques to everyone.

Most who took part at the outset have been spiked or burnt by crypto so I doubt you’ll have your captive audience that AMC had then.

So the best outcome for LTH here is that the heavily indebted company takes on more debt. Marvellous!

The simple answer is it’s not somewhere you would want to be stuck over the weekend - news could fall at any point over the weekend and who knows what as RNS Monday morning could say.

"The figure looks scary but I don't believe in itself it is a sign the company is in 'dire trouble' as you put it. After all the difference was also $1bn in 2019 and the business was much healthier then with decent profits"

Hexam - You've answered your own question here mate.