Closed theatres, nervous moviegoers push Cineplex to $121.2M Q3 loss

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TORONTO — Canada’s largest theatre chain is trying to quell the “severe” financial impacts of COVID-19 with a more prudent approach to ventures, new private cinema rentals and reductions to expenditures.

Cineplex Inc. said Friday that it will decrease the number of new projects it pursues and continue to try to reduce real estate and payroll costs by considering the sale of its head office and using the federal government’s wage subsidy program.

The measures come as the Toronto-based cinema operator released its third-quarter results, which included mounting net losses and declining revenue, sales and numbers of moviegoers.

Ellis Jacob, Cineplex’s president and chief executive, promised the company would be resilient despite its recent troubles.

“Throughout our 100-plus year history, we have faced adversity and have always emerged well-positioned for future growth, and this time will be no different,” he told analysts on a call.

Earlier, Cineplex reported a net loss of $121.2 million or $1.91 per share, down from the $13.4-million or 21-cents-per-share profit it reported last year at the same time.

The chain’s revenue was $61 million in the three months ending Sept. 30, down from $418.4 million during the same period in 2019.

Analysts expected Cineplex to lose $57.3 million or $1.31 per share, according to financial data firm Refinitiv.

The company has been rapidly trying to reverse such results, which were triggered by waning audiences amid temporary theatre closures ordered by public health officials in COVID-19 hot spots.

Cineplex efforts to stop such trends and cope with pandemic changes have included raising an extra $303 million in credit, materially reducing net cash lease outflows by about $58 million and pursuing the sale of its head office location with the potential for a leaseback transaction.

“We completed a thorough review of our rights under our lease agreements and where we thought we had attractive rights, we approached landlords to monetize some of these rights,” chief financial officer Gord Nixon told analysts.

Cineplex has also temporarily laid off staff, slashed salaries and used $22.5 million from the government’s wage subsidy plan to reduce payroll expenses to $3.9 million during the quarter, down from $40.9 million at the same time last year.

On Friday, it added a new tool to its arsenal: private auditorium rentals for as low as $125.

The venture will allow up to 20 guests to enjoy a film together while distancing and will include a choice of 1,000 movies including holidays hits “the Grinch” and “Love Actually.”

However, returning to 2019 levels of revenue is still expected to be tough.

Cineplex is still battling Cineworld, a U.K. based theatre operator that was due to buy Cineplex for $2.8 billion, through litigation.

Cineworld walked away from the deal on June 12, saying it had become aware of a material adverse effect and breaches by Cineplex, which has vehemently denied the accusations.

Meanwhile, local health regulations have greatly reduced the number of moviegoers Cineplex can welcome at a time and the chain has had to pay for increased sanitization and the costs that come with physically distancing guests and protecting staff.

Only 1.6 million people visited the movies when they were open during the quarter, down from 17.5 million in the third quarter of 2019.

Those who made visits have seen few of the big blockbusters originally planned for the year because studios and distributors have been pulling new releases and rescheduling them for 2021, when they hope the virus will be more contained.

Christopher Nolan’s “Tenet” was one of the few new features moviegoers were treated to. Cineplex screened the film ahead of it being released to U.S. audiences — a rarity in the movie world.

One of the last major releases that has yet to be moved from this year is the sequel to “Wonder Woman,” which Jacob said he has been talking to Warner Bros about.

“If they move it, they would probably move it into the first or second quarter of 2021. At the moment, they haven’t indicated that, but the risk is there,” he said.

If it is moved, Cineplex still has other movies coming like the Toronto International Film Festival’s People’s Choice Award winner “Nomadland” and “News of the World” starring Tom Hanks.

For those unwilling to visit a theatre during the pandemic, Cineplex has long offered home movie rentals and delivery of concession stand favourites like popcorn via Uber Eats or SkipTheDishes.

This report by The Canadian Press was first published Nov. 13, 2020.

Companies in this story: (TSX:CGX)

You can read the original article here.

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