Cineworld Group plc (LON:CINE) shares plunged on Thursday after the FTSE 250 cinema chain warned the coronavirus outbreak could put it out of business.
In its full-year results, the firm said in a worst case scenario the outbreak could result in it losing up to three months-worth of revenues as a result of widespread cinema closures, which in turn would lead to “material uncertainty” and “may cast significant doubt about the group's ability to continue as a going concern”.
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The company’s share price has already been feeling the pinch as delays to several major film releases such as the latest James Bond movie, No Time To Die, have caused investors to worry about its ability to attract customers as the coronavirus spreads.
Cineworld’s chief executive Mooky Greidinger said that while the coronavirus had currently only had a “minimal impact” on the business, there could be “no certainty” of how the firm’s performance would be affected if the virus continued to spread.
“Should conditions relating to [coronavirus] continue or worsen, we have measures at our disposal to reduce the impact on our business including, but not limited to, capex postponement, cost reduction, in order to maintain cash liquidity”, Greidinger said.
2019 attendance slides
The uncertain outlook accompanied gloomy results for the year ended 31 December, with Cineworld reporting that admissions had fallen 10.8% in the year to 275mln, while revenues had dropped 6.2% to around US$4.37bn and adjusted earnings (EBITDA) fell 3.7% to US$1.03bn.
The company blamed the decline in moviegoers on the closure of 18 of its cinemas during the year, of which 16 were in its core US market, as opposed to 14 new cinemas opened during the period.
In a note, analysts at Peel Hunt retained their ‘hold’ rating and 140p price target on Cineworld, saying that while they believed coronavirus would impact the company’s revenues the effect will be “short-lived and that the business will trade through it without additional financing”.
However, the broker added that they believed investors “will continue to regard the business as higher risk” and uncertainty was “likely to persist for some time”.
The sentiment was reflected by the market as Cineworld shares tumbled 24.1% to 67.1p in early deals.