Cineworld Group PLC (LSE:CINE), owner of around 800 global cinemas, is scheduled to publish results on Thursday and investors in some small cap gold miners might want to keep an eye on the statement in case the company is tempted to follow US rival AMC's latest diversification move.
Yesterday, AMC, which operates the Odeon cinema chain, said it is taking a 22% stake in struggling Nevada precious metals miner Hycroft Mining.
With AMC boss Adam Aron acknowledging that “one would not normally think that a movie theatre company’s core competency includes gold or silver mining," before going on to say that it was making the move for Hycroft, which has had a troubled past and filed for bankruptcyas not too long ago, as a “result of our having identified a company in an unrelated industry that appears to be just like AMC of a year ago”.
This time a year ago, Cineworld was announcing preparations to start reopening its US and UK cinemas, hailing a multi-year deal with Warner Bros and eyeing a return to operating profitably as pandemic rules were eased on both sides of the Atlantic.
If Cineworld does follow AMC into gold mining, it will only add to the rollercoaster ride over the past year, with the sector having been rocked by more than its share of dashed recovery hopes as Covid refuses to lie down.
The latest in a list of heavy blows was ejection from the FTSE 250 in the latest reshuffle, but Thursday’s annual results update offers another opportunity to press the reset button.
Helped by recent box office success for The Batman, cinema attendances have been solid and fears that lockdown would kickstart a permanent shift to streaming seem to have been overblown.
Revenues were back up to 88% of pre-pandemic levels by the end of 2021, Cineworld said in January which was some encouragement but that has to continue given the US$8.4bn of debt it has accrued.
Revenue is forecast to have more than doubled in the year, but it is not expected to have been enough to stop the business from making a loss, with a return to profit expected in 2023.
The group is also still locked in a legal battle with Canadian rival Cineplex over the collapse of their planned merger when Covid struck and here the UK business might be on the hook for C$1.2bn in damages after the most recent ruling.