Cineworld Group PLC (LSE:CINE) said it expects “strong trading” in its fourth quarter amid pent-up demand for out-of-home entertainment following the relaxation of lockdown restrictions.
In an outlook statement accompanying its first-half results, the company said most of its cinema estate had now reopened in the US and the UK and since the removal of most restrictions on July 21 it has seen a “gradual recovery of admissions and demand”, supported by strong retail sales.
The firm also said its recovery will be supported by a “strong film slate” and its actions during the pandemic meant it is “well placed for the future”.
In the financials for the six months to June 30, which included around four months of closures due to lockdown, Cineworld reported a pre-tax loss of US$576.4mln, narrowed from a US$1.64bn loss a year ago, while revenues dropped to US$292.8mln from US$712.4mln.
“Despite the challenges, the actions we have taken have ensured that Cineworld has emerged a more focused business with significant liquidity and a clear vision for the future. Trading has been encouraging since we started to re-open our sites in April and it has been great to have our teams back, doing what they do best, and welcoming customers back into our cinemas”, chief executive Mooky Greidinger said in a statement.
“Cineworld is in the position it is today thanks to the great dedication and commitment of the Cineworld team around the world and I sincerely thank each and every member of the team for their loyalty and contribution. I am confident that the business is in a strong position to execute its strategy and deliver a return to growth as we recover from the pandemic and capitalise on the forthcoming strong film slate alongside clear pent-up consumer demand,” he added.
Despite the optimistic outlook, some analysts were relatively cautious about Cineworld’s prospects.
“Some estimates suggest that box office revenues will be 10% lower post-covid permanently as customers have grown accustomed to watching films at home, studios have shortened the theatrical window and exhibitors have permanently closed the curtains on unprofitable cinemas,” said Harry Barnick, senior analyst at primary research firm Third Bridge.
Barnick also said the company may need to shake up its business model to remain viable going forward.
“Cineworld is dependent on blockbuster films enticing customers back to the cinema. It must also pivot to new revenue streams: less Hollywood, more arthouse and alternative content. In an already difficult year, studios have dealt a blow to the exhibitors via theatrical window cuts. We are now entering the unknown: will customers pay to see a film in the cinema or wait 45 days for it to be released on PVOD? Cineworld will hope for the former and worry about the latter,” the analyst said.
Investors, however, seemed to share the company’s optimism, with the shares jumping 8.3% to 66.3p in early deals on Thursday.