The world’s second largest cinema business said Thursday it has enough funds on hand to keep operating for now after it crashed to a loss of $1.6 billion for the first six months of the year as revenues slumped by 67%.
The company warned, however, that it would need to raise additional cash early next year if a second wave of coronavirus cases cause “prolonged” shutdowns in the United States and United Kingdom.
Even if that scenario is avoided, the company said it’s likely to breach loan covenants in December and again in June 2021, putting it at risk of default if discussions with its lenders fail to result in waivers.
“There can be no certainty as to the future impact of Covid-19 on the group,” Cineworld said in a statement.
Shares in the company dropped more than 10% in London on Thursday.
The financial results also included a warning from the company’s auditor, PwC, which said it had not obtained “sufficient appropriate evidence as to whether the waivers could be obtained or additional funds could be obtained where required.”
PwC said it was therefore unable to conclude that the company would be able to continue in business for the foreseeable future.
“The absence of the waivers and the uncertainty over the short term as a result of the ongoing Covid-19 situation represent material uncertainties which are too severe for us to express a conclusion on the interim financial statements,” the auditor added.
Cineworld said that it has so far reopened 561 out of its 778 theaters. Of those that remain shut, 200 are located in the United States, 11 are in Israel and six are in the United Kingdom.
PwC said the company was particularly “sensitive to the ability to open the remaining cinemas in New York and California by the end of October, and to further delays of the current forecast movie slate.”
The theater closures pushed revenue down in the first six months of 2020 to $712 million, compared to $2.2 billion the previous year.
Another problem for the industry is a shortage of blockbuster films.
The box office has been anemic with films like “Tenet,” “The New Mutants” and “Unhinged” being the only notable new movies playing in theaters. On Wednesday, Disney (DIS) announced that it would push back the US release of “Black Widow,” a highly anticipated superhero film starring Scarlett Johansson, from November to May 7, 2021.
— Frank Pallotta and Hanna Ziady contributed reporting.