Cineworld has warned that it could collapse due to coronavirus – sending shares slumping to their lowest level for more than a decade.
The world’s second-largest cinema operator said that it will lose up to three months’ revenue if forced to shut most screens as part of efforts to contain the outbreak – putting its agreements with lenders at risk and threatening its survival.
Shares in the FTSE 250 chain tumbled as much as 49pc on Thursday to their lowest level since March 2009, before recovering some ground to be down by a fifth at 71p.
The company said it has not yet suffered any significant hit to trading from the Covid-19 outbreak.
But if it is forced into widespread shutdowns, Cineworld said it would be plunged into serious uncertainty which could cast doubt over its ability to carry on operating.
The company said this analysis does not take account the fact that films scheduled to be released during this period could be moved to later in 2020.
Cineworld warned it also faces the risk of smaller audiences because the release of new James Bond film No Time to Die has been delayed until November because of the pandemic.
According to data monitoring firm Comscore, box office takings across the UK were up 19pc in January and February compared with a year ago. But this was compared with a poor performance at the box office during the first two months of the 2019, when takings were down 23pc compared with the same period in 2018.
Takings this year were still 9pc lower than 2018, when box office sales were boosted by blockbusters including The Greatest Showman and Black Panther.
Experts fear Covid-19’s impact on cinemas could exacerbate further as the industry braces for further delays to film releases.
Mooky Greidinger, chief executive of Cineworld, said the group has the option to postpone capital expenditure and reduce costs if the outbreak worsens.
“We are closely monitoring the evolution of Covid-19 and so far, we have seen minimal impact on our business,” he said.
“However, there can be no certainty on its future impact on our activities, hence we are taking measures to ensure that we are prepared for all possible eventualities.”
Cineworld reported a 40pc drop in annual pre-tax profits to $212m (£166m), and a 6pc decline in revenues to $4.7bn.
There are mounting fears over Cineworld’s debt pile as it prepares to shell out £1.6bn on its blockbuster takeover of Canadian chain Cineplex.
The chain cut its debts by $200m to $3.5bn in 2019, but analysts at Canaccord said the timing of the Cineplex deal “is now looking terrible”.
Cineworld has 787 sites across 10 countries, with more than two-thirds in the US following the £2.7bn acquisition in 2018 of US cinema giant Regal. That takeover was funded through a combination of debt and a £1.7bn fundraising on the stock market.
On Monday, the group’s biggest shareholder Global City Theatres – Greidinger’s family trust – sold part of its stake to refinance debt.
Analysts at Jefferies previously estimated that Cineworld was burning through about $115m a month and had $470m in readily available cash, meaning it could survive for four months in the unlikely scenario of all cinemas being closed completely.
Analysts at Peel Hunt sought to stay upbeat, saying the impact of coronavirus on the firm will be “short-lived”.