October 30, 2020
07:20
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The cinema giant received 75 percent fewer visitors in the past quarter. The cash continues to flow out of the business. ‘Fortunately, we are strong in our shoes.’
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Kinepolis
welcomed only 2.4 million visitors in the third quarter, 75 percent less than last year. Turnover declined less sharply and gross operating profit (EBITDA) was positive, the company reports without going into detail.
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However, another 16 million euros in cash flowed out of the company. At the end of September, Kinepolis still had 127 million euros available. In comparison, before the pandemic struck, that was almost 200 million euros.
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This illustrates that Kinepolis and other cinema groups are in the middle of the corona storm. “We are in a pause mode, but the break for this film is taking longer than expected,” said CEO Eddy Duquenne.
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The first half of the year already turned blood red at Kinepolis due to the lockdown measures – including the closure of cinemas – to slow down the first wave of the pandemic.
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The summer brought some relief for Duquenne with the reopening of all the halls in Europe and Canada. But there was no question of surprise, the quarterly report shows. Full halls were also not possible, due to the imposed capacity limitations to guarantee the distance between bubbles. The mandatory face masks, the fear of getting infected and the lack of top films also kept visitors away.
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Bombshell
The big movie houses decided to postpone the launch of their potential blockbusters. Disney went even further, bombing the industry by immediately launching ‘Mulan’ on its streaming platform Disney +, as a weapon of war against Netflix.
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Tenet, a scarce source of light for Kinepolis in 2020
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With ‘Tenet’ – the only blockbuster launch, at the end of August – Kinepolis had something to wear. “It did very well,” said Duquenne. That could be seen in the figures. The number of visitors – as a percentage compared to last year – rose from 16 percent in July to 32 percent in September. “Encouraging,” it said.
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Back to square one
But in the meantime Kinepolis is back to square one. This week, the doors in Belgium and France were again mandatory. The cinema in Granada (Spain) and eight Canadian cinemas have also been closed, and the sale of popcorn and other goodies is prohibited in some countries. “In this light, the evolution remains uncertain in the short term.”
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Kinepolis seems to largely miss the fourth quarter – the most important of the year. Starting with the autumn holidays, and who knows even the entire end-of-year period.
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Safe for 12 months
‘Fortunately Kinepolis is financially strong,’ says Duquenne. referring to the financial reserves. “Even in the event of a global closure, the available financial resources are sufficient to meet all of the group’s commitments for 12 months without taking additional measures.”
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If all complexes close, Kinepolis expects a negative free cash flow of 5.8 million euros per month. In addition, the company continues to pursue ongoing investment projects – a new building in Metz and one in Canada, for example -, which increases the actual monthly cash burn.
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The company notes that it will not have to make an initial major redemption of the bonds until 2022, and that it owns a large portion of the real estate, which is estimated by analysts to be around $ 1 billion.
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Duquenne also remains positive about the future of cinema, despite the emergence of streaming platforms and the decision to immediately bring a few top films to the viewer via that route. ‘I remain positive because we notice that many film lovers keep coming despite everything and experience a cinema visit as safe. The fact that the studios continue to postpone the vast majority of their films until a period in which they can secure their income is indicative of the importance and value of a cinema release. ‘
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The Kinepolis share lost 68 percent this year due to the impact of the pandemic on the sector, wiping out seven years of stock market boom (see graph). That is a similar price drop to that of the largest cinema operator in the world, AMC Entertainment, on Wall Street. Cineworld, the industry’s number two debtor, lost 90 percent of its value.
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