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The year 2020 has been harsh on certain sections of the entertainment industry. As the pandemic spread its tentacles across the world, film production and movie theatres came to a screeching halt in March. Stocks of Canadian multiplex chain Cineplex Inc. (TSX:CGX) nosedived by 73 per cent year-to-date (YTD) and seems to be nowhere on the road to recovery yet.
As the height of the first wave of the pandemic, Cineplex closed all its theatres and location-based entertainment (LBE) venues across the nation. It was able to reopen limited theatres in late June after restrictions were eased.
Cineplex Inc burned through a net cash of approximately C$ 15 million to C$ 20 million per month, after it was struck by the pandemic. In the third quarter (Q3) of this year (three months ending September 30, 2020), the total net cash burn was C$ 49.7 million.
The company was forced to let go of many employees as it struggled to slash operational expenses. This reduced its payroll expenses from C$ 40 million in Q3 2019 to C$ 3.9 million in Q3 2020.
Meanwhile, revenue dropped by 85.4 per cent year-over-year to C$ 61 million in Q3 2020. Its outstanding credit facilities at the end of September 30, 2020, stood at C$ 460 million. Cineplex is now planning sell its Toronto-based head office for $57 million to pay off some of that credit facilities, media reports claimed.
Cineplex stock’s year-to-date performance (Source: EODHD/Others, Thomson Reuters)
On the positive side, Cineplex stock is witnessing some rebound in the last three months. The stock has advanced by 26 per cent quarter-to-date (QTD), rising on the back of positive developments on the vaccine front. With the release of Christopher Nolan’s much-awaited Tenet, the theatre chain saw 1.6 million movie watchers headed back for the big screen magic.
Even before the pandemic hit, movie chains across the world were feeling the heat from growing online dominance. The rise of the online streaming platforms has further accelerated in 2020, as people choose to enjoy entertainment from the safe confines of their homes.
Despite following adequate protocols, movie goers have continued to question the level of safely in indoor film theaters amid the raging pandemic.
The future for Cineplex stock seems to be hazy for now. But it may witness an upswing with the vaccine rollouts.
