Can Cineplex be reborn? – Cantech letter
As pandemic restrictions evaporate left and right as governments seek to reopen the doors of the economy, cinemas are preparing their popcorn makers for the return of customers eager for a taste of the normalcy with their buttery aroma. But how much of that return is still a big unknown, as many of us have gotten used to gorging on TV shows and movies from the comfort of our sofa, minus the $10 popcorn and minus the worries of all those others. germs floating around a crowded movie theater.
This is where the real doubt lies about a company like Cineplex (Cineplex Stock Quote, Charts, News, Analysts, Financials TSX:CGX) which has yet to appeal to investors as the stock remains roughly at the same level as at the start of the pandemic. But CGX was already struggling in the pre-COVID years, losing about half its value between mid-2017 and late 2019, with the decline blamed on streaming services like Netflix driving customers away from theaters at an increasing rate. . Movie companies like Cineplex had to work harder to squeeze more dollars from every customer as the number of ticket buyers continued to dwindle.
But Cineplex has made a big push, offering higher-priced options in VIP lounges and ultra AVX seating as well as alcohol and adult dining and more games in their Rec Room activity centers. These efforts also paid off. Theater attendance had dropped in 2019 compared to 2018, from 69.3 million to 66.4 million, but the company still managed to achieve positive revenue growth, reaching $1.665 billion for 2019 from $1.612 billion. dollars for 2018.
And Cineplex appears to be continuing that strategy this year as theaters reopen. Speaking after the company’s recent fourth quarter 2021 earnings release, CEO Ellis Jacob said CGX is aiming to spend between $70 million and $75 million to open more VIP-level theaters and double those additional experiences for customers. customers across Canada.
“We opened three new VIPs, a few gaming rooms and palladiums. Our business has continued to progress and we want to provide our customers with the best possible experience when they enter our facilities,” Jacob said, speaking on BNN Bloomberg on Monday.
Jacob said he’s optimistic that Cineplex will return to pre-pandemic levels in its business and that 2022 has a number of blockbusters that will attract customers.
“I think the feature films will also start to improve as we move forward. You’re going to have things like Licorice Pizza, West Side Story and Dune – those are all films that have been nominated [for awards] and I think they will continue to do well and audiences will come back to our venues as they feel more comfortable,” he said.
Another hurdle for Cineplex is its ongoing legal battle with global cinema company Cineworld whose deal to buy Cineplex, first announced in December 2019, was canceled when Cineworld walked off the table in June 2020. The two companies then sued and last December Cineplex was awarded nearly $1.24 billion in damages when an Ontario Superior Court ruled in its favor. That decision was appealed by Cineworld and last month Cineplex itself filed a cross-appeal claiming the $1.24 billion would be too little, seeking damages of $2.8 billion.
Cineplex released its fourth quarter and 2021 financials last week, showing a net loss of $21.8 million or $0.34 per share for the quarter, which was better than the $230.4 million loss. dollars or $3.64 per share a year earlier at the height of the pandemic. Cineplex reported 10.2 million customers during the fourth quarter of 2021, the best quarterly result of the year. Fourth quarter revenue was $300.0 million, compared to $25.5 million a year earlier. Analysts expected $319.2 million in revenue and a loss of $0.13 per share.
“Cineplex delivered its best quarter in two years,” Jacob said in a press release. “Based on the positive momentum we saw during the quarter and the success of blockbuster films like Spider-Man: No Way Home, we know guests are returning to our theaters. The restrictions and closures imposed by the government in Ontario, Quebec and Atlantic Canada during the peak box office period limited our ability to fully capitalize on this resurgence in the fourth quarter relative to other geographies, including the United States .
Cineplex’s share price ended 2021 up 47% while so far in 2022 the stock is flat.