Yahoo Finance World’s biggest cinema chain has ‘substantial doubt’ it can sustain business after pandemic
AMC Theatres, the largest cinema chain in the world, has “substantial doubt” it can sustain business in the wake of the coronavirus pandemic.
The company provided an update as to its finances in a new regulatory filing filed on 3 June with the US Securities and Exchange Commission.
Due to the Covid-19 pandemic, movie theatres across the world had to shut down in order to observe social distancing measures.
AMC Theatres, which became the world’s largest movie theatre chain in 2016 after acquiring Odeon and UCI Cinemas in Europe and Carmike Cinemas in the US, has now raised flags as to whether it will be able to recover from the ensuing loss of revenue, CNN reported.
The chain explained in the filing that it temporarily closed all of its cinemas around the world through June, noting: “During this period, we are generating effectively no revenue.”
It then says it has begun “to ramp up [its] cash spend with the intention of reopening theatres this summer”.
“We believe we have the cash resources to reopen our theatres and resume our operations this summer or later. Our liquidity needs thereafter will depend, among other things, on the timing of a full resumption of operations, the timing of movie releases and our ability to generate revenues,” the company wrote, warning that its estimates might not be correct because it has ”never previously experienced a complete cessation of our operations”.
It then warned that if operations don’t resume at the estimated time, or if revenues don’t match expected levels, or if a new Covid-19 wave triggers another shutdown, it might require additional financing.
“Due to these factors, substantial doubt exists about our ability to continue as a going concern for a reasonable period of time,” the company wrote.
“Going concern” is a term used to refer to a viable company that has the ability to keep operating for the foreseeable future, without threat of liquidation.
Preliminary estimates, which have yet to be audited, shows a loss of $2.1bn to $2.4bn for AMC Theatres in the first quarter of 2020.
States across the US are reopening on different timelines. In the UK, cinemas are hoping to begin operating again in July.
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