Cineworld defers dividends and directors' pay
By Sean Farrell
Date: Tuesday 07 Apr 2020
(Sharecast News) - Cineworld has deferred dividends and directors' pay to conserve cash after closing all its cinemas during the Covid-19 crisis.
The international cinema chain suspended payment of the 2019 fourth quarter dividend of 4.25 cents a share and upcoming 2020 payouts.
After being forced to close all 787 cinemas in 10 countries, Cineworld's executive and non-executive directors agreed to defer their pay until there is greater clarity about the effects of the crisis.
The FTSE 250 company said it was in talks with landlords, film studios and major suppliers to find ways to reduce the impact of the shutdown and was freezing all non-essential capital spending. Cineworld is also in talks with its banks about its liquidity needs.
Cineworld, which owns Picturehouse in the UK and Regal in the US, joins a long list of companies suspending dividends to preserve cash amid a shutdown of non-essential businesses in major markets. The company said directors volunteered to defer their pay partly because of the impact on its more than 37,000 employees, many of whom are on zero-hours contracts or low wages.
"This is a painful but necessary process as before the onslaught of the Covid-19 virus we were excited and confident about the group's future prospects," Cineworld said in an update.
"With very few exceptions, the good relationships we have built up over the years have been supportive and understanding of our efforts and, together with us, our industry partners look forward to the time when we shall again be able to open our doors and provide entertainment and pleasure to our customers."
Cineworld's battered shares surged after the company's statement. The shares, which have lost three-quarters of their value this year, rose 41% to 55.88p at 09:39 BST.
AJ Bell's investment director Russ Mould said the shutdown of all Cineworld's theatres and its large borrowings made scrapping the dividend inevitable. He said the crisis added to questions about cinema's long term viability with the family blockbuster Trolls 2: World Tour heading straight for streaming instead of waiting for theatres to reopen.
"Coming out the other side [of the crisis] will not be easy," Mould said. "Predictions for the death of cinema have been made before, notably in the 1950s and 1980s when the advent of TV and home video led to declines in admissions, but the industry ultimately recovered. Cineworld and its investors will hoping for a repeat this time."
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