The Cineworld (LSE: CINE) share price jumped in early deals this morning after the company published its interim results for the period ending 30 June.
As the global economy has opened up, customers have returned to the group’s theatres and 9,269 movie screens. The number of admissions reported for the period total 14.1m.
This pales in comparison to the same period in 2020, but the numbers are heading in the right direction. Admissions declined 70% year-on-year.
Overall, for the first six months, group revenues totalled $293m, although profits remained elusive. The loss after tax was $582m. Revenues declined 59% year-on-year.
The company also reported net debts of $8.4bn at the end of June. It paid out $417m in interest and other costs on this borrowing during H1.
On the whole, I think these results are relatively disappointing. However, one piece of information in the update has helped send the Cineworld share price higher.
The plans in progress
In the CEO’s review section of the update, Moshe (Mooky) Greidinger explains that since 2018, when Cineworld acquired Regal, the US has been its most significant and most important market.
As such, and considering the size of US equity markets, the CEO notes the group is now “considering options to maximise shareholder value now and into the future by accessing this liquidity through a listing of Cineworld or a partial listing of Regal in the US.“
This could be a significant development. A listing in the US would provide additional access to capital. American equities tend to trade at higher valuations than their UK counterparts. There are also businesses with similar qualities already listed, such as AMC.
Greidinger and team will have undoubtedly noticed how easy it has been for AMC to raise capital from its investors over the past 12 months to pay down debt and fund further expansion. The company raised $1.3bn between April and June alone, taking advantage of the so-called ‘meme stock’ rally to reinforce its financial position.
Still, past performance should never be used as a guide to future potential. There’s no guarantee Cineworld will be able to replicate this performance. Further, at this point, the company hasn’t made any decision as to which course of action it’ll take.
A partial listing of Regal would also free up capital. Management could use this to reduce debt, strengthening Cineworld’s balance sheet.
Cineworld share price outlook
I think the organisation is taking the right approach by considering options to raise capital. Until it does, I believe the company’s uninvestable, and I would not buy it myself. It just has too much debt, and its outlook is too uncertain.
Therefore, I think today’s news is broadly positive and could help improve investor sentiment towards the Cineworld share price.
However, there’s no guarantee the company will take either of the courses outlined above. Even if it does, there’s also no guarantee the firm’s actions will lead to a faster earnings recovery.
