Coronavirus hopes buoy markets, and Cineworld and the cinema industry face battle for survival

“UK and European stocks started Tuesday very much on the front foot, following gains in the US and Asia overnight, and despite the shock of Prime Minister Boris Johnson’s admission to intensive care,” says AJ Bell Investment Director Russ Mould.

“Investors are reacting to indications that lockdown measures in the UK, US and Europe are beginning to ‘flatten the curve’ of coronavirus infections and fatalities.

“Recent successful fundraisings at two businesses heavily impacted by the coronavirus, WH Smith and cruise operator Carnival, may also be helping sentiment, showing that there is still investor appetite to back businesses even in troubled times. Notably stocks most bashed up in the crisis, including airlines, enjoyed a big bounce back.

“The ongoing levels of volatility in the market as it see-sawed from hope to despair are reflected in a 500% increase in first quarter revenue at trading platform Plus500.

“The market’s relief is only likely to last so long, and attention will soon turn to how countries intend to exit the current containment measures which have in effect hit the pause button on the global economy."

Cineworld

“News this morning that Cineworld was suspending its dividend was not a twist which can contend with the best in cinematic history like The Usual Suspects or Sixth Sense.

“Although its admission that government-mandated closure of cinemas has been ‘extremely challenging’ ranks up there with ‘Houston we have a problem’ in terms of understatement.

“Combined with the company’s heavy borrowings, built up to fund big acquisitions, this made the decision to defer the payout an inevitability.

“Cineworld’s battle for survival involves bosses forgoing pay, capital expenditure being frozen and urgent discussions with lenders, landlords, film studios and suppliers. Coming out the other side will not be easy.

“A longer term question concerns the existential threat to the wider cinema industry. The upcoming release Trolls 2: World Tour – a sequel to the successful 2016 family film Trolls – will be the first major studio title with family appeal to go straight to streaming services when it drops on 10 April.

“If it is successful questions may be raised about the viability of cinema, nine years after Ben Stiller comedy outing Tower Heist flirted with the idea of a video-on-demand release at $60 a viewing to pretty much coincide with its theatrical debut.

“It is worth noting that predictions for the death of cinema have been made before, notably in the 1950s and 1980s when the advent of TV and home video respectively 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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