Ster-Kinekor Theatres, South Africa’s largest cinema chain, has entered business rescue.
In a statement, it said its board decided to enter “voluntary business rescue proceedings with effect from January 27, 2021”.
Stefan Smyth, a partner at EY in the Africa Turnaround and Restructuring Strategy practice, has been appointed as the business rescue practitioner.
The group’s cinemas will remain open as the company reorganises itself.
The group, which runs 55 movie complexes with more than 400 screens and 64 000 seats, was a profitable business until the Covid-19 crisis started early last year.
“Up until February 2020, Ster-Kinekor welcomed millions of moviegoers every year to their cinemas. The business was profitable and highly cash generative, with good prospects of future/ongoing profitability from the pipeline of blockbuster film content that had been scheduled.”
The Covid-19 crisis has since crippled the business as it was not allowed to operate at all for the first five weeks of the hard lockdown starting in late March 2020.
At the end of August, the lockdown restrictions, to an extent, lifted and it was allowed to operate.
“Since then the company has been operating under various forms of restriction, including curfews and mandatory limits to the number of guests per auditorium. In addition, there has been an impact of the rescheduling of blockbuster film contents from the original date.”
The reemergence of the virus in the last few weeks of 2020 placed the company in a difficult position.
“The second Covid wave hit South Africa and other countries in December 2020, with further lockdown measures and curfews reintroduced across the cinemas. These factors have meant that Ster-Kinekor has been trading at a loss, as the company continued to incur costs.”
These restrictions along with the lack of content for the next four to five months meant that the business was “heading for further operational and cash flow challenges”.
All of this led the board to view that the “safe harbour that business rescue” provided, would assist it to return to profitability, “once operating restrictions have been lifted and when international film distributions start to flow again”.
The business rescue practitioner will on a temporary basis, supervise the management, affairs and business of the company and will devise, prepare, develop and implement a plan to rescue the company.
“Moviegoers can continue to book their movie tickets through our website, App or in-store. All cinemas have instituted strict Covid-19 protocols, which mean temperature checks and hand sanitising on arrival and inside the auditoria and mask-wearing as appropriate. Every two seats are kept vacant for social distancing,” noted acting CEO Motheo Matsau.