PVR issues profit warning, all screens remain shut

PVR, India’s No.1 film exhibitor, said it has put on hold all construction and other capital expenditure related to new projects and screens, and issued a profit warning for the current quarter on account of the ongoing COVID-19 pandemic.

“The Company opened 13 new screens in FY’21 which were already under fit-out prior to lockdown. Since the beginning of the pandemic, we have not taken any fresh handovers of project and all additional Capex plans for new screens have currently been put on hold,” it said, indicating that it is only funding those works that were commissioned before the COVID-19 started in March 2020.

The comments came in the wake of all its hundreds of screens being forced shut due to the second wave of COVID-19 in India that started in April, and yet another quarter of suppressed performance in Jan-Mar 2021.

“As of date, the company has shut down all cinemas across India with shut down happening in a staggered manner in the month of April’21, except for cinemas in Telangana and Andhra Pradesh which were shut down in the 1st week of May’21. This is in line with the prevailing guidelines as laid out by the Central and various State Governments and regulatory bodies.

“Since Cinema Exhibition is the only business segment, the company is currently not generating any material operating revenue from admissions, food and beverage sales, or other revenue and cash flow from operations,” PVR Ltd said in a trading update for investors today.

Last year, it said, it was able to reduce its operating expenses by 63% to Rs 638 cr, thanks largely to a reduction of around Rs 522 cr in the rental and maintenance expenses it was obligated to pay to its various landlords of its nearly 175 cinemas.

The company had invoked Force Majeure (Act of God) clause in various lease agreements for its cinema properties, for a complete waiver of rent expenses during the lockdown period. “The Company has been successful in getting relief from almost all landlords,” it has said.p

This year too, said the company, it has started talks with landlords seeking a reduction or waiver.

“We believe we should be able to again achieve cost savings during the period of shut down in current year even though quantum of that is currently not measurable given the negotiations with developers / landlords have just commenced,” it said.

PROFIT WARNING
The company said it has access to around Rs 750 cr of liquidity as of April end. It had raised around Rs 800 cr in January from shareholders.

Nevertheless, it said, it “continues to incur committed cash outflows, including employee salary pay-outs, other overheads as well as payments related to Debt and Working Capital. This has and will have a significant negative impact on profitability and liquidity during the lockdown and even thereafter till business comes to normalcy.

“Further once the Cinemas are re-opened, we may not be able to run our cinemas at normal capacity on account of social distancing measures that cinemas may be required to follow as well as health concerns that the patrons may have. On account of this, our revenue and cash flow generation may be impacted even when we fully resume operations,” it warned.

PVR also said it cleared most of the creditor/vendor dues relating to FY’21 and the outstanding amount as of Mar 31, 2021, is in the normal course of business. However, said the company, it has again been forced to reach out to its vendors and has re-negotiated payment schedules to preserve liquidity.

“The company will continue to take all measures necessary to further reduce the impact at all cost levels, including fixed costs and outgoing cash flows.”

Q4 PERFORMANCE
Separately, the company reported another set of diminished quarterly numbers for the Jan-Mar period.

Revenue from operations were down at Rs 181 cr compared to Rs 645 cr for the same three months of 2020. However, they were a big improvement over the Rs 45 cr reported in the preceding three months (Oct-Dec 2020).

Total expenses during the first three months of 2021 were at 508 cr, down from 732 cr last year, but up from 393 cr in the preceding three months. The Rs 508 cr figure includes depreciation and amortization expenses of around Rs 146 cr.

As a result, the company booked a loss of Rs 245 cr at a pretax level, compared to a loss of Rs 70 cr for the same three months of the previous year and a pretax loss of Rs 73 cr for the preceding three months.

In the notes to its Q4 numbers, PVR said it doesn’t affect the long-term viability of its business to be impacted by the pandemic.

“We have made an assessment of likely impact from the COVID-19 pandemic on business and..believe while the COVID-19 pandemic may adversely impact the business in the short term, we do not anticipate material medium to long term risks to the business prospects.

“We have carried out an assessment of the appropriateness of going concern, impairment of assets and other related aspects and we believe that there is no impact on the same. We are closely monitoring the developments and possible effects that may result from the present pandemic on our financial condition, liquidity and operations and working to minimize the impact of this unprecedented situation.

As the situation is continuously evolving, the eventual impact may be different from the estimates made as of the date of approval of these results,” it added. Ultra News