Ster-Kinekor Theatres is entering voluntary business rescue, the group’s board announced on Friday (29 January), aiming to rehabilitate the company as it continues to suffer due to the Covid-19 pandemic and lockdown.
The group said that up until February 2020, the business was profitable and highly cash generative, with good prospects of future and ongoing profitability from the pipeline of blockbuster film content that had been scheduled.
However, as a result of the Covid-19 pandemic and the consequent economic lockdown instituted by the South African government at the end of March 2020, all cinemas were required to shut down, and only permitted to reopen under strict conditions as from the end of August 2020.
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 second Covid-19 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," it said.
Additionally, the continued lack of content for the next four to five months means that the business is heading for further operational and cash flow challenges, it said.
"The board is of the view that the safe harbour that business rescue provides, in terms of providing a legal moratorium, will assist the business to return to profitability, once operating restrictions have been lifted, when international film distributions start to flow again."
Stefan Smyth, a partner at EY South Africa, where he leads their Africa Turnaround and Restructuring Strategy practice, has been appointed as the Business Rescue Practitioner.
Ster-Kinekor said that its cinemas will remain open.
"For our customers, it is important to note that our cinemas remain open for business. 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 sanitizing on arrival and inside the auditoria and mask wearing as appropriate. Every two seats are kept vacant for social distancing", said acting chief executive Motheo Matsau.
Ster-Kinekor executives and Business Rescue Practitioner teams are engaging with employees, who have been requested to continue with their normal work duties, also under strict Covid -19 health and safety protocols, Matsau said.