PVR postpones capital expenditure plans due to COVID-19

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As PVR is braving a substantial effect on its profitability in its present fiscal year due to the continued COVID-19 pandemic, its capital expenditure plans have been postponed to suppress the costs.

Since the government declared a national lockdown to monitor the spread of COVID-19 in March this year, the cinema halls in India have remained locked.

PVR Ltd. Chief Operating Officer (CFO) Nitin Sood said in the Company’s 2019-20 Annual Report that “We temporarily suspended a large part of our planned equity investment that we conducted before the shutdown, and will now reassess all new capital spend once the shutdown is over.”

PVR noted that, despite the reopening of cinemas, the company would not be able to operate its facilities at usual levels of capacity utilization due to social distances and health issues that the cinemas may have.

“Therefore it could be possible to obstruct the company’s sales and cash flow production until it is authorized to resume operations. Our FY 2020-21 operations will be affected substantially, with substantial lockdown losses,” he said.

In 71 cities in India and Sri Lanka, PVR owns a network of 845 screens across 176 premises. PVR’s portfolio comprised 87 screens in 2019-20.

The company currently does not generate revenue admissions, food and drink sales, or from other sales and cash-flows, because film exhibition represents its only segment of the market.

The firm said it retains its obligations to the outflow of cash, including wage payouts for workers, other overheads, and compensation for older working capital.

The shutdown of movie theatres, during the lockout and even afterward before business reverts into normal life, has and will have a major negative effect on profitability and liquidity, PVR said.

The net profits of PVR were Rs.26.85 for fiscal 2019-20. In 2018-19, it was Rs.189.40.

PVR has taken crucial steps to mitigate COVID-19 impact on its business and has adopted cost reduction strategies, such as stopping all non-essential operational and capital expenditures, the daily review, and approval of CFOs for all procurement and payment requests outgoing as well as substantial pay reductions for corporate employees.

PVR said it has cut staff costs through such steps as layoffs and cutbacks and shut-in wages. For senior managers, the organization said the pay dropped by 50% and for other workers by 20-35%.

In its annual report, the Company informs developers about the lifting of rental and Common Area Maintenance (CAM) costs for the time of lockdown and is discussing the issue of lower rentals after reopening.

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