UFO Moviez business freezes due to Covid-19 crisis, stock trades flat

Since cinemas have shut down, the company has stopped generating revenues.

Jul 15, 2020 09:07 IST India Infoline News Service

UFO Moviez India Limited informed the exchanges Tuesday that the World Health Organization (WHO) declared the Covid-19 outbreak a global pandemic on March 11, 2020. Cinemas were the first to be impacted by Covid-19 and they started shutting down following the orders passed by various regulatory authorities and in a few days, all cinemas across India were temporarily shut-down.

Since cinemas have shut down, the company has stopped generating revenues. However, it continues to incur cash outflows on account of manpower and other committed fixed costs. This will have a significant impact on the profitability of the company until cinemas are allowed to re-open.

Also, once cinemas re-open, in the initial days, occupancy will be impacted on account of  social distancing measures and other protocols that may need to be followed as the Government may prescribe. This will influence revenues until the situation normalizes.

The company has carried out a financial review of the Covid-19 impact on the business. It has assessed the potential impact on the recoverability of assets and determined that there is no significant impact on the carrying amounts of these assets as on date.

However, the company will continue to monitor the impact on account of changes in future economic conditions on these assets. Also, the company is in a reasonable position to fulfill its current obligations and does not foresee any significant impact on its business due to the non-fulfillment of the obligations by any other party.

The Government, vide its order May 30 had stated that cinemas will be allowed to open in the third phase of re-opening. However, as of date, there is no clarity about the re-opening of cinemas and much will depend on the assessment of the Covid-19 situation by the Government.

However, some of the cinema operators, in various parts of India, have started preparing for the re-opening by putting in place, plans for enhanced safety and precautions for cinemagoers. The company is fully prepared to resume providing  services once cinemas reopen. To ensure this, the company has established comprehensive safety and precaution protocols to be followed by all employees.

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