Less than two years after exiting business rescue, SA’s largest movie exhibitor Ster-Kinekor may retrench nearly a quarter of its staff and close up to nine cinemas in Gauteng, KwaZulu-Natal and Western Cape as it battles with a drop in attendance.
In a presentation seen by Business Day, Ster-Kinekor outlined plans to rightsize the business, saying the moribund economy and the business’s financial position required it to restructure.
Ster-Kinekor, now managed by UK-based Blantyre Capital and Greenpoint Capital, declared plans to retrench, citing global and domestic factors.
The company said the Hollywood actors and writers strike affected the film industry globally resulting in the limited film releases. Prolonged and intense load-shedding affected the performance of its cinemas on top of low attendance as cash-strapped consumers cut out luxuries. Streaming options and online subscription video-on-demand services have become popular since the lockdowns, also trimming down foot traffic.
Ster Kinekor confirmed that in February it issued a notice to all staff informing them of the company’s intention to restructure under section 189 of the Labour Relations Act and begin the consultation process. It said issues affecting its operations were largely out of its control and the financial affect was likely to endure for some time.
“Ster-Kinekor Theatres has had to review its cost structure to ensure the continued survival and sustainability of its business. Ster-Kinekor is committed to complying with all the legal requirements, and will also ensure that employees are kept abreast of all developments throughout the section 189 process,” the company said.
It listed the Boardwalk, Mimosa and Shelly Beach cinemas in KwaZulu-Natal, Cedar, Maponya, Matlosana, Southgate, Sterland in Gauteng and Bayside in the Western Cape as affected branches that would close in three to six months, affecting 68 employees.
Ster-Kinekor said that “cinemas will be closed at gradual intervals, conditional on lease negotiation agreements”.
The company said another eight movie theatres including the Secunda, Wonderpark, Bedfordview, Cradlestone, Mooi River, N1 City, Rosebank Nouveau and Rustenburg cinemas were under review for possible closure. This would result in 69 more job cuts. Gateway in KwaZulu-Natal would have only one role affected.
If the cinema resizing plans are executed in totality, an estimated 138 employees will be affected of the total 194 workers at those cinemas. Overall, the layoffs are set to affect up to 237 workers, including those in the CEO’s office, marketing, sales, human capital, information technology, business operations, content, finance, head office, regional operations and cinemas.
About 13 voluntary severance packages have been requested and accepted so far, according to the presentation.
The restructuring and subsequent retrenchments come less than two years after the company emerged from business rescue. The cinema chain went into business rescue after forced lockdown restrictions forced cinemas to remain closed in the early part of the pandemic in 2020.
A lack of new blockbusters due to delays in releases from the UK and US added further strain to the income-earning operations stream. This severely affected the company’s ability to pay its debts as and when they fell due, forcing its decision to seek protection in January 2021.
Established in 1969 and with hundreds of screens in SA, with others in Namibia and Botswana, Ster Kinekor was operational while under administration, but owed creditors more than R250m. In 2022, the group was plucked from business rescue after a R250m cash injection that returned the company to solvency came from Blantyre and Greenpoint, forming the basis of the business rescue plan.
Its successful exit from the business rescue was said to have saved it from liquidation and ensured the continued employment of its staff of nearly 800 and the refinancing of existing capital structures.
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