The Inter-American Entertainment Corporation (CIE) will take the first steps towards the recovery of its finances, after since the beginning of the pandemic it was forced to suspend sporting events, theaters and concerts.
The measures to contain the contagion of COVID-19 hit the company until the first quarter of this year, when its income fell 66% to 788 million pesos compared to the 2,339 million it invoiced during the same period last year.
CIE declared in its financial report for the first quarter of the year that its operating cash flow went to negative territory, with a loss of 24 million pesos. It also registered a net loss of 223 million pesos.
More than a year after the start of the pandemic, the country adds 19 states in the green color of the epidemiological traffic light, including Mexico City, where since June 7 the authorities raised the capacity in outdoor sporting events to 50% and in some theaters, which will give a break to the company’s business.
“It is not difficult to know that the confinement of people has a particularly strong impact on these types of companies. Now, as the reopening materializes, they will surely be able to recover their rhythm, although the interesting thing will also be to see how solid it has been sustained in this difficult stage, ”says Carlos Hermosillo, an independent stock market analyst.
CIE projects that the recovery will come in the third and fourth quarters of this year. For now, he has in favor that, as of June 15, in the capital of the country the massive open-air concerts return with a capacity of 25%, with some conditions: boxes must be established in which there may not be more than 8 people, who must wear face masks throughout the concert. The boxes must be two meters apart.
In the analysis ‘Perspectives on the change in the entertainment habits of Mexicans’, the consulting firm EY points out that after the confinement a massive return is not expected in the different turns of entertainment away from home, however, the challenge will be to rethink the sanitary measures without dramatically increasing your operating costs.
“Entertainment companies have an opportunity to capture a large number of consumers by returning to the new normal. However, to accelerate this reactivation, they will have to get closer to their most loyal customers and rethink their pricing strategy, their brand image and their value proposition in a more competitive environment ”, said Juan Solana, Partner of Innovation and Business Transformation for Latin America North, by EY.
Stay afloat
CIE undertook various measures to recover from COVID-19 and, for example, held conversations with artists to reschedule some concerts. At the time of suspending activities, the group had 283 face-to-face events for sale, of which only 48 were canceled.
From October 2020 to date, new face-to-face events have been put on sale, including the Electric Daisy Carnival Festivals and the Pa’l Norte festival, also scheduled for the month of November at the Fundidora Park in the city of Monterrey, Nuevo León .
On the cost and fixed expenses front, CIE reduced its operating structure by 48%, which meant that its staff went from 2,160 people at the beginning of 2020, including executives and key personnel, to 1,130 people at the end of 2020. In other fixed expenses, such as rents, compensation for the operation of buildings and maintenance, negotiations were carried out, which allowed generating savings of 37%.
The good news is that 91% of the public keep their purchased tickets, with the expectation of attending the events in the future, which for the specialists is a sign of the confidence that the spectators will return to the company venues, which controls the Foro Sol, the Metropolitan Theater and the Palacio de los Deportes, among others.
In addition, in these 15 months Operadora de Centros de Espectáculos (OCESA), a subsidiary of CIE, held virtual events with national and international artists, as part of a trend that various production companies promoted to generate income during the crisis.
Iván Santiago, CEO of BlackBull Advisor, adds that another favorable point for the company is that it managed to maintain a stable debt, since it went from 2,625 million pesos in the first quarter of this year to 2,634 million pesos during the first three months of this year.
These shares were also reflected in CIE’s shares on the Mexican Stock Exchange, which although last year reached minimum prices below 4 pesos, they have managed to recover.
“The pandemic affected all of CIE’s business lines and as a result, year-on-year sales fell dramatically, but the actions taken by the company have been appropriate and this will give them an impetus to resurface,” he says.
