(Yicai Global) Dec. 10 -- SMI Holdings Group is closing down its movie theaters as the Chinese cinema chain struggles with millions of yuan in unpaid wages and bills following a multi-year expansion.

The Hong Kong-based firm has already shuttered six venues in Beijing, state-backed news agency Beijing Youth Daily reported. The company admitted in a Dec. 6 statement that it did not have enough cash to maintain operations and had lost nearly 43 percent in market capitalization so far this year.

SMI shares [HKG:0198] started the year at HKD4.12 (53 US cents), but had slumped 43 percent to HKD2.34 on Aug. 31, when the company halted trading. The Hang Seng Composite Index, which tracks most companies on the Hong Kong bourse, plans to drop the stock for suspending trading for more than three months.

Tighter liquidity and management chaos following a large-scale expansion are the main reasons behind the closures, the report added. The company had 365 movie theaters as of this year's mid-point, compared with just three when it started business in 2009. It had 2,290 screens and 40 million members at the end of last year.

Ticket sales are rising across the country, but much slower than growth in the number of theaters and screens, the report added, citing the Forward Industry Research Institute as saying the number of cinema chains in China will likely drop over the next five years and hit about 25 in 2022. Ticket sales will be concentrated around the top 10, it said.

The rapid scale-up has led to much higher operating costs and more money being spent on finance. The group had CNY1 billion (USD145 million) in cash at the end of 2015, but that had dwindled to less than CNY100 million by the end of last year.

It now has around HKD108 million (USD13.8 million) in unpaid wages, HKD201 million in outstanding rent, and about CNY150 million (USD21.8 million) owed in licensing fees for the movies screened at its theaters.

Several of SMI's subsidiaries have been caught up in lawsuits, with complainants including property management and decoration firms from Henan and Guangdong provinces, according to data from China Judgments Online. The disputes mostly involve late payments for rent, property services, renovations and utilities.

Editor: James Boynton