Box-office down but Village prospers
In the last half of 2013 the Australian box-office fell by 5% on the prior year but Village Cinemas defied the trend, posting a slight increase in revenues and an 11% boost in profit margins.
Ord Minnett analyst Nicholas McGarrigle credits that result to the continued roll-out of Gold Class and Vmax screens.
Parent company Village Roadshow Ltd reported earnings before interest, tax and depreciation of $90 million for the half year, excluding one-off costs, fractionally up on the prior year.
The exhibition division rang up $127.7 million in revenues (up 0.7%), distribution posted $170.6 million (down 12%) and theme parks $159.7 million (up 3.7%).
“VRL saw an increase in Australian admissions to its circuit, suggesting gains in market share given the decline in domestic box- office in the period,” McGarrigle said in a briefing to clients. “With 15 new Gold Class and seven new Vmax screens coming online in FY14 and FY15 we see margin improvements as sustainable longer term.”
The analyst has a bullish outlook for next few months, citing such releases as Captain America: The Winter Soldier, The Lego Movie, Need for Speed, X-Men: Days of Future Past, Godzilla and Transformers: Age of Extinction.
He forecasts Village Roadshow Ltd.’s exhibition empire will post EBITDA of 24.5% this fiscal year, beating the prior year’s 23%.
Roadshow Films remains the No. 1 distributor with a market share of 27.2%. VRL reported the Australian digital market for film and TV content has grown by 23% and is projected to accelerate exponentially.
Despite The Great Gatsby’s worldwide box-office haul of $USS351 million, the company received a few million dollars from its 48% investment in VREG, whose Village Roadshow Pictures co-produced the film with Warner Bros.
That’s because VRL only gets interest on $100 million worth of redeemable shares in VREG and the profits are retained in the US-based entity, McGarrigle said.
Ord Minnett has a buy recommendation on VRL with a valuation of $8.15 per share. That excludes the stake in VREG which it believes is worth $1.60-$2.40 per VRL share