VILLAGE ROADSHOW LAMENTS 'ATROCIOUS' SUMMER
Written on the 24 February 2015 by Nick Nichols
VILLAGE Roadshow's (ASX: VRL) Gold Coast theme parks suffered a sharp fall in earnings due to what the company calls "atrocious" weather over the peak holiday period.
The problem was not only confined to the Gold Coast, as the company's fledgling Sydney theme park division also suffered the same fate due to the NSW capital's wettest summer in 50 years.
Village Roadshow says the theme park division had a promising start in the first quarter, but record rainfall softened attendances on the Gold Coast, hitting sales of both season passes and one-day tickets.
Monthly rainfall on the Gold Coast during December almost tripled to 189.6mm, from 71mm a year earlier, while January's rainfall surged to 510mm up more than 700 per cent on the 72.7mm recorded in January 2014.
Movie World managed to lift attendances thanks to the Carnivale special event in July and new attractions such as the Junior Driving School, while the White Christmas event saw attendances up 22 per cent on last year.
However, unlike Dreamworld which drew an extra 100,000 visitors over the six-month period, Village Roadshow's visitor numbers remained steady at 2.7 million.
Sea World was the worst hit of the parks, with attendances down 7.5 per cent and earnings impacted by higher costs associated with maintenance and water treatment for animal enclosures.
Sea World Resort, however, had another strong half-year, in line with a broader lift in the Gold Coast hotel sector, boosting both revenue and operating profit. Village Roadshow says the performance was strong considering the competitive hotel environment on the Gold Coast and the downturn in visitor numbers to the theme park.
Theme park income for the six months to the end of December slipped 5.7 per cent to $164.3 million, while EBITDA fell 7.3 per cent to $41.8 million.
Gold Coast theme park revenue was $143.6 million, down from $145.7 million. Pre-tax earnings fell to $15.7 million, from $19 million a year earlier.
Village Roadshow, which also has theme park operations in the US, has cut its forecast EBITDA for the division by between $7 million and $10 million for the full year.
"Short of prayer, there is nothing we can do about the weather except take comfort that likely, based on the law of averages, next year should be better," says co-CEO Graham Burke.
"We have over four months this financial year to go and by extending enormous human energy with dynamic showmanship and rigour in micro focus on all costs, I'm confident of delivering a solid year."
The company says it has made a promising start to the current quarter, with trading in line with last year.
Village Roadshow is pinning its hopes on driving higher attendances this year through the Carnivale special event during the Easter school holiday period, as well as the introduction of new attraction Creatures of the Deep at Sea World and a new show for Australian Outback Spectacular which it says is "drawing power from local and international markets".
"Management has also implemented a detailed expense reduction program, which will see a reduction in expenses below those of the previous year, helping relieve some of the pressure on the top line," says the company in the notes accompanying today's interim result.
"With the successful execution of the above initiative, and hopefully a more stable weather pattern in the second half of FY15, management expects to see an increase in attendance and frequency of visitation in the second half of FY15, to underpin the revised forecast for the parks."
Village Roadshow is also exploring opportunities to grow its theme park division in Asia, and is looking at sites in China and South-East Asia.
Village Roadshow also notes that the Pirates of the Caribbean sequel being filmed on the Gold Coast will be the studio's biggest production to date. Earnings from the studio have risen in the latest half year, also boosted by the filming of San Andreas.
Village Roadshow's group revenue dipped 1.7 per cent to $480.1 million, while EBITDA slumped 15 per cent to $69.2 million. Net profit of $13.3 million was down from $18.1 million.
The company is paying an interim dividend of 14c per share.
Author: Nick Nichols