Village Roadshow Ltd (ASX: VRL) shares flopped 10% on Tuesday after the $600 million entertainment group released a disappointing trading update to ASX investors.
Village Roadshow is a film production company, owner of Village Cinemas and the name behind Gold Coast theme parks Warner Bros. Movie World, Sea World and Wet’n’Wild.
The Update
This morning, Village Roadshow announced a trading update for the first six months of its 2018 financial year. That is, the six months to 31 December 2017.
Village said its two main divisions, theme parks and cinemas, “experienced challenging trading conditions”. As a result, Village now expects its first-half results to be substantially below the result it achieved in the first half of last year, although it didn’t specify the exact amount.
“Cinema Exhibition experienced a slow start to the financial year as the weighting of the major releases such as Ready Player One, Avengers: Infinity War, Solo: A Star Wars Story, Deadpool 2 and Jurassic World: Fallen Kingdom are all scheduled to be released in the second half of the financial year.” – Village Roadshow
In addition, Village said the tragic events at Ardent Leisure Group’s (ASX: AAD) Dreamworld theme park in 2016 was continuing to have an adverse impact on its theme parks.
Village expects to report a profit (before material items) between $12 million and $17 million for its 2018 financial year, down from the $19.2 million it achieved in its first half of 2017.
Village’s forecast excludes a profit of $150 million generated by the sale of its Singapore Exhibition business in October 2017.
Outlook
Fortunately for shareholders, Village expects cinema exhibition to recover in the second half, and said theme park ticketing improved in January.
“VRL’s Theme Parks on the Gold Coast has seen improved ticket revenues in the month of January which indicates a significant recovery following the introduction of the new ticketing and marketing strategy in November 2017, however the impact of this cannot be fully determined until after the key annual pass renewal period of May/ June.”
Despite its outlook, Village’s recent performance stands in stark contrast to the ongoing demand for online streaming services like Netflix Inc (NASDAQ: NFLX). Last week, Netflix reported a total of 118 million users and said the release of its most expensive self-produced movie, Bright, starring Will Smith, was a success.
The Village share price traded 10.7% lower at $3.67 on Tuesday.
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