When Village Roadshow Ltd (ASX: VRL) reported its FY19 result, the share price shot higher by 16%, here’s why.
Village Roadshow was founded in 1954 in Melbourne with a drive-in cinema and has been listed on the ASX since 1988. The company owns Theme Parks (like Warner Bros. Movie World, Sea World and Wet ‘n’Wild), Cinema Exhibition, Film & DVD distribution and Marketing Solutions. It also has a shareholding in movie producer Village Roadshow Pictures which produced films like The Matrix, Ocean’s Trilogy and The Lego Movie.
Village Roadshow FY19 Result
Village Roadshow reported that income from continuing operations fell by 12.7% to $1 billion.
However, there was a solid performance for Village Roadshow’s underlying profit (excluding material items and discontinued operations). Group EBITDA (click here to learn what EBITDA means) rose by 37.4% to $124.9 million.
The main contributor to the growth of EBITDA was the Theme Parks segment, growing EBITDA by almost 100% to $76.5 million. Indeed, except for reducing Corporate & Other costs, all the other segments each saw a fall in EBITDA by a few million. Theme Parks generated the increase by a combination of higher revenue by around 10% and lower expenses.
Village Roadshow underlying EBIT improved by 170% to $54.4 million and underlying net profit went from a $7.3 million loss to a $20.6 million profit.
However, the company reported a statutory loss of $27.2 million due to $11.4 million of restructuring costs, $18 million of mostly impairments and $15.7 million of other provision adjustments.
Village Roadshow also announced that it is selling its promotional solutions business, Edge Loyalty Systems for an enterprise value of $32.3 million to Blackhawk Network. The net proceeds will be used to reduce the company’s debt which stood at $219.6 million at 30 June 2019.
Village Roadshow Dividend
Village Roadshow announced the return to paying dividends with a final 5 cents per share dividend. Dividends will continue to be paid as long as business operations continue to meet expectations and there’s available free cashflow.
Are Village Roadshow Shares A Buy?
Theme parks are doing better with July 2019 attendance up 12.5% on the prior corresponding period. There’s potential opportunities for more Asian theme parks, but no equity investment.
Cinemas performance is dependent on a number of releases expected in FY20 like Joker.
The decline in sales of DVDs and Blue Ray is obviously expected to continue. However, piracy is falling and the company continues to invest in content creation.
Village is an interesting idea which is trading at a much lower share price despite a bit of recovery. But, it’s not the type of business I’d put in my own portfolio. I’d prefer investing in the growth shares in free report below instead.
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