Village Roadshow posts $26m first-half net loss with drag from film distribution arm

The company estimates a $3m hit to bottom line amid a drop in visitors due to the coronavirus, bushfires and recent flooding.

Justine Partoon, marine animal trainer with Kiama at Sea World on the Gold Coast. Picture: Adam Head

Village Roadshow has posted a $26m net loss in the first half, weighed down by impairments on its film catalogue, while projecting a drop in international theme park visitors as a result of the coronavirus outbreak.

The soft result comes as a battle for control of the group’s film and theme park group is being fought by two leading private equity firms, PEP and BGH Capital.

Interim revenue was down 7.1 per cent on the corresponding period, at $491m, and Village estimated a hit to the second-half bottom line of about $3m as a ­result of a drop in international visitors due to the coronavirus, bushfires and recent flooding.

Village Group booked impairments of $39.7m, with the film distribution arm pulling down the group to the tune of $33.5m amid a drop in royalty payments and impairment of goodwill on film assets.

“Following an in-depth review of film distribution’s future revenue streams, Village Roadshow has determined there is a material impairment of the carrying value of the division’s assets. Impairment has been applied to both the film library and the goodwill of this division,” Village said in a statement to the ASX.

The performance of the film distribution arm was also hit by a delay in a new pay-TV deal with Foxtel (majority-owned by News Corp, publisher of The Australian) that has recently been renewed, with Village saying it has “content slates locked in for the second half of the 2020 financial year with its key TV partners”.

The company said it would now refocus its strategy towards opportunities in video on demand and electronic sell-through to compensate for the losses in the all but obliterated DVD industry.

While attendance at Village theme parks on the Gold Coast — which include Sea World, Movie World and Wet ‘n’ Wild — showed a 6 per cent growth in ticket sales, the overall theme parks division increased EBITDA 7 per cent to $42.5m.

A drag on the division was the Wet ‘n’ Wild Las Vegas park, with Village owning a 50.09 stake in the venture that only scraped together EBITDA of $700,000. But Village blamed that performance on “one-off operating expenses not expected to arise in the second half” of the financial year.

Two of the nation’s top private equity firms are in a battle for control of Village Roadshow, with Private Equity Partners and BGH Capital both lobbing bids in recent months.

Late last year PEP launched a $3.90-a-share offer in cash and scrip, with BGH coming to the party in January with a $4-a-share offer in both cash and scrip.

The takeover bid could put an end to a family drama at the company that has seen brothers Robert and John Kirby pitted against each other over strategy. The two brothers, along with ex-CEO Grahame Burke, own 42 per cent of the company.