Village Roadshow posts $117m loss as Covid crunches parks and cinemas

Village Roadshow is looking for a lift after a $117m loss caused by the pandemic, in what may be its last results outing on the ASX.

Having fun on a Warner Bros. Movie World rollercoaster. Picture: Getty Images

Entertainment company Village Roadshow has crashed to a heavy loss after coronavirus hit its cinema and theme park operations, and as private equity firm BGH Capital tries to end its life as a public company.

The company, which is subject to a takeover bid worth up to $487.5m, fell to a full-year net loss after tax of $117.4m. Even after taking out hefty writedowns on key assets, it lost $43.4m.

The result could be its last outing on the ASX as the founding Kirby family, which holds about 40 per cent of the register, is backing a cut price takeover by BGH despite dissident shareholder Mittleman Brothers calling the bid opportunistic.

“After a strong start to the financial year, Village Roadshow has felt the full impact of COVID-19 shutdowns and restrictions,” chief executive Clark Kirby said.

“We are seeing light at the end of the tunnel as we reopen for business and look forward to more normal domestic travel patterns and the pent-up demand for seeing movies on the big screen.”

Village CEO Clark Kirby. Picture: NIGEL HALLETT

Village said COVID-19 had had a significant adverse impact on the company’s theme parks and cinemas, although the parks and most cinemas, except theatres in Victoria, have since reopened, albeit at reduced capacity to comply with social distancing rules.

The group has slashed costs to survive and taken on $70m of additional debt funding from its lenders and the Queensland government.

Village said it had entered the coronavirus crisis with low leverage, and was seeking to conserve capital, even though it will outlay more on new rides at its theme parks.

The company stood down employees hit by business closures and reduced senior executives’ salaries, as well as tapping the JobKeeper scheme. It will also raise $35m via fresh shareholder equity or equity-like instruments, by February.

BGH Capital has two alternative schemes to acquire control of Village, which are worth up to $2.45 per share. However the shares are languishing due to border closures, crimping both operations and trimming back the conditional takeover price ahead of the schemes being voted on in November.

Village warned factors such as further COVID-19 lockdowns, cross border closures, social distancing restrictions and the status of a vaccine may hit its operations.

The Gold Coast theme parks – Warner Bros. Movie World, Sea World, Wet’n’Wild, Paradise Country and Australian Outback Spectacular – are running at half capacity, with guests mainly from the local market. Village warned a recovery could take time.

A more positive outlook hangs on interstate visitors and international visitors from New Zealand being able to visit the Gold Coast, potentially from October or November for interstate tourists, but other international markets are not assumed to be returning this financial year.

In the cinema unit, all venues in Victoria are currently closed and it’s assumed they’ll not reopen until at least October.

Cinemas are showing the newly-released Warner Bros blockbuster Tenet but many other major releases have been pushed back until next year, denting earnings.

Village expects a lower than usual trading cash flow, which is estimated to result in an overall “neutral to slightly positive free cash flow” before capital expenditure, although this includes support from the JobKeeper scheme in this quarter.

The company will spend $70m-$75m on its theme parks division, mostly on the New Atlantis Precinct at Sea World and refurbishing the Sea World Resort.

Village said it was operating on a “negative cash basis” and expects this will continue for several months.

Mr Kirby said company was still “really in the middle of this maelstrom”. But he remained upbeat. “We do know we‘re in a strong position to emerge post COVID-19,” he said.

The company will also hold the line against discounting at its theme parks, with Mr Kirby saying there was no place for that in the market.

Morningstar equity analyst Brian Han said the result was “ugly, as expected” but said the company thought it had a “good handle” over the variables it could control. He cautioned that the external revenue environment was difficult to forecast.

Village shares lost 1c to close at $2.11.