Village Roadshow Ltd (ASX: VRL) has invested a lot into its new Wet 'n' Wild Sydney water theme park that opened in December, already getting over 400,000 visitors since it opened and having strong trading results. In the full-year report we will see more of a contribution, but in the half-year results, the returns of the investment are still to come.
The company is a theme park operator and film distribution and exhibition company that has brands like Warner Bros. Movie World and Sea World. It operates 680 cinemas in Australia, Singapore and the US and has distribution deals with Warner Bros and The Weinstein Company. It was involved with the film production of The Great Gatsby and upcoming films like The Lego Movie, Winter's Tale, and Edge of Tomorrow.
In its report for first-half 2014, total revenue was down 0.2% to $478.8 million and net profit after tax was $18.9 million, 43% down from the $33.4 million in the pcp. Expenses excluding finance costs were about $20 million higher on 1H2012.
Robert Kirby, the co-CEO and co-chairman said: "We have spent money to invest in the building blocks for our future. The opening of Wet 'n' Wild Sydney has been a huge success and will pave the way to our future growth prospects in China and South East Asia."
It declared a 13 cent per share dividend fully franked to be paid on 31 March 2014, in line with the 13 cps final dividend paid in October 2013.
Over the past three full-year reports its net underlying profit has risen from $31.5 million in 2011 to $57.3 million in 2013, so the company has been performing well, yet the need to invest for further growth will reduce short-term earnings until those investments begin to pay off, as in the case of the Wet'n'Wild Sydney park.
Foolish takeaway
With a recovery in the general economy gradually occurring, more discretionary spending will go towards leisure activities like films and theme parks. In addition, tapping into the big Asian market is timely as more Chinese try international tourism. The company also has a theme park under construction at the Chinese tourist destination Hainan Island, which is scheduled to be fully open in May 2015. I look forward to seeing the attendance numbers of that park added to the new Sydney park. These building blocks will keep the company on its path of growing business over the long term.
