The Village Roadshow Ltd (ASX: VRL) share price plummeted over 5% in early trade on Friday as Australia's leading theme parks and cinema operator reported a poor set of results amidst challenging conditions.
Key takeaways from Village's 2017 first-half results include:
- Revenue from continuing operations was up 4% to $542.5 million
- Earnings (EBITDA) was flat at $78.5 million
- The group's net loss after tax was $6.7 million (from $25.5 million loss in prior corresponding period)
- No interim dividend was declared for the half-year
So what?
Friday's fall comes off the back of a forgettable few months for Village.
Village's stock has shed over 20% this year alone, with Thursday's closing price of $3.77 being almost 45% lower than this time last year.
The root of the cause has been poor foot traffic at Village's Gold Coast theme parks in the wake of the tragedy at Ardent Leisure Group (ASX: AAD) owned Dreamwold in October last year. To add to its woes, poor performance of recent blockbusters has led to lower cinema exhibition earnings to deliver a one-two blow to Village's bottom line.
Theme parks
In Friday's results, management reiterated that theme parks trade remained lumpy with half-year earnings coming in marginally higher on prior corresponding period. However, the outlook for the year remains glum as management now expects full-year earnings from its theme parks division to be lower than last year.
Cinema exhibition
Despite Village reporting a strong start to 2017 in its Cinema Exhibition business late last year, earnings fell off towards the end of the first half and came in 14% lower than the prior corresponding period. Village blamed higher costs and a sluggish Singapore economy as cause for the drop-off in earnings.
However, management remains optimistic on the full-year outlook, indicating stronger performance in the second-half of 2017 should keep earnings flat on prior year.
Foolish takeaway
Village's business appears to be struggling as a perfect storm of an unprecedented tragedy and poor cinema exhibition numbers take a toll on the company's results. Nevertheless, the company intends to baton down the hatches and pursue its strategy of creating an entertainment and leisure experience in all of its operations.
Whilst the turnaround is yet to play out, given Village's two biggest divisions are struggling and management halted its dividend, I'd be inclined to sell the stock until the benefits of this strategy are seen.
