Dreamworld woes hit other theme parks
Theme park operator Village Roadshow has raised eyebrows with a downbeat trading update that shows the extended toll taken by the tragedy at rival Dreamworld.
An investor sell-off saw Village Roadshow shares drop 10.7% to $3.67 yesterday after the group warned of “challenging trading conditions” in the six months to December.
The leisure group expects its first-half results to be “substantially below” the previous corresponding period, with net profit before material items and discontinued operations of $12 million to $17 million, compared to $19.2 million a year earlier.
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The weaker result comes after an accident at rival Dreamworld in October 2016 that resulted in deaths, which Village Roadshow said was still adversely affecting its theme parks on the Gold Coast, which include Warner Bros Movie World, Sea World and Wet’n’Wild, and in Sydney.
“I was surprised by the magnitude of the impact the Dreamworld tragedy is still having on Village’s theme parks,” Morningstar analyst Brian Han says.
“As a result, the costs being incurred (marketing and ticketing) to restore attendance will be one area I will particularly be focusing on at the half-year result.”
Ticket revenues had improved in January after a new ticketing and marketing strategy was introduced in November but the impact would not be fully known until after the annual pass renewal period of May and June, Village Roadshow says.
The Dreamworld tragedy has affected other theme parks.
Han says he will focus on how committed management is to corporate cost reduction at the February results.
“And (I will look at) whether Village still harbours ‘growth ambitions’ now that the balance sheet is deleveraging, or whether it will now solely focus on restoring earnings from existing operations to their full potential,” he says.
“I prefer the latter course of action.”
The group says it has cut its leverage ratio to below three times at the end of December.
The company has repaid debt with the proceeds of the sale of its Singapore exhibition business, and will realise a profit after tax on the sale of about $150 million.
The group also sold its land at Oxenford in Queensland but will record the deal as a finance lease and not as a profit on sale.
Village Roadshow flagged challenges in its cinema business, with major releases including Avengers: Infinity War, Solo: A Star Wars Story and Jurassic World: Fallen Kingdom scheduled for release in the second half of the financial year.
This article originally appeared on www.theaustralian.com.au/property.
