Cineplex offsets weak attendance to deliver higher revenue, profit
Movie chain says quarterly profit up three cents per share on year-over-year basis
Canada's largest movie theatre chain touted the success of its diversification into esports and other businesses as it reported an increase in profits despite a decline in theatre attendance and box office sales.
Cineplex Inc. said Tuesday it earned $23 million or 37 cents per share in the first three months of 2017, up from $21.5 million or 34 cents per share in the comparable quarter of last year.
The company also increased its dividend by 3.7 per cent to $1.68 per share on an annual basis, starting with its May dividend which will be paid in June.
The results came as first-quarter revenue went up four per cent to $394.2 million, although box office revenue slipped 1.7 per cent and attendance fell 4.8 per cent due to a weaker selection of films.
Gains came from revenue from food services which added 1.7 per cent, while media revenue gained 2.6 per cent and revenue from Cineplex's amusements business climbed 58.9 per cent, due largely to two acquisitions completed in the fourth quarter.
"This was the first time where we really saw the impact of (our diversification) and the benefits in the long-term," said CEO Ellis Jacob, adding it will be a slow and steady process to grow the company's other entertainment ventures.
Cineplex opened its first Rec Room, a 60,000-square-foot space for gaming, live entertainment and dining, in Edmonton last September. The location added $2.1 million in food service and $2.0 million in amusement revenue in the most recent quarter.
Three more locations are under construction in Calgary, Edmonton and Toronto, but aren't scheduled to open until the fall.
As part of its esports business, Cineplex and WorldGaming hosted the Call of Duty: Infinite Warfare tournament final in late March where spectators watched teams battle each other in the video game on the big screen.
"It's not to say that we are giving up on movies," Jacob said, "because we aren't."
Cineplex also continues to upgrade its theatres to provide a better viewing experience.
By the end of the year, 15 theatres in total will have be retrofitted with large, leather reclining seats, he said, an upgrade the company started making in select theatres late last year.
The company also plans to open at least three to five more VIP theatres over the next 18 months, he said. Currently, Cineplex has 17 such locations, which offer luxury seating and serve alcohol.
Higher ticket prices for VIP, Imax, UltraAVX and other specialty screenings helped boost box office receipts per patron by 3.3 per cent to a record high $9.97, said Jacob. Concessions revenue rose five per cent to $5.71 per moviegoer.
Jacob said he's expecting attendance to pick back up this quarter with a strong lineup of movies coming, including Guardians of the Galaxy: Volume 2, Bon Cop Bad Cop 2 and Cars 3.
Despite the strong line-up, Jacob said it is important for Cineplex to be diversified for quarters when the movies don't deliver.
"There's so much disruption taking place," he said. "When I started in business you had a five-year plan and it was, you know, good for five years."
"Now, a five-year plan is good for about three months."