Dent in fourth quar­ter Cine­plex prof­its doesn’t de­ter CEO

The Peterborough Examiner - - BUSINESS - SEAN CRAIG FI­NAN­CIAL POST

Cana­dian movie the­atre gi­ant Cine­plex Inc.’s earn­ings fell nearly 70 per cent in the fourth quar­ter of 2016 and 42 per cent for the full year as the chain strug­gled to keep pace with a record break­ing 2015 that in­cluded the re­lease of the third-high­est gross­ing film of all time, Star Wars: The Force Awak­ens.

The de­clines came de­spite the re­lease in De­cem­ber 2016 of the first stand­alone film in the space opera fran­chise, Rogue One: A Star Wars Story.

Though Rogue One has earned more than $1 bil­lion US at the box of­fice, Cine­plex’s over­all fourth quar­ter rev­enue nev­er­the­less de­clined 5.4 per cent to $385.4 mil­lion. At­ten­dance also fell 12 per cent year-over-year in the fourth quar­ter, which many an­a­lysts pre­dicted due to the one-off boost pro­vided by The Force Awak­ens. That led to a 9.6 per cent year-overyear de­crease in box of­fice rev­enue in the fourth quar­ter to $177.5 mil­lion.

Lower at­ten­dance at Cine­plex the­atres in the fourth quar­ter also pushed the com­pany’s food-ser­vice rev­enue down 7.3 per cent to $105.5 mil­lion. How­ever, the per cus­tomer rev­enue on food-ser­vice trans­ac­tions in­creased 3 per cent to $5.75.

Cine­plex CEO El­lis Ja­cob said that the nat­u­ral up-and-down cy­cle of box of­fice rev­enues was the pri­mary cause for the de­clines, in par­tic­u­lar the per­for­mance of films out­side the Star Wars fran­chise.

“We don’t have the same de­mo­graph­ics in Canada as in the United States,” Ja­cob said, in an in­ter­view with the Fi­nan­cial Post. He noted that four ma­jor films in par­tic­u­lar — Boo: A Madea Hal­loween, Al­most Christ­mas, Kevin Hart: What Now and Birth of Na­tion — earned a com­bined $145 mil­lion in the US but only $1.8 mil­lion in Canada.

On the other hand, El­lis pointed to per cus­tomer box of­fice rev­enue, which in­creased 2.8 per cent to $9.90 in the fourth quar­ter and 3.5 per cent to $9.55 for the 2016 fis­cal year – both high points for the cinema oper­a­tor.

“We have more choices for cus­tomers, and we are try­ing to make the cinema an ex­pe­ri­ence that you can’t repli­cate in your home” Ja­cob said, not­ing that the com­pany’s premium movie of­fer­ings — in­clud­ing 3-D screen­ings, IMAX the­atres and im­mer­sive “4DX” venues equipped with mo­tion-con­trolled seats, strobe lights and wind and fog ef­fects — were ma­jor con­trib­u­tors to per cus­tomer in­come growth, mak­ing up a record 48 per cent of box of­fice rev­enues in the fourth quar­ter, up from 46.8 per cent yearover-year.

“Our per­cent­age of box-of­fice rev­enue from premium of­fer­ings is nearly dou­ble that of our U.S. peers,” Ja­cob added.

POST­MEDIA NET­WORK FILES

Star Wars fans ready for the lat­est en­try in the movie series at an Ed­mon­ton Cine­plex the­atre in 2015. The com­pany took a hit in its fourth quar­ter prof­its for 2016, but CEO El­lis Ja­cob isn’t wor­ried.

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