Village Roadshow Ltd (VRL) chairman John Kirby has told shareholders that the company's unsatisfactory profits in the last two to three years are entirely due to the exhibition arm of the business, most recently because of a downturn in film quality.
Speaking at the company's annual general meeting last week, Kirby also said the problem is being addressed with sell-offs and cuts to overheads, including a reduction of the worldwide cinema circuit from 18 to 8-10 territories.
According to Kirby, VRL underestimated the negative impact on exhibition of piracy in Hong Kong, and the local government's will to address it. In Germany, the company has been adversely affected by "ultra competitive" forces and high rents, while construction schedules and delays in obtaining permits are among problems VRL has faced in Italy and the UK. In addition, major property holdings in Argentina, Greece, Taiwan, and France are taking longer than expected to sell.
Kirby also said that an overwhelming number of sites and countries with tremendous growth prospects - VRL's standout performers are Korea, particularly because of local product, and Greece - had been hit by a sudden cyclical fall off in film quality. Kirby described this as a temporary setback, which VRL could withstand because it is "a cautiously geared and well-balanced and disciplined entertainment company" in stark contrast to a number of single-purpose highly-geared US exhibitors who had not learnt the lessons of history. The board's deliberate investments in radio, theme parks and film production were paying off handsomely, he added.
"We are very confident that this division (exhibition) will return to strong profitability, but this is likely to be as far away as the next financial year," Kirby said. "If the product improves we will see the benefits of the current overhead reduction, retrenchments and the sale of a number of territories."
Kirby also used the AGM to defend executive salaries and benefits including Bruce Berman and Peter Ziegler's equities in Village Roadshow Pictures and Robert Kirby's equity in the online division, which is a partnership with Network Ten.