Cineplex shares plunge on third-quarter earnings miss despite higher revenues
A Cineplex theatre is seen Friday May 22, 2015 in Ottawa. (Adrian Wyld / THe Canadian Press)
Tara Deschamps, The Canadian Press
Published Thursday, November 15, 2018 12:53AM EST
TORONTO -- Hit films helped deliver box office and concession stand gains for Cineplex Inc., but that wasn't enough to keep the entertainment giant from missing expectations as lower profits caused the company's shares to fall by more than 20 per cent.
The Toronto-based movie theatre operator said Wednesday that it earned $10.2 million or 16 cents per diluted share for the company's third quarter, a 40.7 per cent drop from $17.2 million or 27 cents per diluted share the year before.
Revenue for the period ended Sept. 30 increased 4.4 per cent to $386.7 million, up from $370.4 million.
The company was expected to earn 30 cents per share on $400.2 million in revenues, according to analysts polled by Thomson Reuters Eikon.
Cineplex shares closed down $7.49 or 20.78 per cent to $28.56 in Wednesday trading on the Toronto Stock Exchange after hitting a low of $28.26.
President and chief executive officer Ellis Jacob attributed the decreased profits to lower advertising revenue and some screens that were out of commission.
However, he said he considered the quarter's performance "an anomaly."
"It was a tough quarter," he said, referencing the advertising dollars the company attracted. "The large contracts in some of the automotive areas...pushed out or reduced, and then we also had the change in the (Ontario) government and there has been less spending in comparison to the prior year."
Cineplex's earnings were also hampered by higher share-based compensation and $1 million in restructuring costs.
Jacob stressed that Cineplex is not expecting to see in the fourth quarter -- typically Cineplex's best quarter -- the decline it saw in the third quarter.
"This is not a business where the floor is falling out from under it," he said on a call with analysts.
Later, in an interview with The Canadian Press, he added, "we would like to be up, but this quarter has been such a big miss that it's drawn a lot of attention, but we think the fourth quarter will be back to normal."
Concession revenue per patron rose to $6.25, up from $6.01 in the same quarter last year and box office revenue per patron was $10.07, an increase from $9.81 a year ago.
Theatre attendance was up 2.6 per cent to 17.2 million, compared with 16.8 million. That increase was attributed to moviegoers flocking to see "Mission: Impossible Fallout," "Ant Man and the Wasp," Jurassic World: Fallen Kingdom," "Crazy Rich Asians" and "Hotel Transylvania 3: Summer Vacation," Jacob said.
"When we started 2018, everybody was nervous about the box office, but some of these movies have come out and delivered and the audiences want to see it on the big screen in a social environment," he said. "I think that is going to going to continue into 2019."
He said he was feeling "encouraged" by the forthcoming film slate because it includes much-anticipated films "Mary Poppins Returns," "Star Wars: Episode IX," "Jumaji 3" and Transformers spin-off "Bumblebee."
Jacob said he still considers the movie business to be "strong," especially when content is good and a social experience can be delivered for the price of a film ticket.
"It is a very small price to pay," he said. "It costs you more to park your car than to go to a movie."
Drew McReynolds of RBC Capital Markets said the quarter was dragged down primarily due to Cineplex Cinema Media, a high-margin business whose revenues decreased by 26 per cent to $20.3 million from the prior year.