The Palace Amusement Company (1921) Limited and CinemaOne Limited have finally returned to profitability after sustaining three years of massive losses from the novel coronavirus pandemic.
Palace Amusement was able to earn a historic $486.35 million in revenue for its second quarter, which exceeded pre-pandemic figures, with quarterly attendance coming in at 215,000 patrons. For the first six months revenue was at 80 per cent of pre-pandemic numbers.
As a result of this performance, Palace was able to earn a consolidated net profit of $78.66 million — the first time it's seeing a profit since September 2019.
All locations registered a positive bottom line for the first time since the pandemic, except for the New Kingston Drive-In, which was closed in the previous quarter — due to "ambient light and noise concerns," the Palace quarterly report stated.
Palace's six-month revenue stood at $736.06 million with its consolidated net profit at $24.67 million. Carib Cinema in Cross Roads brought in the most revenue at $266.38 million and a segment result of $10.60 million, while the Sunshine Palace location in Portmore brought in $41.42 million in segment earnings from $203.25 million in revenue. This is contrasted to pre-COVID times when the location was impacted by states of emergency (SOEs), curfews and other COVID-19 and crime containment measures.
Palace's best year was in its 2018 financial year (FY) when it hit $1.16 billion in revenue and $137.31 million in consolidated net profit. In that year Black Panther and other Marvel cinematic movies brought in thousands of patrons to its locations.
Palace Amusement's film activities segment recorded a 13 per cent segment margin from $225.43 million in revenue. The October to December period saw blockbuster films such as Woman King, Black Panther 2: Wankanda Forever and Avatar 2: The Way of Water being the most watched movies.
Avatar 2 has become the third-highest-grossing film of all time in under two months following its December release.
CinemaOne had similar fortunes as it raked in TT$4.59 million ($103.31 million) in revenue with the period being its best-ever first quarter for attendance to its locations. This immense performance resulted in the company earning TT$29,914 ($673,065) in net profit for the December period.
"As the global cinema exhibition industry's recovery continues and patrons return to moviegoing, CinemaOne's Q1 FY 2023 performance was strengthened by the blockbuster appeal of major movie titles," the CinemaOne quarterly report stated.
CinemaOne's best FY was in 2019 when it recorded TT$19.01 million ($427.82 million) in revenue, TT$5.16 million ($116.15 million)in earnings before interest, tax, depreciation and amortisation and TT$871,047 ($19.60 million) in net profit.
Palace operates four locations in Jamaica. CinemaOne operates two locations in Trinidad & Tobago with a third location to be opened at Price Plaza in Chaguanas. Palace celebrated its 101st anniversary last year while CinemaOne observed its 14th year of operations in December.
With demand for screenings still being the best distribution route, both cinema operators are now making moves to facilitate expansion and growth.
Palace Amusement, at its January 24 annual general meeting, approved a 600:1 stock split that will take effect on February 28, with February 27 being the ex-split date. This will push the issued ordinary shares from 1.44 million ordinary shares to 862.22 million shares.
The stock split approval pushed Palace's stock price to its highest of $3,300 on January 27, which surpassed the November 2019 record of $2,900. While the stock price tumbled down $2,051 by February 2, its Thursday closing price of $2,718.03 will see a shareholder with 100 shares owning 60,000 shares at $4.53 after the split.
Chairman and principal owner Douglas Graham noted that the stock split would not only increase the availability of shares to the market, but is a precursor to an equity raise which is currently at the discussion stage with stockbrokers. Although he didn't give a preference of which route he'd prefer, Palace Amusement has to take into consideration its $653-million debt owed to Victoria Mutual Investments Limited (VMIL).
Financial controller Carol Lee and PricewaterhouseCoopers (PWC) representative indicated that one of the two VMIL loan facilities is expected to mature in short order with the overall facility being for five years following disbursement in November 2021. Palace's working deficit decreased to $17.64 million with its accumulated losses standing at $388.98 million. Its total asset base has increased to $1.71 billion with cash and cash equivalents at $184.90 million. Total liabilities and equity attributable to shareholders closed December at $1.30 billion and $404.42 million, respectively.
Palace was able to renegotiate some of its leases in Jamaican dollars and for a shorter tenure to help balance out its costs while attempting to navigate the difficulties faced due to the pandemic. Graham noted that ticket prices are price inelastic in the sense that patronage tends to go down when prices increase.
He highlighted that the company did not seek to be a site for the 2022 FIFA World Cup due to its negative experience in 2014 when the rights holder went to a different location.
Concessions and Screen Advertising Manager Steven Cooke explained that the company is currently engaging with developers to modernise its website and assist it in developing a mobile application as it aims to try and build its marketing efforts plus build greater engagement. Social media platforms such as Instagram require payment to target potential customers while push notifications cannot work on its 24-year-old website.
However, it is exploring a VIP service, exploring the introduction of solar panels at other locations to bring down energy costs and improve its digital channels with 10 per cent of tickets purchased online. The consideration for other business opportunities or expanding the range of its concessionary items will come down to its ability to source capital for growth.
"Our goal to ensure that our audience enjoys the ultimate move experience is still high on our agenda and re-engaging them is our priority; hence our recent listing as a merchant on the GiftMe platform is aimed at meeting that objective while improving accessibility and market reach," the Palace quarterly report ended.
Meanwhile, CinemaOne recently completed its rights issue from which it raised TT$6.02 million ($135.35 million) at TT$4.42 for allotted shares and TT$3.75 for under allotted shares.
TT$2 million will go directly to its special purpose vehicle CineCentral, which will also be financed with debt for the Price Plaza location. The remainder of the proceeds went to debt service repayments to Guardian Trust and Giant Screen Entertainment. The additional shares were listed on January 25.
"This transaction has strengthened the company's financial position and provided initial capital for CinemaOne's strategic theatre expansion plans which are being prudently pursued," the quarterly report added. The stock price closed at TT$7.90 ($177.75) on Thursday.
CinemaOne's equity base was TT$21.13 million in December with the rights issue to push its share capital to TT$38.59 million. Total assets stood at TT$85.29 million (J$1.92 billion) in December with its cash and cash equivalents at TT$2.54 million. Total liabilities closed the period at TT$64.16 million.
"Management believes that although the cinema industry's recovery from the COVID-19 pandemic must be measured in years versus months, the entertainment industry's planned FY 2023 upcoming releases of more blockbuster and mid-tier content will provide an enabling environment for CinemaOne to reposition itself on the trajectory towards profitable growth," the annual report stated.