Cineplex Q3 attendance falls; revenue stable, profit falls 39% to $15.9 million

TORONTO – Even the superheroes of “Guardians of the Galaxy” couldn’t save movie exhibitor Cineplex Inc. (TSX:CGX) from a big drop in third-quarter profit.

Chief executive Ellis Jacob summed it up as a weak summer period for Hollywood where very few movies became massive hits and the rest arrived with little fanfare.

“We didn’t have the same slate as in prior quarters,” he said in an interview Thursday. “We all knew that going into 2014.”

The Toronto-based theatre chain operator said profits fell 39 per cent to $15.9 million, or 25 cents per share, from $26 million or 41 cents a year earlier.

Earnings were 13 cents short of analyst expectations, according to a survey by Thomson Reuters.

Still, on the Toronto Stock Exchange, Cineplex share gained nearly five per cent, or $2.12, to close at $44.88 on Thursday.

The latest results capped a dismal summer movie season that began badly and never seemed to recover.

Blame Hollywood for most of those problems because there were few family-friendly movies on the release slate and the blockbusters that were released seemed ill-timed against the soccer’s World Cup.

Big flops like “Sin City: A Dame to Kill For” and “The Giver” were spread across several weeks, while the latest instalment of the Transformers series and “Dawn of the Planet of the Apes,” were given little space before another big franchise film was released. The outcome was that too many big movies aimed at the same demographics wound up devouring each other’s potential ticket sales.

During the period, attendance was down about 5.1 per cent from an especially strong 2013 third quarter when hits like “The Smurfs 2” and “Grown Ups 2” attracted families, Cineplex said.

Revenue was flat at $299 million, including contributions from concessions, additional theatres acquired from Empire Co. Ltd. (TSX:EMP.A) and the contribution of its media business.

Box-office revenue per patron increased to $9.01 from $8.84 while concession revenue per patron was up 6.2 per cent to $5.11 from $4.81.

Among the key accomplishments of its media business — which generated $32 million of revenue, a 15.4 per cent increase from last year — was the deployment of the TimsTV digital signage network to Tim Hortons restaurants, and the initiation of a plan to install a “digital ecosystem” at 10 major shopping centres across Canada.

Cineplex has been trying to edge away from relying on Hollywood hits to drive its bottom line, with efforts to grow into businesses like digital advertising, e-commerce, food services and live event programs.

Rumours have emerged recently that Cineplex could be looking at buying the assets of Regal Entertainment, a U.S. exhibitor based in Knoxville, Tenn. that recently announced plans to explore options that could include a sale.

Cineplex has shied away from owning U.S. movie screens in the past, and while Jacob said he “looks at all opportunities,” he doesn’t plan to “run helter-skelter into the U.S.”

“We don’t feel that when looking at (Regal) on the surface (that) it meets the criteria from a value perspective,” he said, before adding that he hasn’t looked deep into the company’s financials yet.

“We’re a big fish in a small pond, we don’t want to be a minnow in an ocean,” Jacob added.

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