Cineplex earnings soar, theatre operator cashes in on premium ticket prices

TORONTO - Canada's largest movie theatre operator, Cineplex Inc. (TSX:CGX) reported record second-quarter results, helped by summer blockbuster "The Avengers" and the addition of more premium theatres that come with higher ticket prices.

Toronto-based Cineplex reported Thursday second-quarter profits of $21 million or 34 cents per share, up sharply from $13.4 million or 23 cents per share a year ago. That was up 56 per cent overall and 47.8 per cent on a per share basis.

Revenue was up two per cent to $263.6 million from $258.4 million.

That included record second-quarter box office revenues of $156.2 million, despite a 0.2 per cent decline in attendance from a year earlier.

Box office receipts have been lacklustre across North America so far this year, with "The Avengers" being one of the few big blockbuster hits. Some Canadians are also choosing to stay home and avoid the box office ticket prices as they tighten their belts amid continued economic uncertainty.

However, the company credits investments in more premium-priced theatres, such as 3D, UltraAVX, IMAX and VIP cinemas — which also come with higher ticket prices — with helping to drive revenues.

Higher snack sales also helped boost its earnings, with concession income up 4.9 per cent at $80 million.

The top film at box offices during the quarter was Marvel's "The Avengers," which has become the third-highest grossing film of all time.

And president and CEO Ellis Jacob said theatre-goers can count on more so-called franchise films —those stemming from a comic book, novel or a sequel — as movie makers play it safe in these uncertain economic times.

"With the bigger studios, their concern is more driven by the fact that if you've got a franchise film, you're guaranteed to get a return, so it's a safer bet," he said in an interview.

"I think they're making more of those, but also I don't think they've totally given up on the smaller movies that can deliver also."

And as studios continue to churn out "safe" box-office bets in the form of those franchise movies —the latest being the third instalment of Christopher Nolan's "The Dark Knight" series — Cineplex is set to cash in as it continues to invest in upgrades and new theatres that come with premium price tags.

Jacob said the company will continue to focus growth on adding more premium screens like the VIP theatres — which have assigned seating and alcoholic beverages — under construction in Montreal and Winnipeg, rather than through acquisitions in a market it already dominates.

"It's very, very limited as to what remains in Canada, so it's going to be focused on the two or three (theatres) that we open every year," he said.

Last month, the theatre operator announced a deal to buy four theatres from AMC and upgrade the locations to include digital projection systems.

Under the deal, Cineplex will acquire AMC Ventures, which includes the theatres in Toronto, Oakville, Ont., Mississauga, Ont., and Montreal, for a nominal price.

Meanwhile, Empire Theatres Ltd., the country's second-largest theatre chain, scooped up AMC theatres in Kanata, Ont., and Whitby, Ont.

The two remaining AMC theatres in Canada are in Scarborough, Ont. and Concord, Ont., but Cineplex said it is not interested in those locations.

With the latest acquisition, Cineplex will own, lease or have a joint-venture interest in 134 theatres with 1,445 screens.

News from © The Canadian Press, 2012