SYDNEY — Stung by its plunging stock price and criticism from some institutional investors, Village Roadshow Ltd. is moving fast on numerous fronts to try to improve its balance sheet and restore investor confidence.
Managing director Graham Burke last week ticked off a series of initiatives he hopes will correct what he regards as misperceptions about the financial performance and strategies of the exhibition/production/radio/theme parks group. In an exclusive Variety interview, Burke revealed:
- The company is in the final stages of restructuring the international financing facility for its production co-venture with Warner Bros. Investors’ fears about VRL’s ability to co-fund the latest batch of films — including “The Matrix” sequels shooting in Sydney — contributed to its stock slide. Burke declined comment on local reports that VRL’s share of the combined “Matrix” budget has blown out to $A300 million ($165 million), but declared on the basis of footage he’s seen that “it’s the best piece of film investment we’ve ever made.”
- The debt carried on its circuit in recession-hit Argentina has been slashed from $75 million to $34 million and its book value is prudently being written down to zero. “We’re comfortable with the debt, and despite the economy, our admissions and revenues are significantly ahead of budget,” he says.
- Salary packages for VRL exec directors and senior execs will be restructured so they are based more on performance than on guaranteed sums to address investor concerns that comp levels are overly generous and out of kilter with share price. An outside remuneration expert is due to present a report to the board in a month or so.
- Ticket sales across the firm’s exhib empire jumped by 19% in the fiscal year ending June 30, marking a turnaround from the prior year when its cinema division incurred its first-ever operating loss amid the global B.O. slowdown.
- Roadshow Film Distributors posted record results in the year to June 30, boosted by the first “Harry Potter” and “Lord of the Rings” epics. Burke is bullish about RFD’s lineup in the current year, led by the next “Potter,” “Rings” and “Matrix” installments, and a crop of Oz films including “Crackerjack,” “Bad Eggs” and “Takeaway.”
“The company has never been in better shape,” says Burke, who also cites strong contributions from the radio and theme park divisions.
Still, roughly 35% of VRL’s value was wiped out last month after the firm announced it’s suspending dividend payments on its ordinary shares. Village defended that move by saying it was aligning itself with global giants like Viacom and AOL Time Warner, which aim to reward investors by capital growth, not dividends. However one leading institutional investor branded that reasoning as “ludicrous,” pointing to those companies’ stock slumps.
Some investors also fretted about VRL’s recent injection of $50 million into its co-productions with WB, seeing this as a high-risk investment. But Burke says such concerns are misplaced because those funds were generated by the co-venture’s successful films.
A few analysts accused the Kirby family — Village’s largest shareholder — of intentionally driving down the stock price so it could buy another 2.9% of the stock to lift its total holdings above 50%. Burke slams that notion as “pure idiocy,” asking, “Why would the Kirbys be happy to see $A65 million ($35.7 million) wiped off their investment so they could save $A4 million ($2.2 million) by buying more shares?”
In any event, Burke says no director is allowed to trade in Village stock during the black-out period before its annual results are unveiled in September.
The exec believes the stock market does not place enough value on VRL’s alliance with WB, terming it as a “great partnership based on (Warners’ senior) people and stability.”
And he’s excited about the co-venture’s commitment to developing franchises and sequels, citing “The Matrix,” “Analyze That” and follow-ups in development to “Cats & Dogs” and “Miss Congeniality.”