Home Ent. sees annual profits fast-forward

Earning increase to $16.7 mil as market hits a lull

LONDON — Home Entertainment, operator of Blighty’s second largest video chain, Choices Video, reported a 17.1% increase in revenue to £120.7 million ($190 million) and an 8.7% rise in operating profit to $9.3 million for the year ended May 31.

Results were in line with market expectations with earnings increasing by 11.9% to $16.7 million and a pretax profit of $9.3 million up from $8.5 million in 2002.

Choices Video has 210 rental stores, 23 of which opened in the past fiscal year. Like for like rental transactions were up 6.9%, with DVD accounting for 60.7% of rentals in May, compared with 39.2% a year earlier. Group expects to open 12-15 new stores in the present fiscal year.

Rentals were flat at Video Box Office, another Home Entertainment brand, which provides rentals and sales to more than 6,000 independent retail outlets. Home shopping/Internet arm Choices Direct continues to grow strongly with sales of 29.4%.

Slow rental market

Home Entertainment results come amid a generally lackluster rental market. The British Video Assn. estimated that video rentals were down 12% year on year for January to May. But sales were up 26% compared with the previous year.

The group confirmed that the higher-margin rental market had suffered during the recent hot summer, although it did not disclose figures.

Ben Archer, analyst at Charles Stanley Equity Research, said the group’s exposure to the rental market provides resilience in the face of a downturn in consumer spending.

Home Entertainment execs said there were tentative signs of a recovery in the overall rental market driven by the increased penetration of DVD players.

Overall revenues rose during the first eight weeks of the financial year, with year-on-year growth of 11.5%. Historically, however, the first quarter has made a proportionally smaller contribution to the full year than other quarters.