Odeon closure to boost Palace’s profit

Palace Amusement Company reported a profit of $2 million in the December quarter, compared to a $9 million loss in the previous year and $5.3 million in the half year to the end of 2014, up from a loss of a $6.5 million in the previous year.
The improved profit out turn comes from flat revenues in the quarter but down from 7 percent for the six months. But profit should get a big boost with the close of the Odeon Cinema in Mandeville. The Mandeville cinema had revenues of nearly $23 million in the six months to December 2013 and $10.7 million in the first quarter of 2014, there was no income in the December quarter. Odeon also contributed over $4.6 million to losses in the half year versus $5.7 million in the 2013 period. In 2013 fiscal year the company lost $17 million or nearly $12 per share in the Mandeville operation. Some assets at that cinema was sold off, resulting in gain on sale of fixed assets of $2.3 million reflected in other income.
The segment results suggest that box office, the main revenue generator is a loss leader, as profit is coming only as result of advertising income of $23 million and other income of $5 million for the half year. This situation is unlikely to change even with higher gate receipts in the second half of the year. The segment numbers also indicate that the revenues from this area is contributing more in 2014 as percentage of box office sales than in 2013 and 2012. In 2014 the two Kingston cinemas raked in 43 percent from confectionary sales, up from 41 and 42 percent respectfully, while Montego Bay moved from 37 percent to 38 percent. For the financial year ending June 2012, the ratios were 40 percent, 43 percent and 39 percent respectively.
Going forward Palace is likely to benefit from increase in ticket prices implemented at the end of 2014 and lower utilities cost, with a fall in the price of oil and by extension electricity cost. In 2013 fiscal year utilities cost $65 million, but that would include water light and telephones, regardless there should be a few million dollars shaved off cost.
Gross profit margin jumped by 35 percent in the December quarter, from 17 percent to 23 percent, partially helped by the closure of the Mandeville cinema, and improved by 12 percent, for the year to December, as the margin moved to 23 percent, from 24 percent in 2013. Administrative expenses were flat for the last quarter and up slightly for the year to date.
Interest bearing debt is down to $27 million, cash is at $70 million but working capital is only $12 million.