Village Roadshow Share Price Drops

Village Roadshow’s [ASX:VRL] share price has been on a downwards spiral the past 12 months — shedding more than 45% of its share value.

This morning Village announced a $51 million equity capital raising which will be used to pay down debt as the entertainment group heads for a loss. This is a result of the Dreamworld tragedy and lower than expected earnings from their cinema exhibitions.

The entertainment company shares are still in a halt, which was announced yesterday.

Why is Village raising capital?

Shareholders were offered five new shares for every 26 they owned, at a price of $1.65 — a 24.3% discount to the prior closing price of $2.18.

Funds raised combined with the recent sale of their Wet ‘n’ Wild Sydney water park is expected to generate $87 million, which will be used to reduce the company’s debt.

Village is anticipating its syndicated loan facility to be reduced to about $338 million.

Graham Burke, Village Roadshow Co-CEO and Co-Chairman said that the capital raising will be used to strengthen the balance sheets and reduce borrowings.

Our primary objective for FY19 is to maximise operating and investment net cash flow through improving the operating performance of our core businesses, executing substantial identified cost savings across the Group, limiting capital expenditure and potentially selling some remaining non core assets.

What is 2019 looking like for Village?

Village expects a full-year loss of between $6 million and $10 million due to the difficult trading conditions. There are a number of factors influencing this, including the Dreamworld tragedy, pre-opening cost of recent attraction Topgolf, lack of quality title films for the first half of the year and the ongoing impact of piracy.

Despite the 2018 loss, the entertainment company is taking a number of measures to improve their earnings for 2019.

Next year, Village is expected to benefit from improved operating costs and margins in theme parks, a 25% reduction in Director’s fees, a revised ticket pricing strategy, full year contribution of Topgolf, a number of blockbuster movies, along with further growth marketing solutions, including the benefit of international expansion.

Dannielle Rawlings

For Money Morning

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