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This report is divided into:
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Entertainment
Australian Domestic Exhibition
Domestic exhibition continued to build on the growth experienced in the previous two years. Total revenue from owned and managed sites was $341,000,000, an increase of 7.6% on the prior year.
Cinema admissions grew by 2.8% on the prior year and merchandising revenue by 11.0%. Group companies, along with our joint venture partner Village Cinemas,
operated or had an interest in 10 of the 12 highest grossing cinemas in Australia in 2003/04, up from 8 of the top 12 in the prior year. Admissions growth was
driven by the outstanding success of Finding Nemo, Lord of the Rings – Return of the King and late in the year, the third Harry Potter instalment, Harry Potter and the Prisoner of Azkaban.
Screen advertising revenue continued to be affected by the renegotiated contract with sales agent Val Morgan. The company sold its equity stake in Val Morgan in March 2004 and a new screen advertising agreement was then
signed with Val Morgan. The new arrangements are expected to deliver an improvement in this important revenue stream in the upcoming year.
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"In addition to the growth achieved in our core businesses, an improved performance from our investment in Roadshow Distributors further contributed to the excellent result... an encouraging improvement in our German cinema operations was
evident late in the second half and this gives some confidence for a further strengthening through the first quarter of the 2004/5 year.".
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The result benefited from the full-year impact of the increased interest in the Australian Theatres Joint Venture acquired in March 2003.
The highly successful Gold Class cinema concept was introduced at our flagship location at Marion, Adelaide in June. Seven locations now offer Gold Class
and the concept is expected to be expanded to other locations in the coming year.
An 11-screen cinema complex at Bondi Junction opened on 1 July 2004 and is performing to expectations. This facility showcases a number of new strategies
to sustain growth in future years. Features include a fully licensed bar, a significantly expanded candy bar and range of food and beverage items and the successful Gold Class concept.
The Company continued its previously announced policy of rationalising underperforming sites. Underperforming cinemas at Southbank, Mermaid,
Whitford and Joondalup were closed or disposed of during the year.
International Exhibition
GERMANY
Trading prior to the acquisition of the additional 50% interest in Kieft & Kieft
on 2 December 2003 was impacted by the heatwave conditions in Germany,
particularly in the months of July, August and September. This was compounded
by the recessed economic conditions and resultant low level in consumer
confidence and spending.
December was a very strong trading month driven primarily by Lord of the
Rings – Return of the King. Improved trading in the months of May and June
was also achieved with the release of Troy, The Day after Tomorrow, Harry
Potter and the Prisoner of Azkaban and the German production Der Wixxer.
The results of Kieft & Kieft for the full year including our share of losses for our 50%
interest to 2 December 2003 and 100% interest from that date amounted to $10,239,000 before unusual write-downs.
Whilst the immediate outlook remains encouraging with the release of Shrek 2,
Spiderman 2 and the German production Traumschift Surprise, the longer term will
remain dependent upon a recovery in the German economy and subsequent lift in consumer confidence and spending.
THE NETHERLANDS
With flat admissions, growth over the prior year was achieved through a lift in
average admission price and merchandising spend. Modest but positive earnings flowed from our 33.3%
interest in The Netherlands joint venture.
THE MIDDLE EAST
The Middle East circuit experienced strong growth, continuing the trend from
the prior year. Total revenue was 12.5% higher than the prior year, driven by
admissions growth of 4.7% and merchandising revenue growth of 24.0%.
All cinemas experienced admissions and revenue growth. Marina Mall enjoyed an
11% increase in admissions and made a positive profit contribution for the first
time in its three-year history. A new 14-screen complex at the Mall of the
Emirates shopping precinct in Dubai is expected to open in September 2005.
Entertainment Technology
Australian domestic film and television production remained at historically
low levels during the year, limiting revenues from negative processing
and post-production services and contributing to reduced overall earnings
for the 50%-owned Atlab group.
The Atlab group’s major revenue source, duplication of feature film and trailer
prints for theatrical release, remained strong with printing for major Hollywood
studios and work subcontracted by Deluxe laboratories.
Production capacity was expanded during the year following the opening of
the new release printing facility at Lane Cove, Sydney, with several record print
footages in subsequent months.
The 100%-owned Atlab Image & Sound Technology improved earnings, despite
deferral of several installation contracts to 2005, with strong revenues from
service contracts and organisational changes that yielded significant
reductions in operating expenses.
Filmlab Engineering and Filmlab Systems International produced satisfactory
results with additional orders for processors and sales of Colormaster
units to customers in North and Central America, Europe and Asia.
Although no significant recovery is forecast for domestic film and television
production in 2004/5, earnings growth is expected from continued improvements
in production efficiency at the new release printing facility and growth in
digital post-production services.
Strategic Investements
Roadshow Distributors continued to perform exceptionally well, delivering
significant growth over the prior year. The Theatrical division benefited from the
major share of top grossing films at the Australian Box Office. Strong performing
titles included Lord of the Rings – Return of the King, Matrix Revolutions, Harry
Potter and the Prisoner of Azkaban and Troy. Other titles performing well
included The Last Samurai, Something’s Gotta Give and Scooby Doo 2: Monsters Unleashed.
The Entertainment division recorded its best ever result with the release on DVD
of Matrix Reloaded, Matrix Revolutions, Lord of the Rings – Two Towers and
Lord of the Rings – Return of the King.The solid trading performance was also
supported by strong sales of back catalogue and ABC/BBC titles.
In March, in accordance with undertakings given to the ACCC the Company undertook a divestment of its 33.3% interest in the cinema screen advertising company Val Morgan, which was controlled through a joint venture
company with Hoyts and Village Roadshow. The sale price reflected the improvement in earnings achieved during
the period of ownership. More favourable screen advertising contracts were also negotiated at the time of this divestment.
Hospitality & Leisure
Earnings before interest and tax for the Hospitality and Leisure division were up on the prior year by 57%.
The combination of the recovery from SARS, an increased focus on domestic
business, an improvement in international visitor arrivals and the staging of the Rugby World Cup all
assisted in this growth within Rydges Hotels & Resorts, Matilda Cruises and Featherdale Wildlife Park.
With occupancy growth of some five percentage points on the prior year, a
strengthened average room rate and improved control over operating costs, Rydges Hotels & Resorts produced
earnings growth of 69%. The level of management fee income was pleasing, which was boosted by the earning of incentive fees at a number of managed hotels.
Internationally, Dubai, Doha, London and Thailand have all traded well.
Of significance this past year was the establishment of a Global Hotel Alliance
between Rydges Hotels & Resorts, Pan Pacific Hotels and Resorts in Asia, Kempinski Hotels and Resorts in Europe and Wyndham International Hotels in the USA.
The alliance comprises over 235 hotels in 58 countries with more than 58,000 rooms.
The alliance was made possible by the development and launch of our online booking engine www.rydges.com and
the similar ability with our partners.
The purpose of the alliance is to offer choice to our loyal customer base, to build our brand internationally, to enable smaller brands to compete on a global scale and to generate business.
Capital works included the refurbishment of conference facilities in Queenstown
and Christchurch and guest room refurbishment in Canberra and Melbourne.
Thredbo earnings were up on the prior year by 27% with a near record season in 2003.
Profit improvement is a result of success in marketing the shoulder periods in the
ski season, maximising yield per skier, continued growth in the summer months and very effective management of costs.
Property sales have been strong with all lots in Woodridge Stage 3 sold.
Thredbo has again received excellent early snowfalls, and is experiencing another great season.
Matilda did show considerable improvement over the prior year in
scheduled and charter business. The Manly and harbour islands tourist
services have proven popular. The scrapping of a number of vessels
led to an increase in depreciation.
The Pier 26 Bar produced an excellent result and continues to trade well ahead
of the prior year and is enjoying strong domestic and tourist support. Securing
the British Rugby Supporters during the World Cup Rugby made a positive
contribution.
Featherdale Wildlife Park enjoyed growth in earnings on the prior year. Strong
international and domestic visitations and the closure of the Australia Wildlife Park
were the primary contributing factors.
Whilst BlueRock Catering showed a significant lift in earnings over the prior
year, the decline in performance for State Theatre led to a combined decline in
catering and venues. The prior year for State Theatre included the very
successful season of Cabaret.
With no major additions to supply in the hotel sector, increasing visitor arrivals
and strong domestic demand the Hospitality and Leisure division can look forward to continued solid growth in the coming year.
David Seargeant
Managing Director
Amalgamated Holdings Limited
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