div to come, page-22

agm Well this is the most positive l have seen from VRL to date. here are some excerpts;

Firstly let me talk about Cinema Exhibition where we are the number one player in Australia,
Greece and Singapore.
Much work has been done in restructuring this division and we have built up sufficient scale for
marketing, buying and overhead spread. In these markets we are deploying our unique Village
concepts of Gold Class, $max and Cinema Europa, to great effect. We were particularly excited
by the opening of a category killer site in Singapore in Vivo City, and in Greece we have replaced
two 'old stock’ theatres with our Village World concept which embraces Gold Class, $max,
Cinema Europa, our own Juice Bar, Movie Store and Bowling Alley. While attendances have
been down in the past year we believe that our new concepts and hopefully, upcoming
blockbuster movies, will bring in the audiences as they seek a unique movie going experience.
Before I start talking about Theme Parks I have some news of interest to shareholders. Next
year our annual general meeting will be moving to Sea World. It is something the Board has
been considering for some time and by this time next year there will be some new attractions that
I am sure you will all be keen to experience.
The great thing about our theme parks is they do not face a competitive threat from new
technology. You can’t replicate on the internet the sheer thrill of a ride or the experience of a day
out.
In our portfolio we have the hugely successful:
• Warner Bros Movie World
• Sea World
• Wet‘n’Wild Water World
• Paradise Country
• Australian Outback Spectacular
• and Sea World Resort – the number 1 occupancy resort on the Gold Coast.
The new attractions at Warner Bros. Movie World - the Superman Escape and the Shrek 4D
Adventure - have driven up attendances in the second half by 9.5% compared to last year.
We’ve lifted capacity at Wet ‘n Wild, Paradise Country continues growing in profitability and our
night-time attraction, Australian Outback Spectacular, has been operating at 95% capacity since
opening in April. We’re looking to potentially include this attraction in next year’s Shareholder
Discount Plan booklet.
Attendances at Sea World are strong and the new giant wheel, “Sea World Eye”, already under
construction and planned for Christmas trading, will underpin its leading position in the market.
We are excited about the growth prospects in Theme Parks, especially as we now have 100%
ownership of the parks, giving us control of unique management expertise – building and
operating theme parks. We are also targeting opportunities internationally and planning to work
even closer with our great partners at Warner Bros..
Film Production was another area of restructuring during the year:
• we brought in Crescent Entertainment which provided both a return of US$150 million of
capital to Village Roadshow and access to significant expertise, contacts and proven
entrepreneurial spirit with our wonderful new partners, Hal Gaba, Norman Lear and Michael
Lambert;
• we extended the Film Production financing facility to US$1.4 billion, which enables the
division to increase the number of films it can produce each year to between 10 and 12;
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• we have a strong line up for 2007 -- all joint ventures with our principal partner Warner
Bros.;
• and, of course, Happy Feet, which we hope will become one of the highest grossing films to
be released in 2006/07.
In Film Distribution we produced close to a record year with both the theatrical and
entertainment divisions cementing market leadership with 22.9% and 18% market share
respectively. Warner Bros.’ Harry Potter and the Goblet of Fire was the number one film for the
year, and our own Charlie and the Chocolate Factory and Dukes of Hazzard did very well.
During the year we also had critical and commercial success with the distribution of the Australian
movies Jindabyne and Wolf Creek.
The beauty of this division is that we have so many avenues of supply. We also have fantastic
management – the best in the business – and hold down the number one position in our core
markets.
Finally in Radio, Austereo led the competition in Sydney, Melbourne, Adelaide and Perth, and
took the number two position in Brisbane. This is a major turnaround from the previous year and
a testament to our programming and marketing strategies.
We are very happy with this investment and while we took the opportunity to sell down and
crystallise some of that value post-balance date, we are very comfortable with - and intend to
maintain - our controlling investment in the business.
I think you will all agree with me that these five businesses provide us with a great platform for
our next growth phase.
Now turning to events that have occurred incurred since June 30.
We completed the 100% acquisition of the Theme Park division in July while retaining our close
and strong relationship with Warner Bros. through a long-term licensing agreement for Warner
Bros. Movie World. The Company has also entered into an agreement with Warner Bros. to
explore opportunities for Warner Bros. Movie World branded theme parks in Asia.
We also acquired the remaining 50% in the Sea World Resort Hotel and as a result the Company
now owns 100% of all of its Australian theme park businesses.
As well, we have made an investment in the Sydney Attractions Group, a business closely
aligned to our Theme Parks business, and probably best known for the Sydney Aquarium.
I have already mentioned that there will be an interim dividend and we are also proposing a
return of capital of 15 cents per ordinary share, and 15 cents per A Class preference share,
subject to ordinary and preference shareholder approval.
As well, we will begin an on-market buy back of up to 11 million A Class preference shares which
is about 10% of the preference shares on issue. The Village Roadshow board has also
announced its intention to buy back up to 15.2 million ordinary shares. Village Roadshow’s major
shareholder, Village Roadshow Corporation, has said that it intends to sell sufficient shares to
ensure that its percentage holding will not increase after the buyback is complete.
While we expect moderate earnings per share dilution from the capital initiatives, this is expected
to be only short term as earnings growth kicks in.
Perhaps of more interest to you all here is that, after taking account of trading, capital
requirements and circumstances when the dividend is reviewed each year, we believe Village
Roadshow should be in a position to pay regular dividends in the future.
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I would also like to comment on the composition of the Board and some changes that will occur.
By the end of the first quarter of next year it is the intention to have a majority of independent non
executive directors. I expect to make some announcements on this matter in the near future.
As you know, it’s not our practice to give forecasts. However I might comment on our current
business. Going forward, we will be implementing growth strategies in all our business units.
In the Theme Parks business on the Gold Coast, now that the Company has acquired the Warner
Bros. interest and has full control of a strong management base with proven expertise, the
Company is exploring growth opportunities outside Australia.
In Cinema Exhibition over the last 10 years the Company has proven the success of its Gold
Class cinema concept in Australia and this has been reaffirmed more recently with strong
performances in Greece and Singapore. In light of this success, we have decided together with
our US partners, Act III, until recently owners of a major US cinema circuit, to investigate
opportunities to roll out the Gold Class Cinema concept in the U.S.
Through the Company’s entertainment partnership with Act III, the Company is also exploring
opportunities in the music business in particular looking for potential synergies between our
feature film production and music publishing interests. Movies sell music and music sells movies.
There is natural synergy for us to enter this space and we are currently investigating our options.
In movie production we will be increasing the number of films we make each year from 8 to up to
around 12 and during the next two years those titles will include: The Reaping, The Dirty Dozen, I
Am Legend, Where Wild Things Are, License to Wed, Get Smart, Music & Lyrics By, Speed
Racer, No Reservations, Invasion, Brave One, and Oceans 13.
As mentioned earlier, we do not plan to sell any more Austereo shares. While sales have been
difficult across the radio industry, we are ahead of last year. We are looking at new initiatives in
the internet and digital technology to ensure that we maintain our leading position in the major
markets.
With the hard work of the restructuring behind us, your Board is looking forward to a very exciting
future for the New Village Roadshow. We are back on course and well positioned for the long
term and, as a taste of what is to come, the coming weeks are looking particularly promising as
we enter our peak trading season with our revamped theme parks. And of course we look
forward to the Boxing Day release of Happy Feet here in Australia.