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Cineplex Galaxy profit more than triples Add to ...

Cineplex Galaxy Income Fund chief executive officer Ellis Jacob says more Canadians went to the movies during the second quarter, which pushed revenue to record levels at the exhibitor and more than tripled profits.

"We attribute this growth to the wide and varied appeal of the movies on screen starting with Fast & Furious and Monsters vs. Aliens , which performed very well in April, a month that historically has not featured strong releases," Mr. Jacob said during a conference call on Thursday

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"In May, every weekend saw the release of a major blockbuster, which included four of the top five performing films during the quarter."

The Toronto-based fund says it recorded net income of $19.9-million for the quarter ended June 30, more than three times higher than year-earlier profits of $6-million.

The earnings were equivalent to 63 cents distributable cash per unit, nearly 56 per cent higher than the 40 cents per unit a year earlier.

Cineplex booked revenue of $248.6-million, the highest since the fund's inception and an increase from revenue of $209.3 million posted a year ago. The increase was about 20 per cent over last year, which beat an average 15 per cent increase for Canadian box-office as a whole, the company said.

The results were helped by a variety of premium-priced events, including 3D movies like Pixar's blockbuster Up and IMAX screenings of Star Trek .

The higher number of patrons also helped the company's concession revenue, which rose nearly 20 per cent to $74.2-million from $62-million.

"In the last 12 months we haven't raised our prices at the concession stands," Mr. Jacobs said in an interview.

"Our focus is to attract as many people to our theatres, and we are very, very cautious" on pricing.

The fund also declared quarterly cash distributions of 31.5 cents per unit, up from 31 cents per unit paid out in the same quarter the year before.

Cineplex's media division, which sells ad space inside its facilities and commercial spots before its movies, reported $16.3-million in profit, up from $14.1-million.

In recent quarters, Mr. Jacobs has expressed concern that advertising sales were being hurt by the slowing economy, particularly because automotive companies were scaling back their advertising budgets and buying spots with less notice.

That made it tough for Cineplex to predict its advertising sales earlier this year, though Mr. Jacobs said things have been improving in recent months.

"The visibility is much further out, and it's looking a lot better," he said.

Executives noted in the conference call that auto companies have been returning to buying advertising, and represented 16 per cent of the media division's overall volume in the quarter, compared to a mere 1.1 per cent in the first quarter.

Back when the economy was strong, and auto makers weren't engulfed in financial troubles, the sector represented 20 to 30 per cent of overall media buys, Ellis said.

He added that wireless carriers are another one of Cineplex's biggest advertising buyers.

BMO Capital Markets analyst Jeffrey Logsdon said he has scaled back his distributable cash per unit for the year to $2.25 per unit from $2.27 on weaker expectations for the third quarter.

He wrote in a note that "a more difficult box-office comparison" could affect third-quarter results, which essentially means that the fall box-office slate is considered somewhat weaker than last year.

"Cineplex has outperformed the market over the past year as consumers chose movies as a positive value proposition in the tough economic environment," Logsdon said.

"We do think it will be difficult to outperform first-quarter and second-quarter (2009) results next year."

He rates Cineplex's stock as a "market perform" with a $17 price target.



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