Cineplex revenue hits a record despite tepid box office receipts

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The movies were nothing to write home about, but the gourmet popcorn was outstanding.

Despite a lacklustre 2014 at the box office, Cineplex Inc. still set a record for fourth-quarter revenue thanks to growing sales at the concession stand and in its media arm.

The company reported fourth-quarter results on Thursday, which were still hampered by the year's soft film slate. Attendance was down 1.3 per cent for the quarter and 5.6 per cent in 2014, accounting for newly acquired and closed theatres, as the latest film in The Hunger Games series failed to drive ticket sales as its predecessor had.

Yet the strong fourth-quarter results suggest Cineplex's efforts at diversifying its business are beginning to pay dividends. Patrons who did go to the movies continue to spend more on concessions, thanks to greater demand for premium snacks and theatres. And Cineplex announced it will launch The Rec Room, a new entertainment and dining chain aimed at adults that depends less on the appeal of the film lineup.

"In the fourth quarter, it wasn't Hollywood that drove our bottom line. It was really media and, yes, food to a certain degree," chief executive officer Ellis Jacob said in an interview.

The company's media arm boosted revenues by 19.5 per cent in the fourth quarter, partly a result of new contributions from Tims TV, a network of screens installed in 2,200 Tim Hortons locations, and a deal struck with Oxford Properties Group Inc. to install interactive digital "ecosystems" in 10 Canadian malls.

The fourth quarter also brought record spending on concessions per patron yet again, at $5.14, up 4 per cent from a year earlier. But box office revenue per patron fell 3.8 per cent year over year, which Mr. Jacob attributed to having only two of the top-grossing films playing in 3-D, compared to four in the same period in 2013.

"But the slate [of films] looks very strong for 2015," he said.

Indeed, many industry observers are predicting that 2015 could be a record-setting year at the box office. The first two quarters include the debuts of 50 Shades of Grey, a live-action Cinderella, the delayed Furious 7 (from the Fast and Furious franchise), Jurassic World and Avengers: Age of Ultron. The new James Bond film, Spectre, and the latest instalments of Star Wars, Mission Impossible and Terminator are all expected later in the year.

Cineplex reported fourth-quarter profit of $32.1-million or 51 cents a share, up 59 per cent from 20.2-million or 32 cents in the same quarter a year earlier.

Revenue for the quarter was $332.2-million, a rise of 2.8 per cent from 2013.

In a note, analysts Haran Posner and Drew McReynolds of RBC Dominion Securities Inc. painted a "favourable" outlook for Cineplex thanks to "stronger box office expectations, a ramp-up in media profitability, and upside from the Rec Room rollout."

The first Rec Room is expected to open later this year in Edmonton, with simulation games, bowling, billiards, dining and a bar with large screens tailored to sports fans. The company hopes to open between 10 and 15 across Canada in the next three to four years.

"I think it's all about, at the end of the day, diversification," Mr. Jacob said. "And to me, this is a way to diversify using our core strengths."

Low gas prices and interest rates are not expected to make Cineplex customers substantially more free-spending, as the industry is "relatively resistant" to economic trends and "the key driver is going to be the quality of film product," said Gord Nelson, the company's chief financial officer. But Mr. Jacob said moviegoers could "end up spending a little bit more at the [concession] stands" if they have more money in their pockets.