A report released by the World Health Organisation on 18 March 2020 has reported a total 191,127 confirmed cases of COVID-19 in which 15,123 cases are new. Death, due to COVID-19, has reached 7,807 on a global level.

In Australia, the number of patients infected by coronavirus has reached 414, and the number of deaths were noted at 5 as on 18 March 2020. This pandemic has been impacting almost all the Australian sectors. The Australian government has taken steps to fight against this pandemic and has released an advisory for the Australian citizens to protect them and slacken the spreading of coronavirus.

The government has put a travelling prohibition on cruise liners from overseas ports coming to Australian ports for 30 days. As per the latest report, Australia has closed its border to non-resident population flying from different parts of the world. Further, the Australian natives returning to the country are required to self-isolate for 14 days.

Government has also provided steps to safeguard the citizens from this deadly disease. Citizens are required to maintain social distancing, good hygiene and follow self-isolation to prevent the spread of the virus.

Aussies are advised to avoid visiting public places like school, shopping complexes, work etc. They have also been advised not to have any visitors except the people living with them. In case, they require essentials like food or other necessary items, they can ask someone to get it for them and leave it at the front door.

Due to the preventive measures taken by the government, there has been a drop in the number of people visiting the public places. As a result, companies engaged in businesses like travelling, leisure, entertainment have been impacted a lot.

In this article, we are going to discuss one such company which on 19 March 2020 released an update pertaining to COVID-19. The entity is known as Village Roadshow Limited, which started operating in 1954. It owns as well as manages one of the first drive-in cinemas in the Melbourne suburb of Croydon, Australia.

The company’s businesses include of the following:

• Cinema Exhibition
• Film Distribution
• Theme Park
• Marketing solutions

In 1H FY2020 results ending 31 December 2019, the company reported a record ticket sale with the 12% growth in the attendance. Cinema exhibition revenues were in line with the previous year. From the Film distribution business, the earnings were impacted through the delay in Pay TV contract renewal and underperformance of theatrical titles. VRL’s marketing solutions business reported improvement from Opia in 1H FY20 while building foundations for future growth.

However, post the coronavirus spread and implication of the government advisory, it has impacted the entity and this is what we would try to make you understand in this article based on the announcement released by Village Roadshow Limited in its ASX media release. Let’s take a look at it.

Village Roadshow Limited; Update on COVID-19

Village Roadshow Limited (ASX: VRL) has noted that there has been an escalation of disruption to their business because of the coronavirus outbreak. The company has provided an update on its various divisions which will be discussed in this article.

Cinema Exhibition division:

In the Cinema Exhibition division, major Studios have postponed various 2H FY20 titles to FY2021. These include:

• Peter Rabbit 2: The Runaway
• Mulan
• Bond: No Time To Die
• Fast & Furious F9
• A Quiet Place Part II

Because of the rescheduling of these titles, the company has confirmed that it would have a considerable impact on the trading of this division.

Theme Parks division:

VRL has noted a significant drop in the number of people visiting the Theme Parks, especially from the international tourist space. Further lower forward bookings & drop in the sale of the annual pass to the domestic market has made the trading situation quite challenging and is anticipated to persist.

According to the CEO of Village Roadshow Limited, Clark Kirby, as per the international standard, there was a possibility that cinemas, as well as theme parks, might be closed in Australia for a certain period, which would be having a considerable impact on the earnings during that time frame. Thus, in this scenario, the company is working on contingency plans for this case.

Because of the dynamic and uncertain nature of the COVID-19 and its impact on the business, the company is not in a position to predict the overall outcome of the financial result in FY2020. Thus, providing meaningful guidance at this point is not possible.

The Group is taking pivotal action to lessen the significant impact of coronavirus on its business. It is implementing the cost reduction strategies to lessen the impact on the Group’s earnings and cash flow. The company is in conversations with Industry Groups & Government at Federal, State as well as Local levels for developing action plans and supports.

Below are certain cash saving steps that were taken by the company:

• The salaries of the Senior executives would be lessened with immediate effect.
• No bonus would be provided to the Senior executives for FY2020.
• All non-essential uncommitted capital expenses would be halted.
• All non-essential international, as well as domestic travel, will be stopped.
• All non-essential recruitment, consulting & advisory task would be restricted.
• All employees are asked to take leave so as to eliminate employee costs.

VRL’s CEO also considers the safety and well-being of the employees, as well as patrons as the top priority. For this, the company would be following the guidelines provided by the government and the health circumstances despite the adverse effect on the company’s profitability.

The cost reduction measures taken by the company would help its earnings and cash flow in such challenging circumstances.

The company is hopeful that once the COVID-19 situation is under control, the earnings, most of which comes from the domestic market would recover swiftly.

Stock Information:

The shares of VRL have generated a negative YTD return of 67.54%. By the closure of the market, on 19 March 2020, the shares of VRL dropped significantly by ~ 31.05% and settled at $0.855 in the direction of its 52 weeks low price. VRL has a market cap of $336.73 million and ~195.21 million outstanding shares.

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