The Palace Amusement Company (1921) Limited plans to lean less heavily on film, building entertainment zones for children and adults as its annual loss widened to $190.2 million and its auditor flagged doubt over its ability to keep trading.
Management intends to build out a family entertainment centre with an arcade, a children’s birthday zone, VIP services, and a bar and lounge, and to sell screen time for live sport, motorsport and e-gaming events.
“While film exhibition remains the group’s core business, the key focus is resilience to longevity and sustainable growth,” the company said in financial statements released Friday.
The measures aim to “maximise per capita spend and increase utilization of physical assets including buildings, screens and equipment”.
Revenue fell 27 per cent to $962 million for its June year end, from $1.32 billion in the year earlier. PricewaterhouseCoopers flagged a material uncertainty over Palace’s ability to continue as a going concern, after the company disclosed that current liabilities exceeded current assets by $175 million.
“These events and conditions, along with other matters … indicate that a material uncertainty exists that may cast significant doubt on the group and company’s ability to continue as a going concern,” the auditors said.
Management rejected the suggestion that the business is in danger. “Management is of the view that the going concern basis remains appropriate as management prepared its assessment and cash flow forecasts and have concluded that the group will generate sufficient cash flow to sustain its operations for the foreseeable future,” the company said in the notes to the statements.
The company blames three shocks for its position: the pandemic closures, the Hollywood writers’ and actors’ strikes that cut off film supply, and Hurricane Melissa, which damaged its Montego Bay multiplex. It describes them as external events outside management’s control that cumulatively hit revenue, cash flows and debt servicing capacity.
Palace expects the film industry to pull it back. “Major studios are strategically investing to capitalize on the substantial earning potential of theatrical exhibition,” the company said, citing the Paramount and Warner Bros merger, a widening exclusive theatrical window before streaming, and a shift to year-round release schedules.
“The recent strong box office response to major releases such as Spiderman: Brand New Day and The Odyssey, validates the industry formula that a good product will result in strong patronage. The Group expects this improved content flow to be a primary driver of recovery,” management said.
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