Village can't see beyond a war

The company said war in Iraq would hurt its cinema and theme park operations but investors are likely to be more worried about its decision not to reinstate its dividend.

Chairman Robert Kirby admitted yesterday that Village had made a mistake by not talking enough to investors about its dividend policy. But he stood by the decision made mid-last year to suspend the payments to strengthen its balance sheet and allow it to direct resources to film production.

``We want to expand our film production horizons ... it does put pressure on our cash flow," Mr Kirby said.

Village has yet to decide on whether it will pay a dividend on its preference shares.

Village yesterday posted a 2.5 per cent rise in interim profit to $46.5 million, after tax, special items and discontinuing operations. On the basis of continuing operations, net profit slumped to a $17.6 million loss from a $35.4 million profit in the previous corresponding period.

The profit was struck on a 4.2 per cent rise in revenue from ordinary activities to $425.5 million.

One-off items included the sale of Village's interest in a South Korean cinema operation for a pre-tax profit of $84 million, and settlement with the Australian Taxation Office of contingent liabilities of $56.6 million.

Village owns 59.7 per cent of radio group Austereo, which last week posted a sharp fall in net profit for the six months to December and warned of poor markets for the beginning of the second half.

However, Village managing director Graham Burke said in a statement to the Australian Stock Exchange yesterday that despite a global advertising downturn and new licences, the effect on Austereo's results was contained by ``strong management initiatives".

He said also that the refinancing of Village's film production division and its move to own 100 per cent of Village Roadshow Films would improve profit prospects.

In February, Village announced plans to expand its co-production deal with Warner Bros, committing an extra $206 million to help fund the Matrix sequels and other big budget movies. This ended months of uncertainty over the expensive and complicated film venture.

Village is now a 50 per cent partner in the joint venture with Warner, the revised deal covering 40 films, 10 more than the original agreement.

But last year credit rating agency Moody's downgraded Village's issuer rating from Baa3 to Ba2 because the plans to lift investment in film production.

The company also announced yesterday that it and Greater Union Organisation had each increased their 33.3 per cent stakes in their Australian multiplex joint venture to 50 per cent, buying out Warner Bros.' one-third share for a total of $100 million.

Village's shares fell 2c to $1.02, just above an 11-year low of $1.01 touched on March 6 and a long way from its high of $6.70 in January 1996.