DIRECTORS’ REPORT  (CONTINUED) OPERATING AND FINANCIAL REVIEW  (continued) Operational Results  (continued) Environmental Regulation and Performance Business Objectives and Future Prospects The VRL group was subject to the  National Greenhouse and Energy Reporting  Act  for the year ended 30 June 2014, however this has not had any material  impact on the VRL group. Other Strategy/Objectives Business Risks Financial Position Events Subsequent to Balance Date 14 VILLAGE ROADSHOW LIMITED – Safety – the Theme Parks and Cinema Exhibition businesses operate  public venues and (in the case of Theme Parks) rides and other  attractions, with the consequence that there is risk of physical injury or  harm. The VRL group takes its commitment to the safety of both its staff  and its patrons at all of the Group’s venues very seriously, primarily in  order to ensure that a safe environment is always provided for patrons  and staff, and as a secondary issue, to minimise any adverse legal or  reputational consequences of any serious incidents; and – International tourism – tourism can be affected by multiple factors  including foreign currency exchange rates, severe weather, disease  outbreaks and terrorism threats, however none of the VRL group’s  businesses, including in the Theme Parks division, are heavily reliant on  international visitation (although they are still affected to some extent); – Weather – extreme weather events can challenge admission levels at the  Theme Parks division’s businesses, with potential customers not  travelling to such destinations when the weather is severe, such as  floods or cyclones. The VIP season pass ticket promotion seeks to  partially address this risk by allowing tickets to be utilised when better  weather returns; – Film production volatility – film production is an inherently volatile  business. This risk is partly mitigated by VREG adopting a portfolio  approach, however the Film Distribution division may also be impacted; – Lack of quality films – the Cinema Exhibition and Film Distribution  businesses are dependent on a solid and reliable flow of quality, high  grossing film content. This risk has been partly mitigated in Film  Distribution by long term supply contracts with major suppliers,  including Warner Bros., and in Cinema Exhibition by new offerings  (e.g. Gold Class) and alternative content and uses; – Piracy – the ongoing issue of film and music piracy poses a challenge to  the Group’s Cinema Exhibition, Film Distribution and Film Production  businesses, and the VRL group is actively working with other industry  participants to reduce the severity of this risk; – Technology – the media through which people receive entertainment  content is ever-changing, with increased digitalisation and portability  being key focuses for many consumers, although the uniqueness of the  Group’s ‘out-of-home’ entertainment experiences appear to have  reduced the extent and impact of this issue; – Competition – all of the Group’s businesses are continuously vying for  customers against a wide variety of competitive forces; – Consumer spending – a shift in the patterns with which consumers  spend their disposable income could impact the Group in all of its  businesses, however historical experience has shown that the Group’s  entertainment offerings are generally impacted less by economic  downturns compared to other discretionary expenditures of consumers; – Continuing to closely monitor and review corporate overheads, including  remuneration costs, in light of ongoing efficiency reviews. – Continuing to monitor opportunities in the digital and online space; and – Increase in output of films per year by VREG, improving the financial  performance of the Film Production division; – Ongoing review of potential further investments across the VRL group’s  various divisions, subject to acceptable financial returns; – Ongoing expansion in relation to the Group’s involvement in theme parks  in China and South east Asia; – Continued development of innovative and competitive products and  services such as higher yielding cinema offerings and site refurbishments  in the Cinema Exhibition division, new attractions at existing locations and  development of new locations for the Theme Parks division; – Ongoing improvement in operating performance of each division; Material business risks that could have an effect on the financial prospects  of the VRL group, and the way in which the VRL group seeks to address  some of these risks, are as follows: The strategy and objectives of the VRL group are summarised as follows: The total net Corporate & Other costs for the year ended 30 June 2014 were  $32.3 million compared to $27.1 million for the prior year, which included  net costs of $28.2 million (2013: $33.0 million) for Corporate, $2.0 million  (2013: $0.2 million) for Asia Development, $1.3 million (2013: $0.5 million)  for Digital Development, a profit of $1.5 million (2013: $1.5 million) for  Digital Operations, and depreciation of $2.0 million (2013: $1.3 million). Net  interest expense in FY2014 was $0.3 million, compared to net interest  income in the prior year of $4.2 million. No dividends were received from  VREG in FY2014 (2013: $3.8 million). EBITDA cost for the year to 30 June  2014 was $30.0 million, in line with the prior year. Net interest revenue was lower in the current year compared with the prior  year due to lower cash reserves and draw down on debt facilities, as  a result of the payment of the shareholder distributions and capital funding  of the Wet’n’Wild Sydney development. During the year VRL also endorsed  a program of Digital Development work across the divisions, focussing on  enhancing on-line data collection, analytics and overall engagement with  customers via digital means. Asia Development net costs are associated with the South East Asia and  China Theme Parks expansion strategy and projects outlined earlier. It is  expected that these costs will be higher in FY2015 as the Hong Kong office  is established. As noted above, no dividends were received from VREG in  FY2014 – these dividends depend on film performance and available free  cash flow in VREG. The recently formed Digital division consisting of Edge Loyalty and MyFun  continues to exceed expectations, showing strong organic growth through  the expansion of the business into new channels and markets. During the  year Digital completed the acquisition of Lifestyle Rewards, which has helped  expand Digital’s reward and loyalty offering. The division has exciting plans  to enter the Asian market in calendar year 2015 via a roll-out of products  similar to Australia. VRL is confident that the Digital division will continue to  develop and contribute materially to earnings in the medium term. During the year ended 30 June 2014, total assets of the consolidated entity  decreased by $31.6 million, including decreases in cash of $16.5 million,  film distribution royalties of $17.9 million and equity-accounted  investments of $13.0 million, which were partly offset by a net increase in  property, plant & equipment of $18.0 million, which included an increase  relating to the remaining Wet’n’Wild Sydney build cost, and decreases from  the disposals relating to US Water Parks and depreciation/amortisation.  Total liabilities increased by $19.2 million, including increases in  borrowings of $62.4 million, provisions of $23.9 million (being the special  dividend of 15 cents per share declared in June 2014), which was partly  offset by a reduction in trade and other payables of $50.0 million. Total equity of the consolidated entity decreased by $50.8 million to  $521.3 million during the year. This was mainly attributable to decreases in  contributed equity of $15.2 million (mainly resulting from the capital  reduction of 12 cents per share in December 2013) and retained earnings of  $40.4 million, partly offset by an increase in the non-controlling interest of  $3.9 million. Net profit attributable to members of the parent was  $45.8 million, but after accounting for dividends and distributions paid or  payable during the year of $86.1 million, retained earnings of the  consolidated entity decreased by $40.4 million. The VRL group’s net debt as at 30 June 2014 was $350.5 million, giving  a gearing ratio of 40%, compared to the prior year’s gearing ratio of 32%.  Of the total debt of $480.9 million, $23.1 million is classified as current  liabilities, and $457.8 million is classified as non-current liabilities. The VRL  group is in compliance with all required debt covenants as at 30 June 2014. During the year ended 30 June 2014, the VRL group restructured its US  Water Park investments, which included the disposal of the Wet’n’Wild  Phoenix and Wet’n’Wild Hawaii businesses, and resulted in a loss on  disposal of investments/businesses of $1.2 million, which is included in  material items of income and expense in the Reconciliation of Results on  page 16 of this report. Other than as disclosed above, there have been no  significant changes in the state of affairs of the consolidated entity during  the financial year. There have been no material transactions which significantly affect the  financial or operational position of the consolidated entity since the end of  the financial year. CLOSE FILE X