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Ardent Leisure Video



 

Stock Of the Day  - Ardent Leisure (Expensive)

Ardent Leisure Group (AAD) recently announced its half year result with revenues of $285.9 million which indicate an increase of 14.1%. The distribution per security went up 2.9% to 7.0 cents. However, there was a 3.8% reduction in the core earnings which amounted to $32.2 million. As at 31 Dec’ 14, AAD reported gearing being equated to 33.6% with a strong balance sheet and substantial undrawn debt capacity. The Company reports to be benefiting from an expanding US earnings base.


HY15 Financial Summary (Source – Company Reports)

Main Event was at the forefront with outstanding results entailing US$ EBITDA growth by 55.9% (US$13.3 million) and total revenues of US$61.6 million reflecting a 52.7% increase on prior period revenues. This emanates from constant centre performance, contribution from new centres (total centre count equals 19), lower fuel prices benefitting unrestricted spending, and new contracted sites. Tulsa centre is scheduled for opening in early 4Q15. Negotiations appear to be ongoing for eight additional locations for FY17.

The EBITDA for Bowling surged 4.6% to $9.1 million while Marinas witnessed EBITDA rise of 2.0% to $5.1 million. For Bowling, launch of new online booking engine (AMF and Kingpin) for social bowling led to an increase in online bookings from 2% to 7% of revenue within six weeks. Another positive was the launch of a call centre to better customer service and conversion of group enquiries. Then, AAD also acquired Playtime Highpoint in Melbourne to enhance the amusement game segment. For Marinas, the Company reported for an overall improvement in portfolio occupancies to 85%.

Results for Theme Parks were noted to be stable after a solid January ’15 result. EBITDA for the half year was cut down 1.2% to $20.4 million. The second quarter witnessed better attendance trends in comparison to first quarter. Performance from SkyPoint Observation Deck business was good. Enhancements in international markets supported by revenue growth from New Zealand and China were key to the stability. Launch of four upgraded Food and Beverage outlets under Dreamworld helped in maintaining the tourist attraction. Weather extremities (heavy rains) did hit the performance though the total unaudited revenues of $12.9 million against prior period revenues of $13.0 million were reported depicting performance under challenge. AAD seems to be geared up for V8 Supercars launch in December 2015.


Capital Expenditure (Source – Company Reports)

The Goodlife Health Club division stood against challenging trading conditions with 11.1% drop in EBITDA to $14.5 million owing to below par constant centre performance partially balanced by contributions from new acquisitions. AAD also reported that constant club earnings before property costs dipped 5.4%. The Company thus plans to introduce “Goodlife 24/7” operating model embarking on a progressive conversion to 24 hour trading. This will be introduced as Australia’s first large format, full service operator offering extended trading hours. Overall, the model can serve as a catalyst to improve margins while bettering membership levels. The first Goodlife 24/7 club is scheduled for opening in March with further 14 conversions throughout the second half of the year. The Hypoxi business was also reported to have contributed $0.2 million to the half year result after US set up costs of $0.2 million. Opening of the first two Hypoxi concept stores is planned in Arizona during the second half. WA Fitness is currently performing slightly below expectations.


Health Club Performance (Source – Company Reports)

The Company however, has only provided a qualitative commentary for outlook, i.e., no hard guidelines as such, failing to shed light on various result related aspects. Further, an increase of corporate cost of $1.2m (up 22.6%) in first half is seen to be coming from a number of new hires, associated recruitment costs and investment in IT capability. The parting of chief executive Greg Shaw has also seem to be linked to the share nose-dive. Although, Main Event is a comfortable piece of trade, unhealthy performance from the Health Club division and a run-of-the-mill contribution from the Theme Parks calls for a caution.


AAD Daily Chart (Source - Thomson Reuters)

We therefore believe that the stock is EXPENSIVE at the current price of $1.965.