The Ardent Leisure Group (ASX: AAD) share price has drifted lower this morning following a quarterly trading update from the entertainment company.
Here are a few highlights from the third-quarter release:
- Main Event segment delivers record Q3 FY 2017 revenue growth of 25.1%.
- Main Event constant centre sales down 2.5% for the quarter, but March saw a return to growth.
- Reduction in planned Main Event openings in FY 2018 to 8 from 11. Long-term target of 200 remains unchanged.
- Theme Park visitor numbers and revenue down 36.7% and 34.3% on the prior corresponding period, respectively.
- Heavy rainfall in March is believed to have impacted theme park visitor numbers.
Overall I felt this was a positive update from the company and was a touch surprised to see its share price drop lower.
Whilst Theme Park visitor numbers and revenue were weaker than in February, the weather appears to have played a key role in this.
During the month of March the Gold Coast experienced a 159% increase in total rainfall compared to the prior corresponding period. According to management historically the weather has "had a significant adverse impact on attendance and revenue."
Were it not for this rainfall, I feel confident its Theme Parks segment would have seen a further recovery in both visitors and revenue.
Which is great news because it appears as though the company's lucrative Main Event centres have moved on from a recent spot of weakness brought on by the U.S. elections and challenging consumer discretionary spending.
Although constant centre sales fell 2.5% during the period, they returned to growth in March thanks to a number of initiatives. One such initiative was switching its primary advertising strategy from radio to television at the end of February.
Today's share price decline could be the result of investors feeling disappointed with management's decision to reduce the number of Main Event centre opening in FY 2018 from 11 to 8.
This was done in order to increase its focus on strategies to improve constant centre growth and also refurbishments. Management plans to refurbish three additional legacy centres in the fourth quarter and the remaining five legacy centres in FY 2018.
I think this was a sensible move by management and am pleased to learn that the long-term target of 200 centres is still in place.
Should you invest?
As I said last week, I think now is an opportune time to invest in Ardent Leisure. Times have been hard for the company since the Dreamworld tragedy, but I believe there are signs that things are improving now.
For that reason I would choose it ahead of rival Village Roadshow Ltd (ASX: VRL) as a buy and hold investment today.
