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Why the Ardent Leisure Group share price is plunging today

The Ardent Leisure Group (ASX: AAD) share price is plunging today after the theme parks business provided an update on its operating performance in the wake of the tragic deaths of several visitors to its theme parks in October 2016.

For the months of March and April 2017 Ardent said that Theme Parks visitation was down 36.7% over the prior corresponding period, with unaudited revenues of $9.6 million down 39% versus the pcp. The group also attributed the big fall in visitor numbers to wet weather and an East coast cyclone that hit the region in late March.

Ardent now expects its Theme Park division that includes Gold Coast-based Dreamworld and White Water World will report an EBITDA (operating income) loss of $2 million to $4 million for the 12-month period ending June 30 2017.

Ardent’s shares are down 2.5% to $2.06 this morning and down 11% over 2017, with it also recently announcing the group’s chief executive officer would be moving to a new role of chief customer officer. The group has appointed Simon King as an executive from broadcaster Nine Entertainment Co Ltd (ASX: NEC) to assume the CEO role.

The managerial reshuffle is reportedly aimed at accelerating the group’s transformation into a U.S. centric entertainment business via its Main Event ten pin bowling and family entertainment centres. The group currently has 29 operating Main Event centres largely centred on the southern U.S. states including Texas in particular. It also has ambitious plans to deepen Main Event’s footprint across the broader U.S. family entertainment market.

Ardent’s tourism and entertainment businesses in Australia are also potential beneficiaries of a falling Australian dollar as this encourages inbound tourism, while also encouraging Australians to holiday at home.

Other listed companies that may benefit from this trend are hotel and entertainment specialists Mantra Group Ltd (ASX: MTR), Event Hospitality & Entertainment Ltd (ASX: EVT) and Star Entertainment Group Ltd (ASX: SGR).

Given the big problems Ardent has in its theme parks division I’m not a buyer of its shares, despite their seemingly cheap valuation and I expect the likes of Mantra Group could provide far superior returns based on today’s valuations.

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The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Event Hospitality & Entertainment. Motley Fool contributor Tom Richardson owns shares of Event Hospitality & Entertainment and MANTRA GRP FPO.

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The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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