Ardent Leisure Group delivers good times for families and investors alike

Ardent Leisure Group (ASX: AAD), a $900 million company, has announced its financial results for the December 2013 half year. Revenue of $250.6 million was up 14.1% on the previous corresponding period (PCP). Earnings of $33.5 million were up 13.4% on the PCP.

Ardent is an operator of leisure and entertainment assets across Australia, New Zealand and the United States. It operates Dreamworld, WhiteWater World, SkyPoint Climb, d’Albora Marinas, AMF and Kingpin bowling centres and Goodlife fitness centres across Australia and New Zealand, and Main Event centres in the United States.

The company has well established theme parks, mainly in southeast Queensland, where there is currently a resurgence in tourism. D’Albora Marinas comprise seven marinas around Sydney and Melbourne, accommodating 1.400 vessels and a range of marine, leisure and tourist businesses. Ardent owns and operates 49 ten-pin bowling centres in Australia and two in New Zealand, under the AMF and Kingpin brands. Goodlife Health Clubs are a star performer with 65 sites.

Headquartered in Dallas, Texas, Main Event operates indoor family entertainment centres in Texas and Arizona. Main Event centres have broad appeal, including corporate team building. They feature a conference centre, full service restaurants, fast food dining, cafes, bars and activities that include ten pin bowling, laser tag, games arcade, rock climbing and glow golf.

Commenting on the December 31 results for 2013, Chairman, Neil Balnaves AO said, “The Group has continued to diversify and reweight earnings to the high growth Main Event and Health Club divisions, where EBITDA grew by 32.3% and 19.3%, respectively. In addition, both Bowling and Theme Park divisions have recorded positive growth, through a focus on providing quality leisure and entertainment experiences at affordable prices.”

Addressing future prospects, he said, “Both Main Event and Health Club divisions are enjoying strong operating fundamentals, with opportunities for ongoing portfolio expansion to drive future earnings growth. Both businesses are now well positioned to benefit from increased scale and operational efficiencies.”

Ardent’s largest competitor is Amalgamated Holdings (ASX: AHD), which is dominant in Australia in its cinema chains, such as Greater Union, and resort holdings, including Rydges and Thredbo Alpine Village. There is more direct competition in the Health Club business, where the leading operator is Fitness First, a privately owned company with 540 Fitness First clubs reaching over 1 million members in 21 countries.

In the Gold Coast, Queensland, competition is more apparent where Dreamworld and Seaworld offer leisure to an increasing inflow of tourists. Seaworld is part of the large international group SeaWorld Entertainment (NYSE: SEAS). However, as tourists tend to visit both theme parks, Ardent has been successful in continuing to attract its share of the tourist dollar.

Foolish takeaway

Ardent is an innovative company with the stated aim of focusing on customer experience. Emphasis is placed on providing affordable leisure in a wide range of activities to bring about increased volumes of customers. The strategy has worked well in recent years and is on track to continue to grow in providing leisure services in the three countries in which it operates.

Price to earnings ratio is about average at 16.7%. Dividend yield is very reasonable at 5%. However, what is remarkable is that over the last five years the total shareholder return is 31.8% on an annual basis. At $2.30 per share, Ardent represents outstanding value. In my opinion, it’s a buy at the current price.

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Motley Fool contributor Chris Koenig does not have shares in any of the companies mentioned.

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