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Why the Ardent Leisure Group share price fell 4% today

The Ardent Leisure Group (ASX: AAD) share price has fallen this morning following the release of a full-year result update.

In early trade the entertainment company’s shares are down 4% to $2.04.

Here are the key highlights from today’s release:

  • Preliminary full-year core EBITDA guidance of approximately $73 million to $75 million for the 12 months ending 30 June 2017.
  • Theme Park division is expected to report an EBITDA loss of approximately $2 million to $4 million. Down from $34.7 million last year.
  • Main Event is expected to contribute EBITDA of US$44 million to $45 million. Up from US$43.5 million last year.
  • Final dividend of 1 cent per share, down from 5.5 cents.

Overall I believe this guidance is largely in line with expectations following the Dreamworld incident and the weaker-than-expected performance of its Main Event centres in the United States.

Whilst Main Event is still posting negative like-for-like sales growth, management advised that the trend has improved in the second-half. Especially in the fourth quarter where there has been a sequential month-on-month improvement.

Pleasingly, the underlying Main Event proposition remains very positive. New stores have continued to outperform return benchmarks with an average first-year EBITDA return on investment in excess of 30%.

Additionally, refurbished centres have also delivered positive early results.

Should you buy the dip?

Although I think that the Ardent Leisure share price is likely to remain volatile for the next 12 months, I have confidence that in the long-term it will prove to be a great buy and hold investment.

The roll-out of Main Event across the United States may have been slower than first expected, but management remains committed to its plan of increasing its network to 200 centres.

This has the potential to be a significant boost to earnings in the long run. After all, the company is on track to finish the year with 38 centres across 16 states.

Because of this long runway for growth I would choose it ahead of rival Village Roadshow Ltd (ASX: VRL).

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. 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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