Ardent Leisure Group shares fall on business update

The Ardent Leisure Group (ASX: AAD) share price has fallen slightly on Friday following the release of a business update.

At the time of writing the entertainment company’s shares are down a touch at $1.98.

What was in the update?

According to the release, the company’s business performance has been somewhat mixed in recent times.

Attendances at Dreamworld were up 41.2% and revenue was up 70.6% between December 10 2017 and January 31 2018 compared with the same period last year. This comparative period was chosen due to Dreamworld reopening on December 10 in 2016 following the tragic incident on its Thunder River Rapids Ride.

Whilst this was a vast improvement, it has been slower than expected. As a result, the company expects to book a further non-cash, pre-tax valuation impairment charge in the range of $15 million to $25 million in its accounts for the first half of FY 2018.

Ultimately, the Theme Park segment is expected to report a breakeven EBITDA result before one-offs for the first-half, with a positive EBITDA contribution expected for the full-year.

Elsewhere, core EBITDA in its US-based Main Event segment is expected to be flat during the first-half in US dollar terms due to margin pressures. It will, however, receive a slight boost from insurance receipts in relation to the business interruption caused by Hurricane Harvey.

One positive is that management has advised that constant centre revenue growth was up 1.3% during the first-half. This has improved in January, resulting in constant centre growth of 2.4%. Which could be a sign that the lucrative business has recovered from its recent weakness and is on its way back to its former glory.

Finally, as a result of the recent U.S. tax reform, management expects to book a tax credit in its income statement for the first-half in the range of US$10 million to US$13 million.

Should you invest?

Whilst it might be a little too soon to say that the company is over the worst of it, I do think that things are looking a lot brighter for Ardent Leisure now.

However, I wouldn’t be in a rush to buy shares just yet. I would suggest investors wait to see if this positive momentum is carried over into the next quarter before taking the plunge.

Until then, investors might want to consider fellow consumer discretionary shares Aristocrat Leisure Limited (ASX: ALL) or Star Entertainment Group Ltd (ASX: SGR).

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Motley Fool contributor James Mickleboro has no position in any of the 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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