The Ardent Leisure Group Ltd (ASX: ALG) share price is down more than 10% this morning after announcing that it is withdrawing its FY20 earnings guidance for its Main Event division, which was originally issued to the market on 21 February 2020.
Earnings guidance withdrawal
Main Event Entertainment currently has 43 centres across the USA. Not surprising, as the coronavirus outbreak uncertainty in America quickly escalates, there has been a significant reduction in attendance and revenue at its centres. As a result, Main Event has stated that it longer believes it will achieve its revenue growth target of between 1.5–2.5% as previously stated, and its earnings before interest, tax, depreciation and amortisation margin is now expected to be below the 20% guidance that it previously had given.
Some of the strategies that both the Main Event and Theme Parks division are undertaking include deferring non-essential investments and reviewing other non-critical business activities.
The company added that it will no longer provide any further guidance on the impact to the group’s earnings for the remainder of FY20.
Ardent Leisure is not the only entertainment company re-evaluating its profit outlook. Last Friday, Event Hospitality and Entertainment Ltd (ASX: EVT) indicated that the coronavirus will now have a greater than expected impact on its second half performance.
Ardent Leisure’s recent troubles
The downward decline in Ardent Leisure’s share price extends beyond just the growing global concern about the coronavirus pandemic. On 24 February, its share price declined by 16% after the release of the findings of coronial inquest into the tragedy at its Dreamworld theme park in late 2016. The coroner gave a damning verdict on the way Dreamworld was operated in general and said in the report that it was only a matter of time until a serious incident occurred. The report further said that Ardent Leisure may even have committed an offence under Australian workplace law.
Also, investors were disappointed with Ardent’s half year results for FY2020. The company recorded a net loss after tax of $22.5 million, up from a net loss of $21.8 million in the prior corresponding period. Ardent Leisure again decided not to declare an interim dividend for the current financial year.
Theme parks close in the USA
The theme park industry looks to be in for a tough period over the coming months globally, with a report in the The Washington Post indicating that Disney and Universal Studios are closing a number of their theme parks through to the end of March in an effort to help contain the spread of the coronavirus. This includes the Walt Disney Resort in Florida, Disney Paris Resort as well as the two theme parks in California.
I think that there is likely to be more closures globally in the months to come.
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Motley Fool contributor Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Event Hospitality & Entertainment. 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 Scott Phillips.
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