How are ASX leisure shares faring in the face of coronavirus?

The economic and social impacts of coronavirus are spreading rapidly. Here we take a look at how ASX leisure shares are faring in these unprecedented conditions.

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The economic and social impacts of coronavirus are spreading rapidly as governments tighten travel restrictions and implement social distancing measures. Initiatives implemented to protect public health are also causing the economy to slow, impacting not just corporate profits, but individual livelihoods. More restrictions on the horizon have cast clouds across an already grim economic outlook.

Here we take a look at how the ASX leisure shares are faring in these unprecedented conditions. 

Crown Resorts Ltd (ASX: CWN)

Crown shares have fallen more than 40% from highs of above $12.50 in January and are currently trading at $7.22. The casino operator was one of the first to feel the effects of the coronavirus outbreak with the flow of gamblers from China reducing to a trickle. 

Crown advised in February that it had been experiencing softer trading conditions as a result of travel restrictions and community uncertainty, particularly over the Lunar New Year period. Since then the situation has escalated considerably and yesterday Crown announced the introduction of social distancing measures at its Melbourne Casino complex. 

In response to the pandemic, Crown has deactivated every second gaming machine and electronic gaming table. It has instituted distancing at seated table games between players, with no standing players. At stand-up table games the number of players has been restricted to five. No more than 450 patrons will be permitted at food and beverage, banqueting, and conference facilities. 

The impact of coronavirus will no doubt come as a further blow to Crown which has been struggling under the weight of adverse publicity and regulatory enquiries. During the first half Crown saw revenue from its Australian resorts fall 5.2% to $1,457.5 million due to softer market conditions which were exacerbated by recent negative publicity. 

Normalised revenue at Crown Melbourne was down 8.3% on the prior corresponding period to $1,025.6 million. Group earnings before interest tax depreciation and amortisation (EBITDA) declined by 14% to $446.8 million, leading to an 11% drop in normalised net profit after tax (NPAT) which fell to $172.7 million. 

Star Entertainment Group Ltd (ASX: SGR)

Star Entertainment Group shares have fallen from the sky, dropping more than 50% since February to just $2.04. Star Entertainment Group yesterday introduced similar social distancing measures to Crown. 

The group has deactivated every second electronic gaming table and gaming machine. Capacity at table games has been reduced, increasing the distance between players at seated games and restricting the total number of players at stand up games. Patrons in food and beverage, banqueting, conferencing, and theatre facilities have been restricted to under 500 with limited density for each outlet. 

Like Crown, Star Entertainment Group was struggling even before the pandemic, with statutory net revenue down 8.4% in the first half to $1,054 million. EBITDA declined 26.5% to $243 million, while statutory NPAT fell by 48.5% to $77 million. 

Ardent Leisure Group Ltd (ASX: ALG)

Shares in Ardent Leisure have plummeted from over $1.50 in January and were trading at 17.5 cents yesterday. Today, however, shares shot up more than 28% to 22 cents before a trading halt was called. Last week it withdrew its earnings guidance for FY20 as a result of the coronavirus outbreak. 

Attendance and revenue at Ardent’s Main Event entertainment centres has been reduced across the United States. As a result, Main Event no longer believes it will achieve constant centre revenue growth of between 1.5% and 2.5% as previously guided. As a consequence, Main Event’s EBITDA margin is expected to be below the 20% guidance previously issued. 

For Ardent’s Theme Parks division, the impact of the coronavirus outbreak is expected to continue for longer than initially anticipated. A range in mitigating actions are being explored by both Theme Parks and Main Events in response to the downturn in guest attendance. These include adjusting operating costs, deferring non-essential capital investment, and reviewing non-critical business activities and discretionary expenses. 

The Theme Parks division is focusing marketing efforts on the domestic market in the short to medium term. The board still intends to pursue potential partnership arrangements to support the growth of Main Event while at the same time continuing to monitor its capital requirements. 

Given the uncertainty around the nature and duration of the coronavirus, Ardent Leisure is unable to provide any meaningful guidance on the impact to its earnings for the remainder of FY20. 

Apollo Tourism & Leisure Ltd (ASX: ATL)

Shares in Apollo Tourism & Leisure have plummeted some 67% since their 34 cent high in late February and are now trading at just 12 cents. The company has withdrawn its FY20 guidance due to the uncertainty created by coronavirus and associated travel restrictions. 

Last week, the company advised that the spread of coronavirus into Europe, North American other parts of the world meant there was too much uncertainty around its future earnings to maintain its FY20 underlying net profit after tax guidance. 

Europeans make up a significant portion of Apollo’s US guests. With the US Government suspending all travel from Europe to the USA, Apollo expects cancellations to materially increase for US travel, although it notes that the US high season is not until June to September. 

Apollo is taking steps across its global business to mitigate the impact of coronavirus, reviewing operating and capital expenditure spend as well as fleet life cycles across the globe. 

Apollo CEO Luke Trouchet said, “in our experience tourism activity recovers and returns to previous growth trends after major travel disruptions. Apollo will benefit when this occurs and realize the investment undertaken in guest experience, leadership, and systems.”

This week, Apollo released another trading update noting travel restrictions had been escalated in Apollo’s rental destinations of Australia, New Zealand, and France. In addition, government advice against large gatherings meant the cancellation of RV expos in Australia and the US at which Apollo would normally sell vehicles. These restrictions will further impact the company and FY20 results, but it is not possible to quantify the extent in a rapidly evolving situation. 

Apollo is implementing additional cost saving measures, including having executive and non-executive board members forgo 20% of their salaries and fees for the remainder of FY20. 

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Motley Fool contributor Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Crown Resorts Limited. 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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