The recent tragedy at Ardent Leisure Group's (ASX: AAD) Dreamworld theme park came just days before its Annual General Meeting, which ensures management will be facing some pointed questions from the media today.
However, there were also a number of important updates for shareholders:
- Expect significant Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) impact for Dreamworld for the remainder of the year due to high fixed costs associated with the business
- Main Event now has 29 centres, with 8 more under construction and 1 planned
- Main Event expected to deliver 30% growth per annum over the next two years
So What?
In my recent coverage of Ardent's annual results, I suggested the company wasn't cheap as the sale of the Health Clubs division would leave a $30 million hole in EBITDA that would take a while to fill. However, the 30% forecast growth for Main Event would see that segment's EBITDA increase from $59 million to $77 million, and then again to $93 million, more than making up for the Health Clubs' sale. (It was unclear if management meant earnings will compound at 30% p.a. for the next two years or if it was a simple 30% p.a. from today's levels).
Theme parks will be the item of concern, with this segment contributing 22% of group EBITDA (pre-Health Club sale) in 2016. It's almost a given that the incident and strong media coverage will scare people away from Dreamworld in the near term. Management had no specific guidance beyond a 'significant' impact to EBITDA for Theme Parks.
Investors in Ardent are also taking on the largely unquantifiable risk of liability over the accident.
Now What?
Ardent shares have taken a 25% dive this week, but I think this just about prices in the potential impact to Dreamworld. Given the growth expected at Main Event, the departure of the Health Clubs division, and the unknowable impact to the Theme Park segment, it's difficult to value Ardent in price to earnings (P/E) terms at present. Growth in Main Event will obviously be the main driver of value for shareholders going forwards, and on that front the company seems to be delivering.
