The Event Hospitality and Entertainment Ltd (ASX: EVT) share price fell 3% to $13.50 at the time of writing, as the market reacted to a drastic plunge in profits after the company's first six months of sales this year. Here's what you need to know:
- Revenues fell 0.8% to $656 million
- Net profit after tax (NPAT) attributable to shareholders fell 23% to $59 million
- Dividends maintained at 20 cents per share
- Weaker film line-up led to lower results compared to last year
- Underlying strength in hotel business masked by fewer rooms available due to refurbishment and redevelopment
So What?
It's hard on a shareholder to wear a tough year just because some movies weren't as popular as others. Star Wars: The Force Awakens set a high bar at the end of 2015 that Rogue One simply didn't match and Event's like-for-like Box Office sales fell 3.4% largely as a result. Over a longer period of time this kind of occurrence should balance out (i.e. some years will be good and others not so much), but the results can look bad over any one-year time frame.
Higher competition in certain areas and the early stage maturity of some new /recently refurbished cinemas centres was also blamed for a weaker box office result, although average ticket prices remained steady and average merchandising spend grew.
Profits in the hotel business also fell, due to refurbishments, redevelopments, and repair costs incurred as a result of the Kaikoura earthquake in NZ. This segment could remain weak for the full year, with two additional hotels closing for redevelopment in the current quarter. Thredbo and the property business performed much better than last year, however.
Now What?
Management didn't provide an outlook or guidance for the full-year results, although with the major holiday period and big film releases behind us, my guess is that the second half of the year will also be unspectacular.
That said, Event has an attractive and well-placed mix of entertainment and tourism assets both here and overseas, some of which (e.g., Thredbo, some hotels) have an attractive competitive position. Although I'd prefer to buy shares at a cheaper price, Event Hospitality appears a well-run business and pays attractive fully-franked dividends.
