Ardent Leisure's new chief executive Simon Kelly has moved to put his stamp on the business, with the release of updated earnings, but warned investors of a fall in the full year distribution, due to the sale of the health clubs and the weakness in Dreamworld theme park contributions.
In his first analyst presentation since assuming the role of chief executive earlier than expected, Mr Kelly said he wanted to clarify the numbers to get "everyone on the same page". The full set of accounts will be released on August 24.
![Main Event venues in the US are owned and operated by Ardent Leisure .](http://web.archive.org./web/20170625083419im_/https://www.fairfaxstatic.com.au/content/dam/images/g/w/x/b/0/6/image.related.articleLeadwide.620x349.gwx7ao.png/1498198932625.jpg)
This has led to broker downgrades, to align with the Ardent figures.
Mr Kelly said the group is transitioning from a dividend yield focus to a "growth", story. But the coming years will see the group more focused on the US entertainment business, Main Event.
"There are numerous levers we can pull and we will do so in a responsible way," Mr Kelly told analysts.
He announced an estimated distribution of 1¢ per stapled security for the second half of the year ending June 30, 2017, bringing the full-year distribution to 3¢ per security.
"This distribution reflects lower earnings in the Australian business following the disposal of the Health Clubs division and the impact of the Dreamworld tragedy. Free cash flow generated by Main Event in the US continues to be re-invested in the growth of that division," Mr Kelly said.
The overall earnings guidance is $73 million to $75 million, which is down on the previous corresponding period, but the numbers are hard to compare due to the sale of the gyms. The d'Albora marina sale will be settled within the next six weeks, with proceeds expected to be about $110 million.
This has prompted Baillieu Holst to downgrade the stock to a hold recommendation, to align analyst forecasts that Ardent has provided for the first time
"Our price target is now $2.20, from the previous $2.50, and it continues to include a 10 per cent corporate appeal premium," the brokers said.
"We have downgraded the financial year 2017 and 2018 earnings before interest, tax, depreciation and amortisation (EBITDA) by 13 per cent and 8 per cent respectively. The downgrade to the 2018 results from taking a weaker for longer view on theme parks and increasing the bias of new centre roll-outs to the second half of 2018 financial year versus the first half of 2018."
Mr Kelly said Main Event is on track to deliver another record fourth quarter, with expected unaudited revenues of about US$60 million ($A80 million) for the period from April 1, 2017 to June 20, 2017, up 20 per cent on the previous corresponding period.
The like-for-like constant centre (the Main Event centres) sales growth for the fourth quarter is negative, but was still an improvement on third quarter trends.
Mr Kelly said the trend has improved progressively through the second half of the year, with sequential month on month improvement during the fourth quarter.
But he said, after a review of the business, one planned 2017 financial year store opening has been delayed into July and new store openings have been weighted towards the end of the year, with five of the 10 new stores opened in 2017 financial year opening in the fourth quarter.
The update was made amid ongoing tensions between the Ardent board and its biggest shareholder, Ariadne Australia, with a 9.9 per cent stake.
The shareholder, run by Dr Gary Weiss and Kevin Seymour, have called an extraordinary general meeting for September 4, to get four board seats at Ardent, which could give it control. Ardent has rejected the claim, saying the board is looking for independent directors with a focus on the US to help expand the Main Event operations.
in response to the earnings update, Ariadne directors said it was now more "important for board changes".
Ariadne Australia Ltd and Kayaal Pty Ltd note that Friday's ASX update by Ardent Leisure – the fifth by the Company since April – is further confirmation that the Ardent Board has presided over a significant loss of security holder wealth and persistent failings in financial and operational performance,
In a sternly-worded statement, Ariadne directors said: "This ongoing erosion of value has reinforced the need and urgency for Board room change and is why Ariadne and Kayaal have proposed that security holders elect four new directors to the Board at a general meeting of security holders on 4 September 2017".
" All four director nominees have extensive and proven credentials and experience, with Dr Gary Weiss and Kevin Seymour representing Ariadne and Kayaal and their associates and Carl Bradford Richmond and Andrew Hedges independent nominees," the statement says.
"We also note that Ardent has now acknowledged it needs to address several issues that we, as the largest holders in Ardent, have raised during the past several months."
Ariadne says Ardent has had ample opportunity to address these issues in the past – "the delay in doing so has cost Ardent investors dearly, further emphasizing the clear need for strengthening the Board as we have proposed".
"It is also concerning to see Ardent's continued reliance on consultants to devise its business strategy, further adding to already bloated head office costs," the Ariadne statement says.