Ardent Leisure: AGM 2016

With a gauntlet of television cameras set up outside The Mint in Sydney, and what felt like more reporters than shareholders inside the venue, today's AGM of Ardent Leisure was never going to be your ordinary meeting.

With four people dying on a ride at its Dreamworld property only two days ago, the usual AGM arguments about remuneration reports seemed trivial. Indeed, the emotional toll of the past few days was clear to see on the faces of directors, and chief executive Deborah Thomas appeared to be holding back tears as she expressed her condolences to the families of the victims.

With a coronial investigation underway into the cause of the deaths, the company wasn't able to provide much information, other than to say that it's having a ‘significant impact' on the operating profit of the theme park business. There's no surprise about that; we'd expect far fewer visitors to Ardent's theme parks throughout 2017 and possibly into early 2018.

With theme parks operating with high fixed costs, profits will be hit hard even before the impact of any compensation the company may have to pay. There's also the potential for penalties from any criminal investigation if Ardent is found to have acted with ‘gross negligence' — a charge the company denies, pointing out that the ride in question passed a safety check only last month.

Despite the black cloud hovering over the event, business was still conducted with shareholders approving a name change to Main Event Entertainment reflecting its new focus on leisure and amusement properties following the sales of its health clubs and ongoing discussions to sell its marina division.

At the time of writing, Ardent's share price is more than 15% lower than its closing price before Tuesday's accident. Investors should expect this volatility to continue while the investigation continues.

It's been more than 3 years since we last reviewed the stock (giving it an Avoid recommendation at $1.48) and we were due to write it up soon in any case. Following this week's health clubs disposal and tragic events at Dreamworld, we are placing the company UNDER REVIEW. Expect a fuller review within two weeks.