Main Event profit weathers year of big spending
Main Event Entertainment Group made 29 per cent more in revenue last year, just enough to give the events company a small boost at the bottom line, despite heavy spending.
For year ending October 2019, Main Event’s sales were up by $402 million to $1.8 billion through strong performance in all group segments.
M Style Rental & Décor nearly tripled revenue to $160 million; and the recently formed M Academy pulled in $16.8 million.
The company’s cost of sales and operational expenses also increased by $405 million, but Main Event hung on to some of the gains with operating profit of $120 million, up from $115 million in 2018; and net profit of $97 million or 33 cents per share, compared to nearly $95 million or 32 cents per share in 2018.
The added spending was due to increases in automobile and fuel expenses, and staff-related costs; but some of the costs related to higher depreciation charges and foreign exchange losses.
Main Event says it recognises “the importance of a lean cost structure” and is looking at ways to bring these costs in line, but says some of the expenditures are linked to the company’s expansion programme.
Main Event, which raised equity capital and listed on the stock market in February 2017, has been expanding the business since. Last year, its capital expenditures nearly reached a quarter of a billion dollars, and the year before that its capex topped $186 million, based on its cash flow statement.
“The increase in administration and general expenditure is the result of management’s actions to take the necessary steps to support our new western division, undertake an organisational restructuring, and implement much needed staff training to facilitate the organisation’s continued growth,” said company chairman Ian Blair.
Even with the substantial increase in direct expenses, which topped $1 billion, Blair said the gross profit margin was is in line with previous year, and that administrative and general expenses, while growing by a nominal $115 million to $533 million, were flat at 30 per cent in proportion to revenue.
He also linked the “flat” 3 per cent growth in net profit to the depreciation of fixed assets for which charges of $117 million were booked, up from $90 million the year before.
As to Main Event’s spending habits, Blair says shareholders should expect the company to continuously invest in capital programmes whenever it identifies market opportunities.
“Our capex will always have to be in keeping with our growth strategy going forward. If not we would have to rely on sub-contractors which is not in keeping with the product we offer to our valued customers,” he told the Financial Gleaner, while declining to give any indication of the payback period for the investments so far.