A word from the CEO – from 18 April 2019
The quarter was burdened by 2Entertain and Kungsportshuset. Stable revenues from implemented acquisitions are important for the Group. Group-wide action programmes are in progress. Resolution passed on a fully guaranteed rights issue to boost the financial position moving forward.
The year’s first quarter was characterized by 2Entertain’s negative sales trends for the current 2018/19 season, and the challenges involved in reaching profitability in Wallmans Group’s investment in Kungsportshuset in Gothenburg. This resulted in a marked reduction in sales and earnings compared to the same period for the previous year. Sales amounted to SEK 217 million (277), and profit/loss recalculated according to the earlier accounting policies amounted to SEK -20 million (1), where 2Entertain and Wallmans Group account for equal parts of the negative performance. Other business areas developed in line with expectations. Immersive Experiences delivered a strong first-quarter while Event was weaker than in previous years, but it had long been known that Hansen would not do any volume business during the period with the same calibre as the Volvo Ocean Race.
2Entertain is taking steps to ensure positive development moving forward.
Because 2Entertain’s business model is based on productions in project form, comprehensive efforts are in progress to minimize future risk in the portfolio and to reduce the weight of fixed costs in the company. A number of these measures were announced during the quarter:
- Investments in Germany under own auspices discontinued. In the future, 2Entertain will instead collaborate with BB Promotion, which entails significantly lower risk. During the quarter, 2Entertain was charged with SEK -3 million in this regard, which is in line with earlier announcements.
- Action programmes to reduce fixed costs. The program is aimed at reducing the costs of premises and personnel to provide a total annual saving of SEK 6 million. This is equivalent to 14% of 2Entertain’s fixed costs, and the savings will be implemented gradually during 2019/20.
- Updated risk assessment model. The model is aimed at reducing risk-taking in future musical, theatre and show productions. In addition to the types of productions that will be performed, the model also addresses break-even levels and 2Entertain’s equity interest in various productions.
The above measures provide conditions for a gradual recovery of 2Entertain’s earnings during the year, especially since it is meeting, at the time of writing, its sales prognoses for upcoming productions in the summer and autumn of 2019.
Stable trends in established arenas in Wallmans Group, but burdened by Kungsportshuset
The established arenas in Wallmans Group performed in line with the previous year, with the exception of Wallmans Oslo, which improved its earnings by SEK 3 million. During the quarter, Kungsportshuset lost a further SEK 3 million compared to the previous year. A thorough evaluation of the Kungsportshuset operation is underway in the business area along with associated measures aimed at successively reducing the impact on earnings during the year, and drawing benefit from expertise within Wallmans Group regarding the business models, concepts and operational organisations of established arenas.
Stable revenues from implemented acquisitions play an important part in the Group
Moment Group’s investment in establishing itself in new segments in the experience industry has been crucial for developing the Group’s earnings. Through the acquisitions of STAR, Ballbreaker and Minnesota, the Group added EBIT earnings of SEK 5.5 million (2.2) in the first quarter, equivalent to EBIT SEK 24 million on a rolling full-year basis. These acquisitions were carried out at a total operational evaluation of SEK 127 million, which corresponds to an EBIT multiple of 5.3. All of these operations are also characterized by cash flows evenly distributed throughout the annual cycle. These companies thus constitute a significant part of the Group’s operations today.
The Group’s current action programme to reduce the weight of costs by around SEK 20 million
There is currently a group-wide action programme aimed at reducing fixed costs by SEK 20 million on an annual basis, including the above mentioned action programme in 2Entertain. It involves merging and streamlining shared functions, not replacing a number of positions due to natural wastage, and reducing office space within the Group.
The decision to implement a fully guaranteed rights emission
Financial trends for 2Entertain over recent quarters, the investment in Kungsportshuset with its associated operating loss and the final payment for the acquisition of Minnesota Communication have placed a strain on the consolidated balance sheet. Accordingly, after the end of the quarter, the Board resolved to carry out a fully guaranteed rights issue that will provide the company with around SEK 55 million aimed at strengthening the company’s financial position and further developing the operation. Together, these measures will create conditions for returning the Group to profitability and continuing to realize the full potential of our operations.
Gothenburg, 18 April 2019