Main Event Entertainment’s financial performance likely to remain depressed with tighter COVID-19 restrictions 

The results of those Jamaica Stock Exchange (JSE) junior market companies that have embarked on a new financial year have so far been mixed but largely positive, as companies such as The LAB and Indies Pharma exhibited year-over-year improvements in their first quarter performances.

However, the financial performance of companies such as Main Event Entertainment Group remained strained by the containment measures, which have put a damper on social events.

Considering the recent spike in COVID-19 cases and the re-imposition of tighter measures, the performance will likely remain depressed.

Each company is expected to benefit from the gradual vaccine-led economic recovery, while others such as Indies Pharma will also increase shareholder value with plans to boost organic revenue generation.

Mixed Q1 results for The LAB, Indies Pharma and Main Events

Some companies have begun to show recovery in their financial performance through higher net profit outturns during the first quarter of their new financial years. Both The LAB and Indies Pharma saw their net profit for the first three months of their current financial year grow by 37.0 per cent and 20.0 per cent, respectively. While higher revenues (+15.4 per cent) and lower administrative costs drove the gains for Indies Pharma, The LAB benefited from increased earnings from media placement, which was up 16.6 per cent, and production which increased by 92.3 per cent.

This contributed to an overall 35.5 per cent expansion in revenues. According to management, the excellent performance of the sales team and the timely return of highly demanded products were behind the expansion in revenues for Indies Pharma. The overall effect of LAB’s robust revenue growth was tempered by higher direct and administrative expenses due to higher staff costs, on account of increased work volume, repairs and maintenance of production equipment and depreciation and amortization.

On the other hand, Indies Pharma was able to reduce its administrative expenses through cost management but it saw a rise in finance cost of $15.58 million, as it had previously raised funding, which was used to repay the loan of $398 million used for the purchase of real estate and to fund the development and approval of two  new drugs at the Food and Drug Administration in the United States.

On a less favourable note, Main Event Entertainment’s net profit was down 88.5 per cent (or $61.93 million) year-over-year. Nightly curfews and government regulations on public gatherings reduced the demand for its event management services, which caused a 70.6 per cent falloff in revenues, were the main drivers of the contraction in its bottom-line.

Re-imposed restrictions will still weigh on the short-term outlook

Tempering the reduction in net profit was a decline in direct expenses and other expenses (-80.0 per cent and 60.6 per cent, respectively). All companies will benefit from the expected rebound in economic activity, and individual efforts to increase shareholder value, but re-imposed restrictions will still weigh on the short-term outlook.

The LAB should continue to benefit from the gradual recovery in domestic economy and the measures being implemented by the government to improve business creation and MSME expansion and competitiveness, which could stimulate increased demand for its services. However, considering the current spike in cases and the re-imposition of tighter containment measures, Main Event’s performance will continue to be adversely affected.