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Paragon Entertainment – “Trading Update” = Profit Warning, Broker updates

By Steve Moore | Wednesday 8 November 2017


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.


A “Trading Update” announcement yesterday from attractions design, production and fit-out company Paragon Entertainment (PEL) included news of project delays and increased costs – and house broker finnCap (them again) has downgraded forecasts…

The update actually commenced with sales expected to be “broadly in line with the board's expectations at £15.0m”. However, it then noted some project delays, cost overruns and increased overheads - and that “EBITDA for the full year to 31 December 2017 will be significantly lower than previous expectations at approximately £0.7m”.

FinnCap was forecasting £1.5 million and it translates the £0.7 million into a £0.3 million adjusted pre-tax profit. The noted EBITDA and profit also though respectively compare to £0.6 million and £0.4 million the company reported for the first half. Chairman Mark Taylor seeks to reassure that;

“While we are disappointed with the way 2017 has unfolded we remain satisfied that the longer term plan for Paragon is sound and our aspirational objective of achieving revenues of £20 million in 2020 remains an appropriate medium term goal for the business with a focus on high quality earnings rather than growth for growth's sake.

Hmmm. If not wanting growth for growth's sake, why have an ‘aspirational revenues objective’? I also note that, having only recently increased overheads in expectation of improved revenue growth, “the board is now taking steps to rationalise costs”. Is it short-term delay or longer-term issues then? Certainly until that is clearer, I avoid.


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