Main Event implements cost-cutting measures amid COVID-19
…records $45-million net loss for Q3
With the entertainment industry still reeling from the fallout of the novel coronavirus pandemic, Main Event Entertainment Group Limited (MEEG) said it had to implement a series of cost-cutting measures as the health crisis slashed profits.
Given the nature of the pandemic and MEEG’S line of work, Chairman Dr Ian Blair indicated that the impact of COVID-19 was pronounced in the second quarter which ended April 30, 2020. MEEG recorded revenues of $286 million and a net loss of $15 million.
MEEG is an event management, production, promotions and digital signage solutions company.
For its third quarter ended July 31, 2020, net loss amounted to $45.5 million and revenues decreased over the previous quarter to $59 million. This also represented an 87 per cent decline in revenues over the corresponding quarter in 2019, which recorded $468.613 billion. Operating loss for the quarter under review was $42.778 million, compared to the $23.162 million in operating income achieved in the corresponding period in 2019.
Speaking at the company’s hybrid annual general meeting on Monday, Blair said that MEEG’S top priority has been to strengthen its financial position to ensure liquidity and flexibility to get through the difficult period.
At the end of the third quarter MEEG had a cash balance of $144 million.
“We started out on a capital expenditure in the last half of the 2019 financial year and the early part of the 2020 financial year. You can see the results of that capital expenditure in the first quarter because it was the highest quarter revenues that we had achieved. Having done that and had this large capital expenditure, the depreciation charged is really what made the profit figure look a bit out of line with the liquidity scenario because we had to write off a higher asset value than normally if we didn’t make that capital expenditure in anticipation of the activities planned for 2020,” Blair explained.
He further indicated that the net losses of the two last quarter is attributed to the over $30 million in depreciation charges.
“We had to take some serious actions to navigate this pandemic. You can see that this is really hard for small companies like Main Event in an industry that has been completely decimated,” Blair said.
“The first factor was estimating how long the effects of the pandemic will last. However long that estimation became of whatever was a reasonable period, we anticipate that it would be twice as long,” he continued.
The chairman noted that main cost-cutting measures included a reduction in planned capital expenditures and the reconfiguring of MEEG’S internal operations.
All team members had a reduction in their remuneration, while some opted for redundancy. The company also determined which team members are essential to work on site and which are best suited to work from home, as well as determining new skills that may be required for any changes post-pandemic.
Blair further added that MEEG anticipated a significant reduction in consumer demand, especially for products of its main corporate clients and had devised strategies to assist customers to navigate this difficult period.
It, however, was able to receive cost reductions from its proprietors but likewise had to give reductions to its customers, which he described as a “gratuitous consideration throughout our industry”.
“It’s not a matter of just reducing cost, it is reducing cost in a manner that will allow us to react when there is a light at the end of the tunnel. I must commend the team members of Main Event for every single detail in terms of cost, revenues and new ideas that were put on the table to ensure that we were in a reasonably good position so that we don’t have to go out and ask for financial support to carry on activities,” he stated.