Paragon Entertainment Limited, the attractions design, production and fit-out business, has said that its full year EBITDA (earnings before interest, taxation, depreciation and amortisation) will be significantly lower than expected.
In a trading update, York-based Paragon announced that it expects to complete the 2017 financial year with sales broadly in line with the board’s expectations at £15.0m.
The statement added: “At the EBITDA level however, second half performance has been notably impacted, with the result that EBITDA for the full year to 31 December 2017 will be significantly lower than previous expectations at approximately £0.7m.”
The company said that, despite solid growth in its product business, two major projects with high margins which were forecast for 2017 have been deferred to 2018.
Delays and cost overruns on certain projects resulted in less gross margin than was previously expected.
Group overheads had been increased in expectation of improved revenue growth in H2 and into 2018 “in the absence of this growth and incremental margin the board is now taking steps to rationalise costs, manage spare capacity while ensuring that the group is adequately resourced for the future”.
The statement added: “We continue to work hard to improve operational delivery at Paragon; both our contracting and finance teams are now under new leadership and have improved processes to tighten our contract discipline.
“However there has been management distraction, in terms of prolonged contract discussions and staffing issues during the second half which has certainly diverted attention away from several key projects which we had intended to execute on this year. These projects are intended to streamline and improve further our design methodology, procurement operations and management reporting, as well as improve operational flexibility and ultimately margins. The impact of these programmes will now likely only become apparent in 2018.
“The day to day operation of our finance function is now under the control of an experienced full time interim group head of finance, David McCabe. The board intends to make a full time appointment of a group CFO and a suitable candidate is being actively sought.”
The company said it was continuing to pursue the re-location of Paragon to a single site to improve efficiencies and reduce property costs.
The company said it was making “sound progress in this regard”.
Mark Taylor, the chairman, said: “Our enormous growth in recent years necessitates that we take a breath and consolidate.
“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.”
The group’s projects have include the design and build of Titanic Belfast and the thematic building of the Wallace and Gromit ride at Blackpool Pleasure Beach.