Viad Divisions Have Disappointing Quarter
By Margo McCall -- Tradeshow Week, 5/8/2006
Revenue and income were down for Viad subsidiaries GES Exposition Services and Exhibitgroup/Giltspur in the first quarter, but they are still expected to finish the year with a profit.
Negative show rotation was blamed for revenue at GES declining to $194.1 million, down $4.2 million from the first quarter of 2005. The general service contractor's operating income of $22.4 million was $4.3 million short of the year-ago levels.
Despite that, GES President and CEO Kevin Rabbitt reported a 10.8-percent increase in same-show growth, a comparison of shows that occur in the same city at the same time of year. A slight increase in exhibitors' material handling expenditures was another good sign.
"We continue to see improvement in the exhibition and event industry and growth in our portfolio shows. Exhibitors seem increasingly willing to spend a bit more on tradeshow activities than they have in recent years," Rabbitt told analysts in a conference call.
Earlier this year, GES established a surcharge to help it absorb the higher cost of carpet, plastic and other petroleum-based products. Rabbitt said customers have largely accepted the surcharge. "They understand that the cost of petroleum is going up," he said.
E/G's first-quarter revenue of $34.7 million was down $11.7 million from year-ago levels of $46.4 million. The exhibit design and construction unit reported a $3 million loss, compared to a $1.8 million loss in the first quarter of last year.
The lower revenues were blamed on exhibitors delaying some tradeshow activity to later in the year. The decline in first-quarter sales followed a sudden surge of booth construction orders in the final months of last year.
"We do not have good visibility over the mix of construction revenue," said Viad CEO Paul Dykstra. "Most companies don't typically build a new exhibit every year, and we don't know which clients will build new exhibits."
Meanwhile, the search is continuing for a replacement for former E/G CEO and President Kim Fracalossi, who resigned in March. Dykstra, who remarked that E/G "continues to be the wildcard," has been temporarily filling that position.
"We're actively recruiting for a new CEO," Dykstra told analysts. "We're really looking for somebody now with a strong sales and marketing background to lead the growth phase of Exhibitgroup."
Dykstra added that there "are great candidates out there" and he is hoping to wrap up the process as soon as possible.
Overall, Viad generated $233.8 million in revenue the first three months of 2006, down from $249.5 million in the first quarter of 2005. Operating income of $17.7 million compared with $22.8 million in the year-ago quarter.
