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Thank you for standing by, and welcome to the Experience Co Limited FY '22 Results Call. [Operator Instructions] I would now like to hand the conference over to Mr. John O’Sullivan, CEO. Please go ahead.
Thanks, Cameron. Good morning, ladies and gentlemen. With me this morning is Owen Kemp, Experience Co's CFO, and it's our great pleasure to be able to take you through our FY 2022 full year results.
On Page 3 of our pack, you'll see an agenda. And as per previous results presentations, I will start by providing a business update. We'll hand over to Owen to talk through the financial results.
And then I'll come back to close out the presentation by giving you an update on our strategy and also an outlook for the year ahead. And then, of course, we're more than happy to take questions at the end of that session.
Turning now to Slide #5 on the presentation. I think without question, FY 2022 has been, without question, the most challenging operating environment in our company's 23-year history, macro level factors ranging from 2 variants of COVID-19 and inflationary pressures affecting fuel and labor have certainly made it a far more difficult year than previously experienced.
This said, however, we are very pleased with a couple of things that have come out of the year. Firstly, we've seen that our business can continue to pivot to that domestic audience without the meaningful international audiences that have been absent from Australia during the course of this financial year.
And we are also extremely pleased with the way that our new acquisitions of Treetops Adventure and Wild Bush Luxury perform, providing the business with much needed resilience in this new trading environment.
Finally, we also ended the year with a balance sheet that enabled us to absorb the economic headwinds affecting the business. If we now turn to Slide 6. Owen will take you through the financial results of the company during the next section of the presentation, but I just wanted to give you a bit of a top line overview of the financial performance of the business.
During the course of the year, the business generated revenue of $55.8 million with an underlying EBITDA loss for the year of $2.4 million. Our balance sheet at year-end had just over $18 million of cash and cash equivalents with a net cash position of $3 million, and our net loss after tax was $13.6 million.
Turning to Slide 7. I think when we go through those financial numbers, it's really important that we understand what is the underlying business that sits behind all of this. And certainly, since the time that Owen and I have been presenting these numbers to you as a market, our business has changed substantially since 2019.
Operating across Australia and New Zealand, we now have 4 very well-established pillars across Skydiving in Australia, New Zealand, Marine experience is operating on the Great Barrier Reef, family adventure across 15 locations within Australia and a premium adventure business operating in 3 high-end locations across Australia.
It is a business which in a normalized environment, has a customer base of over 1 million people per annum, a far more balanced exposure to domestic customers and a more balanced geographical footprint.
It is also in a normalized environment, combining with the acquisitions that we performed during the course of the financial year, with the work that we did during our strategic review in late 2019 and the underlying continuing business units performance from FY '19.
It is a business in a normalized environment, which can generate over $150 million in revenue and also generate an underlying EBITDA of close to $40 million. So it is a very different business from the one that we started with in FY '19.
Turning to Page 8 of the presentation. During the course of the year, our consistent view has been maintained that international volumes for our business will return during the FY '25 financial year, with the key factors we believe driving this recovery being aviation capacity as well as pricing.
What we've seen through research that's being provided to us by Tourism Australia is that we've seen during the course of the financial year, a good recovery in latent demand for Australia as an international travel destination as evidenced by the increase to 85% of pre-pandemic volumes of [indiscernible] searching volumes for the destination.
We've seen a return of aviation capacity to just over 70% to pre-pandemic levels and forward bookings now at around that 40% mark increasing markedly from a 0 base during the -- at the beginning of the financial year. So we do believe that the story ahead for international volumes remains a positive one.
Turning to Page 9. What we are also very excited about is that this business with these 4 pillars that I outlined before, also is now very well predisposed towards the factors that are driving international visitation from around the world.
And once again, the Tourism Australia research shows that in a post-pandemic environment, international travelers will be looking for attributes that sit well within the Experience Co portfolio.
What this tells us is that our business with our iconic locations our great teams of staff are well positioned to take advantage of the post-COVID travel environment.
Turning to Page 10, before I hand over to Owen to take you through the financial results. Our company continues to look to make a difference in the communities via the embracing of the environment and the communities in which we operate, along with the adherence to best practice governance principles.
We continue to advocate for environmental practices, whether that be our participation in conservation on the Great Barrier Reef we're working to reduce our fuel emissions across our Skydive aircraft fleet. The place within our communities is also very important to us with our contribution as a company to key societal issues such as mental health, well-being and importantly, indigenous employment.
And we continue to ensure that our governance standards as a company are continually improved, ensuring that we are an equal opportunity employer, a leader in workplace health and safety, along with adhering to ASX governance principles.
So with that, it now brings to a conclusion the business update. And I'd now like to hand over to Owen to take you through the financial information contained in the presentation.
Good morning, everyone, and thanks, John. It's all in the tagline here with the financial performance. So what we saw was the most highly disruptive period of the pandemic, and we saw no meaningful international travel in the period. . As a result, in the numbers before you on the left-hand side of the page, the FY '22 and prior year trading numbers are well below the historical profile and potential for the business in pre-pandemic conditions. . In particular, the low volumes impact the results, where it's difficult to see the operating leverage and earnings of the business in normal times. So we had revenue of the year of $55.8 million and an EBITDA loss $2.4 million and a net loss after tax of $13.6 million. And this really reflected the intensity of the disruption and externalities of the year.
Year-on-year, the EBITDA retracted that you'll see on the page. And a lot of this is due to the easing of government stimulus from period to period, but also the impact of externalities on customer volumes and workforce volumes and consequent impacts on operating capacity and efficiency.
As the year progressed, we saw the staffing shortage intensify and [ pocketing ] of our business, which also had -- we had the compounding effect of the rapid increase in fuel prices from February onwards.
Encouragingly, moving through the period, in particular, Q4 and into Q1 '23, we've continued to see volumes improving where conditions allow, commencing from the Easter 2022 holiday period and continuing through the winter school holiday period, and we've seen an uptick in earnings since that point in time.
So now moving into the segments on Slide 13. We'll start with Skydive. The group continues to hold a market-leading position in Australia and New Zealand and a world-renowned brand portfolio.
In FY '22, this segment was the most impacted in our business by border closures and restrictions both on the demand and supply side. In particular, we also had the metro lockdowns of key source markets and population belts in Sydney, Melbourne and Auckland.
This is evident in the chart on the lower left-hand side of page when comparing the recovery profile from FY '21 to '22, where we actually see lower volumes in the FY '22 period.
Part of this was due to Delta and Omicron particularly in the first half and into January curtailing activity. But into the third quarter, we start to see the evidence of the third summer in a row, our peak trading period for Skydive being impacted as the weather closed in.
We saw the economy-wide labor shortage and inflationary impacts, impact this business unit. Remember -- and this took some momentum out of the business in February and March, remembering that we were heading into winter, which is a seasonally low period for Skydive even in a normal year.
We have moved to address the challenge of the externalities, in particular, for our employment base, which means key to operating capacity and efficiency.
We've got a heightened focus on nonfinancial measures such as flexibility and development in what has been a challenging time for our industry and its workforce. These are changes that are designed to make our business better in the medium to long term rather than a knee jerk to short-term labor supply and macro climate conditions.
Clearly, late in Q4, we've seen the destination markets of Tropical North Queensland and Queensland improved markedly for the first time since the emergence of the pandemic back in early 2020. Remembering that these are very key markets for our Skydiving segment, and this will be key to the segment's recovery to pre-pandemic levels.
Notwithstanding these short-term challenges reflected in the earnings for the year and in particular, the second half, the Skydiving segment is very well placed to flex for international visitation recovery and deliver the operating leverage achieved pre pandemic.
Moving into our second segment, adventure experiences, which you may recall now comprises our GBR Experiences, vertical, premium Adventure and family adventure. We saw a strong finish to the final quarter with the regions performing strongly, particularly Tropical North Queensland, which is evidenced on the lower left-hand side of the page, where we can see the Q4 relative to FY '19, been close to 99% of volume.
This followed an extraordinarily tough Q3 for the region on the back of its highest caseload and the first real impact of the pandemic for Tropical North Queensland. The second half also saw strong trading across the Wild Bush Luxury portfolio, and we're particularly pleased with the performance of that acquisition.
We saw Maria Island have a record season. And towards the latter end of the year, Bamurru Plains has been performing particularly strongly. Unsurprisingly and consistent with our Skydiving segment, we did see those operating locations on the Eastern Seaboard from SQ or Southeast Queensland through the South Coast of New South Wales, impacted by the extreme weather events, which a number of you have lived through, and that's been evident in Q3 and Q4 volumes relative to the prior period.
Remembering that Treetops had a large exposure to the Sydney region. From April, we were very excited to launch the new pontoon, Remoora in our GBR Experiences vertical, which has been extremely positive for our market position and also yield.
Moving into July. We've seen a particularly strong month for GBR experiences with over 25,000 paying customers in the month and Wild Bush Luxury having a standout month at Bamurru Plains.
In the near term, we will see the impact of higher diesel prices in our GBR Experiences fleet. But we remain hopeful that these pressures are easing into the year.
We continue to pursue the strong pricing and sales disciplines across this segment that have been embedded over the last 3 years and added to the acquisitions as we brought them into the Experience Co portfolio.
Moving on to the balance sheet, Slide 14 -- 15. We finished the year with a stronger balance sheet that absorbed everything that was thrown our way in the period. Cash holdings were up at $18.3 million and we left the period in a net cash position of $3 million or $9.1 million if we exclude finance leases.
In the second half, we did see a cash outflow, which largely comprised deferred consideration payments of $3.7 million and a higher cash CapEx in the period, which included the part unwind of CapEx creditors, including pontoon and aircraft overhauls that we carried at 31 December.
On the banking side, the cash advance facility with NAB has been extended to the 31st of October 2023, which has been consistent with the practice throughout the pandemic of ensuring that we have beyond 12 months maturity on the banking facilities.
We continue to work collaboratively with our bank on meeting all principal and interest obligations as and when they fall due. So we're in a good place there. With that, I'll hand back to John to take us through the strategy update and outlook.
Thanks very much, Owen. Turning to Slide 17. One of our key focuses during the course of FY '22 and also into FY '23 and beyond has been about our investment in new product, particularly in our Adventure Experiences segment. Up in North Queensland, in particular, this financial year has seen us invest in not one but also two products in that region. . As we've explained to you earlier in this presentation, we are incredibly pleased with the outcome and initial performance of our new Reef Magic pontoon off more reef outside of cans. And we're particularly impressed with its performance from a yield per passenger perspective and is also its overall performance within the marketplace. . Similarly, in the last few weeks, we've also combined with 2 of our business units, Daintree Tour is operating out of Port Douglas and Treetops Adventure Newest Park and Cape Tribulation have just launched our new Ultimate Daintree tour, which incorporates this experience as the cornerstone of the Dai's itinerary plus an award-winning Daintree tour throughout the region.
Both of these are examples of high-yield premium experiences aimed at a segment of the market, which we believe will be more resilient as the market returns to normality.
Turning now to Page 18 as was well documented during FY 2022, our major acquisitions were that of Treetops Adventure, and this business and acquisition was completed on the 1st of December 2021.
As Owen alluded to, we have been very pleased with the way that this acquisition has performed despite the impacts of Omicron, recent weather events in the first part of this calendar year, which did result in 1 site at Yarramundi being mothballed due to flood damage. The business has performed admirably and contributed to EXP's overall EBITDA result for the Adventure Experiences segment.
Very importantly, with regards to new site development, our aim is to continue to grow this portfolio to a number of at least 20 sites by FY 2025 with a pipeline of 2 new sites earmarked for completion during FY 2023, FY 2024 and FY 2025.
Turning now to Slide 19. Our other major acquisition during the course of FY 2022 was that of Wild Bush Luxury and the bolt-on acquisition of the Maria Island Walk, both of these completed during the course of this financial year.
And as Owen said before, once despite the impacts from COVID-19, the premium customer remains resilient and in some ways, immune from the impact of this as well as other inflationary pressures.
Our plans during FY 2023 will be to commence the organic expansion of Bamurru Plains and also the Arkaba conservancy to allow us to take better advantage of this latent demand for this category of adventure experience.
Upon completion of these expansionary projects, this will double our walking capacity at Arkaba, one of Australia's great walks of Australia as well as increase the capacity at Bamurru Plains by 30%.
Turning now to Slide 20. It's also important that our investment in growth has not just been limited to our business pillars, but also we've continued to invest in the platform of our business and in particular, our technology capability.
Since 2019, we have streamlined a number of technology systems within our business from 18 down to 6. And importantly, during the course of this financial year, we now have activated our CRM system, established with HubSpot that now enables us to better cross-sell across the business units and across our customer universe within the company.
This, combined with our upgraded reservations and upgraded digital platforms across our business has enabled us to maintain direct bookings in excess of 60% across our business. We've also made a decided effort to invest in our people.
We realized that one of our competitive advantages within the sector is our ability to attract and retain the best talent in the tourism sector across Australia and New Zealand. And of course, finally, at the heart of everything we do is our approach to safety.
We are never completed on this journey. It's a continual evolution, and we believe our industry leading position is one of our competitive advantages in the sector. Turning now to our strategic outlook on Slide 21. Incorporating these investments, incorporating everything that we've spoken to you about, our priorities around FY 2023 are very simplistic.
Firstly, it's about recovering our business to FY '19 levels and in particular, our Skydive and Marine verticals to pre-pandemic levels is the utmost priority for us.
Secondly, we want to maintain our strong capital discipline and maintaining our strong balance sheet and prioritizing capital allocation to those markets that are positioned early in recovery.
And finally, our growth investment will be targeted expansionary products within our portfolio with an acquisition pipeline focused on accretive acquisitions where they became opportune.
All of this is underpinned by a business that our objective is to fulfill our objectives for growth can produce an EBITDA in a normalized environment of $40 million.
Turning to Slide 22 before we end and open up to questions. Recent trading in July and August has been promising with the business performing to expectations in the absence of major disruption from weather events as well as COVID-19 impacts.
Skydiving across Australia, New Zealand has been in line with our expectations from a volume perspective, but margins have been impacted by the price of Jet A1 fuel and labor, which we are expecting to see ease as the year progress.
Adventure Experiences has continued its strong performance from the second half of FY 2022 and with GBR experiences leading the way and outperforming its July budget off the back of a very strong school holiday period, whilst Treetops Adventure and Wild Bush Luxury all performed to expectations.
Importantly, our balance sheet remains in good health with a net cash position. And as we approach the end of the first quarter by 2023 and look forward -- look toward the second quarter of the year, we remain optimistic about the improving international flow of visitors to Australia as well as the opportunity for the business to take advantage of a less impacted summer trading period.
Our focus as a management team for the remainder of this half will be on managing the inflationary pressures as well as staff recruitment and retention in order for us to take advantage of the international reopening of Australia and also to New Zealand.
Due to continued uncertainty, we will not be providing an earnings guidance for this financial year. Thank you, ladies and gentlemen, for your time. And now Owen and I are very happy to take your questions. Thank you.
[Operator Instructions] Your first question comes from John O'Shea from Ord Minnett.
can you hear me okay?
Yes, John. Loud and clear.
Look, just a question from me. If you could perhaps talk us through the impact on the cost side, perhaps the operating leverage, if you like, in terms of what's happening here with -- obviously, you've seen fuel. You've seen a shortage of Skydiving [indiscernible], other costs and a few other things.
I'm particularly interested in the Skydiving business, but obviously across the business in general as to kind of how we should think about and what's sort of going on there? That's, I guess, my first question.
Yes. And that's a really good question because it goes to the heart of the numbers, so I might take that one on the other one. And I think, John, it's really one of volume. And the first being, let's talk through the volume on the demand and the supply side compared to, if we focus on that Skydiving business unit to start with.
Volume on the demand side, the demand is there, we've obviously had the extreme weather events on the eastern seaboard. But if we just set that to the side, the demand is there when we can operate. So that's an issue, obviously, getting across the [ ditch ] in New Zealand has been a slower recovery, and we can come to that.
Another issue on the volume has actually been on the supply side in terms of labor and that efficiency of just having a workforce that's really enabled to go with the overlaying of -- we effectively had 3 summers without a real summer down here in Australia, which is the key skydiving season. And some -- we're not immune from the economy-wide labor shortages.
So they are the 2 elements that really play out the strongest. So yes, the inflationary impacts of fuel is real, but that's a far lesser concern to us. It's not ideal. Don't get me wrong, but it's really about the operating efficiency. So if you think of like an airline, it's all about load factor.
So the more tandem masters, the more ground staff, the more efficient you can make that is really where the margin will come from. And that's starting to improve as we head into the spring time, which we were hopeful, as John alluded to there, that we're starting to see the signs of the labor market recovering after taking a bit of a hiatus at being smashed around by lack of summers in the weather of recent times.
We're also seeing, John, just to add to that, is that the international workforce for Skydiving in particular, is now starting to return. So we're very pleased with the efforts of our people and performance team in targeting those workers from offshore and also now starting to process that international workforce, which is very, very important to that business.
And also our GBR Experiences business. So as Owen said and as I said during the presentation.
Just a question on the cost.
No worries. That gives me a good color -- can you hear me okay?
Yes, we seem to have...
That's right.
I mean we got some background noise, I think, from someone, Yes. That's okay.
Yes. The second question I had was actually around how the [indiscernible] acquisition has performed and how you're thinking about that within the context of the business. . So I just want to get a bit of a feel for sort of how you're thinking about that and your rollout of new sites and all those sort of things that you've spoken about at the time of the acquisition as to whether you're still happy with how that's going? Is it sort of -- are you sort of thinking more or less or the same? Or how are you thinking about that business?
So I think just to the core of your question, how pleased are we were extremely pleased with Treetops Adventure and Nicolas and his team, and we're extremely pleased with the Wild Bush Luxury acquisition.
And I think the original thesis of both acquisitions were that we wanted to increase our exposure to that good quality domestic customer, which the continuing business units in -- up on the Reef and Skydive, in particular, didn't necessarily have because of their international exposures. So we're very pleased with how both of those business units have performed. In Treetops Adventure we are still very much committed to that rollout that we talked about when we did the investment and we had the acquisition, we've launched the 2 sites during -- for FY 2022, which were Taronga and also Cape Tribulation. We are -- we will be launching 2 new sites during the course of FY 2023.
And as I said earlier, our objective is to grow that portfolio from where it is today, which is 15 locations across Australia up to at least 20% by FY 2025. So we're still very committed to that.
We think that this family adventure segment for our business is a really logical vertical for us, particularly now that we have, I guess, the technological capability to cross-sell within the customer universe of the group. So we're very excited about the prospects not only within Australia, but also across the New Zealand of that category.
[Operator Instructions] Our next question comes from Allan Franklin at Canaccord Genuity.
Couple of questions. Just on New Zealand, maybe a quick and easy one first. Just a reminder on the international mix pre-Covid key source markets and to what extent Australia was a key source market pre-Covid?
Yes. So pre-Covid international for our -- for Skydive in New Zealand for our business was 92% of the customer base, which was around about 60,000 passengers we carried in FY '19. And New Zealand customers made up 8%. Within that, you had 37% of that, that amount were from China as a market.
And then your other key source markets were extensively mirroring what you see in Australia. So Southeast Asia, particularly strong markets, so markets like Singapore, Malaysia, India as well as your traditional working holiday maker -- markets as well such as U.K., Germany, France.
Australia as a market was actually around about the sort of 10% market wasn't a huge component of that. But interestingly, what we've seen in July is that with the reopening of the Australian border into New Zealand and the dropping of pre-COVID testing and the ski season that -- we've seen that Australian market now account for about 40-odd percent of passengers in July and August.
Yes. I mean, yes, correct, that was going to be my next question because there obviously are people now heading into Queens town for season. And yes, ultimately, you are seeing a little bit of an uplift from that. We do need Southeast Asia and Europe still.
Yes. That's right, Allan. So we did put in context July, we had in our New Zealand business. We had the best July we've had since 2019. We saw a very strong uptake from Australians.
But importantly, we also now started to see Singaporeans, Indians because those markets are now opened up, and they're actually now starting to travel to both Australia and also New Zealand. So we are seeing that uptick in August has been a very good month over there as well and should land within expectations.
Yes. Perfect. Next one, just on the North Queensland. You did touch on yield benefits in that period, and it does look like -- Sorry, one second, I think another call coming in.
Pardon me, we have lost connection with Allan. We can just wait a few moments so he can reconnect.
Sure.
[Operator Instructions] Your next question comes from Tina Wilson at Capital.
I just wanted to ask a little bit about how you're thinking about pricing. So obviously, there's a lot of talk about the inflationary pressures. And I appreciate you saying that it's really about utilization. But -- to what extent are you willing to actually sort of put up prices for some of the things.
I think -- thanks for the question, Tina. I think you'll find that we have been very happy to increase prices, and we've done that consistently across our business since we came out of COVID initially in June of 2020 -- sorry, get my year 2021, sorry. . But we -- to give you an example, pricing across our Skydiving network has just recently just increased by, I think it's about a blended average of about 6% to 7% for Wild Bush Luxury and our pricing has increased by about 11%.
Yes. I think it's fair to say -- we obviously, we've got a lot of products across the portfolio, Tina, but it's fair to say that we've been quite active in making sure that we're not just sticking with what we've always done and actually just adjusting to the macro environment. So just maintaining that discipline at price point. And how we want to distribute the product as well through these times.
And I think the other thing to add to that is that we've also maintain discipline on our commission. So our commission rates, which we also reviewed and extensively reduced in cost of the business during Covid. And then as we've come out of that, we've maintained that discipline as well.
We do have Allan Franklin from Canaccord Genuity back on the line.
Sorry, technical issue on my side. I was just interested in the North Queensland assets you are talking to yield. Yield improvements, obviously, a big part of that is the new pontoon, but just interested in if there is a rule of thumb, absolute dollar to try and think about yield moving forward given obviously pontoon came in partway through the period?
Yes. I think overall, look, we're seeing a lot of mix play out as well, Allan. So we're seeing Calypso, for example, you're familiar with the detail of our portfolio so I won't get into that. But Calypso and Reef Magic, so the new pontoon that starting to -- following the pandemic where it was that portfolio's performance was largely driven out of Green Island in Fitzroy. But Port Douglas region performing really strongly and that's a higher price point product.
So we're seeing -- it's more of a mix shift there in addition to the pricing increases that we put through the portfolio. But I expect that to continue. So as we see the international come back into the market, that's where those products, particularly the pontoon will start to sort of over-index compared to the more various style services, I guess, in...
Yes, perfect. And just perhaps the last one on the marketing side, that sort of second half marketing cost, just to what extent that's a decent sort of read on look forward marketing costs and how are you sort of positioned for any sort of specific marketing going forward?
Yes. So we did -- so in the second half, we did have a bit of a higher sort of run rate. We're hoping that the market recovery was going to come in the weather in some of these conditions, Omicron didn't help.
So we launched a few campaigns. So that's a bit higher in that second half of the year. And also, we had the acquisitions coming into it, to a lesser degree. But I think you'll see that sort of just track along at those levels.
And it will really go hand-in-hand with what's happening up in the gross margin as well, Allan, in terms of the direct versus indirect share of business. So it's -- I appreciate it's a difficult one for you guys to follow given we sort of have it in different categories. But yes, you're not going to see anything pronounced in terms of cost increases in marketing in this portfolio.
As we are showing no further questions. That concludes our conference for today. Thank you, everyone, for participating. You may now disconnect your lines.
Thank you.
Thank you.