Thank you for standing by and welcome to the Experience Co HY 2024 Results Conference call. All participants are in a listen-only mode. CEO John O'Sullivan and CFO Gavin Yates will present the results for the half-year, followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I will now hand the conference over to CEO John O'Sullivan. Please go ahead, John.
Thank you. Thank you and good morning, ladies and gentlemen, and welcome to Experience Co's first-half results presentation for financial year 2024. With me this morning is our new CFO, Gavin Yates. Turning to slide three in the market presentation, today's agenda will be as per previous market presentations. I'll provide a short overview of the business highlights for the first half of the year. Gavin will present a more detailed financial update, and I will complete the presentation by providing a trading update and outlook. We, of course, are happy to take questions at the end of the presentation. I'd now like to turn to slide five of the presentation. The first half of FY 2024 was another lively six months for the business, characterized by a number of key events as we continued our recovery journey.
The most significant of this was the impact of Tropical Cyclone Jasper, which impacted our operations across our Skydive, Reef Unlimited, and Treetops Adventure business units from the 8th of December until just before Christmas. Despite the obvious disruption caused by this weather event, our business suffered minimal damage, and our Cairns business units in Reef Unlimited and our Skydive experiences were able to resume trading for the post-Christmas period. Our Port Douglas and Daintree tour operations were disrupted until late January, after which the road between Cairns and Port Douglas was restored. While all operations have now been restored within the business, only our Treetops Cape Tribulation site remains closed and will do until early April, depending on the timing of the reopening of road access into the site.
On the 27th of December, the business announced a new debt facility with the Commonwealth Bank of Australia worth AUD 42.7 million. This replaced the previous facility with National Australia Bank. This new facility provides our business with a more appropriate level of debt financing, working capital, and growth capacity. It also provides a different covenant regime in gross leverage ratio and debt service cover ratios, replacing the minimum cash covenant operations that we have been operating since post-COVID. The group also commenced construction of a new Treetops site in Canberra, the first attraction of its kind in the nation's capital, which will be completed by April. We remain excited about the possibility of organic growth within this side of our business. Finally, we saw continued improvements in the inbound recovery story of both Australia and New Zealand, with aviation capacity returning to near-pandemic levels.
Turning now to slide six. Gavin, of course, will provide a more fulsome update on our financial results for the half. But at a high level, the group generated AUD 62.3 million in revenue. We delivered an underlying EBITDA of AUD 7.1 million and a net loss after tax of AUD 1.3 million. Our balance sheet has cash and cash equivalents as at 31 December of AUD 10.7 million and net debt of AUD 6.4 million. Turning now to slide seven. Across the operating segments of the business, the half was characterized by the following events in each business unit. Skydive in Australia and New Zealand responded encouragingly to the continued improvement in the inbound tourists, which provided further tailwinds for the business unit's revenue and earnings improvement.
Both markets have consistently seen volumes at above 50% of the 2019 levels, and New Zealand remains a standout in terms of pace of recovery, given Australia's larger reliance on domestic customers, which have been affected in the later part of the half by cost-of-living impacts. Our focus remains for this business unit on ensuring load efficiency within our Australian operations. On the Great Barrier Reef, our business continues to trade at approximately 90% of pre-pandemic volumes, notwithstanding the obvious impacts of Tropical Cyclone Jasper for the half, as well as more Australians heading offshore for their holidays, as was the case in 2022. The performance of Reef Magic and Dreamtime Dive and Snorkel were particular highlights for the half, both consistently performing ahead of our expectations.
Treetops Adventure, despite some softness in the second quarter of FY 2024, mainly due to weather, cost-of-living impacts, and the closure of our Cape Tribulation and Taronga Zoo sites unexpectedly, saw an improvement on PCP in terms of number of customers. We've been particularly encouraged by the customer response to Cape Tribulation prior to Tropical Cyclone Jasper, and we remain very excited about the prospect of our new Canberra site. Finally, in Wild Bush Luxury, the category of premium adventure travel has not been immune to the impacts of cost-of-living and outbound replacement travel by Australians. But at an underlying EBITDA level, the business unit was profitable, but it has seen a correction in numbers from the FY 2022 and first half of 2023 trading, which was driven by a post-COVID bubble. Turning now to slide eight.
Australia's inbound story continues to improve, with most key source markets now back at over 70% of pre-COVID capacity. We note that over the last 12 months, China's recovery is still only partially realized, along with that of Japan and Hong Kong, which are both very important markets for our business. Turning to slide nine. Before I hand over to Gavin, slide nine outlines the recovery profile of aviation capacity and the type of visitor that is now coming to Australia. Pleasingly, we are seeing the return of inbound capacity to aviation capacity to close to 100% of 2019 capacity, and this is projected to continue throughout 2024. In addition, we are seeing a more normalized balance of VFR to holiday travel volumes, and these are important metrics for our business.
All of these metrics indicate a great opportunity for EXP to continue its recovery towards our 2019 performance in Skydive and the Reef, as well as our continued growth in our other operating segments. I'd now like to hand over to Gavin to give you a financial update.
Thank you, John, and good morning, everyone. Turning to slide 11, financial performance. The first half 2024 results represent a continuation of the trend of improving earnings and cash flows of the group post-COVID. This is particularly pleasing given it was achieved against the backdrop of a challenging macroeconomic environment, the more gradual return of international customers, and difficult weather conditions, most notably Tropical Cyclone Jasper. Revenue of AUD 62.3 million and underlying EBITDA of AUD 7.1 million represent circa 20% growth on the prior period and was largely driven by an improved contribution from skydiving in line with the ongoing recovery of volumes post-COVID and related operating leverage. Regrettably, as John mentioned, Tropical Cyclone Jasper impacted our earnings during the December school holiday period. Thankfully, due to the excellent work of our team, the impact was minimised, and most of our operations recommenced as soon as possible.
During the half-year, the group was not immune to cost pressures associated with the inflationary environment, and implementing initiatives to improve the efficiency of operations and cost base was and continues to be a key focus of management. Net debt was AUD 6.4 million as at 31 December, and I'll make some further comments on the group's recent corporate debt refinancing on an upcoming slide. Turning to slide 12, first half 2024 revenue. Pleasingly, total sales revenue of the group continued its positive growth trend, with total sales revenue of AUD 62.3 million in first half 2024 representing a record half-year result post-COVID. As illustrated in the charts on the slide, the group's revenue growth was driven by the ongoing recovery of skydiving volumes, which are now circa 60% of pre-pandemic volumes in both Australia and New Zealand.
Adventure experiences revenue was also improved, mainly due to the combined impact of price increases and steady total volumes for Reef Unlimited and Treetops Adventure. Turning to slide 13, skydiving. As noted earlier, skydiving recorded strong growth in revenue and earnings in line with the continued return of inbound markets during the half-year. Australia reported 37,000 tandem pax, which represented 25% growth compared to the prior half-year, with our Wollongong, Byron Bay, Noosa, and Mission Beach drop zones recording the strongest growth. New Zealand reported 16,000 tandem pax, which represented 77% growth compared to the prior half-year, with New Zealand's earlier reinstatement of China-authorized destination status a key driver of the more pronounced growth rate compared to Australia. Pleasingly, average revenue per pax remained strong in both markets and benefited from increased uptake, which were evident, and improving the efficiency of operations remains a continued focus of management.
Turning to slide 14, adventure experiences. Pleasingly, adventure experiences volumes and revenues remained resilient during the half-year. The relatively higher exposure to domestic customers saw volume growth rates slow, largely due to the continued elevated levels of outbound tourism post-COVID and domestic cost-of-living pressures, in addition to the more gradual return of inbound markets. Reef Unlimited volumes remained in line with prior year despite the impact of Tropical Cyclone Jasper, with increased levels of cruise ship activity in the region helping support volumes. Treetops Adventure revenues and volumes were up 4% compared to prior year, despite experiences softening in the second quarter, as John noted, with the half-year performance benefiting from increased contributions from our Cape Tribulation before Tropical Cyclone Jasper and Taronga Zoo Wild Ropes sites since reopening.
Our Wild Bush Luxury business experienced softened the trading market conditions, as John mentioned, and feedback from other operators indicates the category, in general, has experienced a bit of a slowdown following elevated visitation levels during COVID. During the half-year, segment margins were impacted by the loss of earnings due to Tropical Cyclone Jasper as well as cost pressures. With respect to cost pressures, I guess some key examples include the award wage rate increase following the Fair Work Commission decision last year, higher fuel/diesel rates due to the global geopolitical environment, and reduced government levy concessions post-COVID. As I said earlier, management remains focused on improving the efficiency of operations to help mitigate the impacts of some of these factors. Turning to slide 15, balance sheet. On the balance sheet, Experience Co ended the half-year period with a cash balance of AUD 10.7 million and net debt of AUD 6.4 million.
Pleasingly, operating cash flows increased in line with improved performance of our skydiving segment. Investing cash flows were slightly lower than the prior comparable period and mainly comprised CAPEX associated with the maintenance of our aircraft and vessel fleets, renewal of equipment, as well as investment in the new Treetops Adventure Canberra site following commencement of construction towards the end of the half-year period. The improvement in financing cash flows was largely driven by the net proceeds from the refinancing of Experience Co's corporate debt facility. I'll now provide an overview of the refinancing on the next slide, slide 16. As noted earlier, Experience Co entered into a new corporate debt facility package with Commonwealth Bank of Australia in December, which replaces Experience Co's prior facility with National Australia Bank.
The overall CBA facility limit of AUD 42.7 million mainly comprises a AUD 14 million equipment loan facility with a five-year maturity, which was fully drawn at 31 December, and a AUD 20.5 million market rate loan facility with a three-year maturity, of which AUD 2 million was drawn at 31 December. The remainder of the CBA facility package comprises asset finance lease, overdraft, credit card, and bank guarantee facilities with an aggregate limit of AUD 8.2 million. For clarity, it's highlighted that the initial AUD 16 million drawdown under the facilities was primarily used to refinance the NAB bank loan of AUD 7.4 million and the remaining NAB asset finance leases of circa AUD 5.2 million. With respect to the refinancing of the asset finance leases, there has essentially been a transfer in our balance sheet from lease liabilities to bank loans for those that have had a look at the movements across the period.
There's no minimum cash requirement financial covenant under the CBA facility, as John mentioned. Instead, the CBA facility includes gross leverage ratio and debt service cover ratio financial covenants, providing additional flexibility with respect to cash reserves held. We're pleased with the support and flexibility afforded by the CBA facility, which sees the group well placed to capitalize on improved volumes, progressed planned organic growth projects, and complementary acquisition opportunities. Back to you, John.
Thanks, Gavin. To conclude today, I would like to provide a quick trading update and outlook for the business post-half-year trading. Turning to slide 18, management confirms that there is no change to our previously referenced strategy for the business during FY 2024 and that our longer-term view of the earnings capability of the group remains unchanged, noting, however, the importance of inbound recovery as well as potential impacts of the cost-of-living pressures on consumption of travel experiences in both Australia and New Zealand. This will be something that management actively monitors over the remainder of the financial year. Turning to slide 19, the China recovery story into Australia continues, noting that leisure arrivals for the half were at 56% of their 2019 levels. This was primarily driven by VFR visitation post-COVID. Also noted is a steady progression of the growth of in-aviation capacity, which peaked in March.
As I referenced before, this is something we will continue to monitor during the course of the year. Turning to slide 20, for the recently completed Lunar New Year period, solid numbers of customers from Greater China exposed to this market. We saw an improved level of activity. Like the results that we saw in the first quarter during the Golden Week holiday period, the most pronounced impacts within our business were on the Great Barrier Reef island. In New Zealand, we saw a return of approximately 54% of the market relative to 2019 across our business, with the most pronounced impact being felt in Queenstown, which was closer to 68% for the holiday period.
On the Great Barrier Reef, across our Big Cat and Reef Magic businesses, the two parts of our business which are exposed to this market, we saw return rates of 68% of Lunar New Year volumes from 2019, with the most pronounced being within [Dreamtime] which outperformed Lunar New Year volumes in 2019 with the FIT market. Finally, while we saw increased levels of Lunar New Year customers within our Skydive Australia business unit, it wasn't pronounced as a recovery as New Zealand with 46%. We attribute this to the later reopening of the ADS relative to New Zealand within Australia as well as a more gradual recovery in the market. Turning to slide 21, before Gavin and I take questions, we'd like to provide a quick update of our trading in January and a broader outlook.
Our unaudited result for the month of January had the business making an underlying EBITDA of AUD 2.8 million despite the continued disruption to our reef business caused by damage in the region due to Tropical Cyclone Jasper and weather impacts across the eastern seaboard, which disrupted our skydiving business unit. Both New Zealand Skydive and our Reef Unlimited businesses exceeded their budgeted underlying EBITDA targets, while Skydive Australia and Treetops Adventure were both profitable at the underlying EBITDA level despite the impacts of weather, while Bush Luxury had a shoulder season and had outcomes closer to management's expectations. As we approach the remainder of calendar year 2024, management's focus will remain on the following.
Firstly, continuing the recovery of our Reef Unlimited and Skydive business units towards their 2019 levels, focusing on the growth of our Treetops business unit with the opening of Canberra and continued assessment of other new greenfield sites. Management of our cost base to ensure improvement in our margin efficiency. As has been consistent with other results, we will not be providing guidance for FY 2024. Thank you, and we're very happy to take your questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Allan Franklin from Canaccord Genuity. Please go ahead.
Yeah. Morning, guys. Thank you for the time, and thank you for all that detail that came through. There is a good level of context there. But just to sort of jump in with a couple, if I may, just on the Treetops side of the business, just help us sort of think about the next sort of couple of quarters in terms of what you think is sort of cycling period on period. And I guess we get a level of sort of tail benefit from Cape Tribulation and Taronga coming through. And then the second part to that is just how you're thinking about activating the domestic audience. Yeah. Does it help drive and/or keep volumes cutting through?
So the second part of the question's around Treetops Adventure or just more broadly?
Oh, sorry. Both. Sorry. Both just relating to Treetops. So just sort of glancing over the third quarter and fourth quarter in terms of, yeah, if you think there's anything particular to draw out in the PCP volume positives or minus.
Yeah. Yeah. So I think on the—I mean, the third quarter and fourth quarter for that business unit, particularly in terms of the seasonality, it's really centered around that April school holiday period. So that is the key trading that is the key trading month for this business unit as we go through the remainder of the financial year, as well as, obviously, Saturday and Sunday trading within the business in those non-holiday periods. So really, for us, Allan, the way we're thinking about that at the moment, we're still into February. As I said, January was disrupted by a lot of the heat conditions that we had in New South Wales as well as some storm activity on the eastern seaboard, which in particular affected the Sunshine Coast location, also locations like Coffs Harbour, which are traditionally locations that do quite well in that month.
So we're just waiting to see how February washes out. There is a little bit of softness in the numbers, particularly around some of the sites that are in demographic areas that you'd expect to be impacted by some of the cost-of-living pressures. So what we are looking at is a number of initiatives that we have been activating in and around more family packages being available to the market, targeting more aggressively school groups and birthday party groups to put into the market, as well as now with Taronga fully opened, we think there's some opportunity there to try and activate some corporate markets with our partners at the Taronga Conservation Society. So really, for us, the key month we'll be looking at will be April, particularly in that Easter trading period and then going into the school holiday trading period.
As I said earlier, we hope to have Cape Tribulation back in time for at least part of that school holidays period because what we found pre-cyclone was that that site was actually really performing well on a PCP basis.
Yeah. Sure. Thank you. And then just on the adventure experiences, I mean, top-down, I appreciate there's a fair bit going on there, but no doubt you lost a level of revenue, which perhaps impacted margins towards the back end of the period. Perhaps just sort of touch on that if you can and/or sort of how you're thinking about sort of cost pressure in that grouping.
Yes. Thanks, Allan. So just with respect to with respect to, I guess, the first part of the question in terms of tropical cyclone, so there was obviously an impact of the disrupted trading towards in December. And I guess moving forward, obviously, most of our operations have now recommenced with the exception of, obviously, Cape Tribulation. So we're hopeful that the impact on margins moving forward, that that sort of will dissipate. We still have seen some impact over January, over the period. Our Port Douglas operations have been a bit softer relative to Cairns, but as I said, sort of some of that stuff is getting a little bit easier as visitation returns. I think in terms of the cost pressures, I guess it is heavily leveraged to heavily leveraged to the return of volumes.
I guess things we can control is looking at things like our rostering and just making sure that we're doing that efficiently. As volumes sort of recover, that we're sort of continuing to sort of monitor those rosters and just to kind of maintain margins as best as we can. Wages cost is, as you would expect, one of the largest if not what's the largest cost component of that division. It is an area where, obviously, we're focused on and just making sure while volume is a little bit choppy at times that we're sort of managing those rosters accordingly.
Yeah . Sorry. Just one other quick one. We're down to get to see the sort of clean profitability showing through just from New Zealand specifically. But are you sort of confident to seeing what you're seeing now, seeing some of the volumes coming through, that you're starting to see the benefits of operating leverage showing through and I guess just an underlying confidence that the sort of margin profile, say, in that New Zealand business can kind of get back to where it was historically?
Yeah. Certainly. We are seeing that. I mean, to give you an idea, the efficiency ratios that we're seeing in that business unit at the moment is that it's operating at around 7.1 per load, which, as you know, is really when you start to get into those high sort of 20% margins. So it's certainly now starting to show that flex that we know that that business unit can do. In Australia, it is still a little bit more inconsistent across the different sites just because of the way that recruitment of tandem masters has worked out and also demand in each of the different sites it's varying. So that's where we're spending a lot of time on working with the operational teams in restoring that. But within New Zealand, yes, we are seeing that return of the return of those margins.
Helpful. Thank you.
Thanks.
Thank you. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question is from Julian Mulcahy from E&P. Please go ahead.
Just a few for me. Firstly, the cash flow statement showing lease payments up quite a bit to AUD 8.4 million. Is that because that figure includes that repayment of the NAB facility, or is it a step up?
That's correct. So just getting in front of me. So yeah, as I mentioned, the step up there is the repayment of the outstanding principal balance with respect to the NAB asset finance leases. That's why I sort of tried to clarify that in some of the opening remarks because, yeah, essentially, there's been a movement in our balance sheet from lease liabilities to bank loans.
The underlying number of three, is that the sort of run rate on a half basis for lease payments?
Yeah. So I guess at a high level, nothing is materially changed in terms of, I guess, if you sort of extract out the lease liabilities.
What sort of CapEx are you expecting for the second half?
Yeah. Look, I think the run rate—I mean, I think the key change is, obviously, we've got the balance of we are investing in our Treetops Adventure experience. We expect it to be similar to what we saw in the first half with maybe a slight uptick just because we have got some of the completion around the construction of the Canberra site in particular.
Also finally, where is sort of headcount now? And is it getting easier to find people, or still a bit of a struggle? I know you talked about the Skydiver guys, but just generally?
Generally, it's getting easier, and it has gotten easier as we've gone through the recovery or as we've come out of COVID. But it does now, and now we're getting down to the point where it's varying by location. So we're obviously a business that operates across 30-odd locations across both markets. So in places like our Treetops sites, it's a relatively generic type of labor set that we need. It's fairly easy to find those staff and put them into the sites. But say somewhere like the Great Barrier Reef, it can be more challenging because you've got accommodation shortages in locations like Cairns, for example, and the same over in New Zealand where sometimes you have parts of the year which are more challenging than others. But overall, it's become far easier than it was this time last year.
There still are parts of the business where we're focusing on that because it is a little bit more difficult than other parts.
Cool. And the current headcount number?
The current headcount number, it's roughly around 1,200 across the business. That's across full-time, part-time, casual, and contractors.
Okay. Great. Thanks, guys.
Thanks.
Thank you. The next question is from John O'Shea from Ord Minnett. Please go ahead.
Morning, guys. Thanks for taking my questions. Firstly from me, just wanted to give an indication of, particularly within the skydiving business, to what extent have you had to change your employment structure for the tandem masters? Traditionally, it was obviously a casual type per jump model. Has that kind of changed given the labor challenges you've had? And how much of that cost is kind of baked into the business, if you like, if that's the way it's gone?
Yeah. So within the Australian business unit, we have had to change the employment model. So we have moved them away from the previously operating contractor model to a more traditional employment model where we have a number of full-time staff. Well, we have some key members within the drop zone like your operations manager or your chief instructors are full-time. You then have part-time, and then you have casualized workforce as well. Basically, though, the model within that, though, is that they still operate. In effect, it still operates in much the same manner that the contractor model did in that after they've done a certain level of jumps, they start to then earn commissions, whereas previously, it was basically a piece pay from the start. This one has some added fixed costs into the business.
But then, as volumes improve and as efficiencies improve, then the model works out pretty much on a like-for-like basis with the exception of, obviously, there are some on-costs that the business carries. Most of that cost now is largely embedded into the business, and it really gets back to then getting the volumes within the Australian business unit to basically but volumes in the business unit to then have that model kick into the same way as how the traditional contractor model used to.
Thanks, John. Do you have any sort of sense as to how much, obviously, of course, I understand that obviously, as the efficiency improves, then you'd expect that to normalize. But do you have a bit of a sense? I'm not going to hold you to it, but just have a sense of how much we're talking here is sort of loaded up in terms of like-for-like, in terms of the cost basis? Does it cost you like AUD 1 million a year, AUD 500,000 a year? What are we sort of talking? I'm just throwing numbers out there to mean nothing, but. You there, John?
Yeah. Sorry. Look, it's a difficult one to answer, John. I mean, it'd probably be a bit irresponsible to start throwing numbers like that around on a phone.
No, that's fine. That's fine.
Certainly, as I said before, once you get that efficiency level back up into the same level as what we got in 2019, you start to see the models level out.
Normalize. Yep. No worries. Now, the second question for me, thanks for that, is on the Treetops side. Obviously, I noted that you're planning to open your 16th sort of site. Of course, this is an area that you continue to mention as being an important part of your future strategy. I note that facility within your new banking arrangements that's dedicated to acquisitions. In an ideal sort of world, how sort of how mature is that market in Australia? Do you think it's early days? Do you think it's sort of part of the way through, or? Do you understand what I'm asking?
Yeah. Yeah. No, I think it's relatively early days, and I think there's a great opportunity for EXP to sort of continue to add scale to that business. And then the other thing we're also looking at within those sites is then adding additional activities within those sites so that we get greater dwell time on site, and then we can start to build ancillary revenues in and around those parks. So at the moment, your average dwell time is probably anywhere from an hour, three-quarter, to sort of 2.5 hours. You'd like to get that higher so you get more ancillary spend, similar in the way that we do, I guess, with Skydive, with video and photo. And the key to that is adding sort of more activities into the existing footprints of the existing sites.
So that's where we're focused on. We think there's still the opportunity to do more parks within that business unit. So the experiences have been around for some time, but it's a relatively, I guess, new business in terms of its size and scale and the category.
Yeah. Thanks a lot, John.
Thanks, John.
Good from me.
Thank you. There are no further questions at this time. I'll now hand back to Mr. O'Sullivan.
Well, thank you once again, ladies and gentlemen, and look forward to seeing many of you on our roadshow over the coming days. Thank you.
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.