Thank you for standing by, and welcome to the Experience Co Limited FY 2022 results call. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you'll need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. John O'Sullivan, CEO. Please go ahead.
Thank you, 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 three of our pack, you'll see an agenda, and as per our previous results presentations, I'll 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. Of course, we're more than happy to take questions at the end of that session. Turning now to slide number five 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 two 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. We're also extremely pleased with the way that our new acquisitions of Treetops Adventure and Wild Bush Luxury performed, 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 six, Owen will take you through the financial results of the company during the next section of the presentation. 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 AUD 55.8 million with an underlying EBITDA loss for the year of AUD 2.4 million. Our balance sheet at year-end had just over AUD 18 million of cash and cash equivalents, with a net cash position of AUD 3 million, and our net loss after tax was AUD 13.6 million. Turning to slide seven.
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. 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 four very well-established pillars across skydiving in Australia and New Zealand, marine experiences operating on the Great Barrier Reef, family adventure across 15 locations within Australia, and a premium adventure business operating in three high-end locations across Australia. It is a business which, in a normalized environment, has a customer base of over one 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 2019. It is a business in a normalized environment which can generate over AUD 150 million in revenue and also generate an underlying EBITDA of close to AUD 40 million. It is a very different business from the one that we started with in FY 2019. Turning to page eight 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 2025 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 been 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 Skyscanner 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 zero base at the beginning of the financial year.
We do believe that the story ahead for international volumes remains a positive one. Turning to page nine. What we are also very excited about is that this business, with these four pillars that I outlined before, also is now very well predisposed towards the factors that are driving international visitation from around the world. 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 ten 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 or 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. 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.
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. 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 page, the FY 2022 and prior year trading numbers are well below the historical profiles 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. We had revenue of the year at AUD 55.8 million and an EBITDA loss, AUD 2.4 million, and a net loss after tax of AUD 13.6 million. This really reflected the intensity of the disruption and externalities of the year.
Year-on-year, the EBITDA retracted, as you'll see on the page. 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 in pockets of our business, we had the compounding effect of rapid increase in fuel prices from February onwards. Encouragingly, moving through the period, in particular Q4 and into Q1 2023, we've continued to see volumes improving where conditions allow, commencing from the Easter 2022 holiday period and continuing through the winter school holiday periods. We've seen an uptick in earnings since that point in time. Now moving into the segments on Slide 13, we'll start with Skydive.
The group continued to hold a market-leading position in Australia and New Zealand and a world-renowned brand portfolio. In FY 2022, 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 2021 to 2022, where we actually see lower volumes in the FY 2022 period. Part of this was due to Delta and Omicron, particularly in the first half and into January, curtailing activity. Into the third quarter, we start to see the evidence of the third summer in a row, our peak trading period for skydiving being impacted as the weather closed in.
We saw the economy-wide labor shortage and inflationary impacts impact this business unit. Remember, this took some momentum out of the business in February and March, remembering that we were heading into winter, which is our 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 remains key to operating capacity and efficiency. We've got a heightened focus on non-financial 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 knee-jerk to short-term labor supply and macro climate conditions.
Pleasingly, late in Q4, we're seeing the destination markets of Tropical North Queensland and Queenstown improve 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 the 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, Vertikal, 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 page, where we can see the Q4 relative to FY 2019 been at close to 99% of volume. This followed an extraordinarily tough Q3 for the region on the back of the high 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 SEQ 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. That's been evident in Q3 and Q4 volumes relative to the prior period. Remembering that Treetops has 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 three years and added to the acquisitions as we've brought them into the Experience Co portfolio. Moving on to the balance sheet, slide 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 AUD 18.3 million, and we left the period in a net cash position of AUD 3 million, or AUD 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 AUD 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 were 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 this pandemic of ensuring that we have beyond 12 months maturity on banking facilities. We continue to work collaboratively with our bank on meeting all principal and interest obligations as and when they fall due. 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 2022 and also into FY 2023 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 the initial performance of our new Reef Magic pontoon off Moore Reef outside of Cairns. We're particularly impressed with its performance from a yield per passenger perspective and also its overall performance within the marketplace.
Similarly, in the last few weeks, we've also combined with two of our business units, Daintree Tours, operating out of Port Douglas, and Treetops Adventure's newest park in Cape Tribulation, have just launched our new ultimate Daintree tour, which incorporates this experience as the cornerstone of the day'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 was that of Treetops Adventure, and this business and acquisition was completed on the first 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 one site at Yarramundi being mothballed due to flood damage. The business has performed admirably and contributed to EXP's overall positive EBITDA result for the Adventure Experience 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 two 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. As Owen said before, despite the impacts from COVID-19, the premium customer remains resilient and in some ways immune from the impacts 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've streamlined a number of technology systems within our business from 18 down to six. 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 at in excess of 60% across our business. We've also made a decided effort to invest in our people.
We realize 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. Of course, finally, at the heart of everything we do is our approach to safety. We're never complete 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 2019 levels, and in particular, our Skydive and Marine verticals to pre-pandemic levels is the utmost priority for us.
Secondly, we wanna maintain our strong capital discipline and maintaining our strong balance sheet and prioritizing capital allocation to those markets that are positioned early in recovery. Finally, our growth investment will be targeted expansionary products within our portfolio with an acquisition pipeline focused on accretive acquisitions where they become opportune. All of this is underpinned by a business that our objectives to growth can produce an EBITDA in a normalized environment of AUD 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 and New Zealand has been in line with our expectations from a volume perspective, but margins have been impacted by the price of Jet A-1 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, 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.
As we approach the end of the first quarter of FY 2023 and 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. Now, Owen and I are very happy to take your questions. Thank you.
Thank you. If you do wish to ask a question, please press star then one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star then two. If you are on speakerphone, please pick up your handset before you ask your question. Your first question comes from John O'Shea from Ord Minnett. Please go ahead.
Morning, guys. Can you hear me okay?
Yeah, John. Loud and clear.
Thanks very much. Look, just a question from me. If you could perhaps talk us through the impact of COVID on the cost side, perhaps the operating leverage, if you like, in terms of what's happened here with COVID, obviously, you've seen fuel, you've seen, you know, a shortage of the skydiving instructors, other costs and a few other things. I'm particularly interested in the skydiving business, but obviously across the business in general as to kinda how we should think about and what's sort of going on there.
Yeah, sure.
If that's, I guess, my first question.
Yeah. Yeah, and that's a really good question because it goes to the heart of the numbers. I might take that one on.
Yeah.
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. If we just set that to the side, the demand is there when we can operate. So less an issue. Obviously, getting across the ditch in New Zealand's 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 ready and able to go with the overlaying of, you know, we've effectively had three summers without a real summer down here in Australia, which is the key skydiving season.
Some, you know, we're not immune from the economy-wide labor shortages. They're the two elements that really play out the strongest. 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 operational efficiency. If you think of like an airline, it's all about load factor. The more tandem masters, the more ground staff, the more efficient you can make that is really where the margin will come from. That's starting to improve as we head into the springtime, which we're 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. It's been smashed around by summer lack of summers and the weather in recent times.
We're also seeing, John, just to add to that the international workforce for skydiving in particular is now starting to return. 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, you know, very, very important to that business and also our GBR Experiences business. As Owen said, and as I said during the presentation.
Just a question on the costs.
Yeah, no worries. Thanks for that, guys. That gives me a good cover around the sort of. Can you hear me okay?
Yeah. We seem to have
That's all right.
We've got some background noise, I think, from someone.
That's okay.
Yeah.
That's okay.
Yeah.
The second question I had was actually around how the Treetops 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 of 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. Are you sort of thinking more or less or the same or how are you thinking about that business?
I think, you know, just to the core of your question, how pleased are we? We're extremely pleased with Treetops Adventure and Nicolas and his team, and we're extremely pleased with the Wild Bush Luxury acquisition. I think, you know, 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. 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 acquisition. We've launched the two sites for FY 2022, which were Ku-ring-gai and Cape Tribulation.
We will be launching two new sites during the course of FY 2023. As I said earlier, our objective is to grow that portfolio from where it is today, which is 15 locations across Australia, up to, you know, at least 20 by FY 2025. We're still very committed to that. We think that, you know, that 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. We're very, you know, very excited about the prospects of, you know, not only within Australia but also across in New Zealand of that category.
Thanks, guys. That's it for me.
Thanks, John.
Thank you. Once again, if you would like to register for a question, please press star then one on your telephone and wait for your name to be announced. Our next question comes from Allan Franklin at Canaccord Genuity. Please go ahead.
Morning, John. Morning, Owen. Great to speak again. Thanks for your time. A 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.
Yeah. Pre-COVID, international 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 2019, and New Zealand customers made up 8%. Within that, you had 37% of that amount were from China as a market. Then your other key source markets were ostensibly mirroring what you see in Australia. Southeast Asia were a particularly strong market. 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, you know, 10% market.
Wasn't a huge component of that. 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 Australia market now account for about, you know, 40-odd% of passengers in July and August.
Yeah, I mean, yeah, great. That was gonna be my next question because there obviously are people now heading into Queenstown for-
Yeah
Ski season. Yes, ultimately you are seeing a little bit of an uptick from that. We do need Southeast Asia and Europe to start.
That's right, Allan. We, you know, to put it in context, in July we had in our New Zealand business the best July we've had since 2019. We saw a very strong uptake from Australians. Importantly, we also have now started to see Singaporeans, Indians, 'cause those markets are now opened up and they're actually now starting to travel to both Australia and also New Zealand. We are seeing that uptick. August has been, you know, a very good month over there as well, and should land within expectations.
Yeah. Perfect. Thank you. Next one just on the North Queensland. You did touch on yield benefits in that period. It does look like, yeah. Sorry, one sec, just have another call coming in.
Pardon me. We have lost connection with Allan. We can just wait a few moments and he can reconnect.
Sure.
A reminder, if you would like to ask a question, you can register by pressing star then one on your telephone or waiting for your name to be announced. We will pause momentarily to allow other questioners to register. One moment. Your next question comes from Tina Wilson at EME Capital. Please go ahead.
Oh, hi. I just wanted to ask a little bit about how you're thinking about pricing. Obviously there's a lot of talk about inflationary pressures. I'd appreciate you saying that it's really about utilization. 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. We've done that consistently across our business since we came out of COVID initially in June of 2021. You know, to give you an example, pricing across our skydiving network has just recently increased by, I think it's about a blended average of about 6%-7%. For Wild Bush Luxury, our pricing's increased by about 11%.
Yeah. I think it's fair to say. Well, obviously, we've got a lot of products across the portfolio, Tina. 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. Just maintaining that discipline at price point and how we wanna distribute the products as well through these times.
I think the other thing to add to that is that we've also, you know, maintained discipline on our commission. Our commission rates, which we also reviewed and ostensibly reduced in cost of the business during COVID. Then as we've come out of that, we've maintained that discipline as well.
Thanks.
Thank you. We do have Allan Franklin from Canaccord Genuity back on the line. Please go ahead, sir.
Yeah. Hey, guys. Sorry. Technical issue on my side. I was just interested in the North Queensland assets. You are talking about yield improvements. Obviously, a big part of that is the new pontoon. Just interested in if there is a rule of thumb absolute dollar to try and think about yields moving forward, given obviously pontoon came in part way through the period.
Yeah. I think overall, look, we're seeing a lot of mix play out as well, Allan. We're seeing Calypso, for example. You're familiar with the detail of our portfolio. I'll get into that.
Yep.
Calypso and Reef Magic, the new pontoon are starting to, you know, following the pandemic where it was that portfolio's performance was largely driven out of Green Island and Fitzroy. Port Douglas region's performing really strongly and that's a higher price point product. We're seeing it's more of a mix shift there in addition to the pricing increases that we've put through the portfolio. I expect that to continue. As we see the internationals come back into the market, that's where those products, particularly the pontoon, will start to sort of over-index compared to the more ferry style services, I guess, in our vernacular.
Yeah. Perfect. Thank you. 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-through for look-forward marketing costs. Yeah, and how are you sort of positioned for any sort of specific marketing going forward?
Yeah. In the second half, we did have a bit of a higher sort of run rate. We were hoping that the market recovery was gonna come and the weather and some of these conditions, Omicron didn't help. We launched a few campaigns. That's a bit higher in that second half of the year. 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. It'll 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.
I appreciate it's a difficult one for you guys to follow given we sort of have it in different categories. You're not gonna see anything pronounced in terms of cost increases in marketing in this portfolio.
Perfect. Thanks.
Thank you. As we are showing no further questions, that concludes our conference for today. Thank you everyone for participating. You may now disconnect your line.
Thank you.
Thank you.