Ladies and gentlemen, thank you for standing by, and welcome to Experience FY 2019 Half Year Results Conference Call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session, at which time, if you wish to ask a question, you will need to press star one on your telephone. I must advise you that this conference is being recorded today, Tuesday, February 26, 2019.
I would now like to hand the conference over to your speaker today, Mr. Bob East, Chair of the Board. Thank you. Please go ahead.
Thank you. Good morning, all. Thank you for your time today. I am here with Owen Kemp, CFO for the business, with Anthony Boucaut, Managing Director and Founder of Experience Co. We will share the pack a bit today and obviously share the Q&A. Thank you for your time today. As we go through the pack, we will probably call out page numbers. Again, thank you for your time today. Look, from the outset, as a Chairman update, the business is in quite reasonable shape. I think the results are reasonable, too.
Obviously, there has been some substantive changes in the business over the last period of time since taking on the chair role in October of 2018. We have seen a new CFO in Owen join the business. We are obviously having advised the market that we are looking for a new CEO of the business, and I have stood in as Executive Chair for the last few weeks. For the last few weeks. As an overall view on the business and the market it is trading in, it is actually reasonably positive.
The bones of a really great business are certainly in order. With a new management team and a recruitment process underway, we are actually feeling confident of the growth prospects of the business, both organically and then in time as we look further afield for acquisitions. The opportunities in our current trading markets in Australia and New Zealand are very strong.
Tourism continues to grow quite significantly in the Australian market, with 9.2 million visitors and growing at about 6%-7%, and projected to stay on a similar trajectory over the next 5- 10 years. Similarly, New Zealand, particularly Queenstown and the areas we trade in, is performing very strongly.
There is a renewed management focus on systems and processes and building up our capabilities in regions to ensure we have good financial literacy, good data to draw from, good KPIs and tracking mechanisms in place so that as we have expanded this business with those controls and those systems are in place so that we can go on and build the business out from there.
The team is actually an incredibly positive aspect of this business, and we are really delighted with the efforts of all team members with over 1,000 team members in place now. Very dedicated and very tourism-focused. The service culture and the safety culture in this business is really second to none. There are outstanding aspects to this business as we go about improving other parts of the business to realize the full potential of the business. The service ethic and the individuals operating in our regions, it really is second to none.
We do think we can add some shareholder value, and we are excited about the leadership. Aside from all of that, sitting here with Owen and with Anthony Boucaut or Bowie, we're genuinely excited about the prospects of the business. We feel like there's been somewhat of a reset, and we're seeing a lot of opportunities of how we can do things better and how we can go about growing this business and working towards our vision.
If I turn to page five, the announcements have already been made, but obviously we've renewed management. We're in market to look for a CEO. In fact, that has commenced, and interviews have actually commenced. We are well on track to secure a very suitable CEO for this business. My step in as Exec Chair is obviously a temporary arrangement until such time we secure the right CEO for the business. We're really pleased, and it's absolutely vital and integral to this business that Bowie remains in and around this business.
The ASX announcement of a couple of weeks ago detailed Bowie's intention to transition to a non-executive director role once a new CEO is underway. That's a really pleasing and probably the most pleasing aspect for me personally and as a board, as we look at retaining the IP and taking this business to its full potential, to have Bowie involved in the business and adding his significant expertise. As current Managing Director and obviously a founder of the business, that's an invaluable transition for us and one we look forward to.
Similarly, on the same vein, we're really happy with Owen Kemp arriving as Chief Financial Officer. That's a very, very good acquisition for this business and has already made remarkable inroads into this business as we go about unlocking the systems and processes and the financial capabilities of this business. Steve O'Malley in North Queensland is doing a very good job up there, as is Clark Scott, GM of New Zealand.
We just announced recently that Ian Douglas, GM of Corporate Development, is joining us, in fact, next Monday, which is another important contribution to the executive team. The finance people and system is obviously a focus. It's one which Owen is well equipped to handle as he goes about improving the financial functions, increasing disclosure and transparency, and improving processes and systems.
As we get more sophisticated and implement new systems, we should be able to unlock the potential, particularly that we are multi-unit or multifunctional business operating across different jurisdictions and regions. It's imperative that we get these hygiene factors in place, and a lot of them are well underway. With Owen on board, we feel very comfortable that that will progress with some pace. Over to slide six. In terms of the vision and strategy, the core of this business and its intent remains intact.
We are dedicated to the task of becoming the largest and most respected adventure tourism company globally. We fundamentally believe that this is a niche that we can explore and prosper in. It is the highest growth engine of tourism and the visitor economy across the globe. Those seeking experiences or hard and soft adventure, the brag ability, the share ability of those experiences. It's not easily achieved.
It does require very core capabilities in service, understanding the travel and distribution market, understanding the service culture and the safety procedures that go along with operating good, efficient, safe, and well-respected adventure companies. We believe we've got the DNA or the core ingredients to capitalize on the opportunity. We are really well positioned.
We do have fantastic customer focus, and as our systems and processes catch up to our capabilities, we should be able to ride what is effectively a bit of a tailwind in this sector of the market. We think we are well-placed. Over on slide seven, just some financial highlights. The revenue is of AUD 84 million, driving an underlying EBIT of AUD 17.3, obviously up significantly on a like-for-like basis. Sorry, on a period-on-period basis, obviously with some acquisitions late in the first half of FY 2018.
We'll go into more detail of how these businesses are operating. There's been over 92,000 jumps, and in fact, we've had 221,105 customers. We are making some significant penetration into the tourism markets in which we operate. Cash is a really pleasing story out of this. I want to go into more detail, we believe we're getting a very good handle of the cash potential of this business, and we've got good flow-through on that front. Sorry, I'll go to slide eight.
Just to highlight and show on a full-year run rate of the calendar year of FY 2018, the split between Australia Skydiving, New Zealand Skydiving, and Adventure Experiences. Again, you can see we've got a bit of a portfolio effect here as we're not overly reliant on one particular sector or geographic region. We are getting good dispersal. As well as we are in places like Cairns, where we have a multitude of options for our customers, and they can go from one activity to the other.
We are starting to unlock some revenue synergies on that front. That gives you a high-level snapshot. I'll hand over to Owen now to take you through from slide nine on financial performance.
Thanks, Bob, and good morning, all. I guess as Bob opened, the core business is in good shape, and this is reflected in the numbers for the first half of 2019, where you see improvement across all the key metrics in the business. Revenue, EBITDA, and net profit after tax were all up, and I will discuss the drivers in more detail in the coming minutes. However, the main message I want to leave you with here on slide nine is the increase in earnings per share, which is calculated on the volume weighted.
We've taken into account the acquisitions and capital raising in FY 2018, and that's now AUD 0.013 per share on both a statutory and underlying earnings basis. Also down the bottom of slide nine, you will see there net assets per security. Now we're looking at about AUD 0.33 per share, which is a slight growth up on June 30. Moving into slide 10. This is where we get into the trading. The trading there, we see an increase in underlying EBITDA from AUD 13.2 million in the first half of 2018 to AUD 17.3 million in first half 2019.
This is driven, as Bob alluded to, by two factors. Firstly, we see some growth in the skydiving segment across Australia and New Zealand. For the Adventure Experiences segment, we see the full year contribution of the first half 2018 acquisitions, principally being Big Cat, Tropical Journeys, and Great Barrier Reef Helicopters. The growth in Adventure Experiences was somewhat held back by extreme weather in late first half and softer trading conditions in the Cairns tourism market more generally.
When we look at corporate costs, they were largely driven by the June 30, 2018 exit run rate, along with changes in headcount and some cost increases in things like insurance. Moving into the Skydiving business on page 11, we see skydiving underlying EBITDA increase by AUD 0.2 million. This was largely revenue-led growth through jump volume, with Australia up 1.4% on first half 2018 and New Zealand 2.5%.
The average price per jump increased largely on the back of healthy volumes at Wollongong and Queenstown, which are two of our higher-yielding price point drop zones. EBITDA margin was down in the period, which was a combination of operating cost leverage in our Far North Queensland business, which has been impacted by similar dynamics to what we see in the adventure tourism, and increased costs across the startup cycle.
More generally, I should say, there's probably been some changes across corporate and skydiving allocation as the business has matured. For those that have a thirst for more detail on the KPIs, and I know there's a number of you, we've included a summary information at Appendix two for both Australia and New Zealand.
Moving into slide 12. The story here is one of an impact of the Far North Queensland weather. Adventure Experiences, while up on the prior period, has had its trading challenges, principally from the previously mentioned weather and tourism trends more generally. That all said, the segment still produced AUD 9.3 million underlying EBITDA in the first half and remains a core business, with the business being impacted by short-term conditions rather than any fundamental issues. I will pick up on this further in the coming minutes.
Moving into cash flow on page 13, this is a great story as an incoming CFO. We're pleased to report that cash flow for the period reflects an operating cash conversion of circa 100%. I would love to quote the 103% and claim to have a magical business that generates more cash than earnings, but I'll settle with 100. This simply reflects the seasonal pattern of higher cash deposits in advance as at December 31 as a result of the Christmas and holiday peak period compared to the June 30 balance.
Nonetheless, a strong testament to the operating cash flow conversion cycle of the business. CapEx of AUD 5.3 million for the half has the business well-placed. We've included this time some additional information on the maintenance CapEx cycle. Naturally, this will vary from period to period. However, we've included these proxies for what you may see in coming years that will look to guide you through each period. For the FY 2019 period, we're looking at up to AUD 15 million CapEx.
Moving into slide 14 and into capital management. As Bob alluded to, gearing is low at 15% and the net debt to EBITDA at 0.7 times leaves us feeling quite comfortable. The short-term and outlook sees a more disciplined approach to capital management and no immediate need for equity. With that, I'll turn back to Bob and Bowie for the remainder of the presentation and look forward to meeting you over the coming days.
Thank you, Owen. Slide 15. It's the Skydiving snapshot. Obviously, a core to our business. This is a core competency of Experience Co. I think it's safe to say, and I've been in and around this business for about eight or nine months now, this business is the market leader in skydiving generally, but more particularly, the systems, the processes, the safety culture, the protocols, the equipment we use, the customer engagement, the logistics of transport, the activation of video and social.
There's undoubtedly we are significant market participants, but more importantly, market leaders in this space. This sector has stabilized following the unfortunate fatalities of FY 2018. We are seeing the resilience of this business and a return to normal market numbers and behavior. The weather events, look, they have been outlined, and they have impacted numbers to a point.
However, with the portfolio effect and different regions operating, we are seeing a good stabilization in this sector, and we're seeing that continue through to the current month. It gives us a sense that the business is trading nicely, marginally ahead of expectations, and looking that it will go on to greater heights in FY 2020. Over to slide 16 and Far North Queensland.
We have included weather charts here, and whilst it should be assumed that there are significant weather events on occasion in Tropical North Queensland, particularly through the wet season, you can see this has been a particular outlier set of numbers with significantly high rainfalls and a lot of non-operating days, which has obviously impacted the business. Overlay that with the fact that these weather events occurred during peak trading period. It certainly did have an impact on our ability to transact with our customers.
Having said that, Cairns is performing reasonably well. On the positive side, we had some new hotels opening with the Crystalbrook Collection having opened Riley and two more hotel openings imminent. The airport has great capacity, particularly on the international front. On current trading conditions, it's trading soft to marginally down with a constraint on domestic flights, running very high load factors of over 90%. Obviously, pricing and yield is a concern for discretionary spenders in the leisure domestic market.
That is having a marginal softening effect on the Cairns region. We do remain committed to Cairns, and we do believe that as internationals continue to grow, that we are well-positioned to capitalize on the market movements. Our expectations are that a lot of our growth in the medium term will come through better organic systems and processes and unlocking the potential of our very good products in that market. Over to slide 17. I won't dwell on these, but obviously these are acquisitions that came in, and we just want to reset expectations.
Big Cat and Tropical Journeys. We've shown a very simple graph there of expectations moving forward. Not dismissing the capability of these businesses to outperform in our views, but setting an expectation around what a season may look like with good or bad weather associated with that. Looking at FNQ FY 2019, rebasing expectations to somewhere to AUD 7 million-AUD 8 million EBITDA line. Over to slide 18 and the Great Barrier Reef Helicopters.
Again, important we share some information around this asset. The contract with Quicksilver does expire on March 31, 2019. This had not been budgeted to proceed beyond that point on the current earnings and, of course, in the earnings guidance. The Quicksilver contract was a significant portion, circa 40%, of revenue and earnings. Having stated this, management has been working very hard on repositioning the asset to obviously reduce any short-term earnings impact.
There has been a restructure of the cost base. We are targeting more commercial work, and we've got some projects underway to unlock the potential in that sector. Obviously looking at more tourism products, and we've also well progressed on some projects on that front. We are considering an investment or additional fleet investment there to better position our fleet with the potential in the marketplace.
We operate up further north of Cairns, and we've identified areas that we think we can better utilize our fleet moving forward. The EBITDA are expected to be impacted by circa AUD half a mil in the fourth quarter of trading. Obviously, we'll be coming out with more information on this asset as we look to FY 2020 guidance later in the year. It does remain core to our Adventure Experiences. It does still have growth potential, and we remain committed to the Great Barrier Reef Helicopters business. I'll hand over now to Owen just on outlook.
The outlook is quite a simple one. You've probably heard us say throughout the call, no surprise there. The strategy is focus and remains as it always had on growing experiences and experience growth. The key takeouts for us as we look forward are that the core business remains solid, and we're reaffirming the FY 2019 underlying EBITDA guidance issued on the February 13th of AUD 30 million- AUD 33 million for the FY 2019 period.
Over the remainder of the year, you'll see continued improvement in processes and systems, the management team working together, as Bob alluded to earlier in the presentation.
That completes the deck. As a conclusion, the business is in a good sector. The business has component parts that are operating either best in class or developing to be best in class. The skydiving business is very resilient, has stabilized, and we expect to see growth in that sector moving forward. The other adventure activities we have under our banners, we will continue to extract both revenue synergies and cost synergies in those business.
We intend to develop systems and processes that make it easier for us to conduct our activities across different jurisdictions and regions. Finally, we are genuinely excited about the leadership and the management team, and the potential of this business moving forward. It's well-positioned, and with strong leadership, it can really carve out a really interesting niche in the broader tourism market.
The operators that we have on the ground and those that are dealing with customers on a daily basis are truly incredible and they really are the secret sauce to us, delivering great experiences to people on the ground. That shouldn't be lost as we go about transitioning this business at a corporate level, which is where our focus has been certainly over the last few months, and particularly since I've come on as chair since October. We're excited about the business and we look forward to meeting with you and discussing it further.
On that note, we'll hand over to any questions. Thank you.
Ladies and gentlemen, we will now begin the question and answer session. 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 withdraw your request, please press the pound or hash key. Your first question comes from the line of James Tracey from Veritas. Your line is open.
Good morning, James.
Yes, good morning, Bob and Owen. Thanks for taking my questions. The first question is on GBR helicopters. You've outlined that you plan to potentially increase investment there. Why are you planning to put more capital into this business given that capacity utilization seems to have dropped on losing the Quicksilver contract? That's the first question. Second question is on free cash flow. On my calculations, you delivered AUD 8.7 million of free cash flow in the half, excluding the proceeds of the asset disposal.
That's sort of more than double what I was expecting. Can you outline what the working capital cash inflow in the period was and what you expect on a sort of full year basis? To what extent does it unwind? Finally, could you just comment on aspirations for free cash flow going forward? Thank you.
Just on the first one, Bowie will give the detail, but there has been a thorough analysis of the potential in the market. This is in relation to Great Barrier Reef Helicopters, overlaying that with the assets we have in market. Quite simply, we believe we're not in a position or a need for asset disposals. We obviously have activities and plans underway to supplant any lost revenue. We obviously have a number of levers to pull in terms of our own product and our distribution network up in North Queensland.
Second to that, we've also identified greater potential for commercial work with the helicopters. We don't want to go into detail. Some of this is market sensitive. Some of the actions are market sensitive. Needless to say, there's been very thorough process underway. We've known this event was coming for quite a few months, or potentially coming for quite a few months, and therefore our contingency planning has been in place for five to six months.
Okay, if I'm to paraphrase that, you sort of see quite big opportunities in that helicopter area, despite the fact that you've lost one contract, you're planning to sort of invest ahead of that. Is that correct?
Good morning. It's Bowie. That is correct. We have had a look at the commercial opportunities up on the Cape and also around the greater Cairns region. There is a lot of commercial opportunities within that region that previously we haven't really targeted. The business traditionally was mainly a tourism business with an offshoot of commercial capacity. Now the focus will be definitely into the commercial.
There are also a number of tourism activities that we are targeting that previously we didn't put as much energy into. We will focus heavily into those. As well as we're adding some machinery, we will be removing some machinery as well. We will cease with the flying school, which hasn't made profit prior to our ownership or currently. There will be three machines we will dispose of, they will offset the costs of a number of the newer machines. I hope that gives you a bit more clarity.
Yeah, that's perfect. Thank you, Boucaut.
Maybe, James, it's Owen here. I'll pick up tier two of the question, which I think was around the cash flow. I'll try and paraphrase the story here. I think, yes, free cash flow is probably ahead of expectations there, but that's probably more of a capital story than a working capital. Albeit there is a bit of working capital in there. Maybe if I just talk to the working capital that you alluded to, and speaking of that in terms of the operating cash conversion. The EBITDA to operating cash flow.
Look, I wouldn't expect it to be 100% in all periods, but it is the sort of business when you go to it, effectively, I describe it as being similar to a cash book, that as we head into the second half, even accounting for seasonality, it would be something I'd expect to be at least the 80%, but probably around the 90% mark for the second half. You might ask what the key driver is of that. It's gonna be around the deferred revenue. Taking a step back from our numbers, we get a lot of our cash before we actually perform the service. You do have a bit of a timing gap.
Naturally, there's a lot more of that at December 31 than at June 30, just due to seasonal factors in both markets of skydiving and Adventure Experiences. That's on the operating and working capital side. Moving on to the free cash flow side as we go down, you're probably looking more at the CapEx there and what we have in maintenance CapEx. We are tracking sort of lower than what we did in the prior year in that regard.
Look, we're going to have that capital discipline heading into the second half, and that doesn't mean we'll miss opportunities for growth at capital as well, but you'll probably hear us talking about those if we're doing them. I guess things like GBRH, where we're looking to deploy capital, we can get into the semantics of whether that's growth or reinvestment. Ultimately, we'll look to call out those chunky spikes that we might have. We'll well live within our means of AUD 15 million for the whole year of total CapEx.
Okay. That's very clear. Thank you very much, Owen.
No worries.
Once again, if you wish to ask a question, please press star one and wait for your name to be announced. Your next question comes from the line of Mark Carus from Wilsons. Your line is open.
Hi, guys. I'm just interested in the Cairns Airport numbers. Most airports are growing around the country, and just wondering what the major airlines have done to sort of halt the growth of the Cairns Airport. Has there been specific pricing or capacity things that they've done in the last year or two that you guys can detail?
Yeah. They have had growth. It's plateaued now. The biggest consideration with Cairns Airport at the moment is domestic arrivals or domestic capacity. Quite simply, Qantas and Virgin are running with very high load factors, and neither party has been willing to increase capacity over the last period of time. This is reflected in pricing. If you have a look at any of the portals, Webjet or your favorite aggregated portal, you'll see that pricing is reasonably high into Cairns at the moment.
Whilst a lot of the focus is on the international sector, about 70% of the arrivals coming in on domestic flights are reportedly international. You're seeing a constrain on domestic leisure travel and price competitiveness in the leisure market. This has been playing out for some time. It's not a new event, but it's having a bit of a softening effect. I think there's a double whammy there with some really poor weather, and a lot of that last-minute discretionary spend would have gone to other locations given their wet season was particularly bad.
On the international front, they have had some wins, but you'll see that they've also had some losses. China Southern will pull out of that market, and that will obviously give some unwind to the inbound direct out of China. It's not all positive, it's not all negative, but we have a cautious outlook on Cairns. Obviously the next iteration of this may well be increased capacity, and therefore, these things do tend to be cyclical.
Pricing is getting to a point where you would think it would be tempting to put on additional capacity. That's up to the airlines and the airport to negotiate those arrangements.
Thank you.
Again, if you wish to ask a question, please press star one and wait for your name to be announced. There are no questions at this time, presenters. You may continue.
There being no further questions, we look forward to seeing as many people as we can over the roadshow, and we thank you for your time today. Thank you very much. We'll end the call.
Ladies and gentlemen, this does conclude your conference for today. Thank you for participating. You may all disconnect.