Ardent Leisure revenue now above pre-COVID levels

For the first time in six years theme park operator Ardent Leisure (ASX: ALG) is set to record an earnings positive full-year result for FY23, with unaudited revenue of $83.9 million tracking 25 per cent above pre-COVID levels.

This represents the highest aggregate value of ticket sales for Ardent's Dreamworld, WhiteWater World and SkyPoint attractions since FY16, which was just before the Thunder River Rapids disaster that led to the deaths of four people, a tarnished reputation that deterred visitors, and ultimately a $3.6 million fine.

Ardent notes that FY23 revenue per visitor was the highest recorded for many years, and was 54 per cent above FY16 levels. This partially offsets international visitation remaining well below historical levels at just 2 per cent of all visitors, versus around one in five in FY16.

Operating revenue for the last two months of FY23 was up 21 per cent year-on-year, even though there was a slight moderation in attendance volumes during the June half.

"This has resulted in 2H23 revenue being 30 per cent above the prior period, despite macroeconomic headwinds and the business cycling an unimpeded 2H22, which included its busiest Easter period for several years," the company stated.

The company notes that after a December half with an EBITDA of $4.3 million excluding specific items, the business is expected to break even in the June half.

"Consistent with many operators in the consumer discretionary sector, worsening economic conditions have started to reduce discretionary spending and the high inflationary environment has introduced some additional cost pressures for the business," Ardent Leisure reported.

"Management has remained highly focussed on delivering a differentiated and compelling guest experience, while also maintaining a disciplined approach to management of all discretionary costs.

The anticipated positive earnings for FY23, for the first time since FY17, is a "significant improvement" on the EBITDA loss of $15 million in the previous financial year and is "substantially above its FY19 pre-COVID performance".

"While the short-term headwinds of macroeconomic conditions may lead to more moderate growth in the near term, the Group expects performance to meaningfully improve further as it delivers new capital investments," the group stated.

"As international and interstate visitation improves this will boost profitability due to the relatively fixed nature of many operating costs. 

"Management remains focussed on delivering its recently announced pipeline of new attractions to drive incremental visitation and return performance of the business to historical earnings levels."

During FY23, the group announced a pipeline of new rides and attractions worth $50-60 million, to be delivered over the next two years. While some work on these attractions has commenced in FY23, the majority of costs are expected to be incurred in FY24 and early FY25.

By the end of June, cash balances stood at approximately $141 million, and the company is also anticipating the receipt of US$8.8 million from the sale of Main Event.

In its update today, Ardent Leisure also highlighted that management had been working with stakeholders to achieve a preliminary development approval across a 55-hectare site, where in 2021 the group announced plans to establish a $75 million Dreamworld resort.

"Such an approval (if granted) would provide significant optionality and planning certainty for the group to achieve the highest and best use for all parts of its land holdings," the company said this morning.

"This process requires the completion of several complex technical reports and ongoing engagement with the relevant authorities. While it is not appropriate to comment on prospects for an approval to be granted, management to date has received positive feedback and support to move forward with this application."