Tourism companies show signs of recovery as losses alleviated

Tourism companies show signs of recovery as losses alleviated

Great Ocean Road (courtesy of Tourism Australia).

Green shoots of recovery have appeared across the tourism and entertainment industries this week, with several companies reporting encouraging half-yearly results.

After what has been a brutal couple of years for the sector, with travel restrictions and lockdowns being imposed due to the pandemic, there are now tangible signs of optimism beginning to emerge for the industry.

Rebounding to pre-pandemic levels is still a distance away. Still, with the vaccine roll-out in full swing and Australian borders re-opening to international tourists, there does appear to be light at the end of the tunnel.

Dreamworld owner Ardent Leisure (ASX: ALG), caravan and motorhome business Apollo Tourism & Leisure (ASX: ATL), peer-to-peer recreational vehicle (RV) marketplace Camplify (ASX: CHL), travel and tourism operator Flight Centre Travel Group (ASX: FLT), and travel-destination company Helloworld Travel Limited (ASX: HLO) have all released half-yearly results during the week.

This is Business News Australia’s wrap of this week’s notable earnings results in the tourism sector.

Ardent Leisure

Ardent Leisure cut its net losses from $82.3 million in 1H21 to $36.8 million as it reported a strong trading performance of its US-based Main Event business, which yielded a US$98.4 million (109.1 per cent) increase in revenues.

“Main Event has continued to perform above pre-COVID levels, and we are optimistic that this positive momentum will continue into the second half of FY22,” noted Ardent Leisure chairman Dr Gary Weiss.

Back in Australia, the Sydney-based owner of one of the Gold Coast's most iconic theme parks increased its operating revenue by 41 per cent to $18.5 million in its theme park and attractions division, largely due to increased pass sales and attendances at Skypoint, Dreamworld and WhiteWater World after they were shut down for much of 1H21.

The opening of the much-anticipated Steel Taipan rollercoaster, Dreamworld’s largest-ever single attraction investment, in December 2021 has been well-received, which the business hopes will contribute to unlocking pent-up demand in local, interstate and international tourist markets.

"The recent reopening of Queensland borders, easing of restrictions and successful launch of the Steel Taipan rollercoasterin December 2021 has seen the Theme Parks & Attractions business pick up demand in both local and interstate markets during the latter part of the period, however this was somewhat dampened by a surge in Omicron cases and impediments to travel related with state government COVID-19 testing requirements," Weiss explained,.

Ardent's theme parks and attractions chief executive officer Greg Yong said Queensland's reopening of borders and the lifting of some restrictions in late December were both warmly welcomed, however they coincided with the Omicron wave and difficulties related to state government COVID testing and isolation requirements.

"Despite this, the business has seen increased ticket sales and attendances for the period, with January and February results suggesting demand is improving for leisure experiences," Yong said.

“While it was pleasing to see our businesses operational for most of the half, demand was significantly impacted due to the Delta wave and associated border and public health restrictions.

“Although the businesses continued to incur significant costs while trading, this was not supported to the same extent seen in the earlier stages of the pandemic when the Australian Government-subsidised businesses through the JobKeeper scheme.”

Local recurring revenue streams have been developed to supplement admissions as the business manages its cost base. A new Spring Country Fair augmented record attendances at the annual Winterfest and Happy Halloween events.

Expenses increased from $24.7 million to $32.3 million over the period in the division, which saw the attraction Buzzsaw dismantled and included spending on a new website and payment process. Overall corporate costs increased to $4.1 million, up 27 per cent, mainly due to increased insurance costs.

ALG shares were up 17.16 per cent to $1.57 at the close of trade, returning to levels last seen in November.

Apollo Tourism & Leisure

Apollo also managed to reduce the scale of its losses with a result that was $2.2 million in the red, compared to a loss of $7.5 million in 1H21 as revenues from recreational vehicle (RV) sales mitigated the loss in rental income.

The business looked to manage its liquidity issues through selling some of its fleets, undergoing a cost restructure and through government support loans as overall revenue decreased 11 per cent to $141.6 million.

The business drew down $29.2 million in government COVID support as RV sales in Australia were impacted by the closure of several dealerships during lockdowns and supply chain issues affecting the company’s Brisbane manufacturing plant.

Planned fleet sales following the summer season in Canada and Europe were put on hold to preserve fleet numbers for the 2022 summer seasons in response to supply chain constraints reducing RV manufacturers’ ability to fulfil orders.

“COVID-19 has continued to disrupt tourism markets around the world, however, we believe the end is now in sight as international borders reopen and countries transition to living with the virus rather than trying to eliminate it,” CEO and managing director Luke Trouchet said

Apollo anticipates tourism to recover once international borders ease.

 “Apollo is ideally placed to service international and domestic guests looking for “COVID safe” ways to explore the great outdoors with family and friends,” Trouchet said.  

“We have now seen international borders opened in all of our operating regions, except New Zealand, and we expect bookings from our key international partners to grow steadily throughout the remainder of 2022.

“With strong RV sales demand, a growing forward rental book, and a lower cost base, Apollo is well placed to benefit from the reopening of domestic and international borders and return to profitability.”

The Queensland-based company completed a merger with Tourism Holdings Limited (NZX: THL) in December 2021.

“With significantly improved market conditions, both Apollo and thl are ideally placed to move forward on a strengthened combined basis, should the merger be approved,’ Trouchet added.   

“In the event that the merger does not proceed, I am confident that the worst of the pandemic is now behind us, and we can continue on our COVID recovery path with renewed optimism that we can return to our previously strong levels of profitability.”

ATL shares were up 0.9 per cent at $0.56 at the close of trade.

Camplify

Newcastle-based Camplify - often referred to as an "Airbnb of caravans" - more than doubled revenue to $6.8 million, but didn’t manage to turn a profit with an overall net loss of $2.8 million.

The business is partly 17.9 per cent owned by Apollo.

Transaction volumes grew 61.6 per cent to $22.9 million as the peer-to-peer digital marketplace highlighted several positive metrics, including a rise in total bookings of 24.7 per cent to above 17,300.

Currently operating in Australia, New Zealand, Spain and the UK, the cash burn was roughly $1.8 million, with the company retaining $19.3 million in the bank.

Revenue growth grew by 83 per cent, driven by hirer revenue (HR) growth of 64 per cent and premium membership (PM) and insurance growth of 115 per cent. Van sales accounted for $824,000.

Gross profit margins on premium membership and insurance sit at 28 per cent, meaning hirer revenue margins of 77 per cent are the key metric Camplify will hope to chase.

“Camplify has delivered a strong result in the first half of the year for FY22, positioning the company to continue our excellent growth trajectory,” said CEO Justin Hales, winner of the Australian Young Entrepreneur Award - Hospitality & Tourism in both 2019 and 2020.

“During this period, travel was challenging due to restrictions placed on consumers as Delta impacted our key markets during key holiday periods. Having successfully weathered this storm and shown strong growth, Camplify is well-positioned with our healthy balance sheet to continue our objectives," added Hales, whose company listed on the ASX in July 2021.

“With international travel returning and more and more restrictions lifting, Camplify has built into a true player in the RV rental segment in key markets.”

In October, Camplify announced its first proposed acquisition of Mighway and SHAREaCAMPER (NZ & AU) from Tourism Holdings Limited (thl). A decision by the New Zealand Commerce Commission is expected in March 2022 as the purchase is still under consideration.

Capturing Australian sentiment towards future tourism, the half-yearly results predict 35 per cent of Aussies are dreaming of their next holiday, up 4 per cent from November 2021 – with 41 per cent of those recipients thinking about travelling to New Zealand in the next two years.  

CHL shares rose 4.45 per cent to $3.05 by the close of trade today, up 115 per cent on their IPO price of $1.42.

Flight Centre

Flight Centre reported it had doubled its revenue during the December half, with that trend continuing into 2022.

Flight Centre expects the EMEA (Europe, Middle East and Africa) and America’s businesses to lead the recovery as it targets a near-term return to profitability.

“After two years of lockdowns and heavy restrictions, we are now seeing the strongest indicators of a return to normalcy. Borders are now generally open, and some governments, particularly in Europe, are starting to treat the virus as endemic,” Flight Centre managing director Graham Turner said.

“Changes are happening at pace – we are seeing positive new developments relating to travel every day.

“Confidence in the recovery is building, and momentum is taking off globally, as we are clearly seeing right now in both the corporate and leisure sectors and particularly in the three regions that materially drive our results – EMEA, the Americas and Australia.”

Confidence in the rapid recovery in the travel sector is based on Flight Centre’s calculation that omicron concerns are decreasing, travel restrictions are easing, and there is significant pent-up demand from travellers.

Shares in Flight Centre Travel Group (ASX: FLT) fell 12.7 per cent over the past five days, closing at $18.18 this afternoon.

Helloworld Travel

A substantial increase in domestic travel in the last three months of 2021 led to a 45 per cent revenue jump for Sydney-headquartered travel agency Helloworld, with the board hopeful to achieve a "break-even position or slightly better" in the June quarter this year.

The company indicates it will incur $1-1.5 million per month in cash losses for the next three months, but that would still put it in a better position than its statutory loss of $14 million in the six months to 31 December 2021 - itself a marginal improvement year-on-year.

Earlier this week the company reported total transaction value (TTV) grew by 60.4 per cent in the half to $694.3 million due to the relaxation of border controls in key eastern seaboard states, although the Australian TTV segment was running at 20 per cent of pre-COVID levels.

The business holds $87.6 million in cash, down $43.4 million from June 2021, with external borrowings of $71 million.

Helloworld announced in mid-December that it had entered into a binding agreement to divest its corporate and entertainment travel business in Australia and New Zealand to Corporate Travel Management (ASX: CTD) for an enterprise value of $175 million.

Helloworld’s corporate travel businesses comprise QBT, AOT Hotels, TravelEdge, Show Travel, Show Freight, APX (NZ) and Atlas Travel (NZ).

The travel-distribution company reports that the sale will strengthen the balance sheet allowing it to pay full attention to its core divisions of air ticketing, network, wholesale and inbound growth across Australia, New Zealand and Fiji.

Keeping cost controls at a minimum, the business did spend on improving its technology suite to benefit customer outcomes, cost reductions and enhanced capabilities.

Outbound international leisure bookings from April 2022 onwards have increased, with the company holding significant forward bookings for the latter part of 2022 and throughout 2023.

Renewing its partnership with Qantas for a further three years, the business will sell the national carrier’s flights until June 2023, which provides some commercial certainty.

Seven Ocean Cruising has been fully integrated into Helloworld’s leisure wholesale business, enabling a new customer offering.

Shares in HLO declined 12.9 per cent over the course of this week to $2.22 each by the close of trading today.

Corporate Travel Management

Announcing its result last week, Brisbane-based Corporate Travel Management (ASX: CTD) posted a net loss of $10.04 million - a significant improvement on the $37.38 million loss a year earlier.

However, the company returned to underlying profitability by recording EBITDA of $18.19 million for the period, up from a $15.19 million loss the previous year.

“The strategic acquisitions we made during the pandemic have transformed CTM into a much larger business with greater exposure to the North America market, which along with the UK market is rebounding sharply,” Corporate Travel Management CEO Jamie Pherous said.

“CTM has a unique combination of personalised service and proprietary technology, which is helping our clients adjust with confidence to the increased complexity of corporate travel.

“Revenue in North America is now above pre-CTM COVID levels, pointing to the potential of the business when the travel market fully recovers.”

CTD shares spiked after the announcement, but like many stocks globally it declined in recent weeks by more than 8 per cent to $22.29 by the close of trade today.

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