Investors have been encouraged by EVENT Hospitality & Entertainment's (ASX: EVT) December half results after a strong performance from its cinema businesses helped it return to profit, although the result was propped up by a $56.2 million COVID bridging payment from the Germany government.
The company's bottom line swung from a loss of $31.1 million in the prior corresponding period to normalised earnings of $64.1 million in 1H21, with its Australia-New Zealand entertainment business accounting for more than a $20 million improvement, albeit still in the red.
EVENT’s share price has risen at the time of writing by 4.46 per cent to $15.22, buoyed by expected higher revenue from blockbuster releases during the current half.
Notwithstanding the restrictions across Australian cinema, box office taking increased by 105.9 per cent, with No Time To Die grossing $35.6 million and Spider-Man: No Way Home grossing $79.3 million – making it the fourth highest-grossing film in Australia in the past 20 years.
Customer spending per visit at EVENTS cinemas, including Birch Carroll and Coyle, Greater Union, Moonlight Cinemas, increased by 49.9 per cent on pre-COVID levels, although the business had to contend with no JobKeeper revenue and $1 million in additional COVID costs across Australia and New Zealand.
“In this half-year period, the group navigated materially greater government lockdowns and restrictions than the prior comparable period,” EVENT CEO Jane Hastings said.
“Despite this, the transformation strategies and actions we have completed over the past few years ensured we are agile and able to respond to the ever-changing landscape.
“This is evident in the revenue growth and EBITDA turnaround for the group in this period, which included $75 million of active cost management. Our new business models are already delivering evidence of improved margins which we expect to continue post the pandemic.”
The hospitality & leisure company reported a profit before interest and tax (EBITA) of $64.1 million, from an 1H20 loss of $31.1 million, as normalised group revenue hit $438 million – a growth of 54.8 per cent across Australia and New Zealand.
Divesting underperforming non-core assets has helped cut debt, and since the pandemic commenced in 2020, EVENT has delivered a total reduction of costs of $339 million.
Rising by $93.6 million, statutory profit after tax was $33.3 million for the half-year as EVENT divested $194.4 million of assets including Canberra Civic, Rydges Bankstown and Newcastle cinema and underperforming asset QT Falls Creek.
The business avoided labour shortages, having decided to retain staff in 2021, and food and beverage revenue rose 18 per cent as margins were kept despite increased pressure on costs.
EVENT hotel brands, including Rydges Hotels and Resorts, QT Hotels and Resorts, Atura Hotels and JUCY Snooze, outperformed the market with a robust average rate growth.
New operating models at Thredbo led to record revenue levels before the forced closure of the resort in August.
The board at EVENT is looking to resume dividend payments later in 2022, subject to trading conditions, as the company announced a positive outlook for H2.
“Demand for the cinema experience remains strong when restrictions are lifted and based on the current film line-up and release dates, the group expects second half box office revenue to exceed that achieved in the second half of the prior financial year,” Hastings said.
“Signs of recovery for hotels were evidenced in the December trading period before Omicron, including pleasing growth in the average room rate, and in Australia, corporate travel is expected to gain traction from April.
“Thredbo’s summer season is tracking relatively in line with the prior summer season.
“Overall, our underlying group EBITDA in the second half last year was approximately $15 million excluding the German Government’s November and December 2020 aid program, and we expect underlying group EBITDA in the second half this year to demonstrate a strong improvement on that result, subject to no further government trading restrictions.”
Due to the successful divestment H1 strategy, the EVENT property segment result is forecast to track down in H2, but the business expects all other areas to expand as restrictions ease.
“Our strong balance sheet, underpinned by the property portfolio, and management’s agile response to COVID-19, positions the Group well to navigate through the Omicron wave, leverage pent-up demand once restrictions ease, and invest for future growth,” chairman Alan Rydge said.
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