EVENT turns a corner in January after heavy losses

EVENT turns a corner in January after heavy losses

EVENT Hospitality and Entertainment (ASX: EVT) would rather close the curtain on the December half when COVID-related shutdowns wiped out revenues by more than $400 million, but investors will be reaching for the popcorn after an encouraging start to 2021.

The company's CEO Jane Hastings says not only were cinemas back in the black in January, but the group's resort in Thredbo Alpine Resort - normally only a money-maker during the winter ski season - recorded its first ever EBITDA-positive January this year thanks to record mountain biking numbers.

"We have already seen the pent-up demand for our businesses, which was reflected in the outstanding result in Thredbo despite capacity restrictions of up to 50 per cent, strong leisure demand in hotels, and cinemas achieving an EBITDA positive result in January despite the Australian nationwide box office being down 50 per cent," says Hastings.

The company reported a $60.2 million loss after tax in the first half of FY21, which would have been greater still if the group hadn't wrangled $155 million in savings from March to December. The bulk of the losses came from its cinema divisions in Australia and Germany, which were $23 million and $42 million in the red respectively.

Meanwhile the cut to normalised earnings at Thredbo were far less pronounced, falling 17 per cent to $23.8 million.

This is in contrast to Hotham and Falls Creek in Victoria, which owner Vail Resorts needed to close due to stay-at-home orders in the state. The US company also owns Perisher in NSW, where poor snowfall negatively impacted results in July, with impacts from capacity constraints despite improved visitation through the ski season.

Hastings points to several initiatives put in place last year to drive future growth across EVENT's various divisions.

"Despite the intense focus on reengineering the business to reduce cash-burn in response to COVID-19, we have also made good progress on growth initiatives," she says.

"The Hotels division is on track to exceed our highest ever year of hotel network expansion and we launched the 'Independent Hotel Collection by Event' as a platform for continued growth.

"Our 'Cinema of the Future' concepts resulted in an increase in spend per customer and a material increase in customer satisfaction scores, at a lower cost to serve."

The company's cinema strategy led to higher spending per customer in the half year, while EVENT recently launched "Cinebuzz on Demand" to leverage its database of 2.5 million movie fans when they are stuck at home.

EVENT notes in the December half only one film - Tenet - grossed more than $15 million at the Australian box office, compared to 10 films in the same period in 2019.

The group attributes the lower numbers both to shutdowns in global markets, but also delays from major studios delaying blockbuster films.

Locally-grown content is going well though, with Penguin Bloom and The Dry taking the top the top two positions at the Australian box office over the recent holiday period; the first time this has ever happened for two Aussie movies.

The Dry is currently tracking as one of the top five Australian films of the last 10 years, and recent surveys from EVENT demonstrate a strong desire amongst Australians to get back to the cinema after a year of binging at home on streaming.

Research undertaken in the December half and updated in February showed 91 per cent wanted to return to the cinema as soon as there is something to see, 95 per cent believe going to the cinemas is safe, and 96 per cent are satisfied with cinema social distancing measures.

Hastings says she is proud of the EVENT team, and confident that the company's research is validated by recent customer behaviour, as people can't wait to see the next blockbusters once they're released.

"Whilst the pandemic makes it difficult to predict the short term, we are optimistic about recovery in the travel and entertainment sectors as soon as the relevant government's vaccination programmes are well progressed," she says.

"For Entertainment, the COVID-19 vaccination programmes in the USA, UK and Germany are providing more confidence that these markets will re-open in time for the northern hemisphere summer period and studios will then release blockbuster films globally.

"Studios generate up to around 40-50 per cent of their revenue from cinemas and the future film line up, as it is currently dated, looks very strong."

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