Dark February at Airport

Travelling back through Brisbane Airport yesterday a quick check on my budget Acer Spin road warrior discovered the Cairns Airport statistics for February. However by the time I arrived home the Airport web site seemed to be undergoing an update with links moved and all I could find on the performance page was the message “Sorry, there are currently no listings.” Luckily the PDF was still open on the road warrior:

Airport Feb 1

  1. Maybe i’m too pedantic but how does an organisation like Cairns Airport manage to post online a document with such obvious errors in some of the growth percentages without being picked up by somebody? Maybe it will be corrected when reposted?
  2. The numbers and trend are awful. You have to go back to the dark days following the GFC crunch to find a negative domestic month of this size. The -7.9% is correct for the month and now -1.65% annual and falling.

Airport Feb 2

However those early month seasonal factors also come into play as well as recent climatic events. As the largest airport and international gateway Sydney Airport’s ASX listing provides the best timely benchmark. Sydney also posted February numbers this week and the monthly commentary is worthwhile posting on seasonal and capacity factors:

The number of International passengers moving through Sydney Airport in February was slightly ahead of the prior corresponding period (pcp) growing by 0.4%. Domestic passenger numbers were down 2.7% on the pcp.

International passenger numbers grew by 0.4%, which is in line with seat growth through the period. As indicated last month, the shift in the Lunar New Year buoyed January while impacting the February comparison.

International passenger growth year to date is 2.9%, representing close to 83,000 additional travellers through the airport. Last year the Lunar New Year shoulder extended into March, so the shift forward in 2019 will impact the March numbers.

Reduced domestic seat capacity (-1.9%) combined with lower load factors (-0.7%) has impacted the February domestic passenger numbers compared to the pcp. In addition, cancellation rates for the month continue to be higher than usual.

Domestic at Sydney was flat in January so it is noted that they have also experienced a slightly slower negative growth start to the year with international growth also below annual growth in the opening months.

Local media, tourism and lobby groups seem to have finally discovered the slow tourism narrative with the Cairns Post running a campaign on it for a week and we were even feted with a visit from Kate Jones. A Sunday jaunt to Port Douglas (for some Pickled in Port drunken gingers) and a weekday evening wander around the city this month both indicated a quiet March also with some businesses taking the opportunity for a break.

April will be a key month to watch with additional Qantas capacity to Cairns scheduled from March 31. Easter also moves later into April with Good Friday last year on March 30. Hanrahan says if we can’t get a positive growth month in April with a tailwind from those factors then we’ll all be rooned before the year is out.

 

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Dismal January at Airport

No respite in January numbers at the Airport with domestic down -4.7% on the previous year.

Airport January 2019 1Airport January 2019 2Airport January 2019 3

Difficult to know without again any commentary from the Airport. Sydney Airport reported increased domestic traffic towards the end of the month related to pull forward of Chinese new year which should have been a boost for the month. On the other hand January in Cairns was impacted by heavy rainfall and floods with tour operators like Experience Co reporting cancellations.

International held up which may be related to direct Chinese traffic but will have to wait a couple of months for BITRE route data on that.

Experience Co 1H2019

Experience Co half yearly this morning following the recent guidance downgrade:

Adventure Experiences

The growth on the prior period, has been driven by the full period contribution of the 1H18 acquisitions, in particular Big Cat, Tropical Journeys and Great Barrier Reef Helicopters (‘GBRH’).
Overall, with over 98% of our Adventure Experience business located in Far North Queensland our earnings have been impacted by record rainfalls in late 2018 and a softer tourism market, which is reflected in period on period decreases in airport arrivals (both domestic and international). Market commentary attributes a significant driver to be domestic airline capacity and ticket pricing, which is driving down the all important domestic incoming passenger volume, noting that Cairns international patronage often comes via other major Australian centres.
These factors were the primary drivers of the revised earnings guidance issued in February 2019, as these conditions continued into early 2019.

Many of the Cairns businesses were acquired during the previous corresponding period in 2018 so what we don’t get this time is a direct comparison as previously provided, Update on Experience , which flagged very modest comparative growth between peak dry season quarters for the FNQ components.

Perhaps we have a more savvy management with market responding positively to Bob East (ex Mantra CEO) exercising control.

Experience 2019 1

I did log in to the results conference call but was cut off for another call. The results presentation is worth a look and has a trio of interesting graphs:

Experience 2019 2

Not sure on the record rainfall with Cairns Aero 300mm short of the 2000 calendar record with Cyclone Steve the monthly record in February 2000. There is material for a rant post though on the way this has been presented and rainfall statistics.

Most interest is in that FNQ hotel occupancy from TTNQ. Dransfield Hotel Futures is a few months away and not sure when the next Accommodation Monitor from TRA is due. However this indicates that the growth in recent years occupancy has stalled and reversed. That is despite the reduced capacity during the period from the Crystalbrook transformation of the Tradewinds which was returned from December.

 

Friday dump: Reef Casino

Was looking for a Friday dump from the airport but it was Reef Casino (RCT) which got in with an annual result after market closed. $10.1 million is the lowest result since 2010 as flagged in the distribution estimate in December: Hard grind at Reef

Commentary wasn’t as forthcoming as hoped particularly nothing on trading since and into the Chinese new year period.

Complex performance Rental paid to Trust  Total complex rentals to the Trust were 4.4% lower due to more challenging trading and economic conditions in 2018 even as visitations to the casino increased by 6.0%.
Casino 

Electronic games Revenues were 4.0%# lower than 2017. We continued to implement measures and take action to increase our competitiveness in the local market. 

Table games Revenues were 12.8%# higher than 2017. Stronger premium play was in a large part due to an improved Chinese New Year tourist season. Softer grind play was mainly due to an overall softer China tourist market. Hotel 

Room accommodation Record revenues were 17.8% higher than 2017. Successful yield management, product packaging and leveraging off Accor’s global and Australian network continue to be key to a good performance.

 Food and beverage Revenues were 0.2%# higher than 2017. Our food and beverage facilities continued to play a key role in supporting our casino operations.
# On a comparative basis without t he impact of AASB 15 Revenue from Contracts with Customers applied for the first time in this period.

1) Room accommodation revenues are driven by both higher occupancy and higher rates associated with reduced capacity in Cairns for the period which is also mentioned previously in the report and in previous posts here. Observers of NVS/IVS expenditure for TTNQ should note increased accommodation rates in recent years.

2) EGM (pokie) revenue down -4.4% is a stark contrast to the regular numbers posted here for booming pubs and clubs in Cairns: Pokies finally rolling over

It’s also a stark contrast to the most recent report from Star Group (SGR) where the annual results report this week pretty much boasted about gains in EGM share for SEQ and particularly Star/Jupiters Gold Coast.

Insurance was also noted in cost increases.

No Nova News

Commentary in the latest report from WGC to the Singapore exchange:

Aspial 2018Q4

Nothing much changes in commentary except that there have been about 7 additional sales in the quarter which probably isn’t bad given the sales history today and current property climate:

Project Nova City Tower 1
Type Residential & Commercial
Total Units 187
Launch Date 4Q2016 (calendar year)
Units Launched 101
20172Q % Sold* 34%
20173Q % Sold* 34%
20174Q % Sold* 35%
20181Q % Sold* 39%
20182Q % Sold* 50%
20183Q % Sold* 54%
20184Q % Sold* 61%
* % sold based on number of units launched

Still no indication of any construction timetable for Nova and news around the project has been relative quiet of late. A curiosity is sales at Australia 108 in Melbourne which had been as high as 98% before the completion of stage 1 in 2018 but now reported at 89%.

1 Computed based on the number of sale and purchase agreements that have been entered into and still subsisting (less any sale and purchase agreements for those completed units that have been rescinded) or fully settled as at the date of this announcement.

Cairns Business Counts

A quick preliminary look at ABS business numbers count data out today for Cairns Regional Council area listed from bottom to top of industry division losses and gains:

Accommodation and Food Services   -29
Construction   -19
Retail Trade   -19
Manufacturing   -13
Electricity, Gas, Water and Waste Services   -10
Rental, Hiring and Real Estate Services   -6
Agriculture, Forestry and Fishing   -4
Information Media and Telecommunications   -4
Arts and Recreation Services   -4
Mining   -2
Wholesale Trade   -1
Public Administration and Safety   2
Education and Training   4
Not Categorised   4
Financial and Insurance Services   6
Other Services   14
Health Care and Social Assistance   34
Administrative and Support Services   36
Professional, Scientific and Technical Services   49
Transport, Postal and Warehousing   207
Total   263

Cairns business numbers were up 1.9% for the year to June 2018 v 2.4% for Queensland. However almost all that gain was in Transport, Postal and Warehousing category (+207 or +21%) and almost all of that was in non employing businesses with turnover <$50k. Is this Uber drivers or something?

Some Queensland analysis from Nick Behrens

 

All eyes on China

Chinese travellers lead the way down under was how the ABS led with the latest overseas arrivals data. China may have overtaken New Zealand but has slowed significantly from previous levels: Short term arrivals data shows Chinese growth slowing further

To update from last month:

OAD December 1

December is a more average month in the volatile Chinese arrivals but not sure the most recent months haven’t been just slightly more positive?

OAD December 2

Much neglected is the purpose of visit data:

OAD December 3

Education may lag a long third behind Holiday and VFR (Visiting Friends & Relatives) over the year but get a load of those peaks around the university calendar. This was a significant  factor in 2017 correlated with Chinese arrivals. Which is why I think in our FNQ context that maybe we should be looking here:

OAD December 4

Sydney Airport updated for January today and reported January growth in Chinese numbers at 20%. However this was attributed to end of month traffic with the Chinese New Year period moved forward to earlier February. Domestic at Sydney was flat following recent weaker months.

Lots of Cairns stuff due over the next week: Cairns Airport January; Reef Casino Annual Result; Experience Co half yearly; World Class Global including Nova.

 

Pokies finally rolling over?

Booming pokies growth numbers in Cairns finally look to be rolling over in line with broader trends for Queensland.

EGM Jan19

These are the LGA for Cairns and Townsville Councils. Caution around that though as modest 0.8% growth in January for Cairns may be impacted by rain and flooding towards the end of the month. Townsville was down -1.1% on the previous January but most rainfall and flooding has been in February.

Cairns City SA2 (ex casino) was down -4.6% on the previous January. Douglas was down a whopping -20.2% but that was mostly because January 2018 was one of those mysterious bumps with an unseasonal splurge by losing punters that year. Cairns Regional Council ex the City SA2 which has about 60% of operating EGM’s in the region (ex casino) held up with 2% growth for the month.

Reef Casino is not included in any of these numbers which has I think has about 500 or 20% of approved EGM’s within the Cairns LGA. Pokies at the casino have been under pressure with competition from pubs and clubs so total growth for Cairns may be lower than indicated. Will look at the further with the imminent RCT annual results.

I should update previous regional data which showed growth in 2018  was weighted to regions outside SEQ.

 

 

Insurance and Underinsurance

Underinsurance is going to be an issue with events in Townsville. Particularly flood and we are going to see how previous regulatory changes since 2011 work out in practice.

The Insurance Council is constantly on about underinsurance however you can only wonder when your insurer comes back with a contents renewal value which implies you have stripped Harvey Norman of flat screen TV’s in the past year.

This study from JCU is worth a look and bookmark reference: Underinsurance in cyclone and flood environments: a case study in Cairns, Queensland

This is a small sample which is acknowledged. Probably the most interesting bit though was this:

Underinsurance

Spot the anomalies? What would be really interesting though would be if they had thrown in a question on Earthquake risk in Cairns.

Whilst earthquake is not widely recognised as a significant threat to Cairns, our research and the known record of seismic activity along the entire east coast of Australia leads us to conclude that strong earthquake poses the third greatest risk to the Cairns community. This risk is largely derived from the geology of the region. Much of Cairns is built on thick sediments. In addition, the sediments that underlie much of the downtown area are classed as ‘soft’. All these sediments are likely to significantly amplify strong ground motions, even from relatively distant earthquakes. Much of the major construction boom in Cairns took place after the publication of the first Australian earthquake loadings standard in 1979. However, this standard was not used widely in Queensland and, unlike its 1993 successor, did not cover domestic buildings. Nonetheless, many Cairns buildings are earthquake-resistant to a degree, having been designed to comply with wind loading standards from around the late 1950s for engineered buildings and 1982 for domestic buildings.

That report is from 1998.

Experience flushed again

Experience Co is apparently learning the hard way on the vagaries of our tropical climate with another seasonal profit warning ahead of the upcoming half year results. The ugly details:

Experience Co Limited (“Experience Co” or “the Company”) (ASX: EXP) today announces the following trading update, revised guidance, executive leadership and board changes:
1. Unaudited results for H1 FY2019 The unaudited results for H1 FY2019 are summarised as $84.3m revenue and $17.6m EBITDAI. In summary, skydiving pax numbers, revenue and contribution were marginally ahead of management internal forecasts, whilst other adventure activities were behind due to a combination of factors including, softer than anticipated international and domestic visitors in December 2018 and significantly higher than average rainfall for the December month. The full results, with management commentary, will be set out in the ASX Appendix 4D and the Half Year Financial Report expected to be released on 26 February 2019.
2. Revised Guidance for FY2019 The Directors have revised the FY2019 earnings guidance due to the continuation of softer trading conditions in the FNQ other adventure activities, combined with continued adverse weather conditions impacting volumes and earnings in both January and February 2019. We also expect this momentum will have some impact on volumes in the coming months. This severe weather event saw extensive flooding, airline and hotel cancellations and impacted tour operators in the region. Management has reviewed the forward projections for all operations for H2 FY2019 and as a result provides the following revenue and EBITDAI expectations for FY2019 as follows:

Previous Guidance Revised Guidance Revenue $165m – $175m $155m – $165m EBITDAI $37m – $41m $30m – $33m

Further details on the revised guidance will be provided when the Company releases its half year results at the end of the month.

The “other adventure activities” are pretty much the Cairns FNQ businesses: Raging Thunder; Reef Magic; Big Cat; GBR Helicopters; Tropical Journeys

And

3. Resignation of CEO/Executive Director CEO and Executive Director, Anthony Ritter has resigned from the Company as an executive and as a Director, with immediate effect.
4. Interim CEO arrangements Non-Executive Chairman, Bob East, will assume the role of Executive Chairman, pending appointment of a replacement CEO. The Board has commenced a formal process for the recruitment of a replacement CEO for the business.
5. Board changes Founder and Managing Director, Anthony Boucaut (Bowie), will step down as an Executive Director of the Company when a new CEO is appointed. At that time, he will join the Board as a Non-Executive Director of the Company. Bowie is keen to remain involved in the ongoing strategy and development of the business and both he and the Board believe that his extensive experience and expertise will be of benefit to the future direction of the business. The transition to a Non-Executive Director also coincides with his 20-year anniversary of founding the business.

Bob East was the highly regarded former CEO of Mantra Group until the takeover of that company by Accor. East joined the board last year after completion of that takeover and was elevated to the Chair at the AGM in November.

Only just posted at ASX this morning so will have a closer look later ……..

Previous posts: Update on Experience; Experience washed away in wet season