I started a watch on ASX listed Experience Co (EXP) last year after their acquisition of a string of Cairns based tourism businesses: Raging Thunder, Reef Magic, Big Cat, GBR Helicopters, Tropical Journeys. EXP had previously been Skydive the Beach (SKB) with a business model based on aggregating operations in that sector.

My most recent post followed a profit guidance warning in April after an intense wet season period severely impacted the Cairns business. Experience Co announced FY 2018 results today. This was not well received by investors with EXP down about 5% on robust volume. This appears to be mostly related to performance of Skydive.

Experience actually beat the downgraded April guidance following the wet season. However as we can see here there is a problem in Australian skydiving. Within that it was domestic rather than international visitors. This has been attributed partly to a couple of tandem skydiving fatalities in recent years which includes the Mission Beach fatality last October. A warning on the risks inherent in this kind of business. My guess is also that this would be a business with low repeat customers.

Revenue from other adventure experiences is now close to 50% of the group and this is overwhelmingly the Cairns business. The growth number above is nonsense for comparison as it relates only to the company with acquisitions during the comparison period rather than the underlying business. They do then provide some comparisons for the Cairns business:

Where the businesses were acquired during the course of the financial year the comparison provided is only for the relevant period of EXP control:

Anyway, investors didn’t like it and are now down more than 50% since the start of the year:

In initial posts on Experience I did specifically warn that the reason for following and posting on Experience was a relatively transparent insight into this important sector of Cairns tourism and not investment advice. I also specifically warned on understanding dilution in an acquisitive company. While revenue and profit are up for the year, Earnings Per Share (EPS) is down significantly on issued shares and capital to fund acquisitions.

Previous Posts: Experience washed away in wet season; Experience Results 1H2018; An eye on Experience; Experience on Watch

Uncategorized