Experience Co 2019

Previously flagged at Tourism Stock Watch the headline result from Experience Co today was a shocker with a loss of $48 million after tax et al. This was though mostly writedowns in valuations “driven by $62.5 noncash impairments in the Adventure Experiences segment” as the new management team mucks out the stable.

The Adventure Experience segment is Cairns which is where the problems are rather than the skydiving business. Adventure Experience comprises approximately half of group revenue:

The Adventure Experiences segment is primarily a Cairns, Far North Queensland based operation located in the Australian wet tropics. The region experienced softer trading conditions in FY19, demonstrated by a decrease in Cairns airport arrivals (particularly pronounced from September 2018 onwards), combined with record rainfalls in the region, with continued poor weather into 2H19.

FY19 was on the back of significant acquisition activity in the Adventure Experiences business in FY17 and FY18, and as a result the downturn in market conditions (relative to the trading highs of FY16 and FY17) and slower than anticipated integration has had a material impact on Group earnings.

Great Barrier Reef visitation volume, ex-Cairns marina was down ~8% on FY18. While at a portfolio level our brands increased market share in terms of volume, it included a shift to lower yielding products.

Great Barrier Reef Helicopters had a challenging year, which included the loss of a key tourism customer contract from 1 April 2019 which led to a rebalance to commercial work, including an investment in additional helicopters and associated ancillary plant & equipment. FY19 also saw capital investment in the helicopter fleet driven by time life component and overhaul requirements. Capital intensity and asset management specialisation continue to be defining features of the Great Barrier Reef Helicopter business and we are considering the strategic position of this business in the Group’s portfolio.

The full year contribution of FY18 acquisitions, being Great Barrier Reef Helicopters, Big Cat Green Island and Tropical Journeys (Calypso and Daintree Tours) was offset by the impact of the deterioration in tourism trading conditions in the region in FY19.

 

The only comment on current on current trading conditions was that FNQ tourism is expected to remain soft into FY2020. There is also a results presentation. There will also be a further strategic review. I wouldn’t expect further acquisitions in Cairns given the circumstances and reference to geographic diversity in the presentation.

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