Event Hospitality & Entertainment (ASX:EVT)

Jane Hastings
CEO & MD
Market Cap (AUD): 1.94B
Sector: Communication Services
Last Trade (AUD): 12.21 +0.16 (+1.33%)
Tab Bar

1. About

Event Hospitality & Entertainment Limited (formerly Amalgamated Holdings Limited) is an Australian company with over 100 years of operation. The Company has expertise in exhibition into various areas of entertainment, hospitality, and leisure. The Company is engaged in the following activities:

  • cinema exhibition operations in Australia, including technology equipment supply and servicing, and the State Theatre;
  • cinema exhibition operations in New Zealand;
  • cinema exhibition operations in Germany;
  • ownership, operation, and management of hotels and resorts in Australia and overseas;
  • operation of the Thredbo resort including property development activities; and
  • property development, investment properties, and investment in shares in listed and unlisted companies.

2. Business model

 

The Group operates the following divisions:[1]

 

Business

Revenue ($’000)

% of Revenue

% of Profit (before Tax)

Profit drivers[2]

Entertainment - Australia

$455,121

35,5%

N/A



 

  • The total Australian Box Office for the year finished 4.7% below the prior year and the Group’s box office traded in line with market. The titles that grossed over $30 M at the Australian Box Office during the year
  • The total revenues for the division were correspondingly impacted by the fall in the Australian Box Office. The average admission price declined by 1.7% due to targeted discounting which was largely offset by increased admissions and merchandising spend
  • Good growth in other revenues including advertising up 7% and online booking fees up 22% underpinned by a 42% increase in online transactions. Costs were impacted by rising energy and electricity charges which increased by 12% ($1,161,000) and new site opening expenses of $826,000

Entertainment - New Zealand

$87,308

6.8%

  • Total New Zealand Box Office fell by 1.5% whilst the Group’s box office revenues were marginally above the prior year. The five highest-grossing titles within the New Zealand market
  • Merchandising spend per admission increased by 3.5%, driven by a focus on the core product range and a number of successful candy bar combo promotions. There was a strong increase in online booking fee revenue of 44% over the prior year, with 30% of all admissions booked online. Costs decreased by $1,556,000 on flat admissions driven by a focus on new operating models
  • Income from the Virtual Print Fee (“VPF”) arrangements totalled $932,000 (2017: $1,397,000). These arrangements are expected to conclude in the 30 June 2019 year with remaining income of approximately $732,000

Entertainment - Germany

$307,383

23.9%

  • The result reflects an 8.9% fall in the total German market admissions which was impacted by the relative underperformance of the release slate, extreme and record weather conditions and disruption caused by the staging of the FIFA World Cup that was held in June and July 2018
  • Average admission price and screen advertising revenues were consistent with the prior year whilst merchandising profit per admission increased by 7.3% and booking fee income was up 7.4%. Costs were well managed and the strengthening of the Euro by 5.7% against the Australian dollar also assisted with the conversion
  • Income from the Virtual Print Fee (“VPF”) arrangements totalled $6,819,000 (2017: $5,795,000) and this income item is expected to wind-down over the next two years and conclude in the 30 June 2020 year. The Cinestar loyalty program was enhanced and has increased the membership base by 27.8%

Hotels and Resorts

$337,093

26.3%

  • The normalised profit before interest and income tax expense was $69,270,000, an increase of $16,536,000 or 31.4% above the prior comparable year
  • Occupancy in the Group’s owned hotels (all brands) increased three percentage points to 79.5% whilst the average room rate increased by 3.4% to $185, resulting in an increase in revenue per available room (“revpar”) of 7.5%
  •  The majority of the Group’s owned hotels delivered earnings growth with a total of 56% of growth coming from new hotels QT Melbourne (opened September 2016), QT Queenstown (opened December 2017) and Rydges Geelong (acquired March 2017), and 44% from all other owned hotels
  • Occupancy in the Group’s owned Rydges hotels increased by two percentage points to 80.3% and the average room rate increased marginally to $159, resulting in an increase in revpar of 3.6%

Thredbo Alpine Resort

$72,971

5.7%

  • The normalised profit before interest and income tax expense was $21,838,000, an increase of $3,651,000 or 20.1% above the prior comparable year
  • The 2017 snow season was consistent with the 2016 season in July and August however September 2017 experienced good snowfall resulting in a 40% increase in skiers which largely contributed to an overall increase in visitation of 12% for the season. Total revenue for the year grew 10% to $72,971,000 with lift pass revenue for the 2017 snow season from 1 July 2017 increasing by 13%, and similar increases achieved in other ski-related ancillary revenue streams

Property and Other Investments

$23,776

1.9%

  • The normalised profit before interest and income tax expense was $16,528,000, an increase of $7,185,000 or 76.9% above the prior year. The improved result includes rental income from the two properties located at 458-472 George Street, Sydney, which were acquired in May 2017 and are currently leased to several retail and commercial tenants. The result was further assisted by a fair value increment of the investment properties of $5,750,000
  • Updated independent valuations for the majority of the Group’s properties have been obtained at 30 June 2018, and based on these valuations the fair value of the Group’s property portfolio at 30 June 2018 is approximately $2.0 B (including investment properties), whilst the book value of these interests is $1.2 B

3. Strategy

 

Key strategies include:[3]

 

Entertainment

Whilst the Group has no control over the general audience appeal of available films, providing consumers with a demonstrably superior experience in the cinema to that which can be achieved in the home is a central strategic platform. To achieve this, the Group will pursue the following strategies:

  • refurbishing key premium locations and reviewing and where appropriate closing underperforming locations;
  • implementing new pricing strategies to drive improvements in the average admission price and/or admission numbers;
  • developing new food and beverage concepts to drive improvements in spend per head;
  • enhancing the Cinebuzz loyalty program to grow membership and customer engagement;
  • growing alternative content to reduce reliance on Hollywood film titles;
  • identifying other sources of entertainment income;
  • sustaining audiences to grow advertising and sponsorship revenue; and
  • leveraging technology to increase efficiency through automation.

 

Industry Developments

The Group believes that there are certain current issues pertaining to the industry that has the capacity to impact the strategic plans and future direction of the cinema operations. The Group will continue to monitor developments in relation to the following issues:

  • alternative film delivery methods and the rise in popularity of other forms of entertainment (including over-the-top (“OTT”) internet content, subscription-based streaming services and video on demand (“VOD”));
  • shortening of the release window of film to other formats such as OTT and VOD;
  • increase in unauthorised recording (piracy) of visual recordings for commercial sale and distribution via the internet;
  • increase in competition including in relation to pricing;
  • international media industry consolidation which may reduce the number of distributors of Hollywood film titles;
  • changes in operating expenses including employee expenses and energy costs; and
  • impact of weather on cinema attendance.

 

Hotels and Resorts

The Group will continue to provide hotel guests with accommodation that consistently delivers a product and service that meets or exceeds guest expectations. To provide this, the Group will continue to pursue the following strategies:

  • upgrading key properties to deliver growth in earnings;
  • adding new rooms to the Group’s portfolio including through new hotel management or other agreements, redevelopment of existing properties and freehold acquisitions;
  • enhancing the Priority Guest Rewards loyalty program to grow membership and customer engagement; growing conference and events revenue;
  • improving and innovating food and beverage offerings in the Group’s hotels to build incremental spend and enhance each hotel’s reputation; and
  • leveraging technology to increase efficiency through automation.

 

Industry Developments

The Group believes that there are certain current issues pertaining to the industry that has the capacity to impact the strategic plans and future direction of the hotel operations. The Group will continue to monitor developments in relation to the following issues:

  • new hotel supply in key markets increasing competition for the Group’s hotels in those markets;
  • competition for the distribution of rooms from online travel agents;
  • changes in operating expenses including employee expenses and energy costs; and
  • growth and market penetration of alternative accommodation providers.

 

Thredbo Alpine Resort

The key strategy for the Thredbo Alpine Resort is to maintain the facility as one of the premier Australian holiday destinations. This strategy includes:

  • continuing to ensure the popularity, high quality, and ambience of the winter-time resort facility;
  • continuing to improve snowmaking capability to mitigate risk in poor snow seasons;
  • increasing the number and quality of sporting and cultural events to increase visitation outside of the snow season;
  • expanding the mountain bike trail network to appeal to a broader range of riders; and
  • ensuring that the environmental integrity of the Resort is maintained and, where possible, improved.

 

Industry Developments

The Group believes that there are certain current issues pertaining to the industry that has the capacity to impact the strategic plans and future direction of Thredbo’s operations. The Group will continue to monitor developments in relation to the following issues:

  • reliance on natural snowfall, which is partially mitigated by the Group’s snow making capability;
  • changes in operating expenses including employee expenses and energy costs; and
  • short and long-term climate-related physical, regulatory and transition risks. Further information regarding the Group’s response to climate change is available in section 5.8 of the 2018 Corporate Governance Statement.

4. Markets

 

The Group operates in markets including:[4]

 

Industry (Australia)

Industry Revenue

Growth Rate (Annual 13-18)

Cinemas

$2 billion (2017)

1.0% (Annual 13-18)

Hotels and Resorts

$8 billion (2018)

2.4% (Annual 14-19)

Residential Property Operators

$47 billion (2018)

3.0% (Annual 13-18)

5. Competition

 

Major competitors include:[5]

 

  • Eumundi Group Ltd.
  • Village Roadshow Ltd.
  • Transmetro Corporation Limited (ASX: TCO)

6. History

 

1913[6]  

Two men joined forces to form Union Theatres, fostering the rapid development of the Australian cinema industry

 

1930  

Union Theatres evolved into Greater Union and grew into an entertainment powerhouse that played a pivotal role in Australian exhibition, film production and distribution

 

1962  

The Company was listed on the Australian Securities Exchange

 

1998  

New Zealand acquisition

 

2007  

Media Rel: International Operations Lift Event Hospitality & Entertainment Limited

 

2008  

Strong Hotel Result for Event Hospitality & Entertainment Limited

 

2009  

SKYCITY’s Cinemas Business sold to Event Hospitality & Entertainment Limited

Rydges Sabaya Port Douglas was acquired

 

2010  

Moonlight Cinemas was acquired

 

2013  

Movies drove strong earnings growth for Event Hospitality & Entertainment Limited

 

2015  

Event Hospitality & Entertainment Limited acquired Museum Art Hotel in Wellington

Renames to Event Hospitality & Entertainment Limited

 

2016  

Event Hospitality and Entertainment acquires Mercure Geelong for $25M

 

2017  

Event acquires 458 - 472 George street, Sydney

7. Team

 

Board of Directors[7]

 

Alan Rydge – Non-Executive Chairman

Kenneth Chapman – Independent Non-Executive Director

Peter Coates AO – Independent Non-Executive Director

Valerie Davies – Independent Non-Executive Director

David Grant – Independent Non-Executive Director

Patria Mann – Independent Non-Executive Director

Richard Newton – Independent Non-Executive Director

Jane Hastings – Managing Director and Chief Executive Officer

 

Management Team

 

Jane Hastings – Managing Director and Chief Executive Officer

Norman Arundel – Managing Director, Rydges Hotels & Resorts

Gregory Dean – Director Finance & Accounting, Company Secretary

Mathew Duff – Director Commercial

Hans Eberstaller – Managing Director of Commercial, UK, and Europe

Jordan Rodgers – Director of Thredbo Operations


read more

8. Financials

 

2018 Full Year Results Presentation

 

Financial Year 2017/2018 (ended 30 June):[8]

 

Business

Revenue ($’000)

% Change

Profit (before Tax) ($’000)

% Change

Entertainment - Australia

$455,121

(3.48%)

N/A

N/A

Entertainment - New Zealand

$87,308

(7.2%)

N/A

N/A

Entertainment - Germany

$307,383

(0.1%)

N/A

N/A

Hotels and Resorts

$337,093

10.0%

N/A

N/A

Thredbo Alpine Resort

$72,971

9.6%

N/A

N/A

Property and Other Investments

$23,776

53.3%

N/A

N/A

Total

$1,283,652

1.8%

$165,541

(5.2%)

9. Risk

 

Major risks include:[9]

 

Credit Risk

Credit risk arises from trade and other receivables outstanding, cash and cash equivalents, derivative financial instruments, and deposits with banks and financial institutions. It is the risk of financial loss to the Group if a customer or counterparty to the financial instrument fails to meet its contractual obligations, and arises principally from the Group’s trade receivables. The Group’s exposure to credit risk is not considered material. The Group’s maximum exposure to credit risk at the reporting date was considered to approximate the carrying value of receivables at the reporting date.

 

Liquidity Risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group manages liquidity risk by continuously monitoring forecast and actual cash flows. The Group’s treasury function aims to maintain flexibility in funding by maintaining committed credit lines with a number of counterparties.

 

Market Risk

Market risk is the risk that changes in market prices, such as interest rates and foreign exchange rates, will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, whilst optimising the return. The Group uses derivative financial instruments such as interest rate swaps and forward exchange contracts to hedge exposures to fluctuations in interest rates and foreign exchange rates. Derivatives are used exclusively for hedging purposes and are not traded or used as speculative instruments. This is carried out under Board approved treasury policies.

 

Interest Rate Risk

The Group manages interest rate exposures on borrowings in accordance with a Board approved treasury policy that specifies parameters for hedging including hedging percentages and approved hedging instruments. The policy specifies upper and lower hedging limits set for specific timeframes out to five years. These limits may be varied with the approval of the Board.

 

Foreign Exchange Risk

The Group is exposed to currency risk on purchases, borrowings and surplus funds that are denominated in a currency other than the respective functional currencies of Group entities, primarily the Australian dollar (“AUD”), but also the New Zealand dollar (“NZD”), Euro (“EUR”) and Great British pound (“GBP”). Transactions undertaken by Group entities are primarily denominated in AUD, NZD, EUR and the US dollar (“USD”).

The Group manages foreign currency exposures in accordance with a Board approved treasury policy that specifies parameters for hedging, including hedging percentages and approved hedging instruments. At any point in time, the Group hedges up to 60% of “highly probable” foreign currency exposures and 100% of confirmed foreign currency exposures. Typically, foreign currency exposures are hedged with the utilisation of forward exchange contracts.