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EVENT Hospitality and Entertainment Limited

Team Veye | 15 Sep 2020 ASX - EVT
EVENT Hospitality and Entertainment Limited
Call Buy
Asx EVT

EVENT Hospitality & Entertainment Limited (ASX: EVT), formerly Amalgamated Holdings Limited, is engaged in cinema exhibition operations; ownership, operation and management of hotels and resorts in Australia and Overseas, and property development. The Company's principal activities include cinema exhibition operations in Australia, including technology equipment supply and servicing, and the State Theatre; cinema exhibition operations in New Zealand and Fiji; cinema exhibition operations in Germany; operation of the Thredbo Resort, including property development activities, and investment properties and investment in shares in listed and unlisted companies. The Company's segments include Entertainment Australia, Entertainment New Zealand, Entertainment Germany, Hotels and Resorts, Thredbo Alpine Resort, and Property and Other Investments. The Company has operations in Australia, New Zealand, Fiji and Germany (Profile source: Reuters)

 

From the Company Reports

 

Swift response to COVID-19 delivers full year normalised profit in unprecedented circumstances

Entertainment, hospitality and leisure operator EVENT Hospitality & Entertainment Limited (ASX; EVT) (“EVT”) on 31 August 2020 announced a full year result with revenue down 22.3% to $784 million, normalised EBITDA down 54.2% to $105 million, and normalised profit before AASB16, interest and tax from continuing operations of $34.1 million, a decrease of 78.5%. Overall, the Group reported a statutory net loss after tax of $11.4 million, including $54 million individually significant items net of tax, the majority of which were non-cash items.

(Chart source: TradingView)

Operating and Financial Review

Key points

  • The year was impacted by the most unprecedented external market factors (bushfires, floods, COVID-19) and COVID19 government mandated restrictions, experienced in the company’s 110-year history.
  • Strong momentum on group strategy resulting in good performance prior to the COVID-19 period (unaudited) driving overall growth in revenue ($684,595,000, +2.5% on an adjusted basis) and normalised profit ($105,736,000, +2.2% adjusted) from continuing operations in the period up to February 2020.
  • Normalised profit before interest and tax (“PBIT”) from continuing operations of $34,101,000 (2019: $158,945,000) was down due to impact of COVID-19 in the final four months of the year, including government-mandated temporary closure of cinemas in Australia, New Zealand and Germany, government-mandated travel restrictions impacting hotels and government-mandated restrictions impacting Thredbo Alpine Resort operations.
  • COVID-19 government-mandated restrictions resulted in revenue loss of $261,615,000, but swift development of new operating models, cost management and government wage subsidies mitigated the impact by $139,651,000, excluding the majority of the benefit derived from landlord negotiations which will be reflected in the FY20/21 year due to accounting requirements.
  • Leading COVID safe operating practices for each division implemented and tested by infectious disease experts.
  • Statutory loss of $11,366,000 (2019: profit of $111,889,000) after interest, income tax, individually significant items and discontinued operations. Individually significant item expense net of tax $53,571,000 (2019: income of $2,808,000) includes $56,910,000 (before tax) non-cash impairment charges. The net impact of AASB 16 Leases was an expense of $635,000.
  • Net debt at 30 June 2020 of $421 million and new debt facility secured and increased to $750 million, majority matures in 2023.
  • Strong balance sheet underpinned by a solid property portfolio with a fair value of $2.0 billion at the most recent valuation dates.
  • New operating models developed for each division to enable the business to pivot for COVID-19 scenarios and deliver benefits into the future.
  • Clear evidence of pent-up demand as government-mandated restrictions are eased

 

(Graphic Source – Company Reports)

FY0 Full Year Overview

  • Group Revenue to February 2020 $685 million, up 2.5% (adjusted3) and full year $782 million down 21.7% - including $34m Government subsidies.
  • Hotels, Thredbo and Property generated profit for the year, despite the major impact of COVID-19 due to active cost management. Entertainment result excludes rent abatements negotiated with landlords to be booked in FY21.
  • Underlying unallocated expenses down 17% in H2 despite the impact of increased insurance premiums.
  • Adjusted Group EBITDA to February up 1.7% and full year down 52.4%, excluding the majority of rent benefits negotiated during this period.
  • Normalised profit of $34 million down 78.5% on an adjusted basis.
  • Impairments and asset write-offs of $63 million include $22 million for cinemas and $41 million relating to hotel properties.

Strong Property Portfolio

  • Rental income in the property division consistent with the prior year however, normalised PBIT was down after recognition of provisions for rent receivable for certain tenancy arrangements.
  • $1.7 million fair value decrement was booked to reflect the fair value adjustments on investment properties, down on the prior year by $3.6 million.
  • Rydges Townsville and Loggerheads Hunter Valley sold, and under-performing cinema sites in Mackay (owned), Canberra (leased), Cronulla (leased) and Arndale (leased) have been closed.
  • Stage 1 DA for 525 George Street development in May 2020. Stage 1 DA in progress for 458-472 George Street.

(Chart source: TradingView)

Successful refinancing and Business update

EVENT Hospitality & Entertainment Limited (the “Group”) on 6 July 2020 announced the successful refinancing of its debt facilities and provided an update on the Group’s mitigation actions to manage the impact of the global coronavirus pandemic (“COVID-19”) on the Group’s businesses. In summary:

  • debt facilities have been increased by $205 million to $750 million, resulting in available cash and undrawn debt facilities of ~$320 million;
  • majority of cinemas in Australia and New Zealand are now open;
  • process for divestment sites to allow for the completion of the CineStar sale underway;
  • majority of hotels have remained open throughout the COVID-19 shutdown with a number of initiatives implemented to mitigate the impact of COVID-19;
  • restricted opening of the Thredbo winter season from 22 June 2020; and
  • implementation of actions to substantially reduce operating costs at a corporate level.
EVENT Hospitality & Entertainment Limited (ASX:EVT)
Stock Overview
Sector Media & Entertainment
Risk Low to Medium
Market Cap $1.54 billion
Daily Average Volume -
EPS (FY) -$0.071
PE RATIO -
Yearly Dividend Yield  5.43%
Target Price (s) T1 $11.90 T2 $13.15
Stop Loss $8.00
Recommendation Buy
52 weeks High $14.280
52 weeks Low $5.440
Managing Director Ms Jane Megan Hastings
Non-Executive Directors Mr Peter Roland Coates
Ms Valerie Anne Davies

 

Veye’s Take

The year was impacted by the most unprecedented external factors experienced in the Group’s 110-year history, including bushfires, floods and COVID-19 government-mandated restrictions. Despite the impact of bushfires, EVT achieved strong performance prior to the COVID-19 period with revenue up 2.5%, EBITDA up 1.7% and normalised profit up 2.2% in the eight months ended February 2020 on an adjusted basis. This was the second highest EBITDA result for the period from July to February from continuing operations in the Group’s history. The stock has strong support near $9.50 on the daily t/f. Both MACD and RSI are bullish on short as well as long term charts. The ichimoku cloud is also generating a bullish perspective. The stock can have the potential to gain very strong momentum above $11.02. Veye recommends a "Buy" on “EVENT Hospitality and Entertainment Limited” at the current price of $9.83


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