Coast Entertainment Holdings Limited (CEH) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Ardent Leisure Group Limited Half Year '22 Financial Results Conference Call. [Operator Instructions] I would now like to hand the conference over to Dr. Gary Weiss, Chairman. Please go ahead.

Thank you, and good morning, everyone. It is my pleasure to present the results for Ardent Leisure Group for the first half of FY '22. We are pleased to deliver another solid result for Ardent Leisure Group despite the significant ongoing challenges arising from the COVID-19 pandemic. As set out in our release results, Main Event has continued to perform above pre-COVID levels and we are optimistic that this positive momentum will continue into the second half of FY '22. In Australia, the recent reopening of Queensland borders, easing of restrictions and successful launch of the Steel Taipan rollercoaster in December 2021, it seem the Theme Parks & Attractions business pick up demand in both local and interstate markets, during the latter part of the period. However, this was somewhat dampened by a surge on Omicron cases and impediments to travel related with state government COVID-19 testing requirements. Strong trading performances in the Main Event business and a disciplined approach to capital and operational expenditure and Theme Parks & Attractions have allowed the group to maintain a solid financial position. Ardent is extremely fortunate their highly experienced and dedicated leadership in place at both of our businesses. In the U.S., the Main Event team, headed by Chris Morris and Darin Harper, continue to be inspirational and have led from the front. And they, and all the rest of the team, have executed superbly and to the highest standards. In Australia, Greg Yong and his team at Theme Parks are similarly led by example during these most difficult and challenging times and have continued to drive excellent execution throughout. I'll now pass over to Darin Harper to take you through the results.

Thank you, Gary, and good morning, everyone. On Slide 2, I'll briefly touch on a few highlights before digging into more detail on subsequent slides. First, as Gary mentioned, our financial results for the first half of FY '22 continue to show significant improvement versus the prior corresponding period. Group revenue was up nearly $138 million on the prior period, and EBITDA excluding specific items, was up almost $62 million. The increase in both revenue and profit largely reflects the ongoing strength in revenue performance at Main Event. Main Event constant center revenues for the first half of FY '22 increased over 20% versus pre-COVID levels. This trend performance is in spite of significant ongoing softness in our corporate group business as demonstrated by the fact that our constant center walk-in revenue for the first half of FY '22, tops nearly 40% versus pre-COVID levels. We'll discuss Main Event's financial performance in more detail shortly, but we remain very pleased with our revenue performance through the start of the second half of FY '22 as well. For the first half of FY '22, Theme Parks & Attractions revenue increased over 40% with total attendance up 17% versus the prior period despite ongoing border restrictions and snap lockdowns for most of the period. EBITDA, excluding specific items, with a loss of $12.2 million compared to a loss of $3.7 million in the prior year, largely reflecting a $6 million decline in net government grants and subsidies versus the prior period. Greg will assess the performance of the business unit in greater detail later in the presentation. Moving to Slide 3. Revenue from the group in the first half of FY '22 was $275.5 million, an increase of over 100% versus the prior period. This increase is driven by year-over-year revenue growth of approximately 109% for Main Event and 41% for Theme Parks & Attractions. This revenue performance for both businesses was generated despite the ongoing pandemic in both the U.S. and Australia. Group EBITDA, excluding specific items, was $41.8 million, up $61.6 million on first half of FY '21, primarily driven by the strong performance in the U.S. business. Corporate costs continue to be managed well with the $0.9 million increase mainly due to higher insurance premiums in the current period. [indiscernible] in comparison to pre-COVID performance, revenue for the first half of FY '22 was over $28 million higher than the pro forma results in the first half of FY '20. And EBITDA, excluding specific items, was nearly $23 million higher, with outperformance to pre-COVID level demonstrates the strength of the group's overall revenue performance and significant flow-through of the incremental dollars to the bottom line due to high operating leverage. Net borrowing costs decreased by $1.6 million in the current period due to lower outstanding U.S. dollar debt and a remission of $1.2 million of interest payable to the ATO. This decrease was partially offset by higher interest with respect to RedBird's investment as well as incremental borrowing costs for the QTC loan. Lastly, on this slide, the current period reflects tax expense of $1.4 million compared to a tax benefit of $1 million in the prior year due to improved trading results, partially offset by reduction in tax losses and deductible temporary differences not recognized as deferred tax assets in the current period. On Slide 4, we've presented the key specific items impacting results, which we believe are useful in better understanding the group's performance. For the first half of FY '22, in addition to the call out of the customary lease accounting impact, I'll draw your attention to the LTI Plan valuation expense as well as the RedBird option valuation expense. The group incurred a $10.2 million LTI Plan valuation expense related to the Main Event long-term incentive plan, reflecting an increase in equity value associated with the improved performance of the business. As described in our FY '21 annual report, this is a onetime award grant that is linked to the future appreciation of equity value in Main Event with payments only occurring upon a future realization event. Additionally, the group's results were also impacted by a $10.8 million noncash RedBird option valuation expense, which reflects the estimated increase in the value of the option, which is due to the improved performance of the Main Event business. As described in the FY '21 annual report, AASB 132 requires the RedBird investment to be treated as a compound financial instrument, which results in a derivative option liability being recorded and revalued at each reporting date. [ Back ] to the end of slide, tax expense includes $7 million related to tax losses and deductible temporary differences not recognized as deferred tax assets in the current period. It's important to note that the economic benefit of these deferred tax assets remain to the extent the business generates future taxable income prior to the recognition is not currently reflected. Let's now move ahead to Slide 6 and discuss Main Event's performance in a little bit more detail. Total U.S. dollar revenue of $188.6 million in the first half of FY '22, was 109.1% higher than prior period, driven by strong performances in both constant and nonconstant centers as well as incremental revenue from new centers. Total constant center revenue growth year-over-year was up 94%. The prior period of FY '21 was impacted by much softer revenue performance due to COVID-19, including the temporary closure of several sites. Versus pre-COVID levels representing the first half of FY '20, total and walk-in constant center revenue performance was up 20.1% and 39.5%, respectively. During the current period, one new center was opened in Chesterfield, Missouri on the 1st of September, and this location has performed above expectations. This opening brings the total number of centers to 45 across 16 states as of the 28th December 2021. The strong revenue performance for Main Event drove significant EBITDA generation. EBITDA, excluding specific items for the first half of FY '22, was $42.6 million, which was an increase of $52 million versus the prior year. As means of comparison, Main Event's performance in the first half of FY '22 versus pre-COVID and pro forma adjusted FY '19 reflected higher revenue of $44 million and higher EBITDA, excluding specific items of nearly $25 million. The strong EBITDA performance was unfavorably impacted by increased commodity costs, higher wage rates and other operating expenses. However, despite the additional cost pressures, Main Event's EBITDA margin, excluding specific items, increased over 10 percentage points to 22.6% for the first half of FY '22 versus the first half of pre-COVID in FY '20. The ongoing strength in Main Event's trading performance during the period has continued to support a strong balance sheet and has positioned the business well for future growth with several anticipated new center openings over the next 12 months. With that, I'll hand the call over to Chris Morris.

Okay. All right. Thank you very much, Darin. Thank you, everyone, for joining us this morning. Picking up on Slide 7. We continue to be very pleased with the performance of our business and incredibly proud of the work being done by our team members all over the country and throughout all areas of our business. We have generated record-breaking sales and profitability performance since March, highlighting the remarkable strength and unit economics of our business. We believe this performance reflects not only the robust post-recovery consumer demand for out-of-home entertainment here in the U.S., but also reflects the success of our strategic initiatives and the pre-COVID sales momentum we have built upon over the last 18 months. Since March, constant center revenue performance has been significantly ahead of pre-pandemic levels, driven by strong walk-in performance despite continued softness with corporate group business. December 2021 constant center revenue growth was negatively impacted by an estimated 22% due to soft corporate group performance and Christmas occurring on a Saturday in 2021 versus a Wednesday in 2019. Further, the Omicron variant began to impact walk-in performance. January 2022, constant center revenue growth was negatively impacted by an estimated 5% due to the New Year holiday falling on a Saturday in 2022 versus a Wednesday in 2020. In addition, the Omicron variant continued to impact walk-in performance throughout the January period. Through the first 3 weeks of February 2022, constant center revenue growth was 24% with walk-in revenue up 32%. Suffice to say, we are pleased with these results and believe they are testament to the quality work begun by our teams all across the country as well as the strength of our positioning. Slide 8. We believe we are very well-positioned to build upon the current momentum in our business for the following reasons. First, post-COVID, there's a growing positive sentiment in the U.S. for out-of-home entertainment. Main Event has consistently and significantly outperformed the category, leading to increased market share. Our brand positioning continues to resonate with our core consumers. Main Event remains overindexed on and highly rated by visitors with families versus our competition. Our unwavering commitment to delivering a world-class guest experience and our sharp focus on operational execution are driving best-in-class NPS. There continues to be additional headroom across growth levers. And we expect to see corporate and group events business begin to recover in the F '23 year and beyond. Slide 9. Furthermore, there continues to be tremendous white space for new center openings. We remain on track to open four new centers in F '22; 6 to 8 in F '23; and continue to target 8 to 10 new center openings in F '24 and beyond. Our first [ MCO ] in the F '22 year opened in September 2021 in Chesterfield, Missouri, and has consistently exceeded our expectations. Next up, Huntsville, Alabama, opening tomorrow, followed by Waco Texas and Tomball, Texas. We have ample liquidity to meet the needs of our business and fund near-term strategic priorities. Between our cash balance and our line of credit, we currently have over $90 million of available liquidity. In summary, we're extremely pleased with the performance of our business and continue to believe we are well-positioned to further solidify leadership position and build upon the current momentum in the business. We have an increasingly strong and resilient brand with plenty of white space to grow for many years to come. We're well capitalized from liquidity and capital perspective, and we'll leverage this capital position to drive our new center growth strategy in the years to come. With that, I'll turn it over to Greg.

Thanks, Chris, and good morning to everyone listening today. Starting on Slide 11. In December, [ Ellen Joy ] said that this half has been the toughest since the pandemic began. And from a Queensland perspective, I tend to agree. We were faced by 2 COVID waves: Delta, which started in July, where the effects were felt from both the health perspective and through government restrictions. Our most popular interstate markets were locked down and borders across the nation were effectively closed for almost the entire half. Omicron, which was much closer to home to Queensland -- with tens of thousands of people for the first time facing the real threat of illness and isolation. These coupled with extremely onerous testing regimes created a real barrier to demand in late December. And while we're able to shape the most, but not all of the half, the business was essentially locked down economically for the entire half. Trading also meant -- cost to our -- business. While theoretically winning the cost [indiscernible] being well and truly exploited. As you're all aware, there is a degree of fixed costs required, for instance, to care for our animals and importantly, to safely maintain and operate our attractions. These costs persist whether we have 10 or 10,000 guests in and around our properties. It's also important to note that the expenses incurred were for the full 6 months against a 3.5-month expense [indiscernible] over the first -- over the prior year. We believe that the structural changes made over the last 24 months have recast the cost base. And the business is indeed sustainably more efficient on a like-for-like basis than we were pre-COVID. So with the greatest respect to our southern trend in some ways, it was as tough, if not tougher, here in Queensland from a business perspective. We had many limited accessible markets, we were incurring cost to operate the business compared to being an [ expense ] combination due lockdown and with very little government support compared to what we've seen in 2020. Whilst all of this was going on, we had our shoulder to the wheel on building the framework for the future. And I'm very proud that our team executed well on the initiatives that we've outlined of late. And this can be seen the solid performance out of the local market for the first half and moreover, some very promising signs early in the new calendar year. On Slide 12, we've outlined some of the highlights from the half. As always, that starts with our ongoing imperative focus on safety, certainly from a rising COVID standpoint, but also in consideration of the other critical risks that present on large and diverse sites such as ours and the day-to-day challenge of applying COVID-related restrictions as and when they changed. I'll discuss some of the structural highlights in more detail shortly, but I would note the work that has been done to remove remnants of [indiscernible] attractions from the park and the ongoing enhancement of our plan integrity. The properties are certainly presenting much more professionally. We believe aesthetics imply safety and higher presentation standards lead our guests to feel more comfortable in our properties and to revisit or stay longer as a result. Lastly, we're through the worse of the post closure of major inspection work on our attractions and having a fully functioning fleet as well as the laser focus on the key elements of the guest journey, which we've coined as making the dream more different has led to exceptional guest feedback with NPS growing some 49 points over the half. Turning to Slide 13, and revenue. For all the reasons I've outlined, the first half was extremely challenging. With the borders close to interstate and international guests, in some months of [indiscernible] the number of tickets were sold into those markets literally on both hands. We did do, however, a great job of optimizing local visitation through our annual pass program. And we saw sales [ dollars ] in the first half increased by 40% through increases in volume and importantly, increases in net yield. For the first half, our annual park sales are the high have been in over 4 years and notably 84% higher than the pre-COVID first half of FY '19. It's important to note that as Annual Pass is made up over 80% of our mission mix for the first half, our revenue lags our sales quite considerably given the recognition requirements. In December, several factors started what we hope to be a bumper start for the holidays. The Omicron variant took hold and cases in Queensland went from two in early December to several thousand in mid-December and tens of thousands by early January. This led to subdued performance in the local market who has supported us through the fall of the first half. Predeparture testing requirements created large queues in Sydney and Melbourne, while [indiscernible] testing requirements in Queensland created lines that we had not seen before across the state. And compounding this was poor weather across our most important periods with rains on Christmas Eve [indiscernible] and 74% of our January days being rain-affected. So with all that in mind, I think the performance on the back outlined for January and what we are seeing in February is particularly promising. Again, I'm going to focus on sales and not revenue, and we believe that this is a more meaningful indication of business activity in here, now, as opposed to the complexity of recognizing revenue over the duration required for some of our products. I mentioned the complete lack of visitation from interstate markets in the first half. It was very pleasing to see them return in droves in January and February, with Victoria up 92% in January and 177% up in February, and New South Wales, up 188% in January and 68% in February. Admission sales across all of our ticket types were up 75% in January and up 111% to date in February. For February so far, we're currently at the highest admission sales number that we've seen since 2016. The last few months of the first real signs of meaningful change in Australia since the start of the pandemic. And whilst, I'm very pleasing to see, these early days. Turning to Slide 14. I've outlined our strategic initiatives last year, and I'm pleased to say that we have made steady progress on each. Firstly, and as always, safety eventually a daily focus in our organization. We have [indiscernible] safety culture and importantly, when I think is the most experienced and hands on theme park engineering and operational management teams in the country. They are bolstered by our safety team, many of whom come from Qantas and Virgin, and bring a high degree of critical thinking and rigor to our safety management systems. The adjustments we have made to the cost base are sustainable and come as a result of clearly considered decision to find new efficiencies, which balance our desire to provide a value experience to the guests with the need to manage the financial performance of the organization. We're now seeing the results of this work with a seasonal trading plan for our water park, the reduction in older attraction infrastructure, the variabilized deployment of entertainment, along with our rightsized approach now to corporate costs such as IT and marketing, all proving to have a minimal impact on operations, but position us well to see improved fall-through as revenue improves. In sales, we've achieved much in a relatively short space of time. Late last year, we successfully rolled out our much improved website, which was designed fundamentally with a mobile-first mindset, coming to -- that is critical given most of our ticket sales transactions today are completed on a mobile phone. We also modified our ticketing architecture and spent a lot of time enhancing the part of the purchase. We associate much the performance seen in manual parts business to these changes, particularly with regard to moving the guests through the value chain and up to higher-priced tickets. We've also completed a review on our product mix and distribution models to make sure we're serving up the right product to the right guest at the right time and by the right channel. Again, we believe the gains we saw out of Sydney and Melbourne were in part due to this work, and we believe acquisition costs for these sales is much more efficient compared to what we were seeing pre-COVID. Being [indiscernible] basis and ensuring that we deliver our own unique branded of service, as I mentioned, the dream or difference is fundamental to recovery. Our NPS scores reflect the focus we've applied. But moreover, the detail in the comments behind those scores proves out that the key leaders we're employing to [ up light ] the experience are working. We certainly moved the needles, but this is a never-ending question to answer each and every one of the team who are anxious to ensure that we get right each and every day. I'm particularly pleased with the performance in parks businesses with per cap in January finishing 30% up on last year. Some of this was due to our ability to take some price, but moreover, thanks to enhancements in our F&B offer, which we've been deliberately testing through our major event program. We remain excited about the prospects for that part of the business, and we expect to continue to boost investment and effort into what we believe is an important aspect of the guest journey. Lastly, in the accommodation front. We believe, and our -- of the view, that adjacent accommodation offers a substantial value to the Theme Parks business. Whilst we've discontinued the nonbinding agreement with Evolution Group, we continue to work on this concept and have a number of alternatives under active consideration. Turn to Slide 15. I'm very pleased to say that the Steel Taipan attraction opened on schedule and is being very well received by our guests. On top of an outstanding construction effort, our team did a tremendous job to work through the requirements necessary and successfully gained design registration to the traction. This is an extremely complex technical and is a credit to our Director of Engineering, [ Adrian Summons ]; our Director of Operations, [ Michelle Erasmus ]; and GM Safety Systems, [ James Re ] and each of their respective teams. We're very lucky to have them in our organization. The successful construction, verification and commission experience gives us, and I think our guests, a lot of confidence that we're able to [indiscernible] significant projects and made our dates. This is obviously vital when we evaluate our long-range capital program. To that end, we are very well advanced on future attraction pipeline planning, but we're not ready to make any announcements at this time. I've spoken at length about our intention to create a calendar of repeatable and marquee events as well as a shorter-term activation program that adds value to existing parks and provide another reason for our domestic tourist to visit. Slide 16 goes some way through illustrating the progress that we've made in that regard. We saw record performance in our existing Winter fares and Happy Halloween events with the strongest demand seen since their inception, and we expect to sustain in FY '23. We're also very pleased with the performance of our newly added Spring County Fair event, Dreamworld Fun Run, and [indiscernible] activations, and these will become a fixture in our annual calendar moving forward. We continue to look for opportunities to add new activations at the right time to drive visitation, taking a methodical approach to ensuring wholesome experiences at an appropriate level of investment. Lastly, the team has been feverishly working on a new marketing event for Easter, a concept that we've been delivering on for now over a year. Whilst I can't give any details on this today, we intend to make an announcement in March. So keep an eye out on this space. In summary, on Slide 17, despite the half being particularly difficult from a trading perspective, we saw glimpses of great performance when opportunities arose, particularly in the two holiday periods. We believe that we have now addressed many of the fundamental aspects in the business. We've retained a talented, passionate and I think world-class executive management team, and they are laser-focused on providing a safe, enjoyable experience for our guests. We've made quality decisions to get the cost base in order, and we think these changes are sustainable to support the business and revenue growth. The successful on-time opening is Steel Taipan and also gives us tremendous confidence in our ability to manage major capital projects in a complex regulatory landscape, and this will [indiscernible] as well as we evaluate our future attraction program. And we are very happy with the guest reaction and commercial performance of our events and activation programs. We're putting on events that absolutely look forward to and importantly, with the end in mind for an appropriate level of investment. So we believe we're on the right track, and as we've said in the presentation, our guests think so too. Our NPS results indicate this. And despite Omicron, testing challenges and poor weather, we've seen incremental improvement since December, with January and February trading meaningfully up on the prior periods. I'd like to say my personal thanks to the entire team for their ongoing commitment and dedication. I'll now hand back over to Darin. Thank you very much.

Thanks, Greg. I'll touch on just a few highlights over the next few slides, and then we'll open up the line to Q&A. On Slide 19, net debt for the group was $119.4 million as of 28th December 2021. This is an increase of $37.8 million from 29th June 2021, largely reflecting equipment for borrowing by the Australian business pursuant to the Q1 as well as capital spend on several new center openings, which are in progress at Main Event. Operating cash flow was strong at over $52 million during the first half of FY '22. Turning to Slide 20. The group had a cash balance of $110 million as of December 2021, and it is comprised of approximately $18 million and $92 million of cash available to the Australian and U.S. businesses, respectively. Furthermore, there is a USD 25 million undrawn revolving credit facility available to the U.S. business as well as an [indiscernible] capacity of $24 million available to the Australian business due to QTC loan. Given the ongoing strength and performance, the U.S. business remains well capitalized and in a good position in terms of covenant compliance as well as supporting its growth plans in the near-term. Lastly, the Board has decided not to declare an interim dividend for FY '22 in the view of ongoing uncertainty in the current environments and the Board's previously stated intention to continue to invest in the Main Event and Theme Parks & Attractions businesses. Finally, on Slide 21, as previous -- as noted previously, the group has taken its recurring cost base of over $16 million to a run rate of approximately $6 million over the past 2 years due to significant efforts to permanently reduce the cost structure given the changes to the business. The first half of FY '22 was unfavorably impacted by a challenging insurance market, which drove most of the $0.9 million increase for the prior year. This concludes our prepared remarks. And with that, we'll now open the call to some questions.

Thank you, Darin. All questions will be directed to me in the first instance and then I will allocate the question as circumstances require.

[Operator Instructions] Our first question comes from Sam Teeger with Citi.

Just like to talk a bit about Main Event and the RedBird partnership. Can you talk about how the relationship has evolved? And in this result, has any kind of tangible benefits Main Event receives from RedBird? Or today, is the partnership just being more of a financial contribution at this point in time?

Thank you, Sam. RedBird had been a very good partner, and then produced Main Event's to a number of their investee companies and relationships, and work continues on those fronts. As and when we're in a position to comment on any initiatives that may arise, we will do so.

Right. Sure. And within Main Event, what's the expectations for comps as we move throughout the second half? Appreciate you'll start -- you'll be starting to cycle some bigger numbers from April to June, which reflected some pent-up demand. Do you guys think comps can continue to grow?

I'll ask Chris to address that question.

Yes. And then I will pass it over to Darin just in terms of sort of I can comment on what our guidance is. And then I can add some color commentary after that. Go ahead, Darin.

Yes. Sure. I mean, the short answer is we're not providing any guidance, Sam, on our constant center performance moving forward. I think, hopefully, the chart on Slide 7 provides a bit of perspective and then again, Chris can add some color. But hopefully, the long-term trend of our same-store sales performance as well as the -- how robust, our walk-in performance has been is a good indicator of the expense that we've had this performance, but we're not going to be providing specific guidance.

What I'll -- this is Chris, just to add some additional commentary. Yes, the first thing, Sam, is you mentioned cycling over some more difficult numbers. So just as a reminder, when we report on our comps, we're comparing -- it's a 2-year comp. So we're comparing our current year performance, F '22 to our F '20 year, pre-pandemic numbers. So just keep that in mind. The other thing I'll tell you is when you look at Slide 7, you look at our sales performance, I believe we effectively described December and January, where we had some holiday mismatches and then last really difficult corporate event business. Most of the corporate event business is in the month of December. So eliminating that noise, what you'll see is just real consistent strength in our business. We had just consistently outperformed where we were pre-COVID since March and that momentum does not appear to be exciting. And if you look at the last 3 weeks, February, where -- you saw that -- you've seen the number up 24% and total cost in our sales, up 32% for walk-ins. So we're very, very pleased with the momentum in our business and particularly just the consistency of that momentum since March.

Right. And then just thinking about the cost base in Main Event in the second half compared to the first half. Just give any comments on how you're navigating wage inflation right now? And if there's anything else kind of evolving in that cost base, which we should be considering?

And Gary, you okay if I just keep going?

Yes. Good. Chris, that's -- before you tackle that. Just Sam, to round out that -- the last question, we have called out continuing soft corporate and group performance, which, as you're aware, was a material contributor to revenues in pre-pandemic times. So Chris, if you can respond?

Sure. With respect to wage inflation -- yes, I'll tell you a couple of things. One, given the strength in our comp store sales and the strength of this business model as you know, there's tremendous operating leverage. So our operating leverage is anywhere from 60% to as high as 70%. So the growth that we're seeing in the business has been the best medicine against rising wages. With that said, it is the reality of the business. It's the reality of the -- all multi-unit businesses here in the U.S. as we are seeing wage inflation. We believe that we're managing it better than most. But the best way of handling that is one, to retain -- to manage turnover, so retaining your staff and so you can offset it just with lower training costs. And then secondly, delivering on a great guest experience. And our NPS scores are 13 points higher than where we were pre-COVID. And so we know that we continue to operate at a very high level. We're doing -- we're able -- we keep track of our hourly workforce on how we're doing against our [indiscernible] every single week. And we've consistently been in the high 90% range. So we're -- certainly, the labor shortage here across the U.S., we've been able to keep our center staff. And so we're not necessarily dealing with wage pressure just with price increases. What we're trying to deal with is just with executing at a really high level, even the team members engaged and growing our top line because we know when we grow our top line, we'll flow the dollars to the bottom line. At this point in time, we haven't taken pricing. So -- because there's so much strength in the numbers since March. We don't feel like it makes sense at this point in time to raise prices. But certainly, as we go forward, in the F '23 year and beyond, that is a luck that we can pull. And so we believe that heading into the F '23 year, we actually have more capacity for a price increase than we probably have had in the past 2 or 3 years. So that's a lever that we'll be able to pull next year to help offset some of the ongoing wage pressure.

Just one last one, if I can on Theme Parks. Just like to understand how you guys are thinking about future ride investment? The right thing to do is a family ride versus thrill ride? Just conscious that the Tower of Terror was popular with the local market.

Greg, will you take that?

Yes, absolutely. Look, we feel strongly that the family business is an area that we're slightly deficient in. Obviously, when we think about capital and those are probably the biggest decisions we make in the organization outside of safety decisions. We take a very comprehensive decision-making model to that. And a lot of our analysis shows that our family segment, in terms of our ride mix, there's still an opportunity to grow in terms of potential theoretical capacity. And we think to top end is really added, I think, in terms of the thrill market at this point in time. We also think that there's probably a longer halo effect, if you will, from family attractions. They get written for longer. And if you think about thrill is obviously very, very tight and narrow in terms of the market, and doesn't have the same with delivery or ownership that we typically see out of a family attraction. All of that is in our thinking. Obviously, we've got an open mind around all of that. But certainly, our analysis today suggests that we're very much thinking about what's next in the family space.

Our next question comes from Nick McGarrigle with Barrenjoey.

I was just curious about the December negative comp sales growth. And just if you can quantify maybe the impact that they might have had in terms of EBITDA for that month versus maybe what you were running at in October and November, which look very strong?

Darin, will you take that?

Yes, sure. Yes. We call after the month of December that we simply had estimated 22 percentage points of pressure coming from the holiday mismatch as well as the corporate group business. We didn't attempt to quantify what sort of impact Omicron hand, but certainly, that has some impact as well between those two periods. So broadly, your question, in terms of the EBITDA impact, I would say, approximately $3.5 million on that 22% impact. So approximately a $5 million to $6 million sort of revenue impact with the flow through, it can be $3.5 million to $4 million will be my estimate.

So as that sort of Omicron impact on the consumer center to get out and about, you could have had a sort of circa [ $46 million, $45 million ] underlying EBITDA in Main Event.

I think, that's right. Yes.

I was just keen to dig in also to Chesterfield and obviously, that's a new opening sort of probably one of the first handful of clubs that Chris has been able to design and -- from the very start and obviously evolve the new model. Can you just talk about the performance of that club since it opened? And what that gives you in terms of your confidence of learnings for the future club openings in this half year and beyond?

Yes, absolutely. As we -- we're very pleased with our performance to date. Yes, it has consistently exceeded our expectations, as we said in our prepared remarks. Yes, it's proven that when we're in the right market, we have the right density, we have visibility, good ingress, egress, and there's very good retail gravity nearby that we're going to do well and we are, in fact, doing very well. It's also a market with considerable corporate demand, and so we believe that there is even more upside for that site once corporate business returns, which we expect will start to recover in our next fiscal year. We've opened a number of sites that -- our team now has opened a number of sites. And so far, we have done very well. All the sites that we've opened have exceeded our expectations. And so this is -- this is not the first, but it's one of many, and we're very pleased. Huntsville, Alabama coming up there. As I said, we opened that for tomorrow. That one is -- has -- or has a slightly improved design that we've changed going forward, just trying to continue this never-ending cost of always reaching further, doing more for our guests. And so as we continue to refine our model, we'll continue to tweak some of the floor layout and things of that nature, just to allow us to get more utility out of the square footage, do better job, taking care of guests, managing guest flow as we have guests migrate from one thing to the next. So we've made a few design changes going forward that will first be reflected in the Huntsville location.

Cool. Maybe also just a question. There's obviously quite a bit of CapEx embedded in the first half. Obviously, a lot of that relates to centers that are yet to open. Can you talk through, Gary potentially how the RedBird option adjusts for that investment that you're making as well as the maturity of some of the new centers that you're opening?

I'll ask Darin to respond, but essentially very headline perspective on those points.

Yes. The short answer, two things. Any center that has opened that is not yet open for a full year at the time of the option exercise, there is a run rate adjustment that would be contemplated in the cost of what the option exercise is. If there's capital spent for a center not yet open, then there's a dollar-for-dollar add back in terms of capital spend. I hope that makes sense.

Yes, that's very clear. So the option obviously struck at 9x trailing 12-month EBITDA circa FY '22, but then there's an adjustment item there for those new centers that you're opening during the year plus the capital that you might have deployed in the intervening period?

Yes, exactly.

That's great. I might let other people ask questions. And if there's none, will jump back in the queue.

Our next question comes from Allan Franklin with Canaccord Genuity.

Just interested in a couple of your peers in the U.S. and just in terms of how they -- a couple of announcements they've made recently, specifically with Dave & Busters. I mean, I appreciate there's a seat going on at the management team level, but it looks like they have new activation agreements with the new audience that they're hopeful to obviously shift the narrative that might pushes in further away from your offering and they're also pushing towards smaller center footprint. Just any sort of commentary you can sort of provide in terms of how you're feeling about your offering relative to the market and market changes? And also just on that center footprint, just to clarify, you're still looking at a big boxes for the sort of sites rolling forward into the '23, '24? No sort of changes to the footprint size, I guess?

Might ask, Chris, just to provide a very general overview.

Yes, sure. Well, I guess the thing I'll tell you is, I mean, we are very happy with our performance relative to Dave & Busters. We've consistently outperformed -- we were outperforming Dave & Busters before the pandemic by a wide margin. And what we've seen post-pandemic is that gap has just continued to widen. And so we feel very good about what we're doing, our positioning relative to theirs. We feel exceptionally good about our level of execution relative to theirs. And we're very pleased with the results. So we keep an eye on everything that they're working on. And I think that the marketing that they're doing right now is very good for their brand. But I think the marketing that we're doing is exceptionally good for ours. And so our positioning is different than theirs. And so the further that we define ours against theirs and they do the same, and it's just going to create more opportunities for us. So we feel very good about our results. In terms of the size of footprint, we're having a lot of stuff with our units right now. We're getting great returns. And so there's a handful of white space to continue to grow our business. So we're not looking to fix something that's not working. What we have right now is getting a great return, and we think that there's a lot of upside in our business, and we like having the excess -- we like having capacity across 50,000 square feet to deliver a very unique experience in the market.

Yes, perfect. And maybe just a follow-on to that. I mean, obviously discussion around inflation. To what extent are you seeing any inflation impacts on the new centers and/or to any extent have you noticed impacts on timing of new center rollouts as a result of COVID impact?

Darin, will you take that?

Yes, sure. So the answer is yes. We're seeing the impact as everyone is across the board. We have certain items. Steel roofing materials, things like that, that have to really want to lead time. I'll say our development real estate team has done a fantastic job of staying on top of that. There's some items we made commitments on earlier in the process than normal to secure the ability to have that, to give you some of the openings on time. So, so far, we've done a great job managing to our timetable, but there are some things that are outside of our control that we're trying our best to manage to. And I think similar to what you're seeing with -- through commodities and things of that nature, there's maybe [indiscernible] inflationary pressures that we think is going to be short-lived. Just a question of how short-lived it is. But so far, we've done a good job managing to our timetable and haven't had to make any significant adjustments to opening days.

No, perfect. And then perhaps just one on the Theme Parks. Greg, just trying to get a read through in terms of how to think about revenue per attendance and the sort of noise in the mix. I mean, it feels like there's obviously a strong upward trend and trajectory in the attendance, but I guess that's only really capturing the Queensland dynamic. So just in terms of -- if you can comment in terms of how you might be thinking about propensity to spend in the general populous, how sort of price points and their average price points might be looking relative to pre-pandemic?

Yes. Thanks, Allan. Good question. You're right. The mix at the moment over for the first half, particularly is almost, I think I outlined it was over 80% for the first half of annual passes. And obviously, the face value of that ticket is obviously somewhat higher than our other pass products. I can say at a high level, and I'm probably only got specifics about the ticketing mix in too much detail other than to say that if I look at a single day mix and if I look at our multi-day product, all of those tickets are seeing yield growth. And we believe that there's potential there to do it more over time because we believe that the typical proponent of those particular tickets are domestic tourists and they have, in our view, an historical reviews of our performance have a high propensity to spend than the local market. So we do believe that is moving in our direction. I think similarly, as international returns, that is a consideration for us. And I think for the entire industry really as to how we take that visiting moving forward. And I think the days of really just cheapest guest entry for international guests and the dilution effect that has on yield is that -- we don't feel that we want to get back to doing all that kind of stuff again. If I look at it in park, I kind of outlined what we've seen in January in terms of per caps and 30% up in terms of our per cap space. As I outlined, some of that was pricing. We certainly thought there was an opportunity to take opportunities where we thought that was appropriate. But it's really more about innovation in the menu than anything else. And again, I've been quite studious of what's happening with Chris and Darin at Main Event. And we've really tried to balance just shooting the price in and of itself, it's a very blunt weapon. And again, we've taken it where we think is appropriate, but we have much more focus to delivering good experience. And again, incremental yield growth as opposed to just major increases in price without too much consideration of the impact.

Yes, Helpful.

[Operator Instructions] Our next question will come from Brian Han with Morningstar.

Can you please update us on your thinking about what the sustainable margin could be for Main Event longer term?

Sorry, Brian, could you repeat the sustainable what?

Sustainable margin what it could be for Main Event, longer term?

Not going to provide guidance per se, but I'll ask Darin to respond about the views of the business.

So we've historically, pre-COVID, discussed 20% consolidated margins for the business. Certainly, with where the business is performing, we believe margins acting above that levels are very sustainable and is what we would expect. So I would say 20%, 20% plus is where we think our margins should ultimately settle in.

Okay. Just on.

Brian, just to confirm that the -- those are aspirational targets and not provided by way of guidance.

Of course, Gary. Of course. Just on Main Event, you gentlemen mentioned a few times that corporate and group bookings are still sort of the result. When you look at other industries like travel, corporate, especially in the U.S., it seems like things are almost back to normal. So just wondering why you think those corporates or group bookings are not recovering as much for Main Event?

Darin, would like to take that one?

Yes. I mean, one main reason is the lack of a sponsor, either at a corporate or group level, group meaning at school, church, some of the civic organization. There's still a very strong hesitancy to sponsor an event and bring a bunch of people together. It's been the longest tail in the recovery. And it's consistent with most of the other consumer brands out there, be it [indiscernible], Dave & Busters. Everyone's continuing to have struggled with that over the last 2 years. The overall participants that would be part of that are more than happy because they're walk-in guests and showing their strong willingness to trade, but it's largely -- and so there's a -- we think just a sort of a normalized approach to the virus that these sponsors are going to feel comfortable booking more. But given that there's pent-up demand on that side, we're not speculating and as you understand other time. But I think when that window opens, we're going to be prepared soon to capture our fair share of that revenue.

Okay. Just lastly, Gary, hopefully, you let this through to Greg. But just on Theme Parks, can you please share with us what were the main sticking points that led to the deal with Evolution falling through?

Greg, would you like to tackle that at a high level?

Yes, sure, Gary. Look, I think, Brian, at a very high level, a great partner and have good experience in terms of what we were looking to do. We just couldn't get the deal to work for us as much as we would have liked it to be. So I think the concept was right, but we just couldn't come to an agreement that made enough sense for us to proceed. And we see high income opportunity there with other players out there to look at it hence the reason that we want to just take a bit more time to get it right.

Our next question is coming from [ Roger Coleman ] with [ Pat Limited ].

I just had a question on the drop-through rate for the first half of 43%. At the annual results release presentation and yet again, through this conference, the U.S. team mentioned that the drop-through rate would be in excess of 60%. Now what happened in this first half? And if I add back a 60% rate of the 43% drop-through, your margin should be well into the 30% in other circumstances. Could you just give us some color on why we got 43% given the comments of 60% plus on drop-through?

Thanks, Roger. Darin, are you able to respond?

Yes, yes. Yes. So a couple of things. First of all, some of the incremental revenue coming in is new center revenue, and it's not going to have as much of a pull-through just given the fact that you're referring in as much as fixed cost. So that revenue is not going to come through at that level of flow through, number one. Secondly, so a handful of items that are applying to additional cost pressure. One is increased incentive compensation at the field level, at the support center just based on how the business is performing, ahead of target set. There's incremental costs there that are not reflected of the underlying four-wall sort of run rate. Just some incremental costs also coming in from some marketing spend that we've -- investor.

Sorry, sorry. I do want to get -- cut to the chase. Are we going to get to a 60% drop-through rate? Or are we permanently stuck at mid-40s?

Absolutely not. No. No. You have to -- yes, no, it's -- no, our pull-through rate is consistently for years been the 60% to 70%. But when you look at -- you just have to look at the component of what that revenue coming in when you're looking at consolidated results.

Sorry, sorry. First year openings are normally excessively good and then it normalizes. So that's not the excuse for the 43% in the first half.

Well, absolutely not. They're not at a 70% margin, either. I'm walking you through the components.

Right. I do want to move on to our CapEx, right? Most people used to budget around USD 9 million to USD 10 million of net CapEx, ex-sales of leaseback, the exclusive property. And inflationary in America now, or should we move that up at $11 million to $12 million per center or leave it at $10 million?

So Roger, just to clarify, using U.S. dollars or A dollars?

U.S. dollars.

Okay. Darin?

Yes. I'd say here, in the short run, if you were to consider an additional $1 million, then that's fair. We do have flexibility to get additional funding as well from our partners. So that net cost is something that we can also manage as well through our proceeds.

Right, right. Okay. I want to move on to Greg quick. Just Greg you there? On those February ticket sales up to '22, which is best in 2016, right? You there?

Yes. Roger, post the question, and then Greg will respond.

Right, Greg. 2016 had 2.4 million in attendance and a 32% EBITDA margin. Has this sent [indiscernible] the capability of them repeating that again probably in fiscal '23 with normalized weather?

Roger, I think it's just -- yes, it's too early for us to make any of those kind of predictions around guidance. Obviously, we're very aspirational to return the business, firstly, to breakeven and then towards the historical performance of the business. I would say that the margins that were achieved pre-incident, I don't expect or that we'll achieve those kind of margins into the future. I think the cost of compliance. And I think our view from the Board down around commitment of expenditure to safety is just very different from what was in the organization before. So look, absolutely want to get back to those kind of numbers, Roger, 100%. And as I said in the prepared remarks, it really is just very early days. And so we're certainly very excited about the numbers, but it's a couple of months of good performance so far. And as much as I want to see, I'm sure you also do as well with a bit of consistency in the numbers over the next half.

Yes. Of course, I would agree with that. I'm not a [ short tail ].

Our next question comes from Allan Franklin with Canaccord Genuity.

Yes, sorry, scrap that question coming from over time. Leave that off.

There are no further questions at this time. I'll now hand back to Dr. Weiss for closing remarks.

Thank you. I'd like to thank everyone on the call and also particularly like to thank my colleagues who have joined me on the call and once again, to express my appreciation and the Board's appreciation to the great contribution that our teams at Main Event and Theme Parks are doing to progress the recovery of Ardent so -- with the challenges of the pandemic with us that hopefully are abating. So thank you all very much.