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

Thank you, and good morning, everyone. I'm Gary Weiss, Chairman of Ardent Leisure Group. I'm joined on the call today by Greg Yong, our Chief Executive Officer; and Jose de Sacadura, who is the Chief Financial Officer for Ardent Leisure. The results that we released today obviously reflect the past and the present of Ardent. First, the half year results reflect the substantial gain on the sale of our former Main Event business, which completed on 30 June 2022. Secondly, and most significantly for Ardent moving forward. These results reflect the greatly improved performance of our theme parks and attractions business for the first half of FY 2023. Notably, as reported, our revenue in this division for the period was the highest in over 6 years, and correspondingly EBITDA, excluding specific items, of $4.3 million was positive for the first time since the first half of FY '17. Greg and Jose will speak to the results, but I just want to specifically draw attention to Page 6 of the investor presentation, which provides a useful snapshot of the potential further value of Ardent still to be unlocked. So just turning very quickly to that page. One will see that as at balance date, Ardent was holding $147.7 million of cash equivalent to $30.07 per share. The company is debt free and holds its real estate unencumbered. The next dot points highlight the future potential value to be unlocked in terms of the potential to get back to historical carrying values for our theme park assets, noting as well the value of deferred tax assets on the balance sheet or more relevantly, the exclusion of $127.6 million of tax losses and $48.4 million of deductible temporary differences with a combined potential tax benefit of $52.8 million. So we have not recognized the deferred tax asset within the group. And finally, to note as well the contingent consideration potentially still to come from Dave & Busters. So with those introductory comments, I'll now pass over to Jose.

Thank you, Gary. Good morning, and welcome to everyone joining us today. Over the next few slides, I'll provide a brief overview of the group's results for the half year, starting with Slide 3. The first half of FY '23 has been another significant period for Ardent Leisure. At the beginning of the year, the group completed the sale of Main Event, as Gary mentioned, recording a gain on disposal of almost $650 million. During the period, the group also saw a solid rebound in the trading performance and return to profitability of its theme parks and attractions business. Together, these have led to the group reporting statutory results, which are materially improved compared to the prior corresponding period. Consolidated net profit after tax for the group was $669.5 million, up significantly on the loss of $36.8 million reported in the prior period. Net profit from continuing operations was $20 million, a stark turnaround compared to the first half loss of $20.2 million reported last year. Note, however, that these results were impacted by certain one-off significant items, which I'll cover shortly. Excluding all significant items, the group's revenue of $43.7 million increased by $25.2 million or 136.5% and EBITDA of $0.3 million was up $16.7 million compared to a $16.4 million loss reported in the prior period. Pleasingly, the Theme Parks business has recorded its highest first half revenue since first half '16. This significant improvement has been mostly driven by increased visitation, up 67.4% in prior period and material improvements in per capita yields. The total value of tickets sold, which ignores the timing of revenue recognition under accounting standards, was up 84.3% compared to prior period. The strong revenue performance, combined with ongoing focus on operational efficiency resulted in the Theme Parks business, recording a first half EBITDA, excluding specific items, of $4.3 million. This is an improvement of almost 135% versus prior period, 347% compared to first half '20 pre-Covid levels and is the first positive half year EBITDA result for the business in 6 years. On Slide 4, we provide a little more color on the first half results for FY '23. As noted, the theme parks and attractions business has shown a pleasing recovery in performance during the period. Operating revenue of $43.7 million more than doubled compared to first half '22 revenue of $18.5 million. As I mentioned, this growth was driven by increased ticket sales, visitation and yield as well as the business lapping the Covid-led closure of Queensland borders in the first half of last year. Statutory EBITDA for the Theme Parks business of $3.3 million was up 128% on prior period. The significant uplift reflects a high flow-through of incremental revenue to the bottom line, due to greater leverage of our fixed cost base and our continuing strong focus on operational efficiency and cost discipline. Economic conditions have brought cost pressures in some areas there. However, the business has weathered these well. Despite these pressures, the group has managed to achieve a slight reduction in its corporate cost as it realizes offsetting cost savings following the sale of Main Event. This remains an area of ongoing focus for the group and further detail will be provided later in this presentation. At a consolidated level, the group has reported statutory EBITDA from continuing operations of $32.2 million, up [ $48.1 ] million in prior period. And as I mentioned previously, excluding specific items, improved from a loss of $16.4 million in the prior period to a profit of $0.3 million in this half. If we ignore the prior period contributions from other now disposed businesses, this represents the best first half EBITDA results in first half '17. Further segmentation of the results between continuing and discontinued operations can be found at Appendix 1 of the presentation. Turning to Slide 5. As indicated earlier, the group's results this year has been impacted by a number of one-off specific items. And here, we provide further detail regarding these items. And as a reminder, a further breakdown by segment is provided in Appendix 2 of this presentation. I'll now call out a couple of more material line items. Firstly, the EBITDA result includes an unrealized derivative gain of $32.9 million relating to forward foreign exchange contracts, which were used to hedge the group's exposure on the main event sale proceeds. These FX contracts were put in place in FY '22 and due to weakening of the Australian dollar against the U.S. dollar, the fair value of these hedges resulted in an unrealized loss being recognized in the FY '22 accounts. So the current period gain reflects a reversal of those losses previously recorded in FY '22. In addition, the net results of the group include the gain of $649.5 million from the sale of Main Event as previously stated. Further details in relation to this gain are disclosed in Note 17 to the half year financial statements. However, please note that this amount of the gain does not include $7.3 million of sale costs, which were previously accrued and expensed in the prior year. And as Gary mentioned, orders include recognition of Ardent's share of up to USD 14.5 million of contingent consideration, which is receivable by Ardent upon utilization of Main Event tax losses by Dave & Busters in the future. Moving now to Slide 6. As Gary mentioned here, we provide a summary of the group's position following the sale of Main Event. As previously disclosed, this transaction enabled the group to fully repay its debt, returned $455.7 million to shareholders and retain approximately $150 million of cash to fund the continuing business. Following the sale, the group is now much simplified, but considerably strengthened and is well capitalized to fund the ongoing growth and recovery of its theme parks business, which includes a pipeline of exciting new rides and attractions, which Greg will talk to shortly. At 27th of December, the group holds $148 million of cash, is debt free and owns fully unencumbered real estate assets. Consolidated net assets of approximately $259 million, are materially higher than the $63 million reported at the end of FY '22. But notwithstanding this, the group is well placed to unlock considerable further value in the future. [ Adherence ] as examples, as mentioned by Gary. So firstly, the group's accounts record Dreamworld and SkyPoint assets at their historic costs, net of accumulated depreciation and impairments. Back in June 2016, the fair value of these assets was approximately $275 million, well above the carrying value today of $124.5 million. So with sustained improvement and growth in the business, the potential to unlock value in these assets is clearly quite significant. Secondly, the accounts continue to exclude recognition of deferred tax assets as Gary mentioned, although not in the balance sheet, the losses to which the deferred tax assets relate remain available to the group in future periods when I return to taxable position and are, therefore, considerable value to the group. And finally, as previously mentioned, the group has yet to recognize its share of up to USD $14.5 million of consideration from the sale of Main Event. So as you can see, the future realization of value for [ Ardent's share ] has potential to materially increase the group's net assets well beyond what's -- what you can see in the balance sheet and to unlock significant further value for shareholders in the future. I'll now hand over to Greg, who will walk you through the performance of the Theme Parks and Attractions business.

Thanks, Jose, and good morning to everyone. I'll take you to Slide 8. And as we outlined in previous updates, we've started to see a meaningful shift in performance back in the second half of FY '22. I'm pleased to report that this momentum has not only persisted, but it has accelerated through the last half. We've spoken at length about our attitude towards cost discipline and the importance we place an effective management of expenses, noting that there are priorities in safety and engineering, which we just will not compromise on. These results reflect that stance and whilst the costs have risen as a result of the increased business activity, this increase is negligible compared to the increases we've seen in revenue, thereby creating a much stronger operating leverage situation than we were seeing under our pre-pandemic cost base. We've also said that as we see progress in our strategic initiatives, we expect to see revenue upside as a result. And this is starting to take shape with increases in revenue of over 130% on the prior comparative period and moreover, the best first half revenue result we've seen in 6 years. The complement of these inputs has resulted in our first positive EBITDA half since FY '17. And I cannot overstate how meaningful a milestone this is, but at the same time, there is much more to be done, and we will not be satisfied until we see performance trading up to and ultimately in excess of historical highs. On Slide 9, we've provided some further detail on the half and an insight into how we are tracking on the year-to-date basis as at the end of January, noting again that a performance is unaudited. For the first half, we've seen very pleasing revenue performance as a result of both robust volume and ongoing improvements in ticketing yields. This was further bolstered by the sustained trends with the book that we've been seeing in our in-park spending. Dreamworld food and retail revenue per capitas were up another 40% on the prior year, and we're now at a point where the higher spend that we've ever seen on record. We've previously outlined the drivers of this performance, things like our night market business are focused on food quality and innovation as well as our efforts in retail, particularly with regard to online. With regards to January, it proved to be a very strong month in the back of an auspicious response to our in-park activation consumed reasonably good weather. And while we went through reporting granular monthly results, I can say that we're very pleased with the month. With ticket sales that operating revenue remaining high and unaudited year-to-date EBITDA at the highest level we've seen since January 2016. This is particularly encouraging given the opening of several new attractions that have opened during the holiday season. Turning to Slide 10. In November, we announced the pipeline of new investment totaling over $50 million. This includes the complete reversion of our kids offering, an extension of our iconic Ocean Parade proceeds and a new Wave Swinger attraction, which will bring excitement and kinetic energy to the front of the park. The [indiscernible] which will be known as the Dreamworld flyer will also operate on a pay-per-play basis for non-annual pass members during our night markets with thousands of lines and a beautiful company in founding to [ Southon ] supply. We know that this will make an iconic activity addition to the park. Each of these initiatives have been designed not only to generate new admissions but also to assist our efforts to operate at a much more sustainable cost base into the future. The rebranding and the consolidation of our kids areas to focus in one space on [indiscernible] Australian brands such as the Wiggles and ABC Kids as well as our very own [indiscernible]. It's not only compelling for guests, but it is a much more affordable suite of licenses than what we've had previously. Moreover, these works are very focused on reducing the OpEx burden for future years. This comes in many forms from rigorous selection of painting systems and large rises to reduce tics need for more frequent repaints, robust flooring services throughout the area, which will negate the need for constant maintenance. So thinking deeply about how we think about our landscaping and our irrigation in order to increase efficiency for our horticultural team. Doesn't sound like an important consideration, but it is when you think about managing a side of over 50 hectares. We also announced a major change to the middle of the part, which you can see on Slide 11. This involves transforming the former ABC precinct into a new area called River Town, which is in the [indiscernible] land that we had in the past back when we first opened up 40 years ago. Rivertown will include a reimagined vintage cars attraction, one of our family favorites, and it will become even more popular when put in prime real estate with more ride vehicles and a whole new narrative. We're also launching an incredible new family coaster, which will be called Jungle rush. In addition to this attraction simply put is that we want to see Grandma or Grandpa riding with their grand kids. So we're aiming for a very broad ridership and an experience that families will be able to share together. The ride has several [ well ] first and will be the most immersive thematic execution in the history of the parks. It will signify the largest single attraction investment in our history, and we just can't wait for guests to get out here and enjoy these new experiences. We also announced some significant changes to Tiger Island, which allows us to continue to share the flight of these majestic creatures, but in a way that meets contemporary expectations and also affords us materially lower risks than what we currently see under the program. And lastly, we announced that we are installing over 2,000 solar panels in our parks, which will generate over around 1.3 million kilowatt hours or almost 30% of our current power needs. This will be the largest solar array in any theme park in Australia, and we are very proud to be taking this step both to reduce our environmental footprint and moreover, to protect against our energy cost inflation into the future. On Slide 12, a brief update on our recent summer holiday activation, which is all about growing the joy and the wonder of the circus to Dreamworld. And I've got to say the event was very well received with NPS scores even higher than the highs that we saw last year and to the point where we had to extend the event for a further week in order to meet demand. We're now at a point where we are delivering as many, if not more, significant activations than any single site in the industry globally. And I can tell you from my own experience that this is no easy feat. Not only do we need to ensure that these events meet our hurdles around safety and financial returns, but they must be compelling. Otherwise, there's just no value derived from doing them. Simply put, there's no benefit in doing great events if they're unaffordable. And there's no point doing affordable events if they're not great. We've been developing this capacity in the organization to be able to seamlessly deliver this content and it is now a customer practice for our team. And strategically, it gives us another lever to drive ticketing acquisition and past retention in peak periods and allows us to compete even went up against major attraction openings where we might otherwise see shifts and share to our competitors. I think if you look at the December and January results, we've clearly proved this thesis out. On Slide 13, we provide an update as to what we refer to as the Dreamworld difference, which is code for us for our relentless focus on improving the guest experience. Over the last 24 months, we've seen a 65 point increase in Net Promoter Scores. I've not seen the increase of this quantum anywhere in the industry. Given such a material change, we do expect it will moderate over time, however, our goal is to continually improve this regardless. And there is a clear nexus between guest satisfaction and financial performance. We believe there is no accident that as our experience is markedly improved, so we have our financials. And any of you that have studied NPS would know that the data -- how the data is captured can have a meaningful impact on the results. And so, whilst it's a popular measurement, it also has its limitations. To that end, we also measure gets experienced by the global review index, which is essentially an aggregation of sentiment that is collected from external review websites such as Google and TripAdvisor. Once again, [ the rides and parks, ] and attractions were ramped at the best experiences for both the half and from more recently the December and January holiday period on the Gold Coast. We're incredibly proud of each and every team member of our team for their care and attention they pay to our guests. And importantly, this is a whole of business mission. For example, if I think about our engineering team, they are actually the linchpin of providing a fantastic less experience without well-maintained and reliable attractions continue to deliver maximum throughput in peak periods, we just wouldn't see these kind of results. Similarly, our IT and our marketing teams have been very focused on providing a futuristic-need experience, and we've seen this borne out in favorable commentary from our guests. So yes, when you come to our parks, those interactions are critical, we call the moments of truth. But the work and attention that goes into setting those interactions up can't be overstated. And to me, these results actually reflect how exceptional execution has been across all facets of urbanization, not purely because we had a very friendly team frontline team members. On Slide 14 and in summary, a profitable first half for the first time in many years is a significant achievement. And it's important to take a moment to reflect on that given the challenges that we've all been through. It's a true testament to the resilience of our stakeholders engaged in the organization and not the least of which to our shareholders. But I want to reassure you that this does not mean that one iota of complacency has crept into this culture. We know that this business has been very successful in the past, and we can see from recent results, the potential is clearly there to return to those levels of performance and beyond. So that's to happen. We need all of our strategic enablers in play. We have an indisputably solid balance sheet with no debt and strong cash holdings along with fully owned land and that land and assets is carried up well below historical values. Coupled with this, are meaningful items not reflected in the balance sheet, but has significant economic upside in deferred tax assets and receivables yet to be realized from the [indiscernible]. International visitation is still minute compared to what we have seen pre-pandemic, where we enjoyed visitation of between 15% and 20% of total attendance. And over time, we see no reason why that won't return. I also want to address the macroeconomic situation directly. None of us know when the cycle of interest rate increases will end, and it's prudent for us to contemplate the impacts that could happen on this business. Does it at the light at the end of the tunnel, and we believe that any associated impacts are simply episodic and not emblematic of the industry in which we compete. In fact, the macro trend away from people buying material items and moving towards experiences was established well before Covid and now due to pandemic only [ gamble on ]that sentiment. Out-of-home Entertainment is uniquely positioned to capitalize on that situation. The announcements we've made around future attractions are designed to drive visitation and revenue over the course of the next several years. And we believe our selection to provide the right mix of compelling products that will sell tickets, add capacity and will create ongoing OpEx efficiency over that time. We also continue to work on initiatives to unlock the value from our land holdings. And whilst I have no update on that today, we are running through the requisite processes with both government departments and consultants to in order to facilitate these plans. So we feel incredibly positive about the future of Ardent and the substantial upside still to come and our ability to create value for all of our stakeholders. The last piece of the puzzle was clearly our people, and I could not be more pleased with a truly world-class team we have in place and my confidence in their ability to realize that vision. With that, I'll turn things back over to Jose. Thank you.

Thanks, Greg. I'll now touch on some details regarding the group's Capital management and corporate costs, speak for opening up with on Q&A. So on Slide 16, we present a summary of the group's net debt and cash flows for the period. As you can see, the group moved from a net debt position of $153 million in June last year to a net cash position of $148 million in December. This reflects the receipt of Main Event sale proceeds, net of cash disposed of $583.5 million as well as the elimination of $197.6 million of U.S. debt as part of that transaction. The cash flow also includes payment to shareholders of $455.7 million, and payments of amounts outstanding to the Australian Tax Office of $11 million in July '22. I Operating cash outflows of $7.8 million reflect the consolidated EBITDA performance during the period, combined with an increase in working capital due to higher trading volumes, seasonality factors and the timing of annual insurance premiums, which were prepaid in the first half of the year. Capital expenditure payments of $8.2 million were also made during the period relating to scheduled maintenance CapEx as well as some preliminary development CapEx in respect of the new Jungle rush coaster, wave swinger attraction and the planned redesign and enhancement of the kids area at Dreamworld. Slide 17 provides a high-level overview of Ardent's corporate costs, including the main components of these costs. As the chart demonstrates, the group has achieved meaningful reductions overall in its corporate overheads over the last 6 years. However, as noted in our August results presentation, we've also seen a significant ramp-up in insurance costs during this time, which had grown more than tenfold over half of the group's corporate costs in FY '22. Following the Main Event sale, we've seen a slight reset in premiums, and this has resulted in a $0.8 million annualized reduction in insurance costs for FY '23. However, these costs still make up around 47% of total corporate cost base. Director and employee costs, which make up around 1/3 of corporate costs continue to be prudently managed and are close to the lowest they've ever been for the group. However, the current inflationary environment has created cost pressures in some of the other areas, many of which form a necessary part of being an ASX-listed group. Management are working hard to find offsetting savings and remain committed to carefully managing these costs and continuing to drive efficiencies wherever possible. This concludes the main part of our presentation, and I'll now open up the lines for any questions...

The first question today comes from April Lowis with Barrenjoey.

I just had a question on the January trading period. So it sounds like the strength has continued into January. But the numbers on Slide 9 might imply a little bit of a slowdown in January. So when looking at the January year-to-date the PCP. Is that -- or is that just because maybe the PCP of January is a little bit stronger than this example before. And just wondering whether in January and February so far, other prices and yields still holding up?

Yes, April, thanks for the question. It's Greg here. Look, I think you've alluded to it exactly right, is that if you look at the numbers on a premise basis, I think you can say, well, look, there seems to be a slight decline, and I'd say slight in terms of ticket sales or operating revenue. And I think you've got it right in that the first half, really, the performance that we're seeing against the PCP was obviously not necessarily overstated, but also but somewhat inflated as a result of us competing really against an economic environment, which was handed by shutdowns and so on. January last year really represented us coming out of that environment. Early January had some challenges still with Omicron and so on, but really, we saw a lot of strong demand through the second half of January last year. And as I mentioned earlier in the prepared remarks, that's where we really started to see some acceleration in performance. And so to give you a feel for how we think of things on the ground, January was really busy absolutely flat out, and we didn't really perceive to see any material decline in terms of business activity. I think if you bear it out in the numbers, yes, there's a marginal change there, but I think it's more reflective of what we were seeing in the first half versus the calendar change in the second half around just a comparative of trading performance. In terms of yields and sales, look, we're very happy with how that's all going and no changes to our stance on that as we've outlined to the market previously. We see real opportunity here to continue to grow the business. Now there's a number of different levers that we intend to pull on that, but we certainly are all about rational competition here in the Gold Coast nothing in that view of assets changed in any way.

That's great. One more question for me just on the corporate overhead. So obviously, seat reduction over the last few years. I just wanted to suggest that Main Event has fully washed through? Or could these over costs go down a little bit further, -- noting that, obviously, there was a peak chunk from insurance.

Yes. Look, I'll have a quick go back and then Jose began to add some extra color, if you like. The main event has largely now almost all washed through, but I would say for the first half, there were still some elements of the consolidation work. And even to this day, if you just contemplate what you see in the reporting here that we're still obviously doing work on main events and factoring that into our reporting to the market. And so again, Main Event largely is washed out, but we are still doing work on that, and that's still is an element of our reporting processes. -- even things like if you just think about the receivables that we're working through with them and other things like that, there's still elements of it there. In terms of what we see for corporate costs, and as Jose outlined earlier, we're not about giving guidance in terms of cost, particularly in what is a difficult inflationary environment. And I think moreover, because insurance is just such a significant part of the corporate cost base. So we do see opportunities still to further get efficiency over there. It's the conversation that we have in the organization on a regular basis, and we do see opportunity still gainer efficiencies, but we're not in the view that we can give you any guidance as to how that looks at this point in time. Jose, there anything you want to add to that?

Yes. No, I don't think there is. You mentioned the current inflationary environment. And obviously, that's a bit of an offsetting effect. Some of the savings that we're realizing in some areas are being soaked up with other costs going up to some extent, too. So that does sort of mask it a little bit. But I think you've summed it up pretty well, Greg.

The next question comes from Brian Han with Morningstar.

Great. I understand that there are always moving parts and unusual events every half period. But would you consider that December half, we just had as a relatively normal trading period on visitation and revenue front? And if so, can you remind us what the typical revenue seasonality is for the business?

Brian... To get from you. Look, I don't know what normal is anymore, given the last few years. So it's hard to really give you any perception on that. Obviously, that's somewhat more difficult it and given our history since 2016. I can say to you that through the half, we were very happy with a few things going in our face for sure. Weather, as you know, is a significant driver of our financial performance, and we had a good time of weather over the half, and we executed really well over the half in all of our strategic initiatives. And to be frank, we had some concerns, obviously, given our competitor was opening some very significant capital. And we're really happy to see our performance continues to remain strong despite that. So in terms of was it a normal half, I just can't say you look I think it is already is. And I think we've got a lot more upside as we -- I think we're stressing to all of you is that most organizations are talking about recovering back to pre-Covid numbers. We're obviously on truly there. We're obviously looking at a much longer runway in that regard in terms of what the upside looks like for Ardent. In terms of seasonality, look, it's about 50-50 in terms of revenue. There is some calendar shifts and things like that largely. But I think if you would look at the previous periods, it sits at around that. But I would just caution to say that that's obviously when we think about activity in the business, and that is obviously at times impacted by revenue recognition and things like that.

Fair enough. If you don't mind, just a couple of questions on costs. You mentioned somewhere that theme parks have a semi-fixed cost structure. Now what percentage of the division's cost base do you think is fixed now post covid?

Look, we don't really know about what that percentage may at looks like. I think what we've talked about on an ongoing basis is that if you think about theme parks, there is obviously a fairly significant degree of fixed cost in the organization. If we've got 10,000 people here today or 1,000 people here today. They cost the same amount for us to feed animals very much to maintain our rides and attractions and usually to market and administer the business. What we've called out over a number of halfs now is that we've had a very significant look at costs in the organization, particularly in the fixed cost base really to help reduce that leverage. And so if you think about that, what have we done, this is all happening post covid, but we've had a very strong look at the back end of the business. We've had a very strong look at our SG&A costs. But moreover, we've had a very exciting approach around how we've done things around the water park around how we rationalize the traction. And also just look at enterprise-wide cost efficiency things like how we look got security, how we look at entertainment and trying to really balance that between peak periods and off peak periods and making sure that we're delivering an experience is commensurate to a tenant.

Right. So perhaps I can ask another way, Greg, when you say improving the guest experience, what implications does that have on your fixed versus variable split -- does that make it more variable?

It does. Because if you think about it, and I'll just give you an example, where in February on a Friday today, which is obviously not as favorable for us as a holiday school holiday day. And we make very, very clear adjustments in terms of how we think about deployment of entertainment, deployment of variable costs in F&B and retail and so on across the board. And so it gives us more variability, and we've taken away a lot of the fixed cost element to some of those areas as well. So if you think about it this way, we used to spend several million dollars in entertainment over the course of an annual year. And that was really spread out fairly evenly across the entire calendar. We've gone from a point where we've had that fixed cost base and now having a very significant change in terms of the fixed cost element of that, which means that in peak times, -- we had a lot of variable costs to enhance the guest experience, but in off-peak times like February and May and those kind of periods, we can really turn the tap off and really run the business at the commensurate end to what we expect to have the express look like on a quieter day.

The next question comes from Allan Franklin with Canaccord Genuity.

Great to see the update. Just wanted to -- I mean, perhaps just a quick follow-on on that cost discussion, just to cross-check. On the other gross profit levels, just assuming I'm going the numbers right, but it looks like gross profit level is to doing sort of 4-ish percent gross margin. It's picked up a little bit half-on-half and a couple of cost buckets sort of repairs and maintenance, advertising promotions and the likes of flattening to a certain level. So obviously, within the balance of that, but is employee costs and other costs. But net-net, I mean, that sort of 84%, 85% gross profit, should that be a normal range to think about now going forward? And then as you have alluded to, there is a level of variable cost within the same employees and some of the other buckets, but it really is that 84% to 85% gross margin is the key variable to think about down the P&L?

Yes, Allan, look, again, I think we're very hereto, we don't give guidance as an organization. But I want to give you some color to help you think about that, though. Our view very strongly now is that we've done a lot of work on the cost base. And look, you know me in my approach to this and we're never happy with how we're performing in terms of efficiencies in the business. And we look at that -- look through the initiatives I've talked you through at length in the past around making statistically different decisions around how we operate our water pass to how we think about attractions and so on. And down to simple cultural approaches to cost in the organization. We don't have clean out offices. I don't have a PA. We really think about this business like it's our own, and that's how we operate. We really see upsides in the business going forward, though, in terms of just driving revenue and that being the whole source of us generating further operating leverage. And so whilst I'm not comfortable to give you some guidance around GP and where that sits at the moment, our view is that -- and as we've talked about in the past is that we've seen today and I still perceive business in the business is that there still are these economies of scale at Ardent and now that will only go away as we grow the revenue base. And so what does that mean? If you were to come here again in an off-peak period, I've got people running rise at a minimum requirement to run rise, and I could double the attendance in the off-peak periods and not really add a lot of variable labor. And so I think that illustrates the point is that there will be activity-based cost increases in the organization as revenue increases. It really outpaces what we're seeing in terms of revenue.

No, helpful. And maybe just -- I mean, jumping into some of the revenue numbers there. I mean, you're very, very pleasantly surprised with the yield and the per capital spend. Could you maybe unpack that a little bit? I mean is the tailwinds coming from some of the events that you're sort of running? I know you put through price increases partway through the period. But yes, it did surprise the material. Is it just sort of interested in terms of mix, price other sort of additive items that have helped drive that?

Yes. Look, I think it's a number of different things. And I think not the least of which is also, look, ticketing yields and things like that are really important. That's a big driver. But I just want to touch again on what I mentioned in the call was that our impact spending is up 40% from a per capita basis year-on-year and last year was up significantly as well. And as I've highlighted, again, in the prepared remarks, our parks--the capital spends now are the best that we've seen on record, and we've gone back as far as we can go, and we've never seen in part spends as to where they are today. I think if you look around the markets and you think about other organizations and their delivery of increases in their capital yields, it's not an uncommon story, and I appreciate that. But I think we can clearly point to a number of initiatives and get our hands around them and things that have driven that increase. And so yes, we've had a bit of price inflation, which has certainly helped those spends. But again, things like incremental revenue we're getting on the night market business, things like what we're seeing on be both over and above just pure pricing and things that we're doing in areas like online retail like [indiscernible] are big drivers. From a ticketing yield perspective, look, we've talked about that a lot in terms of our pricing being significantly different in terms of how we think about that compared to back in 2016. But moreover, it's not just about raising prices, but also a lot of work that we've done around the back end in channel management, putting a lot more focus on our direct to our own channels businesses. Tailwinds. Look, there is -- and I've been really upfront on this is that international we see is a really significant upside. But at the same time, international is dilution to yields. And so as with the international come on, I don't think that will actually make a material difference in terms of diluting the work that we've done so far, but it is dilutionary. And so, without international mix, our yields are higher than they otherwise would be. But again, I think that as we bring international on, we can be a lot more selective about how we think about that. And again, I don't think it will have the same impact that it used to have. And again, I'd make the point that as we think about international, that is all in my mind, incremental revenue. And even if it is marginally dilutionary, we'll take it. And so, look, there's a few different things that are driving things. I think if you think about events, yes, I think we're getting really strong results at our events business, and we're seeing that across the board. So our events as I've outlined with the circus of in at Christmas, but moreover, our calendar events now with Street Food Festival. We've entered with Spring -- can Fair with Happy Halloween. We're just seeing tremendous results out of that from all ends. And so they are certainly helping. I don't see any significant concerns around yield going forward. And I think with how we think about strategy around pricing on tickets in the past. And again, we feel very comfortable with how we're doing that at the moment.

Yes, sure. And sorry, just slightly did the events roll into the attendance numbers or you attendance specifically a ticket sold into parks?

No, the event attendance is rolling to the attendance numbers. We don't -- so if you think about events, though, and I think in some businesses, you would -- a portion of your annual pass revenue to an event. I can tell you that our annual pass revenue is straight line recognized over the course of the year, and we don't take any elements of an event and associated value to that and drop it into the P&L. So attendances certainly hit our attendance line, but the revenue for those events, if it's not a single price pay-per-patient entry. The set revenue value is proportion over the course of the year as normal.

Okay. And sorry, just one other any commentary you can make in and around your competitor, obviously, the event they had early on in the year as well as them opening up their new rides. So how have you been able to react to that certainly on the factor of them opening new rides you have to be a bit more aggressive to keep sort of audience share and/or attention or not necessarily?

Look, it's not reasonable for me to suggest I don't look at what our competitors are doing, and that's not the least of our local theme parks. But I think about everything the Gold Coast has been a competitor for our guest time. Look, as I called out in the remarks, we look at ways that we can obviously counter new openings. And look, get to see and pick people will move their discretionary spend according to where they drive value and new attractions in this game and what does that. And so we were certainly very mindful about the new product that was opening over there. And we think, in general, that new product in the industry, particularly in the Gold Coast is good for the Gold Coast, and we'll all get a share of that. But we are out there competing, and we'll give it a red hot go against anyone. And I think our numbers show particularly over December and January that whilst they opened some very significant attractions, we really leasing. I think in terms of the incidents that you might be alluding to, we've seen no impact on our business at all as a result of that.

The next question comes from Roger Colman with [indiscernible]

Gary, I'm wondering is the CapEx to free cash flow allocation and feeding into net cash position and any potential executions that what like the scenario for the next 3 years in terms of EBITDA, free cash flow, CapEx, et cetera, and into that cash position.

So Roger, I'm not going to be drawn into specifics and providing any form of guidance for the future. Clearly, we have announced the approximately $50 million rollout of new rides and attractions, which we announced in November. And we just need to ensure that we can execute on and bringing those rights and attractions and on time and on budget. Clearly, we would anticipate that those new features to the park will add to our overall performance, mix and drive increased revenue and accordingly EBITDA. And we'll just continue to monitor, obviously, not only the rollout of those attractions, but any new items that potentially we would look to invest in keeping a close eye on retaining the strength of the balance sheet, which I think is a very, very strong feature of the Ardent that we present today.

Right. Great. A question to the group. The business used to be able to carry and plus attentive right fee capacity of total start Gold coast and the existing tractors are enough to generate that [indiscernible] again at current year $70 drop for the hand.

Yes, Roger, good to hear from you. I think you're breaking up a little bit there. So I'm going have a go at that [indiscernible]. I think the question was as we see increased attendance and revenues, have we got the attraction capacity to deal with that. Is that largely, I think, what you were...

Yes. I'll just expect to start I'm in a clear response now. You used to do way between $2.4 million. Have we got actually to get back at that on the current yields on the bus...

Yes. So Roger, I feel very comfortable with that. And let me just take you through I. The first part of it is that as we've been doing a lot of work around reconstituting the attendance at the attraction lineup here. We've said very clearly that we wanted to resolve some legacy issues around the attraction mix, and we've done that. And that wasn't easy to do. That was taking a bit of medicine, but I think it was appropriate. And as we've added new attractions, one of the most important things in our minds is making sure that as we add new attractions and we retire older attractions that we add capacity for the future. So that line the major results, I'm really happy with how we're going. But I'm not happy with where we are today, and I think there's tremendous upside to all to come. And I'm thinking about that. And so I'm all about thinking about where we ask [ one 2 ] million-plus attendances. And I won't have this business well positioned to deal with that. And so as I add new attractions, -- the attraction that I'm making and conversely the ones I'm taking away are all about adding additional capacity. So if you add -- if you think about the way swing out in the front of the park and what that's going to do for us in terms of new capacity. If you think about -- and your kids there and some of the newer tractions we're bringing on there, we're retiring older devices. So we're not about just at incrementally adding attraction to earning cost base challenges into the business. But as we sunset older attractions and bring new things on, why don't we get an OpEx benefit because the maintenance of older attractions is and a bit more on has to deal with it. Yes... And the only other thing, I'd say is it's a really big park. And so there's a lot to do on one of our key differentiators between us and others is that we've got all the things that you can do in one place. And so over the course of the day, it's not about just going on rights or just seeing animals, but you can do all those things in a water park or in one space. And so we're more than comfortable that we've got the capacity in the business to get back to those attendances and more...

Yes. Just a quick follow-on. -- about 69% or what was an increase in revenue for Jack and the rental. -- just going into February last February, but the massive statement unheard of. I mean, it must be traffic fantastic figures.

Sorry, Roger, you still breaking up a bit. But Look, in terms of I think if you're saying how in February. Again, we don't give guidance on that, and we've been -- I think it's enough for us to say, look, we want to give the market an insight as to how we've been going post balance date. Yes, we're in the same position now. We're just not able to give any guidance on that from a granular month-to-month result. I think we've outlined our plans and what we see in the business and our plans for the future, and we feel very comfortable about that.

The next question comes from David Kingston with K Capital.

Look, overall, the shareholder value of this company has been very disappointing to Gary. I think you initially bought in, in 2017 after the tragedy of out roughly about $2 a share, and we're currently at a $0.95 return and $0.70 share. So quite a long -- a lot of years later, shareholders are down. Look, guys, I'm disappointed with the EBITDA for the last 6 months. You may well celebrate, but you're finally positive. But it's common knowledge that your competitors have had a record of the last 6 months, and you're barely turning an EBITDA profit, which, of course, is a loss after corporate expenses. Look, I think every shareholder will be very disappointed if you don't get that to the $40 million EBITDA you used to do go. You can't keep blaming the tragedy that's a long, long time ago. The number was there around about $40 million. And if you can't get there, it's very disappointing. Look, the rating you're on is very poor go, 320 market cap. Let's say, you're allocating $50 million for the rides. So that's the $100 million net cash, $220 million EV. Clearly, your real value if you would sell the assets, would be a long on way north of that. which would give shareholders a value way over $1 a share. So look, overall, I think with good sale in America overall disappointing shareholder value. I think it's really important is slash corporate overhead. I presume, Gary, you're going to be changing the Board a lot the people who are there because you had the American business, they will be going. I just think you've got to really put of sound pretty hard. I think you've got to look at potentially returning the $100 million surplus cash to the shareholders. And I think, guys, you just got to prove that you can deliver shareholder value because it's been a disappointing experience -- thank you.

Well, thank you, David. And I appreciate the Monday morning quarter back in commentary on the history of Ardent. A lot I could say now is not the appropriate time to address some of the comments that you've made on small events like a 100-year pandemic have clearly interrupted lots of things that impacted on Ardent and its various businesses. We're very conscious of the value that we have. We try and highlight it. This is an evolving recovery. And as you would appreciate, it takes a long time to turn around businesses that have been not properly invested in for a considerable period of time. I think we're making excellent progress. We've got an excellent team and a very strong balance sheet with a lot of latent value to unlock.

I think, Gary, I'd say as your competitors are obviously shooting the lights out. So I think that ends for the bantered issue. But are you going to be prepared to return some of the excess capital, Gary?

I don't think you need to be unduly concerned about the Board's focus on shareholder value, David, particularly recognizing that our group and associates are one of the largest shareholders. And it's not for me to comment on competitors. I would simply observe that if you have a look at guest satisfaction scores and so on, which Greg has spoken to, we materially outcompete our competitors. Our ratings for our attractions are materially higher. And ultimately, this gets reflected we believe an appropriate financial outcomes. This is not at all dissimilar to the journey that we undertook at main event, where we had very poor performance until we changed the management there. Negative like-for-like sales growth, very disappointing guest experience scores. But if you -- as you have clearly reversed the history, you will have seen that the green shoots in terms of the turnaround and guest experience scores and the attendance numbers preceded a very substantial pickup in business, particularly following the reopening during Covid and which resulted and thank you for accepting that the sale that we completed during last year, was very satisfactory. And in terms if I could just for the record, simply note that in the 4 years since we've been involved in Ardent the EBITDA at Main Event doubled over that period, and that was against a backdrop of inheriting a business which had recorded 3 years of declining traffic growth to centers. And as I said, you need to appreciate as I'm sure you do, that you cannot turn these businesses around on a dime.

But why wouldn't you handle $100 million surplus back there and then you'd still be on [ gen ]?

Thanks, David. As I told you before, we're very conscious of shareholder value. We have worked long and hard to get hardened into a position of having a strong balance sheet, and we will continue to do that.

The next question comes from Roger Colman with [indiscernible].

Gary CapEx. [indiscernible] I've got a couple of pace up there is major track and there on day maybe -- within that $15 CapEx, the scope to is going to cost a site. [Technical Difficulty] And so a you, Gary, like the Ukraine defenders and after that need some.

Sorry, Roger, I'm struggling to hear you, you're breaking up.

[Technical Difficulty] the mine spend, how much is the scope study going to cost to access that...

Sorry, Greg, maybe you can understand, Rogers question.

Sorry, I can't really get any of that, unfortunately.

Is that better?

Yes.

Dollar CapEx, [Technical Difficulty] don't include it to get the oil site as any scoping study on how much it's going to cost and where you get the green [Technical Difficulty] paint.

So Roger, Greg is I think, if I can actually understand what you're saying. Greg has touched on the fact that work continues to look at the potential to maximize the value of our land, but we haven't commented further on that aspect at this stage.

The next question comes from Nicholas McGarrigle with Barrenjoey.

I think Roger and David have asked all my questions. But I might just ask one around the residual proceeds from Main Event on the balance sheet. Where are they sitting? And is there any contingent potential further consideration that's not sitting on the balance sheet that we could think about?

Yes, sure. So as I mentioned earlier in the presentation, there is contingent consideration that Ardent can basically receive as and when main event use certain tax losses in the future. The amount of that is up to $14.5 million, and so our share of that would be circa $10 million. So that's not on the balance sheet. So that is -- represents upside as and when we get -- we receive that. But other than that... Yes. So I was going to say other than that, all the other main sort of proceeds, working capital adjustment, et cetera, that's all being received already. So that's reflected in the cash balance that we have.

Yes. Great. And then in terms of the pricing that you're seeing, I know this obviously November last year that pricing has moved up from your competitor and then you guys followed pretty quickly thereafter. Can you just give us an update on Single Day as well as annual pass pricing where the differential is and if you see any more room to move that further.

Yes, we absolutely do. Just to highlight what we -- how we think about the value proposition. We think about single day, my view is strongly that our experience on a single day basis here at Dreamworld park is as good, if not better than what it is at Village Park on a day-to-day basis. But there's no doubt that if you think about an annual pass that has multiple parts in it compared to our offer that there is a disparate adjustment in value there. And so our pricing really contemplates that. So again, if I look at a single day experience, we're at the same price as a competitor. If I think about annual passes, we're at a price, which I think reflects the difference in value there. But we do also see upside to continually move that up and close that gap. In the past, I think that the gap between your prices was somewhat negligible. And I see that as an opportunity for SPO moving forward, but we're not quite there yet. So look, upside sort of come in, in the past business single day. I think we're in a good space, and that continues to be our strategy.

And maybe just one last one for me. Just as David mentioned, your competitor doing record attendances, I think you're running at about half the run rate that you might have been doing pre the accident. Can you just talk to some of those factors that will help close that gap? I presume the CapEx program that you're investing over the next couple of years will help rebuild interest in the local market and a perception of safety, even though that has improved. So I guess the perception of the paint quality will improve CapEx. But just your view on that.

Yes. I think under said, right, if you think about part of presentation and what that does in terms of people's associated feelings about safety and other things, we have a really strong view that aesthetics in visas. And you see a lot of the work that we've been doing over the last few years, both in the hard park and the water park around plant integrity work to kind of bring that level up. And that's coming from a long, long way back, as Gary earlier mentioned around what we perceive to be a lack of investment in recent in former years. We're catching that up. And we also believe that as we bring new attractions on that they'll absolutely drive additional attendances and revenues. And we're all about how we're going to continue to drive revenue. We're certainly very mindful around costs, but this is all about for us now getting back to historical revenue performance. I mean the other thing that I just want to touch upon again is that the guest experience for us is absolutely crucial. And I think as long as we keep doing the right thing by guests and looking after their them, we'll be able to continue to draw people back in and to come back to the brand and also to revisit them as well. And look, certainly, if you go and have a look at Google reviews, if you go and have a look at the things we've outlined in the presentation today, there's a stark difference in terms of what we're doing today compared to what we're doing a few years ago. Some of that is activity but there's no doubt about that. But I think if you look at some of the other granular levels of comments in the things around how people treat them in the parks, things how organized that parks are things about how prepared we are for busy peak seasons around attraction availability and quality of food and things like that, not to mention what we're doing in terms of our business. We just think that all of those things are all crucial to what we're trying to do here in terms of changing experience driving ongoing.

There are no further questions at this time. That concludes our conference for today. Thank you for participating. You may now disconnect.