EVT Limited (EVT) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Event Hospitality and Entertainment Year Results Conference Call. [Operator Instructions] I would now like to hand the conference over to Ms. Jane Hastings, CEO. Please go ahead.

Thank you. Well, thanks for joining us today to give an update on the results from what is accurately described as an unprecedented period and the 110-mile history of Event Group. From drought to bushfires and floods to COVID-19, we haven't continued to face challenges daily, and I could not be prouder of how well our teams have responded and continue to step up to deliver shareholders the best possible results. We are certainly challenged first, scenario ready and agile enough to be able to face whatever is ahead of us. This in itself is a monumental achievement. Pre COVID-19, we made solid progress on delivering against our strategic plan, achieving group revenue, EBITDA and PBIT growth. In fact, it was the second highest EBITDA result in the company's history. Then COVID-19 hits. We took swift and effective action to mitigate the impact on cash flow and profitability as the government mandate restrictions almost entirely wiped out revenue, which was down $262 million before subsidies. I'm going to provide you a frame of reference for understanding the COVID-19 complexity on operations for our group. The COVID-19 mandated -- government-mandated spaces required a new set of operating models across each of our countries. In Australia and New Zealand alone, we have 6 territories, call it 5 states in Australia and New Zealand. Each was up to 4 governments COVID-19 phases and variations on requirements and timing for those phases. These requirements needed to be applied across our 3 operating divisions and an adapted at a location-by-location level at exceptionally short and sometimes no notice. In addition, we needed to create 3 operating scenarios for each of the 4 phases across the 6 territories, a high, mid and low case to ensure our businesses were agile enough to adapt and deliver shareholders the best outcome. I think you can start to picture some of the complexity we had on operations due to COVID-19. So unprecedented is an understatement, and our teams have been exceptional to adapt there. We've completed at least 3 works in a few months. And as a result, we're well planned, and we're ready for each scenario. There are 3 things we've done to enable to make this happen. Firstly, highly agile decision-making and really transparent communications. We increased the video frequency of decision meetings and then incorporate the most senior executive and frontline managers on those calls to enable instant problem-solving and faster decisions. We have agile operations transformation to reduce costs without impacting our ability to deliver. We have never experienced no little revenue before. Therefore, we had to review how we could afford to compliantly operate under an entirely new set of circumstances. This just isn't what we do, it's how we do it and who does what. And a good example of that would be a hotel GM. Pre-COVID whilst their role may have been more empowered than some of our competitors, the function of the role is quite comparable. This has changed. We developed minimum viable operating models based on what we could invest to stay open. Our [indiscernible] is adapted to be able to lead, source and close business, deliver mills and make bids. The adaptability of our GMs enables the hotel to remain open whilst many other hotel chains. [indiscernible] Thirdly, we initiated an active cost reduction program. Everything was and continues to be under review, including supply negotiations, landlord negotiations and extremely tight cost control. The result of these actions was a reduction in cost of $140 million, excluding the benefit of rent agreements, mitigating 53% of the revenue decline. We had a strong balance sheet underpinned by a valuable property portfolio. We successfully increased our debt facilities during this period, $750 million with the majority maturing in 2023. Our net debt at June 30 was $421 million. Based on what we know today, this places us in a good position to get through the COVID period over the next 12 months. We are agile and able to respond to changes and have designed and implemented best-in-class COVID-safe operating practices. Our COVID-safe practices have been designed location by location, seeking infectious disease expert input which is the concepts of our customer base and implemented digital and practical training for staff to deliver. Whilst the world is still learning day by day about COVID-19, we aim to continue to set the standards for the safety of staff and customers. We believe and know there's a lot of pent-up demand for our businesses, and we've started to see Green shoots to demonstrate the fast recovery businesses we operate in, which I'll touch on during this presentation. So the COVID-19 impact, this bridge illustrates the actions that I've just spoken about in relation to COVID-19. And normalized profit before continuing operations for FY '19 was $159 million. To ensure that FY '19 is comparable with FY '20, we have adjusted FY '19 normalized profit down by $5 million being the total impact of the adoption of the AASB15 revenue, reduced gift card breakage due to the statutory change in expiry periods and the partial closure of Rydges Queenstown. After these adjustments, underlying normalized profit for the 8 months to Feb 2020 was up $2 million, and we had good momentum. Then COVID-19 hit, reducing revenue for the 4 months by $262 million before government wage subsidies. We immediately responded to mitigate the impact as follows. Of course, certain costs on hire and merchandising costs are automatically reducing revenue falls. This totaled $67 million. We've been able to claim $34 million in wage subsidies in Australia and New Zealand, and we proactively saved the $39 million with our quick response to operations. The result was a normalized profit before AASB 16 interest and tax there of $34 million, and we are very pleased with the results and the benefits that we achieved from the actions taken. So I commence it with the group results. To provide a more comparative year-on-year view of results, we've adjusted the results to reflect the closure of the Rydges Queenstown wings due to the seismic issues and the legislative change to the treatment of the expiry of movie vouchers for 1 to 3 years. Group revenue to February 2020 was $685 million, up 2.5% and full year down 21% including the government subsidies. We were very pleased that hotel Thredbo property generated profit for the year despite the impact of COVID-19, and the entertainment result loss negative does not include the abatement and rebates negotiated with landlords, which we'll book in the first half of '21. Underlying unallocated expenses were down 17% despite increased insurance premiums. And adjusted group EBITDA to February was up 1.7% and down for the year 52%, again, excluding the rent benefits I've already noted. Normalized profit was $34 million, down 78% on an adjusted basis. Impairments of $63 million included $22 million for various cinemas and $41 million relating to hotel properties primarily, Rydges Queenstown due to the wings closure, QT Perth and QT Gold Coast. We decided it's best to try and provide you with more insight into the FY '19/'20 year is to break our results down into 2 parts by division, pre-COVID and during COVID, and I'll also provide some highlights in terms of July. Please note the results of the 8-month period pre-COVID have not been audited on a stand-alone basis. However, the half year is subject to the typical review by KPMG. And I'll go [indiscernible]. Okay. So let's take a look at the entertainment group. The group delivered a strong result pre-COVID and has maximized efficiencies during the COVID period, which will deliver us benefits into the future. [indiscernible] consolidated basis, revenue for Australia and New Zealand increased 24% on prior year. EBITDA was down to $26.3 million, and normalized PBIT was down to a loss of $8.7 million. This result again excludes benefits from the rent negotiations, which will be booked once signed in the first half of 2021. So looking at the pre-COVID period, which is the 8 months ended February. We achieved strong total revenue growth, up 5.4% on prior year. And adjusted revenue was up 6.2%, EBITDA improved 7%, and normalized profit before interest and tax increased $10.9 million. Across Australia and New Zealand market box office performance in the pre-COVID period was the best result since the year ended 30th of June 2017. Results from new initiatives are exceeding expectations and whilst admissions were relatively flat, all other key performance indicators demonstrated strong growth. During the COVID-19 period, by March to June 2020, we implemented a number of cost-saving initiatives, delivering savings in excess of $20 million and applied the JobKeeper and New Zealand wage subsidy programs to the value of also $20 million. The cost-saving initiatives enables the group to implement a more efficient operating model for cinemas that will provide benefits into the future. To put this into perspective, if we applied the new operation for the FY '19 year, we would expect an increased EBITDA of around $3 million to $3.5 million annualized benefits. Let's take a quick look at Australia, entertainment Australia. Let's start with the pre-COVID, July to February period. So adjusted revenue increased 4.3%, ahead of the overall growth in the Australian box office of 3.7%. AAP growth of 4.4% was achieved with an increased proportion of customers choosing a premium concept, such as [indiscernible], boutique, gold pass, et cetera, up 2 percentage points. The top 6 titles in the Australian box office contributed 23% more to total box office than prior year included titles like the Lion King, $64 million; Star Wars, $47 million; Jumanji, $45.9 million. We had a record period of merchandising spend to -- spend per head or spend per customer growth, up 7%, with an incredible 7 of 8 record months of merchandising spend. The new F&B initiatives delivering immediate results with new impulse areas delivering an instant improvement of around 20% since then. These results have further cemented our confidence and our strategy focused on investing the best, innovate and expand premium concepts. We did expand some premium sentiments in the pre-COVID period. We added 2 Gold Class auditoriums to Tuggerah in December, a Gold Class auditoriums at Macquarie in October, 4 locations. We expanded an upgrade with the new Vmax 3-seat concept, DBS reclining seats and premium fixed-back seats, which were completed in March. We introduced DBS to 14 Vmax auditoriums in December. The Event Junior concept rolled out of Macquarie and Shellharbour in October. Two locations had candy bar upgrades, incorporating the new concepts, 3 trends were upgraded to the 40x concept in December. And our value cinema offer at BCC Cinemas also improved with the implementation of our first BCC Recline concept at Toowoomba, which delivered immediate double-digit increases. All of these initiatives were completed over the pre-COVID period, so the benefits were not fully reflected in the post results. Mind you, COVID made that a little harder to reflect them anyway. We continue to achieve strong growth in online revenue, up 19.4%, and our direct customer relationships remain exceptionally strong with 30 bars, representing more than 69% of cinema visits and more than 86% of online transactions. Adjusted EBITDA for the pre-COVID period was up 3.2%, and normalized PBIT was up 8.8%. We have really good momentum. Then COVID hit and looking at our October period results, March to June. Cinemas were one of the early impacted industries as a result of COVID-19 where studios moving film releases as early as the 5th of March 2020 when Universal announced that James Bond title would be delayed to November 2020. Other release schedule changes followed with Black Widow moving into November and Fast and Furious 9 moved out to 2021. The government-mandated closures have been occurred on the 25th March. Swift cost reduction actions were implemented because revenue stopped overnight to reduce costs and maintain our assets during quota, resulting in a 45% cost reduction, again, excluding the benefits from rent negotiations. Changes to working hours more than 90% of our staff, plus JobKeeper subsidies offset more than 70% of our payroll. The development of the new operating model when cinemas reopened, which includes variable operating hours and new ways of working will provide a benefit into the future. And again, if we applied it alone in the FY '19 year for Australia, we would have expected the EBITDA to improve by around $2 million. Our COVID-19 policy, procedures and training, as I've previously described, not only provide a safer operating environment for staff and customers, but customers have told us by our NPS scores since we've been open that these practices have improved the cinema experience. In addition, we developed an innovative e-commerce solutions to managing social distancing. Unlike other cinema groups, we developed the ability [ for ] family and friends to book seats together, and our booking system uniquely automatically distances their group from other customers by blocking out around the seats. As part of the continuing strategy to improve our asset portfolio, we also closed Mackay City cinema in December and exited leases at Cronulla and Manuka in the second half of the year. This -- Cronulla and Manuka would have been exited without the impact of COVID-19. All of these cinemas have been loss-making for some years. As a result for the year, revenue was down 24.2%, EBITDA was down 23.8%, and normalized profit was a loss of 4.3%. So in July -- in July in Australia, we had gradual reopening of cinemas operating under the various state government COVID restrictions from the 25th of June with the majority of sites opening by 16th of July. Box office and markets where cinemas have reopened around the world has been between 10% to 20% of prior year, given the delay in major film releases. For Australia, box office was around 13% of prior year and no new major releases. The highest growth in sales for the first month was Sonic the Hedgehog, the personal History of David Copperfield and Red Shoes and the Seven Dwarfs. So what we sensed our premium cinema concepts have had really strong demand, even with little films to play. 24% of customers are choosing one of our premium concepts up 4 percentage points on the same time July prior year. We've also had retro classic titles selling out in Gold Class because people want to get out and to get to the movies. When good films arrive, we're confident people will return. The momentum we've built pre-COVID in spend per head has continued, and we achieved the strongest merchandising spend per head result in the company's history in July. The first largest film releases is, which has recently opened. On the opening weekend, we had 10 of the top 13 locations on the opening weekend, and the film is trading in line with what our pre-COVID expectations were for the film, adjusting for the closure of Victoria. I think the Australian box office numbers has come out today at around 4 million, which is a really terrific result for that film. Unhinged, that's another film which we've had recently, which one is actually going to release in cinemas, was going direct to streaming, and it reversed and came into cinemas, and that has exceeded the expectations on net sales achieving $3 million at the box office today. So let's go to New Zealand. Revenue for the pre-COVID period from July to Feb was really strong increasing 15%. The group outperformed the New Zealand market and achieved a record revenue and earnings result for the period. All key metrics delivered growth. Admits were up 1.8%, box office was up over 13%, AAP was up 10.9%. We had a record merchandise in spend per head every month and up 7%, Sunny Bars membership up 20%, and games revenue was up 9% with our new play concept delivering good results. We also made good progress on the strategy of targeted investment and premium cinema experiences. We upgraded one location at Westgate, which was completed in December with new seating concepts. Four springs across Albany and Manuka sites with the upgraded 3-seat Vmax concept. And in February 2020, a new 7-screen center at Newmarket opened which is all premium incorporated the boutique cinema concept, the 3-seat Vmax cinema concept and 2-seating considerations within 3 traditional cinemas. During the year, the virtual print agreements with major distributors concluded to New Zealand, resulting in the VPF revenue decreasing by $1 million. EBITDA for the pre-COVID-19 period was 22% above the prior year, and normalized PBIT was 12.6% above prior year. And adjusted for the VPF fees, EBITDA was up 30% and normalized PBIT was up 25.4%, an incredibly strong result. And in the COVID period, following the closure of cinemas in March 2020, which was a government directive, revenue declined by $29 million and revenue declined overnight. Cost initiatives were initiated, and we managed to reduce costs by 50%, excluding the benefits from rent abatements. The New Zealand wage subsidy offset 90% of payroll during the closure period. Somewhat Australia, a new operating model when cinemas reopens was developed and to put this into perspective, if we apply it at the FY '19 year, EBITDA would have improved by around $1.5 million. As a result for the year, revenue declined to $68.7 million, EBITDA was down to $2.5 million and normalized PBIT was a loss of $4.3 million. So in July, prior to the most recent lockdown in New Zealand, 18 of 21 cinemas had reopened, and we're operating without any COVID-19 restrictions. Without any major releases, the New Zealand box office was at 20% of the prior year, so quite high relative to other markets and countries with less restrictions. The result was stronger than Australia due to the release of Charlottesville tour for the school holidays in New Zealand. And with no restrictions, the film exceeded pre-COVID box office estimates sitting about $2.1 million in the market. The momentum we have built pre-COVID in spend per head continued and New Zealand also had a strongest spin hit results in its history in July. And our COVID operating plans were being endorsed by customers with a strong increase of the NPS score, showing that we are doing what it needs to take to make people feel really good about returning to summer. Okay. Entertainment, Germany, this outlines the discontinued business. The completion of the CineStar transaction to yield still in progress and is subject to divestment of the 5 remaining sites as directed by the FCO, the Federal Cartel Office. As has been announced, the deadline to complete the divestment was originally the 27th of August, and view has made an extension, which Event has supported. The FCO has approved until the 13th of November 2020. The divestment process is in progress with the shortlist of 5 identified, which will be subject to FCO approval. The division spend presented as a discontinued operation in the income statement for the year 30th of June. The reported net profit after income tax from Germany was $24.6 million, an increase of $19.8 million above the prior year. The results, however, included a net increase in profit after income tax of $36.9 million relating to the application of AASB 16 leases and was further impacted by the requirement under AASB 5, not to charge depreciation or amortization following the specification of the division of sale. Adjusting for these 2 items, the normalized loss before income tax was $18.6 million and the net loss after income tax was $19.4 million. I do want to highlight though on the German market pre-COVID, there's a really strong recovery [indiscernible] increasing 15.3% on prior year. During this period, I think the prior year has disruption of the FIFA World Cup, which we know is cyclical, but it also had that extended summer with a record warm weather, which has impacted some of the [indiscernible]. Okay. Okay. Hotels and Resorts. Overall, Hotels and Resorts revenue was $277.5 million, a decrease of 21% on the prior comparable period; EBITDA was down $61 million; and normalized PBIT was positive at $33 million, down 53%. As of the entertainment, result was really defined by 2 training periods, pre-COVID and COVID, which I'll talk to you through in a moment. We made good progress on our strategy to invest in priority assets with upgrades completed to gift fleet, corridors, pool and lobby in QT Gold Coast; guestrooms, suites and lobby at QT Sydney; additional meeting spaces at QT Sydney and QT Melbourne; and the public areas restrain barren full areas to upgrade at Rydges Geelong. In addition, Rydges Capital Hill was closed in February due severe storm damage. The hotel scheduled to reopen in September 2020 after the completion of a multimillion-dollar refurbishment and will be rebranded as Rydges Canberra. We sold Rydges Townsville but retained the property as a licensed hotel. We also secured 2 other licensed hotels, Powerhouse Tamworth and Powerhouse Armidale. We were also successful in winning the management contract for Rydges Sydney Harbour, which was formally the Holiday Inn at the rocks, located in the very prime location at the rock and securing a key position for the Rydges grand. We also secured a management agreement for Rydges Port Adelaide, 180-room hotel opening mid-2020 -- sorry, 2022. In October, QT Auckland will be our 10th QT in the group. It's planned to open with 150 rooms, and the property is looking fantastic even via virtual tours as we can't travel there at this point in time. The hotel is really well positioned in Auckland [indiscernible] and offers a differentiated experience in the Auckland market. Sean Conley, who leads the best restaurants in the sky for the Auckland precincts has joined the team to open insurer restaurant, our latest QT dining experience. We'll also be launching the ATURA brand in the New Zealand market, rebranding The Thorndon Hotel as an insurer. We're really excited to launch and expand this brand in the New Zealand. The group also acquired a 50% interest in JUCY Snooze and innovative budget accommodation product, current operations in Queenstown and Christchurch and a flagship property, which we're developing in Auckland. We see good potential for growth of this brand into Australia and potentially beyond. So let's start looking at the pre-COVID period. Despite the impact of Australian bushfires and restrictions on inbound tourism from China, which disrupted market in December and January, the group traded well in the pre-COVID period. Revenue was marginally down 1.4% adjusted for the closure of Rydges Queenstown room, and adjusted EBITDA was relatively flat up 0.4%, and normalized PBIT up 0.5%. Over this period, owned hotel occupancy increased by 2.7 points and RevPAR increased by 3.2%. We generated strong market share trading ahead of market in many of the markets that we operate in. Overall, TripAdvisor ranking was also improved by one place across the group, Rydges' health is steady, QT improved 3 phases and insurer has improved 6 phases. During the COVID period from March 2020, there's a serious deterioration in trading conditions as a result of government-mandated COVID-19 travel restrictions imposed globally and throughout Australia and New Zealand. Revenue decreased 61% to $44 million and given the scarce sources of revenue in the market, this was a pleasing result. Our typical hotel demand segments were immediately and substantially impacted due to restrictions. We innovated and shifted our revenue strategy to focus on securing revenue from the Newmarket segments, including government quarantine business, government medical support business, home quarantine business, the customers waiting to depart Australia and New Zealand, work from hotel, the new product we've developed for those who wanted to self-isolate, continuing market segments, e.g., mining construction sector, which were least impacted during COVID-19 and really focusing on encouraging drive demands of local holidays. Occupancy and RevPAR in the group's owned hotels was 35.9% and 53.70%, respectively. The decline of 44.5 occupancy points and 62.5 over the prior year. Costs were significantly reduced with the introduction of a new operating model. The low levers of options experience COVID-19 have never been experienced before, which enable to design this new model. We also refined and streamlined food and beverage offerings and introduced takeaway options. More than 80% of staff was stood down, flex the hours or introduced a restructure of the head office team was completed and wage subsidies were applied. This offset total cost by 60%. Overall, the restructuring undertaken and the new operating model are expected to deliver ongoing annual savings of around $3 million. The ability to secure revenue and the introduction of new operating models enabled the group to keep all owned in the majority of managed hotels open and as that produced more favorable results than closing the hotels. We also launched based on COVID-19 programs for each brand, including Sparkle QT for QT and Godard for Rydges and Insurer, which are performing well. Looking at the key statistics by brand, some riddled highlights. We had growth in occupancy pre-COVID. Average room rate was down 1.3% and RevPAR flat pre-COVID. During COVID, occupancy was a little more resilient than our other brands, largely due to a stronger performance from the city branch location. In terms of QT highlights, we had good growth in occupancy rate in RevPAR pre-COVID in a more competitive market. And during COVID, we had pleasing rate performance down less than 9%. But ultimately, is a little more impacted because of the weaker performance during the COVID period from city hotels relative to city franchise house so is the opposite impact. ATURA highlights, we have strong performance in H1 during the bushfire period off the back of Adelaide and despite the lack of inbound business impacting Blacktown and Dandenong, and we also had pleasing rate performance during COVID-19, largely driven by key clients business in Adelaide. In July, just touching on what we've seen. There's been wide disparities to opening up in terms of performance across the hotels, and this relates directly to the level of COVID restrictions in each state and country. Whilst it's early days in the recovery cycle, New Zealand is beginning to show what level of bounce back can be expected when restrictions are lifted albeit hampered by words still being closed. New Zealand reported having no new cases in mid-May. Upon this announcement, occupancy increased immediately from May in the mid-20s to late 40s in June and in July, occupancy for New Zealand owned hotels was 74.1% and RevPAR was at $137. A good start before the second wave restrictions were imposed. In July in Australia, pre-Victorian lockdown. The Australian market started to demonstrate signs of recovery especially within the leisure market. However, this was impacted by Victorian lockdown and closure of the Queenstown border, but we are still performing ahead of the April-May lockdown levels. The continued support of JobKeeper, intensive cost-reduction program and to secure all available revenue opportunities has resulted in a breakeven EBITDA hotel group result for July, which was an incredible result. This demonstrates how strong our brands are to local domestic audiences in Australia and New Zealand and how strong our local engagement is with our database. Moving to the Thredbo. What a year for Thredbo. We faced it all. So many challenges from the Thredbo bushfires requiring full evacuation of the resort, the heavily-mandated COVID-19 government restrictions in place in order to be able to open the season. Despite this, our Thredbo team has been incredible and pivoting to exceed expectations throughout seeing most challenging period in Thredbo's history. The results of Thredbo reflects the recently 2019 snow season and a promising stanch of the 2019/'20 summer mountain biking season before the impact of bushfires in the third quarter and COVID-19 in the third quarter and fourth quarter. Despite weaker snow conditions majorly impacting the first week of the July school holidays, which is typically one of our strongest trading weeks, revenue for the first half was consistent with the record prior year whilst EBITDA on normalized profit remaining marginally below [indiscernible]. Given the conditions, ski visits decreased 5% [Audio Gap] due air conditions in the July. [Audio Gap] However, [indiscernible] pass revenue increased 49% due to yield management strategy, offsetting the NPAT result and a 6.6% yield improvement. Revenue from food and beverage and snow sports is relatively consistent with the prior year. Our record revenue result was delivered in November, December, driven by a 36% increase in mountain biking revenue before bushfires temporarily closed the resorts in January 2020. Second half results were negatively impacted by bushfires in January and February. However, we managed to open 35 for mountain biking just after the bushfires in January and pre-COVID in March. The demand for leasing from that period was immediate and break records demonstrating how fast and strong recovery can be. Government-mandated restrictions delayed the opening of our 2020 season -- snow season, the 22nd of June, so we lost 3 weekends. As a result, revenue for the second half declined 43%. For the full year revenue was $73.9 million, 9.7% below the prior year, EBITDA of $24.8 million, and normalized PBIT was $20.9 million, 16.3% below prior year. Despite the headwinds experienced in the year, the normalized PBIT result was the third highest in Thredbo's history, an incredible results by the team despite the challenges we faced. We made good progress against all of the headwinds on our strategic growth plan for Thredbo, focusing on increasing capacity and improving the ski experience. Construction of the new merit Gondola was completed on time and within budget. To complement this, we made improvements to widen and enable snowmaking on the Dream Run to provide a better care experience. We also added 75 car parking spaces near [indiscernible]. So in 2020, we'll continue to see the construction of a new green run for mountain bikers, and we'll continue development for replacing for future list replacements. This winter season, Thredbo has been recognized as leading the one ski industry from industry skiers and government bodies for COVID-19 practices. And this is critical in order to be able to achieve approval to open for the winter season. We were very pleased to open, and this season -- even with the season having an up to 50% capacity constraint and subject to conditions. Demand has been very strong. Many days sold out in 24 hours of tickets going on sale. And to date, 60 and 68 days is sold out. The feedback from those experience in this season has been incredible. And again, our customer satisfaction scores have increased. We believe that this season will reset the way in which future seasons are structured to ensure we can continue to deliver an exceptional experience for Thredbo's customers. Moving to property. So the normalized PBIT was $6.3 million, a decrease of $7 million on the prior year. There was a fair value adjustment on the investment properties of $3.6 million. And this normalized result includes the provision for rental income receivable that is not expected to be recovered from Tenet impacted by COVID-19. We also had some falling costs at closed in on cinema sites in Newcastle and Mackay. We continue to make progress in regards to the 2 major development projects at 525 George Street and 458-472 George Street. The concept DA for the proposed 525 George Street development was approved in May for a mixed-use development. Just as a reminder, it's up to 43 stories to include a podium less ground floor retail space about 830 square meters on George Street, a 7-screen cinema complex and a new tower including an ATURA hotel was around 450 rooms, conference center and 72 residential apartments. Subject to market conditions, this development is expected to take 5 to 6 years to complete, and a new valuation for this property is in progress. At concept DA for the proposed 458-472 George Street Development was also launched. Again, to remind you that up to 30 stories to include a podium and ground floor retail space of 314-meter square on George Street an extension of the QT Sydney Hotel, 72 additional room conference center and a QT rooftop bar. As anticipated, the 2 DAs will be required for this project. The first will relate to the podium and the second will relate to the commercial tower above the podium. And subject to market conditions, we expect this development to take 4 to 6 years to complete. Okay, focusing on our strategic priorities. It's important to highlight that our group strategic plan and priorities remain unchanged as though we're delivering results and will continue to deliver results when the COVID-19 government restrictions are lifted. However, parts of this plan are naturally on hold until trading is normalized. This year, we're really focused on being agile and being able to pivot to deliver shareholders the best results in a highly restricted COVID-19 market. Our focus areas are and continue to be to grow revenue above market. Clearly, we need to ensure our COVID-safe operations, so we can stay open. We're enhancing our sales model and structure and strategies to make sure we secure and keep revenue sources and leverage a new centralized model and tools to support that. Product innovation is critical to be able to operate under restrictions and attract customers as examples in Thredbo, [indiscernible] types have been developed and cinemas private products have been expanded in hotels, Newmarket segments and room experiences have been developed. This is complemented with yield management, ensuring we can maximize restricted capacity and generate the best profitable returns. We'll continue to focus on maximizing our assets, and that includes divestment of noncore assets. As an example, we've identified around $20 million of smaller noncore properties that we'll look to divest over the next 12 to 24 months. The majority of our capital projects will be deferred until we see more consistent normalized trading which is prudent to do so, but we'll continue to plan and prepare our major developments. And then business transformation, which was focused on cost and margin management. We'll continue to refine and enhance our new operating models and identifying technology that enhance this further. Our IT environment has been an area of under investments over the past 10 years. So we now have an IT road map focused on platform or system enhancements that will deliver tangible benefits. The priority project includes source to pay, which I have actually talked about at the half year, and we'll see this is about maximizing the benefits and synergies of group purchasing and negotiated pricing arrangements and also in logistics in terms of supply management back of house. The sales from these initiatives are targeted to be around $8 million over a 5-year period. We're also progressing the cloud migration phase 1 project, which includes entertainment and corporate at this stage, which we expect to deliver operating efficiencies of around 1 million per annum. And then we have the employee experience project, which has really streamlined management end-to-end employee relationships with the company, which will commence in the second half. We also and continue to apply strict cost control as a priority focus across all the areas of the business, and we'll continue to do that. So an outlook. Well, I wish I had a crystal ball to provide an outlook on this, but that changes daily. And due to that uncertainty, it makes it impossible to provide a useful outlook. How about what do we see? In entertainment, we've got a backlog film as a result of the delayed releases. That's still forming that as of today. September includes Tenet, and that's performing well recently opened and Trolls opens also as well as Mutant -- October, so it's Wonder Woman 1984 versus Joe the prior year. November looks good. If bond stays in that period and what, which would make November a relatively stronger months than prior year. Currently, December looks a little weaker. It has a lot of family products, but we expect that the studio is still reviewing dates, and one of the films may take a lucrative Boxing Day date, which is still open with top-down moving into July next year. January and February looked a little weaker than prior year at this stage. However, March to June look very strong with Marvel Studios, the Eternals currently dated for February, Fast and Furious 9 dated for April and A Quiet Place 2, Jurassic World, Minion 3 and Venom dated for June. We know the demand for the summer experience is high with more than 80% of our customers wanting to return. Our COVID-safe practices are at the highest standard, and we're really confident that when release customer feedback as we've seen with Tenet and as we've seen with trials already. Looking forward to hotels. In terms of trading, our operating models are ready for a regular test of recovery due to the change in government mandates. We have strong brands in Australia and New Zealand to leverage the domestic market, and we're confident of that. However, whilst we cannot predict what the market will do, we don't expect the hotels group to break even in the first half given the current state of the market in Australia into state border closures, but that could change at any time. We are currently assuming trans-Tasman travel may resume in the second half of the year. And we are really not assuming that international business is likely to return this financial year. In terms of Thredbo, the new model is working very well, and we expect Thredbo to contribute positively to the first half results. So to close, pre-COVID, we had really strong momentum, and our swift actions during COVID enabled us to deliver a better-than-expected result. Green shoots are encouraging. Thredbo's performing well with restrictions; hotels, when restrictions are lifted, are showing quicker recovery than expected; and cinemas delayed release lineup looks strong with the recent release of Trolls in New Zealand, and Tenet have proven that we have good films released, people return to cinemas as they always have done. Right now, we continue to buckle down on costs, secure all available revenue opportunities and focus on delivering the best possible returns for our shareholders. So I'm open to take questions.

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

Jane, I got just a couple of impairments. So in terms of the impairment testing in the hotel division, the annual report is talking about 10% to 25% discount range on properties that were valued pre-COVID. Just wondering what support is out there for the 10% to 25% range at any particular transactions, which we can refer to as a reference point.

I'll take it, it's Greg. There's actually very little market evidence out there at the moment, but we did reach out to all the valuers. So we're just using what we thought would be a conservative discount to apply to those valuations, nothing more than that.

All right. Cool. And then on the cinema impairments, when you're doing the testing, can you talk about some of the assumptions that went into future market conditions? Just keen to understand what event is assuming around windows in light of the AMC Universal deal Disney taking movie straight to Disney+ and Sony considering alternatives.

Look, Sam, I don't want to give too much away about how we've done that. But what we've done is we've just applied an initial COVID discount for the period that we're in now, and then we assume a recovery beyond that.

Got it. All right. Okay. But then without referring to the impairment testing, can you talk about some of those issues facing there in cinema industry, please?

Okay. So picking up on the Disney+ one, I think it's important to highlight that of around 80 films that were released during this period, I think, it was around 12 went direct to streaming, which were majority smaller titles, age less than 10 million box office estimated and then 3 family titles, which were shifted. At the same time, 11 titles that were slated to be released in cinemas were released in cinemas. In terms of Disney, don't say that they are releasing Mulan on streaming in Disney+ markets and theatrically out here as a one-off due to COVID-19 as opposed to saying that there's a new windowing model, and that message has been reinforced locally. So I would say that the COVID-19 period has given all studios a wide open opportunity to try different release strategies, and each of them or their major titles have chosen to delay in release in cinema. That -- we don't have contracts. There's no partnership relationship to make that happen. And we have seen this because the financial model stacks up when they include a theatrical release.

Got it. Makes sense. And then just thinking about using capital at the moment. I imagine a couple of acquisition opportunities emerging in the cinema space given the disruption, which is going on right now, and you do have quite a bit of liquidity, would you prefer to use capital in the cinema space? Or do you see better returns coming from the property developments?

Look, the answer to that, Sam, is we would review all. In terms of looking at the cinema space, it's all about key location for us, and that's part of our strategy. We want the best locations. And we have the majority of the best locations. So whilst there might be other operations on regional infringe, we're probably less likely to look at those because we are focused on location first. If a great location came up, we'd take a look at it.

Got it. All right. And then last question. I think at the end of the presentation you talked about, at the moment, the majority of capital projects being deferred until the impact from COVID starts to reduce. Just wanting to confirm, does that include cinema developments you previously talked about, I think, Green Square, Castle Hill and Queensgate?

So Green Square is off. We actually ended that contract. We weren't pursuing that one. I think I'm not sure if we -- we announced that the half I might have not understand, sorry.

Been delayed.

Has been delayed. The landlord is actually to serve the projects at Castle Hill. And sorry, what was the other one?

Queensgate.

Queensgate. No, Queensgate, we're continuing our planning, so we don't expect the delay to that cinema opening.

Our next question comes from John O'Shea with Ord Minnett.

Yes. Thanks, I had thankfully, Sam ticked off a number of my questions, given that you had a number of ways to approach things. Look, I guess from my perspective, I wanted to get some sort of sense of how we should think about sort of the monthly cash burn at the moment. What the combined impact of your operating expenses, CapEx, interest and taxes, and I think that's really important to give us a gauge as to how you're sort of navigating your way through this process.

Look, John, it is a sort of a moving piece, as you know, and it's hard to sort of pinpoint an approximate number. So we're not going to provide that. It's -- you can see from our fact patent from -- if you look at the half year to the full year and make some assumptions there, you can come up with a range, but there's so many moving parts. And so -- and because the businesses are so diverse, it's hard for us to give you a sort of precise number that you could use in your models. So we're trying to avoid that, to be predictively unpredictable.

Yes. Yes. And look, just following on from what Sam's question was and perhaps asked in a slightly different way. Is it very much a case of battening down the hatches and just hoping? I mean it seems to me with the cinemas of that, really, it's not necessarily just a reflection of the film lineup is, obviously, you're going to be restricted in terms of COVID, in terms of how you go about films and in terms -- and the cinema side of things. And the hotel side is very much dependent on factors outside of your control. So is that kind of the way you're looking at it? And then sort of saying we're batting down the hatches and then sort of conserving as much capital as you can? Or are you sort of saying, well, we got to keep a number of these projects, at least ticking along?

The latter and the answer to that. But coming back to there's few parts to that. I'm going to try and tackle each one and let me know if I've missed anything. But in terms of cinema, don't be concerned with social distancing. So [indiscernible], if I take Tenet as an example, we've got the same number of seats we had without restrictions available for sale because we can leverage screens and programming sessions in order to prioritize the films that are going to make us the most money. And if we look at the lineup moving forward, we really -- we've looked at here, and we can go -- actually, we think we can work around this. What we do then is there will be some periods that you might have to wait another half an hour to get into that film, that will create demand, that will grow online booking fees potentially as people go on to book it here to get into that screen. But we are as concerned about social distancing on that model. And we know that the studios want to release their films. What's really has it is the U.S. domestic market. Now [indiscernible] New York being closed, sometimes that we do where a lot of thinking from the studios is derived from. But in terms of getting the product out there, they want to release those films. They houses the cinema. They had options. They know they're going to make more money that way. And I think Tenet will be a good kick start to that. But keeping in mind, Tenet is not a blockbuster, right? It's kind of a $15 million-ish Australian market box office film, kind of what we sort of might do. But at least it's a good start. And what it does is we demonstrate our seniors back, our premium selling out. And clearly, people are ordering food and beverage.

Yes. And Victoria, obviously, you need to -- obviously, the lockdowns seem to ease to assist that as well.

Correct. We know how to lock down. I can tell you. The models we have developed, we now know we had a little or no revenue and spend the least possible amount to achieve that. And I can tell you, we can count the hours air conditioning's running, like we have gone through this business, like it has never been gone through before to make sure that we know how to manage costs when we have no revenue. So of course, that buckle down factor is there, but you can have confidence that we are across that. And I think our cost savings demonstrate that over and above what the -- what you'd expect to have on the subsidies and calls and things like that. In terms of hotels...

Yes, sorry.

Okay. Yes. So in terms of hotel, you're right, the travel industry is government calling shop in terms of how people can travel at this point in time, but we are largely dependent on the decisions that they're making. But what we do know is our brands are strong domestically. So when Interstate borders list, we feel pretty good about the position we will be in both within New Zealand and within Australia. We know that when trans-Tasman comes on board, which we expect to be sooner than the rest that also gets us to a good place. And as a group, we've been less dependent on international. So we can see the light at the end of that in terms of the current conversations and how things are being planned. But I do want to say that, that buckled down is absolutely a part of our mantra at the moment, but not at the expense of growing revenue above market. So every single one of our sales team and our general managers has a responsibility to secure revenue to find content. Right across the cinemas now, we have church groups and private hires. Like everyone is responsible to securing revenue, not just tightening costs to make sure that we can do the best we can during this period.

And those projects, are you still ticking along those or have they been put on hold, the major projects?

No, no. They haven't stopped. We're continuing planning. And you've got to realize that we're in the DA process, and then we've got [indiscernible].

I understand. I just want to make sure that, that was the case.

Yes. No, it has not stopped as of COVID-19 and their planning at all.

Sure. Just a final one for me. I'll lead someone else have a go was obviously, in Victoria, where I am, there's been a lot of negative press about with the hotel quarantine fiasco hit, not necessarily implicating them, but every time the reporters goes across those sort of standing outside of Rydges hotel. I noticed the rates have come right down in -- you had a suffered dramatically in Rydges. Have you seen any fallout from that negative press at all? Or is that not been effective for you?

It hasn't been a factor, and I have lived that, even though I'm not in Melbourne. So it hasn't been a factor. And we had an external company track our brand sentiments. And sentiment towards the Rydges brand has been neutral because people understand that it's a quarantine hotel under Rydges of governments and not operating as a hotel. So it hasn't impacted what our customers think about staying at a Rydges hotel. And there's also been confusion in the market referencing Rydges staff, but Rydges staff had a really limited role, made around 10% to the workforce under government direction, and they were largely referencing security and nurses contracted cleaning, which were part of our plan. But actually, we saw the opposite result. We actually gained market share in Rydges off a scarce amount of revenue during that period. So we're not seeing it having any negative impact because people have clearly understood that that's a quarantine hotel, not to hotel operators by ourselves or Rydges experienced.

Your next question comes from Nick Caley with E.L. & C. Baillieu.