EVT Limited (EVT) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Event Hospitality & Entertainment Limited full year results conference call. [Operator Instructions] I would now like to hand the conference over to Jane Hastings, CEO. Please go ahead.

Thank you, and good afternoon, everyone, and thanks for dialing in. With me today, I have Greg Dean, Director of Finance, David Strong, our Company Secretary; and Mathew Duff, Director of Commercial. Okay. Whilst the year continued to be materially impacted by the pandemic, the second half performance of each of our divisions that were open, clearly demonstrated that when government restrictions are lifted, demand returns quickly. In Entertainment with 80% of cinemas in the U.S.A. opened by the end of the year, and cinemas reopening globally, studios began to release blockbuster films. We evidenced the immediate demand from customers returning to cinemas, an example of that being Easter 2021 weekend, outperforming the pre-COVID Easter 2019 weekend. By the fourth quarter, U.S. hotel occupancy had reached 60% and despite various interstate and international travel restrictions, the group's hotels in Australia and New Zealand experienced quarter-on-quarter improvement in trading, reaching 63.1% occupancy in the fourth quarter with QT reaching 69.6%. At Thredbo, government restrictions delayed the start of the winter season and kept the available audience to around 50%. However, the changes we've made to the model offset the impact and delivered an EBITDA margin improvement. Also in line with the growing demand relating to health and well-being experiences, we had a record result in summer, which contributed to Thredbo achieving an incredible full year result. Revenue in the second half exceeded the first half and the comparable half 2 period for Entertainment Australia and New Zealand, and Hotels and Resorts. Overall, the strong return of demand for our businesses combined with our active cost management and government support, where available, underpinned all divisions achieving positive EBITDA for the second half. We saw a significant turnaround from H1 group EBITDA loss of $31.1 million to a full year group EBITDA of $27.2 million, and a positive operating cash flow in the second half of $49 million to keep net debt to pre-COVID-19 levels. In total, we achieved $264 million in active cost management savings, excluding government subsidies, since COVID began, thanks to the incredible effort by the team. Next slide. Thank you. This slide illustrates the success of our active cost management in response to closures and restrictions mandated by government. It's important to note that this bridge slightly understates these savings as it compares the comparison of the second half costs with the second half of FY '20, which was also COVID impacted. Overall, we achieved a total of $158 million in active cost management savings in the year, of which approximately 15% relates to rent abatements agreed with our cinema landlords. As a landlord ourselves, we truly understand and appreciate the strong relationships we have with our landlords and the constructive support we've had to date and continue to require as we navigate the COVID-19 period. Next slide. This slide covers the entire COVID impacted period through to June 2021 with active cost management savings highlighted there at $264 million. Of these, approximately 10% related to rental abatements agreed with landlords. There has been and continues to be an extensive amount of remodeling within each of our divisions to create more agile operating models. We believe that some of the changes we've made will deliver longer-term benefits with improved margins post the pandemic. Next slide. Despite the COVID-19 headwinds, we are really pleased with the progress on our future growth strategies. And to highlight a few points, we achieved a record period of hotel network expansion. We've continued to rightsize the cinema portfolio with fewer best locations, and targeted investments in our proven Cinema of the Future concept. Our new concepts have delivered double-digit growth in key metrics. We've also transformed our Thredbo business model and continue to enhance the on-mountain experience. We almost -- also made good progress in our major developments in Sydney, including adding $37 million to the underpinned valuation for 525 George Street following the Stage 1 DA approval. I'll talk more on these later in the presentation. The overall independent value of the group's property portfolio increased to $2.1 billion based on updated valuation reports. After excluding Rydges Melbourne, Rydges North Sydney and Rydges Queenstown, the portfolio valuations increased 8.4%. In relation to these 3 properties, Rydges Melbourne has been identified as a priority asset with a major upgrade program in progress. Rydges North Sydney, was identified as a noncore property and is expected to be sold in this financial year. And the Rydges Queenstown accommodation wings were closed in February 2019 and work is underway to determine seismic strengthening options. So we're on track to realizing the goal of achieving $250 million of proceeds from noncore property asset sales within 2 years. Just as a reminder, a noncore property asset is any property, which does not relate to our operating businesses and has no potential to be developed into an operating business, or is a property located in city fringe or regional locations, particularly a significant capital investment is required to stay in business. In terms of the balance sheet, the net debt position has improved to $355.5 million at 30 June from $452 million at the half year, and $421 million at June prior year. And at 30 June, we had $173.6 million of headroom in our core debt facility, which matures in July 2023. Whilst the medium- to long-term outlook is positive, in the short term, I'm sure you can appreciate, it's extremely difficult in the current COVID-19 environment to predict when government will ease restrictions impacting our divisions. In terms of the July 2021 results, revenue was $63.7 million, up $17.5 million on prior year, whilst EBITDA was breakeven and up $6.7 million on prior year. It's important to note that the prior year included around $9.6 million in different wage subsidies. Hotels have been the hardest hit, resulting in the first negative EBITDA in July of circa $300,000. The Thredbo audience was materially impacted with the Greater Sydney lockdown. This has limited to our audience at Thredbo to around 25% to 30%. Despite this, Thredbo delivered a positive EBITDA result but down 40% on prior year. Entertainment New Zealand delivered a positive EBITDA result with blockbusters being released and no COVID-19 restrictions in July. Entertainment Germany delivered a close to breakeven result as the business reopened. And Entertainment Australia, a negative EBITDA due to lockdowns. Unlike last year, when studios were not releasing films due to global cinema closures, with many major markets now open, blockbusters are being released and the lineup is strong. We just need to be open and trade. There's been no direct support from the Australian government with the recent lockdowns across our divisions, and this is a matter we continue to challenge. However, the German government and New Zealand government have support programs, which we are eligible to participate in. Currently, we have been mandated to close Thredbo for the first time in our operating history. All businesses in New South Wales and New Zealand are also closed, and other areas are operating under various levels of restrictions. We know that the timing of reopening is outside our control and depends on success of the vaccination programs in each market. We're very supportive of the vaccination programs and have over our premises and encourage staff who are able to be vaccinated to participate. We continue to control all that we can control as we've provided evidence of to date, we've had great success in active cost management. We are confident that as soon as we open and restrictions are lifted that we're going to rebound quickly. Next, please. Now analyzing the results for the year. The numbers really speak for themselves. We saw a significant turnaround in the second half of the year when restrictions eased and there were signs of return to pre-COVID-19 demand. Group revenue exceeded -- excluded the benefit of government subsidies was $540 million, down 45% on the prior year. Group revenue in the second half was up 30.9% on the first half. And for divisions that were open, all exceeded revenue in the comparable half year period. The group's unallocated corporate costs were down 12.6% on prior year. This includes the voluntary salary reductions from myself and my executive and reduced Board fees. In addition, no bonus payments were made in the financial year and no long term incentives vested. The unallocated cost savings were partially offset by a material increase in insurance premiums of $2 million. And overall, the group's insurance costs escalated to $11.2 million, up 75% due to extremely challenging insurance market conditions. Overall, EBITDA was $27.2 million, driven by the materials -- materially stronger second half, and there was a 15.7% improvement in total reported net loss year-on-year from $57 million to $48 million. Next, please. Turning now to the property division. We have approximately $2.1 billion in property assets updated at 30 June on the independent valuations, which reflected the 8.4% increase I've mentioned. We've achieved a significant increase in profit of around 120% above the prior year, driven by a fair value increment of $7 million on our investment properties. Rental revenue was below prior year due to COVID-19-related rent relief provided to tenants. As I mentioned earlier, good progress has been on our strategy to divest noncore property assets. By June, we had signed contracts to sales, realizing $79.6 million of gross proceeds. And of that, $49.3 million was received in the year with the balance due to settle by September. The total gross proceeds exceeded the most recent valuations for these properties by $29.8 million, a 60% increase. The assets sold in the year included the Forum Building in Brisbane, which is a retail and commercial office; Double Bay, commercial and service offices; Port Hacking Road Miranda, which was a warehouse; Rydges Plaza Cairns Hotel; Cairns City Cinema, cinema -- sorry, Cairns City Cinemas, which actually ceased operations in 2019; and in New Zealand, the Mt Maunganui Cinemas, which ceased operations in 2020. Further noncore properties are being prepared to sell in this financial year and include Rydges Bankstown, Rydges North Sydney, and the Canberra civic building. So we're on track to realize the proceeds of $250 million within 2 years. Next slide, please. We've continued to make good progress on the major developments in relation to the 525 George Street development. The Stage 1 DA approval has driven a $37 -- actually more than that $37 million increase in the valuation of this property when compared to the previous valuation. This development includes unlocking 810 square meters of retail space, a cinema with 5 screens; a hotel with 335 rooms; conference space integrated within the cinema area; and a city facing bar and restaurant. Above the hotel are 109 apartments. We're targeting a commencement for this development in FY '23, '24, subject to market conditions. Note that this render that you've seen here is taken from the south looking north with George Street running down the right-hand side of the image, the hotel entrance will be via King Street. Turning to our 458-472 George Street development. We have DA approval for the podium component, which will include ground floor retail space of 340 square meters on George Street, an extension of the QT Sydney hotel of 72 additional rooms, conference center, and a QT rooftop bar. A second DA will be lodged for a commercial office tower above the podium with 33 levels and approximately 34,000 square meters of commercial office space. Subject to market conditions, construction is expected to commence in the '25, '26 financial year. And as we stated before, we anticipate that a joint venture partner will be identified to assist in funding and developing the commercial office to our component. Turning to Hotels and Resorts. The Hotels and Resorts result was particularly pleasing. We were EBITDA positive even after excluding JobKeeper in every month from September 2020, and achieved this result despite more than 60% of the year being at least somewhat impacted by local government-mandated trading restrictions and, obviously, international travel restrictions for the full year. In the New Zealand market with few COVID restrictions domestically, we achieved overall owned hotel occupancy of 70.2%. However, Australia was more impacted domestically, and we achieved occupancy of 48.6%. We achieved strong market share across each of our brands. Rydges owned hotel RevPAR declined 10.6 percentage points less than the competitive set. QT RevPAR declined 8.9 percentage points less than the competitive set. Atura RevPAR declined a 5.8 percentage points less than the competitive set. Overall, we saw steady quarter-on-quarter growth in key metrics, and RevPAR improved an impressive 106% from quarter 1 to quarter 4. Our active cost management initiatives in hotels achieved $30.3 million in savings for the year, offsetting around 37% of the revenue decline. And these new operating models will continue to support margin improvement when trading conditions normalize. 6 new hotels with 913 rooms joined the group in the year. QT Auckland, the Independent Collection had 3 hotels. And Rydges also added Rydges Gold Coast Airport and Rydges Formosa Resort in Auckland. We increased our interest in Jucy Snooze to 100% during the year after having taken 50% share in February 2020. We're really excited about the growth prospects for this brand, and it gives us exposure to budget the combination sector when travel restrictions ease. We've also continued to divest underperforming assets with Reef Plaza Cairns sold during the year for $10 million, which compared favorably to the previous valuation of $6.2 million. Moving now to the key statistics by brands. Whilst all brands demonstrated strong growth through the course of the year, the owned Rydges Hotels recovery was relatively more subdued to greater exposure to the Sydney and Melbourne markets, with about half of owned Rydges rooms in those locations compared to less than 1/3 for QT. As mentioned, our owned Rydges performed well relative to the competitive set, and regional hotels performed particularly well. As an example, Snowy Mountains, Jindabyne property grew RevPAR 37% year-on-year. Demand for QT returned strongly in the second half of the year with weekly occupancy peaking at over 80% in early April 2021. For Atura, our Adelaide Airport hotel has been a solid performer through the pandemic, and we're delighted to now be adding Atura management agreement to our owned portfolio. We remain involved in hotel quarantine arrangements with owned hotels, including Rydges Rotorua, whilst QT Gold Coast was also involved for a short period in 2020. Overall quarantine business represented around 6.2% of owned hotels revenue for the year. And in terms of managed hotels, Rydges Brisbane, South Bank, Rydges Fortitude Valley, and Rydges Sydney Airport continued to participate in the quarantine program. Next slide, please. So our strategy to expand our market from the comfort and boutique segment to a broader budget through to luxury segments via existing and new brands is proving successful. We also have refreshed the Rydges brand, positioned as refreshingly local, leveraging our competitive advantages. This year, QT Auckland opened stunning property already being recognized for design awards and food and beverage awards, and is the first QT management agreement in the group. We have a further 2 agreements signed for QT Newcastle, which we expect to open in 2022 and QT Parramatta, which we expect to open in 2024. So the QT Group has grown to 12 hotels. Rydges continue to expand to 44 hotels. 3 new agreements were signed in the year for Rydges Gold Coast Airport in October, Rydges Formosa Resort in December, and Rydges Port Adelaide, a new property, which will open in 2023. As mentioned, we're also really pleased that the Atura brand has grown under management agreements with the Thorndon Hotel at Wellington, converting to an Atura during year and a management agreement signed for a new Atura hotel to open in 2023 in Oran Park, Western Sydney. Next, please. The Independent Collection by Event launched in February is a future growth brand. We recognized a gap in the market and matched this with our ambition to expand and better leverage our capabilities. And it's important to note that there's actually more unbranded properties in Australia than branded. And whilst that set of hotels is a large number, our target is a clear subset of this, which is around -- which is properties of around 75 brands or more. The Independent Collection tiers provide flexibility to ensure we have an option for all hotel experiences. The financial model is flexible for owners, which is important at this time, from traditional management agreements included to reflect services model. We transferred 6 hotels into the portfolio during the year and added a further 3 hotels by June 2021, and have signed an additional 4 hotels to join by June 2022. The portfolio will be a minimum of 13 hotels with nearly 2,000 rooms. Next, please. We're investing in our key assets, and one of these is QT Gold Coast. We are targeting completion by mid-2022. As part of our goal to maximize our assets, we are focused on identifying underutilized space and converting this into revenue-generating space. In completing the pool area upgrade, we've created an outdoor event space and bar. We're also enhancing our conference facilities. In addition, as highlighted in the image, we've developed a new accommodation concept, leveraging vacant rooftop space, inspired by the growing trends for unique brand experiences. Next, please. Another key asset Rydges Melbourne, and we are planning a major upgrade that will transform the hotel into our new Rydges flagship brand standard. Rydges Melbourne is located on Exhibition Street in the heart of Melbourne's theater district. At this property, we've identified opportunities for some new rooms, enhancements in suites to capture long-stay businesses and option for the future, and we'll be expanding our conference area by over 1,000 square meters to maximize this asset better using the underutilized real estate. We aim close the hotel soon to undertake these works. And at this stage, we anticipate partially reopening the hotel from September 2022 with full completion early in the '23 calendar year. Next, please. The new Jucy Snooze Auckland property will be our flagship Snooze location. Whilst Snooze is traditionally aimed at the backpacker market, with international borders closed, we've also unlocked new market segments, including families, sporting groups, and co-living. The property will include 37 double rooms with ensuites, 70 rooms with a shared bathroom facility, 190 pods, a communal kitchen, breakout spaces and our Miss Lucy's food and beverage concepts. We're adopting sustainable, environmental friendly design and a lower cost build using modular design pods. The capital expenditure for the fit-out is approximately $5 million. Now moving to Thredbo. The full year revenue result for Thredbo was up 6.4% on prior year despite a delayed start to the season, mandated capacity restrictions and less-than-favorable snow conditions. In response to COVID-19, we initiated a new strategic direction that focused on an improved customer experience to protect revenue and grow profit. This involves reviewing and reconstructing products, experiences, pricing, and the delivery of the experience. As a result of the 48.7% less skier days, we managed to grow yield by 66.2%. Revenue from summer operations continued the growth trend with an increase in visitation of 23% compared to the 2018/'19 summer, with the 2019/'20 summer having been severely impacted by bushfires and COVID-19. The summer performance underpinned a record setting second half result was a positive EBITDA from summer months for the first time in Thredbo's history. Customer sentiment has also remained high with an improved NPS score above 40. Now any score above 30 is generally considered to be a great score. Thredbo was also named Australia's best ski resort at the World Ski Awards for the fourth consecutive year. Overall, EBITDA was $29.7 million, a record year and up 19.7% on prior year. We're very proud that Thredbo was the Australian -- was the first Australian alpine resort to achieve Gold Certification from EarthCheck, recognizing Thredbo's leadership and sustainability initiatives, the alpine region. Initiatives include powering all of our major resort operations with clean renewable energy; SNOWsat, snow depth technology and store and grooming fleet to gain efficiencies and fuel usage and snowmaking; Merritts Gondola was powered by our highly efficient Direct Drive electric motor; installation of a Closed Loop organics recycling machine; and Thredbo Alpine Hotel Plastic Reduction Plan, focusing on removing all single-use plastic products. Strong progress continues to be made with Thredbo's strategic growth plans. Merritts Gondola was completed ahead of the 2020 winter season, whilst planning is underway for a major upgrade of Merritts Mountain House, a new year-round F&B events and conferencing binge. A new mountain biking skills park was added during the year, taking total mountain biking trails to 8. And we have a new trail, Sidewinder, which will open for the '21/'22 summer season. This will be Thredbo's easiest beginner trial. A further 4 more mountain biking trails in the Cruiser area are planned for the next 2 years, and we're planning to add an Alpine Coaster to add a further year-round attraction. We've also started preparation for the work and for the replacement of the 2-seater Snowgums chairlift with a new 6-seater chairlift. Moving now to Entertainment. The second half result was significantly improved on the first half, with positive EBITDA of $15.7 million compared with an EBITDA loss in the first half. Transformation of the operating model contributed to this result. For example, we achieved a 22 percentage point improvement in profit per admission during the release of Fast and Furious 9 when compared with the previous title in that series, Hobbs & Shaw. Whilst global cinema closures resulted in studios delaying the release of blockbuster titles in the first half, in particular, more blockbuster films are released towards the end of the year due to the gradual reopening of cinemas globally, an advanced COVID-19 vaccination programs in those markets. Whilst the Australian market box office was down 46.6%, it actually outperformed many other major global markets. Mandated closures and restrictions dominated in the year, but we saw an immediate return of audiences when we were able to trade with sequels performing particularly well, including Godzilla versus Kong. EBITDA was positively impacted by active cost management of $46.8 million. And it's important to note that active cost management excludes the benefit of JobKeeper, which on a net basis, excluding pass-throughs, was around $17 million for the year. Pleasingly, our Net Promoter Score showed an improved customer sentiment at a lower cost to serve. Premium concepts were strongly favored by customers with admission contribution from premium concepts increasing by 3.9 percentage points. Key revenue metrics, including spend per head set new records every month and were up 24.5% for the year. The upgrade Cinema of the Future locations are further exceeding the circuit averages. We've continued to exit underperforming location to improve our portfolio with the exit from Arndale and closure of Adelaide City and Townsville. And we're getting some fantastic insights from our Cinebuzz on Demand trial, which we launched in February, and we now have close to 65,000 registered users. Next slide. The next slide illustrates the strong demand we've seen in the second half for Entertainment. Wait for that slide to come up. On the top left, you can see that the key blockbusters released, most were sequels, including Godzilla vs Kong, Fast and Furious 9 and A Quiet Place 2, all outperformed the previous titles in their respective series. The bottom left chart shows that Fast and Furious 9 also outperformed not only Hobbs & Shaw, but also Fast & Furious 8 in markets where our cinemas were able to remain open. The graph to the top right shows that all customer segments have returned to cinema based on our transactional analysis of the Cinebuzz membership database. The bottom right graph highlights that for the Easter weekend, as highlighted before, we outperformed the 2019 Easter weekend. So it's clear that we have returned to pre-COVID demand levels when our cinemas are able to open and blockbusters are released. The next chart on the next slide is really for reference only and aims to illustrate the impact of government restrictions on our Australian cinemas for the year. You can see it's been a year of material disruption. The ability of our teams to pivot quickly the sudden changes announced in the media by government has been second to none. Turning now to Entertainment New Zealand. The New Zealand market was relatively less severely impacted by lockdowns and restrictions, but still experienced a challenging year due to cinemas being closed globally, which delayed the release of blockbusters. Despite that, we reported a positive EBITDA for the second half, underpinned by the success of our active cost management strategies, delivering $11 million in savings. The Net Promoter Score for Entertainment New Zealand also showed a strong improvement to 46 points, resulting in an improved customer experience and at a lower cost to serve with payroll per admission reducing by more than 20% as a result of the new operating model. As in Australia, we saw clear evidence for customers spending more, choosing premium options, and growing our merchandising spend per head around 20% on the prior year. As part of our noncore property divestment strategy, the Mt Maunganui Cinemas site was sold in June for $5.2 million, which compared favorably to the most recent valuation of $3.1 million. Entertainment Germany. Our German cinema circuit operated with restrictions for the -- for part of the first half and then was closed from November through to June. The EBITDA for the second half includes government support payments. When we were able to open, we found customers were spending more each visits and growth was achieved in spend per head and average admission price. Since reopening in July, initial trading results have been encouraging, notwithstanding various capacity restrictions, which are across each of the German states, with July 2021, achieving the best admissions total since July 2018. Across the 16 states in Germany and within the state and within cities within the states, various COVID-19 mandated operating capacity restrictions are in place. We have implemented, where required, the German government's 3G rules, which apply in certain regions and require that customers admitted to a cinema provide evidence that they are vaccinated or have had a recent negative COVID-19 test, or have recovered from COVID-19. Looking ahead, there's a strong lineup of local German films for FY '22 to support the solid lineup of Hollywood blockbusters. In relation to the CineStar sales to Vue, which was prohibited by the German Federal Cartel Office in December 2020 as a result of Vue's failure to satisfy the FCO's conditions for the transaction, we are continuing to review our options in relation to this matter. This next slide illustrates the impressive lineup for this financial year, and we've highlighted what we think could be the top-performing titles including No Time to Die in October; Top Gun in November; Spider-Man in December; Thor: Love and Thunder in May; and Jurassic World in June. As always, the release dates are subject to change, but with the U.S. cinemas open, again, we're optimistic that most dates will hold. We just need to be able to open. The next slide highlights the depth of the local German content slated for release this year, including German Superstar Til Schweiger's new film, which in English translate as saving the known world, and I'm not going to repeat the title in German. As many of you know, after our best-performing titles in the German market are local films. Next slide, please. Looking ahead, as I mentioned at the beginning of the presentation, this is an incredibly difficult year to provide outlook comments as we just don't know how long the current lockdown will extend in Australia and New Zealand. The Australian government have suggested a framework for reopening based on vaccination targets. However, this is yet to be outlined with the New Zealand market. The German government has suggested that given the rate of vaccinations that further lockdowns would be unlikely. However, restrictions will continue. We expect the German market to perform ahead of FY '21 given the challenges of the past year. At this point in time, you'll all be very aware of the vaccination progress in Australia. In New Zealand, 23.6% are fully vaccinated, 41% at least one dose. And in Germany, 65.2% fully vaccinated with 74.9%, having at least one dose. And just for reference, the 7-day rolling average of around 6,000 new cases of COVID each day. As we've said, the timing of recovery depends on the success of the vaccination programs. Like many companies, we've offered to support the rollout and we're keen to see this progress as quickly as possible. Overall, whilst we can't predict when restrictions will ease, we are absolutely confident of the demand and our businesses from customers. From a balance sheet perspective, as I said earlier, we're really well placed with our property portfolio increasing in value and we expect debt to remain relatively consistent with current levels with the potential for further reduction from the proceeds of noncore property sales. In terms of our strategic priorities, they remain very clear. And these are the 3 priorities that have guided our business for the last 4 years. We want to grow revenue above market, maximize assets and continue our business transformation. In terms of growing revenue above market, we are now agile and able to adapt to COVID-19 operating restrictions. We've enhanced our sales models and we'll continue to do so to outperform the market, with a strong focus on looking at every single product, every price, every experience, identifying opportunities to innovate with brands and experiences and recognizing trends to improve yield and unlock future growth. Maximizing our assets. The strategic divestment of the noncore assets with the increased value of the core assets is key, and we've been very targeted with the upgrades based on where we can get the best return. Business transformation. We've made very strong progress with our cash burn. We continue to evaluate everything, every day, and make all the changes that we're making today do deliver benefits into the future. We substantially improved the efficiency across our business. Our source-to-pay progress, which is our procurement strategy is progressing well. We've completed the first stage of our cloud migration. And our digital employee and customer experience programs are well underway. We're capturing and leveraging customer data insights better than ever before, guiding our strategic decision so we can continue to improve customer sentiment. We continue to evolve our corporate social responsibility actions. And we'll be talking more about our ELEVATE program focused on our people, social impact and environment later in the year. Importantly, we've continued to strengthen our culture, focus on every opportunity to elevate our people and ensure we're seen as a preferred employer in this highly competitive market. As I said in February, whilst I understand how difficult it is when you're not in the business, imagining how much work is required to adjust our businesses daily in response to the various government restraints, announced with extremely short notice. However, as a result of the committed experience and talented people we have across our business, we have materially mitigated the impact of COVID-19. And as a result, we are a new business. I'm incredibly proud of our teams, and we're going to come out of the current pandemic far more agile and stronger than ever before. We now have a short video to highlight the key initiatives. And after this, I'm very happy to take questions. [Presentation]

[Operator Instructions] Your first question comes from John O'Shea from Ord Minnett.

Just a couple from me. First of all, on the cost management side. You mentioned how this 180 -- $158 million of active cost management, but you did say that some of that was from rent abatement. Now how much of that $158 million you expect to, in broad terms, retain post the pandemic in the sense that, obviously, that rent abatement clearly won't last forever? That's the first question. The second one is, obviously, the government subsidies, which this year, you've got $112 million. I'm guessing, next year, it'll kind of be less than half of that. I just wanted to get some sort of guide for how that's looking at the moment? And lastly, I just wanted to confirm on the CapEx side with the Rydges Melbourne won't actually start impacting the CapEx until FY '23 based on what you just said. So that were the 3 things.

Right. Okay. I'll get that to go. So first of all, on the active cost management, so the $158 million, I said about 15% is rent basement. Yes, of the remaining, it's too soon to tell that specific amount. So I gave an indication of the margin improvement we had film on film, the Fast and Furious 9 and the Hobbs & Shaw, of around 20%. So I can't give you a specific number over the $158 million. But what I can tell you is we're seeing kind of really good improvements on each film that we're releasing. But we need to get back into a more normalized trading pattern to fully evaluate how much we will save.

Good. But you are expecting to retain a decent portion of that?

So we are expecting to improve our margins. Yes. We certainly have aggressive targets, but it really is too soon to tell what we can keep out of that. And as I've indicated, we've also got other things growing or what's happened to insurance this year. So yes, but the ambition is to definitely improve margins. In terms of the government subsidies, I don't think I'm going to be too helpful here either. So at this point in time, we're not eligible in Australia as a large business for any direct subsidies. And the wage subsidy is continuing in New Zealand. So the wage subsidy in New Zealand covers around 80% of wage costs when you're in a lockdown, and we've got the continued German government subsidies, which -- one of which is based on helping you to reopen. So it help -- supports you while there are restrictions in place. So we can't give you a guide because it all depends on monthly performance, particularly with the German subsidies in terms of how much we qualify for. And we're uncertain as to where we're going to land with the Australian government.

Sure. Now in relation to -- just while we're talking about New Zealand, you gave an indication what Australia and New Zealand received from government subsidies in total. What was the split between Australia and New Zealand of those government subsidies in FY '21?

Sorry, Greg, do you have that on hand?

Sorry, I was on mute. Of the split between Australia and New Zealand, I've got the -- of the total, the $112 million that's recorded in the P&L -- in the revenue. There are a lot from New Zealand because the wage subsidy ended, but it's about $2 million in New Zealand -- $2.30 million.

And the last one was just on the Rydges Melbourne and the time frame, so we can get a bit of a feel for CapEx this year and next year as well.

Yes. So it will be calendar 2022 in terms of that. But I'd say majority '22, '23, Greg?

Yes, I agree. It depends on planning and how that plays out, John.

Sure. So the FY '23 financial year in all likelihood?

Yes.

So would that be just, before I leave it to someone else, would that -- so would that mean that in FY '22, your CapEx requirements -- obviously, this year, your CapEx was very much rolled down for obvious reasons. In broad terms, what can we sort of -- how should we think about FY '22, should we expect it to be pretty similar in terms of the way you're thinking about it?

Well, I think it'll be above the current -- the past year, the 2021 year, obviously, because there were some hurdles in there and we weren't able to do anything much. But we do have some projects on foot now, which are not necessarily growth projects, but projects to catch up on from the previous year. So I think it'll be above that, but it will depend on how the year plays out, particularly in these current circumstances. That's it.

And thank you all. Before I go. I just wanted to thank you on the disclosure this year, both in the preso and in the accounts. Certainly, it's been the easiest it's been since the time I've been covering the stock. So well done.

Thanks, John.

Your next question comes from Sam Teeger from Citi.

Just in terms of the property portfolio, given the tremendous sale prices you've been achieving to date, what's the discussions been like internally around potentially upsizing the asset sale program above $250 million?

Well, at the moment, Sam, we capture what the assets identified as being noncore. So that's what we're focusing -- focused on at this point in time. We do have a couple of others under consideration, but at this point in time, we're focused on the ones that we've mentioned.

Got it. Cool. And how should we think about the gap between some of the recent property sales going for 60% above the life valuation versus now the latest round valuation is up in the single digits?

Yes, we have had much discussion about that internally. All right. No, Mat, you're on the call. Would you like to comment on that?

I think it's a broad range of properties. You can't get away from the fact that a significant proportion of our property assets are operating hotels that have been impacted clearly by the last 12 or 18 months. So I think there's many factors that come into it, and these properties has its own story. But I think in the circumstances, with that increase, it's still a reasonable outcome.

Sure. And just wanted to ask about the abatements in a bit more detail. Firstly, just keen to understand where discussions are at with landlords around the current lockdowns? And in the past when you have got abatements or if you get abatements on the current round of lockdowns, what proportion of leases will you likely extend in the year?

Okay. Look, it's a site-by-site negotiation. We feel like we've been very well supported by our landlords in the recent period, and those conversations are continuing. I think that's really all I can say at this point. We highlighted kind of the percentage of the active cost management that we have in terms of rental abatements and the conversations continue.

Yes. Okay. Well, maybe I understand the current negotiations are ongoing, but the ones you achieved last year, can you give us a ballpark figure in terms of how many of the terms you extended and perhaps by how many years?

I can't give you a ballpark figure, but I would say it wasn't -- there were some, not all.

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