EVT Limited (EVT) Earnings Call Transcript & Summary

Welcome, everyone, and thanks to those of you who've turned out in real life today, which is great. it's really nice to actually be able to do this in person today and bring people back together. So with me, I have Greg Dean, Director of Finance; David Stone, Company Secretary; Norman Arundel, who runs our Hotels division, Matt Duff, who runs Commercial and Cinestar and Luke Mackey, who runs our Cinema division. So if you want to file some questions, we've got some good people in the room today to also support and answering the questions. So that we're really pleased with the full year results, which represented a significant improvement on the prior year despite the first half materially greater lockdowns and restrictions in Australia and New Zealand, and of course, the [ recession ] of job keeper, which ended in June 2021. The transformation strategies and actions we've undertaken in the past few years ensures we are agile and able to respond to the challenges and we've seen evidence of our new business models, delivering improvements when we've experienced periods of revenue recovery. In the second half, group revenue was materially stronger than first half and second half prior year and only $115 million down on the [ pre-guided ] level. Revenue recovery flowed through to EBITDA with the turnaround from $27.2 million prior year to $138.3 million this year. Excluding the German government's bridging aid programs, which principally related to losses incurred in the prior full year as a result of the government-mandated lockdowns and restrictions, EBITDA was $75.3 million, up $48.1 million. We're really pleased that we exceeded our goal of divesting $250 million of noncore property assets, achieving $200 million in gross proceeds to 30th of June. And obviously, subsequently in July, we divested the North Sydney property, which of $275 million, exceeding most recent valuations by 28%. The combination of our new business models, improved trading and strategic divestments reduced net debt down to $210.4 million below pre-COVID levels and significantly below net debt of $355.5 million at June 30, 2021. Note that, that does not include the majority of the proceeds from the North Sydney asset sale. The strength of the group's balance sheet and will enable us to invest in opportunities as they arise. And we really take confidence from the second half trading period that as soon as we can get back to normal or some form of normal market, then our businesses rebound quickly. However, look, we're not -- we're confident in our ability to respond, but we're not yet operating in a normal or pre-COVID environment. We're still in a period where COVID-19 influenza is placing pressures on recovery with staffing levels, et cetera. And like other industries, we're facing inflationary pressures. However, we're implementing strategies to mitigate those as they arise to the best of our ability. Energy costs, specifically in Germany, will be a watching brief for the year. And governments are still maintaining a cautionary position when it comes to COVID. I mean as an example, the New Zealand border has only opened without a COVID test on entry at the end of July, and there's still in the orange traffic light system. So we're not operating in a fully normal environment yet. This and the need for airlines to return to the pre-COVID operating models may delay the recovery of the international market until '23, '24. A This year, subject to market conditions, we expect to be on a pathway to revenue recovery to the FY '19 pre-COVID level. I am incredibly and proud to thank our team today for resilience, agility, commitment, innovation, absolute dedication to turn up every day to make sure we were better than the day prior and to get us through the most challenging period globally for our industries and for our company. And there's no doubt we're a new company with a stronger platform for growth. Turning now to the full year overview. Group revenue was $953.8 million, up 46% on prior year, excluding the benefit of the German bridging aid program, full year revenue was $890.8 million, up 36.4%. The second half revenue result demonstrated the strength of demand for all of our operating divisions. The turnaround was largely driven by the entertainment group benefiting from customers returning to cinemas as soon as blockbusters were released. Top Gun Maverick and Spiderman No Way Home are now 2 of the top 5 highest grossing titles in Australia, and we achieved record growth across our key metrics. A strong second half recovery for our Hotels group with record growth in average room rate and steady growth in occupancy. We saw strong recovery in the Leisure segment and Corporate segments began to return but International [ Group ] and Wholesale group business are lagging in the pace of recovery. A strong summer result for Thredbo was normalized EBITDA up 6% on the previous second half record set in the prior year. And the new business model is working extremely well. We want to offer a premium experience and we're getting the results. The increase in unallocated corporate costs on the prior year relates to insurance premiums and the end of JobKeeper in Australia. Underlying unallocated costs were down 3.7% on the pre-COVID period. Normalized EBITDA was up $111.1 million in the prior year to $138.3 million, and excluding the German government Bridging Aid programs, which principally, as I said, related to losses incurred in the prior full year, EBITDA was up $48.1 million to $75.3 million. Turning to the Property and Development division. We've got a strong property portfolio, which based on the most recent valuations is valued at around $2 billion after the sale of the divestment properties. As mentioned, we've exceeded the divestment goal of $250 million. And we're also pleased with the net process to have retained management agreements for the North Sydney Hotel, which is now trading as the Miller Hotel and operates under the independent collection and Rydges Bankstown, which we also retained under a hotel management agreement. We have a few other properties which have been identified as noncore assets, and over time, we'll seek to divest these when the market conditions are right and we can achieve a good outcome. As part of our strategic goal to maximize our assets, we continue to make great progress on our major property developments. We expect the first of our major property developments to be 525 George Street in Sydney, which currently forms part of the event cinemas George Street location. This is a mixed-use development, and we launched a Stage 2 DA in May. We've appointed a sales agent for the residential apartments process to help planning that process. And we're commenced the detailed interior design work now in progress. We expect the Stage 2 DA to take between 8 to 12 months for approval. Following which, there would be a marketing process for the sale of the apartments if the market conditions are right. And subject to the successful residential sales or pre-sales of those apartments, construction is expected to commence in late FY '24 early FY '25. We also submitted a Stage 1 DA for the commercial office tower component of the 458-472 George Street property directly above where we're sitting now, and we expect this to take up to 12 months for approval following which is a design competition, and that's required before submitting the Stage 2 DA. The intention remains to introduce a JV partner into the commercial office component at the right time. We have a targeted capital plan to upgrade key assets. In terms of hotels, the QT Gold Coast refurbishment is well underway, will be completed later this year. Like our approach to all upgrades, we're looking for ways to generate revenue from underutilized spaces. This is what we mean by maximizing assets. As an example, at QT Gold Coast is the conversion of what was a vacant rooftop area. We've created a new cabin style concept that will be branded as QT QD , connected by a rooftop garden to a new indoor and outdoor conference area. Rydges Melbourne was closed in January for an upgrade that will truly transform this hotel into a Rydges' flagship brand standard. The upgrade includes the expansion of our conference area by over 1,000 square meters and this includes, again, the conversion of a vacant area into an indoor outdoor event space overlooking the theater district. Completion is expected in the first half of 2023. Rydges Queenstown and QT Canberra are the next priority hotels for upgrade works, and we've commenced planning on those projects in FY '23. We're also opening our new flagship Jucy Snooze property in Auckland later this year, and we plan to rebrand this group alongside that launch. We are confident that this will set a new global standard for budget travel -- budget accommodation. The pod designs, there's 190 pods, off of privacy, connectivity and will exceed the research needs of this segment. There are also 70 on-suite rooms and 37 double rooms designed to attract the new age traveler. In relation to cinema upgrades, we also completed the premiumization of Shellharbour Cinema in June and we've commenced 2 of our top 5 cinema locations, Chermside and Innaloo. Once again, the upgrades are focused on premiumisation as part of our similar of the future strategy and the upgrades will be completed later this year. In New Zealand, the Queensgate site will reopen this year after closing in 2016 following the Kaikoura earthquake. We're working on premiumisation concepts at a number of other locations this year, including Marion, which is in Adelaide, Burwood and Campbelltown in Sydney and Robina on the Gold Coast. In relation to Thredbo developments, major upgrades to the snowmaking system, including the installation of 10 new snowmaking guns on Friday Flat was completed and time for the 2022 winter season. Out of our property development strategy. We also unlocked value from underutilized bed rights at Thredbo realizing $7 million in the year. And there are further initiatives in progress to further unlock underutilized bed rights over the coming years. Construction of a further 3 new beginner mountain biking trials and the cruise area has commenced and will be completed for summer, and this will truly position Thredbo as the beginner to advanced playground for Mountain biking in Australia. Looking further ahead, the proposed Alpine coaster installation is expected to add a further year-round attraction to the resort, and I've tried it. It's going to be a heck of a lot of fun and scheduled subject to the required approvals to be completed for the 2024 winter season. We've also started preparation work for the replacement of the 2-seater snow guns chairlift with -- to replace it with a 6-seater chairlift -- with construction -- well, I should say, completion for the 2025 winter season. Now turning to the Hotels division. Certainly, a year of 2 halves as Norm calls it, and it truly was a year of 2 halves, like across all of our businesses, with the second half strong recovery after we saw the ease of those restrictions. Overall, Hotels and Resorts revenue was $217.7 million, an increase of 7.4% on the prior year. and underlying revenue was up 16.4% once you adjust for the government subsidies that were in the prior year and not repeated this year. When restrictions eased in the second half revenue rebounded, second half revenue was $137.3 million, up 74.3% on the first half. Due to the lockdowns in the first half, full year occupancy in our owned hotels was down 5 percentage points to 46.7%. However, in the second half, we saw occupancy rebound over 60% the average room rate of $202, which was 9.2% above the second half of FY '19 or our pre-COVID comparison and a record for the group. The fourth quarter demonstrated good signs of recovery with average rate representing growth on the same quarter of FY '19 of 23.3% and margin approaching FY '19 levels. At a brand level, Rydges QT and Atura continue to attract a greater than fair market share, which is one of our key business goals and we were pleased that we maintained our guest sentiment through this period. Our new operating models are helping us to mitigate the impact of cost inflation to date and an increased focus on things like menu reengineering and I'm talking daily and procurement are a focus that we have to navigate the months ahead. We continue to grow our network of hotels in the year, 5 new hotels were added with Rydges Latimer Christchurch, QT Newcastle and 3 hotels under the independent collection. All brands have recovered well in the second half of the year with record average room rates exceeding the pre-COVID FY '19 year. Performance across the portfolio was underpinned by continued steady growth from the domestic leisure segment and good signs of recovery in corporate. Rydges is recovering well with strong growth in occupancy and room rates in the second half, particularly given Rydges Melbourne, which is a key driver of earnings in pre-COVID times, is not included. I think in February, we indicated that Rydges Melbourne contributed around 15% of the group's owned hotel earnings, and this closure will impact the result for FY '23. The fourth quarter delivered some particularly strong results with QT with occupancy of 81.9%, an average room rate of $250 and Revpar of $205. Our investment in QT from strengthening the brand, enhancing our F&B portfolio, investing in continually upgrading that experience and expansion via management agreements has resulted in really pleasing growth. Q2 result was also good, and this was driven by a strong performance out of Atura Adelaide Airport. In fact, for QT and Atura, Q4 EBITDA exceeded pre-COVID FY '19. the next couple of charts. We had them in the half year presentation. We're really just trying to show you the impact on occupancy and rate as lockdowns occur and then restrictions ease and we start to see some periods of recovery. The yellow line represents pre-COVID FY '19 occupancy. The blue and purple bars highlight the most restricted trading periods. So in summary, you can see as soon as the New South Wales and Victoria boarders opened in early November, demand was tracking ahead of prior year December and January. Then we get the red dotted area and that was the impact of the Omicron virus as took effect. The second half has obviously seen a relaxation of restrictions and return of occupancy to the low to mid-70s and approaching pre-COVID occupancy. As we said, corporate travel in Q4 began to show signs of normalizing, and our forward C&E inquiry has matched pre-COVID FY '19 levels in Q4, which is a great sign. Domestic Leisure continues as the strongest contributing segment across our hotels. In Q4, like for like hotels, revenue was up 11% on Q4 pre-COVID. Encouragingly, the growth is driven by increases in average room rates with occupancy rates as you can see, still a little bit below pre-COVID. Other segments still lagging and recovery include group wholesale business, [ aircrew ] and the international leisure market. This is due to no overseas market having yet returned to pre-COVID levels with China as the most notable example. We've highlighted also New Zealand -- the New Zealand market still lagging a little bit, the Australian market. But whilst the numbers are still low, we expect it to get a pace in line with inbound arrivals. Pleasingly, this is very pleasing for us. Direct bookings continue to exceed all other channels, including OTAs. So as discussed, rate growth is really pleasing. This chart demonstrates the combination of a different market mix and smarter pricing strategies to deliver a record rate growth. In Q4, average room rate was comfortably above pre-COVID comparable months and July has maintained that record. We're also pleased, as I said that all brands continue to outperform competitors. Our hotel expansion strategy has evolved over the past few years to provide more opportunities for growth. We now have a hotel solution that meets the entire needs of the market from luxury through to budget leveraging one of our own brands or and on maintaining an independent brand and leveraging our capabilities. QT hotels in terms of our own brands has been consistently recognized as a leader in premium boutique experiences. We're excited to be expanding to 10 hotels. The opening of QT Newcastle has been really good. It's a great hotel for a Newcastle. There's only one hotel to stay at. It's QT. A managed hotel in May and in Q2 parameter will open in the next few years. Rydges, our flagship brand has grown to 45 hotels across Australia and New Zealand. And we've already secured for financial year '23 Rydges Kings Square, Perth and Rydges Darling Square. Atura, our affordable design-led brand. We're pleased that we have Oran Park, and we spent a lot of time really refining and redesigning the Atura product, and you'll see that unfolded when Oran Park opens in 2023. As mentioned, we recognized a gap in the budget market for our owned portfolio, and that's why we acquired Jucy Snooze currently has locations in Christchurch and Queenstown. And as we said, we're opening the flagship location Auckland later this year. So we've got a really strong collection of owned brands. In 2021, we launched the independent collection by Event. We recognize that owners are looking for more flexibility in brand and management type agreements, and we match that with our ambition to grow and better leverage our capabilities. We now have -- we're able to take on any hotel that fits a luxury to budget brand that -- this group has grown to 12 hotels to 30th of June with the addition of HotelMOTEL Adelaide, the Terrace Adelaide and the Kennigo Hotel Brisbane. And the independent collection continues to grow. So post-year-end, we have the Miller Hotel, which was formerly the Rydges North Sydney, Arawa Park Hotel, which was formerly Rydges Rotorua, and we've secured the Holiday Inn in [indiscernible], which now Rydges Rotorua And so that's foreign party independent collection. Hotel [ Toto ] and [ Wollongong ] and the [ Adel ] and Adelaide. So we're really pleased with how the strategy is progressing and how the market is receiving it. Now turning to Thredbo-- as you all know, winter revenue was materially impacted with the 5-week lockdown bang smack in our peak operating period. And it was the first time in through both history that we've actually been asked to close for that amount of time. As a result, ski days were down 55.7% on the prior year. However, the continued expansion of Mountain Biking resulted in a strong summer revenue result with 25% growth in mountain biking revenue. Reported EBITDA for summer of $7.4 million included $7 million from property sales. On an adjusted basis, this is only the second time last year was the first time and Thredbo history that the summer months have been profitable. EBITDA for the year was $16.3 million, 45% below the prior comparable full year. Look, COVID-19 and influenza have continued to challenge staffing levels, particularly in the F&B area. And we've had strategies to help mitigate the impact of that. And customer feedback is telling us we're doing a pretty good job of that. We're now seeing the benefits of our new business model with June revenue and EBITDA margin growth on the June winter and 2019. Our strategy is to optimize the premium experience by offering new products that attract a higher-yielding customers. We want to ensure that customers can maximize their day on mountain with minimal queuing time, and they are, with customers now averaging an additional 2 runs per day. We've changed our season pass to target and appeal to truly frequent customers, and our day pass price is still more competitive than our nearest competition. Customer sentiment remains high, and we're achieving results. We've improved our snowmaking capabilities, as I mentioned, which should allow for better conditions later in the season in the Friday Flat area. However, we are still subject to [indiscernible] conditions, after a strong opening weekend of natural snowfall, snow-making conditions have been pretty variable for the remainder of the season. We've previously made a commitment to ensure Thredbo uses 100% renewable energy. Which has been supported by a new contract with Red Energy and Snowy Hydro, which took effect from the first of July and now covers all of our electricity requirements for the resort. Now turning to Entertainment. Feel like a bit of a broken record, but the first half was disrupted by state government mandate closures, really with the majority of these in New South Wales and Victoria, which is where the majority of our entertainment earnings or cinema earnings come from. Despite this, revenue was $318.6 million, a 45.3% increase on the prior year. And excluding JobKeeper, which only benefited the prior year, revenue increased 71.7%. And The Australian box office increased 73.4% on the prior year, and our box office revenue increased 83.2% on the prior year. We saw a return to cinemas across all demographics. Eight titles were released that grossed over $20 million compared to only $5 million in the prior year and 2 of the top 5 highest grossing titles of all time in the Australian market, as mentioned. Other blockbusters included Dr. Strange, which actually delivered 82.4% more than its prior -- more than the previous Dr. Strange title and No Time To Die, which was in line with the previous James Bond spectra. For the 2 key trading months of December and June, the group box office revenue was back in line with pre-COVID levels. And in June, the group's box office revenue exceeded June by 9.7%. It's clear to see, and it's obvious to see in the results, and when blockbusters a release, customers want to see them on the big screen at the cinema. Premium concepts continue to grow in their appeal, increasing by 6.5 percentage points in terms of admission contribution from premium concepts. And the premiumisation strategy resulted in a record yield result with average ticket price increasing 17.7% over the pre-COVID year and a period of record merchandising spend per share, up 48.9% on the pre-COVID level. Our direct customer relationships remain really strong with cinemas representing 68% of all cinema visits and 84% of online transactions. We were pleased to see margin improvement in June 2022 with the Senate month -- Month Cinema EBITDA margin for the owned and operated Event Cinemas up 3.8 percentage points on the peak over June 2019. Excluding the benefit of JobKeeper in the prior year, EBITDA increased $51.2 million, and we were really pleased that cinemas delivered such a good result given the challenging period that we went through. Now looking at New Zealand. New Zealand experienced significantly more COVID lockdowns and restrictions. But despite this, again, releasing the key blockbuster titles got people back out into cinemas. Revenue was $58.2 million or $39.6 million up on the prior year. And excluding the government wage subsidies, has increased by 35.9%. Nationwide box office increased 39.5% with 5 titles that achieved over $4 million in box office in the prior year, there was only one. So it really was a year of more blockbusters being released. It's also worth noting as top 4 films for sequel titles, all of which outperformed the prior firm and their series. As in Australia, similar of the future premiumisation has resulted in customers spending more per visit, operational model has reduced our cost to serve and customer sentiment is improving. So the model is right. We had another record period of merchandising spend per head, up 43.1% on the pre-COVID period. Cinebuzz again strong, 76% of all online transactions, and we're pleased that the EBITDA result for the year was a profit of $1.8 million, which was a turnaround from the loss of $3.1 million in the prior year. Turning now to Germany. So the cinemas reopened in Germany in July 2021 following an 8-month closure period, which is what a lot of the bridging aid subsidy is related to. Initially, 3G rules were applied, which meant for a customer that actually enter cinema. They had to be vaccinated, have a recent negative COVID test or have recovered from COVID-19. That then changed to a 2G role, which meant they needed to show evidence of a vaccination and a negative COVID test. These rules don't apply. They all ift the market at the end of April. But it was a pretty challenging year for operations in Germany. Given these restrictions, we are able to mitigate some of the financial impact in terms of active cost management strategies, the way we've structured the business in Germany and obviously pursuing the German government subsidy programs. Subsidy programs included a damaged compensation program for the November-December 2020 lockdown period and bridging aid programs for the periods from January 2021 to June this year. We also received support under the German Governance Culture Fund which provides compensation in cases where there's a spike of coronavirus infections. You're not mandated to close, but you have restrictions. You may need to cancel sessions, postpone sessions or have restricted capacity restrictions. Overall entertainment, Germany revenue was $283.6 million, which was well up on the prior year. And excluding the Bridging Aid program, revenue was $220 million, again, up on the prior year. Standout title in Germany was no time today, which is the best-performing title in Germany since Frozen in the pre-COVID period. Interesting to note that Top Gun was not in the best films of top 50 films of all time, in Germany. So whilst Top Gun has really fired around the world, there were some markets in European markets just didn't fire because they didn't relate to the first Top Gun and really wasn't part of their culture and psyche at the time. In the pre-COVID years, German film content typically represents around 20% of the mix. And looking ahead, we expect that to get back to those sorts of levels and the second half of the financial year. We achieved solid growth in AAP up 5%, and that's without premium. So like Australia and New Zealand, we've seen the benefit of that, and we're now investing in premium seating for selected locations. We've actually got 7 locations and 12 screens in time for Christmas. And we also delivered a record spend per head period through the German business as well, adopting similar strategies. Energy costs have increased materially in Germany, up nearly 43% on Financial Year '19 and these are expected to continue to rise this year. EBITDA for the year was $75.6 million, and excluding the German government bridging aid summary programs, EBITDA was $12.6 million. In relation to View we announced in May 2022 that we had filed a formal request for arbitration against you for filing to meet contractual obligations on these [indiscernible] Last month, [ you ] filed documents with the U.K. court seeking approval for a scheme of arrangement to avoid insolvency and indicating they plan to undertake a financial restructuring later this year. We've obtained advice, and we're actively pursuing our legal options, but there's not any more that I can say on that matter today. So premiumisation -- what does it mean? Our Cinema of the Future Strategy. Just to explain this further, we focused on 3 areas: number one, every seat can be yielded. So every seat inside every single auditorium, we're looking at ways to grow the yield from that seat. So you may walk into a 12-plex and have a different experience by a behind every door and different ranges of seats within that. Secondly, it's data led, data optimization. We don't just design marketplaces that look good. There's a reason for everything to go there because we know where people congregate what they want to buy and how to best leverage that retail space; and thirdly, technology. So technology is really improving our cost to serve as well as our ability to sell with some proprietary technology we've developed in terms of F&B ordering within the gold class experience. And in terms of premiumisation, there's a range of experiences that we can adopt globally or that we had to. In terms of gold class, we've elevated with improved recliners, laser projection and our new proprietary F&B ordering technology, which is in a great lift in spend. Boutique, something we've created offers the latest and premium seat design in a really unique environment. And we're really happy with how this is going in terms of its appeal for the corporate market, which has been strong. V-MAX, we've enhanced with 3 seating types, the day beds, recliners and fixed-back seats, Junior we've introduced, which appeals to young children and therefore, parents, which means that parents want to spend more times at cinemas with young children. IMAX and 4DX, just a couple of the global premium concepts that are performing well in key locations for us. So we feel really confident in our Cinema of the future strategy and our premiumization. We've got the experience right. It's now about focusing on the film lineup. As I said, we've had a really strong start to the year with blockbuster titles in May and June continuing well into July. August and September, they've got no blockbuster releases. So naturally, we expect that to be a quieter period. We're excited for the new DC title, Black Adam in October; and Marvel Sequel, Black Panther: Wakanda Forever in November. And of course, the long awaited return or the long anticipated release, I should say of Avatar, The Way of Water, which is really expected to underpin performance in December and January trading period and the sneak footage we've seen is outstanding. Early 2022 also looks a little bit quiet, with Shazam in January and the Ant-Man Movie in November. And as is often the case with the film lineup, the financial year is loaded with potential blockbusters in the May, June summer release period. Look, it's still early in terms of the lineup and movies will still move around and some will appear, but that's the lens through to the film lineup that we have as of today. So as you've heard throughout today and through the last time that we met, we've done a lot of transforming for the bidder. We've invested in improving our consumer brands over the past few years, and now we want to focus on better positioning our group to the market. We've been a bit of a best-kept secret. When we say we work for Events, people say, "Oh, Event cinemas." but as we all know, what people don't understand as an Event stands for more than cinemas, and we've got a lot of the best brands, a lot of great brands that -- more brands that stand behind that. And our name was an obvious part of the problem. It hasn't quite told our full story like the strength of our property portfolio and development plans, Thredbo. The fact that we operate more than 150 restaurants and bars and have an extensive C&E network with over 1,500 indoor and outdoor venues. Greater recognition of our company brand is a really important part of attracting talent, especially in a highly competitive marketplace, like we're facing today. So we need to better sell what we do. So we have to solve this and move forward in a way that amplified our inherent strengths and sets us up for the future. And it turns out, as often the case, the answer was right in front of us. Most people were calling us EVT simply because it was our domain name or our ASX code. So we've embraced it, and we've amplified it. E is for entertainment. We've got an extensive portfolio of experiences, and we are the #1 place to meet colleagues, celebrate, chill out, connect, et cetera. In the eyes of our customers, this includes indoor and outdoor cinemas, restaurants and bars, bars, golf courses, any of our businesses seeking customer discretionary time and spend. V is the ventures, driven by passion for new opportunities from hotel management to media partnerships to property. And T is for travel, better tell our story of the range of hotel experiences that we offer and, of course, Thredbo. So E is for entertainment, V is for ventures, T is for travel, makes sense, and it's pretty nice and simple, too. And launching EVT will demonstrate what we do with more impact. Our customers are in the center of everything we do, and our aim is to fulfill their needs by attracting the greater share of their discretionary time and spend. We do this for our customers by continually enhancing our entertainment experiences for our B2B customers by investing, partnering, managing their assets for growth and by delivering exceptional travel experiences. An example of a change that's more customer-focused is the way that we're presenting our F&B experience is under entertainment. I mean we've been positioning our hotel -- our restaurants under hotels. And I don't know many people who are looking for a restaurant and go searching under hotels for somewhere to dine. So under entertainment, it's going to be in a place where customers search for what we do and that's what will be found on evt.com. Under ventures, you'll see our extensive property portfolio and developments like never before, and under travel, have more access to information around our luxury to budget accommodation offers. Entertainment, ventures, travel. It's in our name. It's what we do through the eyes of our customers. But how we do it is what makes us unique. It starts with responding to what customers want and our vision is to be leaders in creating experiences that escape the ordinary. This means changing the game, making an impact being bold and never cookie cutter. We bring this to life through our 3 strategic goals: grow revenue above market, which we're demonstrating; maximizing our assets, what you're seeing us do; and business transformation to improve margins is what we're all about. Each of these 3 goals is only successful if customer satisfaction is growing at the same time. And that's why we've invested over the past 4 years and finding out what our customers think for our Net Promoter Scores, our e-sentiment tracking and aligning our strategies and capital investment into making sure that we're responding to those insights. However, our success is not measured on profit alone. At the same time, we're responsible for constantly improving our workplace and employee engagement. I'll give back to our communities where we operate. and taking a responsibility for creating a better tomorrow for the environment, all of these are just as important. This is what we define as our ELEVATE program, elevating our people, communities and environment. Every pillar has a clear set of goals relevant across every part of our business. As an example, elevate our environment, sustainability has been a core part of what we've done for the past 5 years now. But what we're doing is providing clearer disclosure and a clearer framework on what we do. As an example, we're well progressed with a program of replacing older plants and equipment with new more efficient models and the variable operating model implemented during the pandemic has really helped us to manage costs and energy consumption. This year is the first time that we will have 3 key pillars across every business. One, sustainable design, two, sustainable practices and procurement, and three, transparency in reporting. Within these pillars, we're operating to 7 goals across the group. It's also the very first time that every EVT leader in the business will have an environment performance goal tailored to their local business. In our annual report, we've disclosed the results of our climate-related risks and opportunities assessment. The first step towards full alignment with the TCFD recommendations, and we expect to achieve full alignment with TCFD by no later than FY '24. We're also developing a pathway to Net Zero and expect to announce a formal target next year once we've completed our assessment of our Scope 3 emissions. So we're currently rolling out the EVT change internally because there's no -- we've got to make sure our people know us better than anybody else and plan to launch our new website, evt.com publicly on September 27. I'll now play just a short sneak fly-through of what that website will look like. [Presentation]

One of the key advantages of our groups is the perks we can offer and really bringing that to the forefront has been quite important. You'll be able to search our 150 restaurants and bars, make a booking, location, find the menu. Our ventures will, of course, outline our entire property portfolio and provide updates on our developments as well as our hotel management capabilities. And of course, there are so many careers you can have at EVT, and we want to make sure that everybody knows about them. Right. So we're also planning on holding an Investor Day on Thursday, the third of November in Sydney to provide more insight into the EVT and my team will be presenting on each of their strategies under the EVT. So we hope to see you all there. In closing, I wanted to touch on the outlook for the year ahead. Look, the year got off -- July got off to a great start. Box office beating pre-COVID comparative July performance. The recovery of hotels and occupancy in the mid-70s and record average room rates and Thredbo delivered a strong result for July. Looking further ahead, the Entertainment Group's performance will be subject, as always, to the appeal of the overall film lineup with limited blockbusters scheduled for August and September and only partial visibility still on the second half of the year. But we do know when blockbuster titles are released, we expect to benefit from our new operating model with improved results. Demand for the group's hotels is expected to continue. We see recovery in corporate travel continuing, and that will assist in FY '23. However, as I said, the international market factors, we don't see that fully recovering in this year. A solid winter 2022 result is expected for Thredbo with the group's new business model delivering strong results. Summer performance is expected to be relatively in line with FY '22, subject to weather conditions. And the property segment result will continue to track below the prior year as a result of the successful divestment of the noncore property assets. Like all businesses, we continue to face headwinds, including energy cost increases, particularly in Germany and the other inflationary cost pressures, but we continue to work on ways to try and mitigate some of the impact. From a corporate perspective, the investment required in compliance and risk and management continues to grow, whilst we're also investing in our sustainability initiatives. Our maximized assets plan will see CapEx return to pre-COVID levels. And whilst we hope that most government-mandated closures and restrictions are now in the past, we continue to be exposed to any of those changes, but boy, we've never been ready -- more ready to respond. Subject to favorable trading conditions, the Board desires to resume dividend payments later in the 2022 calendar year. The transformation across our group has been material, from new business models to greater adoption of customer and business technology, we are so much more agile than we were ever before, and we have a much stronger foundation for future growth. Overall, if market conditions improve, we see a pathway to getting back on track to reestablishing 2019 revenue levels. What we're all hoping for and looking forward to is a much less interrupted recovery year. So I'll now take questions. I think maybe if we take questions in the room first and then we go to the phones. Great. Sam [indiscernible]

Thanks for the presentation, Jane. Can you talk to us about your outlook for cinema ticket prices and discounting in a weakening consumer backdrop and any consumer insights from recent New Zealand trading would be helpful given they are ahead of us in the interest rate hiking cycle and a couple of listed retailers have called out some weakness over there?

Yes. So look, we feel pretty confident in the position that we have in our recovery because you remember, when you're looking at cinema, you're comparing that to going out for dinner. You're comparing it to other often more expensive entertainment options. And so what we're seeing is actually, at this point, no impact on the cinema experience and what people are seeking from us is a better cinema experience because that's where they're choosing to spend time. So at this point in time, we feel confident in the strategy that we have. And we're not feeling any pressure on market to be discounting at this point in time based on the immediate impacts.

And then just from New Zealand?

I'm meaning New Zealand as well. Yes. And we're watching that -- I mean, it's a great question. We're watching both markets across all businesses really closely, but still at the same time, if people want to see Top Gun, they want to see Top Gun. When a blockbuster is out there. People are willing to pay the prices for the experience that we're offering.

Sure. And second question, of the Cinema leases, what proportion are linked to CPI?

Most , Majority . Yes

Okay. And then finally, just on the topic of gift card breakage, there might be some changes to accounting standards happening at the moment. So can you just talk us through that? And any impact to FY '22 and '23 that we should be aware?

No. We're -- we made some substantial changes about -- correct me if I'm wrong, team about 2 years ago, 2 or 3 years ago to reflect up-and-coming changes. So I think we've taken most of the impact of that earlier on. So we're not actually seeing any further changes at this point that we need to respond to. But again, that's a watching brief.

All right, sorry, I'll just sneak in. What proportion of the cinema circuit is traditional auditoriums versus premium formats and how you're thinking that evolves over the next 5 years and associated CapEx with that?

Yes. So that's a really big question, Sam, and that's why we're having our Investor Day. Basically, our ambition is to make more money out of every single seat that we have. And that will happen over a number of years. We were really focused at this point in time is on our top 10 -- top 5 or top 10 because we've always had a -- well, for the last 5 years, the strategy has been few or better, which we've said a lot of. So the top 10 is where we are focused. And then we're looking at regional locations with other concepts. So you'll be aware that BCC Cinemas we launched a version of a reclined product. At a different price point, that's worked really well, and we go, okay, for that type of cinema, we will roll that out. Currently, we are less than 30% premium in Australia and far less than 20% -- actually less than 20% in New Zealand and very low in Germany. So we see plenty more room for premiumisation.

Just a question on inflation, just some trends that you're seeing in the back end of FY '22 and so far in FY '23. And you mentioned in your presentation some ways that you're mitigating against inflation? If you could touch on that.

Yes, look, prices are changing every day. So it's not like a trigger at a point in time. Every single day, prices are moving, particularly in the food and beverage game. So what we're doing is we call it menu reengineering. So what may take a tomato might take something else the next day. So the teams are having to literally daily, weekly adjustment us reprint menus to get the -- to try and maintain a cost of goods related to what that experience is and a price you can charge the customer. So -- we're -- it's not over. Prices are continuing to move, and our model is if we can take it in price, great. If we can't, then we need to reengineer what we're doing to try and offer a different range or different experience. It's intense focus at this point.

I can imagine. Two more questions from me, if that's all right. Second one is just on the German film slate in terms of like domestic German films coming up. Do you know if there's much in the pipeline? And is that an important driver of the German segment?

Yes. So it's about 20% of their box office is from local German film content. We've got a few between now and Christmas. But we really see second half of the year that they're starting to date again.

Great. And then last one, just any more subsidies to accept in FY '23 for across all of the segments?

Nothing of any material nature. That's the way we're looking at it.

I'll continue the [ Barrenjoey Line ] line of questioning. So apologies for that. You mentioned in the Hotel segment that June hotel revenues were up 11% on the 2019 level. Can you give us a view on margin? Because obviously, there's been a big program around operating more efficiently. How does that look compared to that 11% revenue growth?

Look, I said we said that margins were recovering to the FY '19 level. So we're trying to hold margins.

Yes. So I think the comment was margins were approaching FY '19 levels for the quarter. And presumably building over that quarter.

Yes.

And then the other question that I had was around Cinemas. I think you made a comment on July cinema being above 2019. I just -- is that at the revenue or earnings level? Because I guess the content in a [indiscernible] transmission...

Revenue and earnings level.

Right. Okay. I'll ask one more question. As the George Street DAs begin to get approved, how do we think about that impacting valuations of those properties in the independent way?

That's a good question. We probably have -- so we've got another year's work to unlock more value out of 525 and probably another year's work to unlock more of that value out of 458.

[indiscernible] June last year -- adjusted for some of the DA approvals there anyway.

On 525.

Just on the hotel room rate. So they're now above 2019 across all your brands. How much further do you think they can go? And how much room do you have to reprice for inflation as that comes through as well?

That's a really good question ask that of Norm every day. It's a [ tailing ] dialogue. Look, you can charge as much as you can deliver on experience. Yes. So we believe that -- we believe that there's probably a little bit more to go in our QT experience. And as our Rydges properties get renovated, of course, there's growth in that. But we are actually seeing that where we're sitting right now feels like the right place to sit in the market. We're quite comfortable with where the occupancy sits and the rates we're sitting at, and we think that, that's delivering good results at this point. So I think that's -- Norman, do you want to comment any more on that? You're in the room?

[indiscernible]

Sorry. I should just repeat that Norm just said that the conference market is still rebuilding. So there is likely to be some growth from that.

And just on the spend per head in cinemas, that's obviously substantially higher than pre-COVID. How much of that do you think is actually just a bubble post lockdown? And how much of it is sustainable?

So we break down every single center of that growth in terms of exactly where it's coming from, from prices, from the technology we've implemented from ranging from everything else. Look, we feel like that there are a number of factors which delivered that increase. It's not just price increases. In fact, price increases are small part of how we've achieved that growth. So we're quite comfortable where we're sitting at this point in time.

Can you maybe speak to staffing challenges that you face, particularly in the hotels? And if that had any drag on like occupancy levels?

So we're really proud to be one of the very few hotel chains that has not had to reduce its occupancy because we've not had staff to deliver the experience. Look, staffing is a challenge. It's a challenge out there for everybody. We're working over time, we've been really happy with launching EVT internally and making sure that we've got really good internal programs to keep staff engaged and with the group. It's a very big competitive advantage in this market when you can say you're part of EVT and now you can work in E the and you can get T benefits and you work on the T, you can get E benefits. It's really unique, and it's been really powerful at this point in time. But we've invested more. We've developed more training programs. We've developed a lot around our values and reward and recognition programs over the past 2 years. We've actually completely transformed our people culture and how we look after our people to be in that position. So where we've really found it tougher to get staff has been at Freeland the food and beverage area. I think if there was one area that the guys have done incredible job of mitigating that, that has been one area that has been tougher for us to resolve. And so we've done things like reduced menu options, looked at operating hours, et cetera, we've managed to get through, and we've managed to deliver a good experience, but that has been tougher. I think that does anyone. I think that's the key thing. We have -- we've worked so hard in the last -- this hasn't been a now thing. We've been working -- we've been seeing this coming for the last 2 years, and we have materially transformed the way that we look for people in the way we retain people.

I think you only indicated previously that Melbourne was around -- I think it was 10% or 15% of owned hotel EBITDA. So fair to say that that's been the impact that has been born in the second half of the FY '22 result in terms of the drag on earnings from that being closed for the lack of ins?

Partially that there's more -- because it was in a COVID period as well for some of those months. It's more versus pre-COVID.

[indiscernible], that 10% to 15% would have been prior 2019 year. [indiscernible]

But like the other hotels benefited [indiscernible]