EVT Limited (EVT) Earnings Call Transcript & Summary

Hi. Everyone. Before we get started, I'd like to acknowledge the traditional custodians of the land. I'm speaking to you from today, the Gadigal people of the Eora nation. I'd like to pay my respects to Elders past and present, and I'd like to acknowledge any and all Aboriginal and Torres Strait Islander people joining us today. Thanks, everyone, for joining the call. We were pleased to achieve underlying group revenue growth up 4% to $1.221 billion adjusted for the benefit of the German Government subsidies in the prior year. The Hotels division achieved a record result with revenue of $407.4 million, up 15.5%. Full year Entertainment revenue was up at $714.8 million, and that was certainly a year of 2 halves for Entertainment with a record first quarter and a good first half. The disruption that followed from the Hollywood strikes, which shut down film production, materially impacted the second half with fewer blockbusters released, and I'll explain this further in the presentation. Our Thredbo team delivered a solid result despite revenue down 18.9% with a new business model helping to offset materially worse weather conditions. We continue to invest for growth and find ways to transform our business to offset material cost headwinds. One of our strategic goals is continual business transformation, and we've deployed programs to offset the tens of millions of dollar cost increases relative to pre-COVID, particularly in labor costs, energy, insurances and the general cost of compliance. We've recently also completed a further restructuring to streamline our Entertainment operations. Most pleasingly, we reached a major milestone in our 5-year IT transformation road map with cloud and digital transformation milestones achieved and transitioned to OPERA Cloud for hotels to be completed in the coming year. We were also leveraging efficiencies from AI where relevant and continually improving our customer-facing digital technology. We achieved improvement in our Net Promoter Scores across most parts of the business and also improvement in our employee engagement scores, and we're continuing to better leverage our EVT group-wide customer data to unlock more value for our customers. All of this faces us in the best position to realize growth when all of our industries normalize. Reported normalized EBITDA was $151.3 million, down $35.7 million on the prior year. As you're aware, the prior year included $22.2 million of German Government subsidies and excluding this, underlying normalized EBITDA was down $13.5 million. The Hotels division achieved a record EBITDA result of $101.5 million, up $14.1 million on the prior year. The Entertainment EBITDA result adjusted for German Government subsidies was down on prior year, and I'll explain the reasons for this further. Thredbo EBITDA was down $20.1 million, in line with the impact on revenue due to the materially worse winter season. Our unallocated expenses were down $1.3 million. And on an underlying basis, unallocated expenses are also below the FY '19 year. It's important to understand the nonrecurring items that are impacting the movement in reported NPAT of $4.8 million. This year includes a one-off $26.9 million noncash tax adjustment following a change in the rules on the depreciation of buildings in New Zealand. The prior year includes $47 million after-tax benefit from property sales and $15.5 million after-tax benefit from German Government subsidies. We also saw an increase in depreciation as expected following the opening of Rydges Melbourne and IMAX Sydney. The adjusted NPAT is down $12.9 million, in line with trading performance. Net debt of $304.1 million remains below pre-COVID levels, and our balance sheet remains strong and positions us well for future growth. I'll comment further on the outlook at the end of the presentation. And the Board has declared a fully franked dividend of $0.20 per share, which will be paid in September. Turning now to the trading overview. As you all know, we're a diversified business. So we thought the best way to explain the result was to clearly illustrate the movements year-on-year by division. As I previously mentioned, you can see the $22.2 million of German Government support in the prior year that was not recurring. You can also see that our team delivered a very strong performance from our Hotels division. Hotels EBITDA of record with revenue up $55 million and EBITDA up $14.1 million, assisted by like-for-like growth across Hotels and a full year of trading from the upgraded Rydges Melbourne property. EBITDA margin was marginally up on prior year, 0.1% more than offsetting cost pressures. Thredbo experienced materially worse winter conditions and by this, I mean, less natural snowfall and more wind hold days. Despite that, the team delivered EBITDA of nearly $20 million for the full year, which is a solid result in the circumstances. With the new Thredbo business model and our investment in snowmaking, we are able to generate an EBITDA result that is at least 30% higher with these conditions on around 30% less skier scans, a great result. This means that when we do get a reasonable season, not even a great season, we'll generate materially stronger EBITDA as we did in 2022. Property held and the group's unallocated corporate costs were $1.3 million below prior year despite market cost challenges, and we continue to invest in the ever-increasing cost of compliance and in new capabilities in growth areas of the business. The challenge was that, whilst we achieved revenue growth in all 3 entertainment markets, EBITDA was up in New Zealand but declined in both Australia and Germany, and I want to talk a little bit more about this. Following the impact of the studio shutdowns during COVID, we are expecting a really solid film lineup for financial year '24. The first quarter started off exceptionally well. It was a record first quarter with 2 great blockbusters released, Barbie and Oppenheimer, and the benefit of our premiumization strategy. This chart highlights weekly admissions in Australia versus prior year in 2019. As you can see, recovery in the release schedule in the first quarter resulted in admissions growth year-on-year at some point ahead of financial year '19. Then the film industry came to a halt with the Hollywood strikes from May 2023 for writers and July for actors until November. There was a range of studio announcements of film release delays, including Deadpool & Wolverine, which moved to July '24, Captain America, Mission Impossible, Spiderman and Disney Snow White. The reasons range from films not being able to be completed in time for release to studios making a strategic decision not to release films without the ability to do talent tours, which is an important marketing mechanic for the films. You can see the impact this had on admissions. Following the end of the strike, it was not until around the mid-first quarter of calendar year 2024, that studio started to share a clearer view on the impact of production shutdowns on film release dates, which provided quite an uncertain operating environment to navigate. The direct and most material impact of film release disruption was experienced during the April to mid-June period where we recorded the lowest admission weeks on record, excluding COVID closures, down 60% on FY '19 and 40% on prior year. The impact of the delayed titles was compounded by a change in mix of films with less contribution from potential blockbusters like The Fall Guy and Furiosa, which failed to meet studio expectations, and more contribution from family films at a lower yield per admit. You can see the mid-June recovery with the family titles Inside Out 2 and Despicable Me. And whilst our revenue strategies have increased spend per family year-on-year, family titles generally attract lower yields than blockbusters. Overall, second half admissions across our territories were down 14.1% year-on-year. So in summary, we have materially less blockbuster films due to the strikes, greater film contribution from family films, and cost increases to offset that came into effect in the second half. Given the short-term nature of this impact, whilst we were able to absorb material labor cost increases in all 3 markets, we weren't able to flex our base cost model further. The important point is that, this was a short-term impact due to the strike impact on film supply. Out of interest, in Australia on a like-for-like basis, adjusting for the benefit of IMAX Sydney, second half revenue was down $19.2 million and second half normalized EBITDA was down $12.9 million. And Entertainment in Australia was further impacted by temporary closure of screens and key locations for upgrades because whilst we didn't have films, we decided to get on with more premiumization of seats. This -- I mean, this slide clearly shows you what the FY '24 lineup of blockbuster films. And by that, I mean, films that take over $15 million at the Australian box office. And it's pretty easy to see the gaps created due to strikes, especially from September to November and in April and May, which are traditionally strong periods for box office. You can see how this inconsistency of major blockbuster film releases hurt EBITDA margin in Australia. I mean, pleasingly, 7 out of 12 months, we achieved admissions that were comparable to pre-cover trading months and improved the EBITDA margin result on those like-for-like trading months. The pricing strategies we've implemented are designed to more than offset the cost increases, and we're still achieving growth in like film average admission price. For example, you can see good growth on blockbuster titles like Deadpool & Wolverine compared -- and family titles like Despicable Me 4. However, as stated, family titles yield at a lower level and the significant increase in the mix of family titles in the top 100 films this year to around 34% versus 23% prior year meant that we couldn't realize all the potential upside from our pricing strategies in the second half also. So we've already covered a lot of Entertainment, so I'll briefly run through this. Entertainment Australia revenue was $379.6 million, up 1.7% and EBITDA was $38.7 million. Pleasingly, Entertainment New Zealand revenue was $75.7 million, up 3.8% and EBITDA was $800,000, up 50%. Australia benefited from the opening of IMAX Sydney in October. And what we do know is the attraction of premium cinema experience grows and customers are prepared to pay more for premium experiences as we've highlighted in our revenue strategies. Interestingly, we had a record contribution from World Content this year, making up 8.6% of Australian box office and 11.8% of New Zealand box office revenue. As I've covered, our premiumization strategy continues to deliver growth in yields. In Australia, AAP and spend continued to grow, and we're well ahead of pre-COVID, up 26.6% and 51.3%, respectively. AAP was up 4.7% and spend per head up 0.9% on prior year. In New Zealand, a pretty similar result with AAP up 43.7% and spend up 51% on pre-COVID. AAP was up 3% on prior year and spend per head was up 0.9% like Australia. These are really good results considering the change of film mix with a greater proportion of box office from world family and mid-tier films, which generally deliver less spend per head. In Germany, the first quarter was a record, driven again by Barbie and Oppenheimer. The rest of the year was impacted by the combined impact of the film release days due to the Hollywood strikes and also the European Championships football tournament held in Germany during June and July. We also had a lower contribution from local German films in part because of the impact of the football. Overall admissions were down 1.9% with underlying revenue, excluding government subsidies, up 1%. AAP was relatively flat due to a materially lower contribution from 3D films, which attract a surcharge and made up only 5.9% of admissions this year compared to 21% prior year due to less blockbusters released. Pleasingly, though, the AAP for 2D films was up 8.9% on prior year. Spend per head was up 1.1% on prior year and up 37.8% on pre-COVID. Adjusting for prior year government support, Entertainment Germany's revenue was up 1% and EBITDA was down $1.7 million. Like Australia, the ability to fully mitigate second half rent and house cost increases, including an increase in labor rates. And just to note, average hourly rates in Germany were up 6.4% on prior year and up 31.7% on pre-COVID was impacted by the strike-related record lower admission periods and the European championships. Looking ahead, the beginning of the financial year has exceeded expectations globally with the release of Inside Out 2 now the highest grossing animated film of all-time, and Despicable Me 4 bringing families back into cinemas. Deadpool & Wolverine teamed up to revive Marvel's fortunes and has also outperformed, reversing a downward patch in the first half of the year that was due to a lack of steady product resulting from Hollywood strikes. It Ends With Us is also exceeding expectations. Given we are cycling the record performance of Barbie and Oppenheimer prior year, the revenue deficit is less than expected for the first quarter. We're looking forward to potential blockbuster titles later this year -- this half year, including the Joker, Gladiator II, Wicked, Moana to and Mufasa: The Lion King. The lineup for the second half includes Captain America, Bridget Jones, Snow White, Michael, Mission Impossible. Overall, once the lineup remains impacted by last year's strikes, and we may still be subject to changes in film release dates, we have a more consistent release of films. Looking further ahead, there are really good signs of recovery in the film lineup in financial year '26 with more blockbusters in the release schedule, including Avatar 3, the Mandalorian, which is a new Star Wars film, Jurassic World 4, a new Avengers title, Super Mario Brothers 2 and Toy Story 5. Turning now to ventures. We have a strong property portfolio valued at around $2.3 billion. It's important to understand our property strategy, which is to own hotel properties in key city locations that will support the asset-light growth of our managed hotel portfolio in Australia, New Zealand and internationally. We have a competitive advantage when pitching for hotel management agreements as an owner and operator of hotels when our competitors are almost exclusively asset-light. As operators of the assets, we can demonstrate how to grow asset value over time. We believe that a mix of owned and asset-light hotel growth approach will continue to unlock more opportunities for EVT. During the year, we have increased our interest in Rydges Christchurch to 100%, have taken an equity stake in Rydges Esplanade and acquired a property in Fremantle for conversion to a new LyLo with works expected to commence in financial -- this financial year. Our major developments continue to progress. 525 George Street in Sydney was an underutilized asset in our portfolio in a prime Sydney CBD location. The development plan we have created aims to realize the potential value of this asset. We have secured Stage 2 DA approval for a 43-storey mixed-use development with an integrated hospitality and entertainment offer, including prime George Street retail, a hotel and residential apartments. We're currently considering options to generate the best return for shareholders from this asset, including confirming the cost of construction, and we expect to be able to update the market on the preferred option at the end of this financial year. The second development opportunity is 458-472 George Street. We've secured DA approval for the podium component, which includes the extension of the QT Sydney Hotel, and we've commenced planning for this development, which will be subject to market conditions. We also launched new experiences, including the conversion of the Limes Hotel in Brisbane to Australia's first LyLo, which opened in May. We opened IMAX Sydney in October, which is already a top 10 cinema in Australia despite having only 1 auditorium. And we've signed an agreement with IMAX for 2 additional IMAX screen conversions in Australia and 4 in Germany. Two new ScreenX auditoriums opened in Robina and Campbelltown and 18 other screens completed or are in part progress of premiumization upgrades. And Thredbo's new Alpine Coaster opened on schedule in June 2024 and has performed ahead of expectations so far. Planning work continues for our key location and premiumization upgrades, including Thredbo snowmaking upgrades and planning for the replacement of Snowgums chairlift and many other projects. I'll share with you on the next slide. So this is a snapshot of the developments we're working on in this financial year. It includes at the planning stage successfully achieving DA approval for a LyLo development on the underutilized land at QT Gold Coast. We expect to commence development on the conversion of the Fremantle property to a LyLo. The upgrade of the east wing of Rydges Queenstown, including seismic works. We've also secured DA approval for a new basement bar at QT Sydney. We're adding additional rooms at Atura Adelaide Airport and a currently underutilized conference space, a refurbishment of the rooms at Rydges Cronulla, new IMAX screens in Australia and Germany, and as I've said, premium cinema upgrades. The timing of all the projects is as always subject to approvals and market conditions. Turning now to the Thredbo division. As you're aware, adverse weather conditions impacted both our winter and pre-Christmas summer seasons in Thredbo. Despite the marginal conditions in shortened season, our new business model resulted in winter yield up 76.7% on pre-COVID, and we continue to provide guests with a more premium experience reflected in high customer sentiment scores. The first half summer months were also impacted by poor weather conditions, limiting trade with closures during key trading periods. The second half summer months traded in line with prior year. Weather conditions result in the late start to the 2024 winter season, we were able to open on the June long weekend, but only with a magic carpet on Friday Flat operational. In July, with snowmaking, we were able to open the Cruiser area in a high noon later in the school holiday period, which compared unfavorably with the prior year. The good news is that, in late July, we had good snowmaking conditions and national snowfall, which improved performance in August. Overall, the 2024 winter season result will be subject to conditions in September. The Alpine Coaster opened in June with great demand and feedback from customers, and this is a really fantastic year-round attraction, which will add to the overall appeal of the result. Thredbo has now been recognized also for the seventh year in a row at the World Ski Awards as Australia's Best Ski Resort, which is an incredible achievement and credit to the team. Turning now to Hotels. As highlighted, so pleased that the Hotels division delivered a record revenue and EBITDA result for the year. Whilst Rydges Melbourne was, as expected, a significant contributor to the growth in revenue and EBITDA, like-for-like hotel trading was also ahead of the prior record year. We were really pleased with the strong conference and events result following a focus on the segment to best position our capabilities. We were also recognized with many restaurant and bar awards, which is an area of competitive advantage for our group. EBITDA margin was marginally up on the prior year, which is an excellent result given the cost pressures and a larger proportion of our revenue coming from food and beverage. In terms of our key hotel brands, occupancy continues to rebound with each of our brands achieving record RevPAR results. Rydges RevPAR was up 23.4% on pre-COVID levels and up 3.9% on prior year. QT RevPAR was up 21.3% on pre-COVID and up 3.7% on prior year. And Atura RevPAR was up 40% on pre-COVID and flat with prior year. All of our brands are continuing to deliver more than their fair market share. Across all owned hotels, occupancy was up 3.8 points to 76.7%. And whilst each brand achieved growth and room rate, the group average room rate statistic reflects a decline. This is purely due to the larger proportion of the group room mix coming from Rydges this year versus prior year with the reopening of Rydges Melbourne. A record owned RevPAR was achieved, up 3% on prior year. On this chart, the yellow line represents pre-COVID FY '19 occupancy. As you can see, occupancy is still recovering towards mid- to high-70s compared with around 80% pre-COVID. You can also see occupancy levels are getting closer to pre-COVID, particularly in peak trading months like February and March when we enjoyed a boost from Taylor Swift in the Sydney and Melbourne markets. We experienced a strong corporate market with good weekday performance. Offsetting this, we saw a good recovery in wholesale business, which is lower yielding but still above pre-COVID levels and the weekend leisure markets soften unless events were driving demand. There are a few key challenging markets, including Auckland, Wellington and Canberra. The New Zealand market, excluding a strong Queenstown market is particularly challenged. New Zealand inbound travelers lagging with the full recovery to pre-COVID levels now not expected until 2027, and there is a lack of events to drive visitation, particularly into Auckland. Our QT hotel in Canberra continues to be materially impacted by light rail construction work, blocking the entire front of our hotel. You can see from the chart that normal seasonal trends are evident, including the different occupancy in Q4. These trends are pretty consistent with pre-COVID trading patterns. We managed to hold room rates in the year and rates are still well above pre-COVID. Special events are a key driver of rate growth with customers willing to accept high rates. Looking ahead, we don't see any events that could match the impact of the Eras Tour, but we continue to see regular events such as the Australian Open and the Grand Prix in Melbourne, Vivid in Sydney and concert tours such as Coldplay later this year as important drivers of leisure demand. We've seen a softening in weekend rates as leisure demand cools whilst weekday rates are holding up reasonably well. Overall, rates are expected to soften as occupancy grows given a lack of comparative major events this year and different segments of the market returning, including inbound groups and crew business. However, whilst this lower-yielding business, it is still returning at rates higher than pre-COVID. As you know, our hotel strategy has evolved over the past few years to enable expansion. We've now got a hotel solution that meets the needs of the entire market from premium to budget experiences from leveraging one of our own brands or maintaining or creating an independent brand and leveraging our capabilities. Our own brands include QT Hotels, recognized as a leader in the premium boutique experiences, and we really look forward to the opening of QT Singapore under management agreement in September, and QT Parramatta is also expected to open in the 2026 calendar year. Rydges, we're pleased to have secured the management agreement for the Rydges Ringwood in Victoria this month. And we've also signed 2 new management agreements for future developments, including Rydges Resort Wailoaloa Beach in Fiji, which is at the planning phase. And Rydges Tauranga in New Zealand expected to open in financial year '27. Atura, our affordable design-led brand will welcome Atura Oran Park, which is located in Southwest Sydney and is expected to open later in 2026. And LyLo, our game-changing lifestyle budget accommodation experience with locations now in Auckland, Christchurch, Queenstown, Brisbane, we'll look to open Fremantle and Gold Coast in the coming years. Our plan for LyLo is to establish our credentials in Australia and New Zealand in order to look for expansion partnership opportunities offshore in the future. Managing independent brands enables owners to retain their own brand or we create a brand for them and they leverage our management expertise. We added 3 independent hotels in the year, including the Hotel TOTTO, Harbour Rocks in Sydney, the Inchcolm in Brisbane, and we recently also welcomed The Alex Hotel in Perth. We've grown the network to 82 hotels, and we're really confident that our brands can add value to owners in local and international markets. Many of you will be very familiar with our strategy. We have 3 strategic goals that guide every division of our group: one, grow revenue above market; 2, maximize our assets; and 3, continual business transformation. You can see from the half year results or the full year results that we've been able to grow revenue above market with smarter pricing, we've launched new experiences whilst listening and really improving on customer feedback. We continue to maximize our assets with consolidation of a premium cinema footprint as part of our fewer better cinema strategy. We're going to continue to pursue hotel expansion opportunities as a growth segment priority with the right combination of acquisitions investment or asset-light strategies. We'll continue to operate our owned hotel properties, delivering above market results and deploy smart capital to upgrade key hotels, which in combination underpins growth in our property portfolio value. We'll also continue to divest noncore assets when the market timing is right, and we can achieve the best outcome. And we're going to continue to implement business transformation initiatives that improve insights and efficiency and assist in offsetting cost increases whilst also delivering material improvements in our culture, community and environment initiatives. I'm really pleased to announce today that we've committed to carbon reduction goals for 2030. We're aiming for a 50% reduction in our Scope 1 and Scope 2 carbon emissions and a 25% reduction in our Scope 3 emissions by 2030 compared to our financial year '23 base year. We have a very detailed plan on how this will be achieved. But in summary, for Scope 2 emissions, we will transition to purchasing more renewable electricity for our cinemas and hotels, having been purchasing renewables for Thredbo for a number of years. For our Scope 3 emissions, our focus on working with our suppliers to understand their targets and over time drive more sustainable procurement decisions. I look forward to updating you on our progress towards these goals. Right now looking ahead to FY '25. As I've stated earlier, the group has had a slower start to the year and expect a weaker first quarter year-on-year due to fewer events driving hotel demand, a later start to the Thredbo winter season and the fact we're cycling a record performance in Entertainment prior year. However, we expect to experience further normalization within our industries throughout the year. In Entertainment, as I mentioned earlier, we expect the first quarter to be down on a record first quarter as we cycle Barbie and Oppenheimer. However, by any other standards, it has been a good start to the year. Whilst the lineup for financial year '25 remains somewhat impacted by the 2024 Hollywood strikes, there is a more consistent supply of films, and we have some titles in that lineup that believe -- that we believe could exceed expectations. Therefore, subject to actual film performance, we expect the full year market box office to be broadly in line or ahead of prior year. The agility of our Entertainment teams to innovate and pivot through the impact of COVID being getting a taste of film lineup recovery only to be stalled again by the Hollywood strikes has been second to none. We have outperformed many industry peers globally. We can now see a clear pathway for film lineup recovery with a strong list of blockbuster titles ahead in financial year '21. I can tell you, we cannot wait to have film supply consistency, so we can realize the benefits of all the improvements we've made. When the studios deliver good films, we'll deliver stronger results. In Hotels, our aim is to achieve another record year, and we are aware this is a challenge. This will be assisted by Rydges Melbourne despite subdued trading in some key markets like Canberra, Melbourne, Auckland and Wellington. We will closely observe and adapt to pressure on consumer spend when it relates to leisure travel and do all we can to cycle the impact of major events in the prior year. In Thredbo, we expect a winter result in line with prior year subject to conditions in September and, of course, June 2025. Summer performance will be subject, as always, to weather conditions. Our teams have done an incredible job transforming the way we do business to offset energy, wages and other inflation pressures and still invest in areas for growth, and we'll continue to do so. Thanks for listening, and I will take questions after the video. [Presentation]

All right. Thank you. We'll now take questions.

[Operator Instructions] Your first question comes from Nicholas McGarrigle from Barrenjoey.

Obviously, the cinema result was quite strong in terms of the controllables that you managed to control against a softer box office backdrop. I'm not sure if you can talk through some of the mechanisms that you put to work in order to manage what was the softer second half box office content?

There were many. But I think the biggest lever we had to pull was we had very variable operating hours. Based on the location and the community and whether we could find mid-tier films or other content that would appeal to that community, et cetera. But I think variable operating hours is one of the key levers that we pulled.

Okay. And then, I guess, you've [ guys provided in ] last half about the expectations for the second half box office. I think you've kind of alluded to expecting things to be maybe in line or up year-on-year into this financial year. I guess, the month -- the first month performance against Barbie and Oppenheimer has been pretty good. I guess, on our read of things, only down kind of 6%. I'm not sure if you can talk through kind of the expectations or what's helped to form that view for the next financial year?

Look, it's -- when -- you can see -- I showed a slide of what we ended up with last year because of the strikes, and then I showed a slide of what we think we'll get this year. And clearly, there are more titles in there. There are quite a lot of family titles in there still because coming out of strikes, they're obviously -- they're probably simpler films for studios to fix because you're not dealing with the timetables of as much talent. But look, there's a film like Mufasa at Christmas, and that could do Lion King numbers, which was -- that was close to $100 million or it could do a typical film, which is $15 million. It all depends on how good Mufasa is. So, we basically use our own insights, and we look at Gower Analytics, et cetera, to determine what box office levels are, and you'll see those bounce around. But there's some titles in there that could be pretty average or really good. So that's why we've gone in line or better than prior year. We'd need titles like that to really overperform.

Yes. Okay. And then on the Hotel business, a strong result there. Can you talk through the ROI for Rydges Melbourne? And how that has tracked for the year? And, I guess, is there kind of an additional full year annualization as it's been open and kind of running at full steam into next year?

Look, with Rydges Melbourne, it's performing ahead of our expectations, which is always good when you head into a major upgrade program. We think it actually rebounded faster than we had expected in that financial year. So the first half was rebuilding, the second half did pretty well, and I think that's partially because of the market-leading conference facilities that, that hotel has. So it's tracking ahead of where we thought it should be and it's kind of 2- to 3-year get back to business after being closed for 12 months.

Okay, great. We've kind of seen a bit of revenue -- sorry, ADR pressure across the market. I'm not sure if you can comment on how your portfolio is tracked into this new financial year on that front?

Well, look, we continue to perform ahead of market. I think that's a very important internal statistic that every single hotel GM has. And it's one of our key measures. The markets are bouncing around, you're right. I mean, if you look at financial year-to-date, the Sydney market RevPAR is back 8.8%, Melbourne's back about 3%. But we had the women's soccer tournament in the prior year. So you're lacking -- you're missing 1 major event, which is probably knocking those markets around a bit. But as we highlighted, Auckland RevPAR is back 27%, Wellington 31%. It's the New Zealand market that we think has got some challenges.

All right. Great. I'm not sure if you've given a view on CapEx for the group in '25 and '26 because obviously a fair bit of work underway. I'm not sure if Greg can give us a guide on what that might look like for the next year or 2?

Look, we think it will be around $120 million to $130 million for the next financial year.

In both years.

For the next financial year, it will be $120 million to $130 million. We can give you an update at the half because it's all around planning approvals and project time lines to give you any indication beyond that.

Okay. Great. And then, I guess, on Germany, not sure if you can give us kind of your view on the operating performance there. I guess, the second half tipped back into a loss, but was that predominantly due to the euro towards the end of the financial period? Or was it really just because of the stimulus rolling off that led to a second half loss?

It was actually strikes. The May was the worst Germany we've had on record outside of being closed for COVID because of the lack of films and the lack of films came in 2 ways. It was the Hollywood films and the local films. So it was just strike-related shocking admissions in that period.

Your next question comes from Ed Woodgate from Jarden.

Just a great result given the challenging environment. I was just wondering if I could ask you about the Rydges Hobart sales. What that looked like compared to book value? And then just also a comment on the Elanor hotels portfolio, just whether there's any interest in that.

I'm not sure I quite understand the second part of the question.

So there's some speculation regarding the Hotels portfolio, [ the Elanor, found to be ] in a bit trouble, I think.

No. Yes. So I'd say we haven't heard anything around the second part of the question, and we think we're in good shape. But the first part of this question with Hobart, yes, we sold it above book value.

Yes. Sold it above book value and the last independent valuation, which we got last year. So it sort of replicates what we've seen in prior years in relation to the sale of hotels.

Okay. Yes, I guess, any feedback you can give us about the Elanor hotel portfolio when you're getting information on that, that would be useful. But -- and then secondly, just in relation to the outlook for Thredbo. So I think you were saying that should be broadly in line with the prior year, subject to conditions in June 2025. Can you just explain what your -- what kind of conditions you're assuming to have a flat result? Is that similar conditions to this year? Is it an improvement?

It's some natural snowfall at the end of August to kind of aid September trading this year. And next year, it's opening more than Friday Flat on the opening weekend. So we're not after great conditions. We've been quite reasonable with our wishes.

Yes, sure. And then just as far as I think in the report versus the presentation was slightly different wording for the Hotels outlook. The presentation talked to the growth. I think the report was saying flat to growth. I mean, are you leaning more one way than the other as far as your expectations for the Hotels portfolio outlook?

No. I think what I've said is, our goal is to grow, but we realized that we are in a more challenging market to achieve that. But we definitely wouldn't -- flat would be a base. We're aiming for growth on prior year.

Sure. And then the domestic German box office, you mentioned that, that was a bit weaker. Did any of that get deferred from the second half of '24 into the first half of '25 due to the euro? And might you benefit from some catch up?

Yes, they will -- we are expecting there to be more local films in this financial year, which is partially catch-up. And obviously, it's the same catch-up as every other market from Hollywood content perspective.

Sure. Okay. And then maybe just 1 more for me. Just on the CapEx, $120 million to $130 million. Is that -- I imagine it's broad the Hotels related. But is there anything you can call out specifically regarding Thredbo there or any major CapEx plans?

No, there's not a whole lot of the -- there's not a whole lot in there for Thredbo. I mean, there's the snowmaking, and then as I said, we're doing prep work for the 6-seater chairlift replacement of Snowgums, which will take place over the next couple of years. So it's more prep work in there for Thredbo.

Your next question comes from John O'Shea from Ord Minnett.

Jane, can you hear me okay?

I can.

There's 2 from me. I guess, the first one relates a follow-on from the previous questions from Nick and Co on the CapEx. The $120 million to $130 million you mentioned, is that including or excluding the payment release liabilities? And the second question relates to your strategic thinking, Jane, is there any change in your strategic thinking? I understand your strategy was articulated in the previous slide. But in terms of the approach of the group, given the inherent value of the property assets there, obviously, I appreciate the fact that we're in a difficult climate at the moment. Has there been any change in strategic thinking in terms of trying to realize the value of that property portfolio inherent in the company versus its market capitalization at present?

So first question, that's excluding leases.

Okay.

Second question, we're continuing on the same path with our strategy, which we've alluded to, I think, if you read our press release, there's a highlight in there from the Chairman also commenting on the direction. And basically, we see our property portfolio is hotels predominantly. And we've been on a journey, as you're aware, and we continue to divest hotels and non-hotel assets that don't fit that strategy. And we think having a partial ownership of hotels was an asset-light strategy helps us to grow and gives us a point of difference. So our properties are hotel properties. What we are also working on is, broadly speaking, creating optionality. So we are aware that fewer better is the direction that we're taking with cinemas, and that means a smaller portfolio of prime locations that are premiumized generating very strong cash flow. And we're on that -- we've got another few years to implement that strategy. And as you've highlighted at this point in time, it's definitely not the time in the market to be considered making any decisions about changing the mix of earnings or types of divisions that we have. However, in a few years' time, we do want to be in a position where we have more options to consider the right mix of earnings. And so, there's quite a lot of work going on internally to make sure that the company is structured and prepared for that.

Yes. No, that's fantastic. I appreciate the transparency and the honesty there, Jane.

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

Excellent. Just on Thredbo, with skier days down 35% in June. I'm just wondering on whether reducing the price of the lift tickets in line with weaker snow conditions drives demand. I guess, some people may still be okay to ski or board on the artificial snow, but maybe they just don't want to pay over $200 for a day pass, unless the snow is good, especially with the consumer backdrop being quite challenging.

A really good point. But we have done -- we don't just sit at a fixed premium price every day of the week. If you go on to our website, we are looking at conditions and demand, and there are special deals to be had every single day of the week at Thredbo. And our day pass price sitting below our nearest competitor, if you turn left rather than turning right, certainly positions us well for that. But primarily, at the moment, it's been conditions. We see the lift when the natural snow comes and the demand is there, and it just took a while to get started this year to drive that business. We've also put more attention right across our group on families. So we think EVT can deliver quite strong family value proposition. So family skiing at certain times in the Thredbo season are getting really good deals, could stay and eat free at Rydges, and then we've got great family offers across cinemas. So, we're looking at what is happening in the market, and we're making sure that we're driving the right value to the right segments but also maintaining the premium, so we're not discounting for discounting sake.

Got it. And I appreciate the comment against the major competitor. Are there any thoughts in terms of how some of the smaller ski resorts are performing? And how you -- and just any comments on relative pricing there as well?

I think our day pass price, if you do some research, is pretty competitive. And it's something that we have maintained. It was our season pass pricing because we wanted to make sure that we are offering a premium experience, and we still are. I mean, the customer feedback at Thredbo, has improved substantially because everyone is getting more runs per day and no queues. And we're also, therefore, offering that experience on a day pass price, which is pretty competitive. And as you know, Thredbo outperforms all of the nearest resorts because of its apres-ski and the total Thredbo experience that people go for from the food and beverage, to the events, to the Flare Runs, to the family events, et cetera. So it's on a really good value spot for that day pass price.

Got it. All right. And then just lastly, 458 George Street. Can you just talk through what are the next milestones on this project and expected timing around it?

So 458 is the existing QT building. That's the one you're meaning?

Yes.

Yes. Okay. So right now, what we're doing is, actually, we're working through the planning process for -- so we got the approval to extend the podium. And so, we're in detail planning now about how to best leverage the retail footprint because it's such prime retail space, how to leverage the hotel extension. And so, detailed planning and then cost assessment, we will head into for that project.

Your next question comes from Brian Han from Morningstar.

Jane, I note the strong growth in the admission price and spend per head in cinema, which is kind of at odds with what we're seeing on discretionary spending in general. Do you think the lack of films led to lease of some pent-up spending on the few films that we're showing? Or do you think the growth in price and spend was all to do with your premiumization?

Look, again, really good question, and we challenge ourselves all the time with that. But we have -- so the premiumization has improved the experience. So people aren't paying a whole lot more for an old seat. They're paying more for a better experience. And so, if we've got any old seats in the circuit, we're still pricing those appropriately because we track Net Promoter Score. But I think a really good data point for us was when we had Barbie and Oppenheimer and we had -- we were really leveraging the growth in spend per head and AAP. We had a look at Commonwealth Bank data and it's -- because they track obviously discretionary spend. And our category was increasing as other categories were shrinking. And more insight around that is, people come to the cinemas kind of 4 times a year. It's a treat. And still in terms of relative cost to other entertainment experiences, even though our premiumization strategy is in place, it's still more affordable competitively. So, we've seen this in the past, and we're kind of seeing it now. Cinemas actually can perform well when discretionary spend is tight because they're trading out of something else and people still need to escape. So I think that Barbie, Oppenheimer period because that showed a time where we had great films, et cetera, demonstrated that. And also the family films, the last 2 family films, you might think, well, Despicable Me and Inside Out 2, they'll choose one, not the other. That was not the case. Both outperformed, both got gross and both of the measures that we've outlined. And it's just simply that. People are choosing cinema over other forms of entertainment when they've got less to spend.

Okay. Also, on Hotels, do you think it's leveraged special event have increased in recent years? Or am I reading too much into that?

No, I think it's always been there. I just think that when you look at the rate growth versus pre-COVID and the premiums that the whole market has moved and now enjoys, I just think getting growth on those record numbers is really supported by big events. And I just wanted to highlight that, Taylor Swift across all sectors was quite a positive impact on the economy in kind of February, March period in Sydney and Melbourne. And that drove records upon records, if it makes any sense.

Right. Who is Taylor Swift? I was only joking.

Your next question comes from Ed Woodgate from Jarden.

Maybe just to touch base again on the Elanor hotels portfolio, which is coming up for sale. Maybe you can't comment too much on that, but it sounds like a lot of the issues are because of the regions being a bit under pressure for hotels. Can you just comment as to whether there's anything in your portfolio that you're seeing as similar to that? Any comments in relation to that, please?

We're not -- I'm not quite sure what you're referencing to in terms of hotels portfolios coming up for sale. But we are really confident with the assets that we have. We have a few like Hobart, Rydges Hobart, which we recently sold. We have a few properties that we would look to sell Rotorua we've highlighted, but New Zealand market is not the right time to do that at this point in time. And that's simply because we believe that we can recycle that capital into other growth projects and the brands are strong enough and don't need those locations or we can offer asset-light management agreements in smaller locations. So -- but I don't think I can comment on -- we're certainly not seeing signs of trouble in our hotel portfolio.

So pretty consistent performance in the regions as in the [indiscernible ] days.

So the regions, as we've highlighted, have had the leisure boom come off, but the rates are still sitting above pre-COVID. So it's still not bad. It's still pretty good.

And then for the full year, the RevPAR was 3% year-on-year, reasonably strong compared to the first half. Can you just clarify whether Rydges Melbourne was in the PCP and whether it's dragging the prior year number down? Or that was just a strong second half performance?

No, it's just a strong second half performance. But remember, the Taylor Swift event was in the first quarter of the second half.

Yes. Got it. And then just -- that's helpful. And then just one final question on Germany. Is there any sort of indication you can give us regarding the trajectory in the financial year-to-date? Is it still trading at an EBITDA loss? Has it improved post the euros finishing after the first 2 weeks of July?

Look, it's trading in line with the film lineup. And the film -- and you've got the market stats on that. It's behind the record prior year, but it's better than a typical year. So cinemas trade in line with whatever films turn up. But Germany is having the same experience with the films being released as Australia or as New Zealand does.

Yes. And sorry, just one further question. Sorry if you've already touched on this. And maybe I misheard, but I thought you were saying there was -- you're looking at restructuring or implementing some cost savings in the Entertainment business. And I understand, as you said, you've been managing the variable cost structure in the group. But is there any material savings that you've identified or been able to achieve that should be carried forward from just the fixed cost base?

No. It's part of our continual transformation. We've done that in all divisions. I was just highlighting that we recently completed it again in Entertainment. And the way to think about that is, we're just streamlining Australia, New Zealand expertise a little more.

Your next question comes from Charles Kingston from K Capital.

Jane, just a quick question following up on that CapEx comment, the $120 million odd of guidance. Could you just provide some sort of distinguish between what you think is genuine maintenance CapEx and what is sort of gross CapEx, given -- I suppose if you look at your cash flow statement this year, you had roughly $220 million of operating cash flow inflow, unless you have -- your lease liabilities of $110 million, if we were then to deduct the CapEx from that going forward, the business isn't really generating much free cash flow. And I appreciate, I'm assuming a lot of the CapEx going forward will be growth, but it would just be helpful if you could provide some clarity as to what you think is genuine maintenance in hotels. It is a vague line between what's growth, what's maintenance if there's new rooms. Obviously, there is growth, et cetera. If there's a new chairlift in Thredbo that's growth. But I appreciate if you just provide some clarity because it will be helpful to understand sort of what the free cash flow the business is actually generating.

So it's about $30 million to $40 million would be kind of what we call our stay-in business operating CapEx and the rest would relate to growth.

And what goes in the growth bucket?

Anything that adds -- anything that we can drive -- anything we can yield and grow incremental earnings on. We've highlighted those projects in the development section as the key priorities.

Okay. Is there any clarity you could provide between segments as to where that CapEx will be spent?

No, we don't break it down. But I think we are pretty focused on spending money to get growth.

No, I appreciate that, but I suppose -- given the asset value that you put forward in terms of what the market or your market value estimates and obviously, you've been selling some of those hotels at above book value. That's one figure that I think it would help if you maybe spoke to free cash flow to understand how we can sort of justify those asset values based on more of an earnings multiple as opposed to EBITDA, especially because there's a lot that comes out below. But maybe I'll just leave that as a comment, but yes, any sort of reference that you could pull forward to free cash flow, I think, going forward would help. I suppose the market's confidence in those asset values and maybe close the gap to NTA, which does seem to be a bit chronic at this stage, but it seems like it's sitting in the right direction. But yes, I appreciate any reference to free cash flow going forward.

Okay. Noted.

Your next question comes from Nicholas McGarrigle from Barrenjoey.

Just a quick follow-up. Obviously, we've got the AGM coming up and you'll give us a 1Q update. I'm not sure if you could just give us a sense of what to expect it just so there's not a lot of surprise coming into that, but it would obviously seem that Thredbo is going to have a tough period, but maybe in line with last year, cinemas down modestly, but maybe some of the cost outs helped to offset that. And then maybe Hotels still looking good because of the Melbourne run rating at a more complete occupancy. I'm just not sure if you wanted to frame that 1Q update just so it doesn't come as a surprise at the AGM?

You are pretty close, Nick, to summarizing it. So, yes, I've said, we've got fewer events driving hotel demand. So pretty flattish once you've added the new things to offset the lack of events. You're cycling the record performance in Entertainment, but you can track what that is, by that period of time. I mean, July was off, August has done a little bit better. September, we have to wait and see what happens, having lost a film out of September. And yes, Thredbo, we will understand if we -- we will understand what September looks like, which actually will be the difference in the season if we get snow at the end of August. So, probably a little bit behind prior year or flat. So that's why we've said overall, we think there'll be a slower start and a weaker quarter 1 year-on-year. But looking ahead beyond that, we see some more positive trends.

Your next question comes from Ed Woodgate from Jarden.

So just noticed in the -- your announcement you were talking to continuing to evaluate the group structure. I just haven't seen that wording recently in previous statements. So I was just wondering, is there anything that you're thinking about or that's been proposed to you in relation to the structure of the group and how you might realize the best value for shareholders.

Well, I think those words have been used before, but I think we are alluding to the fact that we're not hung up on the same businesses and the same mix of earnings. So we're making sure internally that we're well structured to be able to create optionality when we actually get some normalization of Entertainment and our other businesses. And at that point in time, that enables us to go, is this the right mix of earnings? Or are we better off having a less diverse business? It's really just to create optionality, but no decisions have been made. I think we've highlighted pretty clearly, though, that a priority growth segment for us is Hotels. So we're very focused on that.

Thank you. There are no further questions at this time. I'll now hand back for any closing remarks.

Thanks, everybody, and thank you for your questions.