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Edited Transcript of EVT.AX earnings conference call or presentation 20-Feb-20 9:00pm GMT

Half Year 2020 Event Hospitality and Entertainment Ltd Earnings Presentation and Conference Call

Sydney Mar 10, 2020 (Thomson StreetEvents) -- Edited Transcript of Event Hospitality and Entertainment Ltd earnings conference call or presentation Thursday, February 20, 2020 at 9:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Jane M. Hastings

Event Hospitality & Entertainment Limited - CEO, MD & Director

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Conference Call Participants

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* Brian Han

Morningstar Inc., Research Division - Senior Equity Analyst

* Nicholas Caley

E.L. & C. Baillieu Limited, Research Division - Equity Research Analyst

* Nicholas McGarrigle

Ord Minnett Limited, Research Division - Head of Institutional Research & Small-Caps Industrial Analyst

* Philip Campbell

UBS Investment Bank, Research Division - Analyst

* Sam Teeger

Citigroup Inc, Research Division - Analyst

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Presentation

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Jane M. Hastings, Event Hospitality & Entertainment Limited - CEO, MD & Director [1]

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So welcome, everyone. For those of you here today, it looks like everyone's enjoying a good bacon and egg roll to start the day. So thanks for coming along. Are we all right on the phones? Getting the heads up. I'm going to -- fine. So all okay to go?

Okay, great. Okay, so let's get into the results and leave you lots of time for questions. So, we were really pleased with this first half result. We had -- normalized revenue was up to $524 million, up 1.9%. Normalized EBITDA, down 1.5% and normalized profit down 2.2% to $86 million. We've highlighted adjusted results because it gives you a truer picture of what's actually happening in the business.

So what we've adjusted for are external factors outside of our control. So in Entertainment, we've adjusted for the change of the AASB15 to change to vouchers and how you account for vouchers and the validity period that moved from 1 to 3 years. So to give you a bit of confidence around that, our voucher sales are increasing, but the way that we can account for them has changed. And also for a decrease in VPFs. So the VPFs are -- have gone from the Australian market, but there's still a little bit in the New Zealand market. So we've adjusted for that.

And hotels, for the partial closure of Rydges Queenstown. So we've informed everybody that due to seismic assessment that we had to close 96 rooms in Queenstown. So they are things that we have adjusted for. Once we've adjusted for those, the Entertainment Group revenue was up 6.1%, and profit up 7.4%, so it was a strong half for Entertainment. Hotels Group was up 4.4%.

And given the really challenging market that hotels are facing, and I'll talk a little bit more about that, we have outperformed the market in many of the hotels, so we're really proud of that result. And despite less favorable snow conditions, which was actually the first week of the school holidays, which is a peak trading period, we didn't have the right snow conditions. However, through good yield management, we managed to maintain revenue, and that was a good result.

Underlying costs, well managed as you can see, I'm going to lap so if you've got any questions on that lovely AASB16 lease adjustment, which has been a lot of work over the period, please feel free to ask throughout the presentation, but the impact on profit was $700,000. Normalized profit then up -- down 2.2%, but up 3.3% on an adjusted basis.

And just relating to Germany, so you see the $2.4 million to $34 million. It's a discontinued operation, so therefore, it does not include depreciation. And the amortization as a result of the AASB16 lease change has impacted that result. But really, the underlying is $12 million. So you can see what's happened in that business with the rebound in that market.

So Entertainment group, as we said, now 94 cinemas across the circuit and 835 screens. Admissions up, we love admissions up. We love admissions up where we get average admit price up at the same time, and both of those grew across both countries. And normalized profit up 7.4%.

Our Entertainment strategy, and again, I'll show you a little bit more around that, to invest in the best and make sure that we've got cinema of the future concepts, really focused about premium and how we can drive more spend out of customers across those areas, is proving to generate great results. And I'll share some of those with you.

And also, as we've said, we're going to divest underperforming assets, so we can really focus our group on the best assets. Another thing that we've also done there is really leveraging data around our merchandising areas. I've spoken about that before, and I'll also share some of those results.

So Entertainment Australia. Great. It was a record half Australian market box office, and we traded relatively in line with that. We closed 1 cinema in this period, Mackay City, and overall now, we have 1 less cinema and 3 less screens. And we had strong share growth from the top 5 films. And the top 5 films made up 34.6% of the box office in the half, which was up 43% in the prior. So we were more dependent on the top 5 films, and we grew share across those top 5 films.

And month by month, July was great. We had Spider-Man and Lion King, which performed really well. August, Lion King flowed through, then Hobbs & Shaw and Once Upon a Time came in. September was down on prior year, just marginally.

October, again marginally down, but November was the tough market with nationwide box office down 29%. We had the Joker, which was playing through that time and performed well, but the comparative period had Bohemian Rhapsody and A Star is Born, which the current lineup just didn't make what the prior year had done.

In December, good year, growth on prior year with Star Wars, Frozen 2 and Jumanji. However, we expected more out of the Star Wars title. Great to get growth in December. We'll bank it, still done $47 million, still tracking towards $50 million or $47 million at the moment. But we did anticipate that that film would hit the mid-60s like its predecessor, so that was slightly off.

We had good AAP growth and admit growth. As I said, we want those 2 things growing together as a result of the smarter pricing we're doing, a lot more variable and dynamic pricing across the circuit and a stronger premium contribution. So premium seats, it's our Daybeds, our recliners, our Gold Class, our Vmax, the contribution was up almost 3 percentage points.

So people are choosing more premium experiences, and that's despite a larger mix of family films. So in the top 5, we had a high dependency on family films, and they typically don't really choose the premium experience. But we are actually seeing people migrate to a better experience. We now have 25% of our screens at premium, and that's up from 21%. So we're progressing as we go through to make sure that we get more premium.

We are absolutely proud of our spend per head. So the film will be what the film will be. You turn up, but we really need to make sure we sell something to every customer who walks through the door. So our spend per head, being up 6.7% was a company record. We have 5 of 6 months being company records, and that led to our merchandising profit per customer, it's what we bank per customer, up 5%. So really pleasing results there.

Online sales continue to grow. 47% of our customers are now booking online. So almost 50% of our customer base are booking online, and that's also really important because our Cinebuzz base is growing. So 68% of all of our transactions are Cinebuzz customers. And now we're getting close to 50% online. That as a business gives us a lot of power to connect directly with our customers to make sure that we can get them into the cinemas, upgrade them to new experiences and sell them more things. So data to us is gold in that equation.

In terms of new concepts, we introduced 2 EVENT Junior cinemas, and I'll show you those, 3 4DX screens, and 4DX is the motion cinema; 3 sites with 3-seat concepts, so the new Vmax concepts. We rolled out the Daybeds across 15 sites. And just a reminder, the Daybeds are going at the front of cinemas that have the right level of -- the right dimensions and space at the front. So they were areas that we never used to make any money out of them. And people are paying $50 on -- 2 people on a Daybed. So that's been a great success.

Two new Gold Class screens at Tuggerah and the Birch, Carroll & Coyle brand. So this is our value brand. So we had our premium strategy, which is the Event brand. And our value brand in Birch, Carroll & Coyle. The team have rebranded that and you'll start to see that rolling out if you live in Queensland, mostly. Because that's where most of the BCC cinemas are.

But we also came up with a premium value concept -- used premium and value in the same sentence. So it's a Gold Class without the food and beverage, in a BC cinema. And so what we've done is taken a really great seat recliner, and there's a $5 additional charge on that seat. And that is performing really well, because there is that segment of the market that will still pay a little bit more. It's not the Gold Class seat. It's a different version, but it's trying to make -- so we're testing now, how we can get a little bit of premium out of the value market also.

At New Zealand, wow. So New Zealand had a really great first half. First time our New Zealand nationwide box office tipped over the $100 million mark at the half. The previous record was in 2018, $95 million. New Zealand box office was up 4.6%, and Event was up 16.9%.

The top 5 films performed a little differently between Australia and New Zealand. So New Zealand market does really well with family product and action product. So the Lion King performed a little bit on the New Zealand market, as did Spider-Man and Frozen, which were 3 of the top 5 films. But a film like the Joker underperformed in the New Zealand market and performed better there in the Australian market. The point here is, there are different performances for the same film, even though we all think we have the same customer.

New Zealand also had the benefit of a really good release date of Jojo Rabbit, the Taika Waititi film, which released in November. And I've just highlighted that it was a really weak November in the Australian market. Disney released that film in the New Zealand market in November, which gave it a great window to perform well. Jojo Rabbit in Australia was launched in the January window, which was quite a cluttered window, so it hasn't performed as well.

AAP and admissions growth, as I said, the magic formula happening in the New Zealand market. Similar strategies with our merchandising, and they had 6 months of record spend. The only thing that we've seen that really wasn't a revenue stream that was a little off through this period was our screen advertising revenue. And I think that's probably subject to the advertising market as a whole, but in Australia and New Zealand, that was down a little.

So Germany, as I said, it's a discontinued operation just in terms of the market. They had a good rebound effect. Europe is talking about a good rebound and we've got to remember that the prior year had the impact of the FIFA World Cup and record hot temperatures across Europe. And it really does go to show, weather has an impact. We definitely see that in the Australia and New Zealand markets.

When it rains, we can get a great uplift on the same lineup. And in Europe, when the sun came out after the cold weather, people weren't coming into cinemas. So those record hot temperatures really had an impact. The Hollywood lineup also appealed a little bit more and they had a few good German films, but there was a big weather impact, and that just goes to prove that point.

So I've already mentioned the adjustments so that you can see what the underlying number in Germany was. In terms of the FCO process, we're still on it. That's, I think, the summary. It's been 16 months, a long process. It's the way things go when you're selling a business in Germany. So we are expecting a decision in early March with some conditions. Once we get that, then we'll act on those and we'll act on that decision.

In terms of the total sale consideration. So we had -- we mentioned that we had a base price of EUR 130 million, and then there was a variable component based on admissions. We can confirm that that earnout is EUR 56.9 million. So it was quite nice that the market rebounded for us through that period.

So just taking a little look at some of the concepts. So Tauranga Crossing. So New Zealand opened a new cinema. I mentioned they had close to 4 points market share growth. Half of the market share growth came from strategies where they managed to grow their Auckland market share. So same like-for-like business is up. The other half of the market share, 1 portion of it came from the opening of a new site and the other came from the closing of a site in Wellington. We have fewer screens. We got the benefit of that.

So Tauranga Crossing is performing exceptionally well. We've had an AAP uplift of 14%, great occupancy uplift and spend uplift of 17% with new concepts, relative to other cinemas. And in this cinema here, we've actually got a selection of premium in every cinema so that we can test that.

I've got to show you, Whangarei, a regional cinema in New Zealand, because this is what we're going through and doing. This is the before. This is a good photo. It's a kind photo, took the photo from behind the seat rather than in front. And we're just going through, and this is the after. So it is -- you can see that people will come back to cinemas when the experience is right, and that's what's happening.

4DX is performing really well. That's -- we've got that at George Street. It's now gone into Parramatta, Pacific Fair and Chermside. I mean, of course, the AAP is well up because of the pricing structure, up over 120%. But its occupancy, which is 32% higher than 30% -- actually 30% to 40% higher than a traditional cinema, so performing well.

EVENT Junior went into Macquarie and Shellharbour. This concept is really about us cracking the family market. The young children, when they're walking, mums walking around or dads or caregivers are walking around malls, nothing to do. How can we actually leverage our premises to bring them in, whether they want to watch a movie or not -- don't want to watch a movie. So we built the playgrounds at the front of the cinemas, and there's an option for $5, 0.5-hour play. You can just come in and play for 0.5 hour and do the $5, or of course, you can do play and movie.

In terms of the cinema itself, the back of the cinema, black, great seats. So in the evenings, we can -- basically, you don't -- you're not distracted by the playground, and we can still leverage that cinema space. But during the day, caregiver can have a great seat at the back. We've got kid seats at the front. We've got a playground area.

I don't know how many people have kids in here. But when you've got young kids, telling them to sit down and watch a movie is a nightmare, and parents are loving it because the lights are up a little bit. They can run around and no one's annoyed. People know what that session is about.

So we're really pleased with this concept. The AAP is up 30% to 40% in the site spend. We also upgraded 5 of the screens here with the new -- with our new concepts. And we also upgraded the candy area. That had been one site where we had struggled a little bit, really competitive food and beverage options around the outside. We took all our data and heat mapping, which we've been applying to the new sites. We tracked it. We remodeled with minimal spend the Macquarie flow, and our spend, almost overnight, went up 30%. So these changes that we're making are really having a good impact.

And Tuggerah got Gold Class and the market are loving it, which is great. We also did an upgrade of the whole site. And again, as soon as you give them something nice to come to, the market says, yes, I will come. And they're willing to pay a premium. And BCC recline, this is what I was trying to describe. The picture is so much better than my description. So you can see it's a recliner seat, a really lovely cinema and affordable, but it's our premium value offer.

So moving into -- actually developments. I'll just give you an insight into where we're going next and what we're doing. So new cinemas, starting with new cinemas, new market, which is in Auckland opens next week and it's looking fantastic. We've got 2 boutique screens in there, similar to the boutique that we launched at George Street, and that really is our Gold Class product for that site. And of course, we've got the 3-seat VMaxes and the other seats going into cinemas. And we've taken all our insights from food and beverage and pop demand. So we're looking forward to seeing how that performs.

Queensgate, which is actually a site that we did have, but after the Wellington earthquake, it was no longer a viable site. So we'll be rebuilding that for 2021. Edmondson Square opens middle of this year, which is Western Sydney. And our joint venture with VR -- with Village, we have got Clayton opening also in the middle of the year.

The blue highlights, the sites that we're focused on for screen upgrades. So screen upgrades is the key point here. It may not mean the whole summer is getting upgrade because we're really targeting our capital, and we're working out the balance of premium and where we can put our money to get the best return. However, in saying that, Chermside's a total site upgrade because it's the #1 mall in Brisbane. And I don't know if you've been there, but what Scentre Group has done to the ALP Precinct is phenomenal. And so we're upgrading the cinema to reflect that.

How and when? These are happening over the next 2 years. So we're phasing them out because naturally, what we don't want to do is take the biggest, largest screen out of action when we've got a really good blockbuster film. So we time our upgrades of screens around the lineup.

So Hotels and Resorts. So as I said, strong result in a more competitive market. We are absolutely delighted with the Hotels performance. Adjusted revenue flat and profit up 4%. We outperform the market in many of our hotels. So all QT hotels with the exception of Canberra, outperform their markets. All Atura hotels, with the exception of Albury, outperform their markets. And all of our Rydges upgraded properties outperform their markets.

So what we're doing is right. We know how to sell. We know how to position our product. We know how to operate and we know how to work in tougher conditions. So we're going to keep on doing that.

The Rydges aged sites. So when I'm talking about aged sites, I'm talking about Capital Hill, and to let you know, we've just completed -- we are completing a refurb of that for middle of the year now. So that will no longer be a problem. Actually great timing because as we started this, the hail came and destroyed the roof, and we had to close the hotel for 3 months, so.

Rydges Geelong is 1 of those aged sites, and we've completed the ground floor upgrade, and we're moving through rooms. So that will be done in the next kind of 8 months, 8 to 10 months. I'm looking at Norman. He's gulping, going, oh, I'm not sure if that's my timing.

Rydges, North Sydney. Plans are underway for the upgrade, and that's in the next financial year, and I'll update you more on that at the full year. And Rydges Melbourne rooms upgrade. So we've completed the ground floor area, and we'll do the rest. So that's what we're talking about when we're talking about our aged assets, not so many that we need to deal with.

So I just wanted to highlight the markets that we are operating in, although I'm sure you're probably pretty well versed with this. Australian RevPAR was down 1.6% for this period and New Zealand RevPAR was down 0.7%. Just to give you a feel, Melbourne RevPAR was down 1.5%. Supply growth was up 5.2% in this period. Sydney was down 25.7% and Central Sydney and supply growth was up 3%.

Canberra, RevPAR down 3.7%; supply growth, up almost 3%. Gold Coast, Cairns, Wellington, Queenstown, Rotorua, all of those markets had negative RevPAR growth and supply growth. The positive growth markets during this period were Perth, so great for that big stadium and attracting events and also the flights there opening up into Perth, which had RevPAR up 1.7%, despite supply growth of 8.5%. So a good result for Perth.

Adelaide, RevPAR was up 5.5%, supply growth of 1.4% in Hobart. So 3 of the markets actually had -- I mean, total market on our performance, total market actually had growth. All of the others went backwards and that's why we're so pleased with getting growth in this result.

Our occupancy and RevPAR growth across -- grew across the group and we had marginal impact in -- average room rate, I was about to say r -- that's average room rate. QT Perth contributed a modest but positive contribution in this half, which we are pleased with. Atura Adelaide airport performed really well. We improved our TripAdvisor ranking also by 1 place, focused on making sure that experience gets better and better. We improved our F&B and our GRP margins improved. So it was a pretty, pretty good half.

We also announced that we've acquired 50% of JUCY Snooze, and I'll talk a little bit more about what that product does. Why did we acquire it? Really simply, the budget market in Australia is worth about $3 billion, and we've had none of it. So we're entering another growth market for us.

In terms of Rydges, I've really highlighted the newer hotels. What we've done, and I've highlighted actually most of the upgrades, occupancy up 2.9%. Average room rate off slightly, I've explained why and RevPAR up 2.1%. So really, what we're doing in Rydges is working, because this is the part of the market that is most impacted and it's really Western Sydney that has actually had quite a hard and tough time. But this is the really competitive part of the market. So what the teams are doing underneath to try and strive and get conference and events revenue growth, et cetera, is making a difference.

We're also pleased to be, as a managed hotel, Rydges Gold Coast opens in the middle of the year. We also welcomed Powerhouse Tamworth and Armidale to the group and a license agreement. So I've spoken to you before about how our strategy is to really leverage our capability. We've got management agreements, license agreements. We can have marketing and sales agreements. And so we had 2 come under that banner. So it was great for them to join.

And a great one was to secure Rydges Sydney Harbour, formerly the Holiday Inn, down at The Rocks. And that opened in mid-January, a great hotel for us and a part of the Sydney market that we didn't have any representation in.

So QT, up in occupancy. Room rate and RevPAR, the QT brand really fought hard and held hard in this market. QT Canberra, that needs an upgrade, pure and simple. It probably is the hotel with the ground floor -- the food and beverage experience is excellent. The conferencing facilities are excellent. The rooms need an upgrade. We know it. Market knows it, and that's what we're going to move through and do.

We've actually got an opportunity on the top floor to add 16 additional suites, which is where we're going to start, which was actually a lounge, which was, again, maximizing assets. Underutilized space, that we're going to start in the next 12 months to put those suites in.

Also with QT, outstanding loved by locals is a really important part of our QT strategy, and it's not waffle. It means that our food and beverage outlets, must be the place that locals want to go, because if locals want to go there, guests will go there. And that's how you really make a difference.

And Santini in Perth, won best restaurant in Western Australia during this period. Not best hotel restaurant, not best fine dining restaurant, not best sub, sub, sub restaurant, best restaurant in Western Australia, which is an outstanding result for a hotel restaurant. And so we're continuing to perform well and make sure that margins improve across our F&B.

Atura, small group, but pleasing results. A really strong result from Adelaide Airport. That, the connectivity to the airport is working really well, and we're getting conference business. It's flying this hotel.

We had a tougher time out in the -- at a couple of the hotels, particularly Blacktown, because Western Sydney was really suffering from business as a result of the pressure on the Central Sydney market. But overall, pretty good. The good news here is that the Thorndon Hotel, which was a managed hotel in New Zealand, is being converted to an Atura hotel, so it will be our first yellow dot on the New Zealand map so that we can start to get some brand recognition around Atura in that market.

This is really exciting. Rydges Queenstown. So 96 rooms closed, the remaining 60-odd rooms, 67 rooms-ish. I got it? Good. 67 rooms, we have done an upgrade of. We've refurbished them. Why? Because openly, Rydges Queenstown Hotel was ranked as the worst hotel experience in Queenstown, because it was such an old product. We've gone through during this half. We've upgraded the rooms, and we're seeing the improvement. Only 67 rooms, but really important, what we have there is of the standard that we can really compete in that market. So we're pleased with that.

We've gone through QT Sydney and completed the soft upgrade. The suites, we're really pleased with our suite product. It was kind of asking $500 to $600 a night, and now we're getting between $1,000 and $1,500 a night. So we've put a lot of effort going through the property, maximizing assets to do that upgrade. Next area will be [Galings].

Rydges Geelong, this is what it kind of looks like. You need a before photo, because it did not look like that (inaudible) -- did not look like that. But again, outdoor conferencing, how can we really leverage these spaces? What is the conference market after? What do we need to do? So we finished the ground floor refurbishment, so it's looking fantastic, and then we'll move through to rooms.

QT Gold Coast. QT Gold Coast, great property. Fantastic entry experience, had old pool, old conferencing and the rooms needed a refresh. So the QT and QT Canberra, were kind of products which were half done in the QT mix, and really, we're just making sure that we're bringing them up to the QT standard.

This is exactly what the pool looks like. It's flying. Again, we've expanded the space, great for conferencing. We've taken the area, which is towards the back to create an outdoor conferencing space so that we can deliver that. The suites have been finished, and now we're going to move through and do rooms and conferencing.

QT Auckland, which is a managed hotel. First managed hotel that will open under the QT brand, probably July, August of this year. It's looking fantastic. It will be a real landmark property for us for QT. QT actually has a strong brand recognition in the New Zealand market because of people coming to Sydney and Melbourne and because the Wellington property is so strong. So this was a missing link. So we're really excited to launch this, same concept.

We've gone out and secured the best in F&B, so Sean Connolly, who is a well-known chef in Australia and the New Zealand market. He has, formerly with the SkyCity Group with all of their fine dining precincts. He's joining us to take over the F&B precinct downstairs. And of course, we'll have a rooftop bar. A New Zealand version, a few more windows, because the climate might not actually let us open up that rooftop too much in one day.

So JUCY Snooze, really excited about this. What is JUCY Snooze? I don't know how familiar you are with it, but basically, it's an innovative capsule-style accommodation, focused on the budget sector, targeting millennials, 18 to 35s. Although the market, as we're learning, is extending beyond that. It's a convenient option for customers.

So the market extends to people out in town for the night, don't want to take a taxi home, convenient place to stay. Families, because it's like a bunk room, an affordable place to stay. Family of 4, family of 5 can all be together in a bunk room. Retirees, just want to rest their head. So actually, whilst we think it is a core millennial product, and that's how we're going to market it, it does have other markets that are interested in staying here.

Each pod, they're great. They've got king single beds, so a great room. They've got a luggage storage underneath. You've got your own power supply, your own temperature control, a privacy screen, which blocks out the noise. So you're in, you're really contained, and WiFi connection. So in that pod, the research and innovation gone around what these travelers want has been phenomenal.

And in the budget market, it's tired across Australia and New Zealand. That privacy is a big issue in that market across Australia and New Zealand, if you look at backpacker market. So it's a great concept. There are 2 properties currently. One is in Christchurch, which opened in 2016, 144 pods and 61 en suite rooms. So there's a mix. And all this though is founded around a shared living space. So there's a shared kitchen, a big lounge area, shared bathrooms for the pods, et cetera, shared working spaces, taking on the shared working environment trend.

In Queenstown, which has 196 pods and 36 en suites also has a great rooftop pizza bar and a great view. And the pricing makes the market and what's happened with the Queenstown property, is it's loved by locals. Why? Because it's an affordable place to go with a great view, and it's really relaxed. So a great -- great concept.

We are opening Auckland and Cook Street, which is top center part of Auckland in late 2020, with 190 pods, 37 double rooms, 70 en suite rooms, again, shared spaces. And we're going to take the Queenstown Miss Lucy's concept into there.

So why have we invested? I've said it's a segment we're not in. It also really covers our portfolio. We've got upper scale with QT. We've got mid-scale with Rydges and Atura, and now we're in the budget area with JUCY. The supply is barely growing, in this segment of the market, so a lot of the supply growth has been focused on the upper scale end. So that's another strength. It's a disruptor and innovator.

We're partnering with great people from a technology sense, and from an innovation and product sense, who are ahead of their game in this market. It's got compact real estate requirements. So -- and it's an affordable development, which are very good concepts. So this could go into an empty retail space in the center of a city. It could actually be a student accommodation solution. It could be a ski lodge accommodation solution. It can be molded to different size and scale.

So what we're excited about, what are we going to do with it? That's the question. So we are focused on opening Auckland, because that's the third model and the next level of innovation in the concept. Make sure those metrics are right, and then we're looking to launch this in Australia following the markets where the budget crowd go to.

I'm just going to play you a video now. So those on the phone, if you just click the video tab -- video button, video tab.

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Jane M. Hastings, Event Hospitality & Entertainment Limited - CEO, MD & Director [2]

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(technical difficulty) growth area for our company, and we'll keep you informed as we go on that. In terms of our owned hotel developments, just keeping you in the loop on what's coming up. So I've mentioned, actually starting with our major developments, 525 George Street and 458-472 George Street, so we had quite a long overview at the last meeting around what that included. Stage 1 DA is a run. We're feeling very confident that that will get approval of stage 1 DAs in this half, and then we go through a design competition. So we'll probably have more to update you on with those properties at the full year.

Rydges Queenstown redevelopment. So of the rooms that we can no longer use, we're going to demolish those rooms, and then we're going to expand that property. It is prime real estate, right? This is the location in Queenstown. So we're being very careful with that planning, but we're coming out with a model which will give us more room rate, more occupancy, really raise that brand and really leverage the land value that we have in Queenstown.

Our Rydges Capital Hill, I've already talked about. Rydges Melbourne guest room upgrade I've talked about. Geelong, I've talked about and North Sydney, which will be a complete refurbishment. We're also going to be adding in conference facilities in North Sydney as well, because there's a clear gap in that market for those facilities.

Heading towards Thredbo. So yes, a good result despite the mixed conditions, really. Weaker snow conditions this season. Can't control the snow. We can make it though, but we can't -- we need those conditions to help us make it. July -- first week of July, school holidays really was the impact, but we were really pleased that through yield management and the new strategies we're applying, if you are a customer of Thredbo, you can go onto the website and see what we're doing every day in terms of managing discounting and demand with the types of products that you can buy. And so that really helped us to maintain our revenue.

Very pleased with mountain biking revenue. We've opened a new -- just before Christmas and before the impact of the bushfires, we opened a brand-new mountain biking trail that, for the season-to-date to the end of the year, was up 36%, and that's why you're seeing strong growth in summer revenues of 9.5%.

Again, Thredbo is holding on to being recognized as the best ski resort, really important, and the team are doing a great job. Key initiatives, so the gondola, pleased to say it's on track for the season; it will open for this winter season. Also have Dream Run. So I don't -- how many of you go to Thredbo? Great.

Dream Run was called Nightmare Run, so it needed improvement. Basically, it was narrow, and it didn't have snowmaking facilities on that run. It's now been widened. It's a beautiful run and it's got snowmaking conditions. So that really creates a better flow across the mountain, leveraging our gondola investment. And we've also started our car park extensions for the season. So underway with our Thredbo development plan. And we think we're going to have -- we're going to have a good one there. It's what we want. We need those weather conditions to kick in for us.

In terms of property, I've touched on the 2 major developments. Really, our rental income was consistent with prior year. We divested our Carlton Investments, our holding of Carlton Investments throughout the year. As we've been looking at all of our assets, we've divested some hotels which don't make sense. Carlton didn't make sense, et cetera, because we can put that money into better returns in the company.

There was a marginal adjustment on our fair value of our owned properties. We sold Rydges Townsville in December. And Norm on our hotels team then signed it up as a license agreement. So Rydges won't be leaving the group. It's just that we don't own the Rydges Hotel. And the Mackay City cinema closed, as I've said.

You can ask questions, I think, at the end. Don't we do that? If anyone's got questions on how we've managed the AASB, least, I think you've gone to every presentation probably hearing all about this, but please feel free to ask questions at the end.

So moving forward to our outlook. I'm going to start with entertainment. So the film lineup for H2 looks good. But we -- we're on a very strong comparative period. And when we say a very strong comparative period, I'll give you some insight.

So in March, we have Peter Rabbit and A Quiet Place, but it's up against Captain Marvel, which was a strong film, and the LEGO Movie. April -- so we think March is off in terms of that lineup, but who knows? There might be lots of people after all of those environmental impacts who think it's time to head to the movies.

April, we think will be off, because we've got -- sorry, what am I talking about? April is going to be strong, because we've got the new Bond film and that trailer launched again this week with a really great appeal. We've got Trolls, which is a great franchise, and Mulan from Disney versus Shazam!, Dumbo and Us. So we think that April is looking pretty strong.

May, we've got Black Widow, which is a Marvel film, and Scooby, but it's up against Avengers. And Avengers is one of the best-performing films of all time, took $84 million at the box office. So if Black Widow is great and Scooby's great, we'll see how much of that we can make, but we see a good flow-through from April with that strong lineup.

June on paper looks stronger to us, Fast and Furious 9, Wonder Woman 1984, The Minions versus Toy Story, Aladdin, Rocketman, and The Secret Life of Pets. But as you know, in the entertainment game, the films, we don't make the films. We play the film. So the films will be what the films will be, and that will always fluctuate, but that just gives you a guide for we're looking at the second half. I should say Top Gun, which we're all very excited about, but no one wants to say. Top Gun kicks in the last few weeks of June, but that will really give a good impact until July.

So overall, we think the lineup will be in line with -- may be in line with prior year, could be slightly off, but it's really too soon to tell. But that gives you a flavor of what the lineup looks like.

In terms of the impact of coronavirus on the cinema business, there is one. It's marginal. It's the release of Chinese blockbusters, which have stopped. So in the scheme of our business, that was kind of around circa $5 million box office. So marginal in the scheme of box office dollars.

In terms of hotels, I think you've been hearing this everywhere. It is impossible to provide really clear guidance on the impact of coronavirus, because there are so many factors, what the airlines are going to do. What the government's going to do with the ban. So we chose to try and give you some insight to what March looks like, because it's right in front of us.

I do actually want to give you a little bit of insight, though, on what's actually happening in the market today. And I've got some hot off the press numbers to give you a sense. So 26th of January to the 17th of February period, which is really when the coronavirus impact kicked in, so the Cairns market RevPAR fell 21%. Canberra's down 7%. We've got Darwin down 10%, almost 11%; Gold Coast 7.5%; Hobart, down 16%. This is market, not us, by the way. I should reinforce that. This is Australian market. We have Rotorua off almost 16%. Sydney's off almost 18%. Sydney West off 9%.

So why is that? There are 2 impacts. We've got the direct impact, which is the impact of that segment of the market, not staying in our hotels. We can all assess that. We all know what that looks like, and we can look after it and we can understand that and we can have strategies to replace that, which is what our mitigation strategies underway are doing, trying to do. But there's the indirect impact.

The indirect impact is what happens to room rates when people lose that amount of business. So room rates across the entire market have adjusted as people are fighting to really recover that loss of business. And if you take Central Sydney as an example, so rates drop in Central Sydney, even harder for the Western Sydney area to recover, because obviously, more affordable to be in Sydney. How much those rates will move, your guess is as good as mine. It is changing, on if not a daily, a weekly basis at this point in time.

And we do see the benefit of events. When you've got a great event, so March has held -- Melbourne's held up pretty well through this period because it's had the benefit of the tennis. So events can also have a positive impact through this time.

And I think it's -- to put the scale around it. This -- we roughly had about 164 inbound flights from China into the Australian market. It's now down to 20. When that goes to 25, 30, will it hit 50? There are a lot of assumptions out there, but now that's outside of our control.

In terms of the direct impact of that market, at some of our hotels, this business makes up for less than 5%. At some hotels, it can be up to 45%. It all depends on the location of the hotel. QTs are pretty resilient through this.

So March trading, as we've highlighted, indicates circa $2 million to $3 million earnings impact in that month. Whether April will be better or worse? We can't say. As the stats come out, we'll all be adjusting and refocusing the business. The one thing I'm exceptionally confident on is that we're really used to fighting in tough markets. And I think our first half results and the results prior demonstrate that. Our teams know how to fight for share in whatever market comes up, and they're going to continue to drive those strategies and do so.

Thredbo. So Thredbo was impacted by bushfires. We were exceptionally lucky. There was a 48-hour period where Thredbo may no longer have been Thredbo. So we evacuated -- clearly evacuated the resort, and that's really impacted the peak summer trading period. So an impact on earnings, we've estimated around $1 million to $1.5 million.

We've seen some pleasing immediate results now. So we had our first non-weather-impacted Saturday last week, and we were seeing double-digit growth in our revenue on prior year. So people were coming back. And the mountain biking market have been pretty resilient. They came back pretty fast. It's just about getting the rest of the market back down to Thredbo. Not having the roads open to Thredbo has also been a little bit of an impact while we were open. So we think that we're on the out of that bushfire effect, and Thredbo will hit its strides from this point forward.

Mitigation strategies. I think that's all we're talking about at the moment. What, when how, why. Is it working, alter it, adjust it, change it, make it happen. Fight harder, go after more, what else can we do? So every single team, I'm confident in our sales and marketing team, as I've said, that they have adjusted their plans to go after new segments of the market to help make sure that we get the best share of whatever market that we're going to be operating in.

We also have initiated a cost savings program, as everyone else would and should and could. So that will also help to offset what we've seen through this period. Actually through the last couple of years, the rising cost of electricity and insurance, which is largely talked about in the market, is why that we've been really good at maintaining our costs through continual restructuring and automation processes driving through. But now we're at the stage where we're kicking into a cost-saving program also as part of our mitigation plan.

So going forward, our 3 priority goals aren't changing because they're working. We've got our top line revenue growth, better than market. Every single one of our operators knows what that means, what that looks like, how to go after it. That's through smarter pricing, continual product innovation.

You can't have the same product at the same price next year and expect to grow. Everything needs constant renewal. We've made excellent progress in strengthening our sales tools, which we didn't have in the company prior and our capabilities, and the results are showing. And we're looking at monetizing our data, leveraging our data more smartly across the group and also as an advertising income stream.

Number 2 is maximizing asset performance. I've gone on about this, and I think I have on about it all day every day, reconfiguring spaces, new stores and management agreements, upgrading priority assets. So when the market rebounds, we are looking strong.

Entering new segments of the market, that's JUCY Snooze. Business transformation is about reducing costs and improving margins. Our source-to-pay project, which I discussed when we last met, is well underway, will take us 3 years. And it's end-to-end from what we buy, how much we buy to how we pay and how we negotiate across all businesses and reconfiguring that system. And we see benefits, a lot of benefits in that.

Automation continues. Our kiosk rollout, how do we better utilize labor. We roll out kiosks at one site, and we reduced labor by 250 hours. So we're looking at everything. How do we place things? Is that working? How can we become more efficient?

And really, a clear focus on our people program. So I've discussed 18 months or 2 years ago about launching our vision and values, that's gone through. We focus on things called green leaders. They know what a green leader is. They know what that means from a profit sense, a leadership of team sense, communication sense in delivering against our 3 values.

We're more agile than we've been, which makes us all feel good about responding to the headwinds that we face. But I feel good that when the market rebounds, we're going to be in a very strong place. Questions?

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Questions and Answers

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Unidentified Analyst [1]

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Just one on the property portfolio. Great results. Just a question on the property portfolio. So fair value was a touch over $2 billion at 30 June last year. Do you have a sense on whether there's been uplift in the valuation over the last 7 months?

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Jane M. Hastings, Event Hospitality & Entertainment Limited - CEO, MD & Director [2]

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Look, that's too hard to -- that's too hard to say at this point. Do you want to comment on that, actually?

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Unidentified Company Representative [3]

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Yes. I don't think it's materially changed across the portfolio, but again, hard to say.

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Jane M. Hastings, Event Hospitality & Entertainment Limited - CEO, MD & Director [4]

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It is.

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Unidentified Analyst [5]

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And then looking at the margins in the Australian cinema business, a touch off the prior period. Is that due to the film mix or --?

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Jane M. Hastings, Event Hospitality & Entertainment Limited - CEO, MD & Director [6]

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Film mix. 100% due to the film mix. Remember, we pay different film hire. Film hire adjusts, based on the type of distributor and the way that a film plays. It's just film mix.

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Unidentified Analyst [7]

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Good. And JUCY Snooze, are you able to give some more color on what you paid, what kind of earnings impact and whether you have -- are you entitled to upside over in the U.S.?

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Jane M. Hastings, Event Hospitality & Entertainment Limited - CEO, MD & Director [8]

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We've got global ability to take this brand. Yes. So happy to answer that last bit. So we paid close to $9 million once Cook Streets opened, around about that, and it will be disclosed in the full year. I'm not going to comment on earnings at this point in time, but obviously, it was a rational multiple.

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Unidentified Analyst [9]

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And is there a JUCY Snooze going up in San Diego?

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Jane M. Hastings, Event Hospitality & Entertainment Limited - CEO, MD & Director [10]

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There is a stay-open concept going up in San Diego, which is related to a JUCY Snooze concept. Research.

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Unidentified Analyst [11]

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Just wondering, given the interest around Village at the moment, whether you guys would potentially be a seller of the cinema exhibition business, if someone was looking to put those 2 together.

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Jane M. Hastings, Event Hospitality & Entertainment Limited - CEO, MD & Director [12]

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Well, I can't comment on the Village, what's going on with Village at the moment and what will happen. And that's out of our hands. So I'm sure you can ask Village those questions. And -- but I think the easiest thing to say is, we're always open to all options. And we always evaluate all options. So however that plays out, options will arise. We'll evaluate them.

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Unidentified Analyst [13]

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I was interested in your comment that Jojo Rabbit was shown -- screened in New Zealand in November and then, in January, in Australia. You don't have any control about that, but considering the proximity to the 2 markets, can you actually work it a bit better? I mean, I imagine it was quite successful and good film, people liked it. But to have it in New Zealand first and then 2 months later here, you kind of lose revenue on it.

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Jane M. Hastings, Event Hospitality & Entertainment Limited - CEO, MD & Director [14]

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You can come to a Disney meeting with me. So no, we don't control dating. That's the studio's decision, and they make those -- and largely, they get them right, because they've got a lot of insights and a lot of history and a lot of research. So dating is not typically a big issue.

On this one, our feeling is it wasn't a great dating time period. Disney may feel otherwise, but we do influence. So the way that works is, they come to our programmers, and it's all about -- because they want sessions and screen time, and what's going into premium or not going into premium. So our programmers have an influence and make recommendations around the best time for that film to get the most air and the most box office, that feeds in.

But the studios will still make decisions and counter other factors like they may have another release of a similar genre coming up against it. So there is some discussion, but the final decision sits with the studio, and they typically get it right.

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Unidentified Analyst [15]

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Did you guys see a benefit from bush fires and low-quality air days?

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Jane M. Hastings, Event Hospitality & Entertainment Limited - CEO, MD & Director [16]

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No. Not at this point. And we did at a couple of properties in the regional areas, where people were needing to be close by but out of that area. The poor air days, actually our business like Moonlight were impacted, because people didn't want to go outside to watch a film. So I would say that we were more impacted by those days than we benefited. Okay. Questions from the phones? Yes. Sure.

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Operator [17]

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(Operator Instructions) Your first question comes from Sam Teeger from Citigroup.

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Sam Teeger, Citigroup Inc, Research Division - Analyst [18]

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Can you please talk about -- you say you had the Australian cinema revenues up 4%, but earnings were down 1%, and just why the leverage hasn't come through?

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Jane M. Hastings, Event Hospitality & Entertainment Limited - CEO, MD & Director [19]

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Our earnings were up 1%.

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Sam Teeger, Citigroup Inc, Research Division - Analyst [20]

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Either/or, you've got revenues up 4% and earnings up by less. Just keen to understand what's happening at the cost line, and why we're not seeing more leverage in the Australian cinema circuit.

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Jane M. Hastings, Event Hospitality & Entertainment Limited - CEO, MD & Director [21]

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Okay. Firstly, it's really good to make sure you're quoting up not down, because that's quite important. Get the numbers right, because actually, we just -- I've just answered that question prior, around film hire and different mix of product. So that's largely where it was. It's nothing happening really in any other cost lines. In fact, they were becoming more efficient. That was the mix of films.

As I've said in this first half, it was close to 36%. No? Over 30% of the box office was dependent on the top 5 films. That was up 40% -- over 40% compared to the prior period. So that changed our film hire mix.

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Sam Teeger, Citigroup Inc, Research Division - Analyst [22]

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Right, sure. And then just so you know, the negative 1% is coming from Slide 5 of your deck. And then in terms of the corporate costs, they're down a bit in the first half. How should we think about second half?

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Jane M. Hastings, Event Hospitality & Entertainment Limited - CEO, MD & Director [23]

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I think, as I've said, we've got increasing insurance, electricity. Our aim is that they don't grow. I think that's how you should think about it. So we're looking to be down in line with prior year.

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Sam Teeger, Citigroup Inc, Research Division - Analyst [24]

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Sure. And just keen for your views on -- you said Star Wars was good, but it maybe didn't do as much as you thought it would. What do you think is the reason that it wasn't as successful as you thought?

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Jane M. Hastings, Event Hospitality & Entertainment Limited - CEO, MD & Director [25]

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Yes. Good question, the film, itself. So we track repeat visitation as an indicator of how well that film is going to perform. And relative to other blockbusters, our percentage of repeat visitation and relative to other Star War films, it underperformed.

And feedback from sessions was it was a good film, don't get me wrong. Like we will take $47 million, $40-odd-7 million any day. It was a good film. It wasn't a bad film. It just didn't have that intrigue. So fan feedback was that it delivered what was expected. It was a good film, but I don't need to come back and see it. So the film itself is why we think that happened.

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Sam Teeger, Citigroup Inc, Research Division - Analyst [26]

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Right. And just in terms of the cinema upgrades, can you just give us an update as to kind of what they're costing and the returns you're targeting and achieving?

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Jane M. Hastings, Event Hospitality & Entertainment Limited - CEO, MD & Director [27]

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Look, we're not disclosing, as we never have, what they're costing. But I've given you an indication today of kind of the percentage returns on the areas that we're getting from the areas we are investing in. But we maintain that range of 10% to 20%. And what we're pleasingly seeing, though, is in some of our candy areas, it's low spend, and we're getting well above that. So there's a range.

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Sam Teeger, Citigroup Inc, Research Division - Analyst [28]

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Sure. And then last question. Given you've called out weather is impacting the performance on your various circuits and you're seeing some films do better than others, what's your thoughts on bringing in a subscription just to smooth out some of the sales volatility?

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Jane M. Hastings, Event Hospitality & Entertainment Limited - CEO, MD & Director [29]

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Look, we've not actually seen any really solid evidence that subscription has done great things. I mean, we're comparing to markets that never had strong loyalty bases. We believe that we are able to leverage our loyalty base and we're seeing those results to bring people in.

So -- I mean, you'll know that our frequency was up across our customers through this period. So we're not -- we actually have not seen any subscription model, which has genuinely delivered solid results, great results in the first year. Good results in the second year, then it starts to trade off. So we're not sure that it's the magic formula.

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Operator [30]

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Your next question comes from Nick Caley from Baillieu.

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Nicholas Caley, E.L. & C. Baillieu Limited, Research Division - Equity Research Analyst [31]

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Just on the proceeds from Germany, you -- still the intention just to retain those funds within the group?

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Jane M. Hastings, Event Hospitality & Entertainment Limited - CEO, MD & Director [32]

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The decision has been made, but I've mentioned before that there is a good lineup of development projects, and so they will be high on the list in that discussion. But no decision has been made.

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Operator [33]

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Your next question comes from Brian Han from Morningstar.

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Brian Han, Morningstar Inc., Research Division - Senior Equity Analyst [34]

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Jane, in your spend per head in cinemas, what percentage of the spend is from non-ticket prices? And how much has that grown in the past couple of years?

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Jane M. Hastings, Event Hospitality & Entertainment Limited - CEO, MD & Director [35]

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So when I quote spend per head, that's all non-ticket prices. It's actually merchandising spend per head. So that is just purely food and beverage.

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Brian Han, Morningstar Inc., Research Division - Senior Equity Analyst [36]

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And of that percentage, is there total revenue from each patron increased a lot over the past couple of years?

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Jane M. Hastings, Event Hospitality & Entertainment Limited - CEO, MD & Director [37]

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It has.

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Brian Han, Morningstar Inc., Research Division - Senior Equity Analyst [38]

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A lot more to go?

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Jane M. Hastings, Event Hospitality & Entertainment Limited - CEO, MD & Director [39]

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We don't think we're finished, that we've got room to upgrade. With the insights that we're gaining from the upgrades that we have as we roll out across our development project, we think there's room to grow.

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Brian Han, Morningstar Inc., Research Division - Senior Equity Analyst [40]

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Okay. And how much of your cinema sales are from gift cards?

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Jane M. Hastings, Event Hospitality & Entertainment Limited - CEO, MD & Director [41]

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That's competitive. Not disclosing that. I can just say that in a tough retail Christmas period, our sales were up year-on-year, and we performed really well, and it's not a small number.

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Brian Han, Morningstar Inc., Research Division - Senior Equity Analyst [42]

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Okay. If I may, what percentage of those gift cards just expire?

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Jane M. Hastings, Event Hospitality & Entertainment Limited - CEO, MD & Director [43]

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Again, competitive. So -- but it's an important income stream as it is to get customers into the cinema and spending on food and beverage. So -- but I can't give out that number.

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Operator [44]

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Your next question comes from Phil Campbell from UBS.

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Philip Campbell, UBS Investment Bank, Research Division - Analyst [45]

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Just a couple of questions from me. The first one was, just wanted to get your kind of updated views on some of the structural potential risks in the industry. Because I noticed in New Zealand and Australia, it looks like the box office is reasonably strong, both from an admissions and price perspective.

But you look at the U.S. or U.K., obviously, it's more difficult. I just wonder if that you think is down to, again, the content slate for 2019 or whether you are seeing some potential marginal impact of some of these reasonably popular streaming movies from Netflix, like the Irishman and stuff like that. That's the first question.

The second one was just -- you touched a little bit on Cinebuzz and how you're kind of using the data there to kind of help drive the business. So I was just wondering if you could kind of give us some examples of that.

And then, I also note that Vista through Movio, which I think you partner with, is kind of introducing a new commercial model for Movio. So I was just wondering if you'd had a look at that and whether or not you think that's going to help you drive additional attendance or pricing that way.

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Jane M. Hastings, Event Hospitality & Entertainment Limited - CEO, MD & Director [46]

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Okay. I think I've got 3. So the first question was structural. It's film lineup. Film lineup is what's dictating performance in each market. And we get a good sense of that because we can see the difference between Germany versus New Zealand versus Australia. And some of the films didn't perform as well in the U.S., but they had quite a strong lineup in recent years. Things like Black Panther outperformed. Coco outperformed in that market. So the film lineup does actually distort the picture.

In terms of streaming services, of course, people are spending time watching content. But if it was that damaging to the industry, there's no way we'd be achieving record half box offices in the market. And our frequency of our Cinebuzz customers was up during that period. Our research, and we do continually -- we do track it, is that our most frequent cinemagoers just love that they can access more content. But the decision to go out is still the decision to go out versus the decision to stay home.

In terms of Movio, yes, we work closely with Movio and Vista. They're a great company to partner with. We are across their commercial models. We have our own commercial model in terms of what we want to do around our data, and we're highly protective of that. So we are participating in some of their innovations. And I suppose there'll be more announcements on that at the full year.

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Operator [47]

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Your next question comes from Nick McGarrigle from Ord Minnett.

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Nicholas McGarrigle, Ord Minnett Limited, Research Division - Head of Institutional Research & Small-Caps Industrial Analyst [48]

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So I just wanted to dig into the guidance around the hotel business and how that's been built up. Is that just based on forward bookings for March?

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Jane M. Hastings, Event Hospitality & Entertainment Limited - CEO, MD & Director [49]

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Largely.

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Nicholas McGarrigle, Ord Minnett Limited, Research Division - Head of Institutional Research & Small-Caps Industrial Analyst [50]

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And so in terms of the early read you've got on April, is it sort of tracking better or worse than the impact for March?

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Jane M. Hastings, Event Hospitality & Entertainment Limited - CEO, MD & Director [51]

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Sorry, Nick, I -- can you repeat that?

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Nicholas McGarrigle, Ord Minnett Limited, Research Division - Head of Institutional Research & Small-Caps Industrial Analyst [52]

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The question was just if the early bookings for April are tracking better or worse than that impact for March.

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Jane M. Hastings, Event Hospitality & Entertainment Limited - CEO, MD & Director [53]

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Too soon to tell. It's -- because of the indirect impact, it's adjusting on a weekly basis. And we're still waiting for more information on what's happening with flights and bans, which we should get more updated on this Saturday, actually. And I should highlight that that April number does include our assessment of that direct and indirect impact and obviously assessing forward bookings.

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Operator [54]

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There are no further phone questions at this time. I'll now hand back to Ms. Hastings for closing remarks.

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Jane M. Hastings, Event Hospitality & Entertainment Limited - CEO, MD & Director [55]

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Thanks, short and sweet. Thank you, everyone.