Cinemas and hotels business Event Hospitality & Entertainment (ASX: EVT) this afternoon reported a net profit of $110.8 million on revenues of $1.294 billion for the full year ending June 30, 2017. Normalised profit adjusted for one offs and income tax was $169.9 million, 8.6% below the prior year.
Pleasingly, the group's second-half performance was significantly stronger than the first half, with normalised profit up 6.4% over the prior corresponding half, after what was a weak start to the financial year for the group.
Cinemas
The main reason behind the softish year for the group was the performance of its cinemas businesses in Germany and ANZ. The German cinemas business in particular was affected by the European soccer championships and a comparatively weaker film line up.
The Australian cinemas business also suffered from a weaker film line up and increased competition, with the cinema sector remaining unpredictable over the short term. Over the long term though it should deliver steady growth if Event Cinemas can retain market share and open cinemas in new urban areas such as those planned at Sydney's Green Sq area of high-density apartment development.
Hotels
As expected the group's hotels business put in a strong performance with full year revenues up 10% and the group's new QT Melbourne Hotel flagged as performing especially well. In fact the group stated every QT hotel it operates delivered "strong" revenue and EBITDA growth. The group also plans to expand its successful QT brand into Perth, the Hunter Valley and Queenstown, while also investing $116 million last April to buy property to develop its flagship QT Sydney Hotel.
Its budget Rydges and Atura brands also delivered reasonable years, although occupancy rates were marginally down on the prior year. While its Thredbo alpine resorts posted a record result, with revenue and normalised profit up 10% and 21% respectively.
The verdict
Overall this was a tale of two halves for Event in more ways than one, with a strong second half to the year following a weak first half. Its hotels and property business also performed well, while its cinemas business performed disappointingly.
The group will pay a final dividend of 31 cents per share to take full year dividends to 51 cents per share on earnings of 69.6 cents per share.
As at June 30,2017 the group had cash on hand of $92.3 million and bank debt of $323.4 million.
Outlook
Event is a well-run business with long-term plans to develop its hotel and property assets, while its cinemas business should offer investors moderate returns.
It sells on around 18x trailing earnings at $12.30, with a 4.1% fully franked dividend yield. This is probably quite good value if you're confident the cinemas business can deliver long-term growth.
