Shares in Event Hospitality and Entertainment Ltd (ASX: EVT) hit a 52-week high today after the group reported an adjusted net profit of $190.3 million on revenue of $1,290 million for the financial year ending June 30, 2018. The adjusted profit was up 12%, with revenue flat on the prior year.
The group will pay a final dividend of 31 cents per share (flat on the prior year) and will pay a total of 52 cents per share in dividends over the year, which represents just a 2% lift.
The year was a tale of different performance from Event’s two operating businesses of cinemas and hotels.
The hotels business is performing strongly, with an impressive 31.4% growth in earnings with the QT Hotel brand and Thredbo ski resort properties the highlights for investors.
As I have flagged before the QT Hotel brand is a real growth engine for investors and makes up the majority of the investment case given its success and potential for expansion. The group’s other Rydges and Altura hotel brands also delivered some respectable mid-single digit growth and all the properties are exposed to increased tourism via a weaker Australian dollar.
The value of the group’s property portfolio was also lifted to $2 billion from $1.5 billion previously, in a positive result that is non-cash, but shows the strength of the group’s bricks-and-mortar assets.
The familiar disappointment for investors was the cinemas business that struggled from a lack of blockbuster movies to attract punters to the cinemas. Admissions, revenues, and profits were down in the mid-single or double digits across its Australian Event cinemas business with only the likes of Black Panther drawing in the big crowds.
The German cinemas business also reported admissions and profits down more than 10% with Event flagging that it is exploring options to sell this business given the performance and lack of “economies of scale”. If a buyer is found at a suitable price investors will likely applaud the retreat from Germany.
Event has plans to open or upgrade multiple new cinemas and hotels in the ANZ region, while looking to bring costs out the business. As such it’s not going to shoot the lights out anytime soon, but remains a reasonable play with a rock solid track record for anyone seeking a growing stream of income.
The stock is changing hands for 22x FY 2018 earnings per share of 69.9 cents at $15.22, which reflects investors’ expectations that FY 2019 should deliver some more reasonable growth. Others in the leisure and tourism sector include Sealink Travel Group Ltd (ASX: SLK) and sky-diving merchant Experience Co Ltd (ASX: EXP).
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The Motley Fool Australia owns shares of and has recommended Event Hospitality & Entertainment. The Motley Fool Australia owns shares of EXPERNCECO FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.