The Experience Co Ltd (ASX: EXP) share price has come under pressure on Thursday after the adventure tourism company released a trading update and a revision to its full year guidance.
In morning trade the Experience Co share price fell 13.5% to 25.5 cents.
What was in today's update?
This morning the company advised that the softer trading conditions it experienced in Far North Queensland during the first half have continued and have impacted the region's tourism market which is "experiencing a pronounced challenging period of trading."
A number of issues have been impacting tourism in the region. These include:
- A decline in passenger volumes into Cairns airport as a result of a reduction in services into the region by international carriers such as China Southern.
- A reduction in capacity by Qantas Airways Limited (ASX: QAN) and Virgin Australia Holdings Ltd (ASX: VAH) into Cairns and high load factors impacting relative affordability compared to international destinations.
- FY 2019 total passenger numbers ex-Cairns to the Great Barrier Reef are projected to be more than 12% lower on the prior year with Experience Co's Great Barrier reef volumes expected to be down ~8% over the corresponding period.
This has unsurprisingly had an impact on Experience Co's earnings in the region, particularly with its higher yielding activities on the Great Barrier Reef operated by its Big Cat, Reef Magic, and Great Barrier Reef Helicopter brands.
The softer than expected trading has driven a decrease in the company's EBITDA margin due to the operating cost leverage of the Far North Queensland adventure experiences.
One area of the business that has been impacted in the region is its skydiving operation. Management has revised its tandem jumps volume expectations by ~20% in the second half.
In light of this and management's review of its Easter holiday trading, it has revised its FY 2019 guidance. Revenue is expected to be 4% lower than previously expected, whereas underlying EBITDA is expected to be in the range of $27 million to $28 million.
The latter compares to its previous guidance of underlying EBITDA between $30 million and $33 million.
