Experience share price explodes on FY20 result

The Experience share price has rocketed 15% higher today after the company released it results for FY20. We take a closer look.

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The Experience Co Ltd (ASX: EXP) share price soared 15.38% higher today as the company announced better than expected full year results. Experience's share price was trading at 15 cents at close of trade.

Experience provides adventure tourism and leisure activities in key tourist destinations in Australia and New Zealand. Some of these experiences include tandem skydiving, Great Barrier Reef snorkeling, helicopter and diving tours and hot air ballooning.

Experience's FY 2020 challenges

The Experience share price has been battered this year as it suffered from the impacts of Australia's bushfires and the COVID-19 pandemic.

CEO John O'Sullivan said 2020 had presented "the most challenging conditions" in the company's 20-year history.

"The Australian tourism industry was already on the back foot from the Australian bushfires, however it was brought to an immediate halt upon the emergence of COVID-19," he said.

So how did the company perform in FY 2020

Experience generated $87.4 million from continuing operations. This was a 32.8% decline on the previous year, largely driven by COVID-19 and the bushfires. Underlying EBITDA fell even more drastically to $7.3 million – a 70% decrease. This included a second half loss of $1.8 million with allowance of bad debts.

The company posted a loss of $39.7 million for the year, falling from a $5.4 million profit the year before. As international customers make up 65% of Australian and 92% of the company's New Zealand operations, it is not hard to see the impact of coronavirus-related travel restrictions on business operations.

With tourism not expected to return to pre-pandemic levels until after FY24, net debt is an important consideration as companies struggle to pay off large debts. Experience share holders will be happy that its net debt of $9.0 million has declined as a result of divestment in non-core assets. This has delivered approximately $22 million.

The Experience share price rocketed today, with most of the bad news likely to be already priced in. Cost-saving programs and rapid response to the pandemic have also mitigated the impact of such extreme adverse conditions.

Outlook for the Experience share price

Heading into FY21, Experience enters the recovery phase. Trading conditions will depend on pandemic developments and restrictions on domestic and international borders. Profitability is understandably one of the company's foremost concerns and as such it has implemented stringent cost-saving controls.

The Experience share price is on the rise as operations restart across the portfolio. Skydive locations have opened in all locations except for Victoria and Glenorchy (NZ). Furthermore, July trading has been encouraging, with underlying EBITDA breakeven for the first time since the return of operations. However, this is aided by the support provided by Jobkeeper and landlords.

Motley Fool contributor Daniel Ewing has no position in any of the stocks mentioned. 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.

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