Hotel and cinema giant Event has kicked off a $250 million divestment program of non-core property assets as part of plans to reduce its debt mountain and as it tries to navigate its way back to profitability after its hospitality and entertainment businesses took a pounding due to the impacts of the pandemic.
The 111-year-old company, backed by Financial Review Rich Lister Alan Rydge, revealed the divestment strategy after revenue fell 58 per cent to $294 million over the December half year and after it swung to a $31 million operating loss from a $144 million profit a year earlier. No dividend was declared.
“A strategic divestment of non-core properties has commenced to unlock value in the group’s property portfolio, with a target to realise proceeds of $250 million before tax within two years,” said Event in its half-year financial report.
The assets were not identified. Event said it was in the process of “preparing a number of expression of interest campaigns for the sale of certain freehold assets that are non-core to the business operations of the group”.
Event’s balance sheet is bolstered with a substantial property portfolio of hotels, commercial buildings and development sites. These were worth about $2 billion pre-COVID, though Event estimates hotel property values may have fallen 10-15 per cent during COVID.
On the other side of the ledger, Event’s total debt has grown to $534 million from $493 million pre-COVID-19. Event increased its debt facility by $205 million to $750 million in July last year.
This debt facility will decline by $100 million by no later than January next year with the remaining $650 million maturing in July 2023.
Its half-year results show Event’s cinema business, which dates back to 1910, was the hardest hit by lockdowns, social distancing restrictions and a lack of Hollywood blockbuster releases, reporting operating losses of $18.5 million in Australia, $4.7 million in New Zealand and $42 million in Germany, where the contracted sale of its Cinestar business to Vue International has come unstuck.
Its hotel division, which includes the QT, Atura and Rydges brands, had a better six months, reporting earnings of $11.3 million compared with a loss of $2.5 million for the COVID-affected period from March to June. Event’s best performing asset was its Thredbo Alpine resort which delivered operating earnings of $23.8 million.
Over the six-month period Event received $41.73 million under the JobKeeper scheme.
“The result was defined by the impact of COVID-19 government mandated restrictions materially impacting our ability to generate revenue,” said Event chief executive Jane Hastings.
“In response, within every division, we have transformed every aspect of our business to be able to respond to the pandemic constraints.
“We secured more than our fair share of scarce revenue opportunities whilst transforming and mitigating cash-burn.
“Swift and active cost management resulted in more than $155 million in savings from March to December 2020, excluding government subsidies, and excluding the benefit of most of the rent relief negotiated with landlords which will be recognised once agreements have been signed.”