Alan Kohler's been keeping up with EXP for some years over on The Constant Investor and it's a timely interview that surfaces now following a recent drop in SP (along with the broader market, obviously!).
Some nice questions about the diversification of the business and what the real numbers look like.
https://theconstantinvestor.com/diversifying-leisure-experience-co/ (paywall, $1)
Ballooning and white-water rafting and helicoptering, they’re all higher margin businesses, are they?
Yeah, it’s interesting, ballooning for example is absolutely higher than skydiving. The other two you mentioned, rafting is a little bit lower, marine vessel’s – some’s higher, some’s lower. But it’s amazing how similar this adventure tourism industry is in terms of the margins. Obviously, we bring these smaller to medium businesses in with our corporate structure. There’s not only the cost synergies which we’re trying to realise and achieve, it’s more the revenue synergies able to offer more products to the one customer to increase that customer yield.
Just take us through how the skydiving thing works. How much do you charge for a jump and what do you make on it? Because obviously there’s variable costs that you have to pay the guy who’s jumping – the instructor, and the fuel and the aircraft and so on. How do the numbers work?
Yeah, the skydive itself ranges from anywhere from $260 to $400 dollars just for the actual skydive, including GST. We then obviously can offer a video product. 75% of people throughout Australia and New Zealand take up that video product and that’s consistently grown over the years with today’s day and age with the Millennials and how Millennials want to experience all these activities and then show off that they’ve done the activity. We’ve noticed since 2011 to now we’ve grown from 64% conversion to 75% conversion. The cost of our videos ranges from about $149 to $169.
That equates ultimately to an average sale of around $430 for a skydive and we’re making these sort of margins around that 30 to 34%. Those margins obviously exclude the shared services cost and head office expenditure of course.
Right, $430 average revenue and the gross margin of 35%?
Correct.
And what about the pricing of the other experiences? Take us through those numbers.
As you can appreciate, there’s so many, we’ve got quite a few activities/experiences now, so they range.
(20min delay)