The Experience Co Ltd (ASX: EXP) share price is flying higher in morning trade, up 17.24% at the time of writing to 17 cents.
Experience Co is a provider of adventure tourism and leisure experiences in Australia and New Zealand. These experiences include skydiving, island day trips, and reef tours. The company's operations are located predominantly on the eastern seaboard of Australia from the Great Ocean Road in Victoria to Queensland's Port Douglas. It also has skydiving operations in Queenstown, New Zealand.
Despite getting off to an impressive start after listing in 2017, Experience Co shares haven't had the best run on the ASX to date – falling from around 88 cents in December 2017 on the back of weak tourism conditions, poor weather events, and the resignation of its CEO.
Why has the Experience Co share price bounced today?
This morning, Experience Co released a market update in regard to the impact of COVID-19 on its operations. The company had previously announced the indefinite suspension of all operations on 23 March.
According to today's release, operations have resumed at Experience Co's Queenstown skydiving drop zone. The company is also aiming to resume operations at a number of Australian-based drop zones during June.
On the whole, experiences will be activated on a breakeven basis, staged over the coming months in line with the relevant jurisdictional lifting of restrictions.
In terms of financial stability, the company believes it is well-positioned to sustain an extended period of hibernation with $10 million cash on its books as at 30 April 2020. It also has an additional $15 million undrawn capacity on its debt facility with National Bank of Australia Ltd (ASX: NAB) and facility agreement waivers in place in relation to covenant testing for the 30 June 2020 testing period.
Assuming operations are suspended and there are no material changes in market conditions, Experience Co is anticipating its minimum monthly net cash outflow to average approximately $1 million per month to 30 September 2020.
As for wages, the company has triggered job subsidy programs in both Australia and New Zealand. The respective programs have been implemented for 360 eligible employees in Australia and 78 employees in New Zealand. Meanwhile, senior executives and board members have taken a 30% reduction in remuneration until 30 June 2020.
Experience Co has also been supported by lease cost relief with the co-operation of its landlords. As a result, monthly lease expenses through a combination of waivers and deferrals have been reduced. This includes 100% rent relief for Ports North and fees and charges in its Great Barrier Reef business until 31 December 2020.
Looking forward, Experience Co noted the continuation of its strategy for business simplification. It described the divestment of its Hunter Valley and Byron Bay Ballooning businesses as "well progressed" and cited other surplus asset sales processes are ongoing.
Additionally, Experience Co highlighted that good headway has been made on business process projects. This includes implementing a new reservations system for the skydiving business and process improvements across corporate functions.
Management commentary
Commenting on today's update, CEO John O'Sullivan said:
"The EXP team has been working extremely hard to design and implement COVID-19 operational processes and procedures since the Australian and New Zealand Government regulations came into effect. We are cautiously excited about recommencing our operations all the while recognising that the emergence is likely to be protracted and will require a sustained level of resilience across the business. Our goal remains to maintain a viable business and balance sheet, positioning EXP for when conditions improve."
"At the time of suspending operations we noted that we were not in a position to forecast with any level of certainty the duration nor recovery profile from this pandemic. This remains the case and our continued strategy is to minimise short-term cash outflows," he added.
