Why Experience Co (ASX:EXP) Shares Are Skydiving

The Experience Co Ltd (ASX: EXP) share price is down an unlucky 13% after releasing some news to investors.

Experience Co is an adventure tourism company founded in 1999 with the aim of becoming the largest and most respected adventure tourism company in the world. Experience Co offer adventure experiences of tandem skydiving, hot air ballooning, white water rafting, canyoning, sea kayaking, and tours to the Great Barrier Reef. The company currently has numerous locations throughout Australia and New Zealand.

Experience Co’s Trading Update

The company said that softer trading conditions in Far North Queensland have continued to impact the region’s tourism market which is going through a “pronounced challenging period of trading”.

Experience Co said that passenger volumes into Cairns airport are down on the prior year with international volumes lower too. Domestic airlines have also reduced their capacity to Cairns.

FY19 total passenger numbers excluding Cairns to the Great Barrier Reef are projected to be more than 12% down on the prior year, with Experience Co Great Barrier Reef volumes expected to be down around 8% compared to last year.

The loss of visitor numbers have impacted earnings, particularly highly profitable activities like Big Cat, Reef Magic and Great Barrier Reef Helicopter brands. This is expected to reduce the EBITDA profit margin (click here to learn what EBITDA means).

However, excluding FNQ, the core skydiving business in Australia and New Zealand “remains solid” with full year tandem jump volumes expected to be 5% higher.

Overall, FY19 revenue is expected to down 4% compared to previous expectations and underlying EBITDA is expected to be between $27 million to $28 million.

Experience Co Outlook

The company said that the medium term for the Cairns tourism market remains positive, although tough conditions are expected to continue into FY20.

Experience Co said: “Given the fixed cost intensity of our FNQ operations, management is proactively reviewing its assets, product mix and ongoing strategies to increase its market share during this weaker trading period.”

The Experience Co share price is certainly cheaper than it was yesterday, but I wouldn’t want to invest whilst it’s profit is dropping. I think it could be better to wait until things have turned around.

I think the two ASX shares in the free report below could be better picks for growth than Experience Co right now.

At the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.

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