Tourism Holdings returns increase in subdued period

Keith Smith
Keith Smith
Tourism Holdings Ltd has reported a 7% increase in after-tax profit for the year to June - rising from $13.4 million last year to $14.3 million - but cautioned it is down almost 10% on forward rental bookings, and tougher times are ahead for the next 12 to 18 months.

THL chairman Keith Smith said that operations in New Zealand expected to see consolidation in the rental sector and a return to "more rational pricing" as competitors were squeezed by the availability of credit.

"The year brought considerable change for the group, beginning with the distraction of a takeover offer and continuing through a lengthy sell-down of non-core assets," Mr Smith said in a statement yesterday.

In mid-June, at the same time as THL announced an up-to-$3 million profit downgrade to a range of $15-$16 million, Dunedin company Skeggs Group paid $17.3 million for the Milford Sound assets of THL, which included its Red Boats passenger service.

In total, $69 million of tourism assets were sold or joint-ventured, including Johnstons Coachlines, Kelly Tarlton's aquarium, Airbus and Kiwi Experience.

From that $5.8 million was booked in this financial year, with the balance of $63.2 million being settled in September and appearing in its 2009 accounts.

This year's after-tax $14.3 million profit, includes a loss of $3.3 million against THL caravan manufacturer CI Munro as well as the $5.8 million from the total asset sales.

ABN Amro Craigs broker Peter McIntyre said it was not a strong result, considering $5.8 million of the asset sales went into the after-tax profit, THL had a "poor trading outlook" with rental bookings down 9% on the same period last year, a downturn in tourism and had to contend with volatility of currencies and fuel prices.

"The key drivers of THL's revenue are completely out of their hands," Mr McIntyre said.

However, Mr Smith said that overall, THL's products and destinations were well positioned for growth in arrivals, which will come from stabilising oil prices, aircraft capacity increases and a falling New Zealand dollar.

"We are confident that, as these factors take effect, New Zealand and Australia will return to solid growth in inbound arrivals," Mr Smith said.

THL had "invested heavily" in web-related technology and would seek to gain a "market-leading position" in online marketing, he said.

Mr McIntyre said while the result was not strong and THL faced numerous headwinds during the next 18-months, by selling non-core operations and booking most of the sales in the next financial period, the company had done well in a period where credit is tight and tourism was expected to be subdued.

Mr Smith said THL's actual capital spending depended on the way economic conditions unfolded and the outlook for arrivals from key markets beyond 2008.

ABN maintained its hold recommendation on the stock, but had recently dropped its 12-month price target 26%, from $2.05 to $1.50.

The stock was trading about $1.41 yesterday.

THL will repeat last year's dividend of 11c per share.

Peter McIntyre's financial disclosure document is available on request.

 

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