Tourism Holdings beats first half guidance on reduced fleet, wider margins

Tourism Holdings [NZX: THL], the largest campervan rental business in Australia and New Zealand, more than doubled first-half profit, beating expectations, after cutting costs and fattening margins.

Profit rose to $5.6 million in the six months ended Dec. 31, beating its December guidance of $5 million and up from $2.5 million a year earlier, the Auckland-based company said in a statement. Sales slipped 2.3 percent to $109.7 million as it reduced its fleet numbers, while the cost of sales shrank 12 percent to $28.8 million. The board declared an interim dividend of 7 cents per share, up from 5 cents a year earlier.

Tourism Holdings has improved earnings across its businesses by selling off excess fleet capacity and focussing on margins. The company is looking to leverage earnings from New Zealand's booming tourism market to fund growth in the international motorhome market. It expects profit increases to be led by growth in its local and Australian rentals businesses, as well as cost cutting.

"We are operating in a positive tourism environment and have addressed the core operating issues within the business," chief executive Grant Webster said. "We are employing new capability and enabling the business to grow in a smart manner."

The company affirmed its December guidance of annual profit to be at least $17 million. That's higher than its November range of between $15 million and $16 million, which was itself an upgrade, and would be at least 53 percent higher than the $11.1 million it recorded in 2014.

Tourism Holdings' New Zealand rental business narrowed its earnings before interest and tax loss to $1.1 million, from a loss of $2 million a year earlier, as flat rental income was offset by lower depreciation costs from a reduced fleet. Its tourism business, which includes Waitomo caves tours and Kiwi Experience buses increased Ebit 48 percent to $2.4 million, as New Zealand tourist numbers rose to a record in 2014.

Australian rentals lifted Ebit 81 percent to $4.7 million, as a smaller fleet meant lower operating costs. US rentals Ebit slipped 3 percent to $6.1 million, but was up 5 percent on a US dollar basis. Lower fleet numbers during the peak season after strong vehicle sales in the second half of the 2014 financial year weighed on rental income but was largely recovered in the shoulder season, Tourism Holdings said..

The company's joint venture with Alpine Bird Manufacturing, RV Manufacturing Group, lifted Ebit 55 percent to $1.1 million, as new procurement and design adaptions drove down costs.

As at Dec. 31 the company had $6.3 million in cash and cash equivalents on hand, down from $11.3 million a year earlier, while its assets were reduced to $301 million from $313 million a year earlier. It had $91.1 million in borrowings and loans at balance date, down from $108.3 million a year earlier.

The company said it expects its capital expenditure to be on the higher side of expectations, with full year net capex to be between $25 million and $30 million, while net debt will be between $80 million and $85 million.

Shares of the company last traded at a near seven-year high of $1.87 and has gained 3.9 percent since the start of the year. In 2007 shareholders rejected a takeover bid by Australian company MFS Living and Leisure when the shares were at $2.80.