Tourism Holdings Ltd is buying a recreational vehicle rental business in the United States called Road Bear, which will contribute to earnings in the first year but will cut net profit in the 2011 financial year when costs are included.The acquisition fro
Tourism Holdings Ltd is buying a recreational vehicle rental business in the United States called Road Bear, which will contribute to earnings in the first year but will cut net profit in the 2011 financial year when costs are included.
The acquisition from JJ Motorcars Inc, comprising $US5 million ($NZ6.6m) of goodwill and $US12m for recreational vehicles, was expected to be completed on December 31.
Road Bear currently operates a fleet of between 350 and 450 rental vehicles from branches in Los Angeles, San Francisco, Denver, Las Vegas and New York.
It has been in business since 1980 and under its current ownership for 10 years.
"This is a significant milestone in Tourism Holdings change of direction over this period, in which we have transformed from a tourism business with diverse assets in attractions, coaching and rentals, to a leaner operation focused strongly on rentals," said chairman Keith Smith.
Road Bear would contribute $US2.1m of earnings before interest and tax in the first 12 months of ownership, but would also generate a non-deductible one-off expenses of around $NZ1m in the 2011 financial year, he said.
The expense occurred because accounting rules now require all costs associated with the acquisition to be expensed rather than capitalised into the purchase price.
The company is sticking to a forecast of a net profit after tax of $4m from its existing business for the 2011 financial year but said when Road Bear is included the figure will be $2.5m.
"The 2012 financial year will reflect the full benefit of the acquisition," Mr Smith said.
The vendors, Daniel Schneider and Horst Hagner, will remain with the company as employees for an agreed period after the completion of the purchase.
Mr Schneider will remain as chief executive and president of the business for the medium term.
The purchase will be fully debt funded.
