Tourism Holdings Limited 2004 Results Announcement
Tuesday, 24th August 2004
STOCK EXCHANGE RELEASE
2004 Results Announcement
The Directors of Tourism Holdings Limited (THL) announced an audited Net Profit After Tax (NPAT) of $11.2m for the financial year ended 30th June 2004. This compares to last year’s profit of $8.7m.
Excluding one off tax adjustments in both years and unusual items from last year the trading Net Profit After Tax of $10.3m was $3.1m or 43% ahead of last year.
The trading NPAT of $10.3m is favourable to the Directors February forecast of $10m.
The second half year NPAT from trading was $6.1m which compares favourably to the first six months of $4.2m and last year’s $3m. The international tourism environment over the past six months has been more stable than previous years and not disrupted by international events such as terrorism attacks (911 and Bali), Iraq Wars and the SARS virus. THL in New Zealand enjoyed the benefits of a full high summer season, the first for three years. Unfortunately the high season in Australia’s Northern Territories was affected in the first six months by cancelled bookings directly related to the Iraq War and outbreaks of SARS.
The profit was achieved on a turnover of $166m, which excluding discontinued businesses was 4% up on last year. Earnings before interest, tax and amortisation (EBITA) was $27m or 7% up on last year.
The Company once again generated strong operating cash flows of $40m. With the increase in Capital Expenditure on plant, new developments and the special dividend payment in April, net debt rose from $38m to $52m.
The Balance Sheet Equity Ratio excluding intangibles reduced from 66% to 62% and the Debt to Debt plus Equity Ratio increased from 22% to 27% due to the increase in Capital Expenditure noted above. THL Board policy is to maintain an Equity Ratio excluding intangibles of at least 60%, which whilst conservative provides a buffer against unforeseen events.
Based on the 2004 results and the current trading outlook, the Directors have declared a fully imputed dividend of 5 cents per share payable on the 22nd October 2004 for Shareholders of record on the 15th October 2004. This compares to a 4 cents per share dividend paid in October last year.
Directors will continue to assess the Capital structure of the Company in the context of the trading results, financial position and trading outlook.
The Directors consider a dividend payout ratio of 60% of NPAT pre Goodwill Amortisation as being appropriate.
SOUTH PACIFIC TOURISM MARKET ENVIRONMENT
The region has benefited by the resumption of international travel. Greater security awareness and continuing international terrorism has benefited the South Pacific where its distance, isolation and “peace haven” status means the region is seen as a desirable and appealing destination. This has also been assisted by the significant increase in airline capacity, new airline competition and the expenditure by airlines on long distance aircrafts.
The New Zealand outlook remains strong with growth to June 2004 of 10% and the Tourism Research Forecasting Council forecasting annual growth of 6% to 2010. New Zealand continues to capitalise on the successes of Tourism NZ’s 100% Pure Campaign and films portraying NZ scenery such as the Lord of the Rings trilogy and Whale Rider. Tourism New Zealand’s recent gold medal achievement and overall coverage at the 2004 London Chelsea Flower Show reinforces in our key UK market NZ’s green image and high appeal of eco-tourism. We have confidence that the $150m film production of The Lion, The Witch and The Wardrobe will continue this marvellous coverage of New Zealand’s landscape.
New Zealand was also voted for the second year the world’s #1 tourism destination by the highly influential Lonely Planet publication.
THL has 33% of its business in Australia which has not performed to your Directors expectations. Australia is recovering albeit at a lower growth rate than New Zealand. The increased international and domestic airline capacity will encourage greater tourist numbers. The Australian domestic market has grown since the terrorist attacks of 911 and Bali and is now seen to be of high importance being the target of Federal and State tourism initiatives. The recently announced A$235m Federal tourism funding boost and the recently launched “Australia – a Different Light” advertising campaign will increase both international and domestic tourism over the medium term.
Increased airline competition and capacity has also benefited the Pacific Islands and in particularly Fiji where THL operates.
RISK MANAGEMENT AND CASH IS KING
THL once again concluded the year in a strong financial position. The doctrine of Cash is King is firmly entrenched within THL as part of our overall Risk Management programme.
During the year Senior Management and the Board have commenced development of a comprehensive Risk Management programme. This is designed to identify and manage the various risks that can impact THL. Whilst some risks, such as incidents of world terrorism and wars, are outside of our control there are both internal and external risks that can be identified and the negative impact minimised.
THL Rentals comprises motorhomes under the brands of Britz, Maui and Backpacker together with rental cars and fleet disposal operations in both Australia and New Zealand. CI Munro, our motorhome manufacturing business, is based in Otorohanga, New Zealand and supplies both our New Zealand and Australian requirements.
Total Rentals revenue was down 2% with Earnings Before Interest, Taxation and Goodwill Amortisation (EBITA) increasing 16% from $17.9m to $20.8m.
Rentals NZ has enjoyed a strong year with a 13% increase in revenue and 30% increase in EBITA both as a result of NZ being a “Hot” tourist destination but also due to the appeal of NZ as a motorhome touring country. The geographic spread of Rentals NZ customer base including the UK, Europe, US and Australia has benefited us. In particular the UK has had good economic growth and consumer confidence which encourages travel.
The New Zealand market has also in recent months consolidated with the withdrawal of Hertz New Zealand Campervans in April 2004 and the closing of Cruise NZ at the end of July. THL has from August 2004 acquired the forward bookings in New Zealand of Cruise NZ.
At Rentals Australia the overhang of SARS and
the Iraq War impacted their traditional high season of
July-October. Australia also draws a much larger portion of
its customers from Germanic Europe which continues to suffer
from low economic growth and flagging consumer confidence.
Whilst we have been very successful in expanding sales
outside this area, in particular domestic travel within
Australia, this has not compensated for the drop in the key
Since Balance Date THL has acquired the campervan fleet and forward bookings in Australia of the Hertz Australia franchisee.
This division includes the key New Zealand attractions of Kelly Tarlton’s Antarctic Encounter and Underwater World, Waitomo Glowworm Caves, and Milford Sound Red Boat Cruises.
Benefiting our Waitomo investments was the November 2003 acquisition of Black Water Rafting and the securing of a 30 year concession on the neighbouring Ruakuri Caves. These historical and picturesque caves will be reopened in February 2005.
Attractions revenue increased 13% with a profit decline of 5% from $6.6m to $6.3m.
Kelly Tarlton’s suffered through decreased patronage and increasing competitor attractions in Auckland. The major redevelopment of Kelly Tarlton’s is on plan with the completion of the new $3m filtration plant in July and the opening of its new attraction Stingray Bay is due by Christmas 2004.
Waitomo Glowworm Caves and Milford Sound Red Boat Cruises were adversely affected by the Japan/Asian market down 11% for the year due to Iraq / SARS and exceptionally wet and unseasonal bad weather.
The Coaching division includes Johnston’s chartered coach operation, Great Sights Coaching with its Discover NZ packaging and contact centre, Airbus, Kiwi/Oz/Feejee Experience and Tourist Transport Fiji. Last year Great Sights was included in Attractions, this division is now reported under Coaching.
Overall Coaching had a disappointing year. Revenue increased 7% to $48m with EBITA increasing only 3% to $3.2m.
Johnston’s operates in the tour coaching sector of prescheduled or packaged travel which has not increased over the past five years. Johnston’s has responded to the challenge by being a niche coach operator focussed on the high yielding market.
Great Sights and its packaging business of Discover NZ bounced back well from the impacts of Iraq / SARS with a 13% and 57% growth in revenue and EBITA respectively. With the strong growth of semi-independent travellers (SIT) and free independent travellers (FIT) these businesses will continue to expand.
Oz Experience incurred another significant loss. The Australian Backpacker industry remains in deep decline and is estimated to be 20 - 30% down on the previous year. Management and product changes have been made.
Kiwi Experience did not perform to expectation and a review of products on offer has been undertaken.
Fiji is enjoying a major upsurge in tourism with the political and economic outlook more certain. This led to a 32% increase in revenue by our operations in Fiji with Feejee Experience in particular enjoying significant growth.
The strategy of evaluating acquisitions or new developments as “Bolt On” to existing businesses has proven to be successful. Feejee Experiences launched in November 2002 as a new Fiji Backpacker experience modelled on Kiwi/Oz Experiences has gone well. The Waitomo acquisitions in October 2003 of Black Water Rafting and Ruakuri Caves (30 year concession) have and will continue to prove extremely popular, with Ruakuri Caves reopening in February 2005.
The recent acquisitions in August 2004 of the campervan fleet and forward bookings of Hertz Australia and the forward bookings of Cruise NZ have been integrated into our Australian and NZ rental fleets with minimal cost, customer or operational issues. THL will continue to evaluate similar growth opportunities.
Mr Don Spary, a founding director of the Helicopter Line (THL’s predecessor) in 1986 has chosen to resign at the Annual Meeting on 16 November 2004. Don has been a major contributor to THL and with his vast Aviation and South Island tourism experience has been of great assistance to your Board and Management over the past eighteen years. We wish Don and his wife Jan our very best wishes for the future.
The Board appointed in June 2004 Mr David Cushing as a non-executive Director. David is based in Christchurch and has a track record of proven business experience in New Zealand. Apart from other Directorships he has enjoyed a successful career in Investment Banking.
Both the immediate and long term outlook for tourism is good. THL has a strong Balance Sheet, high cash flows and good competent management and staff. The prospect for the international tourism markets that THL operates in is positive.
Tourism Holdings Limited