THL confident in new strategy; investors nervous

Wednesday 31st October 2018

Tourism Holdings is at pains to stress to it isn’t betting the family farm, despite selling most of its remaining traditional tourism assets and launching an ambitious investment programme in digital products for campervan owners and renters.

Chairman Rob Campbell reassured shareholders the company would continue to make money during the next two years while it goes through the changes. These include the sale of its Kiwi Experience bus tour operations and almost all its Waitomo tourism assets except the glowworm caves. The company is also planning significant focus on its recently-launched TH2Connect joint venture with US recreational vehicle manufacturer Thor.

TH2 involves a range of web and mobile products from route planning to service reminders, from ‘internet of things’ for RVs to safety alerts.

“We believe we are maintaining quite a strong growth profile," Campbell told shareholders at the company's annual meeting in Auckland today.

"That’s why we are sending a message about maintaining dividends,” he said in answer to a question from a shareholder worried about THL “taking a break from growth”.

THL increased its revenue by 25 percent in the year to June 30 to $426 million. Net profit after tax was up 24 percent at $37.5 million.

That’s a significant lift from the $3.8 million profit the company made in the 12 months to June 2013, the year Campbell joined the company.

THL announced a final dividend of 14 cents per share, up from 11 cents in 2017, and said it expected that level to be maintained next year.

On the other hand, the company - now the biggest RV rental outfit in the world - will be investing $15 million into TH2 this financial year, which will inevitably impact on profit.

“NPAT in the coming 12 months will be below the performance of the FY18 year,” Campbell said. The company is predicting net profit of $32 million-$34 million for 2019.

Still, Campbell stressed TH2 won’t become a black hole into which the company will pour good money after bad. He says THL will invest “up to a maximum of US$5 million” in the 2020 year, and then only if it has confidence in the performance of TH2 against its key performance indicators.

“So that’s a maximum of US$30 million of investment, inclusive of the original costs for the THL intellectual property in TH2.”

Meanwhile, performance at the company’s US campervan sales and rental subsidiary El Monte RV was about 12 months behind expectations, he said. THL paid US$65.3 million for the US company at the beginning of 2017, but this year has been a tough one for US recreational vehicle sales, Campbell says. El Monte’s 2019 earnings are expected to be lower than this year’s, but he wasn’t showing any concern.

“We think that’s coming right at the present time and the long- and medium-term future remains strong. El Monte isn’t a problem.”

Having seen its share price climb steadily from sub-$1 levels in 2014 to more than $6.50 in June this year, the stock has taken a bit of a battering over the past four months, falling to below $5 over the last few days.

Campbell wasn’t letting that faze him.

“No one likes when the price is going down and we’ve been treated harshly relative to the total market,” he said. “The reasons: we are going through a period of change and is there is uncertainty in the mind of investors. Plus we have significant offshore investors and RVs are being treated harshly overseas.

“In our view the inherent value of the business continues to increase and our existing businesses and growth options are probably better now than have been for some time.”

THL shares rose 1 percent to $5, trimming their loss this year to 16 percent.

(BusinessDesk)

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