THL full year 'break even at best'

By Phil Boeyen, ShareChat Business News Editor

Wednesday 27th February 2002

The combined effects of the global tourism downturn and Ansett Australia's collapse have severely dented Tourism Holdings (NZSE: THL) interim profit and may result in a small full year loss.

The tourist operator reports its net surplus in the six months ended December has fallen 61% to $2.56 million compared with $6.58 million the year before. Sales revenue for the first half fell to $96.45 million from $101.23 million previously

As a result the company won't be paying out an interim dividend and will review further dividend payments at the end of the current trading year.

"The acts of terrorism in the United States together with the risk of further worldwide acts have had a serious and detrimental influence on international tourism," says chairman, Keith Smith.

"During that same week the financial demise of Ansett Australia occurred which raised major international concerns over Air New Zealand's and other international airlines ongoing viability.

"These three external factors have led to a high degree of uncertainty in worldwide international air travel and more importantly have affected THL's operations in New Zealand, Australia and Fiji."

Mr Smith says the fact that the events occurred just prior to the summer season compounded the effects, denying New Zealand and Australian tourism operators their high seasonal earnings.

The company has also announced that it will divest its Aviation interests, selling The Helicopter Line and Mount Cook Ski Planes together with a 50% shareholding in Milford Sound Flightseeing.

"Bearing in mind the historical origins of THL through its aviation investments and in particular The Helicopter Line, this decision by your directors has not been easy," Mr Smith says.

Net turnover from New Zealand during the period fell by $6 million or 10%, mainly in the last quarter of 2001. Operating profit dropped by around a third to $7.9 million.

In Australia net revenue grew by 2% to $40.6 million as the Oz Experience business recovered and as a consequence of a major increase in the company's car rental fleet. However operating profit fell 35%, from $6.3 million to $4.1 million.

On a divisional basis earnings before interest, tax and amortization fell 31% in the Rentals division to $10.2 million while the Coaching businesses reported similar Ebita at $1.6 million.

"However the full impact of the terrorism threat on our Coaching operations won't be fully known until later in 2002 as generally long distance travelers who were booked continued to tour with the exception of the Japanese market," says Mr Smith.

Although an increase in domestic tourism helped the Experiences division it was also badly hurt by the events of September 11 with Ebita dropping 41% to $2.2 million.

"Our traditional markets of USA, Japan, Europe and the United Kingdom were down between 20% and 50%. This seriously affected our Great Sights operations and our attractions businesses of Red Boats, Waitomo Caves and Kelly Tarlton's," the chairman notes.

THL says while it is difficult to forecast the full year's trading result it expects that net profit is "likely to be at best breakeven with a small loss possible." However it says this is before any one off gains or losses which may occur from the sale of businesses.

Keith Smith says that the past six months have proved as challenging as any for the company's executive and staff.

"Your directors are confident that with THL's strong operating cash flows and balance sheet we are well positioned to take advantage of the tourism growth that will arise with New Zealand and Australia being seen as highly desirable tourism destinations.

For the remainder of the financial year the company says it will continue to focus on matching capacity and demand while ensuring it is well positioned to take advantage of the anticipated tourism upturn.

It reports that enquiries and bookings are improving out of Europe, United Kingdom, USA and Japan and that attention to improving trans Tasman and domestic business has been positive.

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