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Tourism Holdings lifts FY profit to record $30.2mn, ahead of guidance

Tuesday 22nd August 2017

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Tourism Holdings exceeded guidance, posting a record 2017 profit and said it aims to boost earnings to $50 million by 2020.

Net profit rose 24 percent to $30.2 million in the year ended June 30, with revenue rising to $340.8 million from $278.9 million, the Auckland-based company said in a statement. That's ahead of the upgraded guidance the company gave in June, when it said profit would be about $29.5 million.

The company said today that the second half had delivered better-than-expected results, mainly due to a strong performance from its New Zealand rentals business and higher-than-expected margins on the sale of its old El Monte fleet.

Chief executive Grant Webster said a detailed 2018 forecast would be given at THL's annual meeting in October, but gave an initial net profit range of $36 million to $39 million.

"There are a number of achievements within the result which should be celebrated and yet, we can clearly see more opportunities for improvement as we head towards the FY20 goal of $50 million NPAT," Webster said. "The year’s review should be dominated by the announcements we made in December 2016. The acquisition of El Monte to take us to a clear number two position in the USA, the investment in Roadtrippers - a leading travel and technology company in the USA - and the pilot of Mighway all reset the way we think about North America."

THL's purchase of the El Monte rental and sale business was effective from January 2017, though that segment's peak season is between July and September meaning the second half of the year ending June 30 is mostly off-season. That purchase still added $33 million to revenue and $1.1 million to net profit, the company said.

Net debt increased to $176 million from $79 million in 2016, and the company's debt to earnings before interest, tax, depreciation and amortisation ratio is at 1.9, compared to 1.4 a year earlier. It is forecasting net debt to rise to around $200 million by Dec. 31, with a debt:ebitda ratio of about 2.

"We operate in an industry that’s in a growth phase, we deliver compelling experiences and we are a business that has improved, is still improving and is prepared to take some careful risks for future substantial growth," Webster said.

Rental earnings before interest and tax (ebit) in the New Zealand segment rose 57 percent to $24.2 million, with Australian ebit up 16 percent to $7.8 million while US Road Bear ebit dropped 2 percent to $12.2 million. Fifty-two percent of the company's revenue came from New Zealand in the year, 27 percent from the US and 21 percent from Australia.

The board declared an 11 cents per share dividend, with an Oct. 3 record date, payable on Oct. 16. That takes the annual payout to 21 cents per share, 11 percent higher than 2016.

The shares last traded at $4.42 and have gained 20 percent this year. The stock rallied into this result, up 3.5 percent in the past week, with the market expecting a good performance given the continued strength of tourism numbers in New Zealand. The stock has a mean target price of $4.29 and is rated a 'buy' from an average of four recommendations compiled by Reuters.


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