Southern Travel's dismal half year not as dire as expected

By NZPA

Thursday 23rd February 2006

Tourism company Southern Travel Holdings has reported its December net profit fell 53% to $238,000, but it was not as dire as a warned in November.

The NZAX listed company warned in November the fall-off in Japanese tourism could see the profit down by up to 80%.

Southern Travel raised almost $6m via an IPO on the NZAX in 2004 with shares offered at $1.30 each. They closed yesterday at 44c.

Its June 2005 year net profit of $884,000 was less than half the prospectus forecast of $1.84m. There was no forecast for the 2006 in the prospectus but the company predicted good growth prospects.

No dividend was declared, due to the uncertainty of the trading environment and a final dividend would be considered once full year results to June 30 2006 were available.

Revenue in the half year fell 10.7% to $18 million and pre-tax profit fell 56% to $336,000. Earnings per share fell to 1.81c from 3.9c.

"Whilst this result is disappointing it is an improvement from the earnings update provided in November 2005," chairman Ross Keenan said.

The improvement was made by slashing costs.

During the period the overall outbound Japan market declined by 2.5% while tourist numbers from Japan to New Zealand declined almost 10% and Japan to Australia by 4%.

Keenan said improvements in yields were partly offsetting the fall in tourism numbers.

"However, the increasingly competitive marketplace for Japan travellers remains evident."

The same factors would affect the second half - lack of price competitiveness due to the strong New Zealand and Australian dollars and reduced airline capacity from Japan.

"The company is accordingly taking a very cautious view of the remainder of the year as it embraces a continuing decline in overall attractiveness of the Oceania, whilst seeking to retain yield and achieving further cost efficiencies."

The IPO was organised by merchant bank Bancorp and broker McDouall Stuart.

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