Campervan company dramatically cuts debt by selling off vehicles

Friday, 30 October 2020

Covid-19 has caused people to rethink their holiday plans with more buying their own campervans. (Video first published on September 24, 2020)

Tourism Holdings’ manufacturing arm has gone from building campervans to turning out more ambulances and mobile policing units in the wake of Covid-19.

And a huge sell off of the THL rental fleet helped the company avoid the need to seek a capital injection to stave off the impact of the global pandemic.

At its annual meeting on Friday shareholders were told THL had undergone the biggest organisational change in its history as it adapted to a lack of international customers.

Selling off surplus rental vehicles meant that since March net debt had been reduced by $153m to $35m.

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But chairman Rob Campbell warned there was a “hard road ahead” given the increasing likelihood that international borders would remain largely closed for the current financial year, and no profit or dividend was expected in 2021.

Net profit before tax was down 8 per cent to $27.4m for the 2019 financial year, and earnings before interest and taxes in the last four months of the 2020 financial year was down $10m on the same period last year.

THL’s domestic rental campaign led to about 20,000 bookings as Kiwis took to the road, attracted by greatly reduced hire rates.

Australian bushfires and Californian wildfires had taken a toll, and THL also had to contend with a disastrous fire at its Auckland depot.

But chief executive Grant Webster said efforts to meet market changes were paying off.

THL campervans in New Zealand had been used for quarantining overseas arrivals, and in the US they had accommodated essential employees at key power stations.

THL had reduced its fleet which stood at one rental vehicle for every 1900 Kiwis, compared with one for every 17,000 Australians and one for every 172,000 Americans.

Domestic hires in New Zealand tended to be shorter and mostly around weekends, and rates had to be cut by about 50 per cent to generate demand, compared with 30 per cent in Australia, while pricing in the US was the same, or even slightly above, traditional levels.

Webster said he expected the New Zealand business to make the greatest losses and capital investment would be reduced accordingly.

The Australian fleet would be maintained at current levels and in the US, where a number of competitors had reduced fleets and exited the market, new vehicles would be purchased creating a net debt of about $100m at year-end, the lowest in many years.

“One of our competitive advantages is our strong balance sheet relative to others that enables us to invest in new fleet and expand before others as the market allows.”

Webster also hinted at expansion down the track.

“We continue to look at the broader tourism market holistically and in New Zealand, [and] there may be some appropriate acquisition opportunities worth exploring given the current market conditions.”

Craigs Investment Partners analyst Mark Lister said THL was to be commended for its financial management through a very difficult period.

“I couldn’t believe they managed to get through this year without having to go cap in hand to shareholders to raise capital like we have seen Auckland Airport do and Kathmandu do.

“All these companies that have faced a really challenging period have had to come back and ask for a fresh injection of equity,” said Lister.