Tourism Holdings turns focus to campervan sales as rentals hurt by Covid

Friday, 26 February 2021

Tourism Holdings is facing the biggest single challenge in its history with international borders closed to tourism.

Tourism Holdings has managed to keep its revenue stable in the first half of the year by selling down its campervan fleet as cash from rentals was cut in half after Covid-19 wiped out the international travel market that underpinned the business.

However that wasn’t enough to prop up profits, and the company on Friday posted a loss of $1.8 million for the six months to the end of December, from a profit of $13.1m in the year earlier period.

Revenue slipped 1 per cent to $205.8m, as money from rentals fell 50 per cent to $64.8m, while vehicle sales jumped 132 per cent to $137m.

To bolster the business during the biggest single challenge the company has faced in its history, Tourism Holdings is selling more campervans, with 1,786 vehicles sold in the half, 89 per cent more than it sold in the same period the previous year. It’s used that money to pay down debt, with about $106m paid off during the half, bring net debt down to $22m.

“Tourism Holdings has reduced debt significantly, in particular over the last six months, and is positioned well to face uncertainty,” said chairman Rob Campbell. “The manner in which we operate the business and the decisions we make today are critical to the long-term positioning and success of Tourism Holdings.”

New Zealanders have heeded the message to get out and see their backyard, with holiday hot spots even busier than usual. But the tourism industry is still struggling to fill the $6 billion hole left by international tourists.

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Chief executive Grant Webster said the company plans to increase its debt to about $90m over the remainder of the financial year as it re-invests in new fleet, given the volume of vehicles recently sold.

The US market has been a bright spot for Tourism Holdings, where motorhomes are being called ‘Covid cocoons’.

“We have confidence that we can sell vehicles to generate a profit, based on the sales performance over the last 12 months,” Webster said.

The company has agreed to acquire the half interest in vehicle manufacturer Action Manufacturing from its joint venture partner for $9m. Some $7.5m of the payment will be in Tourism Holding shares issued at $2.30 each, and the remaining $1.5m paid in cash.

The manufacturer suffered a 2.6 per cent decline in pre-tax profit to $700,000 in the half as Tourism Holdings pulled back motorhome production and that trend is expected to continue for the remainder of the year. However, the business is expected to recover as Tourism Holdings builds up its fleet again to meet rental and sales demand, the company said.

In New Zealand, domestic rental revenue surged more than 500 per cent in the first half, but that wasn’t enough to offset the loss of revenue from international tourists, which normally makes up between 90 and 95 per cent of its business here. As a result, total revenue in New Zealand slumped to $14.6m from $40.5m in the same period last year

In Australia, rental revenue fell to $14m from $37.7m as domestic travel was hurt by interstate travel restrictions in place across most of the half. However, the company believes the Australian rentals business can be profitable in a domestic environment with no travel restrictions, and it expects significant improvement in the second half with a moderate number of short, interstate border closures.

One bright spot has been the company’s United States business, which increased pre-tax profit 34 per cent to $16.6m. That market has been helped by a bigger population and less concern around motorhome travel in Covid times, with a rise in the popularity of ‘Covid cocoons’ like motorhomes.

Rental revenue in the US slipped by a lesser amount than other markets, falling to $36.2m from $52.4m, and the company said domestic bookings achieved higher yields although were for a shorter time.

”While we consider that our result for the half has been positive in the circumstances, particularly within our USA business, we are realistic about the losses that we will be incurring in the remainder of 2021,” Webster said.

He said it was difficult to provide guidance for the full year, but they are managing the company with the expectation that there will be no international travel in the period, and continue to expect a loss.

In December, the company said its loss for the full-year was likely to be more than the $12.8m expected by analysts.

Tourism Holdings won’t pay a first-half dividend.

Shares in the company slipped 0.9 per cent to $2.17 in late morning trading on Friday and have fallen 15 per cent over the past year.