Tourism Holdings returns to profit, resumes dividends, rewards staff

Tuesday, 29 August 2023

Tourism Holdings has emerged stronger from the Covid-19 pandemic, the biggest single challenge in its history.

Campervan company Tourism Holdings returned to annual profit and resumed dividend payments after emerging bigger and stronger from the Covid-19 pandemic.

The world’s largest campervan rental company reported a $49.9 million profit in the year to the end of June, a turnaround from a $2.1m loss the previous year. Revenue jumped 92% to $663.8m.

The company’s shares were the biggest gainer on the NZX on Tuesday afternoon, surging 15% to $4 - their highest level in more than three months.

Tourism Holdings, which builds, rents and sells campervans, faced the single biggest challenge in its history when Covid-19 closed borders around the world, wiping out the international travel market that underpins its business.

It sold down its campervan fleet, achieving record profit margins, and took full control of its vehicle manufacturer Action Manufacturing and its UK motorhome partnership Just Go. In November it acquired its largest rival, Australia’s Apollo Tourism & Leisure, which strengthened its position in its home markets, enabled it to expand into Canada and giving it a listing on Australia’s ASX market.

“The result reflects an excellent performance and is evidence that the new [Tourism Holdings], following the merger with Apollo, is a larger and stronger entity,” said chairperson Cathy Quinn.

The merger created a platform for future growth and the company planned to provide further guidance on its medium-term growth aspirations at its annual meeting of shareholders, it said, noting that it would continue to explore acquisition opportunities.

Tourism Holdings announced a dividend payment of 15 cents per share, having not paid a dividend since 2019, prior to the pandemic.

Tourism Minister Peeni Henare addresses a tourism meeting at Air New Zealand’s HQ in Auckland.

The company said its new dividend policy would target a payout ratio of 40% to 60% of underlying net profit after tax which it said factored in its equity position and need to invest in its fleet. Its previous policy prior to Covid-19 was to pay 75% to 90% of net profit in dividends.

Tourism Holdings has been ramping up its vehicle manufacturing at pace to meet the pent-up demand for travel coming out of the pandemic.

“Tourism is definitely remaining resilient,” said chief executive Grant Webster. “People want to travel, they are clearly foregoing other items of expenditure so that they can take their short haul, or long haul trip, and we do see long term demand remaining positive in tourism.”

The company’s capital expenditure jumped to $337m in the latest year from $181m the previous year as it invested in growing its rental fleet to meet increasing demand. After taking into account fleet sales, it spent a net $162m, and it expects to spend a similar amount in the coming year as it grows its fleet in New Zealand, Australia and the UK.

Tourism Holdings had 7233 campervans at June 30, an extra 550 vehicles across the combined businesses. It pulled back its growth expectation out to the end of its 2025 financial year to below 9500 from 10,000.

“It's really important that we ensure that supply stays slightly behind demand and that we maintain that opportunity from a yield perspective,” Webster said.

While margins from campervan sales were normalising from their highs, the company’s average rental yields were either continuing to grow or holding recent increases, he said.

Compared with pre-pandemic 2019 levels, New Zealand average rental yields were up about 55%, Australia up about 85%, US up about 40%, Canada up about 20% and UK up about 50%.

“We know that eventually we will see some declines, but we've had no indication that pre-Covid yields will return, no indication, those days appear past,” Webster said. “We do see yields broadly being stronger than what they've been historically.”

The latest year included seven months of trading from its Apollo business acquired on November 30, 2022, and the acquisition of the remaining of the remaining 51% interest in Just Go on September 30, 2022.

Its latest profit included several one-time items related to mergers and transactions. Excluding those, underlying net profit was $47.8m compared with a loss of $5.4m the previous year.

Tourism Holdings is rewarding about 1800 eligible staff with $1000 worth of shares each, which it said was in recognition of their dedication and the company’s return to profitability.

“I am hugely proud of the efforts of our crew over what was the most challenging period in our company’s history,” Webster said.

“The results that we are now achieving are a real testament to all our [Tourism Holdings] crew globally (old and new), who come to work every day with an immense passion for creating unforgettable journeys.

“The board and executive believe in the positive future of [Tourism Holdings], and we want our crew to be able to benefit from the success that we expect [Tourism Holdings] to have.”

The board reviewed Webster’s remuneration following the merger with Apollo.

His base salary increased to $901,333 for the 2023 year, up from $679,556 in 2022. He had voluntarily reduced his salary the previous three years.

Webster’s remuneration totalled $1.8m in 2023, including a share retention scheme, long-term incentive scheme, and bonuses. That’s ahead of $1.4m in 2022.