Tourism Holdings navigates challenges to hit profit target

Tuesday, 27 August 2024

Tourism Holdings is the largest provider of campervans for rent and sale in New Zealand and Australia.

Tourism Holdings has met its revised down profit target for the financial year, but says it will take longer than expected to return to pre-Covid levels.

The campervan company announced an after tax profit of $39.4 million for the year to June 30, a decline of 21% from the previous year.

Underlying profit after tax of $51.8m was down 33% on the year before, but within the reduced target of between $50m and $53m full year profit it announced in May.

That was a significant revision down from earlier guidance, released in February, which forecast its net profit to be about $75m.

But the company’s revenue was up 5% to $922m.

The Hawke's Bay Regional Council wants to cut funding for tourism, but industry figures say this would negatively affect the area.

Tourism Holdings chief executive Grant Webster said the results reflected a mixed set of outcomes by business area and geography.

While the underlying profit was still a significant number, it was below what the company thought was achievable, and well below earlier expectations, he said.

“Positively, the New Zealand rentals and sales, action manufacturing and New Zealand tourism divisions have all achieved record ebit results.

“This success is reflective of the recovery in international tourism to New Zealand as well as the continued growth of action manufacturing following several small acquisitions in the past few years.”

Tourism Holdings said operating conditions for the coming period were uncertain, but it expected an increase in underlying profit over the 2025 financial year.

Current rental forward bookings year-on-year were up in hire days over the next year within the company’s key markets of New Zealand, Australia and North America, it said.

“But booking intakes in recent weeks indicate that the recovery is slowing, potentially impacting rentals in calendar year 2025.”

That indicated it might take longer than initially expected to return to pre-Covid levels, which aligned with broader industry feedback and sentiment, it said.

Tourism Holdings’ Grant Webster says the company’s underlying profit was significant but below what could be achieved.

“We see these headwinds as cyclical and associated with the wider economic downturn, rather than any structural change for the RV (recreational vehicle) industry.

“We have a positive longer-term outlook for the RV category and believe it is positioned to increase its share of the broader tourism market.”

Tourism Holdings chairpeson Cathy Quinn said the company was prepared for the uncertain and difficult operating environment.

It had balance sheet strength and renewed financing arrangements that positioned it well to manage persisting economic pressures, she said.

“We will continue to focus on improving operational performance, cost reduction, primarily on fleet as our largest single investment, and achieving target returns on capital across all our businesses.”

The company had previously stated a goal to achieve $100m profit after tax in the 2026 financial year, and it believed its core assumptions supporting that goal were intact.

“However, the economic climate in the key markets of New Zealand and Australia, and more broadly overseas, have deteriorated more than anticipated when we set this goal,” it said.

“And in our view makes achievement of this goal by the 2026 year unrealistic.”

Tourism Holdings owns the Maui, Britz, Mighty, Kea Australia and Motek Vehicle Sales brands. It also operates several tourism businesses in New Zealand, including Waitomo Glowworm Caves and Kiwi Experience.

In 2022, it acquired its largest rival Australia’s Apollo Tourism & Leisure, and became the world's largest commercial RV rental operator.