Debt reduction and a dividend repayment from listed Tourism Holdings reflect positive signs for the year ahead, albeit still in challenging times for the tourism sector.
THL yesterday posted a full-year to June result with operating revenue up to $182.3 million from $169.3 million the year before. The before-tax operating profit of $6 million turned around from a loss of $3.2 million.
THL shares were up 2.6% at 79c after the announcement.
Forsyth Barr broker Peter Young said the short-term demand for THL's outlook "remains challenging", but he expected all of THL's divisions to improve sales and earnings before interest and tax during the full-year 2011.
"We're very encouraged by the $19 million decline in THL's net debt from, $56 million to $37 million. This also highlights why we have emphasised that short-term profit is less important for THL," Mr Young said.
Chairman Keith Smith said, while demonstrating positive momentum, THL required a higher return on the capital invested in the business.
THL focused successfully on addressing key operational issues within the company during the past 18 months, to align the business model to the visitor environment.
"The balance sheet is strong and the company is well positioned to continue its focus on the customer," Mr Smith said in a statement to markets.
Craigs Investment Partners broker Chris Timms said THL's head delivered "a reasonable recovery result", reactivating a dividend and dealing with debt.
However, he cautioned the earnings before interest and tax of its New Zealand van rentals division, historically a large earner, was down 58% to $1.9 million.
The nationalities of people visiting New Zealand were changing, and THL had to focus on European customers in the year; but it was likely to be well placed already to make the most of Rugby World Cup travellers, Mr Timms said.
Mr Smith said there was a welcome increase in Australian arrivals to New Zealand, but unfortunately, those visitors had a shorter length of stay than other nationalities.
"The decrease in hire duration translated to increased costs," Mr Smith said of New Zealand rentals.
