Tourism Holdings Ltd yesterday reported an interim financial result that disappointed the market, with a warning from chairman Keith Smith about an uncertain climate for forward business.
The financial result for the six months ended December did not make happy reading for investors.
Earnings before interest, tax, depreciation and amortisation (the accepted measure these days of a company performance) slumped 47% to $14.1 million from $26.5 million in the previous corresponding period (pcp).
Revenue fell 7% to $80 million to give a rate of return of 17.6% compared with 30% in the pcp.
The profit before tax of $6.9 million last year turned into a loss of $6.7 million this year and the $5 million profit from continuing operations in 2007 became a loss of $4.8 million this year.
The surplus attributable to shareholders was a loss of $300,000, compared with a profit of $4.9 million in the pcp.
THL shares were trading yesterday at 59c, a far cry from 2007 when they were trading at $2.80.
Back in 2007, ASX-listed MPS Living and Leisure lodged a full takeover of the company at $2.80 a share, an offer brokers recommended investors not take up.
The offer was described as opportunistic.
Forsyth Barr broker Peter Young said yesterday that the result was worse than he had expected and worse than market expectations.
The quality of earnings was poor, the outlook was challenging and the earnings revision was likely to be downwards.
"As expected, THL suspended the interim dividend but there is every chance it could pay a small final dividend of 3c to 5c.
This will be dependent on its gearing levels and outlook at the time of the full year result in August."
The sharp deterioration in earnings from THL's rentals division was disappointing but reflected the extraordinary trading conditions, he said.
In New Zealand, fleet utilisation and yields both declined due to a sharp decline in tourists from the United Kingdom.
In Australia, fleet utilisation was steady but yield was down as the lower-yielding Australian domestic customers increased their share to offset the fall in usage from European markets.
On a positive note, Mr Young said THL's net debt fell by $7.2 million to $68.5 million at balance date.
THL received $46 million from asset sales, partially offset by more investment in a new Australian rental fleet.
"We expect THL's debt will reduce further to around $55 million by June 30," Mr Young said.
THL's balance sheet was backed by hard assets and even with lower operating earnings, there was no need for THL to raise equity, he said.
Mr Smith said THL anticipated reporting a small net profit after tax for the full year, including gains from the sale of discontinued businesses.
