Tourism Holdings Ltd was battening down the hatches for a tough six months and predicting that its after-tax profit for the present financial year would be "well below" last year's $14.3 million, shareholders were told at its annual meeting in Auckland yesterday.
THL had realised $69 million from the recent sales of assets, and in late August had booked a 7% increase in after-tax profit for the year to June, rising from $13.4 million last year to $14.3 million.
THL chairman Keith Smith reiterated earlier comments that the tourism sector faced several challenges during the next six to 12 months, while THL chief executive Trevor Hall warned THL would not be immune from job losses , and management knew they would have to "dig deep" during the next two years because of the difficulties ahead.
"Already there are signs of consumers cutting back on discretionary spending, and this is creating stress in some sectors of the tourism industry," Mr Smith said in his speech.
He yesterday said it was "prudent to suspend" investigation into offshore markets, especially in the United States, but THL was otherwise in a "sound position" to consider any opportunities to expand its core business.
In mid-June, at the same time as THL announced an up-to-$3 million profit downgrade to a range of $15-$16 million, Dunedin company Skeggs Group paid $17.3 million for the Milford Sound assets of THL, which included its Red Boats passenger service. In total, $69 million of tourism assets were sold or joint-ventured, including Johnstons Coachlines, Kelly Tarltons aquarium, Airbus and Kiwi Experience.
From that, $5.8 million was booked in this financial year, with the balance of $63.2 million being settled in September and due to appear in THL's 2009 accounts.
For the year to June 2008, after-tax $14.3 million profit iucluded a loss of $3.3 million against THL caravan manufacturer CI Munro as well as the $5.8 million from the total asset sales.
Outgoing chief executive Trevor Hall said the uncertainty of the times meant stock was oversold, with tourism "at the sharp end of world economic shocks" and noted "further job losses would occur" in the sector, from which THL management and staff would not be immune.
"I think we can safely predict that the pressure on world economies will make it impossible to reach profit levels anywhere near those of the past two years," Mr Hall said.
THL's stock has steadily weakened during the past six months, from a high of $1.90 to trade around 87c yesterday, ABN Amro Craigs broker Peter McIntyre said.
Tourism operations had been affected.
Like retail, they were at the front end of the downturn in discretionary spending and had struggled, he said.
There would be no resolution during the next six to 12 months, but tourism was cyclical and would rebound over the longer term, he said.
Mr Hall said THL was in a dominant market position, had already invested in new technology, had the largest and most modern rental fleet in New Zealand and Australia, and had low debt on a "strong" balance sheet.
"Our New Zealand business is in decline by 13% [compared to Australia's 9%] for the same period [last year]. New Zealand lacks the size of Australia's domestic economy and this is the main reason why the decline is greater," he said.
He said THL's half-year report, due in about two months, would report a small after-tax profit due to the sale of assets, and a firmer full-year profit expectation would be announced then.
