Reducing the fleet pays off for Tourism Holdings

Tourism Holdings put in an impressive effort to consolidate and improve its operations -- and the result has been a big boost in profitability.

Tourism Holdings is the largest motorhome rentals operator in Australia and New Zealand under the Maui, Kea, United Campervans, Britz and Mighty brands, and the company has lowered the overall fleet size to make it more competitive.

It also consolidated its RV manufacturing facilities at Kea's Albany plant and established Motek in Melbourne to service Australian rentals.

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Tourism Holdings won the Best Growth Strategy award after reporting net profit of $20.1 million, up 81 per cent, for the 2015 financial year ending June, while operating profit was $32.1 million, up 41 per cent.

The profits were achieved on total revenue of $236.7 million, with costs of $171.4 million.

The sell-down of its motorhome fleet enabled Tourism Holdings to reduce net debt from $119.6 million (2013 full year) to $69.2 million (2015). The company has lifted its full year dividend to 15c.

The judges say Tourism Holdings' improved growth is a good story. "We have seen this coming for a number of years with its investing and buying (Road Bear US acquisition and merger of United and Kea NZ), and it has a good spread of independent directors from different boards in New Zealand."

Judge Sandy Maier says Tourism Holdings is made up of a number of businesses and it has established a co-ordinated strategy. "It is building momentum and we are impressed by the projections and set of actions."

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As well as the motorhomes and manufacturing facilities, Tourism Holdings operates leading attractions and guided experiences -- Kiwi Experience, Waitomo Glow Worm Caves, Ruakuri Cave, Aranui Cave and Black Water Rafting.

The 2015 operating profit for the New Zealand Rentals division was $12.2 million, up 65 per cent; Australian Rentals $6.1 million, also up 65 per cent; United States Rentals $8.9 million, up 17 per cent; and Tourism division $7.7 million, up 16 per cent.

Kiwi Experience completed the introduction of a new leased fleet.

The sharp fall in fuel prices, depreciation of the NZ and Australian dollars and increasing number of visitors from UK, Germany and United States are all expected to help Tourism Holdings meet its newly-stated target of net profit of $30 million by 2019.

Finalist: IAG New Zealand

IAG New Zealand's move to buy competitors in tough times and in a "hard as nails" industry is bold and interesting, say the judges.

"Acquiring competitors to grow is a valid growth strategy and IAG NZ has had to put runs on the board -- the results are good," according to the judges.

Insurance Australia Group (IAG) bought AMI and Lumley insurance companies, making it New Zealand's largest general insurer and the biggest player in intermediate insurance, for commercial cover sold by brokers.

IAG NZ made a full-year 2015 profit of $26 million as its parent company reported a $1.2 billion profit, representing an insurance margin of 10.7 per cent. Net natural peril claim costs increased $543 million, and gross written premium grew 17 per cent to $12.5 billion. The net profit was $799 million.

IAG said in announcing its latest result: "New Zealand continued to perform strongly as the business maintained its market-leading position, with gross written premium growth of 22.8 per cent derived from the acquired local former Wesfarmers business (Lumley), which was augmented by a favourable foreign exchange effect."

Underlying profitability was expected to remain strong, considering there will be further benefits from continuing to integrate the Wesfarmers business. The implementation of the quota share agreement with Berkshire Hathaway would reduce earnings volatility from 20 per cent of the group's business, IAG said.

Finalist: Z Energy
Fuel distributor and service station operator Z Energy has undoubtedly added value to its forecourts and stores and modernised the former Shell brand.

The judges knew Z Energy was a credible finalist held back to some extent by the pending decision from the Commerce Commission on the company's purchase of Chevron NZ.

The judges felt it might also be a little early to fully test Z Energy's long term growth strategy.

Z Energy reported an increased net profit of $67 million for the six months ending September 30 on the back of $1.31 billion revenue.

The full year 2015 net profit was $7 million on revenue of $3.09 billion.

The company believes the synergy benefits from the Chevron takeover will be between $25 million and $30 million.

Chevron is expected to gross $150- $160 million in earnings for the full 2015 year, up from $132 million in 2014. Analysts have increased Z Energy's 2016 gross earnings to $274 million, up $12 million, and believe the company has positive earnings momentum from the refinery. Fuel margins also remain firm.