Tourism Holdings ‘troubled’ result forecast; Forsyth Barr says investors need assuarance

Tourism Holdings has a fleet of rental vehicles in NZ, Australia, Britain, Canada and the US.

Tourism Holdings (THL) will report a “troubled” full-year result tomorrow, Forsyth Barr analysts say.

In May the camper van and tourism company downgraded its earnings forecast because of a weakening economy.

It said then it expected its net profit in 2024 to be between $50 million and $53m. THL’s previous guidance, issued in February, was for a net profit of around $75m.

Forsyth Barr analysts Andy Bowley and Hugh Lockwood are forecasting a net profit of $52m, up 4% on last year.

They say a materially weaker second half stems from a significant slowdown during the fourth quarter due to declining vehicle sales demand impacting both (new and ex-fleet) vehicles sales margins.

“Investor confidence is in need of restoring, which we expect to take time. At best, investors can expect small steps in that direction at this result. Further reassurance over the balance sheet will help,” the analysts said.

THL said in its downgrade announcement it expected to be compliant with its banking covenant assessments for the last quarter.

The company said it would engage with its banking syndicate to try to amend its covenant package to better reflect current trading conditions.

THL shares started the year at $3.80 but today were trading at $2.10.

Forsyth Barr identified key issues likely to feature in tomorrow’s announcement:

Rental yields/utilisation: At the May 2024 profit warning, management suggested that rental yields progress had largely met management expectations, though referred to a recent slowdown in forward booking intakes for the Australasian shoulder season.

Vehicle sales: Sales margins and volumes have been under pressure in all regions, particularly Australia. This reflected lower cyclical demand, the key driver of weak 2H24 profit performance.

Capital spending (Capex): THL previously guided to about $170m of net fleet capex. Given the weaker vehicle sales market, Forsyth Barr expects net fleet capex of about $200m. A material drop in planned capex for 2025 is expected as THL manages both its fleet and balance sheet.

Outlook commentary: THL said in May that its expectation for 2025 net profit was below $77m. Consensus is currently at $62.8m. Profit growth should be supported by Apollo synergy realisation, but is ultimately reliant on rental yields, and vehicle sales margins and volumes. Investors expect THL to remove or lower its $100m net profit target for 2026.

Disclosure changes: THL will provide some revised disclosure in its investor presentation, including: (1) a focus on (monthly) average rental fleet size, (2) RevPARV (revenue per average rental vehicle) based on average fleet size, (3) enhanced reporting around vehicle sales, and (4) focussing on average net debt given seasonal fluctuations during the year.

Grant Bradley has been working at the Herald since 1993. He is the Business Herald’s deputy editor and covers aviation and tourism.