Tourism Holdings shares fell 24 per cent when trading opened after the company lowered its full-year earnings guidance by as much as 22 per cent and said a decisive operation and capital review of its US operations is now underway.
The company, which rents and sells campervans, expects net profit of $25 million to $28 million for the year ending June 30. When reporting first-half earnings in February, Tourism Holdings signalled annual profit would be around $32 million, already lower than its previous guidance of $32 million to $34 million.
The stock fell to $3.85, the lowest since June 2017. It recently traded at $4.05 as bargain hunters moved in after the initial tumble, said Grant Williamson, a director at Hamilton Hindin Greene. He noted it was the second downgrade in a "relatively short period of time," and as a result investors had "treated it harshly."
"I think investors are concerned," he said, noting the company has recently expanded aggressively which creates some risk.
Tourism Holdings said the main reason for the downgrade was the ongoing deterioration in US vehicle sales.
"THL's expectations for the financial year are now substantially below previous forecasts," it said.
According to the Financial Times, US auto sales rose in 2018 but Ford and General Motors reported a drop in domestic sales that pointed to a slowdown in 2019.
Tourism Holdings' US operations include Road Bear, Britz and El Monte RVs rentals, which they also sell. It also has a 50/50 joint venture with Thor Industries, a motorhome manufacturer in the United States.
The TH2 JV runs the Cosmos digital platform to RV owners and operators, and the Mighway and Roadtrippers businesses.
Earlier this month, TH2 merged its trans-Tasman CamperMate and Roadtrippers businesses with Australia's GoSeeAustralia and Outdoria to create one entity.
In the six months to Dec. 31, Tourism Holdings posted a 23 per cent decline in first-half profit as the rental RV operator continued to invest in its joint venture with Thor but reiterated its expectation for TH2 to be a "significant earnings contributor in the future." That's one of several strategies underpinning Tourism Holdings' stated aim of doubling the value of the business within three years.
Performance in the New Zealand and Australian markets remained on track with a solid outlook, Tourism Holdings said.
The company said it will provide an update on the review before the end of May.