THL predicts first-half loss

Motor home rentals operator Tourism Holdings is expecting to report an operating loss for the first half of the current financial year as it feels the brunt of a slowdown due to the worldwide credit crunch.

For the half year to December 2007 THL made pre-tax operating profits of $7.4 million and after tax earnings of $4.9 million. But the company told shareholders at the annual meeting in Auckland today that it would slump to an operating loss for the first half this year, while there would be a small after-tax profit due to asset sales.

"We expect a very challenging second six months as well," chairman Keith Smith said. "But we are unable to fully quantify the impact on the year end at this point. However, reported net profit after tax for the year will be well below last year's $14.3 million."

Smith said in the light of current market conditions the board had "deemed it prudent" to suspend market investigation of expansion into further geographical markets for the rentals business - the US in particular.

Chief executive Trevor Hall, who is leaving THL in December to be replaced as CEO by Grant Webster, said that the summer bookings position was looking "challenging". The company's latest information showed that bookings in its Australian business were down 9 per cent on the same period last year, while New Zealand bookings were 13 per cent lower.

"Nevertheless, the new wide-body aircraft are still pointing our way with pricing initiatives currently being marketed. Our own marketing campaigns are constantly being reviewed and our online sales growth remains impressive year-on-year.

"...Of all the sizable companies in the New Zealand and Australian tourism industry, THL remains one of the strongest and best positioned for the upturn - and for opportunities to examine distressed assets as they present," Hall said.

Hall said that THL needed, however, to take swift action to reduce costs. Recently announced changes to the company's management group that would see a number of management positions either not being replaced or made redundant would reduce costs by about $1.7 million.

"With the ongoing challenges in the tourism industry, it is becoming evident that further job losses will occur in the industry throughout New Zealand and, sadly, Tourism Holdings' staff and management will not be immune."

Hall said THL was "delighted" incoming Prime Minister John Key had indicated he would take the tourism portfolio and saw it as a sign of recognition of the current and future value of tourism.

"If there is a deepening of the global economic woes, we will need sensible intervention from the new government to maintain quality and professional tourism operations through tough times. I urge the new Minister of Tourism to act with urgency and quickly engage the industry."

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