Merger costs to kick THL into loss

04:34, Nov 27 2012

Tourism Holdings expects to go into the red in the December half-year as it absorbs costs associated with the merger of its business with Kea Campers and United Rentals.

Speaking at the annual general meeting in Auckland, THL chief executive Grant Webster said it expected a net loss of between $1 million to $5m in the six months to December, down from a profit of $4.2m at the same time last year.

Earnings before interest and tax is forecast to drop from $11.5m to between $4.2m and $5m, and revenue to decrease from $108m to $105m.

"This is well down on last year's result due to costs associated with the merger and the fact that last year the New Zealand rentals business benefited from the one-off contribution of the Rugby World Cup," Webster said.

THL bought the assets of the two companies for $69.5m, which included the refinancing of $50.9m of debt. The company also spent $1.2m on related acquisition costs.

However, the company thinks its 2013 full year profit will still improve on pre-merger results - $6.8m, up from $6.1m if it hadn't merged.

A glut of campervans on the rental market and a lack of foreign visitors forced the merger. 

The entity has assets of $157m, combined revenues of $95m and vehicle fleet of 2500, though this will reduce to a total fleet size of 1800 within two years.

The merger of the large motorhome providers was settled on October 31 and it had gone "seamlessly", he said. 

The company's merger strategy was to maintain its market share of 45 per cent, increase customer satisfaction, cut fleet and staff numbers, and sell properties surplus to requirements, he said.

It expects a rapid cut in debt from $158m to $117m by the end of June 2013, with a key part of achieving this goal the sale of its Hamilton building that has a book value of $8m.

Over the next two years the company plans to rebalance where it gets its return on funds, to a more even split between rentals, manufacturing and sales. 

Webster said the launch of its new small van-sized budget motorhome Mighty Jackpot was an example of that, and demand for the vehicle had been strong since October.

Webster said the company had undergone "intense change" during the year even before the merger, after reconfiguring its manufacturing operations, buying a new brand in Australia and cutting fleet numbers in its New Zealand rentals business.

The outcome for the year was still highly dependent on the performance of its core European and UK markets, where the economic conditions underpinning tourism in those markets remained a concern, he said. The company's cost base had reduced in response.

Chairman Keith Smith announced he planned to retire at next year's annual general meeting. 

Director Rick Christie retired after 14 years on the board, and former Fisher & Paykel CEO John Bongard was re-elected to the board.

A sub-committee led by non-executive director Graeme Wong is looking for a successor to Smith.