Purchase slows down travel chain

The acquisition last year of a rival travel chain has dragged Gullivers Travel's full-year profit below its prospectus forecast.

Gullivers reported a net profit of $7.8 million for the year to March 31, below the prospectus forecast of $8.4 million. But the firm's lower profit was due to the $23.1 million purchase of the PIH group of assets, which included 60 retail travel outlets.

The company posted $24.3 million in earnings before interest, tax, depreciation and amortisation - 0.4 per cent above the prospectus - from revenue of $610.4 million - 31 per cent above prospectus.

Andrew Bagnall, outgoing managing director, said: "Gullivers has been taking an increasingly bigger slice of the overall travel market of New Zealand".

"We've grown substantially in market share, probably about 3 percentage points for the whole market over the year."

Gullivers' shares, which were issued at $1.60 in December 2004, closed down 5c at $1.67 yesterday. They have traded between $1.16 and $2 in the past year.

Bagnall said revenue would keep growing despite the falling currency and slowing economy.

"We are just going to continue to grow steadily and strongly and primarily through the rationalisation of our acquisitions and continue the growth in what I call our strategic growth areas."

These included corporate travel management, retail and online.

Gullivers owns United Travel and Holiday Shoppe stores.

First NZ Capital research analyst Jason Familton said the Gullivers result was positive.

Although the headline numbers were below forecast, they had come out well above prospectus once the acquisition cost was stripped out.

"They've continued to be able to grow the business despite some headwinds based on the fall in currency and from the economy slowing down a little bit."

He expected more one-off costs in integrating PIH.

"As long as that continues to keep on track and the integration goes well this year, it should be reasonably earnings accretive in the future as well."

He said the corporate business was likely to grow quicker than the wholesale and retail.

Bagnall will resign as managing director from July 1 but remain on the board. Bruce Cotterill, Noel Leeming chairman, will replace him.