Tourism Holdings drives up earnings after quake

Tourism Holdings Chief Executive Officer Grant Webster. Photo / Dean Purcell

Tourism Holdings is boosting its earnings forecast after better-than-expected United States vehicle sales and improved rentals following the Christchurch earthquake.

The NZX-listed tourism operator - which is the target of a takeover attempt - upgraded its forecast operating earnings before interest and tax (ebit) for the year ending June 30 to $4 million from break-even. Its operating loss after tax is now put at $1.4 million, compared with a previously expected $4 million loss.

Tourism Holdings' assets include car and motorhome rentals in Australia, New Zealand and the US, Waitomo Glowworm Caves, motorhome manufacturing in Hamilton and Kiwi Experience backpacker transport.

The improved outlook included better-than-expected vehicle sales volumes and margins in the US, which would result in a small earnings gain for the six months ending June 30 for the Road Bear RV Rentals and Sales business bought last year.

New Zealand rentals improved primarily because of motorhome use after the earthquake in February. Costs had also improved compared to the previous forecast.

Tourism Holdings forecast earnings for the 2012 financial year of about $17 million, with net profit after tax of $6 million.

Chief executive Grant Webster said: "We're happy that that's a good step forward from where we are and it's a realistic step forward and then we'll be looking for further gains the following year."

The company was looking closely at airline capacity, exchange rate and economic stability.

"That high Australian dollar is spooking people quite a lot and again causing a real need for discounting by operators."

Goodwill carried on the balance sheet for rentals businesses in Australia and New Zealand would be written down to zero value, resulting in a non-cash charge to the profit and loss account of about $27 million.

The goodwill impairment would result in a reported net loss after tax of about $28.4 million for the year ending June 30.

It was a non-cash item, with no money changing hands and it did not affect the banks, the company said.

Forsyth Barr head of research Rob Mercer said it was good to see the guidance go up a little, although it still reflected a low level of earnings.

"The market's still pricing the business on the fact that they're not getting a return on capital ... while this is a helpful recovery it's still considerably below where you'd want it to be."

Tourism Holdings' shares closed up 1c yesterday at 73c.

New Zealand-registered Ballylinch LP this month launched a partial takeover offer for the company at 67.5c a share for 40.85 per cent of the shares it does not already own, conditional on getting more than half the voting rights.

Tourism Holdings' independent directors reiterated a recommendation to not sell pending an independent adviser's report and target company statement due by the end of the month.