TOURISM HOLDINGS LTD FY16 INTERIM RESULTS PRESENTATION 23 February 2016
H1 FY16 Highlights Earnings before interest Revenue and tax* Net profit after tax $15.0M $134M $8.2M up 20% up 45% up 42% H1 EBIT 15.0 10.6 Interim dividend 7.2 9 cps $M (partially imputed) 5.3 up 29% FY13 FY14 FY15 FY16 * EBIT excludes joint venture and associates earnings 2
Results Summary NZD $M H1 FY16 H1 FY15 Var % Operating revenue 133.7 111.4 22.3 20% Earnings before interest and tax* 15.0 10.6 4.4 42% Operating profit before tax 13.7 9.5 4.2 44% Profit after tax 8.2 5.6 2.6 45% Earnings per share (in cents) 7.2 5.0 2.2 44% H1 Operating Profit Before Tax (NZD$M) 1.3 0.9 3.7 0.1 0.1 13.7 1.1 0.0 9.5 Profit Before Rentals Rentals Rentals Tourism Group Action Interest Profit Before Tax H1 FY15 NZ Aus USA Group Services Manufacturing Tax H1 FY16 * EBIT excludes joint venture and associates earnings 3
Rentals NZ Rental income growth of 11% achieved with a similar sized fleet. H1 FY16 - NZD Flex fleet did not start until late December. NZD $M H1 FY16 H1 FY15 Var % Rental income 26.5 23.9 2.6 11% Improved profitability mainly due to Sale of goods 16.3 13.6 2.7 20% small increase in utilisation and yield Costs 42.8 38.6 (4.2) (11%) improvement. EBIT 0.0 (1.1) 1.1 98% Costs well controlled, with 3% growth on operating costs. Total cost increase of 11% arises from higher vehicle sales volumes and higher average net book value of vehicles sold. Vehicle sales volumes up 19 units on Vehicle Fleet LY. Vehicle sales contribution lower Units: H1 FY16 H1 FY15 Var due to mix of vehicles sold. Fleet Sales H1 218 199 19 Core rental fleet is lower than Dec Fleet Purchases H1 314 196 118 FY15, with flex fleet (short term Closing Fleet Dec 2,038 1,996 42 inventory to be sold after peak) providing growth. Peak season demand is strong. 4
Rentals Australia A flat result on FY15. Includes H1 FY16 - NZD upfront costs for Telematics and Melbourne RV Sales Centre, with NZD $M H1 FY16 H1 FY15 Var % benefits not yet realised. Rental income 30.3 29.9 0.4 1% Sale of goods 5.9 5.0 0.9 18% Rental income was up 2% in AUD on Costs 31.5 30.2 (1.3) (4%) FY15 due to higher utilisation with a lower fleet. EBIT 4.7 4.7 0.0 0% Vehicle sales have improved on H1 FY16 - AUD FY15. Melbourne RV Sales Centre is now open for direct retail sales, with AUD $M H1 FY16 H1 FY15 Var % momentum growing. Rental income 28.1 27.5 0.6 2% Sale of goods 5.5 4.6 0.9 20% Costs excluding vehicle sales were Costs 29.3 27.8 (1.5) (5%) up 4% in AUD on last year. EBIT 4.3 4.3 0.0 0% 4WD owned vehicles have been reduced and were replaced with leased fleet for peak 4WD season in Vehicle Fleet H1. Units: H1 FY16 H1 FY15 Var Fleet Sales H1 145 114 31 Fleet numbers down 61 units, mainly Fleet Purchases H1 172 155 17 due to 4WD fleet . Closing Fleet Dec 1,310 1,371 (61) 5
Rentals USA A strong EBIT result, up 25% in USD H1 FY16 - NZD terms and 61% in NZD. NZD $M H1 FY16 H1 FY15 Var % Rental income 16.9 11.4 5.5 48% Rental income was up 15% in USD Sale of goods 22.7 14.9 7.8 52% terms with higher utilisation, Costs 29.8 20.2 (9.6) (48%) increased fleet and improved yield. EBIT 9.8 6.1 3.7 61% Vehicle sales demand has been H1 FY16 - USD strong, with YTD sales ahead of expectations. Vehicle sales revenue USD $M H1 FY16 H1 FY15 Var % in USD was up 25% on LY. Rental income 11.3 9.8 1.5 15% Sale of goods 15.3 12.2 3.1 25% The development of the new Seattle branch is on track for opening in Costs 20.0 16.7 (3.3) (20%) summer 2016. Forward bookings are EBIT 6.6 5.3 1.3 25% meeting expectations. Fleet to be increased for summer 2016 by ~10% units. Vehicle Fleet Units: H1 FY16 H1 FY15 Var Fleet Sales H1 321 267 54 Fleet Purchases H1 155 40 115 Closing Fleet Dec 447 310 137 6
Tourism Group EBIT up 37%. Includes launch costs of new Waitomo Caves Homestead H1 FY16 - NZD offering café/ restaurant, retail and NZD $M H1 FY16 H1 FY15 Var % ticketing. Revenue 15.1 12.7 2.4 19% Costs 11.8 10.3 (1.5) (14%) Visitation growth across the shoulder EBIT 3.3 2.4 0.9 37% season and running into summer has been very strong. Chinese growth, in particular, is benefiting Waitomo. Kiwi Experience peak travel period started in late December, with travel volumes up strongly. ‘Glamping’ sites have been set up in 3 key stop-offs to ensure accommodation is available. The Waitomo Caves Homestead opened on schedule in December. Initial performance is in line with expectations. 7
Action Manufacturing NPBT H1 FY16 ( thl share) - NZD NPBT down on FY15, as expected, due to lower motorhome margins. NZD $M H1 FY16 H1 FY15 Var % This results in lower build costs for Revenue 15.6 14.1 1.5 11% thl. Costs 14.7 13.0 (1.7) (13%) NPBT 0.9 1.1 (0.2) (18%) H1 included first production of new KEA Breeze 4 berth and Action Pods, both used as flex fleet by Rentals NZ across summer peak. Continued progress on reducing costs of motorhomes. Debt outstanding to thl reduced by $1.3M. Focus on international opportunities for emergency vehicle market. 8
New Initiatives Update Flex Fleet Waitomo Caves Telematics NZ rental income has Homestead met expectations. Launch slow, but now Opened December. fitted in all Australian Forward vehicle sales Meeting expectations. vehicles and under pilot in looking positive. NZ. Speeding and other poor driving behaviour being positively impacted. Just Go Total Customer Provided fleet for flex Experience fleet initiative. Behind schedule. Growing fleet for next Mighway Functionality obtained high season. Vehicle owners signups through Geozone over 100 and growing. purchase being First rentals started in integrated into tablet late December. offer. 9
Business Model and Capital Flexibility thl recognises the capital intensity of the core business model and is adapting its approach to investment in fleet accordingly. Our traditional response to growing demand would be to increase long term core fleet. This potentially created fleet over-capacity when demand dropped, leading to yield and utilisation impacts and negative operating leverage. Flex fleet initiatives and balance sheet management are enabling thl to take advantage of the high demand periods without creating potential long term risk for the business. The following changes have been made to the business model to create more flexibility and resilience: Diversification – now operating in NZ, Australia, USA and UK. Reduced the core fleet. Introduced flex fleet with a fast stock-turn, building on the Road Bear model. Adjusted covenants with the banks, including creating allowances for shock events. Improved ROFE of the core business and balance sheet ratios. 10
Long Term Debt Versus Working Capital We have positioned the business model today to look at debt and working capital in a different way. T he accounting methodologies haven’t changed and fleet are still considered fixed assets. We are now positioning flex-fleet as, in essence, working capital as the purchase cycle and sale cycle are dramatically different to the past. Traditional Buy Sell Core debt | | | | | | | 0 1 2 3 4 5 6 Years Flex fleet Working capital Buy Buy Buy Buy Sell Buy Sell Sell Buy Sell Sell Sell 11
Capital Spend - Flexibility Flex fleet in FY16 takes the form of: USA fleet, turned over in 9-18 months NZ flex fleet – trialled in NZ for FY16 summer period, turned over in under 9 months. AU flex fleet – 4WD vehicles purchased under a buy-back arrangement for the 2016 winter season, turned over in under 9 months. The increase in forecast gross capex spend for FY16 is mainly funding flexible fleet that is turned over in under 18 months. Forecast core gross capex spend on long-term fleet is stable at around $60M. 12
Capital Structure Net Debt Net debt has increased to $90M, 100 3.0 predominantly funding flex fleet. 90 2.5 $6M 80 $14M $79M 70 Key ratios remain well within 2.0 $85M $90M benchmark Baa/BBB target rating Debt:EBITDA 60 measures and are considered $69M conservative. There is capacity for $M 50 1.5 value accretive acquisitions. 40 1.0 30 Ratio^ H1 FY16 H1 FY15 20 0.5 Debt:EBITDA # 1.3 1.4 10 Debt/Debt + Equity 38% 38% 0 - EBIT/Interest 8.1 5.5 June 2014 Dec 2014 June 2015 Dec 2015 EBITDA/Interest 15.5 12.7 Net Debt (lhs) LC Commitments* Debt:EBITDA (rhs) (incl LC commitment) * Commitments under the documentary letter of credit (LC) facility in June each year relate to work in progress on NZ fleet for the following season produced by AMLP. ^ Based on 12 months ending December. # Debt includes LC commitment. 13
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