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Edited Transcript of THL.NZ earnings conference call or presentation 27-Feb-20 11:00pm GMT

Half Year 2020 Tourism Holdings Ltd Earnings Call

Auckland Mar 20, 2020 (Thomson StreetEvents) -- Edited Transcript of Tourism Holdings Ltd earnings conference call or presentation Thursday, February 27, 2020 at 11:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Grant Webster

Tourism Holdings Limited - CEO

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Conference Call Participants

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* Andrew James Bowley

Forsyth Barr Group Ltd., Research Division - Head of Research

* Jack Crowley

Jarden Limited, Research Division - VP of Equity Research

* John O'Shea

Ord Minnett Limited, Research Division - Senior Research Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, good afternoon, and welcome to the Tourism Holdings Limited 2020 Interim Results Briefing. (Operator Instructions) I must advise you that this conference is being recorded today, the 28th of February 2020.

I would now like to hand the conference over to your first speaker today, Mr. Grant Webster, CEO of Tourism Holdings Limited. Please go ahead, Grant.

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Grant Webster, Tourism Holdings Limited - CEO [2]

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Thanks, Vincent, and thank you for the reminder that we're being recorded. I don't know how many times I say inappropriate things on these calls. So nice reminder. It's Friday lunchtime, so I know the Wellingtonians will be going, "What on earth are we doing listening to Grant when we could be out having lunch." So we'll try and keep it moving.

I have here with me some of the THL team, but obviously, Jen Bunbury is here; and Steven Hall is here as well. You all know both of them. We've got a couple of the rest of the team here as well. So look, let me dive into it, and then we'll get into the Q&A post that.

So we'll go through the presentation, but just a couple of comments to start. We'll go through it at a reasonable pace because I think there should be no significant surprises of note. We'll talk about what we think of the key points that you'd like to hear and that we'd like to share at the same time. But broadly, we're performing in the core. We're dealing with the events and the uncertainty in the appropriate way. Clearly, the U.S.A. and Togo Group are items of focus that we'll talk about some more. Rentals and sales in New Zealand and Australia are, what we would call, strong and we still believe we're very well-positioned in the markets in which we operate.

We've given some outlook commentary in terms of FY '20. But there is little to be said about FY '21. We'll talk a little bit more about that. Certainly, a reminder again before the Q&A. Because our approach at the moment is to note that, I just would say, we're certainly not medical experts, and we're certainly not psychics. We recognize that it's an uncertain and what everyone would call volatile time. The information that we have to date we don't believe is -- shows anything materially sort of different one way or another in terms of where FY '21 is hitting. We think if we were to speculate on what was happening then we would be falling into that area of really the unknown. It's certainly uncertain. So we are staying neutral and, I guess, muted in terms of our comments about FY '21.

The information that we have today is certainly, again, not substantive in terms of our bookings for FY '21 at this point for the core markets. So we're probably just not going to get drawn on a lot and would ask you not to read anything into that, which I think is really important. We're just staying neutral.

So let's dive into the results, and if you do have the presentation in front of you, I'm going to flip through it reasonably fast. And in terms of the IFRS 16, I think we've accounted for that in the same way that everyone else has. It looks like we've been a little bit more open in our disclosure than some in the market. And hopefully, that will make sense. Steve can talk through some of the details if needed when we get to that. The summary and what we've got on that summary slide and what we read through, again, should be reasonably self-explanatory as I see it. I know it's going to be repeated. The revenue result of the Rentals is okay. This vehicle sales result is okay and strong in New Zealand, not where we want it to be in the U.S., but that's been well flagged, and we'll talk about where that is right now and where we see that going for the next short while.

We have reiterated and would focus on Future-Fit position within the business. It's still very important. We're working very hard on the analysis within the business, and I'll talk a little bit more about that.

Net debt will be discussed. Togo, we'll discuss within the Togo page. And as you would hope, the $24 million remains our current expectation for NPAT in FY '20. The half year in review, I think, is all self-explanatory and I don't think I need to go through the figures in summary because we'll go through the details. Financial highlights slide is the same.

I think if we move over to the balance sheet side, just a small piece of explanation. It's worthwhile just working through H2 because that's where the purchases dropped in the U.S.A., and that's where you see a substantial change. So if you were to sort of just look at the half and do a reconciliation with the equity raise, you'd sort of go and see the debt a little bit lower. It's in this half that it really readjusts itself. So we'd see $135 million to $145 million. If you were to take the midpoint, you'd be comparing that midpoint of $140 million to $202 million at the end of June 30, 2019. And then if you take the equity raise of that $202 million, $30 million had already appeared in the placement in the $50 million. Then you look at the Togo investment, you look at the dividends, and you see that actually we have been controlling debt well and that reduction in excess fleet and fleets in the U.S. and reduction in capital expenditure all sort of flows through in this coming half.

In terms of net debt to EBITDA, we were sitting with -- we haven't changed our views in total anywhere around that 2x as it's very safe for us. Our scenario planning provides us that -- or suggests to us that that's still -- and unless you can take a very, very extreme scenario that puts us in a very good position.

So then just moving over to dividend. So $0.10 per share, obviously, down because earnings are down, but obviously, also more shares on issue post the equity raise last year. So there's just a simple mathematical equation there. The imputation credits. So we have the credits available, so prepared to use them. If you look at the last few years, we've been somewhere between that 50%, 75%, 100% imputed. This is -- 100% is fine and we're good for that now. We haven't made a determination on what the imputation level would be at the end of the year. I'd be surprised if it was -- there's no reason why it would be below 50%, but we'll work through that at the time.

I would note that the assumption that we've made to get that cash dividend yield sees that we would have another team, it seems, at the end of the year. That's just an assumption for that calculation. That's not a forecast or a commitment. But fundamentally, there's no change in our policy around dividend, and no change in the expectation that we will remain at the high end of that policy somewhere more towards the 90% payout level, excluding the Togo investment.

So we don't see any reason why that should change at this point in time, reinforcement in the balance sheet is in a good place, and we still have growth opportunities within the structure that we have.

Moving on to Togo Group. So we do have some ongoing wins. We've got some figures in there around subscriptions. CamperMate performing exceptionally well again in terms of user numbers. The Togo RV design has been launched this week. The new design and new features are added as part of the new further features by the end of March. So if you haven't engaged with that yet, please do so, please make sure you update and have a look at it. The usability has vastly improved and a lot of functionality coming through as planned. Roadtrippers certainly continues to resonate well, both on a U.S. domestic and international basis as does CamperMate. What's important with Togo Group in general is our view is that the opportunity that exists for that business remains as strong as it always has. So if we look at the investment to date, there are some other ones within this. So Togo Fleet is performing well. Also, we've had a number of components launched for the THL business within that, that are giving us some really good scheduling advantages and improving our inventory management and utilization as a result, and we've got other features that are launching over the coming months. Insights was key. That's our Telematics product and what's associated with that, what's key around the bush fires, and we've got new technology and advancements and that product's launching from next week. So some good stuff happening there.

The question is inevitably going to be raised around what we mean by the nature of THL's future investment in Togo is under review. And the questions will be asked, what are the boundaries, what's in, what's out, what would you do? It is a wide scope. It is a clear signal to all investors that we are very cognizant of the additional investment that has gone into Togo beyond our original expectations. We're noting that the investment in FY '20 is expected to be higher than originally intended for this year and that relates to the slower launch of Togo RV Phase 2 and some of the revenue associated with that being pushed out somewhat. So it's not a sort of out-of-control cost kind of scenario. It's light feature development. But given that, we do feel it's appropriate for us to literally review the nature of our investment.

So that is not suggesting anything. We have always indicated that with Togo Group. We don't want it to be a bottomless pit, that we're going to remain very disciplined about what we put into that business and why and have our internal metrics around what's good performance and what's not, and we've always been clear about the fact that we believe we have a number -- a series of alternative scenarios that can still deliver all sorts of benefits from Togo Group. So we're reviewing all of those. The discussions with Thor are within that as well, as our joint venture partner.

We would both very happily say that the relationship is as strong as it has always been. It is very positive. And we both understand the need to look at the different elements within Togo Group and what's driving what, where and what's next and what investment is required to get what to where. So we won't be drawn on anything further than that at this point in time just because we believe, again, that, that could be misleading to the market, misleading to the teams and misleading to our customer base if we were to do so. It is, however, appropriate that you know that we are taking those debt level of investment very seriously and judging it and being disciplined in our approach around it. So I have a sense that I will probably repeat that in various ways through the Q&A session.

So let's just go into the divisional results. And so we start with New Zealand Rentals. We would say that overall this is a good result. Again, there is always some areas for improvement, and we search those out in every part of our business. We believe that outperformed compared to the general tourism market and sentiment in New Zealand. We would note that the vehicle sales, we would consider that a strong result versus the prior corresponding period and versus the market. We've fixed some issues like the MiniVans' Flex Fleet that we had talked about for some time is trying to work through. And in fact, that's turned from an issue to fix to more of an opportunity. So I think we've done the right thing in terms of change of people, change in strategy and in terms of how we're actually taking their product to market. Flex Fleet is working. Standard core fleet sales are performing well. And we're getting good pricing and margin on our product and believe we are gaining share. The Rental business is going well. In addition to that, our retail business is performing. Our servicing business is improving, and that's a really substantial opportunity into the future we're open to take at any site that we've talked about before and we do see future stages of growth for this business in general terms.

So moving on to Australia. So we've noted in here that the Australian bush fire impacts are estimated to be around NZD 1 million. That does fall predominantly into H2 and flows through to the comment that we've made that those events mean that our expectation is that Rental revenue will be below FY '19 for the second half.

But broadly beyond that, and a reasonable result in the Australian business, up in Rental revenue. The vehicle sales situation, contribution improved on the prior half. The revenue was down, which was a mix point, and volume was about flat. So given that the caravan market in Australia has been down over the last 6 to 12 months, we actually think again that we gained share and performed quite well in that market.

So holding margins in that business we think is positive. A couple of areas of cost control that need improving but has been rectified and are hitting in the right direction, predominantly R&M that got a little bit out of whack with a few vehicle types, we've addressed that, and those vehicles since done and we're hitting back in the right direction.

So moving on into the U.S.A. Again, we've talked about this a lot. So let's just move on to the vehicle sales situation. So Rental revenue, okay, and we've indicated that. We have provided, again, a greater level of detail here showing Q1 and Q2 volume in margins. You will see Q2, just remembering, that's obviously winter in the U.S. and that's a lot lower volume, and given everyone in the market has been broadly conservative, it got more conservative in winter. So we're okay with that volume number for Q2. Yes, you look at it, and it's down in percentage terms on the prior year, but we're okay with it. That's okay. The important thing for us is that we've started to see some margin recovery. There's a bit of a mix issue around wholesale and retail and how that plays out as well. But you can see that sort of 800-odd dollar improvement in margin being around a 20 sort-of-percent improvement in margin between Q1 and Q2.

Our January, February sort of indications are again positive. So volumes are where we expect and want them to be, margins improving ultimately not back to where they should be and where we believe they will be, but again hitting in the right direction. Broad sentiment around the RV industry from an ownership perspective seems to be turning attendance at our RV shows throughout the U.S., had been positive over the last sort of 6 to 8 weeks of this calendar year.

The broad plan on U.S.A. recovery. So a number of changes that we said we would do have been -- well, the changes have been enacted. We're still going to keep moving. This vehicle sales impact has been clearly significant. It does mean that our FY '20 results for the U.S. is going to be well down on where we wanted them to be ideally and where they have been historically, but we are pulling funds out as we have indicated. So the purchase levels into this coming half are substantially down, and we'll release that kind of cash that we've talked about out of that business.

The ongoing impact in FY '21. So we will have a smaller, a much smaller fleet in FY '21 as we look to pull that funds down, so that does limit some of the revenue opportunities, but the return on funds is the critical point for us. We'll seek that over and over again. They have to shrink to grow and get the disciplines right and get their capital return right.

Tourism, look, nothing substantial to note. I would say, Kiwi Experience has turned to the corner. The cost initiatives -- cost reduction initiatives that we've put in place are coming to fruition and the team have done a good job here. They have introduced new products, snow product, small group touring product, that's been well received by the market. The brand is very strong, and we're stretching that brand out into those other areas and that's working. And so I think the team here doing a good job. The Waitomo numbers and the Kiwi numbers down at the revenue level, passenger level, in line with how the whole market is down. But no concerns of note out of that business.

The equity investments, Togo Group, we've talked about just go immaterial on a total result basis, and I don't need to repeat the words, but they're in there. Action, a good recovery, obviously, this last year and good prospects. So there are a number of tenders that we are putting bids in for at the moment across Australia and New Zealand, and we're well positioned in a number of those. So Action is actually in a very good position right at the moment. The sentiment is actually quite strong in that side of the business. Clearly, from a contingency planning perspective, supply chain impacts of Covid-19 coronavirus is what we're focused on in that perspective. On the Group Support Services, again, I'd be just repeating the words. So I think that that's pretty self-explanatory, as is the capital expenditure. So we come to the outlook.

So I'm going to reiterate a number of points that I've said at the outset. So it clearly is uncertain. But we'd reiterate, we don't think there's any value in sharing our current position today. The bookings that we have aren't material in terms of the total FY '21 result. We do note Apollo's because there's probably going to be a question in Apollo's results saying that FY '21 forward bookings remain strong in all regions. Forward bookings, we take as bookings. We're not sure if that means that their revenue is strong or not. We don't know. There's been some reasonably aggressive pricing at times in response to the bush fires in particular. But again, we've indicated what we believe the impact is of that. We are seeing differences in origin and operating market and channel bookings by week. So some up, some down, less consistent than prior year. But certainly, if there was anything that was material in nature, we would clearly be articulating that and sharing that at this point in time.

So overall, our expectations for FY '20 are what they are, and we see no change at this point in time. Net debt, we've talked about. We're managing the balance sheet from a capital expenditure perspective. We've talked about the dividend. And then, I guess, this is the next important point. Given that we're not making an enormous amount of commentary or any commentary about FY '21, we are making a commitment to provide a further update to the market prior to our FY '20 annual results release. So we're not picking a date for that, but we just want to reinforce to investors in the market that we want to be communicative. We want to be providing you with the information that you're interested in, but that needs to be accurate and meaningful. And if we were to do that right now, we just think that would neither be accurate or meaningful for you. So we're making that commitment. We're saying we'll talk. We don't think that we're cleaning up or that we're hiding anything. It's just about doing what we believe is the right thing based on the information that we have on the market environment.

So I'm actually going to conclude at that point, and I'll conclude by just reiterating that we believe we have a strong market position. Our customer metrics that we don't share are improving again and have improved in the half. The core business is still performing well. We are doing what we've said we will do in terms of being disciplined around capital and managing capital. It is a difficult market to predict right at the moment. We believe we are well positioned. We're making money. We're managing our return on funds employed. We're still maintaining a focus on the future and investing where appropriate on future opportunities, and we are planning for a number of different possible scenarios given what's happening in the world at the moment. And that's what you'd expect. Our Board is very clear about the need for us to be well prepared for a series of scenarios, and we're well down the track of understanding what we would do in a range of circumstances.

So I just -- beyond that, I'd just like to thank the finance team in THL for preparing the results. Again, the IFRS changes and lease changes do add another chunk of work. I think, again, we've produced results that should be seen as clear and very open in terms of what we're doing. And we're moving forward at pace. So Vincent, I will hand back to you to open up for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question today comes from the line of John O'Shea from Ord Minnett.

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John O'Shea, Ord Minnett Limited, Research Division - Senior Research Analyst [2]

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Just wondering if you could comment on the fallout from all of this in the U.S., what -- I mean, obviously, been -- it's a very tough climate for yourselves and everybody over there. What's been the fallout from the others, I guess? And what do you think that means moving forward? I mean are there any players that have sort of completely been blown out of the water? Or what are the bigger players -- how has it sort of played out so far?

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Grant Webster, Tourism Holdings Limited - CEO [3]

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Yes. So good question. So if we take the sort of market that we operate in and the rentals and sales market, look, there is no clear definitive sort of market step. So this is anecdotal evidence based on sort of what we see around the base and what we hear in the market. So what we see is that vehicle sales has clearly been tough for everyone. And what we're hearing out of the -- a number of different sort of sources is that fleet purchases into this calendar year have been dramatically reduced by the rental operators and, in fact, 0 from some. And we see that as a sensible and good thing in terms of, obviously, maintaining fleet volumes at appropriate levels, which then, obviously, flows through to, obviously, rational capacity management relative to demand on the rentals front. So we see that as positive. We also see some vehicles or some players going through auctions, and those are going through prices that we would suggest may well be burning equity. We don't know for certain. But they are pretty low prices. We're not at that point. We're very open about the margins. You can see that we're still making margins on the vehicles that we're selling. So we think...

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John O'Shea, Ord Minnett Limited, Research Division - Senior Research Analyst [4]

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Why the discounting...

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Grant Webster, Tourism Holdings Limited - CEO [5]

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Discounting on the vehicle sales front, yes. But we're holding out. We've got a very strong quality proposition. Our fleet age is in a good place. We've got a very strong customer proposition within the international trade market. We've been gaining some market share in that space as well. So we think we're well positioned. We haven't seen anyone falling over. We've seen one, a smaller but relevant player, close an L.A. branch and not reopen for the summer. So I think that's very interesting to watch. If you're not in L.A., I'm not quite sure why you're operating in the U.S. But yes, I'd say it's rational and stable, but people are seeing the same kind of impact on vehicle sales as us.

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Operator [6]

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Your next question today comes from the line of Andy Bowley from Forsyth Barr.

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Andrew James Bowley, Forsyth Barr Group Ltd., Research Division - Head of Research [7]

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So a couple of questions here from me. First of all, around the guidance that you put in place a few weeks back and in light of some of your comments this afternoon in relation to bush fires and coronavirus, can you give us a sense of, one, the number of cancellations that you've seen from each of those to date? And then what the assumptions are in terms of demand? And I guess, the biggest impact from coronavirus is likely to be in the Tourism group, but whatever you can tell us in terms of those underlying assumptions for the guidance you provided.

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Grant Webster, Tourism Holdings Limited - CEO [8]

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Yes. So the cancellations for -- look, the cancellations for bush fires are sort of -- well, they're obviously included within here and they were short-lived. So that was right at the time. And obviously, it became a bit of a -- let's say, that was while the fires were in the worst sort of state and people where the roads were closed and so forth and on. So that was a very limited period of time. But at that time, forward bookings dropped pretty substantially, but they recovered very quickly as well as we sort of hoped or expected that they would. So cancellations around bush fires moving forward aren't a big issue.

Cancellations around coronavirus. You got to remember, it's one of the difficult things. We have cancellation every week of every year and always have. So it's all about the difference in cancellation numbers rather than sort of an absolute number. So you're right. It's about the Tourism group or Waitomo and more particularly. So what we have assumed in there is a decent impact through to, well, the volumes from the China market reduced quite a lot through into winter, right? So basically, we're taking a big hit to non-China numbers for Waitomo and a general hit on top of that for the rest of this financial year. So look, sitting here at the 28th of February, again, the forecast that we've made and the assumptions that we've made appear very accurate at this point in time. Not any impact of note, as I say, volatility by channel, by market, at the moment in general bookings, but again, nothing material.

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Andrew James Bowley, Forsyth Barr Group Ltd., Research Division - Head of Research [9]

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I guess, the U.S. has a few cases, but can you make any comments in terms of forward bookings for the upcoming peak season in the U.S.?

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Grant Webster, Tourism Holdings Limited - CEO [10]

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No. Look, we're in line broadly with what we're sort of expecting to do. We have indicated that revenue will be down because we've got fleet down. But again, that's the focus on return on funds. That's what we wanted to do. So we don't think there's any sort of broad market issues at this point in time. There is definitely -- there's nothing material for us to say beyond anything that's going end up being speculative.

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Andrew James Bowley, Forsyth Barr Group Ltd., Research Division - Head of Research [11]

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And then moving on to, I guess, back to the previous question around gain on sale in U.S. vehicle sales issues, and I appreciate the enhanced disclosure around gain on sale in the U.S. But can you give us your thoughts in terms of what's the kind of sustainable ongoing margin there? Clearly, there's been a pretty sizable reduction in margin that you've been able to generate. But what's the historic margins kind of at the level that are sustainable, bearing in mind that the U.S. market had a fair few tailwinds for it generally in terms of the year-on-year increases in terms of production and in retail sales?

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Grant Webster, Tourism Holdings Limited - CEO [12]

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Yes. It'd be pretty brave of us to say, look, margins moving forward should be x or y. What we would say is -- or what I would say is that the margins at the moment still reflect a different market environment than what the historic norm has been. So if you were to say, look, the current margins are where it's going to be moving forward, that's not their current expectation in any way, shape or form. Will margins be what they were -- look, there's a number of things that were sort of changing in the business anyway, between retail and wholesale channels and our mixes between that. We'll definitely make a higher margin in retail. And we are continuing to focus on improving margins in retail. If you ended up with a much stronger retail mix, you're actually going to potentially could have a margin that's higher than where we were historically. Likewise, in retail, you get back in. So you get F&I and come on top of that. So I guess the fundamental point is, I know in your modeling, you'd love to have a figure that THL sees that you can pop in. I'm not going to provide that figure, but certainly happy to say that the current margin is not what our expectations are moving forward.

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Andrew James Bowley, Forsyth Barr Group Ltd., Research Division - Head of Research [13]

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Maybe just in terms of elaborating around the shift to retail. To what extent are you being able to shift the channel mix in the U.S. to retail, particularly for those vehicles in Road Bear, which have historically been through wholesale?

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Grant Webster, Tourism Holdings Limited - CEO [14]

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Yes, yes. So that's a work in progress in a period of time that's quite different up there. So you will see, and we indicated that there are some -- we're managing very, very tactically the volume margin wholesale retail mix. So as we look at it and as we see certain situations, and we look at this on a 5 vehicle-type basis and vehicle-age basis. So for example, we may look at a 2017 particular model, why call one out, we can go, we don't think that's quite moving rightly, it's wholesale that right at the moment, given the market and given where that is, let's accept that, that will be a lower margin so forth and so on.

If you want the broadened tent, the broadened tent over time is to do more retail. And yes, we are selling Road Bear units through retail. And yes, we want to keep growing that. It is not a material number of the Road Bear units at this point in time. But we still see more opportunities for us to improve retail. We don't think our retail marketing is where it needs to be yet. We don't think our site preparation is where it needs to be yet. It's getting better and better, but we need to do more in that space. I still didn't answer your question, I know, but we've been very tactical with it.

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Operator [15]

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Your next question today comes from the line of Jack Crowley from Jarden.

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Jack Crowley, Jarden Limited, Research Division - VP of Equity Research [16]

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Just one for me. I guess just wanting to understand that $1 million EBIT impact related to the bush fires. Are you able to kind of clarify with -- I guess, that's purely to do with yield but utilization and kind of rental days still being kind of broadly consistent after, I guess, forward bookings kind of dropped away but then subsequently recovered?

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Grant Webster, Tourism Holdings Limited - CEO [17]

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So -- look, again, we're probably going to just do nothing but frustrate the analyst community in terms of the way that we're answering some of these things. So look, the $1 million is, in essence, is an assessment of where we were pre and where we believe we will be after. So there are a number of combinations and factors in there. It's clearly the cancellations' yield over a period of time and utilization over different periods. Now you could then add other factors into it. So for us to say it is definitively this for this and that for that and this for that, is just we just -- we'd be making stuff up. Broadly, what we know is that when we look at pre-bush fires, our expectations and where things were and post and what our expectations are, we're saying it's $1 million. So it is a combination of all those things. There's been a little bit of a channel mix change. And yes, some of the bookings have moved around. Some of the -- one of the months is higher than what we expected that it was going to be before, which indicates that we had some people probably cancel and move and rebook, so forth and so on. So I don't think it provides much more benefit to you for us to try and break that down because we'll be making stuff up.

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Jack Crowley, Jarden Limited, Research Division - VP of Equity Research [18]

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Okay. No. That's fine. I appreciate the honesty in that regard. And the second one would just be kind of in terms of, I guess, the signaled decline in Rental revenue in Australia. What's the extent that we can kind of isolate that to, I guess, being driven by the kind of the bush fires, noting that kind of New Zealand, you're still thinking about kind of low single-digit growth and it could be as kind of no reference in the U.S.? Or maybe a kind of a different way of asking would be what do you think the impact coronavirus has had on your rental growth? Like would we be seeing kind of high single-digit-type stuff in New Zealand and similarly in the U.S.?

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Grant Webster, Tourism Holdings Limited - CEO [19]

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So the way I interpret that question, Jack, is -- and an appropriate question, obviously, is can you isolate our events for us to tell us what the underlying sort of situation is? And I guess this is exactly why we're not providing any information on FY '21. Just because that would end up being immensely speculative on a number of fronts because people would then go, well, what's what and what's so forth and so on. So what I will do is happy to come back up a little and focus on a couple of core things at a more macro environmental tourism perspective and very much sort of judgments.

I don't believe that the Australian bush fires has any long-term impact on Australian tourism. I think that the reaction from the government to reignite people's interest on the basis that, "Hey, we're okay, we're open to trade," so forth and so on, in conjunction with the holiday-at-home campaign and the money that they're putting into that are the right responses. And I think if you look at California fires and responses, if you look at Christchurch earthquakes and Kaikoura earthquakes and you look at the number of events that we've experienced and other events that we've analyzed around the world, I have no concerns about Australian tourism in the long term. I have no concerns about the motorhome industry and the rental industry in the medium to long term. So I don't think any of these things turn off either our destination markets or our type of travel. What that means, I guess, is that inherently, is we're saying that any impacts are event-related. But that's as far as our link then.

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Jack Crowley, Jarden Limited, Research Division - VP of Equity Research [20]

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Okay. That's helpful. Just next one for me. I guess in terms of, I guess, how you're thinking about kind of dividend payout when kind of there are shocks to the global tourism sector, could you -- are you able to provide any color on -- do you think kind of there is or should be added flexibility around your kind of dividend payout ratio targets? Or kind of -- will you guys generally take the approach of, I guess, kind of mirroring the underlying decline in performance even if it's short term through to your kind of dividend?

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Grant Webster, Tourism Holdings Limited - CEO [21]

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Disclosure on that isn't something that we've overly discussed at a Board level. So when we say the following, which certainly came over us, just annoying people have been word for word, we've been happy with our commitment to say that the FY '20 dividend is expected to be at the upper end of our dividend policy. So we think we have assessed that and we're happy to say that, and we've been happy to obviously say that our expectation remains around $24 million. So if you're saying there for FY '20, I think those are the 2 definitive statements that we've made. And I think that provides the answer to that generally.

Beyond that, what I would say is, we do take into account within our dividend policy, both net profit or after tax and operating cash flow. And as evidenced in the half, and as you can flow through for the year, this is the year where we will have positive operating cash flow. We were -- what we were plus cash flow in sort of plus 1% versus minus 7% for the half last year. And so we take both into account. So that's not making a conclusion on that at all. I don't want to do that. But we do take that into account when we consider dividend payments. We also have been clear to say that we believe we are paying these dividends at this kind of payout ratio because -- and we can still grow the business. So we can still invest in fleet where we have fleet growth opportunities.

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Jack Crowley, Jarden Limited, Research Division - VP of Equity Research [22]

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Okay. And just the final one for me. I guess there's been a few references towards channel mix that's occurring in response to some of these events. I guess I'm just interested in, obviously, you guys have a more diverse business, but are there kind of winners and losers that you see out of this kind of potential situation beyond your own business? And do you think that potentially provides a bit of a shakeout for certain operators?

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Grant Webster, Tourism Holdings Limited - CEO [23]

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That's really getting into speculation in the industry comment that are probably not going to be supported by some in the industry for saying, look, I support the view that tourism businesses should have a balance sheet structure that can see them through at these situations. And I think smart operators had that situation. I think some operators don't necessarily have that situation. I think there are some players in the inbound market, in the OTA kind of a market that get themselves too heavily hooked on future cash flows and say forward bookings is their cash flow mechanism. And when you're in that situation, it's just obvious if you are living off forward bookings as your today cash flow revenue stream, that's quite dangerous. So you're not actually living off the profit, you're just living off the assumption that you continue to grow the business. So that's -- for us, we've got strong data management principles, and we've got strong payment terms. So we watch that carefully. But on an industry globally, that's where I think the risk sort of lies, in major, major events. That's what you tend to see happening historically, but those that are running poor business models are the ones that are impacted the most. I don't think in our motorhome industry sector, I don't want to get into commenting on competitors, but there is strong EBITDA that exists in the industry, where the people can fund fleet growth and fleet renewal is an interesting question. We definitely can. We can fund fleet renewal and fleet growth if we choose.

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Operator [24]

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(Operator Instructions) I think we have no further questions on the line today. I would now like to hand the call back to Mr. Webster for closing remarks.

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Grant Webster, Tourism Holdings Limited - CEO [25]

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Excellent. Thank you. Look, thanks, Vincent, for facilitating the call. Again, thanks, Jen and Steve and Amir for pulling the results together in the way that they have, and thank you all for attending. And we're obviously always happy to take out the calls and questions. Appreciate your support. Thank you.

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Operator [26]

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Ladies and gentlemen, that does conclude today's conference call. We thank you all for your participation. You may now disconnect.