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Tourism Holdings to shrink US fleet

Tourism Holdings to shrink US fleet

Monday, 27 May 2019, 12:23 pm
Article: BusinessDesk

Tourism Holdings to shrink US fleet in bid to improve cash
flow

By Paul McBeth

May 27 (BusinessDesk) – Tourism
Holdings will shrink its US fleet by about 17 percent as the
rental RV operator seeks to address an “unacceptable”
performance from its North American business.

The company
said the US vehicle sales market is in decline, and it
estimates the volume of wholesale transactions is down 40
percent and retail sales are down 10 percent. What’s more,
heavy discounting is squeezing margins, something Tourism
Holdings expects to continue to another 12 months.

“Despite the current market conditions, our USA
performance for FY2019 to date is unacceptable,” chief
executive Grant Webster said in a statement.

“However,
there is nothing which indicates our fundamental build/buy,
rent and sell model is broken or that we have a poor
business.”

The company downgraded earnings guidance in
April, blaming the deterioration in the US business, and
said it was reviewing its operations that include Road Bear,
Britz and El Monte RV rentals, which they also
sell.

Tourism Holdings affirmed its intention to declare a
final dividend of 14 cents per in the current
financial year, keeping the annual payment in line with the
27 cents paid in 2018. It also reaffirmed guidance for
profit to be $25-28 million in the year ending June 30. Net
debt is expected to be about $240 million due to the decline
in the vehicle sales environment.

The company will cut
US$40 million of planned capital spending from the US
business and expects to shed 400 vehicles from its US fleet,
giving it about 2,000 RVs in the 2020 financial year.

It
forecasts gross capital expenditure in the US of US$23.8
million in the year ending June 30, 2020, down from a
forecast US$62.5 million in the current financial year. The
company wants to reduce its funds employed in the US by
US$20 million

Tourism Holdings expects its US business to
generate positive operating cash flow of about US$35
million. It plans to strip out costs from the 2021 financial
year by franchising or exiting up to five locations and
cutting its wage bill. Tourism Holdings is also working
line-by-line to trim other operating costs.

The s
last traded at $4.30, and have dropped 17 percent so far
this year.

(BusinessDesk)

ends

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