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backpacker bus business Kiwi Experience.

The basic ingredients have remained the same for some time, but there have been some changes. One was the merger with rival campervan companies Kea and United in 2012.

The deal allowed THL to control a reduction in capacity in the New Zealand market with several benefits in mind. One, it could ensure the supply of vehicles did not exceed demand, helping to avoid price discounting. Two, it could reduce the amount of capital tied up in vehicles, a process which would simultaneously cut debt and capital expenditure.

From 2500 New Zealand vehicles in the group in 2012 the number was cut to 2210 by June 2013 and less than 2000 this year. Group debt has fallen from $140m in December 2012 to $82m in June 2014.

Another change is harder to assess but it could be part of the mix. On August 29 last year the company elected a new chairman, Rob Campbell, who made it clear the business would focus on return on funds employed – a measure he defined as the ratio of earnings before interest and tax to average working capital plus fixed assets.

At the annual meeting last November he told shareholders: ‘‘Until we achieve an acceptable ROFE, shareholders should expect to see the funds employed in the rental fleet continue to fall.’’

That attitude appears to extend to all aspects of THL’s business. CEO Grant Webster told me last week that Campbell was ‘‘passionately’’ committed to lifting returns and the group was more aggressively pursuing its targets as a result.

‘‘Any business that’s not returning what it should do is not getting new capital,’’ he said.

Investors may have assumed this sort of thing went without saying. The fact that Webster and Campbell are saying it so explicitly may indicate THL went through a loose period for capital allocation.

At the interim result announcement in February there was again discussion of capital expenditure, with a major reduction forecast for the 2014 year compared to the year to June 2013. A significant part of the fall came from Australia as the business adjusted to difficult trading conditions.

By that stage the shares had risen to $1.05 but they took a further jump on the bullish comments of Webster and Campbell at the half year.

Campbell announced a forecast full year net profit of $10.5m and a 5c interim dividend, more than double the 2c paid out a year earlier.

‘‘The business is well on track with its transformation and a decisive focus on achieving appropriate returns for shareholders,’’ he said.

As it turned out, THL beat the forecast profit and debt numbers, and announced a final dividend of 6c, bringing the annual dividend to 11c, plus partial imputation credits.

At the current share price that’s a yield of about 8 per cent, which is pretty decent. At the share price of a year ago it’s way better than decent.

But would anyone other than time-shifting aliens from Tralfamadore have had the wit to pick THL as a winner? Maybe. Looking back there were some pointers of better things to come, even if they came with risks but it would have taken an alert and hard-working investor to be looking in the right direction.

Now that THL has turned a corner, is it still worth a shot? Investors interested in small stocks – THL has a market capitalisation of just $155m – may yet find it worthwhile.

‘‘Shareholders should expect more from us in the future. That is the expectation we have of ourselves,’’ Campbell said.

I would have thought the scale of improvements in capital spending and debt can’t continue, but the company is considering growth options beyond 2015.

‘‘We want to see clearly growth in FY16, 17 and onwards, so we’re working through how we approach that in the next few months,’’ Webster said.

As for the troubled times of 2011 and 2012, when there were losses and a breach of debt covenants, ‘‘I absolutely believe those days are gone.’’ Tim Hunter is the deputy editor of the Fairfax Business Bureau.