THL blames weak economy for earnings downgrade

Tourism Holdings (THL) is blaming a weakening economy in most regions for a sharp decline in its expected earnings for the year.

The company, which went into a trading halt last week pending yesterday’s announcement, said after a review it now expects a net profit in 2024 to be between $50 million and $53m. THL’s previous guidance, issued in February, was for a net profit of around $75m.

Based on its new forecast, THL said it expects to be compliant with its banking covenant assessments for the June 2024 quarter.

However, THL said it would engage with its banking syndicate to try to amend its covenant package to better reflect current trading conditions.

“Based on a preliminary review, THL also believes it is probable that there will be impairment in relation to the UK/Ireland business division as part of the upcoming 2024 year-end process,” the company said.

THL said the weakening economy had impacted most regions and business divisions negatively and had lowered its expectations going into the fourth quarter to June 30.

“Vehicle sales have been a major factor globally, with sales volumes and margins now declining more quickly than expected in most markets.”

Over 50 per cent of the overall group earnings before interest and tax decline are attributable to the Australian Retail Dealership division and in particular, a shortfall in the sales volumes of high-margin ex-fleet vehicles.

“Rental yields have generally met expectations in most markets. However, a recent slowdown in forward booking intakes for the Australasian shoulder season will lead to a poorer rental performance than earlier forecasts in the remainder of the full year 2024,” it said.

THL has retained the goal of a $100m net profit for 2026.

“THL has considered the assumptions underlying the goal and believe the goal remains appropriate based on a positive rental growth outlook and a recovery in the RV sales market globally,” it said.

However, expectations for 2025 are now below the 2023 net profit of $77.1m, it said.

Last week, THL went into a trading halt in the New Zealand and Australian exchanges, with the company citing “materially lower” earnings than existing guidance.