Tourism (ASX:THL) executives told investors the company is “in a positive place” as rental activity strengthened in the first half and management continued to execute on initiatives aimed at improving returns and reducing leverage, while flagging ongoing uncertainty in the U.S. market.
Chief Executive Grant Webster said the core rentals business was strong across most regions during the half, describing the outlook as solid “in all regions,” while noting the U.S. remained an exception. Vehicle sales have been a drag over the past several years after a rapid decline in volumes, but Webster said the business is now seeing “some degree of stabilization.”
Half-year themes: rentals strength, sales stabilization, capital discipline
Management emphasized comparisons for gross margin trends should be made against the immediately preceding half rather than the prior corresponding period, saying margin movements were “reasonably consistent” on that basis.
On the balance sheet, Webster said the company has “debt well down” and is forecasting net debt to be under NZ$400 million by year-end, with a debt-to-EBITDA ratio of under 2x. He characterized FY2026 as a transition year, adding that the combination of actions underway and improving fundamentals supports a more positive view into FY2027.
Regional update: New Zealand and Australia positive; U.S. still uncertain
In New Zealand, Webster said the company’s outlook is “very positive,” but he urged investors to consider the first-half result in the context of fleet additions and associated costs that are “all about setting up for H2.” He said forward bookings in New Zealand were “still well over 20%” and that January and February results were tracking in line with full-year expectations. Webster said the company expects New Zealand to deliver a record result.
On vehicle sales in New Zealand, he said ex-fleet sales remained strong, particularly for lower-priced units. However, he noted higher-priced vehicles associated with U.K. and European sourcing “haven’t been selling quite as well.” He also pointed to what he described as pleasing “real depreciation rates” across New Zealand and Australia.
In Australia, Webster reported strong rental growth in days, improving utilization, and a positive forward booking position. He said the company sees opportunity for RevPAR to continue increasing. In retail, he said cost reductions would start to flow through and should support results looking toward FY2027. He also said inventory in the Australian retail business is now at a “really good level,” down another NZ$22 million.
North America remained mixed. Webster said the company is reducing funds employed where returns are not meeting targets, while retaining the ability to recover. He said Canada has been positive, with forward bookings up over 30%. Fleet sales across North America were described as positive, but at lower margins, and management again encouraged comparisons to the prior half.
The U.S. remains “uncertain,” Webster said. He cited good domestic and event-related revenue, but said international visitors from core traditional markets “are staying away from the USA at this point in time,” a trend he said is also affecting hotels, airlines, rental cars, and attractions.
Strategic actions: manufacturing consolidation and retail product reset
Webster said the company has reviewed underperforming areas and taken action, describing the initiatives as planned and underway since the start of the prior calendar year and now moving into the “last phase.”
- Australian manufacturing: Webster said the company is still closing down the Australian manufacturing process, working through work-in-progress, moving stock and equipment, and seeking to sublease the property. He said synergies from combining activities into New Zealand should start to be seen over the coming year, with benefits flowing as the fleet rotates.
- Manufacturing cost benefits: Management said the movement of the Brisbane factory volume is expected to support reduced purchase prices for units used in Australia and New Zealand, with benefits expected in FY2027. Webster noted a lower margin on internal product reflects pricing movements as reduced costs flow through to rentals.
- Australian retail: Webster said a new motorized product range is due to launch in the second half, and management sees both volume and margin opportunity.
Webster also briefly addressed the company’s tourism-related operations, saying the segment “looks slightly underperformed,” mainly due to the Korean market to Waitomo. He added the company was “happy with the current discussions” occurring in Waitomo, but would not provide more detail due to confidentiality.
Cash flow, debt reduction, and dividends
Chief Financial Officer Ollie Farnsworth said first-half net operating cash flow rose 67% to NZ$40.5 million, driven by improved EBITDA and lower net capex. He noted an unfavorable working capital movement that he characterized as timing-related and expected to normalize during the year.
Looking to the full year, Farnsworth said the company expects “significant growth” in cash flow, driven by ANZ peak season earnings, fewer new fleet purchases in the U.S., no U.K. purchases, and a one-off gain from the U.K. and Ireland divestment.
Net debt was NZ$493 million at the end of the half, and Farnsworth said it had already reduced by NZ$30 million in January. The company is targeting net debt below NZ$400 million by year-end, supported by operating cash flows. Farnsworth said that level of debt reduction would translate to an interest cost saving of about NZ$6 million into the following year.
On capital spending, he cited expected gross capex of NZ$210 million, down year over year, reflecting lower North American purchases and no purchases into the U.K.
On shareholder returns, Farnsworth reiterated the company’s dividend policy of a 40%-60% payout ratio, distributing approximately 30% as an interim dividend. The board declared an interim dividend of NZ$0.03 per share, 100% imputed and 0% franked, which he said was up 20% year over year. Based on the forecast range disclosed, he said the company expects the full-year dividend to be up around 55% year over year, and added the company is beginning to accumulate franking credits that could be used in the final dividend.
Guidance and outlook: NPAT range, but U.S. remains the key variable
Webster said the company is providing guidance “for some time at this time of the year,” giving an expected full-year NPAT range of NZ$43 million to NZ$47 million. He said the U.K. divestment impacts that figure by about NZ$1 million on a net basis, reflecting the loss of high-season earnings, partially offset by interest and other factors.
Management reiterated that forward bookings were positive in New Zealand, Australia, and Canada, while the U.S. remains the “key concern” for both rentals and vehicle sales. Webster said group vehicle sales are expected to be up in the second half compared with the second half of the prior corresponding period.
During Q&A, Webster said the company expects operating cash flow to sustain growth toward a fleet of roughly 9,000 vehicles by June 2028, with net debt expected to be “reasonably flat” over the coming years after the current year’s larger reduction. He agreed that improving EBITDA should help the net debt-to-EBITDA ratio fall further.
On vehicle sales conditions, Webster said global trends show consumers “buying cheaper units” and “trading down,” with shoppers seeking deals, but he also said inquiry rates are increasing and consumer confidence “seems to be coming back.” He pointed to expectations for small single-digit growth in public market commentary, citing a 2.5% to 4% range. Regionally, he said Canada has benefited from well-priced stock after a period of tariff-related hesitancy, while the U.S. is still early in the selling season with initial show feedback described as positive. He said Australia remains challenging, with Chinese products taking share in the towable segment.
Asked about North America strategy if conditions remain weak, Webster emphasized discipline on returns and said the company would make “hard decisions” if needed, while adding that was not an indication of an exit. He said the industry view is that a return of U.S. tourism is “a matter of when, not if,” and said THL is focused on cost reduction, capital discipline, and driving revenue where available.
Webster also said the company does not expect a meaningful short-term benefit in calendar 2026 from major U.S. events such as the FIFA World Cup, describing those events as too dispersed for RV travel and more likely to create “crowding out” in hotels. He added that broader initiatives such as Route 66 celebrations and America’s 250th anniversary may support brand awareness and consideration over time, but not near-term gains.
On costs, Webster said group support cost-out programs are coming to fruition and described the run rate as “about right,” with benefits expected to carry into FY2027. He added that Action manufacturing’s second-half third-party outlook is “really positive,” citing a stronger forward order book and an improving New Zealand economy backdrop.
About Tourism (ASX:THL)
Tourism Holdings Limited, together with its subsidiaries, operates as a tourism company in Australia, New Zealand, and the United States. The company operates through New Zealand Rentals, Action Manufacturing, Tourism Group, Australia Rentals, United States Rentals, Canadian Rentals, UK/Europe Rentals, and Other segments. It engages manufacture, rental, and sale of motorhomes, campervans, caravans, and other tourism related activities. In addition, the company engages in the recreational vehicle (RV) rental business in Australia, as well as rents motorhomes, campervans, and engages in other tourism related activities.
