THL - Tourism Holdings

[Beagle]

Forward bookings give management confidence. I think $15mil will be conservative. In 2H14 they made $8.5 million.
NPAT after tax doesn't tell the true story. Have a look at cashflows. They had $44mill in Operating and investing cashflows in FY14. Market cap of $158mill.Yes they sound confident of their forecast. High cash flows are distorted by fleet rationalisation.

Top line growth is an issue (much like AIR). I think it is management priority to sort out the business first. They are still not satisfied with it's operating performance. They believe that that can wring a lot more out of the business yet. My guess is that acquisitions will be the next growth step.Brokers are expecting top line growth of 5% for AIR

THL paid full tax in FY14.
What's this then ?, extract from annual announcement

The final dividend of 6 cps will be partially imputed (up to 50%). The
company has been in a tax loss position in New Zealand and will resume a cash
tax paying position in New Zealand in FY15.

AIR is more exposed to the NZ economy. THL is more exposed to international tourism. Remember THL have operations in USA and Australia and most rentals in NZ are from international tourists. Which company is more exposed to Fuels prices and exchange rates? My hunch is AIR.
A high exchange rate makes N.Z. less attractive to visit. AIR are well hedged on fuel prices.


DISC: Holding AIR and THL

If they were paying full taxes this year why isn't the final divvy fully imputed like AIR's final and special are ?

[winner69]

If they were paying full taxes this year why isn't the final divvy fully imputed like AIR's final and special are ?

Don't imputation credits only apply to earnings generated in NZ?

At EBIT level 50% earnings came from US and Australia

[Beagle]

My understanding is that THL as a N.Z. resident company is liable for world-wide income in N.Z. with any tax paid in subsidiaries overseas in tax treaty countries like USA and Australia being allowable as a credit to offset N.Z. tax. There is a section in the N.Z. imputation return that allows a credit for FDP credits.

I would have thought "The company has been in a tax loss position in New Zealand and will resume a cash tax paying position in New Zealand in FY15" is self explanatory.

Perhaps what they're suggesting is in fact the opposite of your line of thinking W69. i.e. they are in a tax paying position with one or more of their subsidiaries overseas, (but not in N.Z. as stated in their annual result) and they are able to attach a 50% imputation credit because approx. 50% of their earnings are from overseas where they've had to pay tax. That tax appears to have been able to flow through to their imputation account under the foreign dividend payment scheme. That or they had some imputation credits left over from years gone by.
Anyway...this is something for someone who has skin in the game to get their teeth into. I like fully imputed dividends, especially big special ones
Distribution of earnings to shareholders with only partial imputation credits is a highly questionable way to optimise shareholder value in my opinion. The directors then go on to pay for commissioned research. My Beagle nose detects something smells a little bit "carefully orchestrated".

[noodles]

In 2014 they actually paid more tax than they should have (see note.9)
Actual:7,047
Theoretical:6,014

So why no fully franked dividend? It is mentioned at the interim...
"As a result we have the confidence to provide a dividend pay-out ratio at or around NPAT
in 2014. Whilst this doesn’t reflect a change
in dividend policy for the company the
current conditions warrant this pay-out.
The April 2014 dividend utilises the
remaining imputation credits. The tax
losses currently held in New Zealand are
expected to be utilised in full during FY15."

If you read the full report, it is quite confusing. What is clear is that there are no imputation credits left and tax credit of $3.2mill

So I guess that is the reason why the dividend is partially imputed.

Please don't question me on this as I'm at the limit of my accounting abilities

[winner69]

My understanding is that THL as a N.Z. resident company is liable for world-wide income in N.Z. with any tax paid in subsidiaries overseas in tax treaty countries like USA and Australia being allowable as a credit to offset N.Z. tax. There is a section in the N.Z. imputation return that allows a credit for FDP credits.

I would have thought "The company has been in a tax loss position in New Zealand and will resume a cash tax paying position in New Zealand in FY15" is self explanatory.

Perhaps what they're suggesting is in fact the opposite of your line of thinking W69. i.e. they are in a tax paying position with one or more of their subsidiaries overseas, (but not in N.Z. as stated in their annual result) and they are able to attach a 50% imputation credit because approx. 50% of their earnings are from overseas where they've had to pay tax. That tax appears to have been able to flow through to their imputation account under the foreign dividend payment scheme. That or they had some imputation credits left over from years gone by.
Anyway...this is something for someone who has skin in the game to get their teeth into. I like fully imputed dividends, especially big special ones
Distribution of earnings to shareholders with only partial imputation credits is a highly questionable way to optimise shareholder value in my opinion. The directors then go on to pay for commissioned research. My Beagle nose detects something smells a little bit "carefully orchestrated".

You can see why corporations have a Tax Function employment several/many highly paid people who probably get consultants in as well.

The Notes to the accounts not very clear are they.

Nuplex don't apply much if any imputation credits as they generate stuff all profits in NZ and they are a NZ tax resident company. FBU on the other hand manage a fully imputed divie for NZers

Agree with Edison report being a bit fishy .....wonder the reason

[Beagle]

Agreed Gents, it is a bit confusing. Its probably to do with the timing of payment of tax, (a company can provide for tax in their accounts but if it doesn't get a credit in its Imputation credit account until its actually paid). As there's penalties if one's ICA account goes into debit, (i.e. you attach imputation credits to dividends paid before paying the tax itself), that's something they'd want to avoid.
Still...paying partially imputed dividends doesn't make sense to me in terms of optimising shareholder value especially seeing as they've acknowledged they're moving to a full tax paying position next year, go figure ? A conspiracy theorist / overly cynical bloodhound might gather the impression they're trying to create the impression that THL is a top dividend payer on a sustainable basis.

W69 - Commissioning that research couldn't possibly have something to do with Rob Campbell buying in a stake earlier in the year, no we can't have that, Directors pushing their own wheelbarrows.
That...and the confidence exuded about next year's result just looks a fraction too over the top and was just excessive enough to give me a small but sadly inconclusive reading on my pump and dump meter I think I prefer AIR's approach where they exude confidence without going too far and putting a number on it, (they have plenty of forward bookings too).

[percy]

There is an article in today's Sunday Star Times headed "Tracing THL's 'soaring arc' which I found interesting.page D11.
Very much Rob Campbell's "focus on return on funds employed."

[Balance]

There is an article in today's Sunday Star Times headed "Tracing THL's 'soaring arc' which I found interesting.page D11.
Very much Rob Campbell's "focus on return on funds employed."

Shows the huge difference a good BOD and Chairman can make to a business - RBD being another good example.

At the heart of it all is the fact that there are directors and executives well past their used by dates but who stubbornly hang on even when it is clear to all that it's time for them to go.

Remember Bill Falconer? RBD, HBY, Tower etc.

Keith Smith is the one now to avoid - THL is now performing under Rob Campbell. Keith's presence in the Warehouse is why I avoid that stock - tired old faces with no new ideas.

[golden city]

looking solid.., will be another push upper trend after AGM

[golden city]

New Zealand set for tourist boom

Last updated 13:20 05/09/2014


The number of tourists visiting New Zealand is likely to rise strongly until at least 2020, the Ministry of Business, Innovation and Employment has forecast.

It said the global economy appeared to be recovering from the worst of the global financial crisis and it estimated annual spending by foreign tourists would increase by a quarter to hit $8.3 billion by 2020.

The prediction was based on modelling past data, current trends and the "best available forecasts of international factors", but was not "cast in stone" and was "subject to the global economic situation", spokesman Michael Bird said.

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Tourism New Zealand chief executive Kevin Bowler said the forecast growth followed a "very successful two years" for the sector, and tourism operators would take away the message that now was likely to be a good time to invest in their businesses.

"International visitor spend in New Zealand lifted 11 per cent in the 12 months to the end June 2014," he said.

"We are well on the way towards achieving the Tourism 2025 aspirational target of $41b total tourism revenue by 2025."

The 2025 target includes spending by international and domestic tourists.

Bird said there would be "reliable growth" in arrivals and spending by tourists from North America and Germany.

"China and Australia will remain key markets in the coming years, with arrivals from these two countries projected to make up 80 per cent of visitors by 2020," he said.

The ministry forecast the number of international tourists visiting New Zealand would rise from 2.8 million this year to 3.6 million in 2020, but their average spending would decrease from $2462 to $2356.