GROWING GLOBALLY INTERIM REPORT

Transcription

1 GROWING GLOBALLY 2018 INTERIM REPORT

2 CONTENTS 01 Highlights 02 Chairman and CEO report 08 Consolidated income statement 09Consolidated statement of comprehensive income 10 Consolidated statement of changes in equity 12Consolidated statement of financial position 13 Consolidated statement of cash flows 14 Notes to the consolidated financial statements 28 Corporate information

3 HIGHLIGHTS H1 Revenue $209 M +43% H1 Earnings Before Interest and Tax 1 H1 Net Profit After Tax 2 $33.3 M $22.8 M +78% +102% Interim Dividend H1 EBIT 13 CPS (partially imputed) +30% M 15 M 18.7 M 33.3 M 1 EBIT excludes joint venture and associates earnings. 2 Includes non-recurring benefit of $1.8M arising from re-measurement of US deferred tax. All increases are compared to the prior correspondending period (pcp). thl Interim Report

4 Chairman and CEO Report Dear Shareholders We are pleased to present thl s interim report for the first half of the 2018 financial year. Last week we announced the next step in the development of the business, with what has the potential to be the most exciting addition to the thl group since its inception in The formation of TH2, a joint venture between thl and Thor Industries Inc., to create a global digital platform for the industry will leverage proven skill sets in thl and Roadtrippers, along with the significant expertise and scale of Thor, who are the largest manufacturer of RVs in the world. thl and Thor, both publicly listed, and showing strong growth over the past five years, have very similar core values. Any joint venture depends on the relationship and alignment of the members. We are confident today that we have strong alignment. This opportunity has been structured to enable thl to leverage the success of the joint venture, while continuing to develop the core business globally. We will not take our eye off what has assisted our recent successes and we will not stop addressing the areas that require improvement in the business. Growth does need to be sustainable and the business will continue to check and monitor the impact on the environment, community and the team we rely on to perform. The result for the half-year is strong and includes some one-off items. We have highlighted those items and note that this is the first time El Monte RV has been included within this half period result. As part of our responsible tourism operator goals, we launched a new values-based communication to customers at the end of the half-year. Kiwipledge provides an opportunity for customers to see, in a fun manner, what we stand for as a country and, importantly, provides some key statements to guide them on how to behave and act when travelling in New Zealand. There is no direct commercial benefit we are seeking from this initiative and we will work collaboratively with the industry to refine and release the Kiwipledge, or similar concepts, more broadly for the betterment of all. Visit the pledge at 02 thl Interim Report 2018

5 This report provides you with some insight on the last six months for the business and a guide to where we see the full year for FY18. If you have not yet reviewed our 2017 Sustainability Report, please do so by visiting the thl website and provide us with your feedback and hold us to account for our progress in all aspects of our business. The outlook for all operating markets into FY19 is currently positive, although there does appear to be a greater price sensitivity and the increases in yield achieved broadly by the industry over the last two years will likely stabilise. Business Update PROFIT GUIDANCE The half-year results for the business are better than we had originally anticipated, with strong results from El Monte RV in the USA, compared to forecast, and NZ Rentals, which has had another record result. The result for the full-year will include the non-recurring gain from the change in US tax legislation (deferred tax balance re-measurement) and the gains associated with the TH2 joint venture creation. We have provided a forecast with and without these items. We are forecasting an NPAT result for the full year of between $55M and $59M, including the nonrecurring items, and $36M and $40M excluding them. We should note that the impact of the lower US tax rate on the current year tax expense is not considered a non-recurring item, although the deferred tax balance re-measurement is. The federal tax rate has moved from 35% to 21% and, for thl, has effect for the full 2018 financial year. It should also be noted that the final value of the gain from the TH2 transaction is subject to the finalisation of the fair value accounting and exchange rate movement. An assumption of an NZD:USD exchange rate of 0.73 has been applied. We have made no changes to dividend policy and continue to expect to pay dividends at the upper end of our 75-90% payout policy. OUTLOOK AND THE BROADER BUSINESS ENVIRONMENT FOR THL From a thl perspective, the volatility in the financial markets has not had any impact on the desire for people to explore, book and travel globally. We did see a drop in visitor numbers from Europe and the UK to the USA throughout the 2017 calendar year; however, movement in exchange rates between the Euro and USD seems to have compensated for any perceived political influence on demand. The half-year results for the business are better than we had originally anticipated, with strong results from El Monte RV in the USA, compared to forecast, and NZ Rentals, which has had another record result. Competitor activity is as we had expected and, pleasingly, any fleet growth in markets seems to be well aligned with increases in demand. There has been growth globally in the size of fleets operated by the sharing economy players in our industry segment, however we have seen positive growth in overall demand as a result. The sharing economy platforms offer more fleet at peak periods and increase availability for events and locations that don t always work financially or logistically for large own fleet operators. Mighway is obviously a beneficiary of this growth and has a positive future. BUSINESS PERFORMANCE Revenue for the period was up 43%, to $209M. Rental and services revenue was $136M, up 40% and vehicle sale revenue was $73M, up 49% on the prior corresponding period (pcp). Of this, El Monte RV contributed $29M in rental revenue and $15M in vehicle sale revenue. The geographical revenue split saw New Zealand fall below 50%, achieving 36%, the USA growing to 44% and Australia at 20%. This has been a planned diversification and reflects an ongoing trend we expect in the business. thl Interim Report

6 In absolute numbers, the total New Zealand revenue for the business grew by $7.9M. Operating profit before interest and tax (EBIT) was up $14.6M, or 78%, on the pcp. NPAT of $22.8M was up 102% on the pcp. The non-recurring gain in the period related to a re-measurement of the deferred tax balance for the USA post the changes to the tax legislation in that jurisdiction. This resulted in the gain of $1.8M. The change in tax rate also reduced the tax expense by $2.3M for the half-year. NZ Rentals There was a significant improvement in the New Zealand Rentals business, with EBIT of $6.6M compared to $3.7M in the pcp, an increase of 78%. The 16% increase in rental revenue for the half included approximately 3% that can be directly attributed to the Lions tour. The consequential benefit of the Lions tour to EBIT was approximately $1M. The increase in shoulder season revenue is the most significant driver of the improved result. This is a trend we believe will continue and aligns with the Tourism NZ strategy and direction. Operating costs have been well controlled with some benefit from the pre-lions tour maintenance work, which was conducted in May and June 2017, which was included in the FY17 result. Vehicle sales revenue increased 13%, with volume up 15%. The difference is primarily mix, with margins in line with expectations. We continue to monitor margins in vehicle sales and have been more aggressive with imported product and the LDV chassis vehicles in the last few months. This is very well-aligned with the business plan for the year and the expectations we have released to market over the last six months. FY19 currently looks positive, with further growth expected. Australian Rentals The Australian business EBIT growth of 4% in AUD, was achieved on the back of an 8% increase in rental income (9% EBIT growth in NZD due to exchange rate movements). The Australian business is at a point where utilisation is near a peak in nearly all months. We are growing the fleet in a slow, flexible and controlled fashion to leverage the overheads and grow EBIT. We have increased flexible fleet for the summer period and are happy with the progress to date, which will be reflected in the full year results for Australia. Costs continue to be well managed, with initiatives such as telematics continuing to provide an improved customer experience and lower operating costs. The Australian business is at a point where utilisation is near a peak in nearly all months USA Rentals Road Bear In USD terms, rental revenue was up 6% on the pcp and EBIT was flat. The business continues to provide the highest ROFE within the rentals group in thl and has little sign of abating. The US Travel Association has indicated that international visitor spend in the year to November 2017 dropped by 3%. Within the result, there were additional costs with the mediated settlement of a legal issue which cost USD$0.5M. After the increase in operating costs experienced in FY17 to allow the growth in the business, we saw good cost control in the first half of FY18 when considering the growth in vehicle sales of 14%. Vehicle sales revenue was up 20% in USD, with a total of 427 vehicles sold for the half and a total of 754 for the calendar year. The property in Orlando, which was owned, has been sold with a March 2018 settlement. The business will move to the El Monte RV site in Orlando, which has ample capacity and strong street frontage. There is a small gain on sale, which will be reflected in the year end results. 04 thl Interim Report 2018

7 The Road Bear outlook for FY19 is positive at this point in time, with rental demand looking strong for the high season and vehicle sales demand remaining constant. We expect to see more modest growth in Road Bear over the coming two years, but we remain in line with our long-term forecasts and excellent ROFE performance. USA Rentals El Monte RV The revenue result of $29M rental revenue and $15M in vehicle sale revenue was above our forecast for the period, which had been lowered from the original expectations based on the political changes at the start of the 2017 calendar year. The key focus point goals for the year are on track. We have included a scorecard in the investor presentation pack and encourage shareholders to look at that detail to assess the performance. We have invested in new fleet for El Monte RV, which will all be operational for the calendar 2018 summer season. The average age will continue to drop from the current position of 2.4 years and is well down on the average age at acquisition, which was 3.7 years. The outlook for the second half is positive with continued growth forecast. Waitomo, in particular, has a strong linkage to overall visitor arrival growth and is well positioned to continue to grow market share of total International arrivals. Operating costs have been well controlled. The expected synergies and lower R&M costs due to the newer fleet have been achieved. Property synergies are on track. The integration, to date, has gone well and we have high expectations for the total USA business over the coming years, with targeted growth in the quantity and quality of earnings. Tourism Businesses The tourism business continued to grow as a group, with a 3% increase in revenue to $18M. The Waitomo group visitor growth exceeded the overall inbound visitor growth. Kiwi Experience was stable, but did not grow in the manner we desired, possibly reflecting some share shift to competitors and other types of travel; however, more substantially reflecting the lower UK and European backpacker visitor numbers, which have been the mainstay of the Kiwi Experience business for many years. EBIT for the group was $4.7M for the half, an increase of 9% over the pcp. Return on funds for these businesses is still well above standard expectations and the capital draw expected over the coming years is minimal. The outlook for the second half is positive with continued growth forecast. Waitomo, in particular, has a strong linkage to overall visitor arrival growth and is well positioned to continue to grow market share of total International arrivals. Group Support and Other Ongoing group support costs have been well managed. We continue to focus on leveraging these costs across the larger thl group. Mighway is included within this segment. Owner numbers have continued to grow, with around 700 owners on the platform in New Zealand. The business is profitable in New Zealand over the peak season. We have been pleased with growth in USA owner numbers, however rental demand generation has been slower than anticipated. Mighway will move into the TH2 joint venture, and we expect to see rental growth in the USA over the coming year. thl Interim Report

8 Associates and Joint Ventures EQUITY INVESTMENT REPORTING It is timely to remind shareholders that these part-owned businesses are not controlled by thl and are equity accounted. The results are not reported in the Earnings Before Interest and Tax (EBIT) and are not included in our core ROFE calculations. We do, however, measure each of the businesses on both ROFE and other metrics more akin to their business model. ACTION MANUFACTURING (50%) Action Manufacturing had a positive start to the year and has, yet again, committed to lowering the cost of build for some of the core products thl purchases in New Zealand and Australia. Production efficiencies (as seen in this half), further improved manufacturing processes and reductions in some material costs all contributed to the 40% improvement in the contribution to thl. Production efficiencies (as seen in this half), further improved manufacturing processes and reductions in some material costs all contributed to the 40% improvement in the contribution to thl. Importantly, the specialist vehicle side of the business has also performed very well, producing ambulances for Queensland, Australia as well as St John in New Zealand, and securing reasonable size contracts for various new build work in Australia. The Hamilton business forward bookings for production slots is strong for the year. JUST GO (49%) The underlying growth in fleet and rentals for Just go was positive and on track with expectations. NPAT was down 9% in GBP and the translation to NZD was impacted by a weaker GBP post-brexit. The business has absorbed increases in overhead costs for the period, as it expands both in rentals and sales. The outlook remains very positive for this business, both in the current UK site and possible expansion elsewhere. ROADTRIPPERS (23% USA, 50% AUSTRALASIA) Roadtrippers has continued to develop the customer base, content and data set over the last six months. Roadtrippers Australia and New Zealand commenced in the half and has added another dimension to the current CamperMate offering. CamperMate has continued to grow active users in both New Zealand and Australia. Post the closing of the half, thl entered into agreements to form TH2, which has entered into an agreement to purchase 100% of Roadtrippers and its associated entities. Completion of these transactions is expected on or around the end of February GENERAL BUSINESS UPDATES AND INITIATIVES TH2 The release last week regarding the formation of TH2 needs little further commentary. We are confident we have an appropriate partner of this business and will work with them on ensuring TH2 delivers to its internal goals, easily and effectively. We strongly encourage shareholders to read the releases, available on our website. We are not in a position to detail the path to profitability for TH2 yet. We would, however, note that the initial cash on hand is expected to be sufficient, at this point, with the exception of acquisitions or new initiatives. The FY18 impact is included within the forecast slide in the interim result presentation. 06 thl Interim Report 2018

9 Sustainability Post the release of the first sustainability report in August 2017, we have continued to drive to the goals we set publicly. We are on track with the FY18 goals and continue to develop the manner in which the business operates from a sustainability and culture perspective. We are very pleased to have received a grant from the Energy Efficiency & Conservation Authority regarding our electric vehicle projects. This past summer we had a trial electric campervan seeking insights on the journey, the difference in the experience and to get feedback from the industry both customers and providers. This project will continue aggressively over the coming months. Capital Structure and Debt Net debt at 31 December was $178M, compared to $103M in the pcp. The El Monte RV purchase increased debt by $79M. Total available debt facilities for the business are around $250M. We remain confident with the net debt position of the company, given the strong asset backing and equity ratio relative to the industry norm. Net debt is expected to grow at the year-end, as we will be in the middle of the USA high season with both Road Bear and El Monte RV at peak fleet levels. The forecast net debt for 30 June 2018 is around $190M. Capital Expenditure Capital expenditure has been largely as planned, with a similar mix of flex fleet and core fleet investments over the period. The target net capital spend for the year is forecast at around $37M. Dividend A partially imputed dividend (to 50%) of 13cps has been declared, up from 10cps for the FY17 interim dividend; an increase of 30%. The Dividend Reinvestment Plan (DRP), which was launched a year ago, will continue. We are pleased with the take-up of the DRP and appreciate that there are a variety of circumstances for shareholders. Rob Campbell Chairman Grant Webster Chief Executive Officer thl Interim Report

10 Consolidated income statement For the six months ended 31 December 2017 (Unaudited) NOTES 12 MONTHS TO Sales of services 135,988 96, ,206 Sales of goods 73,078 49, ,595 Total revenue 209, , ,801 Cost of sales (61,762) (41,018) (92,473) Gross profit 147, , ,328 Administration expenses (24,427) (19,032) (44,274) Operating expenses (89,493) (68,335) (157,495) Other income/(expenses), net (37) 1,157 1,157 Operating profit before financing costs 33,347 18,737 47,716 Finance income Finance expenses (4,443) (2,471) (6,747) Net finance costs (4,428) (2,427) (6,676) Share of profit/(losses) from associates 7 (443) 175 (186) Share of profit/(losses) from joint ventures 6 1,404 1,222 2,874 Profit before tax 29,880 17,707 43,728 Income tax expense 2 (7,098) (6,437) (13,550) Profit for the period 22,782 11,270 30,178 Earnings per share from profit attributable to the equity holders of the company during the period Basic earnings per share (in cents) Diluted earnings per share (in cents) The accompanying notes form part of, and should be read in conjunction with, these financial statements. 08 thl Interim Report 2018

11 Consolidated statement of comprehensive income For the six months ended 31 December 2017 (Unaudited) NOTES 12 MONTHS TO Profit for the period 22,782 11,270 30,178 Other comprehensive income Items that may be reclassified subsequently to profit or loss Foreign currency translation movement (net of tax) 12 4, (1,436) Cash flow hedge reserve movement (net of tax) 514 2,093 1,560 Other comprehensive income for the period net of tax 5,041 2, Total comprehensive income for the period attributable to equity holders of the company 27,823 13,909 30,302 The accompanying notes form part of, and should be read in conjunction with, these financial statements. thl Interim Report

12 Consolidated statement of changes in equity For the six months ended 31 December 2017 (Unaudited) NOTES SHARE CAPITAL RETAINED EARNINGS CASH FLOW HEDGE RESERVE OTHER RESERVES TOTAL EQUITY Opening balance as at 1 July ,241 26,552 (2,663) (1,186) 193,944 Comprehensive income Net profit for the six months ended 31 December ,782 22,782 Other comprehensive income Cash flow hedge reserve movement (net of tax) Foreign currency translation reserve movement (net of tax) 12 4,527 4,527 Total comprehensive income 22, ,527 27,823 Transactions with owners Dividends on ordinary shares 3 (13,234) (13,234) Issue of ordinary shares 3,556 3,556 Employee share scheme reserve Total transactions with owners 3,556 (13,234) 160 (9,518) Closing balance as at 31 December ,797 36,100 (2,149) 3, ,249 NOTES SHARE CAPITAL RETAINED EARNINGS CASH FLOW HEDGE RESERVE OTHER RESERVES TOTAL EQUITY Opening balance as at 1 July ,326 19,946 (4,223) ,123 Comprehensive income Net profit for the six months ended 31 December ,270 11,270 Other comprehensive income Cash flow hedge reserve movement (net of tax) 2,093 2,093 Foreign currency translation reserve movement (net of tax) Total comprehensive income 11,270 2, ,909 Transactions with owners Dividends on ordinary shares 3 (11,577) (11,577) Issue of ordinary shares Employee share scheme reserve Total transactions with owners 138 (11,577) 135 (11,304) Closing balance as at 31 December ,464 19,639 (2,130) ,728 The accompanying notes form part of, and should be read in conjunction with, these financial statements. 10 thl Interim Report 2018

13 Consolidated statement of changes in equity (continued) For the six months ended 31 December 2017 (Unaudited) NOTES SHARE CAPITAL RETAINED EARNINGS CASH FLOW HEDGE RESERVE OTHER RESERVES TOTAL EQUITY Opening balance as at 1 July ,326 19,946 (4,223) ,123 Comprehensive income Net profit for the year ended 30 June ,178 30,178 Other comprehensive income Cash flow hedge reserve movement (net of tax) 1,560 1,560 Foreign currency translation reserve movement (net of tax) 12 (1,436) (1,436) Total comprehensive income 30,178 1,560 (1,436) 30,302 Transactions with owners Dividends on ordinary shares 3 (23,572) (23,572) Issue of ordinary shares 14,816 14,816 Transfer from employee share scheme reserve 99 (99) Employee share scheme reserve Total transactions with owners 14,915 (23,572) 176 (8,481) Closing balance as at 30 June ,241 26,552 (2,663) (1,186) 193,944 The accompanying notes form part of, and should be read in conjunction with, these financial statements. thl Interim Report

14 Consolidated statement of financial position As at 31 December 2017 (Unaudited) NOTES Assets Non-current assets Property, plant and equipment 4 336, , ,156 Intangible assets 42,156 20,225 42,385 Advance to and investments in joint ventures 6 6,393 4,677 6,205 Investments in associates 7 4,070 11,539 10,794 Total non-current assets 389, , ,540 Current assets Cash and cash equivalents 13,473 8,132 6,117 Trade and other receivables 45,312 42,721 26,892 Inventories 42,061 19,849 35,761 Advance to joint venture Taxation receivable 2,467 2,842 1,323 Derivative financial instruments Assets held for sale 13 12,765 Total current assets 116,167 73,914 70,487 Total assets 505, , ,027 Equity Share capital 174, , ,241 Other reserves 3, (1,186) Cash flow hedge reserve (2,149) (2,130) (2,663) Retained earnings 36,100 19,639 26,552 Total equity 212, , ,944 Liabilities Non-current liabilities Interest-bearing loans and borrowings 8 169, , ,943 Derivative financial instruments 10 3,033 2,658 3,431 Deferred income tax liability 22,075 14,554 17,155 Total non-current liabilities 194, , ,529 Current liabilities Interest bearing loans and borrowings 8 22, Trade and other payables 34,211 25,292 39,418 Revenue in advance 29,972 27,816 21,907 Employee benefits 7,788 5,592 8,847 Derivative financial instruments Current tax liabilities 2,136 2,357 2,629 Liabilities directly associated with assets classified as held for sale 13 2,294 Total current liabilities 98,975 61,769 73,554 Total liabilities 293, , ,083 Total equity and liabilities 505, , ,027 The accompanying notes form part of, and should be read in conjunction with, these financial statements. 12 thl Interim Report 2018

15 Consolidated statement of cash flows For the six months ended 31 December 2017 (Unaudited) NOTES 12 MONTHS TO Cash flows from operating activities Receipts from customers 123,379 89, ,193 Proceeds from sale of goods 73,078 49, ,595 Interest received Payments to suppliers and employees (92,580) (72,890) (174,614) Purchase of rental assets (85,724) (60,307) (145,539) Interest paid (4,443) (2,471) (6,747) Taxation paid (4,348) (4,327) (7,378) Net cash flows from/(used in) operating activities 9,377 (857) 14,581 Cash flows from investing activities Sale of property, plant and equipment Receipts from repayment of advance given to joint venture ,512 1,613 Purchase of property, plant and equipment 4 (2,004) (4,094) (7,061) Purchase of intangibles (459) (1,243) (1,508) Dividends received from associates Investments in associates and joint ventures (100) (7,575) (7,575) Acquisition of El Monte RV (77,620) Net cash used in investing activities (2,191) (11,143) (91,703) Cash flows from financing activities Net proceeds from borrowings 8 9,820 28, ,837 Dividends paid 3 (9,789) (11,577) (22,410) Proceeds from share issue 846 Net cash flows from financing activities 31 17,062 80,273 Net increase in cash balances 7,217 5,062 3,151 Opening cash 6,117 3,020 3,020 Foreign currency translation adjustment (54) Closing cash 13,473 8,132 6,117 The accompanying notes form part of, and should be read in conjunction with, these financial statements. thl Interim Report

16 Notes to the consolidated financial statements Index to notes to the consolidated financial statements Note About this report 15 Section A Financial performance 16 1 Segment note 16 2 Income tax expense 18 3 Dividends 18 Section B Assets used to generate profit 19 4 Property, plant and equipment acquired and sold during the six month period 19 5 Capital commitments 20 Section C Investments 21 6 Joint ventures 21 7 Investments in associates 22 Section D Managing fund and risk 23 8 Borrowings 23 9 Seasonality of business Financial risk management 24 Section E Other Related party transactions Foreign currency translation reserve Assets held for sale Events after the reporting period thl Interim Report 2018

17 Notes to the consolidated financial statements (continued) About this report Basis of preparation The primary operations of Tourism Holdings Limited (the Company or Parent or thl ) and its subsidiaries (together the Group ) are the manufacture, rental and sale of motorhomes and other tourism related activities. The Parent is domiciled in New Zealand. The registered office is Level 1, 83 Beach Road, Auckland 1010, New Zealand. Tourism Holdings Limited is a company registered under the Companies Act 1993 and is an FMC reporting entity under Part 7 of the Financial Markets Conduct Act The interim consolidated financial statements of the Group have been prepared: in accordance with Generally Accepted Accounting Practice in New Zealand (NZ GAAP). They comply with NZ IAS 34 Interim Financial Reporting and consequently do not include all the information required for full financial statements. These condensed Group interim financial statements should be read in conjunction with the annual report for the year ended 30 June 2017; in accordance with the requirements of Part 7 of the Financial Markets Conduct Act 2013 and the NZX Listing Rules; Critical accounting estimates and judgement The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. The estimates used in the preparation of these interim financial statements are consistent with those used in the 30 June 2017 annual financial statements. Accounting policies The accounting policies used in the preparation of these interim financial statements are consistent with those used in the 30 June 2017 annual financial statements. Issued standards and amendments effective from 1 July 2017 There are no new or amended standards which have been adopted in the six months ended 31 December 2017 that have a material impact on the Group. under the historical cost convention, as modified by the revaluation of certain assets and liabilities as identified in specific accounting policies; and in New Zealand dollars with values rounded to thousands () unless otherwise stated. These condensed interim financial statements were approved for issue on 21 February These condensed interim financial statements have not been audited. Throughout most months during the financial year, the Group has net current liabilities excluding assets held for sale. This arises mainly from the revenue in advance liability that reflects the collection of rental income from customers prior to the month of travel. This liability is recognised as revenue in future months, and does not represent a future outward cashflow. Comparative information has been restated where needed to conform to current year classification and presentation. Comparative information has been reclassified for cost of sales ($2,221k decrease) and operating expenses ($2,221k increase). The change primarily relates to certain repairs and maintenance expenses which have been reclassified from cost of sales to operating expenses to align with the current year classification. With the addition of El Monte RV into the Group in the 2017 financial year, it was considered more meaningful to group all repairs and maintenance expenses together as opposed to distinguishing between the expenses incurred during the life of the vehicle on the rental fleet and the expenses incurred at the time it is prepared for sale. thl Interim Report

18 Notes to the consolidated financial statements (continued) Section A Financial performance In this section This section explains the financial performance of thl, providing additional information about individual items in the income statement, including segmental information, certain expenses and dividend distribution information. 1. Segment note The operating segments of thl are made up of the following business operations: New Zealand Rentals Rental of maui, Britz and Mighty motorhomes, and the sale of motorhomes sold under the RV Super Centre retail brand. Tourism Group Kiwi Experience and the Discover Waitomo Group. Australia Rentals Rental of maui, Britz and Mighty motorhomes and 4WD vehicles, and the sale of motorhomes sold under the RV Sales Centre retail brand. United States Rentals Rental and sale of Road Bear, Britz and El Monte RVs. Other includes Group Support Services and Mighway. The joint ventures and associates are also included in this category. SIX MONTHS TO DECEMBER 2017 RENTALS NEW ZEALAND TOURISM GROUP AUSTRALIA RENTALS UNITED STATES RENTALS OTHER TOTAL Sales of services 35,722 18,258 34,184 47, ,988 Sales of goods 21,076 7,473 44,529 73,078 Revenue from external customers 56,798 18,258 41,657 92, ,066 Depreciation (7,930) (824) (7,083) (5,951) (99) (21,887) Amortisation (183) (333) (16) (185) (717) Other costs (42,102) (12,399) (28,490) (67,438) (2,686) (153,115) Operating profit/(loss) before interest and tax 6,583 4,702 6,068 18,803 (2,809) 33,347 Interest income Interest expense (15) (496) (962) (2,970) (4,443) Share of profit from joint ventures and associates Operating profit/(loss) before tax 6,568 4,702 5,576 17,844 (4,810) 29,880 Taxation (1,839) (1,385) (1,673) (3,017) 816 (7,098) Operating profit/(loss) after interest and tax 4,729 3,317 3,903 14,827 (3,994) 22,782 Capital expenditure 35, ,492 9, ,668 Total non-current assets 157,014 25,964 87, ,245 11, ,536 Total assets 197,362 30, , ,083 25, ,703 Net funds employed 157,315 23,458 78, ,402 18, , thl Interim Report 2018

19 Notes to the consolidated financial statements (continued) 1. Segment note (continued) NEW ZEALAND SIX MONTHS TO DECEMBER 2016 RENTALS TOURISM GROUP AUSTRALIA RENTALS UNITED STATES RENTALS OTHER TOTAL Sales of services 30,801 17,650 30,308 17, ,805 Sales of goods 18,565 5,864 24,731 49,160 Revenue from external customers 49,366 17,650 36,172 42, ,965 Depreciation (7,034) (753) (6,089) (2,306) (88) (16,270) Amortisation (102) (322) (26) (324) (774) Other costs (38,534) (12,271) (24,442) (30,653) (4,284) (110,184) Operating profit/(loss) before interest and tax 3,696 4,304 5,615 9,566 (4,444) 18,737 Interest income Interest expense (28) (280) (139) (2,024) (2,471) Share of profit from joint ventures and associates 1,397 1,397 Operating profit/(loss) before tax 3,668 4,304 5,339 9,427 (5,031) 17,707 Taxation (1,027) (1,305) (1,602) (3,865) 1,362 (6,437) Operating profit/(loss) after interest and tax 2,641 2,999 3,737 5,562 (3,669) 11,270 Capital expenditure 28, , ,383 Total non-current assets 147,185 27,746 71,006 26,065 18, ,514 Total assets 182,411 30,979 87,063 41,776 22, ,428 Net funds employed 145,031 25,833 60,676 29,351 16, ,726 Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker (CODM). The CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the executive management team together with the Board of Directors, who together make strategic decisions. Interest income and expenditure are not included in the result for each operating segment that is reviewed by the CODM. Inter-segment transactions are entered into under normal commercial terms and conditions that would also be available to unrelated third parties. All revenue is reported to the executive team on a basis consistent with that used in the income statement. Segment assets consist primarily of property, plant and equipment, intangible assets, inventories, receivables and operating cash. Investments in associates and joint ventures, assets held for sale and derivatives designated as hedges of borrowings are included in Other as they are not allocated to specific segments. Net funds employed are total assets less segment non interest bearing liabilities and cash on hand. thl Interim Report

20 Notes to the consolidated financial statements (continued) 2. Income tax expense Income tax expense is recognised based on management s estimate of the weighted average annual income tax rate expected for the full financial year. In December 2017, a new federal corporate tax rate was enacted in the United States. Consequently, as of 1 January 2018, the corporate tax rate in the United States was reduced from 35% to 21%. This change resulted in a gain of USD$1.3m related to the re-measurement of deferred tax assets and liabilities of the Group s US subsidiaries being recognised during the six month period ended 31 December Due to changes in the depreciation allowable for capital purchases under the new legislation, it is not expected that the Group will be required to pay income tax in the United States in the current financial year. As a result of this, the reduced federal corporate tax rate is effective for the Group s calculation of income tax expense for the current financial year. 3. Dividends During the six months ended 31 December 2017 the Group paid dividends of $13,234k (11 cents per share). The final and interim dividends paid in the year ended 30 June 2017 were $11,577k (10 cents per share) and $11,995k (10 cents per share) respectively. Under the Dividend Reinvestment Plan, 715,928 ordinary shares were issued in October 2017 at an issue price of $4.806 per share to shareholders who elected to participate in the scheme. 330,115 ordinary shares were issued in April 2017 at an issue price of $3.515 per share to shareholders who elected to participate in the scheme. 18 thl Interim Report 2018

21 Notes to the consolidated financial statements (continued) Section B Assets used to generate profit In this section This section describes the assets thl uses in the business to generate profit, including: Property, plant and equipment The most significant component is the motorhome fleet. Premises in general are leased, however significant owned properties are the Waitomo Caves Visitor Centre, the Waitomo Caves Homestead and the Orlando branch in the United States. 4. Property, plant and equipment acquired and sold during the six month period MOTORHOMES OTHER PLANT & EQUIPMENT CAPITAL WORK IN PROGRESS TOTAL Period ended 31 December 2017 At 1 July ,134 28,123 22, ,806 Additions and transfers from work in progress (net) 74,925 1,010 (9,267) 66,668 Disposals (51,357) (65) (51,422) Transfer to assets held for sale (note 13) (1,037) (1,780) (2,817) Exchange differences 7, (2) 7,396 Depreciation charge (19,135) (2,752) (21,887) Closing net book amount 322,594 25,650 11, ,744 As at 31 December 2017 Cost 405,701 49,257 11, ,458 Accumulated depreciation (83,107) (23,607) (106,714) Net book amount 322,594 25,650 11, ,744 Reclassification of motorhomes to inventory at balance date Cost 31,530 31,530 Accumulated depreciation (8,703) (8,703) Net book amount 22,827 22,827 Closing net book amount post reclassification 299,767 25,650 11, ,917 Period ended 31 December 2016 At 1 July ,228 24,328 22, ,202 Additions and transfers from work in progress (net) 61,007 3,245 (15,869) 48,383 Disposals (35,734) (119) (35,853) Exchange differences (1,310) (8) (1,318) Depreciation charge (14,333) (1,937) (16,270) Closing net book amount 227,858 25,509 6, ,144 As at 31 December 2016 Cost 300,231 48,027 6, ,035 Accumulated depreciation (72,373) (22,518) (94,891) Net book amount 227,858 25,509 6, ,144 Reclassification of motorhomes to inventory at balance date Cost 12,166 12,166 Accumulated depreciation (6,095) (6,095) Net book amount 6,071 6,071 Closing net book amount post reclassification 221,787 25,509 6, ,073 thl Interim Report

22 Notes to the consolidated financial statements (continued) 5. Capital commitment Capital commitments relates to the build of the Group s fleet for the following year. Capital expenditure contracted for at balance date but not yet incurred is as follows: Property, plant and equipment 148,014 98,154 68, thl Interim Report 2018

23 Notes to the consolidated financial statements (continued) Section C Investments In this section thl s investments comprise subsidiaries, associates and joint ventures. This section explains the investments held by thl, providing additional information, such as analysis of thl s associates and joint ventures. thl s investments include a 50% interest in Action Manufacturing, a business that manufactures motorhomes for the Group s New Zealand and Australian business segments and other speciality vehicles for external customers; and a 50% joint venture investment in Roadtrippers Australasia Limited Partnership (Roadtrippers Australasia). Other investments include a 49% interest in Just go, a motorhome rental operation in the United Kingdom; and a 23% interest in Roadtrippers Inc (Roadtrippers USA). 6. Joint ventures Action Manufacturing LP (AMLP) thl has a 50% joint venture partner in AMLP, a vehicle manufacturer based in New Zealand. The other 50% partner is Alpine Bird Manufacturing Limited, which is owned by Grant Brady (refer to note 11). Due to the nature of the contractual rights and obligations, AMLP is classified as a joint venture for accounting purposes and accounted for using the equity method. AMLP manufactures motorhomes for the Group s New Zealand and Australian business segments, and other speciality vehicles for external customers. The Group s recognised interest in AMLP The following table sets out the Group s interest in AMLP: Investment in AMLP Profit recognised against the investment balance 6,143 2,586 4,410 Net investment recognised 6,393 2,836 4,660 Advance opening balance 394 2,007 2,007 Net cash advances/(repayment) during the period (367) (1,512) (1,613) Advance closing balance Net interest in AMLP 6,420 3,331 5,054 Non-current 6,393 2,961 4,660 Current ,420 3,331 5,054 The advances from the Group are payable on demand. In previous years the directors did not expect full repayment within the next 12 months, accordingly only the amount that was expected to be received within 12 months was presented as a current asset. Interest is payable at a rate of 5.0% per annum. thl Interim Report

24 Notes to the consolidated financial statements (continued) 6. Joint ventures (continued) Roadtrippers Australasia thl has a 50% joint venture investment in Roadtrippers Australasia. The other 50% partner is Roadtrippers USA. Due to the nature of the contractual rights and obligations, Roadtrippers Australia and New Zealand is classified as a joint venture for accounting purposes and accounted for using the equity method. The Group s recognised interest in Roadtrippers Australasia The following table sets out the Group s interest in Roadtrippers Australasia: Investment in Roadtrippers Australasia 1,829 1,729 1,729 Profit/(losses) recognised against the investment balance (518) (13) (184) Net interest in Roadtrippers Australasia 1,311 1,716 1,545 Subsequent to 31 December 2017, the investment in Roadtrippers Australasia was contributed as part of the investment in TH2 (refer to note 13). Accordingly, at 31 December 2017, the investment was classified as an asset held for sale. Total advance to and investments in joint ventures Non-current 6,393 4,677 6,205 Current 1, ,731 5,047 6, Investments in associates In December 2016, the Group acquired a shareholding of 23.0% of Roadtrippers USA. The investment has been accounted for as an investment in associate, and the Group s share of associates losses have been recognised with the Group s investment. Part of the equity of Roadtrippers USA includes convertible share options. If all of the share options were to be fully exercised, the Group s investment would be diluted to 16.2%. In this situation the Group s voting rights would not be diluted, and the Group would retain a seat on the Board of Directors. Consideration has been given to these factors with respect to determining that the investment is to be treated as an investment in associate. In March 2015, the Group acquired a shareholding of 49.0% in Skewbald Limited (trading as Just go) for GBP 1,744k. Just go is a motorhome rental business operating in the United Kingdom. The investment has been accounted for as an investment in associate and the Group s share of associates profits have been recognised with the Group s investment. The carrying amounts recognised in the balance sheet are as follows: Just go 4,070 3,328 3,515 Roadtrippers USA 6,922 8,211 7,279 Total 10,992 11,539 10,794 Subsequent to 31 December 2017, the investment in Roadtrippers USA was contributed as part of the investment in TH2 (refer to note 13). Accordingly, at 31 December 2017, the investment was classified as an asset held for sale. The share of profits/(losses) recognised in the income statement are as follows: 12 MONTHS TO Just go Roadtrippers USA (722) (164) (701) Total (443) 175 (186) 22 thl Interim Report 2018

25 Notes to the consolidated financial statements (continued) Section D Managing funding and risk In this section This section summarises thl s funding sources and financial risks. 8. Borrowings Non-current 169, , ,943 Current 22, The Group has the following undrawn borrowing facilities: 191, , ,437 Expiring within one year 7,964 Expiring beyond one year 46,326 39,448 50,993 54,290 39,448 50,993 The Group has sufficient working capital and undrawn financing facilities to service its operating activities and ongoing investment in rental motorhomes. The Group has met all banking covenant requirements in the current period. 9. Seasonality of business The tourism industry is subject to seasonal fluctuations with peak demand for tourism attractions and transportation over the summer months. The operating revenue and profits of the Group s segments are disclosed in note 1. New Zealand and Australia s profits are typically generated over the southern hemisphere summer months and the United States of America s profits are typically generated over the northern hemisphere summer months. Due to the seasonal nature of the businesses the risk profile at 31 December 2017 is not representative of all risks faced during the year. thl Interim Report

26 Notes to the consolidated financial statements (continued) 10. Financial risk management The carrying amount of financial assets and financial liabilities recorded in the financial statements approximates their fair values: Derivative financial instruments are carried at fair value as discussed below. Receivables and payables are short term in nature and therefore approximate fair value. Interest bearing liabilities re-price at least every 90 days and therefore approximate fair value. Financial instruments of the Group that are measured in the statement of financial position at fair value are classified by level under the following fair value measurement hierarchy: Level 1 Level 2 Level 3 Quoted prices (unadjusted) in active markets for identical assets or liabilities. Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs). There were no changes to these valuation techniques during the period. There were no transfers of derivative financial instruments between levels of the fair value hierarchy during the period. Recurring fair value measurements The following financial instruments are subject to recurring fair value measurements: ASSETS LIABILITIES ASSETS LIABILITIES ASSETS LIABILITIES Derivative financial instruments (Level 2) 62 3,062 2,959 3, thl Interim Report 2018

27 Notes to the consolidated financial statements (continued) Section E Other In this section This section includes the remaining information relating to thl s financial statements which is required to comply with financial reporting standards. 11. Related party transactions Key management compensation 12 MONTHS TO Salaries and other short term employee benefits 3,209 2,913 4,451 Share based payments benefits The above includes the CEO, direct reports to the CEO and direct reports to the COO. Total positions included above are 15 (31 December 2016: 14; 30 June 2017: 12). Executive management do not receive any directors fees as directors of subsidiary companies. Directors fees (shares issued in lieu of cash) At the 2013 annual meeting of shareholders, shareholder approval was obtained for thl to issue shares in whole or in part payment of directors remuneration. Currently, Rob Campbell has elected to receive 50% of his director fee in shares, and Graeme Wong and Debra Birch have elected to receive 33% of their director fees in shares. Prior to her resignation from the Board of Directors with effect from 1 November 2017, Christina Domecq had elected to receive 100% of her director fees in shares. No. of shares issued in lieu of cash (000's) Value of shares issued in lieu of cash ($000's) Accrued value of shares yet to be issued in lieu of cash ($000's) Christina Domecq (Non-executive Director) Foundry Innovations Limited (Foundry), Ora HQ Limited (Ora), Software Innovation NZ Limited, The Fulcrum Limited (Fulcrum) and Wild Logic Limited (Wild Logic) are companies in which Christina Domecq is a shareholder. Foundry, Ora, Software Innovation NZ Limited, Fulcrum and Wild Logic have provided consulting and software development services to thl. The chair of the audit and risk committee has approved the provision of these services. Christina Domecq resigned from the Board of Directors with effect from 1 November MONTHS TO Amounts paid to Ora and Foundry Amounts paid to Software Innovation NZ Limited Amounts paid to Fulcrum Amounts paid to Wild Logic 14 Kay Howe (Non-executive Director) Supreme Motorhome Manufacturing Limited (Supreme) is owned by entities associated with thl director Kay Howe. Supreme has provided caravans, parts, and service work to thl. 12 MONTHS TO Payments to Supreme including purchase of motorhomes and caravans Sales of motorhomes to Supreme 279 thl Interim Report

28 Notes to the consolidated financial statements (continued) 11. Related party transactions (continued) Cathy Quinn (Non-executive Director) Cathy Quinn was appointed to the Board of Directors in September Cathy is a partner at MinterEllisonRuddWatts (MinterEllison). MinterEllison has provided legal services to thl. The amounts paid for the legal services are set out in the table below: 12 MONTHS TO Legal services Grant Brady (shareholder and director of Alpine Bird (New Zealand) Limited) Grant Brady, Managing Director of Action Manufacturing, is a minority shareholder and director of Bush Road Enterprises Limited. thl subleases a property in Bush Road which is owned by Bush Road Enterprises Limited. The lease on this property was renewed for a further term of six years in April The cost of the sublease and operating expenses are set out in the table below: 12 MONTHS TO Cost of sub-lease and operating expenses Action Manufacturing LP Grant Brady is a shareholder in another entity, Alpine Bird Manufacturing Limited which owns 50% of Action Manufacturing Limited Partnership ( AMLP ) that was set up in March thl owns the other 50%. AMLP manufactures the motorhomes and campervans used by Rentals New Zealand, manufactures motorhomes and parts for Rentals Australia, and manufactures specialty vehicles for external customers. Pricing is based on the cost of manufacture plus an agreed margin set out in the Limited Partnership Agreement. AMLP also subleases part of the Bush Road property described above. The transactions between AMLP and thl are set out in the table below: 12 MONTHS TO Purchase of motorhomes by the Group from the joint venture 33,315 30,045 53,372 Sales of vehicles by the Group to the joint venture 3,237 Interest charged to the joint venture Net interest in Action Manufacturing LP (note 6) 6,420 3,331 5,054 At 30 June 2017, $9,814k (June 2016:$17,235k) was outstanding under a Documentary Letter of Credit in favour of AMLP. This amount is included in the purchase of motorhomes shown above, and the outstanding amount is included in trade and other payables. At 31 December 2017 and 31 December 2016 the amounts outstanding were nil. Just go During the six months ended 31 December 2017 the Group purchased motorhomes from Just go with a value of $4,808k (six month ended December 2016: $5,796k; year ended 30 June 2017: $5,818k). Schork Family As part of the consideration for the acquisition of El Monte Rents Inc in January 2017, the Group issued 3,384,266 ordinary shares to entities associated with the Schork family. Tucker and Todd Schork have been contracted by El Monte Rents Inc to assist with the transfer to thl management. An entity associated with the Schork family provides warranties to customers of El Monte Rents Inc, the total amount paid by customers during the six months ended 31 December 2017 was $248k (six months ended 30 June 2017: $389k). At the time of the acquisition, the Group entered into a number of property lease agreements with entities associated with the Schork family. The leases are in relation to branches used by El Monte RV. The cost of the leases are set out in the table below: Rental and operating lease costs 1,425 1, thl Interim Report 2018