Tourism Holdings Limited (THL) Earnings Call Transcript & Summary

Tourism Holdings Limited. My name is Cathy Quinn, your Chair. I've been advised that we have a quorum present, and as it is NZ 1 P.M., I will declare the annual meeting open. We are glad today to be able to welcome our shareholders here in person and online. For those of you joining online through our virtual meeting platform, you are able to vote and ask questions online by [Operator Instructions] If you encounter any issues, please refer to the virtual meeting online portal guide or call the helpline on 0800 200-220 if you're in New Zealand or 1-800-990-363 from Australia. For those in the room, we have microphones available and at the appropriate time, I'd ask you to hold up your admittance card if you'd like to ask a question. When you speak, please tell us your name and whether you're a shareholder or a proxy holder. Also, for those of us here in the room and the unlikely event that a fire alarm goes off, please follow the directions from the MUFG staff, who will direct us to the appropriate exit. I'm joined in the room by my fellow directors: Rob Baker; Rob Hamilton; Grainne Troute; and Executive Directors, Luke Trouchet and Grant Webster. Sophie Mitchell is also joining us today online by teleconference. Unfortunately, she wasn't able to be here physically present today. In the room, we also have our Chief Financial Officer, Cameron Matthewson; and Company Secretary, Amir Ansari. I also welcome other members of our executive team here today: Juhi Shareef, Ollie Farnsworth, Steven Hall and Joe Hilson. They're also in the room. A number of our other executives are based on other locations are attending online. Representatives are present from our auditors, EY; and our lawyers, MinterEllisonRuddWatts. Before moving on, I would like to acknowledge Debbie Birch, who's recently stepped down from the Board and recognize your contribution to serve on the THL Board over the last 7 years. As indicated on the screen, we have received 118.9 million valid proxies and postal votes, representing 54% of the ordinary shares on issue. Of those, 86.2 million have appointed me as Chair of the meeting as proxy. I intend to vote all discretionary proxies I have received in favor of the resolution set out in the notice of meeting. During today's meeting, I will provide a brief overview of the business and then hand over to our Chief Executive, Grant. We'll then proceed to the formalities of the meeting and the resolution detailed in the Notice of Meeting being concluded by opening for general questions relating to our business and the year that has passed. THL remains a business with a resilient balance sheet, strong market position and positive prospects. The issues of the last 6 months clearly correlate through broader sector performance in which we are not alone in challenging macroeconomic conditions, yet we remain realistic and reflective. The underlying net profit after tax of $51.8 million did not achieve our returns on funds employed target of 15.8% -- 15%. As strong performances from the New Zealand and Australian Rentals, Action Manufacturing and Tourist divisions were weighed down by the Northern Hemisphere divisions falling below target. The overall Australian division did not perform to target, largely due to challenging RV sales despite RV rentals performing very well. We are disappointed in the trend in the share price over this year and recognize the impact this has on our shareholders. In particular, we acknowledge the share price reaction after the profit downgrade release in May. We, as Board, are all shareholders and our two executive directors both have significant shareholdings with the True Show family being our largest single shareholder. We are aligned. We saw sentiment turn very quickly in all markets. This was not specific to motor homes and has been seen across the broader vehicle and leisure industry, including boats, motor vehicles and motorbikes. We believe we are amongst the first publicly-listed company in Australasia to see this change coming and revise our guidance with several other companies doing the same later in May and June. While the share price reaction in some views in the market were that THL would need to raise capital, it was not the case. And our view remains that we do not currently require additional equity to operate the business in its current form. We rightly indicated in May that we would engage with our lenders to seek additional headroom on our covenants for 30 June. And we subsequently did that with no issues. We've since implemented a significant refinancing of our bank facilities with higher facility limits, an improved covenant structure, longer terms and better pricing. We see this as a reflection of our lender support and confidence in THL. A reminder, that THL's debt is supported by assets. For every $1 of net debt that THL currently has, we have almost $2 in the value of our rental fleet and RV inventory. We have a business of around 8,000 vehicles globally. And in challenging times, we've seen the primary source of equity as our own fleet, either through accelerating sales or reducing purchases. Our business model does have a flexibility that allows us to adjust the fleet to market conditions, and we showed through the pandemic that we can do that very effectively. As part of our annual results, we withdrew the timing of achieving our goal of $100 million NPAT by 2026. A deeper and more prolonged economic downturn affecting vehicle sales along with a slower recovery of international tourism, particularly to New Zealand and Australia made this goal unachievable by FY '26. While we remain optimistic about THL's long-term prospects, the uncertainty on the timing of recovery of those factors make it difficult to provide a new target year for this goal at prism. The Board approved a final dividend of $0.05 per share for the financial year, bringing the total dividend for FY '24 to $0.095 per share. This represented a payout of 40% of underlying profit within but at the bottom of our policy target of 40% to 60%. Based on the closing share price at the end of the financial year, the FY '24 dividend represented a 5.3% cash dividend yield or a 7.4% gross dividend yield for the New Zealand resident shareholder, given the fully imputed nature of the dividend. While our expectations for the result changed drastically in May, the Board considered and saw no reason for THL to deviate from its dividend payments in line with policy. The net profit for the year, while disappointing, were still an underlying profit of over $50 million and the second largest in THL's history. We recognize the importance of a consistent approach to dividends for our shareholders. The uptake for the dividend reinvestment plan that was made available for the final dividend was 30%. This is the largest uptake for THL in recent history and a reflection on our view of shareholders' belief and a positive outlook for THL. We are appreciative of the ongoing support from our existing shareholder base. I'd like to reiterate how important return on funds employed is within THL. We have an internal target for each division to deliver a return on funds employed at above 15%. For the rental businesses, each fleet investment requires Board approval. And each fleet request includes financial analysis to demonstrate that a 15% returns on fund employed is achievable or that there is a clear path to return a division to delivering a 15% return on funds employed. Underperforming divisions such as North America and the U.K. at present, received additional attention and scrutiny from the Board, which I'm sure they enjoy. The Board has reviewed and supported the North American synergy project that has been implemented. Which looks at how Canada and the U.S.A. divisions can work better together to maximize the opportunity in that market. While it will take some time for the benefits to be realized, we believe the opportunities are meaningful for the future of the division. Likewise, we had management review the U.K. business in some detail. We would acknowledge this has been one area of the merger, which has not gone to plan. And therefore, it is a focal point of management. In closing, the THL Board and management are focused on managing to the current conditions, but also conscious of short termism. We aim to continue to position THL for recovery as economic conditions improve. This means that we continue to invest in sensible fleet growth and improving our digital systems and the safety and training of our people, and we continue to explore inorganic growth opportunities that present themselves in the current environment. Before I pass over to Grant to cover the result in more detail, I would like again to thank you and acknowledge you for your support. We hope to continue on this journey with you for more prosperous times ahead for THL. I'll now hand over to Grant.

Thank you, Cathy. Our FY '24 result reflect a mixed set of outcomes by business area and geography. Our core rentals businesses have performed well, particularly in markets like New Zealand and Australia, but challenging conditions and vehicle sales have impacted our overall performance. The profit downgrade in May was a defining moment for THL, and there has been significant questioning by everyone involved given the quantum of the move and the timing so close to year-end. The scale of the downgrade is partly a hangover from the pandemic where we achieved record sales margins in fleet values appreciated resulting in unusually large earnings exposure to our projected vehicle sales volumes. This came to the fore in the fourth quarter of FY '24, where we sold fewer ex-fleet vehicles in Australasia and RV demand in North America did not recover in line with broader industry expectations. Long term, investors in THL will know that a movement of this magnitude and expectations in THL is unusual. We hope you know as shareholders that we have taken the situation very seriously and we have responded with clear definitive actions. Whilst acknowledging that we are in a challenging environment, I believe it's still important to reflect on the positive elements of the year as well. We've seen New Zealand rentals continue to go from strength to strength, delivering a record EBIT and with a continued positive outlook for fleet and earnings growth this year. Earlier this year, we also acquired Camperagent RV Center, a leading RV dealership in South Australia, lifting our sales capability in that market. We also spent $165 million in net fleet capital expenditure. That comprised of $40 million to replenish x rental vehicles sold in the period and $125 million to grow our total fleet and x rental vehicle inventory. So that was 1,074 additional vehicles. This investment assists us to maintain a young fleet age and deliver a premium product. Pleasingly as well, both Action Manufacturing and the New Zealand Tourism division also delivered record EBIT results. We're delivering more profit on lower customer numbers in the Tourism division, and we see opportunity to continue to grow that business as international tourists return to New Zealand. Action Manufacturing is also seeing the benefits of the bolt-on acquisitions that we've undertaken in recent years or particularly in the commercial vehicle space. Thinking about the global operating context, the key indicator for our rental business is the state of international tourism. The recovery of tourism back to 2019 levels continues but the pace of growth has been slower than the broader industry expected this year, particularly in New Zealand and Australia. Year-to-date, international arrivals to our main operating countries are between 8% to 16% down on 2019 volumes. These statistics importantly show that there is still a runway of growth for our Rentals business as leisure tourist arrivals return to pre-COVID levels. Vehicle sales does continue to be challenging. Consumers have chosen to close their wallets on big ticket discretionary expenses in response to the ongoing economic uncertainty. This is even the case for our customer base, which leans towards older retirees that are less likely to have a mortgage and more likely to have benefited from the recent higher interest rate environment. Some of the data we see from larger RV markets in Australia and the U.S. indicates that overall RV sales as the market is down by nearly 40% from its peak. Some investors have questioned whether the spike in RV sales through the pandemic brought forward demand for several years. We see that as one of several factors, but we also see that there is a much greater category awareness for RV travelers as a result. One statistic out of the U.S.A. is really interesting. It indicated that during the pandemic, the median age of first-time RV buyers dropped from 41 years age to 32. This can only be really positive for us in the long-term outlook for our industry. We regularly see RV buyers trade up from towables to campervans to motor homes over the years as their family and circumstances change and develop. We see the improvements that we expect in vehicle sales to be closely connected with the economic recovery in all jurisdictions. In the U.S., which is the world's largest RV market, industry projections are for 7% increase in RV shipments in calendar year 2025. Our experience has been that the U.S. tends to at the moment, showed trends that are leading the Rest of the World by between 6 to 12 months. I want to talk about cost out and optimization. We're coming up to nearly 2 years since the merger with Apollo completed. We believe the integration to date has been implemented well, but we know that the journey to maximize all benefits is a longer one. We see ourselves as nearing the completion of the integration and progressing into a new phase. We will look to maximize and optimize every part of the business. This is a significant project that is ongoing as we look at all markets and all segments within our business. The work we are currently undertaking on shifting our global businesses onto common digital platforms is one that I am particularly excited about. It's going to enable us to more deeply and quickly compare key metrics, maximize conversion rates and revenue generation and cost efficiencies between markets at a level of granularity that neither THL or Apollo ever had previously. We've recently indicated that we would be moving from synergy targets to broader cost out opportunities. Our rebased targets are relative to the FY '24 cost base. It's just been too complex to try and compare synergies of a counterfactual case that is now some years old. We're also, as part of that shifting our terminology to more accurately describe these now as cost out and optimization opportunities. To be clear, this doesn't mean that we're moving away from the synergies, it means we have those expectations and more. We believe we can deliver an improvement of at least $12 million in net profit after tax in FY '27, primarily through cost reduction across multiple categories in reduced depreciation resulting from the optimization of their fleet production and procurement efficiencies. The clarity again, we note that we see this $12 million is incremental to the other standard trading opportunities that we see will improve our performance over the coming years. Moving on to a trading update for performance in the first half of the year. The recent high season in the U.S. has been positive where we've achieved rental revenue growth. While rental revenue in Canada has been broadly flat, we have improved RevPARV in both the U.S.A. and Canada. Forward bookings in these markets are showing growth. However, this is through the obvious quieter shoulder season. As we near the summer season in New Zealand, our rental intakes have been positive in showing year-on-year growth. This market is also where we've expanded our fleet the most over the past year. The RevPARV in the first half is expected to be slightly down in this market as we carry that additional fleet through the shoulder season ahead of that high season, which is more weighted to the second half profitability. The rental revenue intake in Australia, which is less seasonal has been mixed. Up in some months and down in others but broadly flat overall for the first half. We do expect a small decline in RevPARV in this market as well for the same reasons we're operating a larger fleet going into the peak season. In vehicle sales, the difficult market conditions at the end of FY '24 have continued into the first half of FY '25. Volumes in North America have been volatile, and currently are tracking below the prior year in both the U.S.A. and Canada. Sales volumes in New Zealand, however, so far have been in line with last year. This also applies to the overall sales in Australia. We're seeing new retail sales down in that Australian market, whilst our ex-rental sales are tracking ahead of last year, likely a reflection of the market being softer at that newer, higher price point end. There's margin pressure, obviously, across all markets, and as would be expected in a down market from a volume perspective, that will impact our performance this year. Looking at outlook, our expectations for FY '25 always included that the first half would obviously be significantly below '24, as any overall increase in rental revenue was unlikely to offset that weaker performance in vehicle sales. We continue to hold this view for the first half of FY '25. As expected, the challenging operating conditions for vehicle sales from the fourth quarter of FY '24 had persisted through the first half of FY '25. We expect to achieve NPAT growth in the second half of FY '25 driven primarily by stronger rental activity in New Zealand through the high season and targeted operational cost savings. And we remain focused on increasing underlying NPAT in FY '25. Before passing back to the Chair, I do want to acknowledge the present challenges. It is a difficult time to be in the RV industry globally. But whilst sales are at a low point and cyclical, we see no structural difference or change in the vehicle sales environment. The economic conditions should and will improve in time and with it, the RV sales market. But most importantly, international tourism is still in growth mode. There is still room to move, and we see that growth even despite the broader economic challenges. And to add to all that, we now have a clear plan and target for further cost out and optimization in the business. And we are fiercely focused on achieving that $12 million net profit after tax improvement in FY '27 over and above that recovery in the sales market and improvement in broader tourism and rental activity. Our Board and management team have experienced these kind of conditions before. We know that we can't stand still or take our ability to recover within the market for granted. We've got to be fast. We've got to be assertive. We've got to be agile. Better than we have ever been before, and we will. We want to be leading a more effective business that is maximizing the opportunity as these conditions improve. Thank you. I'll now pass back to the Chair.

Thank you, Grant. We'll now move on to the formal items of business on the agenda. We are operating a poll for the resolution today. Eligible shareholders or proxies have been given a voting card. For the resolution, you need to tick the box indicating whether you are voting for or against the resolution or abstaining. MUFG representatives will collect the voting cards at the end of the resolution prior to general business, and the votes will be counted and collated with postal and online votes. For those attending the meeting online, you are able to cast your vote by clicking, Get Voting Card. Further instructions can be found on the online voting -- on the online portal guide. Voting will remain open for 5 minutes after the conclusion of the meeting, and the results will be announced on the NZX and ASX. The resolution set out in the Notice of Meeting is to be considered as an ordinary resolution and must be approved by a simple majority of votes cast by shareholders entitled to vote and voting on the resolution. As all of the directors were reappointed by shareholders within the last 2 years, our single resolution today relates to the director setting the remuneration of our auditors. EY was THL's auditor for the 2024 financial year. I propose that the directors are authorized to fix the remuneration of the auditors for the ensuing year. Are there any questions on this measure from the floor? Are there any questions from shareholders online?

No questions on this resolution.

Thank you. So therefore, there have been no questions, could you please cast your vote on the voting card or online in relation to the resolution? [Voting]

That ends the formal aspects of the meeting. For those of you in the room with us today, representatives from MUFG will now collect your voting cards. For those of you joining us online, please ensure your votes have been submitted. At this time, I'd like to advise the outcome of proxy votes that were lodged in respect of the resolution, which are shown on the screen. So for, 117,572,853; against, 37,795; abstained, 10. Moving on to general Q&A, I'd like to open up to the floor and online for questions.

Are there any questions from the floor? Okay. Sorry, [ His name ] was first.

Thanks, Chair. Alex Ball, New Zealand Shareholders Association. Just really wanted to clarify a few things about capital management. You sort of made a few opening comments about the new facility. But I just wanted to just reflect on the fact that at the year-end, you had a net debt level of $446 million, which in the old fashioned net gearing ratio is against $16 million of total equity gives you a gearing ratio of 72%. It's quite high gearing. I noted you've drawn against the asset finance facility, the floor plan facility and the syndicated facility at year-end and you had headroom in all of those. Could you clarify with the new $475 million facility, how much of that is effectively retiring elements of the asset finance facility and floor plan facility? And how much of that is just providing additional, in your words, headroom for future activity of the business?

You got that -- do you want to do?

Yes, of course. I think part of our approaches to me ensure we maintain flexibility. And at certain times, certain types of funding are more suitable than others. So what we try to do is balance that between bank syndicated debt and also things like asset financing and floor plan financing. So it's more about an availability and having the right type of funding available at the right time. And then obviously, we make those decisions based on the circumstances we find ourselves in.

Yes, we didn't retire some asset financing as part of that.

Yes, you haven't actually answered the question, but any indicators of proportion? I know you don't have to give your numbers, but just to let shareholders know how much extra gearing you might be thinking of taking on.

Yes. Well, so two separate sort of questions there, I think. On the asset financing, so we've left ourselves a little bit of room there. So -- but we've paid down the vast majority of the asset financing. The flooring finance remains for the dealerships, and that's the most effective thing for those dealerships at this point in time. But the second point in terms of how much more are we going to draw down, we have given some indications around where net CapEx is hitting and it's certainly less than the current year. So you will see debt move far less than in the current year. But ultimately, probably just one other point that I'll come back to on your original point around the total CapEx spend and that movement and that leverage ratio. So when you obviously -- this is -- I know this is really obvious, but I think it's worth reinforcing. When you get that new fleet on straight away, in essence, day 1, your leverage ratio is infinity, right? So you've got to have that time to get those earnings. And there's no better example than New Zealand this year. So that increase in fleet, we will absolutely get a return from that this summer. But clearly, that leverage ratio as you move through to that point is always going to be higher. So it is about us understanding that there will be a return on that capital. That's that discipline of the 15% and where we've got excess making sure that we are managing to that and bringing that down, and those disciplines relate very strongly to that.

And it's something that board and management regularly review. Yes, it's obviously a very important metric. Sorry, I'll just wait for the -- let's just -- if you just want to take the microphone.

My name is [indiscernible] Chen. I'm the shareholder. I would like to discuss a few things related to the profit and loss statement and the balance sheet. I find it's a bit strange that CEO and you haven't covered this detail here. And then I want to talk about the impairment loss of sudden seems to be the $12 million impairment loss certainly pop up and also the derivative financial instrument, 50% loss on that. And also the investment of about $20,000 -- sorry, 20 -- what's that? $20 million? Is it $23 million loss? So the $12 million loss in the impairment and so those are the three details.

Thank you. Between Grant and I and Cameron, will endeavor to answer your question. So perhaps if I start with the impairment. The impairment for the U.K. business, which was $12.4 million. Obviously, there are a number of reasons behind that. And we acknowledge that as one part of the business where the merger has not gone to plan. We were very disappointed about the need to do that impairment, but we do have an obligation to do so when the carrying value is higher than the realizable value. And that's also impacted by -- there was an impact of an increased WACC rate, which resulted us having to make an impairment. So it's a requirement to do that. We didn't like doing that, but that's our obligation. And all I can assure you is that the Board and management are very focused on seeking to return the U.K. business to have more acceptable financial performance and return to our 15% ROE target. On the NPAT -- sorry, the profit and loss statement, who's going to speak to that?

Well, I'll just make an initial comment, and then just we can clarify a couple of points. So in terms of talking about the P&L and the balance sheet in more detail, we definitely do a lot of review of that in our investor presentation post the year-end. And we definitely encourage people to have a look at that, refer to that and raise any questions accordingly. So from an annual meeting perspective, we have found historically that people would prefer us to keep at a high level. And knowing that, that information is there and available. In terms of your other $23 million point, I'm not sure exactly what you're referring to? Yes, that's fine. Or if you like, we're more than happy to talk to you afterwards and go through that in some detail.

It's on Page 50, so we have got the asset column. So what I have covered also the investment and the derivative financial instrument part. So those are the two parts there.

Sorry. The derivative financial instruments is obviously just moving out our swaps and so forth. What's your $23 million that you're talking about? So that's in FY '23. So that's the difference in investments from a joint venture perspective. And so FY '24 is a more normalized year.

In fact, if you've got some more detailed questions about Grant and Cameron, we're very happy to talk to you afterwards. Are there any other questions? Yes. Sorry, can you wait for a mic to come to you. Thank you.

My name is Shabir, shareholder. This is regarding -- first thing is we should -- I didn't get this copy of this beforehand to analyze it correctly. But right now, after getting this, I came a little bit early. I got a small question on this on Page 57 of the report, where you say about the notes on consolidated financial segment. Now the New Zealand business has got some figures. And the interest part, if you come to interest expense, it is only 3,839, whereas the Australian business is practically double, but the expense is 4x interest expenses. It's 12,872. So what is the explanation for that? Why the interest expense in Australia is so high compared to New Zealand? That was my first question. And the second question is, what is your -- you said that the -- when I saw the presentation over here, the tourism returns are very good. Absolutely, 138% you are showing the returns. So what is the tourism returns? So I would like to have more details on that, please.

Okay. So I can at least do the tourism. The tourism relates to our Waitomo business, our business in Waitomo. So that's what that relates to. Grant, can you -- do you want to give a comment on the difference between Australia and New Zealand?

Yes. So just a very first point. So we'll follow up with you afterwards on the actual annual report. You should have either had the online version come to you and if you've chosen to take a paper version that should have arrived some time ago.

I have lots of them. [indiscernible] Physical form but I didn't get any...

Okay. We'll follow up with that for you. So just the interest expense difference, just we have slightly different debt levels by country, which depends on a whole raft of things, and it depends on a difference between when fleet is being purchased. It depends on the interest rates in the different markets, so forth and so on. So we do manage it based on different equity levels and different debt levels based on just what's appropriate across the contrast.

[indiscernible] It is 3,000 and this is 12,000.

Yes. So one of the big differences there in Australia is that we've got all the retail business as well. So the retail business has all the fleet associated with that as well. So it has a higher total funds employed from that perspective.

It's also got the manufacturing included?

Yes.

So we separate that in New Zealand between Action and New Zealand. So those two are separate. The first two columns whereas with Australia, those things are combined.

So that's the total Australian business.

It's all combined in one column, whereas New Zealand split in those first two.

Again, if you've got more detail, Cameron and Grant are very happy to talk to you after. Are there any other questions? Yes, I'll get the mic for you.

Yes, [indiscernible]. I'm a shareholder. My question is relating to the electric vehicles, but the move to these, there seems to be quite a bit of confusion created in the markets. Do you see this sort of reflected in -- when it comes to your own manufacturing, where the preference is for EVs? Are you providing for both EVs and other because I note, I have said in New Zealand that they find as far as car rentals are concerned that people tend to steer away from EVs.

Sure. The situation with EVs for our fleet really is that we did a trial in 2019 of EVs, and we're doing another small trial this summer in New Zealand. So we don't really have many in our fleet. And the reason for that is that the motor vehicle manufacturers around the world have concentrated on providing EVs for cars like you and I drive. Light passenger vehicles and heavy big trucks, and they haven't really focused on the opportunity for EVs and for what we call for our product, which is recreational vehicles. So really, they haven't really produced enough product for us to be able to look at that any viability at this stage. So we're constantly talking to the motor vehicle manufacturers around the world. We are seeing more interest and potential production of electric vehicles, actually by some of the Chinese manufacturers. But at the moment, we have very few on our fleet. And then there's a question of whether customers will actually take them up. When we did our trial in 2019, there wasn't massive take-up. It will be interesting to see what the take-up this year is because you know, obviously, range is one issue and as well as people being satisfied there's enough infrastructure for charging.

Because the natural effect from 2019 to now is 5 years, and the EV market has been moving very fast. I would have thought that was too historical to be of much use? 2019.

Yes. I just -- it's nothing has changed. As I said, the interest of vehicle manufacturers to produce a vehicle that is suitable for an RV hasn't really been there. We are seeing some -- as I said, we're seeing more interest in that out of China. And more recently, we've seen some interest in the U.S.A. But really, the motor vehicle manufacturers have been more focused on producing RVs for light passenger vehicles and trucks associated. It's something we continue to look at. But as I say, we to -- we need motor vehicle manufacturers to decide it's worth their while producing those vehicles before we can really go too much further.

So you're just going to have to take what's available sort of thing?

Yes. I mean we think that we're -- obviously, we're the world's largest RV company, but we're a minnow in terms of what is of interest to them. So I don't know if you got any other comments, Grant?

Yes, because I believe overseas manufacturers of EVs have actually found that they're a big disaster as far as the bottom line profits are concerned. And I guess that means next year is going to be very different from this year.

Yes. So look, we continue to explore. And one of the reasons we continue to explore electric or some other form of powering RVs other than petrol and diesel is from an emissions perspective. We just haven't found the solution yet, but we keep working on it. And our team at actual manufacturing in Hamilton, they scan the world along with Grant and they have produced a very pretty cool electric RV that will be seen running around the country this summer. But yes, we just don't currently have the demand -- well, the production available from the manufacturers. Yes.

Is the battery, the size of the battery, a big factor as far as the RVs are concerned? Does that have to carry far bigger one than a car?

Yes. It is a factor. But the key thing that's been holding us back is the lack of supply from the motor vehicle manufacturers. Yes. Thank you. There's a question at the back.

John Hume, shareholder. You're in the industry of tourism, which is your campervans and then you've got Air New Zealand, then you've got Auckland International Airport. And visas are talking about -- the government is talking about raising the visas from $35 to $100. Are you making any submissions with regard to that? I mean Australia can still come here without being compromised like weekend. But you also got U.S.A. and Canada and Europe, obviously, in China that would come and are going to be hit with that if that comes to fruition. Are you making any submissions or have you been approached about this?

We've certainly made our views known and I'll let Grant comment. We don't see the increase in the visitor levy has been helpful. And it's one thing -- we one thinks -- we live here, and we think it's the best place in the world. But actually, our international tourists have choices, and Grant's already had experience of one customer choosing not to come to New Zealand over it. We do compete with lots of other countries looking for international tourists, whether it's Australia or places that people perceive to be cheaper to get to, such as Southeast Asia and even South Africa. So we don't think it's something that's helpful. In other governments -- our government's constrained by money. Other governments are spending, pumping a whole lot more money into their tourism industry and sector to help through the economic recovery that most countries have been suffering. But our government has not been in the position to do that. So we certainly have made it clear that we don't think it's helpful, but our voice has not really achieved anything. Grant?

If they go to Australia, at least you've got the ticket there.

Yes, that's true.

But that will stop them in Australia instead of coming through the South.

Yes.

Yes. So Chair is absolutely right. So yes, we made formal submissions through the consultation process. Yes, we were opposed to it. Yes, we continue to be opposed to it. And it is, in our view, something that reduces demand for New Zealand. As a country, we are getting increasing demand at the moment. That's great. But we, as the Chair said, we are less than 1% market share of world tourism. And if we think that just everyone in the world wants to come here regardless of price, then we're kidding ourselves. So we have to be very aware of that as a country, and that's sort of our position as a company.

Any other questions? Yes, sorry.

My name is Eva Quitting. I'm a shareholder. Ms. Quinn, near the end of your address, you talked about the company will continue to explore inorganic growth opportunities. What does that refer to? What inorganic activities?

Complementary M&A that of -- for example, Action Manufacturing has done a number of small acquisitions, over the last few years. That's been very positive. We take those opportunities. So just growing our market share by providing fantastic customer service. Yes. There's a question over here.

my name is Jagat [indiscernible]. I'm a shareholder. So my question is why we are not in the Europe as per rental business?

Well, our business -- we've obviously got our U.K., Ireland business. But really, we -- I mean, Europe is another market. Of course, that could be an opportunity. But it's not a market that we've currently gone into. We sort of see that we've got plenty of room to grow in the countries we're operating in. And we've got a lot of work to do to look to improve the performance of our North American business and our U.K., Ireland business before we sort of look for another opportunity in further afield. But Grant, do you?

The only thing that I'd add to that is that Europe has been on our radar for a number of years. We understand that market well. It does operate differently to the rest of the world. There are a lot of small dealerships that have a small rental business on the side. And as such, they don't necessarily operate in the level of efficiency that you want as an industry. So they don't really worry about it. They focus on making money out of it. They focus on those vehicles getting a few kilometers on them to help the secondhand vehicles for their sales business. So the way to enter that market and do that in a profitable manner that delivers the right return on funds employed is the fundamental question for Europe. So we keep looking and watching and seeing what that right way would be, but we're not going in there to loose money that doesn't make any sense.

Perhaps before we just -- I'm happy to see if there's more questions from the floor, but perhaps we should just see if there's -- give people an opportunity if anyone online have got a question, and then we could come back to the room. Are there any questions online?

We do have a few questions online. The first one is from John Wilson. John's observation is that the New Zealand market for used campervans is starting to become saturated. He's asked whether you agree? And if so, will this lead to any changes in the policy?

Thanks, John. Thanks for your question. It's an understandable one and one we actually get asked reasonably regularly. Look, we always need to ask whether the market for new and used motorhomes is large enough to sustain the rentals business we have. Our global research indicates that a very high proportion of the population actually want to own an RV. But globally, the market is suffering at the moment for people who do not close their wallets. And for many large discretionary items, including motor homes. New Zealand is a key touring market, which works for motor homes. So we are open to any indication yet to the contrary. Now while during COVID, there may be an element of that growth -- may have been a surge in the purchase of RVs over COVID. The current challenges really are global ones, which suggest it isn't an issue specific to New Zealand. It does suggest it's on a market saturation point. It just -- we think it really stems from the current economic conditions that are impacting us in all the markets we operate in. Now if we deep -- I thought it was a real problem in New Zealand. We do have the opportunity to rotate our fleet at a slower rate, which would require fewer ex-rental sales vehicles each year. And we do build our vehicles to a rental durable standard, which gives us the flexibility to do that. And of course, you will have seen this year that we have increased our RV supercenter footprint from three to five branches nationwide with ambitions for further growth, which again gives us confidence and our ability to sell vehicles as market conditions improve. Any further questions online?

Yes, we've actually got four more questions. The second question is also from John Wilson. He asks whether the company sees the peer-to-peer van rental market as a threat, and if so, then how's the company dealing with the threat?

Again, thanks for the question, John. As you'd be aware, the peer-to-peer market isn't new for THL. It's been around for some years, close to a decade and longer-term shareholders will recall that we used to own a peer-to-peer business up until about 2022. So peer-to-peer in our business, we both operate in the broader RV rental market but we have differences about where we concentrate. So we think peer-to-peer is a good option for domestic customers wanting to hire a campervan outside of the main population areas where it isn't really profitable for any of the commercial operators to have a presence. And we have a stronger focus on international customers, and we promote the certainty, the uniformity and our presence has been close to major airports. And these are all areas we don't think it's so easy for peer-to-peer deliver to the same standard as us. Another area of focus for peer-to-peer is sort of short-term hires, and that's not really again an era we focus on. So a private RV owner doesn't generally track utilization like we do. So they're probably quite happy to hire out the RV for 1 or 2 days over, say, a weekend. But we favor long-term hires with higher utilization across the year, and we actually have policies. We have to have a minimum 5-day hire period in most markets. So we do note that the venture capital funded peer-to-peer companies, and we're very much focused on just revenue. They now seem to be focused perhaps as a result of these tough economic times on actually returning the profit, which we think is probably a good thing. And we've sort of seen a more stable market and a bit more global consolidation. So I hope that answers your questions there, John. Are there any other questions online?

Yes. The third question is from Kay Hadfield. She's asking whether a discount can be offered to shareholders for vehicle hire in New Zealand and Australia.

Thanks, Kay. That's another good question. And we don't have a blanket policy for shareholder discounts. In the past, we saw that has been a bit prone to manipulation with some customers investing in a very small amount of money in THL shares for a short period to try to take advantage of that policy. But we can consider on a case-to-case basis. And so Kay, I'd encourage you to get in contact with our Investor Relations team whose details are on the THL website. To be honest, we're always proud to have our long-term shareholders experience the business and travel experience that you're invested in. So please explore that, Kay. I think you said there was one more question online?

Yes, we've got two now. So the next question is from Jeremy Sutton. He's asking what the biggest positive sign is for the coming year.

Grant, do you want to comment or recovering economy, I hope.

Thankfully, look, for us, I'd reiterate the point that international tourism still has room to move to even get back to the pre-COVID level. So that's really positive. We are seeing that growth continue. And in the coming year, if you look -- if you want a single highlight, we expect that to be the New Zealand Rentals and Sales business. If we look at the fleet growth there is the largest fleet growth that we've got across all our jurisdictions, and we're getting the kind of bookings that we're expecting for that fleet growth at this point in time. So New Zealand, rentals and sales and broader RV tourism.

I'm sure interest rates coming down will provide some stimulus to the economy. Well, we hope so.

So we've got one more question. That's from Benny Wong. He's asking if there are any common characteristics operationally in the different countries that THL operates in? And if there are any synergistic effects?

Well, there's lots of common characteristics because the core of our business is to rent and sell campervans. So there are lots of similarities. And so yes, the core is very similar. You always have to provide outstanding customer service and provide a fantastic product, which is what we seek to do. Obviously, we achieved a lot of synergies out of the THL, Apollo merger, which Grant has talked about. And one of the things we've been investing in is neither THL or Apollo really had common global systems. And we are seeking to implement those common global systems, which we think will create greater efficiencies across the business because it's sort of easier to compare businesses like-for-like when you're actually on a common system rather than doing a whole lot of rework to see that. But Grant, have you got anything additional?

I think that's absolutely right. So that cost-out program includes some common characteristics as has been asked in the question. So we are really looking at that. That's that maximization that we're talking about. That efficiency, that metric comparison and really managing that across the globe.

Are there any other questions online?

None for now.

Are there any other questions in the room? Okay. One final chance for final questions online otherwise, we will move on.

No, nothing else.

Okay. So we now move on to general business. So I'm going to ask, are there any items of general business that anyone would like to raise either from the floor or online? No. Okay. Well, then there being no other items of business, I'd like to thank you all for attending both in person and online. I declare the meeting closed, and invite those of you who are in the room to join us for a light afternoon tea. Thank you.