Tourism Holdings Limited · NZX:THL
Tourism — Merger or Acquisition (September 2012)
34 slides from Tourism's merger presentation, Sep 3, 2012
Slide 1: thl's NZ Rentals Business, KEA Campers and United Campervans Merger
thl’s NZ RENTALS BUSINESS, KEA CAMPERS AND UNITED CAMPERVANS MERGER TRANSFORMATION OF THE NEW ZEALAND RENTAL MOTORHOME INDUSTRY September 3, 2012
Slide 2: Disclaimer
2 DISCLAIMER The information contained in this presentation has been prepared in good faith by thl. No representation or warranty, express or implied, is made as to the accuracy, adequacy or reliability of any statements, estimates, forecasts or opinions or other information contained in this presen
Slide 3: Agenda
3 AGENDA • Transaction overview • Business overview • Strategic rationale • Transaction details • Financial and shareholder implications • Conclusions • Questions
Slide 4: Chairman quote on the merger
4 “This merger is logical, strategic and the best response to the challenging realities of the current New Zealand market.” thl Chairman, Keith Smith
Slide 5: Transaction Overview
5 TRANSACTION OVERVIEW • Merger of thl’s NZ rentals business with two high-quality Purchase NZ tourism businesses: KEA & United Price • Combined Enterprise Value of KEA and United: $69.5m • Purchase consideration includes $8.0m (12%) of deferred Deal contingent consideration and $7.4m (11%) in thl s
Slide 6: Transaction Benefits
6 TRANSACTION BENEFITS • CPS EPS accretive in first year (normalised for acquisition and DPS implementation costs) and substantially in second year • Significant and highly-deliverable synergies • Fast reduction in acquisition debt - $18m in first 8 months plus $1m of deferred consideration • Strong
Slide 7: thl Group Status
7 thl GROUP STATUS New Zealand PROPOSED TRANSFORMATIONAL MERGER Australia Fleet reducing, EBIT improvement forecast USA Performing well, growth prospects Tourism Stable returns, static expectations RVMG LP Transaction complete Small positive NPBT projected Group Transaction costs in FY13 Underlying
Slide 8: Business Overview – thl
8 BUSINESS OVERVIEW – thl: thl before merger FY12 thl after merger FY14 thl divisional revenue thl divisional revenue thl divisional EBIT before corporate costs thl divisional EBIT before corporate costs Before = FY12 including Rugby World Cup benefit to rentals NZ After = FY14 Forecasts
Slide 9: Business Overview – KEA
9 BUSINESS OVERVIEW – KEA • Luxury brand • 17 years heritage • Strong vehicle sales brand • Strong Germanic Europe presence • Superb Quality Vehicles “I am looking forward to the opportunity to focus on my core capabilities of vehicle construction management at the RVMG manufacturing operations and
Slide 10: Business Overview – United
10 BUSINESS OVERVIEW – UNITED • Kay is an industry pioneer • Strong industry relationships • NZ focus • Multi-brands to fit different segments • Strong presence in Holland and France “I am delighted to have the chance to join the thl board at such a critical point in its history. thl, combined with
Slide 11: Strategic Rationale
11 STRATEGIC RATIONALE New Zealand Motorhome Industry Situation and Outlook • Reduced spend and demand by traditional European customer base • Industry fleet sizes have not been adjusted to reflect demand changes 2009 2011 Change Total international visitor spend in NZ ($m) 6,187 5,763 -7% Total vis
Slide 12: Merger of NZ rentals businesses
12 STRATEGIC RATIONALE Strategic Response Status Quo Low returns, excess capacity in New Zealand Drivers for strategic change Supply side Significant Managed fleet thl has substantial response required potential for reduction to meet operating capacity to resolve low synergies due to demand utilisat
Slide 13: Transaction Details – The Combined NZ Rental Businesses
13 TRANSACTION DETAILS The Combined NZ Rental Businesses as of now Combined NZ THL KEA United Group NZ Revenues $55m $40m $95m Fleet Size (approx.) 1,500 1,000 2,500 Average Fleet Age 4.0yrs 1.5yrs 3.5yrs 3.5yrs (approx.) AKL, CHC, NZ Rental Locations AKL, CHC AKL, CHC AKL, CHC, ZQN ZQN Multiple Mul
Slide 14: Transaction Details – Acquisition Cost and Composition
14 TRANSACTION DETAILS Acquisition Cost and Composition ($m) • The purchase price, Fleet1 74.8 Other Fixed Assets 2.1 excluding the deferred Other Assets - contingent consideration, Total Net Operating Assets 76.9 less Discount to Net Operating Assets (7.4) equals 80% of net operating Purchase price
Slide 15: Transaction Details – Acquisition Financing
15 TRANSACTION DETAILS Acquisition Financing • 12.0m thl shares issued at 6 month THL shares $7.4m 11% + VWAP of 61.9 cents per share Deferred contingent $8.0m 12% consideration • Deferred contingent consideration of + THL cash reserves $3.2m 4% $8.0m (12% of agreed value) - mitigates fleet disposal
Slide 16: Transaction Details – Debt Reduction
16 TRANSACTION DETAILS Debt Reduction $41m reduction in debt from completion to June 2013
Slide 17: Transaction Details – Synergies
17 TRANSACTION DETAILS Synergies • Third party review of synergies has been undertaken to confirm deliverability • The estimated net present value of EBITDA synergies is ~$30m • Non-recurring capex reductions total ~$30.5m ($m) Estimate Realisation Maintainability Annual estimated EBITDA savings Bac
Slide 18: Discount to book equity compared to thl market capitalisation
18 TRANSACTION DETAILS Discount to book equity compared to current thl market capitalisation $m Kea & thl United Book Equity Value 156.0 23.8 Consideration Paid Shares 7.4 Cash 3.2 Deferred Consideration 8.0 Implied Market Capitalisation 57.0 18.6 1 Equity Discount 63% 22% Excluding at risk deferred
Slide 19: Transaction Details – Implied Share Price
19 TRANSACTION DETAILS Implied Share Price Pre Post Estimated $ per share Merger Merger Discounted Cash Flow $1.16 $1.49 • Equity uplift $32m or $0.33 cents per share for existing shareholders
Slide 20: Transaction Details – Implied Share Price (NPAT)
20 TRANSACTION DETAILS Implied Share Price $m FY13f FY14f NPAT Pre Merger 6.1 11.6 1 Post Merger 8.3 14.7 Estimate of $ per share P/E Multiple Pre Merger $0.59 $1.12 1 9.5x Post Merger $0.72 $1.26 Notes 1 . FY13 NPAT normalised to exclude transaction and implementation costs
Slide 21: Transaction Details – Purchase Discount
21 TRANSACTION DETAILS – PURCHASE DISCOUNT • The purchase price reflects a negotiated outcome and implies an aggregate discount of 10% to the net operating assets1 of KEA and United. • This discount is less than thl’s current implied enterprise value discount to net operating assets of 39%. • These
Slide 22: Transaction Risk Mitigants
22 TRANSACTION RISK MITIGANTS • Synergies easily realisable — Fleet reduction managed through reduced purchases (not increased sales) — Property commitments have scheduled release — Labour synergies conservative • Fleet purchased at a discount to market value • Resale values of fleet acquired protec
Slide 23: Transaction Risk Mitigants – thl track record
23 TRANSACTION RISK MITIGANTS • thl track-record - Success in cost out, synergies and integration of new brands 2012 KEA Australia integration 2012 RV Manufacturing Group LP creation 2011 Road Bear Acquisition Acquisitions - Black Water Rafting, Fullers Group (BOI) 2005 – 2010 Disposals - Johnston’s
Slide 24: Transaction Risk Mitigants – Deferred Contingent Consideration
24 TRANSACTION RISK MITIGANTS • Mechanism of $8.0m deferred contingent consideration ; - Contingent upon the achieved sale price for each vehicle in the fleet acquired being equal to, or exceeding, the forecast economic sale price at the date of disposal. - Partial retention of payments until deferr
Slide 25: thl Financial & Shareholder Impacts – Financial performance
25 thl FINANCIAL & SHAREHOLDER IMPACTS Group Financial Impacts – Financial performance ($m) Status Quo Post Acquisition Difference FY12a FY13f FY14f FY13f FY14f FY13f FY14f Revenue 200.0 205.4 205.2 239.7 241.3 17% 18% EBITDA 60.7 56.1 62.5 64.2 75.4 15% 21% EBIT 16.3 16.3 22.5 19.3 28.8 18% 28% NPA
Slide 26: thl Financial & Shareholder Impacts – Cash flow
26 thl FINANCIAL & SHAREHOLDER IMPACTS Group Financial Impacts - Cash flow ($m) Status Quo Post Acquisition Difference FY12a FY13f FY14f FY13f FY14f FY13f FY14f Operating cash flows excl fleet purchases and sales 45.2 41.8 51.5 48.2 61.4 15% 19% Acquisition (69.5) n/a n/a Other investing cash flows
Slide 27: Valuation Benchmarks – Forward PE Multiples
27 thl FINANCIAL & SHAREHOLDER IMPACTS Valuation Benchmarks Forward PE Multiples THL post transaction Forward FY13 and FY14 PE multiples of listed Australasian assuming current tourism & leisure companies market cap Source: Capital IQ Note: FY13 for thl based on 8 months
Slide 28: Pro-forma Balance Sheet Impact
28 thl FINANCIAL & SHAREHOLDER IMPACTS Pro-forma Balance Sheet Impact Pro-forma Balance Sheet at 31st October 2012 Oct 2012, ($m) THL Acquisition Combined Group Fixed Assets & Investments 226.0 69.5 295.4 Net Working Capital 3.1 - 3.1 Other Assets/Liabilities (4.9) - (4.9) Waitomo licenses and lease
Slide 29: Effect on capital structure and gearing metrics
29 thl FINANCIAL & SHAREHOLDER IMPACTS Effect on capital structure and gearing metrics ($m) At acquisition FY13f FY14f Debt (150) (110) (97) Deferred Contingent Consideration (8) (7) (5) EBIT Interest Cover 2.4x 3.4x Debt / Debt+Equity 50% 42% 39% Debt / EBITDA 1.8x 1.3x Shareholders' Funds / Total
Slide 30: Shareholder Ownership Impacts
30 thl FINANCIAL & SHAREHOLDER IMPACTS Shareholder Ownership Impacts • 12.0m shares issued to Vendors at 6 month VWAP of 61.9cps • Dilutes current shareholders by circa 11%. Issue Shares THL Shareholder Ownership Impacts post Completion Shareholder Holding % Sterling Grace Capital Management 18.8 17
Slide 31: Transaction Steps & Transaction Timetable
31 thl TRANSACTION STEPS & TRANSACTION TIMETABLE Indicative Transaction Timetable Shareholder Approval Information and Independent Report Mid-Late September Released Shareholder Meeting Mid October Projected Completion 31 October
Slide 32: Finance Condition Status
32 FINANCE CONDITION STATUS “thl has provided its lenders with details of the proposed merger and whilst the funding for the transaction is still to be finalised and remains subject to credit approval and internal bank sign off the lenders have confirmed their support for the proposed merger in prin
Slide 33: Conclusions
33 CONCLUSIONS ü Proposed merger strategically compelling and financially attractive ü Positive financial impact: Value accretive; CPS,EPS and DPS ü Transaction benefits highly deliverable ü Sound post-acquisition capital structure ü Risks managed and mitigated ü Logical, strategic and the best resp
Slide 34: Questions
CAMPERVANS QUESTIONS ¥
Tourism Holdings — Merger or Acquisition (September 2012) on 6ix