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Tourism Investment Corporation Limited - Strong Rand Squeezes Tourvest Release Date: 19/08/2004 12:16:01 Code(s): TRT Tourism Investment Corporation Limited - Strong Rand Squeezes Tourvest Tourism Investment Corporation Limited Registration number : 1996/008144/06 Share code : TRT ISIN: ZAE000012472 STRONG RAND SQUEEZES TOURVEST Johannesburg, 19 August 2004 - The robust rand`s impact on inbound tourism has taken its toll of the Tourvest group in its financial year to 25 June, curbing revenue and earnings in spite of a good operational performance. Comparisons with the previous year are skewed by the special dividend paid in September, which resulted in a cash outflow of R268 million, a once-off STC tax charge of R31 million and a reduction of R23 million in interest income. Excluding STC on the special dividend, the 70% drop in earnings per share to 6.3 cents would have been 50%. Headline earnings per share were 5.9 cents compared to the previous year`s 20.5 cents. Revenue fell by 6% to R1.56 billion which resulted in a drop of 33% to R148 million in operating income. Tight cost control restricted the growth in comparable expenses to 2%. Cash flow remained strong with cash generation of R151 million against operating income of R148 million. The balance sheet was also in good shape with net cash of R5 million. An ordinary dividend of 3 cents per share has been proposed in line with the group`s policy of paying an annual dividend equivalent to 50% of earnings per share. Chief Executive Tommy Edmond noted today that the rand`s appreciation against the dollar during this year - 24% on top of the previous year`s 11% - had reduced South Africa`s competitiveness as a tourism destination as well as the discretionary spend of the tourists. While outbound tourism volumes benefited from the strength of the rand, the group`s 75% bias towards inbound tourism meant that the currency`s overall impact was negative. Looking ahead, Edmond said the recently announced restructuring of the group`s inbound tourism services and outbound travel services divisions would result in greater efficiency, lower costs and increased market shares. This should counter the effect of the rand`s appreciation, provided it remains above the R6.5 level. Group income would also benefit from the contributions made by the Victoria Falls acquisition, the Virgin Airlines concession and once-off costs not recurring. `While we are disappointed at the negative outcome of our conditional offer for Sure, Tourvest remains an acquisitive business and we are examining all opportunities for adding critical mass to our retail travel operations,` he said. Reviewing the group`s operations, Edmond said the financial services division, which consists of the American Express foreign exchange business, had increased its market share and grown its volumes by more than 15% in dollar terms. This growth together with an improved margin limited its revenue reduction to 5% against the 24% appreciation of the rand against the dollar. The tour operator businesses in the inbound tourism division - restructured at the end of the year into a single multi-branded operation - did well in spite of difficult market conditions. The product businesses mostly performed to expectations. During the year the group acquired the remaining minorities in Gametrackers and Sense of Africa and entered the inbound conference market through the acquisition of a 60% stake in Global Conferences. Negotiations for the acquisition of a 60% interest in a new merged business under the Wild Horizons brand, which will complement the group`s existing operation at Victoria Falls and enable it to dominate the tourism activities market in that region, have been concluded. This acquisition is subject to regulatory approvals. The retail travel businesses in the outbound travel services division also had a good year, achieving further market share gains. These businesses now provide travel related services to 57 of the JSE`s Top 100 companies. The back office and procurement functions of the division`s tour and cruise businesses are currently being integrated to benefit from combined purchasing power and resources. Starlight Cruises had reverted to being a general sales agent to prevent a repetition of the loss it suffered through the impounding of the Olympia Countess. In the retail merchandising division, the Tigers Eye group maintained a steady transaction level but the average value per transaction dropped, reflecting the reduction in tourists` discretionary spend. The in-flight duty-free businesses suffered from a lower rand turnover even though sales in dollars were higher. The worldwide duty-free concession for Virgin Atlantic Airlines was won from May this year. The jewellery businesses had a disappointing year with reduced volumes and margin and was restructured during the year. For further information call Tommy Edmond, CEO on 011-339-6044 Issued by du Plessis Associates on behalf of Tourvest. dPA contact Kathy du Plessis Tel : +27 11 728 4701, Fax: +27 11 728 2547, Mobile: 083 266 5847 or e-mail: tourvest@dpapr.com
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