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Tourism Investment Corporation Limited - CEO"s Newsletter
Tourism Investment Corporation Limited
(Incorporated in the Republic of South Africa)
(Registration number 1996/008144/06)
Share code: TRT ISIN: ZAE000012472
Final CEO"s newsletter
Dear Tourvest investor
Market overview
The fourth quarter of the year started slowly with inbound volumes for October
more or less on a par with those for the corresponding month in 2004. There was
an improvement in November, however, with tourist numbers likely to show some
growth over the previous year, and at this stage indications are also positive
for December. During December, incidentally, the leading German tour operator
Dertour will host its annual convention, attended by some 700 travel agents, in
Cape Town. This convention was last held in South Africa five years ago, when
it resulted in a marked upturn in tourism from Germany, and we expect it to do
the same this time around. The domestic corporate travel market remained
largely lacklustre.
Review of operations
In spite of flat volumes, virtually all of the group"s businesses are doing
reasonably well, reflecting the benefits of the restructuring and repositioning
of the past two years.
The Inbound Tourism Services division still has to contend with a difficult
trading environment, resulting from the impact of the strong rand on tourism
numbers and expenditure, but at the halfway mark of the current financial year
it should show an improvement at the operating income level in a comparison that
excludes once-off factors. The consolidation of the division"s activities at
and around the Victoria Falls, which was stalled by regulatory delays, has now
been restructured and the merged operation should start contributing soon. In
the meantime, the division has embarked on an aggressive marketing campaign in
the USA as part of a determined effort to broaden and diversify its sphere of
operations, previously focused mainly on Europe and Asia.
In the Outbound Travel Services division, Tourvest Retail Travel continues to
build on the strong performance of last year, when it produced growth of more
than 20%, through market share gains and margin improvements. The division"s
tour operators business still requires attention, however, and if its recent
restructuring has not produced the required results by next quarter, its
business model will be reconsidered.
Financial Services experienced a decline in volumes although the division has
not lost any major customers during this period. While the contribution for the
first six months from this division will decrease against the comparable period,
we expect that its performance for the full year would be in line with that of
the prior year.
The Retail Merchandising division, which has also been hard pressed by the rand,
is showing a strong improvement. With the shrinkage and start-up problems in
its inflight duty-free operation"s Virgin Atlantic concession having been
effectively addressed, this business"s operating profit is now reflecting its
substantial growth in sales. Similarly, the jewellery business is benefiting
from robust remedial action and will return to profitability for the first half
of the year. The Tiger"s Eye curio operation continues to feel the pinch of
tight tourist spending, performing in line with the comparable period last year.
The interim results
The group"s interim results for the six months to December will be published on
or about 21 February 2006. At this stage we expect these, at the operating
profit level, to be in line with our forecast and the group is also on track to
produce real earnings growth as anticipated for the full financial year to June
2006. It should be noted, however, that comparisons with the prior-year
corresponding periods will be skewed by such non-recurring events as the sale of
Starlight Cruises and once-off recoveries in Inbound Tourism Services. Our tax
bill for the current year will also be significantly higher than in 2004/05, due
mainly to a higher STC charge resulting from the increased dividend paid in
September.
Yours sincerely
Tommy Edmond
Chief Executive
22 November 2005
Sponsor:
Investec Bank Limited
Date: 22/11/2005 09:00:05 AM Produced by the JSE SENS Department
