Solid performance by Trans Holdings

Press, Volume CXII, Issue 33068, 8 November 1972, Page 24

Solid performance by Trans Holdings

Very strict budgetary controls, and newly instituted systems which increased efficiency throughout the Trans Holdings group were reflected by the fact that while turnover increased by 28 per cent, overheads increased by only 17 per cent, says the chairman (Mr J. P. Cronin) in his review with the seventh annual report.

Referring to the future. Mr Cronin says that Trans Holdings is determined to stay in the forefront of the rapidly expanding tourist industry within the South Pacific. “At balance date the company had $2.8 million invested" in hotels, restaurants, tour coaches, tour cars, tour operations, and travel retailing,” he says. “Continued diversified investment in tourist plant and ancillary services will be necessary to take advantage of the many profitable opportunities existing, and to this end further capital and borrowings will be required from time to time.”

“There is only one thing that the New Zealand travel industry can be certain about in the future—people will continue to embark on holidays in ever increasing volume. It is how they will go about it that raises the

imponderables at this moment.”

Mr Cronin says that the travel industry is entering a state of change which, while only slightly disturbing now, could have far-reaching consequences for those not prepared for such contingencies.

Changing industry Airlines are becoming increasingly involved in the industry, with low fare package tours. Trans Holdings is, however, well prepared for developments in the South Pacific and United States markets, and will benefit from any renewed influx of tourists with it hotels, restaurants, rental cars and: ground transport. As announced, group net profit for the year to June 2 more than doubled to $137,687; the result was after 63 per cent more tax, $50,550 more for interest on term liabilities at $76,364, and $31,914 more for depreciation at $103,272. The earning rate on employed capital during the year improves from 10.8 to 22.1 per cent. Asset backing 140 c ’ Shareholder’s funds incicreased from $1,147,600 during the year to $1,506,464; ! the rate on average funds irises from 7.4 to 10.5 per I cent. Paid capital rose from $619,139 to $868,400. while ithe proportion of reserves to i funds was • well maintained, falling only slightly—from 46.0 to 42.4 per cent. Net asset backing a share eases from 153 c to 140 c.

Market development costs of $35,270 were written off during the year. Prospects for a higher dividend next year look good as the chairman (Mr J. P. Cronin) says in the annual report that the directors would have increased the payment above the steady 7 per cent if it were not for the Limitation of Dividends Regulations. As a compensation, 3 per cent of the total is from tax-free reserves. Sound position The group’s liquidity shows a marked improvement. Long-term finance was obtained for the Queenstown and Te Anau hotel properties during the year and capital was increased by $309,570. Commenting on these moves, and a reduction in current liabilities, Mr Cronin says that financial reviewers may consider that the company is still in a tight liquidity position in that, contrary to traditional standards, current assets do not exceed current liabilities.

“This, however, is not the case. The company, unlike those in most industries, has little stock and no work in progress. In addition, revenue received in advance is a major item under current liabilities. A review of other companies in the tourist and airline business will indicate the normality of this situation,” he says. Travel operations In his review of operations, Mr Cronin says: “Dramatic is the only word to describe the improvement shown Sy Trans Tours (N.Z.), Ltd. Sales increased by 30 per cent. . . . This is impressive enough, but even more outstanding is the control on overheads, which increased by only 0.6 per cent. Had it not been for inflationary trends which bumped direct costs up 33.9 per cent, the results of this subsidiary

would have been quite remarkable.”

“The highest degree of improvement for this company was in New Zealand travel, which was assisted by more realistic pricing of coach travel. Travel to Australia from New Zealand increased by 21.3 per cent, which was pleasing enough for Trans as Australia lost ground as a holiday destination. Sales to Fiji jumped by 65 per cent.

The link with Brendan tours of Los Angeles resulted in sales to the United States rising 100 per cent, and overheads being cut by 40 per cent. Hotels profitable The hotel division increased net profit by 70 per cent and “is the most profitable of ail divisions.” The hotels have a bright future and will play an increasingly important role on the group’s success, says Mr Cronin.

The report itself is a pleasing document, which sets out a considerable amount of information in an attractive form and easy to assimilate. It contains one of the most detailed Funds Statements seen for some time.

The shares last sold at 155 c, showing a falling trend from the high point of 170 c in late August. At 155 c the dividend yield is 4.5 per cent, and the earnings yield 14.3 per cent, while the price-earnings ratio is 7.