ATL Released Profit Guidance For FY19; Global RV Sales Dip Thus ATL To Miss FY19 Guidance

On 2nd May 2019, Apollo Tourism & Leisure Ltd (ASX: ATL) provided updated guidance for the group’s net profit after tax for FY2019. The softening of the RV sales market across the globe was being carefully monitored by the Board as highlighted at the half-year results in February 2019. Based on the recent RV shows in Australia as well as the recent industry statistics, it was clear that the expected retail results for FY2019 will not be achieved.

RENTAL:

For the core rental businesses of the company, the trading pattern of the first half is expected to continue in the second half as well. The rental revenue in all the regions is in line with the expectation and on track to finish ahead of last year.

Throughout 2018, the company experienced downward pressure on its ex-fleet pricing and volume forecasts due to the over-supply of new RVs by the manufacturers in North America. Also, there has been a reduction in fleet acquisitions in North America in order to offset the lower RV sales.

As a result of the impact of Brexit on consumer confidence, the ex-fleet sales are down on expectations in the company’s UK business.

RETAIL SALES AUSTRALIA:

The company highlighted that the retail sales volumes have not grown as per the expectations. The retail trading conditions for the sale of RVs continued to be unpredictable; however, the Australian segment was able to maintain the retail sales volume period-on-period. The margin pressure also impacted the earnings.

As highlighted in the H1 FY2019 results announcement, there was a softening in the retail market in Q2, that continued into Q3 as well, reflecting the consumer uncertainty due to unfavourable economic conditions, the upcoming Australian federal election and the housing downturn.

Recently, the company added Coromal and Windsor brands to its retail offering, which is a significant opportunity for the company. However, the benefits are taking longer time to materialise than expected as a result of subdued trading conditions for RV sales.

CORPORATE:

In the half-yearly results announcement, the company reported to have made a heavy investment in supporting the growing global business, which includes staffing expenditure, ERP systems, new locations and branding and guest experience.

Based on the overall scenario, the company now expects the NPAT to be between $17.5 million and $19.5 million by the FY2019.

In the last one-year ATL has generated a negative return of 41.10%. Further, on a shorter time scale the shares of ATL have yielded -38.57%, -20.37%, and 6.83% in the past six months, three months, and one-month respectively.

At market close on 2nd May 2019, the stock of ATL was trading at a price of $0.645, down 25% as compared to its previous closing price. ATL holds a market capitalisation of $160.09 million, with 186.15 million outstanding shares and a PE ratio of 8.78x.


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