Chairman's Address, Annual Meeting

Tuesday, 15th November 2005

NZX RELEASE

CHAIRMAN’S ADDRESS

ANNUAL MEETING

15 NOVEMBER 2005

Welcome Ladies & Gentlemen to Tourism Holdings nineteenth Annual Meeting.

In this address I will cover seven specific areas:

1. THL’s Financial Performance over the past year.

2. The Tourism Environment in which the company operates.

3. THL’s forward business outlook.

4. Dividends.

5. New Zealand International Financial Reporting Standards.

6. Directors.

7. Succession Planning.

CHAIRMAN’S ADDRESS

1. THL’s 2005 FINANCIAL PERFORMANCE

As reported Tourism Holdings earned a Net Profit After Tax of $10.6m in the year ended 30 June 2005, which compares to last year’s profit of $11.2m.

The trading year was negatively impacted by the continued strength of the NZ dollar against the currencies of our major trading partners and unseasonable weather in New Zealand in December / January which discouraged late booking tourists.

Our Australian Rentals business performed exceptionally well with a pleasing 71% increase in profit. The benefits from the major restructuring of Rentals Australia undertaken during the year continue to flow through to increased revenue with a much reduced cost structure. We experienced and continue to enjoy a solid recovery into Australia from our European markets. The Australian domestic market now accounts for 23% of our revenue with Australians travelling around their own country as well as New Zealand. The market rationalisation within the Australian motorhome sector with the demise of two of our major competitors has assisted this recovery.

New Zealand Rentals also had a good year with a 12% increase in profit. They enjoyed a particularly high yielding summer season despite some late cancellations due to the poor December / January weather. The successful integration of the Cruise NZ fleet prior to the high season together with the Lions Rugby Tour also helped to drive revenues. The high New Zealand currency however continues to discourage the backpacker and budget conscious end of the market for both motorhomes and cars.

The NZ motorhome market remains popular internationally with Trans-tasman demand remaining high supported by competitive airline pricing.

Our Attractions Division had a mixed trading year also impacted by poor weather and the high NZ dollar particularly in the price sensitive markets of Japan and Asia. The Attractions businesses did not benefit significantly from the big lift in Australian arrivals stimulated by low airfares across the Tasman.

Coaching’s continuing businesses were less profitable during the year and each business unit has been the subject of a major review by the recently appointed General Manager Coaching, Tim Cantlon.

Increasing fuel costs also seriously impacted the operating costs of our coaching and cruising businesses. The 50% increase in fuel costs were not able to be fully recovered by price increases. We have now adjusted prices for the 2005/06 high season although in this highly competitive industry there is still reluctance by some competitors to recover genuine and highly visible costs such as fuel.

The Balance Sheet remains strong with operating cash flows of $41m and a 52% Equity Ratio, (excluding intangible assets).

Capital Expenditure of $92m was up due to the acquisition of Fullers Bay of Islands and new attractions developments . During the year we opened both the new Waitomo Ruakuri Cave attraction and Kelly Tarlton’s Stingray Bay. Fleet and asset disposals realised $28m in the year, however with an increased asset base net debt increased from $52m to $83m with the Debt to Debt plus Equity Ratio increasing from 27% to 39%.

Dividends paid for the last financial year totalled 10 cents per share.

This compares favourably to the previous year’s 12 cents per share which included a special one off dividend of 4 cents per share.

2. TOURISM ENVIRONMENT

Tourism continues to grow despite terrorism threats. Whilst this growth is reducing after recent years of high growth the principal driver of international tourism, airline capacity, is continuing to increase. Larger aircraft, increased flight frequency and number of competitors continue to encourage international travel into the South Pacific. (For example Emirates is currently negotiating to double their daily flights into Australia to 170 per week).

The massive increase in fuel prices and implementation of airline fuel surcharges has not so far deterred travellers. However there is evidence that the continuing high New Zealand and Australian currencies are slowing growth in the price sensitive markets of Japan and Asia and the Backpackers market segment.

We are however pleased to see that Australia’s international and the highly important domestic tourism markets are growing after five years of sluggish performances.

Both the New Zealand and Australian Government Tourism Research and Forecasting Councils are indicating solid visitor number growth over the next five years. Through to 2011 New Zealand is forecasted to grow at an average annual rate of 5% whilst Australia should grow at 6%. Fiji, where THL has a small but important investment, is enjoying exceptionally high growth. With four new major hotels being completed together with the other new accommodation meeting market demands, Fiji’s future in Tourism remains positive.

3. THL’S FORWARD BUSINESS OUTLOOK

3.1 Trading

The September quarter low season in New Zealand has been below our budget expectations with negative visitor growth from key Japanese and Asian markets, however Rentals New Zealand and Johnston’s Coachlines did enjoy good support in the last three weeks of the Lions Rugby Tour in July.

3.2 Australian Rentals

Our Australian Rentals operation has had a good start to the year with strong volumes in the Northern Territories high season. They have experienced increasing tourist numbers particularly from Europe. With the demise of two major competitors and the withdrawal of a specialised 4-Wheel drive rental operator the immediate and long term outlook for our Australian motorhome business is positive. We have modified the Branch Business model with six of our lower volume locations now under Agency Owner Operator Models. The remaining five are the major international gateway centres. Mackay, our newest agency, which is the gateway to the highly popular Whitsundays opened in July 2005.

Australian Rentals’ trading profit for the six months is therefore expected to be ahead of last year, even after allowing for last years one off GST refund of $1.2m.

3.3 New Zealand Rentals

The New Zealand Rentals motorhome fleet is currently nearly 300 units higher than at the same period last year due to the Cruis e NZ acquisition and maintaining fleet for the Lions Tour.

This has increased fleet holding costs relative to the prior year.

Disposals are tracking to plan. The New Zealand car rental market remains highly competitive and is significantly oversupplied. Our revenue for cars is well down on last year as a result.

Overall first quarter trading whilst at planned levels is below last year due to these factors. We expect this result to carry through to the December half year position.

However bookings for the key high season summer months of January through March 2006 are well ahead of last year and at this stage we expect to recover this shortfall in the second six months to produce a trading profit ahead of last year.

This movement of bookings and activity from the first six months of the financial year into the second half is impacting both Rentals New Zealand and a number of our other New Zealand businesses and from industry feedback reflects the more settled weather in the January through April period.

The outcome of this is THL’s traditional split of profitability in New Zealand between the two halves of the financial year is shifting much more into the second half.

The THL-BP Charitable Trust, which is funded by fuel rebates from New Zealand Rentals vehicle customers, was established during the year. Two initial projects have been established. The environment fund will build predator fencing in Waitomo’s Ruakuri Reserve to allow kiwis and other native species to be released into the area under DoC supervision. THL has four cave attractions in Waitomo of which two operate in the Ruakuri reserve. The second beneficiary of the THL-BP Charitable Trust is the Mangere High School. Two of our major Auckland businesses, New Zealand Rentals and the coaching operations of Johnston’s, Great Sights and Airbus are located in Mangere. Through THL’s Vision and Values programme our staff have as their highest social priority the education of teenagers in lower socio economic areas. After these two initial projects we will extend the funding of the THL-BP Charitable Trust to other Environmental and High School Education programmes in the various areas in which we operate.

3.4 CI Munro

CI Munro has completed their build for Rentals New Zealand and other motorhome operators for the summer season, albeit at lower volumes than previous years. In the New Year they will be relatively busy in building for Rentals Australia for their Northern Territories high season beginning July as well as continuing assembling motorhomes and caravans for non THL customers.

With the lower build volumes, trading profit for the six months will be down on last year.

3.5 Attractions

Eco Tourism in New Zealand continues to develop and is a major attraction for international travellers to New Zealand. Similarly Kiwis are appreciating the beauty of our landscapes and account for 55% of the $17.2b expenditure on New Zealand tourism.

THL is fortunate to have in New Zealand four truly iconic attractions with Fullers in the Bay of Islands, Kelly Tarlton’s Underwater World, our Waitomo Cave attractions and Milford Sound Red Boats.

With the slowdown in Japanese and Asian visitor arrivals, trading profit for the six months is expected to be slightly down on last year.

The key challenges and focus of our Attractions businesses is to establish and manage successfu l relationships with DoC, Iwi and local Councils. Tourism has so much to offer regional New Zealand through the economic growth it offers. This also addresses social issues of high regional unemployment.

Grant Webster the newly appointed Chief Operating Officer of our attraction’s businesses has completed his review and reported to the Board on the potential and future strategic direction of each of these attraction businesses. These focus on initiatives to further grow and develop these iconic businesses.

3.6 Coaching

Coaching continues to be highly competitive in a difficult market.

Tour Coaching (ie prescheduled) represents the travel mode of 16% of international tourists and the market has remained static in recent years. The strong growth in semi and free independent travellers has declined due to the high NZ currency. The Backpackers as well as the Japan and Asian markets have gone elsewhere principally for price reasons. This has impacted Johnston’s, Great Sights and Kiwi Experience which traded below last years levels in the first quarter.

Fuel and other operating cost increases of up to 50% has necessitated price increases in a flat and in some cases declining market environment. We therefore expect a challenging first six months in our Coaching division.

We are continuing to monitor trends in the coaching businesses and will be implementing initiatives to increase yields at every opportunity.

3.7 Fuel Prices

As I mentioned previously over the past year there has been a 50% increase in fuel prices. This has also led to major increases in other fuel related costs.

THL is fortunate that with upwards of 4,000 rental vehicles this cost is borne by the hirers. However with our coaching and cruising operations it has been impossible to recover the full impact of increased fuel costs.

3.8 Forecast Trading Results for the Six Months & Year End

Based on current trading and future bookings the Company should achieve a trading net profit after tax in the range of $5.5m to $6m for the six months to 31 December 2005 compared to last year’s reported $4.9m.

However under New Zealand International Financial Reporting Standards (NZIFRS) we no longer amortise goodwill ($2.5m) and last years result also included a $1.0m after tax loss by Oz Experience which has been since sold; so on a like for like basis last year’s half year net profit after tax was $8.4m.

When we announce the half yearly results in February 2006 your Directors will have a reasonable assessment of how the high season is trading and will be in a better position to give an indication of the year end result. Based on information available to us we are currently forecasting an operating net profit after tax of $17m. Adjusting last years profit for goodwill amortisation under NZIFRS reporting and adding back the losses from the discontinued business of Oz Experience the comparable net profit after tax for the 2005 financial year would have been $18.3m.

I would reiterate that it is early in the current financial year and before the New Zealand high summer season and this year end forecast is just that – a forecast based on current indicators.

Overall there is no doubt that we will have a softening in visitor arrivals in the second quarter of this current financial year. In addition without the high volume, lower yielding (for THL) numbers out of Australia into New Zealand overall visitor arrivals will be in negative territory. Further the drop in average spend by visitors and a slight drop in visitor days in recent months could well remain a trend for the rest of the year. Most notable within our expectation for the year is very soft trading with low volume movements out of Japan and other Asian markets. Our Coaching and Attractions operations will be impacted the most by this.

3.9 Capital Expenditure

Last year’s net capital expenditure of $64m was an abnormal year due to the acquisition of Fullers Bay of Islands and the major Attraction expenditure at Waitomo’s Ruakuri Cave and Kelly Tarlton’s Stingray Bay. Apart from normal plant replacements there is no major expenditure planned for this year. Overall capital expenditure for the 2006 year is therefore expected to be in the range of $43m to $48m . Disposal of fleet is anticipated to be in the range of $20m to $24m, thus net capital expenditure will be in the order of $20m to $25m compared to a net expenditure last ye ar of $64m.

4. DIVIDENDS

Your Directors have a dividend payout policy guideline of 60% of operating net profit after taxation before the amortisation of Goodwill. With the adoption of NZIFRS from the start of this financial year Goodwill is no longer amortised so the dividend payout policy guideline ongoing under NZIFRS is 60% of operating net profit after tax. The actual level of dividend payments set will continue to be based on profitability and capital expenditure requirements.

A dividend of 6 cents per share was paid to shareholders on the 21st October 2005 which compares to 5 cents per share last October. Based on the forecasted 2006 profit and capital expenditure it is expected that a dividend of at least 5 cents per share will be paid in April 2006. This means a total dividend in the financial year of 11 cents per share compared to last year’s 10 cents per share. All THL dividends carry full imputation credits.

Your Directors are confident that Shareholders will receive a stable dividend payment that will increase over time with profit growth as well as retaining funds to enhance the company’s financial strength.

5. NEW ZEALAND INTERNATIONAL FINANCIAL REPORTING STANDARDS (NZIFRS)

THL has adopted NZ IFRS from the 1st July 2005. As already foreshadowed, this will result in a number of accounting changes in the way our results are reported.

The major change is that intangible assets with indefinite useful lives will cease to be amortised. Last year amortisation of Goodwill was $5.2m. This would have meant that the year end profit of $10.6m would have been reported as $15.8 under NZIFRS reporting requirements.

The other significant change identified to date is a reclassification of our fixed term Waitomo Cave licenses from Fixed Assets to Fixed term Intangibles Assets (Goodwill). This is a balance sheet entry that does not impact reported net profit after tax.

6. DIRECTORS

6.1 Re-Election of Directors

Two Directors in accordance with the constitution have resigned and offer themselves for re-election at this Annual Meeting. To assist shareholders in their deliberations I would like to comment individually on the two Directors and their contribution to the company. Each of the Directors up for re -election will also speak briefly prior to that item on the agenda.

(a) Graeme Bowker

Graeme Bowker was appointed as a Non-Executive Director in February 2003. Graeme, resident in Melbourne, has over the past twelve years undertaken a number of Non-Executive Director positions. He was also formerly, Victorian, and prior this, country Managing Partner in New Zealand for accounting firm Deloitte. It has been very beneficial for the Group to have an Australian resident Director given the significant market and asset base we have there.

(b) Mr Harry Price

Harry Price was appointed to the Board in November 2000 as a Non-Executive Director. Now based in Queenstown Harry was prior to his retirement the CEO of Westpac here in New Zealand. Harry enjoyed a highly successful 43 year career with Westpac here and in Australia.

6.2 Retirement of Directors

During the past year three Directors resigned for varying reasons.

Don Spary

As advised at the Annual Meeting last year Don Spary a founder Director of the Helicopter Line (THL’s predecessor) resigned after 20 years of valued service as a Director.

Gunther Gschwenter

On the sale of his family’s 13.6% shareholding in THL in March this year Mr Gschwenter chose to resign from the Board. Gunther was appointed in November 1999 on the acquisition of Britz Motorhome Rentals and had played a very active role on the Board, with his experience as the founder of Britz in 1982 being invaluable to THL.

Joan Withers

Joan resigned as a Director upon her appointment in June 2005 as Chief Executive Officer of Fairfax Publishing New Zealand. Since her appointment in 2001 Joan has been an extremely diligent and energetic Director whose contribution has been greatly appreciated.

Number of Directors

There is no current intention to increase the number of Directors from the current level of six of which five are Non-Executive Directors.

However this will be reviewed when the new CEO is appointed to ensure that the requirements, demands and skill sets of the Board are matched to the company needs.

7. SUCCESSION PLANNING

As advised to the NZ Stock Exchange on the 5th October 2005 the current Chief Executive Officer and Managing Director, Dennis Pickup has indicated his desire to retire with effect from the 31st March 2006.

After seven years as CEO Dennis has expressed a des ire to move on to other business and personal life challenges.

During Dennis’s time leading this company he has overseen a major restructure including the rationalisation of the business into three mainstream products – motorhome and car rentals in Australia and New Zealand, attractions in New Zealand and coaching operations in New Zealand and Fiji. Our core business has grown and we have added to our iconic brands either by acquisition or further development.

Dennis will leave the company with a strong balance sheet, and high cash flows, enabling us to continue investments in other iconic tourism brands in New Zealand and Australia as opportunities arise.

As this will be the last time Dennis will attend an annual meeting in his capacity as CEO, I would ask you to join me in thanking him for his leadership and wish him the very best in the various challenges he takes on in the future.

The Board is well into the process of securing Dennis’s replacement and remain confident that the successful person will be in place prior to the 31 st March 2006.

8. CONCLUSION

In concluding this presentation, I would like to say that the year under review was characterised by the acquisition of three businesses of which Fullers Bay of Islands will play a major role in THL’s future. The disposal of Oz Experience, although costly, was appropriate in a radically changed Australian Backpacker Transport environment.

The highlight of 2005 calendar year has been the vast improvement in our Australian Rentals business. After years of underperformance the successful review and restructuring are returning to shareholders increasing benefits albeit later than planned.

Our New Zealand businesses have their own individual challenges but their ongoing Business Plans address these issues and target improved economic returns.

To meet the increasing demands on THL, five key management appointments were made to strengthen the already experienced Senior Management Team. Most of the new team are here today and will be introduced to you by the Managing Director at the conclusion of this meeting.

THL depends on its staff across all of its operations to consistently perform at high levels in managing the businesses and delivering to customers and tourists a “Superior Experience Every Time”.

Throughout New Zealand, Australia and Fiji THL is fortunate to have dedicated, committed and passionate staff.

I look forward to reporting further positive progress for the Group at the half year announcement next February.

Keith Smith Chairman 15th November 2005

ENDS

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