Tourism : 31Oct2019 - thl Annual Meeting 2019 Chairman & CEO Address

31 October 2019

MEDIA | NZX RELEASE

TOURISM HOLDINGS LIMITED (thl) ANNUAL MEETING - 31 OCTOBER 2019

CHAIRMAN | CHIEF EXECUTIVE ADDRESS

SLIDE 1 - Tourism Holdings Ltd Annual Meeting

SLIDE 2 - Welcome

Tena koutou katoa.

Welcome to the 33rd Annual Meeting for Tourism Holdings Limited. My name is Rob Campbell, your Chairman.

As we have a quorum present, and it is 2:00pm, I declare the Annual Meeting open.

Before we move on to the agenda, I will cover a couple of housekeeping matters. If you have a cell phone, please turn it to silent. If we need to evacuate this room for any reason, please head back to the lifts and exit via the stairwells by the lifts. The assembly point is down Shortland Street and please follow the instructions of the fire wardens

Firstly I want to acknowledge last week's events and the postponement of our original meeting.

We thank you for your patience with us, while we quickly arranged for an alternate date and venue. We have done our best to accommodate for everyone's schedules, while trying to hold the meeting as soon as possible. Unfortunately, our directors Graeme Wong and Dr Guorong Qian are apologies today. I would like to acknowledge, in particular, Guorong's commitment, as he had flown to New Zealand last week in order to attend the Annual Meeting. In order to hold the meeting promptly, we were unable to accommodate for Guorong's attendance in person today, as he had a significant prior commitment in Singapore. He has prepared an address to shareholders, which I will provide to you in his absence later in the meeting.

We are conducting this Annual Meeting simultaneously here and online. I am joined by fellow directors Debbie Birch, Kay Howe, Gráinne Troute, Cathy Quinn and Rob Hamilton. As already noted, we have apologies from Graeme Wong and Guorong Qian.

Graeme Wong and Kay Howe are retiring at the end of the meeting and we will come back to acknowledge their contributions. We're also joined by our Chief Executive Officer, Grant Webster, Acting Chief Financial Officer, Steven Hall and Company Secretary, Amir Ansari. Our Chief Financial Officer, Jennifer Bunbury, gives her apologies, as she is currently on parental leave; returning on a part- time basis next month and full-time from mid-January.

In the audience today, we have a number of the team from within the thl, Kiwi Experience, Action

Manufacturing and Togo Group businesses.

SLIDE 3 - Proxies and Postal Votes Received

As indicated on the screen, we have received 34.7M valid proxies and postal votes, representing 23.5% of the ordinary shares on issue. Of those, 27.0M have identified me, as Chair of the meeting, as proxy.

SLIDE 4 - Our Recent Market Announcement

Shareholders are aware that we provided an earnings update last Monday, which warned that the adverse market conditions for RV sales in North America had impacted our retail and wholesale margins substantially. We noted that if this continued during the winter months and, more importantly, into the spring season towards the end of our current financial year, then net profit after tax would fall significantly below the average earnings projections of the four analysts who cover thl. We also noted that rental activity was at reasonable current and future booking levels, although the North American market is very competitive, and that our Australasian businesses are performing to expectations. In all markets, we consider that our share is growing and that our competitive position and offer is strong.

It will be obvious, but appears to need restating, that we do not control the North American market for sales of used recreational vehicles. We will always face volatility. The present downturn is one of the most serious and prolonged.

We are better placed to react and to develop our long-term market position than we have ever been before. Given our market position and careful fleet management, we are navigating the market without sustaining losses or weakening our future rental market offer. This is good asset management and business operation, and we continue to improve our systems and efficiency through this period.

This is not a time for short-term thinking, but a time to retain clear focus on our long-term goals and to utilise our balance sheet and expertise to realise those goals.

SLIDE 5 - Meeting Structure

Moving on to the rest of the meeting, I will first speak to our adoption of the Future-Fit Business Benchmark. In this context, the adoption of the Future-Fit Business model is relevant. No aspect of this new model of governing and managing this business is a distraction from long-term profitability. On the contrary, it is required in order to provide a firm foundation in a world that is subject to radical and sudden change. The tourism industry is very sensitive to social, economic and environmental change. Accordingly, the industry itself must be ready and willing to change, not just in response to, but in anticipation of, the coming change. The logic is consistent with our corporate activity to strengthen our position in the North American market and to invest in the digital services component of the tourism and RV industries through our Togo Group joint venture.

Given the significance of this decision for the future of thl, I will then open the meeting for questions on Future-Fit, as we look to engage in an open dialogue with our shareholders. I will then provide a brief strategic overview, and then hand over to our Chief Executive, Grant Webster, to provide more detail on the year that has passed and our outlook for the near future. We will then conclude with the formalities of the meeting, including the resolutions as detailed in the notice of meeting.

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SLIDE 6 - A Clear Path

Over the last 12 months, we have made some significant changes, including the adoption of the International Integrated Reporting Framework, the Six Capitals Framework and the Future-Fit Business Benchmark.

We completed our first sustainability report in 2017. That has quickly evolved to this year, where we completed our first fully Integrated Report. The report is available online and I congratulate the team involved in preparing it - it was a significant amount of work. I encourage those of you who have not yet had a chance, to read it.

Moving forward we will be reporting more detail about our strategy, business model, vision and governance than ever before. In our view, this type of integrated reporting is essential in order to allow you, as the shareholders of the company, to make fully informed decisions about your choices of where to invest. We have, over the years, been clear about what has worked well and what we need to do better. However, the reality is that this has been primarily financially focused. Not a bad thing - but also not the only measure that you, as shareholders are, or should be, interested in. As we move forward we will disclose more about the details of how we operate, the outcomes of our actions in a variety of ways; all in alignment with the kinds of measures you expect from us today.

We have adopted the Six Capitals Framework. In doing so, we are considering a wider range of issues and opportunities that we had not previously actively considered. We see this as critical for business moving forward and, indeed, a competitive advantage for the sincere early adopters. I emphasise that it is not simply a matter of how we report, but a matter of how we make all management and board decisions.

SLIDE 7 - Approach to Sustainability

As you know, the management team, supported fully by the Board, have been very focused on sustainability initiatives over a number of years. They, rightly, questioned themselves over the last 12 months as to whether what they have been doing was enough; the right things - and whether it leads us in the right direction for the type of business that is going to be successful in the long term, given all market conditions. There was clearly a need for greater clarity and measurement. Our goals primarily focused on how we can do better in the short term - we were missing a north star. This led the team to the Future-Fit Business Benchmark.

The Future-Fit Business Benchmark team say FFBB is about "defining a line in the sand to really assess extra financial performance in a holistic way. The Future-Fit Business Benchmark provides guidance, grounded in investigable science, provides actionable insight and measures the things that matter, so we manage the things that matter."

SLIDE 8 - Future-Fit Statement

From a thl perspective, what resonates for us is, not only the vision, but the measurability and outcome focus. Of course we want to contribute to a Future-Fit Society - a society that protects the possibility that humans and other life will flourish on Earth. But we want to do that in a structured and sensible fashion, which is clear and understandable, and relates to the generation of a profitable business.

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We know, as shareholders, that you hear a lot about corporations wanting to do "good", especially publicly listed ones. What we are intending to provide you with is:

• Clarity on where we are at;
• Transparency on what we are targeting to achieve;
• Strong measurability on our current state and performance against our targets; and
• We want to deliver leading products and services that customers desire, in a manner which is economically, socially and environmentally sound.

SLIDE 9 - 23 Break-Even Goals

To become a Future-Fit Business is an ambitious goal - it will be a journey and we do not currently know how long it will take us to get there, but we know that we must take action. In an ever more complex and uncertain world, yesterday's business models are no longer fit for purpose. We must find new ways to create value for both our shareholders and society over the long term, without betting the farm at one time.

In order to become a Future-Fit Business, we must achieve 100% against each of the 23 Break-Even goals currently presented on the screen. I think, if you seriously consider these goals, there are none that aren't considered just good business.

We are realistic - it is not lost on us that we operate a fleet of over 6,000 diesel vehicles globally. Ultimately, we need to become a net positive contributor in order to undo some of the damage to the environment historically.

SLIDE 10 - What Does This Mean For Us?

As our shareholders, you are surely questioning what impact this will have for thl. We will be challenging our business model to ensure that it is fit for the future. Across all decision-making in the business, we will be assessing each of the six capitals and all of our internal reporting is changing to follow the same approach.

We are not steering away from our focus on return on funds employed. In certain circumstances we will make extra-financial investments that may, in the short term, provide returns below our ROFE target. Significant time and consideration will be given to making these decisions.

We will assess the costs, the benefits and, importantly, the probability of the outcomes.

The change in financial terms is not about the level of returns, which we continue to target as being significantly above our cost of capital, but rather the time scale and sustainability of those returns. It will not be easy for analysts sifting through the detail of reports and commentaries for short-term profits to adjust to this change. However, for long-term investors making measured decisions, we believe the change will be welcome. It is certainly consistent with what the major institutional investors are stating as their objective.

SLIDE 11 - EV Example

Let's discuss the electric motorhome investment as a small case study. We want to eliminate carbon emissions from our fleet. As an aside, within thl we don't believe in just offsetting emissions. That is a

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story for another day; however, simply put, we want to eliminate the cause, not just mitigate the current outcomes.

We could, as an organisation, wait on the side-lines and see what happens with electric motorhomes, let others invest and wait for a time when the financials returns are clearer and more certain. We have assessed that option and, to be honest, continue to assess it. We have determined that we will take a leadership position, based on research, financial assessment and a strong belief in the probability that we will gain significant competitive advantage from the work we are doing today.

The management team have researched customers' preferences and desires (both current and potential customers), what the chassis supplier situations are globally and have an understanding of some of the risks and uncertainties around the likes of batteries and charging technology infrastructure. There is regular board reporting on these topics and an analysis of the tipping points, where activity and outcomes are expected to cause a rapid growth in the take-up of EVs in a profitable manner, aligned with our ROFE goals.

In addition to all this, there are clear financial models we have created which show the expected returns in time from a financial perspective, but also the other broader capital impacts.

We have learned a lot to date and are clear that the vehicle driving range is still the largest inhibiting factor to a large scale roll out of the EV proposition. At the same time, we now know more about how to maximise range within the vehicles, what is required from other partners in the supply chain for a great customer experience and even what the running costs are compared to conventional fossil fuel combustion engines.

In summary, we are doing what every business should - reviewing customer needs, creating new products and ensuring that we have a business with a future, whilst delivering to a broad range of societal needs. This is the type of measurability that comes with the FFBB benchmarking and what you should expect from business. Not just rhetoric - but clear, justified investment and process.

SLIDE 12 - Measurement and Immediate Cost

We don't yet know what all of the costs and investments will be for us to reach the Future-Fit goals, but we will be working to understand this as we progress our Future-Fit implementation work over the next 12 months.

As a start, we will be investing around $500,000 in FY20 to resource the implementation of Future-Fit globally. The team involved (most of whom will be on short-term contracts) will be helping us assess where we stand today in close to 50 locations around the world. They will assist with creating systems to enable easy reporting in the future, creating training plans to ensure processes are appropriate and assist in creating a culture that ensures we deliver all of the benchmark requirements - financial included.

SLIDE 13 - Future-Fit Q&A

I would now like to invite you to raise any questions you may have about the Future-Fit initiative. We are also open to discussing questions one-on-one after the meeting, if you desire to be more private

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