Rudi’s View: Navigating Covid Legacies

Rudi's View | Jul 16 2025

Four and a half years after the final covid-driven societal lockdowns ended in NSW and Victoria, unforeseen consequences and impacts are still depressing share prices and forcing companies to temper expectations or --heaven forbid!-- issue a profit warning.

Companies still impacted today include Ansell ((ANN)), CSL ((CSL)), Dexus ((DXS)), and Sonic Healthcare ((SHL)).

Investors will be keeping a close watch during the upcoming August results season for any signals the era of covid shackles has definitively (and finally) passed for impacted sectors and companies.

The Recreational Boom

One company that has almost literally seen hell and heaven post 2020 is New Zealand-headquartered Tourism Holdings Rentals ((THL)).

With a market capitalisation of only $400m-plus, this company is a small cap, thus not on every investors' radar, but that hasn't stopped management at the wheel from building the world's largest rental business for campervans and other recreational vehicles.

At first, closing borders and locking down societies threatened its corporate survival only to see an outbreak in sales occurring once countries re-opened, but the past two years have yet again put the share price under pressure as sales have plateaued.

In more recent times, management had been forced to issue a profit warning for the running financial year, which pushed the share price to a post-covid low, but shareholders might be relieved a consortium of BGH Capital (private equity) and the Trouchet family (founders of Apollo Motorhome Holidays) is interested in acquiring the company in full.

One of the seemingly lasting effects from the covid pandemic is a greater desire to travel and holiday locally, surrounded by Mother Nature. Sales for recreational vehicles are still booming, but so forceful was the initial jump in post-lockdown sales that growth in the subsequent years has been rather tepid in percentage terms.

For management at New Zealand's largest tourism operator this has proved too much of a challenge to overcome. On current forecasts, earnings per share next year (FY26) will still not match the company's all-time record booked in FY23.

And that is a problem for a share market looking for growth during a time when smaller cap companies are not exactly in high demand.

Changes In People's Priorities

Recent surveys into changing consumer habits around the world are revealing a glaring discrepancy between consumer sentiment, which tends to be more cautious if not negative, and household spending, which is holding up amidst numerous challenges.

Consumers are looking for bargains and trading down, but only for selected non-priorities. They can be seen splurging elsewhere on luxury, holidays and personal experiences.

In Australia, despite the RBA lowering the cash rate twice already this year, and signalling there will likely be more cuts forthcoming (just not this month), consumer spending remains the weakest link for the domestic economy.

Investors would have noticed through subdued and expectations tempering market updates from retailers such as Accent Group ((AX1)), KMD Brands ((KMD)), Myer ((MYR)), and Super Retail ((SUL)).

There's also anecdotal evidence those with a mortgage prefer to keep paying their financial institution rather than use rate relief for expenses elsewhere. Have populations become more risk-conscious? Or are we reading too much into this during a time when inflation spiked and caused havoc for many a household budget?