27th May 2014 14:40
LONDON (Alliance News) - UK travel operator Thomas Cook Group PLC Tuesday said it has agreed to sell its UK corporate travel business to Mawasem Travel & Tourism Ltd, for GBP13.5 million in its latest asset sale, following the company's acquisition of Thomas Cook's Elegant Resorts business earlier this year.
The UK corporate travel business, Co-operative Travel Management, is a joint venture with partners Co-operative Group and Midlands Co-operative. Thomas Cook, which holds a 66.5% interest in venture, entered into the joint venture in October 2011, when the three parties merged their retail travel agency operations in the UK. The Co-operative Group holds a 30% stake, with Midlands Co-operative holding a 3.5%.
The group said the business is to be sold to Mawasem Travel & Tourism Ltd, the UK subsidiary of Middle Eastern owned travel firm the Al Tayyar Group, the same company that acquired Thomas Cook's UK luxury travel tour operating entity, Elegant Resorts, earlier this year for GBP14.3 million.
"This sale enables us to further intensify our focus on those key brands and products that are core to delivering our strategy for sustainable profitable growth," said Chief Executive Harriet Green.
Thomas Cook said the sale, which it expects to be completed by the end of June, will result in a net loss of around GBP4 million, due to the write-off of intangible assets and goodwill.
The Co-operative Travel Management business recorded earnings before interest and taxes of GBP2 million in the financial year ended September 30 2013, with revenues of GBP11 million.
Thomas Cook has continued to strip out unnecessary costs across the business, under the reign of Chief Executive Green. Part of the group's turnaround plan, and what it calls "wave one," was to sell a string of assets, exiting low-value businesses, and in turn shrink the huge debt pile it built up ahead of the recent economic downturn. Thomas Cook said that it has completed the delivery of its disposals target 18 months ahead of schedule.
"Wave two" is all about profit improvement, yield management and lower distribution costs, as it tries to enhance margins and operate a leaner business, it has said.
Earlier this month, Thomas Cook said it now expects to reach GBP460 million per year in benefits by 2015, with a "wave 2" target of over GBP400 million by the fiscal year 2018, of which it said it has so far identified an initial proportion of GBP150 million in benefits, including enhancements to its hotel and yield management systems, optimised channels and contact centres and increased digitisation.
Shares in Thomas Cook were trading 2.4% higher Tuesday afternoon, at 163.00 pence per share.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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