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Brand new management and extensive restructuring announced

  • 13 Nov 15

Kuoni unveiled weak 9m 15 results, below consensus and our expectations. One-off impacts of the disposal of the European TO operations and unfavourable FX are behind the loss of CHF293m (from CHF52.5m net profit in 9m 14). Still, Kuoni posted 7.6% sales growth LFL in 9m 15, on the back of robust VFS Global (+26.2%) and GTD (+10.6%) but the strengthening of the Swiss franc was highly penalising (-7.7% impact on 9m 15 sales) as well as the struggling GTS division (-1.1% LFL in 9m 15 sales). Within the business, the Destination Management Specialists declined sharply (-10% in sales in 9m, -CHF14.1m EBIT loss in 9m), affected by weak demand from Russia (Middle East and Africa were the most impacted) while the Group Travel business reported 4.6% organic growth in sales, boosted by China and Taiwan. Marketing initiatives made at the GTD division (higher personnel costs and investments in technology), and which came to an end as planned, proved successful as reflected in the improved gross profit in the key summer season. The GTS division however was hit by the collapse in Japanese demand (increase in the consumer tax rate in FY14, the devaluation of the yen) which is largely behind the widened EBIT loss of CHF36.2m (-CHF6m in 9m-14). As a result, EBITA dropped from CHF88.4m to CHF56.3m while EBIT collapsed by 69% from CHF66.4m to CHF20.5m. The latter was also penalised by higher costs invested in the growth strategy of GTD and VFS Global but also the CHF16.4m of impairments related to the GTS restructuring programme. Also, a time-bound contract with the South African authorities has impacted EBIT generated by VFS Global in Q3 15.

A penalising exposure to difficult Asian markets

  • 02 Sep 15

Kuoni announced mitigating organic trends in H1 15, while it was hammered by the conversion into Swiss francs. Revenue grew by 6.8% LFL in H1 15 which was more than offset by the appreciation of the Swiss franc (-7.4%). The VFS Global division (visa processing services) experienced the highest LFL growth (+28.8% vs 14.5% in H1 14) with a 23% rise in EBITA yoy. A temporary contract with the South African authorities in FY14 and H1 15 has contributed to this growth. Global Travel Distribution (GTD) showed 10.9% LFL growth, boosted by the Asia/Pacific region and China in particular but showed a significant drop in earnings (EBIT at CHF3.2m vs CHF15.1m in H1 14) penalised by marketing and IT-related initiatives. The GTS division was weak (-4.4% in LFL sales) despite a strong growth seen in China and Taiwan. This was attributable to declining Japanese demand caused by the increase in the consumer tax rate in FY14 and the devaluation of the yen which made travel more expensive. We recall that Asia/Pacific accounts for 81% of Global Travel Services revenues (source market) with a major part coming from Japan and China, while Europe stood as the most popular destination for holidaymakers (93% of sales). Gross profit came in 3.5% below last year's level, which is explained by tough comps (proceeds from the sale of a property in Zurich in FY14) and higher costs incurred in the GTD and VFS Global strategy, all impacting reported EBITA (-63% yoy). Reported net income from continuing operations slipped to CHF5.9m (vs CHF28.4m last year).