Holiday and travel education firm Cox & Kings on Monday announced sale of its camping business - which was part of its subsidiary Holidaybreak - to French outdoor holiday major Homair Vacances for 89.20 million. Of this 85.5 million pound is payable in cash on completion and 3.7 million pound is deferred relating to a tax refund. Cox & Kings is hopeful of completing the transaction in 90 days . The proceeds will be used for retiring part of its net debt of Rs 4,200 crore. In an interaction with Manisha Singhal, Peter Kerkar, Director, Cox & Kings discusses the sale and other aspects of the business. Edited Excerpts...
Q. You have said it was Indian travellers' habits that forced you to take a re-look at the camping business and eventually sell it off.
A. I always said there was no synergy between the camping business and the rest of the group's activities from day one. I always said that the synergy was between education and Meininger (Hotels) and with our internet business of normal package holidays - Superbreak and adventure which fits in with Cox & Kings UK. So camping, I had gone on record three years ago saying that we like it because it is a market leader but I don't think of it as a long term part of our group. Selling was always my objective. I have always said that but up till now it has been throwing free cash for us.
Q. What was your total investment in this business and what were the losses incurred?
A. We have not incurred any losses to date. If we take the sale price and the cash after capex it is probably around Rs 1,100 crore that we have taken out of this business...
Q. Then why exit?
A. There is another rationale and the reason why we sold this business is not that it is loss making for us. It makes money. But the problem is that it is a very high capex model. We have 7,000 homes which have to be renewed. In the coming years we will have to invest another 25 million pound every year for the next four years to actually renovate our mobile homes which means that $40 million of my cash flow has gone into my capex cost. The second problem is that we see there were some headwinds in the business...
Q. What kind of headwinds?
A. The VAT laws and the employment laws have been changed in France which potentially could have hurt our profitability. Moreover if I felt that were a hundred thousand Indians or the same number of Australians I could send every year from my office or 50,000 Americans then this would become a valuable asset for us. But I do not think of a single Indian to go to one of our camp sites so where is the rationale to keep this business? Also it is a big and complex business so for me it is better to focus on a business where I have leadership that is in education where we are number one in Europe and we want to be number one in India and Australia. We are the top company in leisure market in India we so we will focus on two areas of business that I dominate the market and I see a huge growth potential in.
Q. What are your plans for the education business? Where do you place yourself in India?
A. If we look at our total mix of revenues once camping is disposed India will be 28 per cent of my EBITDAR , my international leisure businesses will be another 28 per cent and then Meininger and education which is one box and is the rest of the box as well.
Q. So how do you plan to expand this business in the market here in India?
A. We have plans for huge organic growth like Australia where we opened a huge centre that spreads across 350 acres and is massive. We will launch in India except that we do not want an asset heavy model in India. This is the reason we will look at leasing and we will put all our investments into developing the property and into facilities which we are very good at doing. We already have 20,000 beds within our Group. It has really changed the mix for us.
Q. Do you see the leisure market changing after the new government has come in?
A. Huge impact. Last quarter was the slowest quarter we have ever seen, there was just 13 per cent growth. I see that we should go back to 26 per cent growth by next year, confidence is back, people want to travel and indulge themselves when things are going good. The prime minister has come out and said that one of the seven points of his agenda is tourism.
Q. How do land acquisition issues impact your business?
A. Normally in PGL (it is Holidaybreak subsidiary and is into school trips and educational travel) we acquire the land. So we have 3500 acres that we own, we have facilities of 1000 beds in each of them some with five football stadiums, outdoor space for 1000 children and lakes in some , we have large land banks. We will lease land in India as we have a lease model also
Q. So when do we see this product being launched in India?
A. I will only say that within this fiscal year we would be able to launch in India also the three interesting geographies for us initially would be Delhi region, Mumbai region and Gujarat region.