UPDATE: Kuoni CEO Sees 1H Revenue Roughly Level To Year Ago

13th Jul 2010 22:43

(Adds detail, plus additional comments from CEO.) By Katharina Bart Of DOW JONES NEWSWIRES ZURICH (Dow Jones)--Kuoni Reisen Holding AG's (KUNN.EB) first-half revenue will be roughly level to last year's 1.76 billion Swiss francs ($1.68 billion) in sales, the Swiss travel operator's chief executive told Dow Jones Newswires in an interview Tuesday. Kuoni has suffered from low consumer confidence in Europe amid austerity measures, fallout from a flight ban caused by an Icelandic volcano, unrest in Thailand, and Greek woes, Kuoni CEO Peter Rothwell said. "If we look back on the half-year overall, there are a number of things which haven't gone our way: We were hoping, of course, following the economic crisis for a nice rapid recovery, reinstallation of confidence and no extraneous events," Rothwell said. "Unfortunately, the extraneous events were considerable." Rothwell said business in the first two weeks of July, which is a key booking month for travel operators such as Kuoni, provides "no reason for exuberance or despair." The outlook, given ahead of Kuoni's first-half earnings and formal July update Aug. 19, means the company continues to face an uphill struggle returning to growth after the financial crisis, when demand for leisure travel dropped dramatically as households curbed spending. This year, business with clients in Scandinavia, a major and very profitable market for Kuoni, has been slow to snap back after Iceland's Eyjafjallajokull volcano erupted, hitting European air traffic hard in April after clouds of volcanic ash drifted across much of the continent, stranding passengers. "Not that Scandinavia is going to be disaster, but certainly the speed of selling was dented by that episode," Rothwell said. Other factors hitting Kuoni and the holiday-travel industry are austerity measures in many debt-ridden European countries, unrest in Thailand, and Greece's debt troubles, which led to strikes in that country. Kuoni, which slashed costs by roughly 15% last year mainly by cutting jobs, is cautiously optimistic about bookings picking up in the second half, after a torrid 2009, in part due to more upscale clients compared to competitors such as Thomas Cook Group PLC (TCG.LN). "We have a population who are certainly ready to spend and definitely have the resources to spend because the proportion of their disposal income which we represent is still very small, but what they did lack in 2009 was the confidence to spend," he said. Kuoni is spending roughly CHF46 million this year to unify its booking systems. The standardized system was rolled out in Spain earlier this year, and Rothwell said Kuoni will tackle Scandinavia in the fourth quarter. Rothwell expressed confidence that a bid for the remainder of the just under one-third of Et-China.com International Holdings Ltd. (ETC.LN) that Kuoni doesn't already own will succeed. "We have irrevocable undertakings for sufficient numbers of shares to see the deal go through," Rothwell said. Cash-rich parts of Asia represent an opportunity for Kuoni to offset stagnant growth elsewhere. Kuoni is also quietly expanding into Finland through its Scandinavian operations, a push Rothwell said will quickly turn profitable as set-up costs are low. The company, which issued a CHF150 million bond last year, GBP50 million of which it has pledged towards Et-China, continues to look at deal opportunities, and would consider "larger plays" than in the past, Rothwell said. "For us, these are bigger acquisitions than buying a local Swiss specialist, because what we're trying to find are synergy plays and areas where we can build a very strong position," Rothwell said. After China, Brazil represents another potential growth area, though Kuoni isn't looking at anything specific currently, Rothwell said. Rothwell said Kuoni will move "substantially" toward its 18%-20% target on return on invested capital in 2010, which it last hit in 2008 and dramatically missed in crisis-hit 2009. "I think we can quite quickly re-establish that," Rothwell said. "I'm not saying that in 2010 we'll get back to that level, but there will be substantial improvement to our return on invested capital." -By Katharina Bart, Dow Jones Newswires; +41 43 443 8043; [email protected] (END) Dow Jones Newswires July 13, 2010 17:43 ET (21:43 GMT)