Accelerated implementation of the corporate strategy as service provider to the travel industry and governments.
Following the faster-than-planned completion of the sale of its traditional tour operating activities, Kuoni Group’s Board of Directors has given intensive consideration to the future of the Group, which is now focussed on services for the global travel industry and governments. After a critical review of the company’s strategy, organisation and cost structures, the Board of Directors has decided to accelerate implementation of the strategic direction. Zubin Karkaria, Head of VFS Global Division has been appointed new CEO of the Kuoni Group with immediate effect. Previous CEO, Peter Meier, will leave Kuoni. Within the loss-making GTS Division, the group travel business will be restructured extensively. Since Kuoni Group is now significantly smaller, support and corporate functions are being adjusted and costs reduced significantly. This will lead to one-off costs of CHF 20 million in 2015. The Board of Directors has also decided to renew its own membership in line with the demands of the new strategy.
The Board of Directors will ask the Annual General Meeting of 26 April 2016 to remove statutory voting right restrictions in order to strengthen shareholder rights and enhance dialogue with shareholders. With this package of measures, the Board of Directors is taking due account of changed market developments and also of investor expectations, while securing the company’s sustainable development.
The sale of Kuoni Group’s traditional tour operating businesses has achieved the planned refocusing of the company’s activities. The corporate strategy announced in January 2015 focuses on three businesses: distribution of hotel accommodation and destination services in the business-to-business sector (GTD Division), destination services in the areas of accommodation, transport, tours and event management (GTS Division) and globally leading visa services (VFS Global). This strategy has been reviewed by the Board of Directors and the Group Executive Board and its implementation is being accelerated. The Board of Directors is convinced that the company can achieve the medium-term targets announced in March 2015.
The three divisions benefit from leading positions in growth markets. The Global Travel Distribution (GTD) and VFS Global Divisions are posting above-average growth and reporting operating earnings as expected. The GTS Division is, however, confronted with major challenges, especially the changes in Japanese group travel business, and is being restructured extensively. Kuoni Group continues to monitor and review market opportunities in order to maximize shareholder value and enable profitable growth.
Zubin Karkaria is new CEO of the Kuoni Group
The Board of Directors has appointed Zubin Karkaria (47) as the new CEO of the Kuoni Group with immediate effect. He replaces the outgoing CEO Peter Meier and concurrently continues to run the VFS Global Division. Zubin Karkaria founded VFS Global in 2001 and built the company up very successfully to become the global leader in visa services for governments. VFS Global Division is the fastest growing, most innovative and most profitable division in the Kuoni Group. Zubin Karkaria worked for Indian tour operator SOTC when it was acquired by Kuoni Group in 1996. In 2005 he was appointed CEO and Managing Director of Kuoni India and South Asia, where he was responsible for all units of Kuoni India (Tour Operating, Destination Management, Business Travel, and Kuoni Academy) while simultaneously managing VFS Global’s business (as CEO from 2010). In March 2013, he was appointed to the Kuoni Group’s Executive Board.
Peter Meier joined Kuoni at the end of 2010 as CFO. He acted as interim CEO from mid-2013, assuming the post definitively in March 2014. He has played an essential role in Kuoni’s comprehensive transformation into a focussed, global service provider for the travel industry and governments, and was instrumental in shaping the new strategy. Following this major change process, Peter Meier and the Board of Directors have agreed it is in the company’s best interests to put its management in new hands. The Board of Directors would like to thank Peter Meier sincerely for his very valuable contribution to Kuoni Group’s reorientation and for his exceptional commitment to the company.
New Kuoni Group Chief Financial Officer (CFO) appointed
The Board of Directors has appointed Dr. Prisca Havranek-Kosicek (40) as the Kuoni Group’s new CFO. Prisca Havranek-Kosicek, an Austrian citizen, has many years’ experience of senior operational and consultancy roles in finance, controlling, strategy development and restructurings. Since the end of 2014 she has been Group Treasurer of Royal DSM, a Dutch company globally active in health, nutrition and materials. Prisca Havranek-Kosicek has an MBA from the University of Economics of Vienna and a doctorate in business administration.
She takes over as CFO of the Kuoni Group in the course of the first quarter of 2016 and will report to Zubin Karkaria, Kuoni Group’s CEO. Prisca Havranek-Kosicek succeeds Thomas Peyer who will leave Kuoni Group in 2016, as announced, after a hand-over period. This appointment completes the renewal of Kuoni Group’s Executive Board.
Restructuring of the GTS Division
The aim of restructuring the GTS Division is to rapidly adjust to changed market conditions through more flexible and cost-efficient structures. Management structures will be adapted, complexity reduced, operational back-office activities outsourced and services that do not add value will be discontinued. Sales activities will be streamlined, simplified and focused on more profitable customer segments. The existing IT architecture has been reviewed and will be adapted to cater for this. The planned new, end-to-end IT solution for Group Travel covering all of the current services is no longer deemed fit for purpose and as a result has been terminated.
The GTS restructuring will primarily take place within Group Travel. This requires the relocation of various activities and will result in a global reduction of around 350 full-time posts, which will be achieved through natural attrition but also through redundancies. This restructuring programme is expected to reduce the cost base sustainably by more than CHF 30 million. Anticipated, non-recurring restructuring costs amount to CHF 15 million, which is likely to impact results in 2015, but will be mainly cash-positive in 2016. The realignment of the existing IT architecture and termination of the planned IT solution will already have an additional negative impact of CHF 19 million on the third quarter 2015 results (see information on the results for the first nine months of 2015).
Organisational adaptation and significant cost reductions in support and corporate functions
The Kuoni Group’s support and corporate functions, which will obviously be smaller following the sale of the tour operating activities, especially in the areas of finance and IT infrastructure, will be simplified and increasingly outsourced, thus lowering the Group’s corporate costs by about a third. The planning activities required for this will be completed by the end of 2015, with implementation to follow in 2016. Related non-recurring restructuring costs are expected to have an adverse impact of CHF 5 million on the 2015 result.
Partnership with the Chinese HNA Group
Kuoni Group has entered a partnership with HNA Group of China. HNA Group is one of the leading private companies of Chinese origin, and is globally active in a number of businesses including tourism and aviation. The goal of the partnership is to jointly develop the outbound travel business in China and to partner in related strategic matters. Both companies are looking at various areas of potential cooperation in order to leverage Kuoni Group’s global destination expertise and network of business partners in the tourism industry, and HNA Group’s tourism assets and strong distribution network in the Chinese market. HNA Group, a Fortune Global 500 company, was founded in China in 1993. It has five core businesses in the areas of aviation, tourism, logistics, industry and financial services, and encompasses 12 listed companies. In 2014, HNA Group had revenues in excess of USD 25 billion, assets of USD 72 billion and nearly 120,000 employees worldwide.
Downsizing and renewal of the Board of Directors
At the Annual General Meeting on 26 April 2016, Kuoni Group’s Board of Directors will be proposing the downsizing of the body from seven to six members and a renewal of the Board’s membership. With its new composition, the competences of the Board of Directors will focus on Kuoni Group’s changed portfolio. A reduction in the Board’s compensation is also foreseen. The Board of Directors will provide information in good time before the meeting about the nomination of new Board members with appropriate expertise and the departure of existing members. Chairman of the Board of Directors Heinz Karrer is working closely with Adriaan Nuhn, Chairman of the Nominations Committee, to lead the renewal process, which will be completed at the Annual General Meeting on 26 April 2016.
Unchanged Dividend Policy
The Board of Directors confirms its current dividend policy with a distribution of 40-45% of net result attributable to shareholders. The Board of Directors intends to propose to the next Annual General Meeting that it distribute a dividend for the 2015 financial year, which will exclude the one-time effects of selling the tour operating activities, the impairment of other intangible assets and the proceeds of the potential sale of the Neue Hard property in Zurich, which could occur in 2015 or 2016.
Comments by Kuoni Group’s Chairman Heinz Karrer: “The Kuoni Group has been transformed from a broadly based travel company pursuing a wide range of very different activities into a focussed global service provider for the professional travel industry and governments. Such an in-depth new strategic direction presents a number of challenges and places heavy demands on management especially in fast-changing markets. After a critical review of the strategic direction, the Board of Directors has decided to accelerate its implementation. The changes in the Executive Board, with Zubin Karkaria as new CEO and Prisca Havranek-Kosicek as new CFO of the Kuoni Group, are part of this process. In addition, the strategic direction is being reinforced by the partnership with the Chinese HNA Group. The renewal of the competences in the Board of Directors and the planned removal of the restriction on voting rights are further important steps as we move the newly aligned Kuoni Group forward on a sustainable basis and with due regard to ever-faster market changes.”
Tatiana is the news coordinator for TravelDailyNews Media Network (traveldailynews.gr, traveldailynews.com and traveldailynews.asia). Her role includes monitoring the hundreds of news sources of TravelDailyNews Media Network and skimming the most important according to our strategy.
She holds a Bachelor's degree in Communication & Mass Media from Panteion University of Political & Social Studies of Athens and she has been editor and editor-in-chief in various economic magazines and newspapers.