Tour operators struggle to maintain profits in weak Q2

Tour operators have struggled to maintained profits despite a strong volume growth in leisure and meeting-incentive tours in the second quarter of the current year.

Weighed down by high interest costs, Cox & Kings reported a 87 per cent fall in profit on a stand-alone basis, while Thomas Cook's profit was down 50 per cent due to lower income and certain one-off transactions.

Profits slumped despite a strong growth in outbound leisure business for both the companies in what is traditionally a weak quarter. While Cox & Kings’ consolidated profit increased 438 per cent to Rs 147 crore year-on-year following the acquisition of the UK travel firm Holidaybreak, Indian operations profits fell from Rs 12 crore to Rs 1.5 crore in the second quarter 2013.

Cox and Kings had raised the equivalent of Rs 1,400 crore in dollar debt to finance the Holidaybreak deal resulting in the increase in debt costs.

"The higher interest cost is due to the working capital debt taken after the Holidaybreak transaction. Interest costs will reduce in the coming quarters due to private equity investment of $140 million to retire debt,'' said Cox & Kings CFO Anil Khandelwal.

The stand-alone interest costs of Cox & Kings increased from Rs 13 crore to Rs 30 crore, lowering its profit. Indian operations constitute 25 per cent of Cox & Kings’ total revenue and the domestic operations saw 43 per cent increase in revenue.