Brexit won't hit biz; Quess IPO key for growth: Thomas Cook

Nothing really changes for the company if Brexit happens as the event will not impact the tourism industry, said Thomas Cook CMD Madhavan Menon. Speaking to CNBC-TV18, Menon said though China, India and Hong Kong's outbound business struggled last year, the travel business excluding Quess Corp will do better due to Kuoni acquisition in FY17. The company's forex and inbound businesses are largely doing well, which makes Menon expect this year's growth for the company to be on par with last year.He is of the view that the travelling company will remain invested in Quess from a long-term perspective. Below is the verbatim transcript of Madhavan Menon’s interview with Latha Venkatesh & Reema Tendulkar on CNBC-TV18.Reema: You have significant exposure to the UK a) if you could tell us what percentage of your business comes in from UK and in the event of a Brexit although the probability is perhaps low what will the impact?A: First of all I think we have always lived in an environment as far as UK and Europe is concerned as different visa, so from an outbound perspective nothing really changes whether the Brexit happens or not because we will continue to have two visa requirements and that will remain unchanged. As far as the global impact of Brexit I am sure there are uncertainties that are building around it. Even though I keep reading in the press that it has been discounted out of the market the reality is there is going to be some impact more likely in terms of economy impact. You will appreciate the global weakness is only specially with low interest rates and everything else is only going to add to some of that confusion. However, from our perspective we don’t see any significant impact at this point of time. It will be limited to other industries not to the tourism industry.Latha: Can you give us a little bit of your revenue breakup? How much is your revenue ex of Quess Corp, excluding the Quess revenues? How much is your EBIT excluding the Quess revenues?A: First of all you will appreciate that we are much larger now because we have acquired Kuoni at the beginning of this year. So, our operations include the Hong Kong operations of Kuoni the inbound business of Kuoni which is known as SITA as well as the outbound businesses of Kuoni and Thomas Cook. If we look at just the revenues out of the travel businesses we are talking of approximately Rs 960 or 1,000 crore. I don’t think you can compare Quess and Thomas Cook here because in the case of Quess the revenue calculation is slightly different and you will appreciate in the travel businesses these essentially represents gross revenue been commissioned that we generate from the sale of services that are bundled together. Latha: What is the outlook ex of Quess for you?A: From an outlook point of view our outbound businesses out of China, out of Hong Kong as well as India have struggled a bit this year for different reasons. Hong Kong because of the Chinese slow down, as far as India is concerned our European long haul business especially in the outbound did suffer a setback because of the terrorism issues that we had in Paris and Brussels and more recently in Orlando. My expectation is that this will reverse to some extent during the course of the year and we should be back to normal. We haven’t fallen significantly but we are slightly behind last year’s numbers on the outbound business. Reema: What impact will that have on your quarter one performance? Will your revenues de-grow on the whole in quarter one or if there is a growth how much slower will it be compared to last year on account of these issues that you highlighted?A: I don’t think we will be on par with last year primarily because the foreign exchange business and the inbound business kicked in well. So, I think the diversification of businesses does help us to that extend. My expectation is that we will be on budget also for the rest of the year because we see other seasons kicking in. So, it’s not a big issue at this point of time. The short fall in the out bound travel has been taken up by other businesses. Latha: What is exactly the contribution of the European business ex of Quess?A: The contribution of the European business to the whole pie is approximately 20 percent. It is not significant in the scheme of all are other businesses. So, I am not too concerned and that is why I said earlier that shortfalls are being picked up by the other businesses so that is not major area of concern to us. Latha: By didn’t you divest now that you have a chance in Quess?A: You will appreciate it is a fairfax philosophy to take a long-term view on all businesses. Prem Watsa has said this time over time that we do not believe in exiting businesses as and when and if an opportunity arises necessarily. We take a long-term view and it is our stated position that we will remain invested in Quess in the long-term. We see a good opportunity of growth in that business and Ajit and his team has proved it so far and we expect that they will continue to focus on growing that business. Reema: Just tell us what your outlook is for FY17 in terms of revenues as well as margins?A: We don’t give guidance at the Fairfax group level. I will say that even though there are certain challenges here in the outbound business we will come in ahead of last year’s numbers. My expectation is that the growth will not be double digit but we will be definitely grow for the full year.