News blog

Minoan Group

  • BY: Andrew Hore |
  • POSTED: 17/03/2012 |

Minoan Group is pushing forward with its strategy of building a travel agency division by increasing its stake in Stewart Travel Centre from 19.9% to 100%.

Minoan is paying £545,000 - £320,000 in cash and a £225,000 loan convertible at 7.5p a share – and on top of that there is an earn-out payable on profits greater than £150,000. The most payable in the earn-out will be £500,000. Founder Willie Stewart will stay with the business and he will be granted an option to buy up to 1m shares at 7.5p each.

Stewart made an underlying profit of £107,000 in the year to April 2011.

The full integration of Stewart will enhance the performance of the travel division.

Minoan is changing its focus from developing a leisure resort in Crete to the distribution of holidays. Minoan has already acquired four travel operations which are focused on niche markets and it would like to expand geographically from the current Scottish base. Acquisitions will be in regional clusters but the company will avoid the London market.

Former MyTravel chief executive Duncan Wilson is heading the new travel business. He has 25 years experience in the travel sector and has built up contacts in the sector. The travel agency business is not as risky as being a tour operator because even if prices are reduced the travel agency still makes its commission on any sales. Although many customers research online they still go to travel agents to buy holidays.

Changes in regulations mean that many smaller travel agents may decide it is no longer worth going it alone. They may decide to close or sell their business. This provides opportunities for Minoan, as does the problems of Thomas Cook. Minoan may be able to pick up some non-core Thomas Cook assets.

The travel market fell sharply in January but Minoan managed to maintain its sales. The travel business is profitable but corporate costs have masked this up until now. That should change this year.

In the four months to February, bookings are down 2% and commissions 1% lower, although there has been improvement in recent months. The market is estimated to be 14% down.

Management still has high hopes that planning permission will be gained for its Crete leisure project. The project has had to be changed but planning permission could come through in the near future.

A valuation of €100m has been placed on the development when it receives consent and the cash value could be half of this. Minoan is likely to sell at least part of the development to someone else who will finance the development. There are potential Middle East buyers.

If part of the Crete development is sold then some of the cash could be returned to shareholders but some of it will be used to finance acquisitions.

At 6.38p a share, Minoan is valued at £6.95m.

Download the latest AIM Journal from http://www.hubinvest.com/AIMPDFMarch2012_30.pdf

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