We shouldn’t be too sceptical about rescue of Thomas Cook shops
The package holiday market is dead and nobody under 40 goes to a travel agent, declared Michael O’Leary after the failure of Thomas Cook. So one must assume the Ryanair boss would diagnose an extreme case of naïvety at Hays Travel, the Sunderland-based, family-owned firm that has emerged as the surprise rescuer of 555 Thomas Cook shops and the willing re-employer of up to 2,500 staff.
Certainly John and Irene Hays did little to deflect the idea that there’s a degree of innocence about their ambition. They were vague about the financial terms but spoke for ages about the “emotional” response from grateful former Thomas Cook shop staff.
As for the challenge in taking on 555 premises – Hays currently has only 190 – they pointed out that their business doubled in size in 2013 when it bought Bath Travel in the south of England. Very good, but Hays’ pretax profits were only £10.1m last year and the Bath deal doesn’t come close to the scale of what’s being contemplated now.
Yet perhaps one shouldn’t be too sceptical. Hays showed net cash of £104m at its last balance sheet date in October 2018 whereas Thomas Cook failed because it was trying to carry £1bn-plus of debt. The former has clearly been doing something right and, as a purer agent, its business is far simpler than Thomas Cook’s all-singing integrated model.
As for the death of the package holiday, O’Leary is surely wrong. Thomas Cook, even when led by a succession of underwhelming chief executives, managed to sell several million holidays in the UK last year. Many punters still value simplicity and service when spending a large chunk of their annual disposable income.
Meanwhile, hoteliers from Turkey to the Canaries still want to sell in bulk into the UK market and can’t do the job efficiently themselves. In theory, there ought to be a good living to be made by a UK agent that sells products from all the main tour operators. Hays looks as well-equipped as anybody else to fulfil that role.
One trusts, though, that the likeable Hays duo will remember to be ruthless in their dealings with their new landlords. They’re making a big bet and securing hefty rent concessions may make the difference between success and failure.
Facebook’s funny money
The Bank of England, uniquely among major central banks, sounded positive when Facebook, in a typical display of corporate hubris, unveiled its plan to launch a new global currency called Libra. Without mentioning specifics, the Bank’s governor, Mark Carney, emphasised the need to move with the times and endorsed the idea of allowing digital currencies access to the payments system.
It was woolly stuff but here, thankfully, comes a policy from the Bank that acknowledges that Facebook’s funnymoney, if it ever becomes popular, will require a smack of firm regulation.
The critical line in the Bank’s latest financial stability report – aside, that is, from familiar analyses of Brexit and trade wars – was this: “If payment tokens were used widely to facilitate routine payments, they should have the same level of operational resilience and safeguarding as the use of debit cards to make payments from current accounts.”
The phrase “same level of operational resilience” could be deadly for Libra since the Bank was clear that it would measure by resilience by looking at all the links in a system, including digital wallets and exchanges. That, in turn, opens up the prospect of bank-style capital requirements, stress tests, money laundering checks and so on.
One can quickly see how the Libra could unravel under the weight of compliance costs. If it is as fiddly and expensive as the current system, what’s the point?
Rudd stays put
Meggitt, the FTSE 100 engineering firm, has “engaged extensively” with shareholders and, to nobody’s surprise, has decided its chairman, Sir Nigel Rudd, is still the right person for the job.
About 27% of investors disagreed at the annual meeting in April, judging that Rudd was “over-boarded”, in the ugly jargon, because he also chairs BBA Aviation, which refuels and services corporate jets, and Sappi, a Johannesburg-listed paper group.
In itself, Meggitt’s refusal to budge looks fair. This is territory for common sense rather than rigid rules and Rudd, who has lived the portfolio life for years without ever being caught asleep, has a reasonable claim for being treated as an exception.
But let’s not be too free and easy. The “over-boarding” rebels’ basic argument is correct – in 90% of cases, chairing three public companies should be off limits.
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