A Shearings Saga?
To Sell or Not to Sell?
Many readers will have read about the Shearings Holiday Group recently, and maybe even read about their owners, the 3i investment group, possibly trying to sell or split the company.
This of course is not unusual for any investment company, who after all are there to make money for their investors. Many big companies do this – remember what the Granada Group did to Forte? – and it could be interesting to see what may happen in the case of the Shearings Group.
Now I should state a couple of things at the outset of this article. One is that as some of you may know I was with the Wallace Arnold Holiday Group for many years, and was made redundant following the Shearings takeover. I bear no malice whatsoever here, as I was treated fairly, went on to a better position with another company, and in any case they made a business decision which at times is something we all have to live with. Secondly, I must admit to being very disappointed to read of the booing that followed the announcement at the Coach Awards when Shearings had won a category. Disappointed because I thought my colleagues in the industry had better manners, and I personally find this type of behaviour unacceptable at any level.
When it comes to the buying and selling of companies – what’s that old adage about anything is for sale if the price is right? That may mostly be true, but it would be a very brave person to move into the coach travel and holiday industry, where profits are hard to find even in well run and operated concerns.
If, and it’s a very big if, the Shearings Holiday Group was sold as a whole, I do not believe it would be kept as is, and would be split to repay part of the cost. But what exactly would you be getting for your money? More to the point – what do we really know about this vast organisation?
Well we know it comprises of National Holidays, Caledonian Travel, Shearings Holidays, Coast and Country Hotels, Bay Hotels, (a total of 50 hotels) and eight Wallace Arnold Travel Shops, mainly in the Yorkshire area.
We know the group employs over 3000 people, and has been spending a great deal of money on refurbishing hotels and coaches.
One can presume they also have a mailing list other companies may only dream of, and we know that they have a loyal and committed following from their clients. They are multi award winners in several prestigious categories, are active members in everything they feel they need to be, have a turnover of £180.4m, and last year’s (ye 31/12/2009) profits were £4.1m. They have successfully diversified into cruises both ocean and river, self drive, and are a profitable operation based in Wigan, Lancashire.
Of this £4.1m operating profit, no less than £3.4m came from the hotels, who boasted an occupancy level of 83%, as two million bednights were occupied. This is far higher than your average hotel, but it has to be remembered that high occupancy is essential to compensate for the lack of corporate guests. The holiday companies carried 640,000 people, which included double digit growth for National and Caledonian. If the remaining profit of £700k came from carrying all those passengers – questions have to be asked about their coach operations. The recent 3p increase in diesel could have a serious effect on next years accounts, dependant on their fuel policy. For example, if the fuel was prebought at a fixed cost they could be covered for this eventuality, or they could have allowed for fluctuations at this level.
Now all of that is public knowledge, and can easily be found on their own and other websites. In the past few years there have been some major changes in the main board to perhaps bring new ideas and plans to fruition – part of which could well be the selling of all or part of the company. No secrets there then.
Before booing and berating their holidays, it would do some people good to actually look at their brochures, just to see why they continuously win awards. In my humble opinion they show innovation, gentle expansion, and whilst everything is not perfect they clearly offer the public what it wishes to buy. That is not to say I agree with everything their management style or system of operating has and does produce, but the results are there for all to see.
The company has been going for over a hundred years, and in that time have absorbed (directly or indirectly) the names of not only Wallace Arnold, but Smiths Happiways, Cotters, Beeline of Middlesbrough, Florence and Grange, Embankment of Plymouth, Salopia, Superdeal, Overland, and Goldenrail (now part of Superbreak). (And these are only the ones that come to mind, I am sure there are others too).
When 3i merged the operations of Shearings and WA in 2005, they valued the new company at £140m. The following year it raised £110m from the sale and leaseback of the then 39 hotels to Moorfield, the property group, who have continued their relationship by purchasing more hotels and leasing them to the group. 3i hold 65% of the group, with management – past and present, holding the reminding 35%. Recent figures suggest that an equity valuation, excluding debt, of about £25 million for the company.
The fleet of Kassbohrer Setra coaches acquired last year and this are leased, but as with the hotels details are clearly confidential so I am unable to comment further.
Interested parties are starting to circle, including (according to a report in The Times) Acromas, the owners of Saga and the AA. One can easily see the advantages should this proceed, but LDC, the private equity arm of Lloyds Banking Group are rumoured to be leading the interest.
So what do I think? I believe a sale will occur, and the company may well be split. National and Caledonian going one way, and Shearings Holidays staying with the new owners. Should this occur, and it’s still a very big if, the future of many jobs in Wigan could depend on the just who the purchaser is. An uncertain time for the employees, and having gone through it myself they have my sympathy and understanding. 3i are a canny lot, and will only sell at the right price, so this could run and run, but my feeling is that the writing is on the wall.
