BCD Travel has bolstered its balance sheet with a $50 million cash infusion from parent company BCD Holdings and is making strategic investments to ready itself for a business travel recovery and support the long-term viability of the company.
Significantly less than 10 percent of the cash injection went to the recent purchase of an 80 percent stake in the third-largest Singapore travel management company, which has more than $100 million in total travel sales, BCD principal owner John Fentener van Vlissingen said last month before the annual Netherland-America Foundation Awards Dinner in Arlington, Va., where he was honored. "As you can imagine, these days the EBITDAs are very low and we are allowed to pay it over three years, so the number is not relevant," he said.
More Asia/Pacific investment is on the way, as BCD must fulfill a contractual obligation to increase its stake in an Australian joint venture with Sydney-based International Express, in which it already has a majority interest.
The bulk of the funds, derived from dividends from other BCD companies, went to shoring up the balance sheet by paying down some of the company's debt. "Naturally, clients are asking, 'Where do you stand?' " van Vlissingen said.
Although BCD Holdings increased its sales in 2008 by 4 percent to $15.6 billion, the company implemented a series of cost-saving initiatives in early 2008 to hedge against the economic onslaught. BCD Travel now employs 700 fewer people than before it implemented a hiring freeze in January 2008 and incurred $6 million in reorganization costs.
"We were already down before the crisis really started somewhere in September," van Vlissingen said. "We had very good results up until September. That's why in 2008 our results were very good. Except for the last quarter, which was not good, we were ahead of budget and then it slowed dramatically down."
Though van Vlissingen sees the current economic situation as being worse economically than 9/11, he said the industry would rebound in line with the slow economic growth expected in 2010. The family has been in business for more than 200 years and "we have seen a lot of crises," he said. "We all know it will go away again. We are just planning to get through this and get out of this stronger. That's why we are still doing acquisitions. We are very sober at the moment, downsizing and bringing our cost down. It's certainly not easy, but we're not worried. We see more clients coming than going and even see the clients increasing that are coming."
With March reportedly a much better month for travel sales than the previous five, BCD projects $1 billion in new business this year.
BCD Travel's transactions decreased 13 percent in 2008 compared with the prior year, but with a revenue increase of 3 percent, said BCD Travel president of the Americas Danny Hood at last month's Association of Corporate Travel Executives Global Education Conference
(BTNonline, April 9)."Results in January and February were clearly down," van Vlissingen said. "We've seen a good improvement in March. If we can keep up that speed, it will be a healthy, positive EBITDA. Understanding how tough this year is, if you are a little bit behind it becomes more difficult to catch up. Our numbers will be lower than the year before. Dramatically down? I don't think so."
Last year, billionaire van Vlissingen made several investments in his former BTI partner, the publicly traded Hogg Robinson Group, to become one of the two biggest HRG shareholders, along with Dnata Group, HRG's United Arab Emirates-based TMC partner.
"Because of the old history, we still have quite a substantial number of clients jointly," he said. "Although that number is naturally going down, it's still an important number for us. It's even more important to see what happens with that company in the future. I feel very comfortable where I am sitting. I can just wait and if it starts to move then I will be there."
He added, "When it went down from 10 pence to five pence, I couldn't resist," he said. "I've also made it very clear that if anything happens with the company, I want to sit at the table. I won't let it go. The English regulations are if you have 25 percent in the company, you cannot take it off the stock exchange. Meaning, if you have 21, it's not so difficult to buy to 25. Anybody who would come along with whatever bid, they would have to invite me to sit at the table. That's the good thing of now having this position."