{"id":1478,"date":"2024-06-11T08:59:05","date_gmt":"2024-06-11T06:59:05","guid":{"rendered":"https:\/\/kurtovicfinancial.com\/?p=1478"},"modified":"2024-06-11T08:59:06","modified_gmt":"2024-06-11T06:59:06","slug":"high-revenue-and-market-share-dont-mean-sht","status":"publish","type":"post","link":"https:\/\/kurtovicfinancial.com\/en\/high-revenue-and-market-share-dont-mean-sht\/","title":{"rendered":"HIGH REVENUE AND MARKET SHARE DON\u2019T MEAN SH*T!"},"content":{"rendered":"\n<p>(Lessons we can learn from FTI Touristik\u2019s failure \u2013 part 1)<\/p>\n\n\n\n<p class=\"has-vivid-green-cyan-color has-text-color has-link-color wp-elements-ff22c8e748b0eb6b794c0a6daa8eda02\"><strong>Sales &gt;4bn \u20ac.<\/strong><\/p>\n\n\n\n<p class=\"has-vivid-green-cyan-color has-text-color has-link-color wp-elements-845d3b6c8a73d2a48fa01725ecb679a3\"><strong>15% market share in Germany.<\/strong><\/p>\n\n\n\n<p class=\"has-vivid-green-cyan-color has-text-color has-link-color wp-elements-9d934c8708d8082e944e725c42ff3f2e\"><strong>#3 position in Europe.<\/strong><\/p>\n\n\n\n<p class=\"has-vivid-red-color has-text-color has-link-color wp-elements-ce922a5d88df74ef0efa93163468642f\"><strong>Failed.<\/strong><\/p>\n\n\n\n<p>_____<\/p>\n\n\n\n<p>What?!<\/p>\n\n\n\n<p class=\"has-vivid-cyan-blue-color has-text-color has-link-color wp-elements-5d5b22af9eb752544b4a985384b99fd4\"><strong>How? Why?<\/strong><\/p>\n\n\n\n<p>It seems FTI\u2019s business model was not that strong after all.<\/p>\n\n\n\n<p>But if the European #3 with 4bn \u20ac in sales is not secure, who is?<\/p>\n\n\n\n<p>Nobody, at least not in this industry.<\/p>\n\n\n\n<p><strong>Being the largest company in a crappy industry does not mean much. <\/strong>Would you like to own the #1 global manufacturer of typewriters used back in the 70s and 80s? Probably not.<\/p>\n\n\n\n<p>While tour operators\u2019 business is not that bad compared to typewriters, it is a high-risk industry because of these:<\/p>\n\n\n\n<ul class=\"has-black-color has-text-color has-link-color wp-block-list wp-elements-1e28f756d744bc5d166510688df74f13\">\n<li>high competition with practically no barriers to entry<\/li>\n\n\n\n<li>frequently changing customer preferences<\/li>\n\n\n\n<li>discretionary spending affected by the movements in GDP and market sentiment<\/li>\n\n\n\n<li>business sensitive to geopolitical risks with operations in some high-risk regions<\/li>\n\n\n\n<li>high seasonality, which means errors in the summer season are not allowed<\/li>\n\n\n\n<li>low gross margin due to high competition and basically being resellers (please check the recent Secret CFO\u2019s post on cash flow sensitivity on changes in business economics)<\/li>\n\n\n\n<li>high fixed costs (labour, leasing of hotels\u2026)<\/li>\n<\/ul>\n\n\n\n<p><strong>If you add a huge pile of debt on these foundations, a company is predestined to fail.<\/strong><\/p>\n\n\n\n<p>We have to be fair and say that <strong>the pandemic affected FTI severely. <\/strong>The government and banks had to step in and save the business. Still, 2022 figures were still below 2019, so they were not recovering that quickly.<\/p>\n\n\n\n<p class=\"has-vivid-cyan-blue-color has-text-color has-link-color wp-elements-417eb342f87c74d10ca216d073c36a7a\"><strong>But is the pandemic only cause of FTI\u2019s failure?<\/strong><\/p>\n\n\n\n<p>To answer that, we have to go back and look how they performed BEFORE the pandemic (I know it is painful to spread the financials for 6 or 7 years, but hey, no pain \u2013 no gain).<\/p>\n\n\n\n<p>Guess what \u2013 their results were baaaaad. The only difference is that they had less debt, so it was somehow manageable.<\/p>\n\n\n\n<p>Their annual average EBITDA was 40m \u20ac, with a margin between 0,5% and 1,5%. Debt stood at 260m \u20ac at 2019YE (net debt at 145m \u20ac). You do the math.<\/p>\n\n\n\n<p>Remember Thomas Cook, the once leading British tour operator that bankrupted in 2019?<\/p>\n\n\n\n<p>They were almost 3x bigger than FTI, their EBITDA margin was at 5-6% and with much lower leverage than FTI today. And they failed in the good times, before the pandemic and all this geopolitical tensions of today.<\/p>\n\n\n\n<p>So, why would FTI survive?<\/p>\n\n\n\n<p>_____<\/p>\n\n\n\n<p><strong>Your company might be a market leader, but if you are a market leader in the local market or even a global leader in a risky industry, it won\u2019t mean much if you get into trouble.<\/strong><\/p>\n\n\n\n<p><strong>Many underestimate the ease with which the banks and investors turn away from the business, write off their investment, and continue with their lives.<\/strong><\/p>\n\n\n\n<p><strong>Everybody is replaceable.<\/strong><\/p>\n\n\n\n<p><strong>Adjust your financial strategy accordingly.<\/strong><\/p>\n\n\n\n<p class=\"has-luminous-vivid-amber-background-color has-background\"><strong>If you need help with it, feel free to get in touch.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>(Lessons we can learn from FTI Touristik\u2019s failure \u2013 part 1) Sales &gt;4bn \u20ac. 15% market share in Germany. #3 position in Europe. Failed. _____ What?!<span class=\"excerpt-hellip\"> [\u2026]<\/span><\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[264,265],"tags":[272,59,271,273],"class_list":["post-1478","post","type-post","status-publish","format-standard","hentry","category-credit-risk-management-2","category-financial-management-2","tag-business-model","tag-financial-statements-analysis","tag-fti","tag-tourism"],"_links":{"self":[{"href":"https:\/\/kurtovicfinancial.com\/en\/wp-json\/wp\/v2\/posts\/1478","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/kurtovicfinancial.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/kurtovicfinancial.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/kurtovicfinancial.com\/en\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/kurtovicfinancial.com\/en\/wp-json\/wp\/v2\/comments?post=1478"}],"version-history":[{"count":1,"href":"https:\/\/kurtovicfinancial.com\/en\/wp-json\/wp\/v2\/posts\/1478\/revisions"}],"predecessor-version":[{"id":1479,"href":"https:\/\/kurtovicfinancial.com\/en\/wp-json\/wp\/v2\/posts\/1478\/revisions\/1479"}],"wp:attachment":[{"href":"https:\/\/kurtovicfinancial.com\/en\/wp-json\/wp\/v2\/media?parent=1478"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/kurtovicfinancial.com\/en\/wp-json\/wp\/v2\/categories?post=1478"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/kurtovicfinancial.com\/en\/wp-json\/wp\/v2\/tags?post=1478"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}