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Ebookers pulls down Cendant TDS
Problems at Cendant Travel Distribution Services’ ebookers business have been blamed for a lower than expected rise in profits in the fourth quarter of the year.
The US conglomerate, which is to spin off TDS as a stand alone business next October, also revealed that TDS chairman and CEO Samuel Katz is to leave the company after 10 years, including four heading the division. He is to “pursue other business interests” after a short transition, according to the company.
Cendant said that “due to challenges” in TDS resulting in earnings increasing at a lower rate in the fourth quarter than previously expected, earnings per share would be at the lower end of the $0.23-$0.26 projected in October.
The company said “reduced return expectations” at ebookers was largely responsible for an expected “non-cash intangibles impairment charge” at TDS of $200-$300 million.
Cendant paid more than $400 million for UK online travel business ebookers a year ago.
Cendant’s chairman and CEO Henry Silverman said: “TDS has clearly fallen short of its 2005 targets due principally to our international online businesses, particularly ebookers.
“We face company specific issues that we have identified and are addressing, not with quick fixes but with significant new investments, including the development of a single, global online platform.”
He added: “While with hindsight our past projections were too high, the fact is that TDS is a strong business that we expect will achieve approximately 11% EBITA growth next year.”
The company forecast this figure to be between $575-$625 million against this year’s forecast of $535-$545 million.
It has also been decided by the company that Silverman will not become CEO of the spun-off TDS as previously indicated. Instead he will become chairman and CEO of the new Real Estate Services company from next spring until January 1, 2008 when he is expected to step down as CEO.
Meanwhile, Cendant’s Vacation Network Group, including timeshare business RCI and the Vacation Rental Group, will not now become part of TDS as the company originally planned. Instead they are to become part of Cendant’s Hospitality division.
Report by Phil Davies
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