ATG CONFIDENT OF TRAVEL INDUSTRY SHAKE UP

RED Gum Resources is forging ahead with plans to relaunch as the Australian Travel Group (ATG) as the mining minnow turned multi-brand travel business insists it will become a “significant new force in the Australian travel sector”. The bold claim follows the release of the much anticipated prospectus for a $3 million capital raising, which will see the Perth-based metals explorer transform via the purchase of wholesaler Asia Escape Holidays, retailer Motive Travel and online player Holiday Planet – which is currently part of the Independent Travel Group. The unlikely shift to the travel sector comes as Red Gum’s share price hit rock bottom earlier this year, prompting the publicly listed mining company to turn its focus to travel as it looks to “regrow shareholder value”. The company’s annual report, released back in October, revealed the company’s total revenue for 2013/14 was just $4,296, offset by operating losses of $1.12m in office costs, expenses and remuneration. The company also wrote off over $4.5m in capitalised project costs and a further $226,000 in exploration expenses. Chairman Raymond Shaw openly admitted the firm needed to diversify to succeed, responding with plans to merge the three travel businesses and relist on the ASX after a capital raising in December. It’s a bold plan, and one that raises questions as to how a struggling mining company can create something out of nothing. But ATG is confident the plan will succeed, predicting its overall TTV will rise 16% this financial year to $100m. Outlined in the prospectus, the company is also expecting $48m in revenue and EBITDA earnings of $807,000 for the 2014/15 financial year. “Each acquisition entity will leverage off each other’s strengths to enable the Group to become a new force in the Australian travel industry,” the prospectus promises. “The amalgamation of the entities will allow for a strong vertically integrated growth platform, expanded distribution channels and economies of scale.” Fine details are still sketchy at this stage, but ATG is touting the company’s potential for east coast expansion, as well as lifting purchasing power for each brand by being part of a larger group. ATG also claims it has a loyal customer base, “on-trend” product offerings and access to technology. Certainly, the firm is confident that expansion will take off and it hasn’t been shy in sharing its plan to target high margin leisure and package markets to improve the bottom line. It also plans to expand distribution channels, roll out IT advances and tap into new product lines such as cruise packages, specialty group tours and luxury holiday packages. ATG executive chairman Alan Dodson - also Holiday Planet managing director - admits the takeover is a complex transaction, but he’s certain the transformed company will make waves in the industry by merging three “very different types of businesses” under one name. It’s still early days, and the plan is yet to be approved by shareholders – though it’s expected to get the green light at the company’s Extraordinary General Meeting on 27 November. At this stage, 15 million shares are on offer at 20c each, with the float envisaged to be completed by 19 December. Certainly, ATG has a long road ahead if it’s to compete with other travel heavyweights, but at the very least it is encouraging for the whole industry that investors see potential in being part of the Australian outbound travel sector.