Richard Downs is chief executive and founder of ski and cruise retailer Iglu
A string of investment deals in UK-based travel firms has given a significant boost to the sector, according to the latest firm to gain a new backer.
Ski and cruise retailer Iglu has secured £19 million of funding from Growth Capital Partners (GCP) in exchange for a significant minority stake to fund expansion overseas.
The agreement follows other recent deals, including Dnata’s purchase of Travel Republic and investment by Equistone Partners Europe in Audley Travel.
Richard Downs, chief executive and founder of Wimbledon-based Iglu, said: “They are all a great endorsement of the travel sector and for the online market.
“What investors are seeing in travel is a two-speed sector, with the high street struggling whereas with online it’s a different world.”
Discussions with GCP started in January just after the Travel Republic buyout was announced.
The deal saw previous backers Matrix exit Iglu ahead of a five-year plan because it felt the international ambitions of Iglu were best served by new partners with more of a pan-European outlook.
GCP has just completed a third round of fundraising and Iglu is its first investment since.
“Ideally, with a private equity house you want to be one of their first investments,” said Downs. “This deal has no bank debt and GCP has headroom for follow-on capital.”
Iglu was established in 1998 focusing on ski, but it has successfully moved into the cruise sector.
The management team at Iglu remains unchanged other than the Matrix representative on the board being replaced by Simon Jobson from GCP. As well as Downs, the other board members are non-executive chairman Martyn Williams, managing director Simone Clark and financial director Lorna Vincent.
Downs said banks were prepared to back travel but were now more wary, particularly in light of Thomas Cook’s troubles.
However, he said investment was available from private sources which were more open to lending.
“One of the biggest players in the industry has wobbled and that’s worrisome if you are in credit control in one of the banks,” said Downs.
“Banks tend not to invest much in the due diligence process. The people who are investing are either corporate or private equity investors who do spend time and money on due diligence.
“Unless due diligence is carried out, it’s more likely all travel companies are categorised in the same bracket.”
Iglu was set to post a turnover of about £90 million for the year to May 31, Downs said.
He claimed the firm’s success came from honing its online skills in ski, combining digital marketing nous with a highly trained call centre team.
“We were probably one of the first online players in ski and have gained a leadership position in a flat market,” he added. “We have a lot of scars and brought that learning into cruise.”
Downs said Iglu understood that in specialist sectors the same principles applied offline and online.
“The customer expectation is the same: they want to speak to someone who understands the product and can work hard to get them the dream holiday.”
Iglu’s first foray overseas is likely to be into the fast-growing German market within 18 months.