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Insurance BPS player The Innovation Group (TIG) has sold its 62% stake in South African travel subsidiary Travest to South African insurance provider Santam for £3.9m in cash. TIG said this is its last significant non-core business for disposal.
TIG’s share in Travest equates to 0.9x FY12 revenue of £4.3m. Travest was highly profitable last year with an impressive 51% PBT margin. The business operates through a subsidiary called Travel Insurance Consultants Proprietary Limited, which claims to be the largest travel insurance provider to outbound travellers in South Africa.
We suspect Travest is now a declining business under TIG. In the six months to 31 March 2013, revenue was £1.9m and PBT was £0.7m – both figures are less than half those achieved in FY12. TIG said it would be difficult for Travest to continue to trade profitably in the future without it creating a regulated insurance entity in South Africa to comply with the new Binder insurance legislation. These are complicated new regulations aimed at cleaning up the insurance sector in South Africa. We think TIG is wise not to get embroiled in this, so the exit now will avoid unnecessary complications and distractions.
The sale shouldn’t be seen as a sign TIG is moving out of South Africa though. The company recently renewed its key SA contract with the insurer and vehicle finance arm of a top four SA bank (see here). TIG's strategy is to focus on organic and acquired growth in the motor and property sectors. So the proceeds from this sale should come in handy for future M&A.
